[Congressional Record Volume 141, Number 161 (Wednesday, October 18, 1995)]
[Extensions of Remarks]
[Pages E1973-E1974]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                            WHO WILL NOTICE?

                                 ______


                          HON. PHILIP M. CRANE

                              of illinois

                    in the house of representatives

                       Wednesday, October 18, 1995

  Mr. CRANE. Mr. Speaker, lately there has been a great deal of 
rhetoric about train wrecks and other analogies to cataclysmic events 
to describe the impending doom to the Nation's financial markets should 
the Government shut down if Congress and President Clinton disagree on 
a Federal budget. I believe that most of the gloom and doom forecasts 
come from bureaucrats and Democrats who generally overstate the 
importance of Washington to the rest of the Nation.
  As far as I am concerned, the shutdown of non-essential Federal 
agencies would constitute the fulfillment of my mission as a Member of 
Congress. However, in the past, the Government has, in fact, shut down 
temporarily as Congress and the President fought over the details of 
the funding for the Federal agencies. I suspect that, outside the 
Capital Beltway, no one noticed when it was shut down.
  In a recent Wall Street Journal article, Jim Miller, the former 
director of the Office of Management and Budget, also argues that no 
one, even those on Wall Street, will notice if the Federal Government 
temporarily shuts down during budget negotiations.
  As we in Congress continue to convince President Clinton of the 
necessity to balance the Federal budget, I commend Mr. Miller's 
article, ``Government Shutdown? `See If Anybody Notices' '' to my 
colleagues for reassurance.

                     [From the Wall Street Journal]

             Government Shutdown? `See if Anybody Notices'

                        (By James C. Miller III)

       Washington is reaching the end game on the budget. The 
     White House wants Congress to compromise on--read, back off--
     a budget that simultaneously cuts taxes by $245 billion, pays 
     dollar for dollar for those tax cuts with spending cuts, and 
     balances the books by the year 2002. In a fit of rhetorical 
     overkill, the Clinton administration has warned of a ``train 
     wreck'' that will shut the government down and shake the 
     financial markets if no agreement is reached by Nov. 15.
       In fact, the so-called train wreck would be more of a 
     fender bender. The law is quite clear: There would be no 
     shutdown--only ``non-essential services'' would be curtailed. 
     The armed forces would stand ready as ever; social security 
     checks would be mailed on time (and the post office would 
     deliver them along with all other mail); air traffic 
     controllers and meat inspectors would stay on the job. The 
     fact is, the government has 

[[Page E 1974]]
     ``shut down'' four times in the last 15 years without anyone much 
     noticing. After one such shutdown in 1990, the General 
     Accounting Office asked various government agencies what 
     their number one concern regarding a shut down was, most 
     answered ``reduced morale.'' The IRS mentioned that it was 
     worried about a ``loss of public confidence in the agency''!
       As for payments to U.S. debt holders, a potential default 
     will be no more than a bump along the road to a balanced 
     budget. In 1987 and 1990, the government hit against the debt 
     ceiling, and we heard the same apocalyptic rhetoric we hear 
     today. In 1985, as Congress and the Reagan administration 
     were busy erecting the Gramm-Rudman-Hollings guillotine, the 
     debt ceiling was reached, and default loomed. Relying on a 
     number of technical fixes, the Treasury Department was able 
     to forestall actual default, but the uncertainty lasted more 
     than a month. Did the market implode? Far from it: Stocks 
     actually staged a rally--taking the S&P index to its then-
     all-time high. There's a lesson in that earlier experience 
     that holds true today: The value of the debt investors buy 
     depends on the dynamism of the U.S. economy--not the fate of 
     the U.S. government.
       As always, in its preference for fear over fact, the 
     Clinton administration is playing fast and loose with the 
     numbers. Take the allegedly increased cost of interest rates 
     if the government does hit the debt ceiling. According to 
     President Clinton's chief economic adviser, Joseph Stiglitz, 
     a rise of one hundredth of one percent--a single basis 
     point--would cost $3.5 billion over seven years. Three things 
     are wrong with that number.
       First, it ignores the fact that over $1 trillion of 
     government debt is ``owned'' by another government agency or 
     entity--money, in effect, that Uncle Sam's right pocket owes 
     his left. Second, Mr. Stiglitz apparently assumes the 
     impossible--namely, that all government debt would re-price 
     immediately--and, third, that it would then carry the new and 
     higher rate for the next seven years. That kind of 
     statistical sleight-of-hand may pass for analysis in the 
     White House, but not on Wall Street.
       How can I be sure? I was serving as director of Office of 
     Management and Budget under Ronald Reagan when one of these 
     noncrises happened in 1986. At that time, of course, the 
     roles were reversed. A Democratic Congress was trying to 
     force increased spending and higher taxes on a reluctant 
     Republican president. The Democrats thought Mr. Reagan would 
     ``blink first,'' approve their extravagant spending bills, 
     and be forced to raise taxes to pay for their largess.
       Unable to convince them that wasn't going to happen, I 
     found myself in the Oval Office apologizing to the president 
     and saying that I feared the government would be forced to 
     close down.
       ``Jim, Jim,'' he said, with that famous smile and a twinkle 
     in his eye, ``just settle down. Let's close the place down 
     and see if anybody notices.''
       Then he went on the radio and said the same thing: If 
     Congress doesn't act responsibly, ``I won't have any choice 
     but to shut it down. If they want to put a real budget 
     together by candlelight, it's OK by me.'' In the end, 
     Congress agreed to take the most offensive measures out of 
     their appropriations bills, and the government engines 
     started back up after a brief pause.
       The moral of the story: No one did notice.
       Perhaps President Clinton is heartened by Mr. Reagan's 
     example, but there is a profound difference in their 
     positions: President Reagan stood with the American people in 
     their desire to cut wasteful government spending. President 
     Clinton stands against their wishes and for a continuation of 
     the spending status quo.
       Congress has the moral high road here, and they shouldn't 
     be afraid of sticking to it. Theoretically, the president 
     could engage in a reckless ``firemen first'' shutdown 
     strategy. After all, the president has full power to define 
     which services are essential and which are not. If he chose, 
     he could define air traffic controllers as ``non-essential'' 
     and hope the American people blame Congress for the closure 
     of the nation's airports. Or, when the debt ceiling is 
     reached Nov. 15, he could stop sending out Social Security 
     checks to senior citizens, at least temporarily.
       But the public will know that none of these actions is 
     necessary. The law is clear: After debt holders, Social 
     Security and other entitlements get first priority, and there 
     is no good reason why those payments should ever be 
     disrupted. If the president chooses to play politics with 
     entitlements, he and only he will be responsible. If there is 
     a ``train wreck,'' he will be the engineer failing to put the 
     brakes on a runaway spending locomotive. And like one of 
     President Clinton's favorite musicians, the late Jerry 
     Garcia, used to sing, ``Casey Jones, you better watch your 
     speed.''

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