[Congressional Record Volume 141, Number 163 (Friday, October 20, 1995)]
[Senate]
[Pages S15395-S15398]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                        TREATMENT OF THE DEFICIT

  Mr. HOLLINGS. Mr. President, I want to touch on an article in the 
morning news relative to how we have historically dealt with the 
problem of budget deficits. But first, let me touch on the point raised 
by my distinguished colleague from New Hampshire relative to the 
Congressional Budget Office's scoring of the Republican budget as 
balanced. I hope everyone within the sound of my ears and the view of 
this particular C-SPAN coverage will look at the Record. Yes, on the 
day before yesterday, on October 18--and you will find it in your 
Congressional Record at page 15263--a letter was included in the Record 
from the Director of the Congressional Budget Office doing exactly as 
the distinguished Senator from New Hampshire claimed. CBO said that not 
only was the GOP budget in balance but that by the year 2002, there 
would be a $10 billion surplus.
  That was day before yesterday. On yesterday, October 19, if you 
please, Mr. President, another letter was sent from CBO to Senators 
Conrad and Dorgan. I ask unanimous consent at this particular point 
that the letter be printed in the Record.
  There being no objection, the letter was ordered to be printed in the 
Record, as follows:

                                      Congressional Budget Office,


                                                U.S. Congress,

                                 Washington, DC, October 19, 1995.
     Hon. Kent Conrad,
     U.S. Senate, Washington, DC.
       Dear Senator: Pursuant to Section 205(a) of the budget 
     resolution for fiscal year 1996 (H. Con. Res. 67), the 
     Congressional Budget Office yesterday provided the Chairman 
     of the Senate Budget Committee with a projection of the 
     budget deficits or surpluses that would result from enactment 
     of the reconciliation legislation submitted to the Budget 
     Committee. As specified in section 205(a), CBO provided 
     projections (using the economic and technical assumptions 
     underlying the budget resolution and assuming the level of 
     discretionary spending specified in that resolution) of the 
     deficit or surplus of the total budget--that is, the deficit 
     or surplus resulting from all budgetary transactions of the 
     federal government, including Social Security and Postal 
     Service spending and receipts that are designated as off-
     budget transactions. As stated in the letter to Chairman 
     Domenici, CBO projected that there will be a total-budget 
     surplus of $10 billion in 2002. Excluding an estimated off-
     budget surplus of $108 billion in 2002 from the calculation, 
     CBO would project an on-budget deficit of $98 billion in 
     2002.
       If you wish further details on this projection, we will be 
     pleased to provide them. The staff contact is Jim Horney, who 
     can be reached at 226-2880.
           Sincerely,
                                                  June E. O'Neill.

  Mr. HOLLINGS. I thank the distinguished Chair. Let me just highlight 
the pertinent part:

       As specified in section 205(a), CBO provided projections on 
     spending specified in that resolution of the deficit or 
     surplus of the total budget, that is, the deficit or surplus 
     resulting from all budgetary transactions of the Federal 
     Government, including Social Security and Postal Service 
     spending and receipts that are designated as off-budget 
     transactions.
       As stated in the letter to Chairman Domenici, CBO projected 
     that there will be a total budget surplus of $10 billion in 
     2002. Excluding an estimated off-budget surplus of $108 
     billion in 2002 from the calculation, CBO would project an 
     on-budget deficit of $98 billion.

  So, unlike 2 days ago, when the CBO scored the GOP budget as having a 
$10 billion surplus in the seventh year, yesterday CBO scored it as 
leaving us with a $98 billion deficit. It piqued my interest because 
the CBO used the expression in the letter to Senator Conrad ``including 
Social Security and Postal Service spending and receipts.''
  What bothers me about that clause is that, this Senator, along with 
my distinguished colleague from Pennsylvania, the former Senator John 
Heinz, cosponsored an amendment that passed the Congress and was 
enacted by the President--namely, section 13301 of the Congressional 
Budget Act, which orders that Social Security funds shall not be used 
in citing in deficits or surpluses of the Government. That particular 
section puts Social Security off budget and in trust.
  But today we learn that a mistake was made over at CBO. In 
considering the size of the Social Security surplus in the year 2002, 
they did not catch the fact that the Finance Committee had banked on a 
small change in the CPI, otherwise known as the Consumer Price Index. 
In turn, a reduction in the CPI reduces the amount of cost-of-living 
adjustments paid to Social Security recipients.
  Under the law, this change in Social Security payments does not 
divert money to lower the deficit or to fund the general budget. 
Instead, if you save money in Social Security, the money merely adds to 
the surpluses in the Social Security trust fund.
  Right now, Mr. President, we have a surplus of $481 billion in Social 
Security. We have a surplus in Medicare of $147 billion. And instead of 
recognizing that fact, we run around knocking over desks to get on TV 
and carry on about things that will happen 7 years from now for 
Medicare, 30 years from now with Social Security. What we don't do is 
to pay attention to the crisis that is happening right this minute.
  And that brings me to the morning editorial by our friend, Mr. J. W. 
Anderson of the editorial staff of the Washington Post.
  I ask unanimous consent that the editorial in its entirety, entitled 
``This Is Leadership?'' be printed in the Record at this point.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, Oct. 20, 1995]

   This Is Leadership?--Since 1973, The Deficit Has Been Central To 
                           American Politics

                           (By J.W. Anderson)

       President Clinton's repudiation of his 1993 tax increase, 
     followed by his ungainly scramble to repudiate the 
     repudiation, has inflicted a severe injury on himself and his 
     party. It becomes increasingly difficult to know exactly what 
     he stands for.
       His first budget with its tax increase and its attack on 
     the deficit is arguably the bravest, and certainly the most 
     useful, of his accomplishments as president. Now, alas, he's 
     running after the Republicans' tax-cut bandwagon and throwing 
     the best of his own record into doubt. But it's not 
     unprecedented. President Bush, running for reelection in 
     1992, repudiated the tax increase that he had accepted in the 
     very constructive budget compromise of 1990.
       This country seems to be going through a series of 
     presidencies eroded and diminished by the savage politics of 
     intractable budget quarrels. How long will it continue? It's 
     hard to say. The process has been going on for more than 20 
     years, and progress has been slow.
       The origins of today's budget fights lie in the pivotal 
     year 1973--the year that the great postwar boom ended.
       For a quarter of a century, from the late 1940s into the 
     early 1970s, standards of living improved faster than ever 
     before in history. It happened throughout the world, but most 
     spectacularly in the developed industrial democracies. As the 
     long boom continued, governments began to think that they had 
     at last solved the mysteries of economic growth and that they 
     now knew how to keep their economies expanding steadily and 
     rapidly.
       The only question was the pleasant one of how best to spend 
     the flood of wealth, private and public, that this boom was 
     generating. Most of the democracies decided to put much of 
     the new revenues into new and expanded social benefits--
     mainly pensions for the elderly and health care. In those 
     years here in the United States, Medicare and Medicaid were 
     enacted, and Social Security was greatly increased. In 
     Western Europe, where the war years had created a hunger for 
     security beyond anything in the American tradition, this 
     expansion of benefits went much farther.
       Then, in 1973, the boom suddenly ended. Economic historians 
     still aren't quite sure 

[[Page S15396]]
     why it happened. The oil crisis had something to do with it and perhaps 
     the American decision to take the dollar off the gold 
     standard. But whatever the reasons, throughout the rich 
     democracies--here in North America, in Western Europe and in 
     Japan alike--the economic growth rates dropped to half the 
     level of the previous 25 years.
       The consequences have been huge. One of them was that high 
     growth no longer produced the immense increases in tax 
     revenues on which all those governments had been counting to 
     finance the new social entitlements. But, having put those 
     pensions and health insurance laws in place, they couldn't 
     retreat from them. The result was the era--which still 
     continues--of big budget deficits.
       The United States is struggling with a deficit that now, 
     counting all levels of government including states and 
     municipalities, comes to about 2.2 percent of gross domestic 
     product. All of the other big industrial democracies have 
     bigger deficits--some of them much, much bigger.
       The budget deficit has become central to American politics. 
     It's the same in Europe, and more so because all of the 
     European Union countries have agreed to get their deficits 
     down as a condition of joining the common currency at the end 
     of the decade. Most of them clearly won't make it, and they 
     fear being shut out of continental prosperity. Just as 
     deficit politics is weakening the American president, it's 
     having the same effect in Europe. The most notable example at 
     the moment is France's new president, Jacques Chirac, who is 
     caught between economic reality and a series of unwise 
     campaign promises.
       The strongest political leader in Europe is Helmut Kohl, 
     Germany's chancellor, who has responded forcefully to deficit 
     dangers by slamming a heavy surtax on top of a tax burden 
     that was already high. It's to pay the costs of modernizing 
     formerly communist eastern Germany. Other presidents and 
     prime ministers don't have the advantage of a widely accepted 
     public need like that one.
       Here in the United States, the past 22 years' record 
     suggests that the country will coast along, weakened and 
     distracted by its budget troubles until they produce a real 
     financial crisis. Americans, and particularly American 
     politicians, are good at meeting crises. Nothing short of a 
     genuine crisis, it seems, can generate enough public 
     attention and concern to make a real solution possible and 
     return the federal budget to the small deficits of the years 
     before 1973.

  Mr. HOLLINGS. I thank the distinguished Chair.
  Summarizing, if you please, Mr. President, Mr. Anderson states that 
``from the late 1940's into the early 1970's, standards of living have 
improved faster than ever before'' in the history of this Nation. We 
had surplus moneys, and the only question was ``how best to spend the 
flood of wealth, private and public. . .'' And, as a result, we greatly 
increased Social Security, health care, Medicare, Medicaid and all 
these particular programs.
  Then Mr. Anderson goes on and says, now wait.

       Then, in 1973, the boom suddenly ended. . . (T)he oil 
     crisis had something to do with it, taking the dollar off the 
     gold standard had something to do with it. . . . The budget 
     deficit has become central to American politics.

  He cites how Europe has confronted this particular problem whereby 
the European countries have agreed that their deficits must be reduced 
as a condition of joining the common currency and, emphasizing, I 
quote,

       The strongest political leader in Europe is Helmet Kohl, 
     Germany's Chancellor, who has responded forcefully to deficit 
     dangers by slamming a heavy surtax on top of a tax burden 
     that was already high.

  Now, that is historic, having the media praise somebody for 
increasing taxes. Let me go to the concluding sentence here of the 
Anderson article that I included in the Record.
  And I quote:

       Nothing short of a genuine crisis, it seems, can generate 
     enough public attention and concern to make a real solution 
     possible and return the Federal budget to the small deficits 
     of the years before 1973.

  Now, my point here, Mr. President, is, we have a crisis right here 
and now. The gentleman says, ``Nothing short of a genuine crisis * * * 
can generate enough public attention.'' The only hope we have is to use 
the free media to reveal that crisis. The press corps absolutely refuse 
to do it. They continue to report deficits in the terms of what they 
call a unified deficit, which, contrary to the law, includes the 
borrowing from the trust funds.
  I can show you what I mean in article after article where $161.4 
billion is cited as last year's deficit. The true deficit was $283.3 
billion--because that is what you get if you subtract out your Social 
Security moneys, your civil service and military retirement, your 
Medicare and all the rest of the trust funds that you are going to have 
to pay back. And as of this minute, we owe the trust funds $1.255 
trillion.
  Now, under the Republican 7-year budget, we are going to use another 
$636 billion of Social Security moneys. So instead of owing Social 
Security $481 billion today, in 2002 we are going to owe over $1 
trillion all the while beating our breast and saying that we are 
balancing the budget.
  We have got to cut out the gamesmanship and get down to truth in 
budgeting. Mr. President, it is a heck of a note to have to write the 
Congressional Budget Office and ask, ``In accordance with the law, 
would you please cite the deficit?''
  On one day, they cite a surplus of $10 billion. Then when we asked 
them to comply with the law, they said, ``Excuse us, there is a deficit 
of $98 billion.'' Now they have corrected that little mistake and got 
it up to $115 billion.
  Just the other Sunday, I was listening to Mr. Russert on ``Meet the 
Press'' asking Mr. Panetta: ``Will you withstand those political 
charges and go along with this reduction in cost-of-living increases in 
order to balance the budget?''
  Going along, with lowering cost-of-living increases in Social 
Security, does not balance the budget. It enhances the Social Security 
surplus. He said time and again on that particular program to Mr. 
Moynihan.
  My point is that historically we have gotten into the hands of the 
Philistines. I saw this start back in West Virginia with our friend, 
President John F. Kennedy, when he was Candidate Kennedy. They never 
expected in West Virginia that upbeat Harvard graduate was going to 
best the populous Hubert Humphrey. But Jack Kennedy had Lou Harris and 
played all the hot-button issues like a Stradivarius.
  He came out on top, and then the rule of thumb came for all national 
elections, ``Get yourself a pollster.''
  Our trouble is that the media act in complicity with the politicians. 
They get irritated or annoyed if you try to explain an issue. They want 
a quick, pithy, confrontational answer to any particular item. They do 
not care about an issue, they do not understand it, and they continue 
to report what is not the fact, namely, that you are balancing your 
budget when they know otherwise.
  Mr. President, I ask unanimous consent that the budget table be 
printed in the Record.
  There being no objection, the table was ordered to be printed in the 
Record, as follows:

                                                  BUDGET TABLES                                                 
                                              [Outlays in billions]                                             
----------------------------------------------------------------------------------------------------------------
                                                                                           Gross                
               Year                  Government  Trust funds    Unified        Real       Federal       Gross   
                                       budget                   deficit      deficit        debt       interest 
----------------------------------------------------------------------------------------------------------------
1968..............................        178.1          3.1        -25.2        -28.3        368.7         14.6
1969..............................        183.6         -0.3         +3.2         +2.9        365.8         16.6
1970..............................        195.6         12.3         -2.8        -15.1        380.9         19.3
1971..............................        210.2          4.3        -23.0        -27.3        408.2         21.0
1972..............................        230.7          4.3        -23.4        -27.7        435.9         21.8
1973..............................        245.7         15.5        -14.9        -30.4        466.3         24.2
1974..............................        269.4         11.5         -6.1        -17.6        483.9         29.3
1975..............................        332.3          4.8        -53.2        -58.0        541.9         32.7
1976..............................        371.8         13.4        -73.7        -87.1        629.0         37.1
1977..............................        409.2         23.7        -53.7        -77.4        706.4         41.9
1978..............................        458.7         11.0        -59.2        -70.2        776.6         48.7
1979..............................        504.0         12.2        -40.7        -52.9        829.5         59.9
1980..............................        590.9          5.8        -73.8        -79.6        909.1         74.8
1981..............................        678.2          6.7        -79.0        -85.7        994.8         95.5
1982..............................        745.8         14.5       -128.0       -142.5      1,137.3        117.2
1983..............................        808.4         26.6       -207.8       -234.4      1,371.7        128.7

[[Page S15397]]
                                                                                                                
1984..............................        851.8          7.6       -185.4       -193.0      1,564.7        153.9
1985..............................        946.4         40.6       -212.3       -252.9      1,817.6        178.9
1986..............................        990.3         81.8       -221.2       -303.0      2,120.6        190.3
1987..............................      1,003.9         75.7       -149.8       -225.5      2,346.1        195.3
1988..............................      1,064.1        100.0       -155.2       -255.2      2,601.3        214.1
1989..............................      1,143.2        114.2       -152.5       -266.7      2,868.0        240.9
1990..............................      1,252.7        117.2       -221.4       -338.6      3,206.6        264.7
1991..............................      1,323.8        122.7       -269.2       -391.9      3,598.5        285.5
1992..............................      1,380.9        113.2       -290.4       -403.6      4,002.1        292.3
1993..............................      1,408.2         94.2       -255.1       -349.3      4,351.4        292.5
1994..............................      1,460.6         89.1       -203.2       -292.3      4,643.7        296.3
1995..............................      1,530.0        121.9       -161.4       -283.3      4,927.0        336.0
1996 estimate.....................      1,583.0        121.8       -189.3       -311.1      5,238.0        348.0
----------------------------------------------------------------------------------------------------------------
Source: CBO's January, April, and August 1995 Reports.                                                          




                                                    Year 2002 (billion)
1996 Budget: Kasich Conf. Report, p. 3 (deficit)..................-$108
1996 Budget Outlays (CBO est.)....................................1,583
1995 Budget Outlays...............................................1,530
                                                             __________

      Increased spending............................................+53
                                                               ==========
_______________________________________________________________________

CBO Baseline Assuming Budget Resolution:
  Outlays.........................................................1,874
  Revenues........................................................1,884
                                                               ==========
_______________________________________________________________________

This Assumes:
  (1) Discretionary Freeze Plus Discretionary Cuts (in 2002).......-121
  (2) Entitlement Cuts and Interest Savings (in 2002)..............-226
  (3) Using SS Trust Fund (in 2002)................................-115
                                                             __________

      Total reduction (in 2002)....................................-462
  Mr. HOLLINGS. You can see how the spending has gone up. For example, 
from 1995 to 1996, spending goes from $1,530,000,000,000 in spending to 
$1,583,000,000,000 in spending. In other words, while we say that we 
are cutting spending, in fact we have increased spending 53 billion 
bucks.
  Under the GOP plan we are supposed to cut $45 billion in spending 
this year. If you see in the last year of their plan you have to have a 
freeze of $96 billion, additional cuts of $25 billion--cuts in 
entitlements of $159 billion and interest savings of $67 billion, for a 
total of $226 billion--plus the Social Security trust fund of $115 
billion.
  Now those are a lot of facts and figures, but what I am saying is you 
have to have total reductions in 2002 of $462 billion. Let's get real. 
If you cannot, with a new group of freshmen spurring us to cut, get $45 
billion, how are you going to get $462 billion?
  That is why I told my colleague, the distinguished chairman of the 
Budget Committee, if this particular plan balanced in the year 2002, I 
would jump off the Capitol dome. There is no chance of that. They know 
it and I know it.
  In the Commerce Committee, for example, we have presumed to save $15 
billion. The truth is--and we all know it in the Commerce Committee--
that $4.5 billion of the $15 billion is already expended in the telecom 
bill.
  That has occurred in a lot of these other committees. In the Finance 
Committee yesterday, they have a mechanism for Medicare called BELT. 
You find out that the poor, the sick, and taxpayers in America are the 
ones that are going to be belted. That little phrase requires that if 
Congress comes in say $40 billion shy, they push off the heavy lifting 
on to the next Congress.
  I ask unanimous consent, Mr. President, that a chart which I compiled 
earlier this year with respect to ``The Realities on Truth in 
Budgeting,'' be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

           Hollings Releases Realities on Truth in Budgeting

       Reality No. 1: $1.2 trillion in spending cuts is necessary.
       Reality No. 2: There aren't enough savings in entitlements. 
     Have welfare reform, but a jobs program will cost; savings 
     are questionable. Health reform can and should save some, but 
     slowing growth from 10 to 5 percent doesn't offer enough 
     savings. Social Security won't be cut and will be off-budget 
     again.
       Reality No. 3: We should hold the line on the budget on 
     Defense; that would be no savings.
       Reality No. 4: Savings must come from freezes and cuts in 
     domestic discretionary spending but that's not enough to stop 
     hemorrhaging interest costs.
       Reality No. 5: Taxes are necessary to stop hemorrhage in 
     interest costs.

--------------------------------------------------------------------------------------------------------------------------------------------------------
                                               1996            1997            1998            1999            2000            2001            2002     
--------------------------------------------------------------------------------------------------------------------------------------------------------
Deficit CBO Jan. 1995 (using trust                                                                                                                      
 funds).................................             207             224             225            253             284             297             322 
                                         ===============================================================================================================
Freeze discretionary outlays after 1998.               0               0               0            -19             -38             -58             -78 
Spending cuts...........................             -37             -74            -111           -128            -146            -163            -180 
Interest savings........................              -1              -5             -11            -20             -32             -46             -64 
                                         ---------------------------------------------------------------------------------------------------------------
    Total savings ($1.2 trillion).......             -38             -79            -122           -167            -216            -267            -322 
                                         ===============================================================================================================
Remaining deficit using trust funds.....             169             145             103             86              68              30               0 
Remaining deficit excluding trust funds.             287             264             222            202             185             149             121 
5 percent VAT...........................              96             155             172            184             190             196             200 
Net deficit excluding trust funds.......             187              97              27            (17)            (54)           (111)           (159)
Gross debt..............................           5,142           5,257           5,300          5,305           5,272           5,200           5,091 
Average interest rate on debt (percent).             7.0             7.1             6.9            6.8             6.7             6.7             6.7 
Interest cost on the debt...............             367             370             368            368             366             360             354 
--------------------------------------------------------------------------------------------------------------------------------------------------------
Note.--Figures are in billions. Figures don't include the billions necessary for a middle-class tax cut.                                                

  Mr. HOLLINGS. Mr. President, I showed the cuts necessary at that time 
and showed that if you wanted to balance the budget without using the 
trust funds you had to increase revenues as well as cut spending.
  Governors pay their bills, mayors pay their bills, but not us in 
Congress and the President. We have no idea of paying the bills. We 
blissfully continue this one grand political charade, this one grand 
fraud.
  The only way I know to expose it is through the free press. Thomas 
Jefferson once commented that between a free government and a free 
press, he would choose the latter. You can have a free government, but 
you cannot hold it long unless you get a free press. But unfortunately, 
the free press here is a pollster press. In today's paper it says that 
the best of the best reporters were out eating supper instead of 
listening to the President's speech in Houston. They do not care. They 
get little snippets and stories, and you cannot get the truth. The 
truth is, Mr. Anderson, there is no crisis we are going to have to 
reach. We are in crisis now.
  We have spending on automatic pilot. Next year we will have to pay 
$348 billion in interest costs on the national debt. That is a billion 
dollars a day. If that is not a crisis, I don't know what is. We can 
straighten out Medicare, but we do not have to devastate the Government 
in doing so. Neither side, including the President, has a balanced 
budget. The Democrats do not have a balanced budget, and the 
Republicans do not have a balanced budget. So we should not act like 
there is a choice at the present time.
  The truth of the matter is that next year we will pay $348 billion in 
interest. They say you cannot avoid death and you cannot avoid taxes. 
Well, you cannot avoid interest costs. As such, 

[[Page S15398]]
you have tax increases on automatic pilot of $1 billion a day. That is 
the hemorrhage we have to stop. That is the real problem confronting 
us. And we are not doing it. We are arguing whether it is for the 
middle class or rich, and who is going to get the political credit. We 
ought to stop these shenanigans and get down to the business at hand.
  I thank the Chair.
  I suggest the absence of a quorum.
  The PRESIDING OFFICER. The clerk will call the roll.
  The assistant legislative clerk proceeded to call the roll.
  Mr. DOLE. Mr. President, I ask unanimous consent that the order for 
the quorum call be rescinded.
  The PRESIDING OFFICER. Without objection, it is so ordered.

                          ____________________