[Congressional Record Volume 141, Number 195 (Friday, December 8, 1995)]
[Senate]
[Pages S18286-S18287]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         THE ROLE OF GOVERNMENT

  Mr. PELL. Mr. President, I once more express reservations about the 
premise upon which we are proceeding in attempting to balance the 
budget in 7 years. I am mindful that both my party and the President 
have agreed to undertake this herculean task of reaching an accord 
where the difference between what the President has proposed and what 
the congressional majority seeks is pegged at some $730 billion in 
entitlement savings, discretionary spending levels, and tax cuts. While 
I fully support their determination to curb deficit spending, I remain 
skeptical of the specific objective they have set.
  With due respect for the Democratic leadership, I must express my 
continuing discomfort with the view that it is imperative that the 
Federal budget be balanced by a date certain. I have always believed, 
and continue to believe, that the Federal budget is not supposed to be 
in perpetual balance, but that as John Maynard Keynes wisely noted, it 
should remain a flexible instrument of national economic policy, 
registering a surplus in good times and engaging in stimulative 
spending in bad times. To insist on a balanced budget means requiring 
tax rates to be increased during a recession and outlays for such 
programs as help for the unemployed to be decreased. This is not a 
palatable solution, and it is one with which most economists would find 
fault.
  My views, I realize, are not widely held. Hence, I was most heartened 
to read the words of Robert Eisner, professor emeritus at Northwestern 
University and a past president of the American Economic Association in 
the Wall Street Journal of November 28. In an article entitled ``The 
Deficit Is Budget Battle's Red Herring,'' Professor Eisner states, and 
I most strongly concur, that balancing the budget is a ``brief 
armistice in a much larger war.'' What we are really engaged in is a 
fundamental disagreement about the role of Government in our lives.
  The real objective of the so-called revolution is the effective 
dismantlement of progressive government as we have come to know and 
benefit from for half a century. Federal spending on health care for 
the elderly, the poor, and the disabled is being drastically reduced. 
Cutbacks are contemplated in our investment in education, the 
environment, the arts and sciences, and foreign relations. These cuts 
typify the great differences in priorities and values which distinguish 
the opponents from the proponents of progressive government. And all of 
this occurs while we focus on that red herring, the balanced budget.
  Professor Eisner accepts the premise that government should provide 
activities and services that the private economy would not provide or 
would not provide adequately. And he recognizes that many of us believe 
that the programs developed over the last 50 years are ``indispensable 
both to stable economic growth and the social compact on which our 
economic system and our society depend.''
  Mr. President, I ask unanimous consent that the text of Professor 
Eisner's article be reprinted in the Record.
  There being no objection, the article was ordered to be printed in 
the Record, as follows:

               The Deficit Is Budget Battle's Red Herring

                           (By Robert Eisner)

       The agreement reached between President Clinton and 
     congressional Republicans to try to ``balance the budget'' by 
     uncertain measures in seven years is a brief armistice in a 
     much larger war. The war has very little to do with budget 
     deficits. What really concerns combatants on all sides--and 
     should concern the American people--is the role of government 
     in our economy and in our lives.
       The ``balanced budget'' slogan is thought to ring very well 
     with voters, so well that virtually all politicians find it 
     obligatory to say that they, too, are committed to it. In 
     fact, it is not clear that the ring is very loud; it is 
     quickly drowned out by the suggestions that achieving balance 
     might entail cutting health care and education or, generally, 
     eliminating programs from which our citizenry think they 
     benefit. Even less popular is an obvious solution for 
     deficits--raising taxes. Last year's deficit, already down to 
     $164 billion from the $290 billion of three years earlier, 
     would have been wiped out completely with 12% more in federal 
     receipts. The transparency of Washington's alleged concern 
     for budget balancing is revealed by the various proposals for 
     tax cuts that in themselves only increase deficits.
       The current argument is not about balancing the budget now 
     or even in seven years. It's about what to do to be able to 
     make a forecast that the budget will be ``balanced'' in 2002. 
     In January 1993, as the Bush administration was coming to a 
     close, its Office of Management and Budget forecast for that 
     fiscal year--already three months along--a deficit of $327 
     billion. That estimate turned out to be $72 billion in excess 
     of the actual deficit of $255 billion. So who can honestly 
     predict now what tax revenues and outlays will be in seven 
     years?
       The Congressional Budget Office projects 2.4% annual growth 
     in real gross domestic product and 3.2% inflation. The 
     Clinton administration's Office of Management and Budget 
     projects 0.1 to 0.2 percentage point more growth and 0.1 
     percentage point less inflation, and those differences would 
     so affect revenues and outlays as to reduce accumulated 
     deficits by almost $500 billion in seven years, and more than 
     double that amount in 10 years. By 2005, these flight 
     differences in projections would amount to half of the CBO-
     projected deficit. That suggests that raising the OMB 
     projected growth less than 0.2 percentage point and lowering 
     the projected inflation rate 0.1 percentage point more would 
     project a balanced budget by 2005 without any cuts in 
     government programs.
       Newt Gingrich insists that the budget projections must be 
     based on ``honest scoring,'' implying somehow that Bill 
     Clinton's OMB is dishonest. But who is to say which 
     projections are correct? Many private forecasters are more 
     optimistic, and an increasing number of economists--and this 
     newspaper's editor--even suggest that considerably higher 
     growth is feasible. Even a modest 0.5 percentage point more, 
     to 3% a year, would wipe out the deficit well within seven 
     years.
       But Sen. Phil Gramm gave away the game when he argued on 
     ``Face the Nation'' recently that a balanced budget that 
     would permit more government spending was unacceptable. No 
     deficit projections, accurate or inaccurate, should be used 
     as an excuse to avoid essential cuts in projected government 
     outlays.
       And that is the real issue--not deficits and debt but the 
     role of government. Conservative economists arguing for a 
     balanced budget have long made clear that it is not 
     deficits in themselves that concern them but the fact 
     that, given public aversion to taxes, preventing deficits 
     would hold down government spending. Voters would not 
     permit increased spending if it had to be financed by 
     taxes rather than painless borrowing.
       Of course, these conservative economists are right in 
     recognizing that deficits and an essentially domestically 
     held public debt such as ours are not a concern. As Abraham 
     Lincoln said in his 1864 Annual Message to Congress: ``The 
     great advantage of citizens being creditors as well as 
     debtors with relation to the public debt, is obvious. Men can 
     readily perceive that they cannot be much oppressed by a debt 
     which they owe themselves.''
       One thing a balanced budget would do is eliminate efforts 
     by the government to maintain private purchasing power. Such 
     efforts would entail cutting tax rates, or at least leaving 
     them unchanged, and raising government benefits, or at least 
     allowing them to grow in the face of business downturns. 
     Insisting on a balanced budget means requiring tax rates to 
     be increased during a recession and outlays of unemployment 
     benefits and food stamps, for example, to be decreased. Aside 
     from the misery that some of these actions might entail, they 
     would appear to most economists as exactly the wrong thing to 
     do.
       Government should provide activities and services that the 
     private economy would not provide or would not provide 
     adequately. Much of social insurance is in this category--
     retirement benefits and medical care for the aged, 
     unemployment benefits for the jobless and ``welfare'' 
     payments for those unable to work and their children. It is 
     perhaps not widely acknowledged, for reasons for electoral 
     politics, that the privatization that conservatives generally 
     favor would extend to Social Security.
     
[[Page S 18287]]

       A further role for government is to be found in the 
     funding, if not always the provision, of education. This 
     would include such federal programs as Head Start for 
     preschoolers; school lunches in primary schools; apprentice 
     and school-to-work programs in high schools; and direct 
     loans, scholarships and social service programs to facilitate 
     enrollment in colleges and other post-secondary institutions. 
     Government would appear needed to support the basic research 
     on which progress in new technology and health maintenance 
     ultimately depend. And efforts such as the earned-income tax 
     credit and job training to get more people to work and off 
     pure government handouts are also viewed by many, including 
     President Clinton, as very much in order.
       Republicans would generally reduce or eliminate these 
     programs and cut taxes, most heavily for those with high 
     incomes. They claim that this would help the economy and 
     hence ultimately make better off the poor and less fortunate 
     who have only been trapped in their worsening positions by 
     the government programs designed to help them.
       The current Republican revolutionaries would reduce or 
     eliminate government programs that have been developing since 
     the New Deal of the 1930s. To the new revolutionaries these 
     programs injure the workings of a free-market economy that 
     has contributed so much to our well-being. But to many others 
     they are indispensable both to stable economic growth and the 
     social compact on which our economic system and our society 
     depend.
       What we've been witnessing in these heated political 
     battles is not just posturing or boys fighting in the 
     schoolyard. There are fateful issues involved. But it is not 
     the deficit, stupid.

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