[Congressional Record Volume 142, Number 30 (Thursday, March 7, 1996)]
[House]
[Pages H1973-H1981]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




           CRIME OF THE RISE UNDER THE CLINTON ADMINISTRATION

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from Kansas [Mr. Tiahrt] is recognized for 60 
minutes as the designee of the majority leader.
  Mr. TIAHRT. Madam Speaker, this country is facing an increasing 
problem with youth violence and drug abuse. After 3 years of reducing 
the effectiveness of fighting against drug abuse, Mr. Clinton is trying 
to salvage his image by appointing a new drug czar. Despite the 
rhetoric, President Clinton has been unable to win the war on drugs.
  When President Clinton swore in his new drug czar, he said a lot of 
positive things against the country's battle against drugs. But let us 
not be fooled by President Clinton's claim to have made a sizeable dent 
in the war on drugs. If he had, we would not have such an increase in 
drug use and a decrease in drug arrests.
  According to Investors Business Daily, two articles, one by Matthew 
Robinson on September 11, 1995, and John Barnes, June 6, 1995, 
``President Clinton has failed to properly fight the war on drugs.'' 
DEA, our Drug Enforcement Agency, their arrests fell from 7,878 the 
last full year under the Bush administration to 5,279 in 1994 under the 
Clinton administration.
  Drug-related arrests, made in cooperation with overseas law 
enforcement agencies, fell from 1,856 in 1992 to 1,522 in 1994. 
Although 140 new DEA intelligence specialists were trained in 1992, 
zero were trained in 1994. President Clinton slashed the Office of 
National Drug Control Policy by 84 percent, cutting the staff from 116 
to just 25. He eliminated 355 DEA agents and 102 personnel from the 
Justice Department's organized crime enforcement task force.
  President Clinton dropped the drug issue from the top to the bottom 
of the National Security Council's list of 29 priorities.
  In a household survey on drug abuse, as shown on this chart, it was 
published in September 1995, the estimated number of 12- to 17-year-
olds who have reportedly smoked marijuana grew from 1992, 1.6 million, 
to 1994, 2.9 million. In the 14- and 15-year-old age group, it saw a 
200-percent increase in the use of marijuana.
  I have another chart that talks about how drug enforcement has been 
down under the Clinton administration. This depicts the number of 
Federal marijuana defendants, which has dropped 18.6 percent, in 1993 
it was 5,500, to 4,100 by 1995.

  Also, the prison time is getting shorter. In this chart, the average 
prison sentence for marijuana defendants is down 13 percent. In 1992, 
the sentence was 50 months. By 1995, it has dropped down to 43 months.
  It is not just confined to drug abuse, either, Madam Speaker. We have 
a problem with violent juvenile crime. The juvenile crime clock, which 
is published by Crime Strike, says that a juvenile is arrested for 
murder every 2 hours and 10 minutes; for rape, every 51 minutes; for 
robbery, every 13 minutes; and an aggravated assault, every 8 minutes.
  Juveniles are not tried as adults as often. Despite the increasingly 
violent nature of juvenile crime, as well as the increased number of 
juveniles involved, the percentage of juvenile cases referred to adult 
courts has actually declined. In 1984 it was 5.2 percent, approximately 
54,000 cases out of 1 million. By 1993, a decade later, the adult court 
referrals had grown to 61,000, approximately, but it was just 4.8 
percent of the 1.29 million offenders taken into custody.
  I believe the liberal Clinton administration is part of the basic 
problem. In our war on crime, the liberals have become soft on 
criminals, and it is making it hard for the rest of us. I think this is 
why many Americans are losing faith in our court system. One of the 
most recent examples is an appointee by President Clinton, Judge Harold 
Baer, a liberal judge in New York City.
  I have two articles I would like to refer to. One is in the Columbus 
Dispatch. It was published on February 5. It is entitled ``Outrage in 
New York.'' To give you kind of a background, I will just take some 
excerpts from this article.

       Judges routinely make close calls in dispersing justice. 
     Sometimes, though, a judge makes a decision so mind-boggling, 
     so dumb, that it makes people wonder what planet he is living 
     on.

  Such has been the case in New York City, where on January 24, U.S. 
District Court Judge Harold Baer, Junior, let a confessed drug courier 
walk free after police officers observed 80 pounds of cocaine and 
heroin being loaded into the trunk of her car. The mayor, the police 
commissioner, and nearly everyone else in New York is up in arms over 
this nonsensical ruling.
  I have a chart here that just kind of depicts how many drugs were in 
the trunk of that car when the arrest was made. There was 75 pounds of 
cocaine, and actually 4 pounds of heroin.

                              {time}  1945

  That was heading toward Michigan, according to the confession of 
Carol Bayless, who was at the wheel of the car. That is enough so that 
every school child in Detroit would have one dose of cocaine. This 
appeared to be an open-and-shut case, but in a bit of twisted 
reasoning, Judge Baer said that the officer had no reasonable suspicion 
to pull over Bayless. He excluded the drugs and the confession, a 
videotaped confession where Bayless admitted that she was paid $20,000 
to take the drugs to Detroit, something she had done at least 20 times 
before, either for her son or for other dealers. But this evidence was 
thrown out. No drugs, no case.
  Bayless was facing the possibility of life in prison. She whooped in 
celebration. If this was not bad enough, Judge Baer's written decision 
reeked with contempt for the police, particularly Officer Carroll who 
made the arrest, who has 10 years of experience on the street and a 
spotless record.
  Senator Daniel Patrick Moynihan, who got President Clinton to appoint 
Baer to the bench, has had some buyer's remorse, according to the 
article. He suggested Baer be sentenced to live in that neighborhood 
for a year to see if that would change his mind.
  Federal prosecutors are pondering appeal. They hate to overturn a 
judgment based on a subjective matter like reasonable suspicion, but in 
this case prosecutors should appeal, and the courts should overturn 
Baer's judgment and put Bayless on trial because justice demands it.
  On ``ABC World News Tonight'' at 6:30, February 8, eastern time, 
there was an article run. Part of it was talking about this same 
ruling. Part of the report said: ``Last month Federal Judge Harold Baer 
ruled that neither the woman's confession nor the drugs found in her 
car could be used in court because police lacked sufficient reason to 
stop her or search her car.''
  Here the police saw four men dumping duffle bags into the woman's car 
at around 5:00 in the morning and when the men saw the police, they ran 
away. This was not sufficient suspicion for Judge Baer, who wrote that 
in Washington Heights residents regard police officers as corrupt, 
abusive, and violent. Had they not run when the cops began to stare at 
them, it would have been unusual.
  Well, in Wichita, KS, the fourth district of Kansas, I think that 
type of behavior would have been reason to stop someone, and I think 
that the abuse that has occurred from the excessive amount of drugs in 
our society justifies having this ruling overturned.
  Mr. SHADEGG. Would the gentleman yield?
  Mr. TIAHRT. I would be glad to yield to the gentleman from Arizona.
  Mr. SHADEGG. I just listened to this story, and it kind of amazes me. 
If you would be willing to, I would like to enter into a little 
colloquy to see if I really understand this and see if we can flesh 
this out a little bit.
  You are telling me that the essence of this judge's ruling was that 
the

[[Page H1974]]

search, the stop made by the police and the search which led to the 
evidence which showed enough cocaine to give every single child in 
Detroit one administration or one dose of cocaine, the search led to 
that, they found that much cocaine and the judge threw it out. And the 
reason he threw it out is because for people to run from the police is 
normal conduct in that neighborhood, and does not justify the police in 
having suspicion that some criminal activity has gone on?
  Mr. TIAHRT. Yes, the judge felt that that was not reasonable 
suspicion. Let me just read through the facts of this case.
  Mr. SHADEGG. This is a city in America, and this is a judge now 
appointed by the Clinton administration to the Federal bench, and his 
decision is that when police look at somebody engaged in what they 
believe is strange activity, those people decide to cut and run, the 
police are not entitled to determine that there is something suspicious 
going on and make a stop?
  Mr. TIAHRT. Let us go over the facts of the case and then you can 
make a judgment yourself.
  Early in the morning on April 21st, I assume this is 1995, Officer 
Richard Carroll sat in his unmarked car staking out a street on 
Washington Heights known as a prime location for drug dealers. At 5:00 
a.m., it was early in the morning, he observed a double-parked rental 
car with Michigan plates.
  Four men walked up to the car without speaking to the driver. They 
put two black duffle bags into the trunk of this car. When they spotted 
the officer, they all ran off in different directions.
  Officer Carroll then pulled over the driver, Carol Bayless, again, 
searched the car, finding the cocaine and the heroin with a street 
value of at least $4 million.
  Subsequently, there was a videotaped confession where she said, yes, 
she knew what she was doing. She has done this 20 times before. It goes 
back to most people would probably consider running from the police 
some type of reason for suspicion. I think that is the way it is viewed 
in Wichita, KS, and I am sure it is probably viewed that same way in 
Arizona.
  I think it is just cause, and it probably shows why we have lost some 
faith in our judicial system when we have liberal judges turning loose 
criminals, confessed criminals, on what has been termed a technicality, 
or his term was, not enough reasonable suspicion to make this arrest. 
It is, I think, a poor excuse for why we are having problems turning 
criminals loose.
  Mr. SHADEGG. If the gentleman would yield, I would be happy to talk 
about some other points on this particular topic. And I do want to 
address this issue of illegal drugs and what has gone on in America 
since the beginning of the Clinton administration, but I just want to 
bring this one point home.
  At least in Phoenix, AR, we have told the police in my district that 
if you have a reasonable suspicion, you can stop someone and inquire 
into their activity. That is in fact the law in America.
  In Phoenix, AZ, if police see some group of individuals at 5:00 in 
the morning or midnight or practically any time of day, and upon those 
individuals recognizing them as police the individuals scatter and run 
in six different directions, that certainly would be for any judge in 
Arizona articulable suspicion and reasonable grounds for them to stop 
those individuals, to make an inquiry, to require them to produce some 
identification, and to find out whether or not criminal activity is 
going on.
  I, myself, signed a letter today calling for Judge Baer to 
immediately resign from the Federal bench.
  If you contemplate the society which he is calling for, it is a 
society in which the norm is citizens may run from police, and when 
police see them run, they are to assume, well, there is nothing wrong. 
I guess if we have understood what he said, he said, well, in this 
particular community the norm would be that it would have been strange 
if they had stood silent.
  I guess the standard Judge Baer is calling for is that if the 
citizens of that community see a policeman and they stand still or they 
continue what they are doing, then the police have the rights to come 
up to them and say, ``This is awfully strange. Judge Baer tells us that 
normal conduct would require that you run away from us, but we will 
require you to stay here. He thinks it's odd only if you do not run. 
Therefore, since you didn't run, we're going to ask you for 
identification and determine whether or not illegal activity is going 
on.''
  It is hard for me to believe that that is the standard set by a judge 
in America. It is hard for me, even further more difficult for me to 
believe that that judge has now been appointed by this administration 
to the Federal bench, and I can see why the good Senator would have had 
perhaps some buyer's remorse on this recommendation.
  Mr. TIAHRT. If we take a practical application of what Clinton's 
appointee, Judge Baer, would view, his view of America as you have 
expressed, suppose you are a common citizen and you are driving your 
automobile, and for some reason a policeman acknowledges that they are 
behind you by putting on their lights. The normal behavior, according 
to the Clinton appointee, would be for you to speed off and try to 
elude the police. I cannot imagine how dangerous our highway system 
would be every time a police officer attempted to stop someone for 
perhaps having a headlight burned out or an unsafe condition ahead 
where they would speed ahead.

  I think that Judge Baer here is exactly wrong. I think this 
exemplifies what is wrong with liberals in our judicial system, and it 
exemplifies why many people are concerned and frustrated by our current 
court system.
  There is another program that was thwarted by the Clinton 
administration, and it was a successful program. It was put in an 
article in the Policy Review written by Charles Molony Condon, who is 
the attorney general of South Carolina.
  While he was working as a circuit solicitor in South Carolina, he 
became aware of the problem that this Nation is having with crack 
babies, and he became aware of its through the Charleston Medical 
University of South Carolina's hospital. He said that he found out that 
about 1 in 10 children born nationwide has been exposed to cocaine in 
the womb, and this affects approximately 350,000 babies every year.
  The hospital, MUSC, the Medical University of South Carolina, said 
that they have seen bills reach $750,000 from crack babies, for one 
crack child. Most are born to welfare mothers, so Medicaid and the 
hospital end up picking up the bill. In one instance, the General 
Accounting Office had found that a single cocaine baby can run up a 
lifetime tab of $1 million in medical costs and educational costs.
  Mr. Condon decided that he would try to do something about it, and 
working with the hospital, they aggressively confronted pregnant women, 
talking to them about the consequences of their drug abuse. They were 
having trouble getting women to voluntarily seek help, but in this 
program they were given a choice: either seek drug treatment or face 
arrest and jail time.
  They did this over a 25-year period, and over that 25-year period 
they were able to see crack babies in this hospital going from 
approximately 24 per month down to about 5 to 6 per month. It was 
called an amnesty program and it had a very positive effect.
  But then in came the Clinton administration with allegations of 
discrimination and accusing the hospital of violating privacy rights. 
The Clinton administration, along with the ACLU, threatened to cut off 
the $54 million in Federal assistance that MUSC was receiving, which 
was about 60 percent of their annual budget. This boiled down to, 
according to the article, the Clinton administration protecting not the 
children but the right of the mothers to escape the consequences of 
their neglect.
  As reported by Health and Human Services Secretary Donna Shalala, 
South Carolina's crack baby program was discriminatory. But according 
to Charleston police Chief Rubin Greenberg, he said the program 
benefited the black community most of all.
  I want to quote from the end of this article. It says:

       One of the most basic responsibilities a mother has is to 
     her child. If a mother injected cocaine into the tiny arm of 
     her infant, causing permanent brain damage or death, 
     certainly that mother would be arrested and prosecuted. Yet 
     that is exactly what addicted mothers do when they consume 
     cocaine throughout their pregnancy. In South Carolina, we 
     tried to do something about it. The program we created was 
     working. Now it is no more. And as long

[[Page H1975]]

     as the powerful Federal bureaucrats continue to manipulate 
     Federal funding to serve a bizarre agenda that is deaf to the 
     cries of damaged babies, there is nothing more we can do. Why 
     is the Clinton administration stopping us from protecting our 
     children?''

  Here we have an effective program that was dealing with some of the 
core issues, some of the heart-rending problems that we are having in 
our society, unborn children being abused by drug abuse. They developed 
a program. It was being studied and sought out by other States, other 
States were looking at it as a model, and yet it was effectively shut 
down by the Clinton administration.
  I think that this program and others leave us puzzled. Why do the 
liberals in the Clinton administration oppose getting good sentences, 
allow criminals to be released, and when an effective program is in 
place, they move in with a force, with a vengeance, and shut down a 
program that has been successful.
  Even though we have drug abuse, especially through teenagers, it is 
not doing enough. I think we have not gone far enough. Overall drug 
abuse seems to be waning or being leveled off, but teenage drug abuse 
is up while enforcement is down.
  I think President Clinton has not only ignored the drug problem but 
he has actively hampered the efforts of drug control agencies. In 
February 1993, less than 1 month in office, President Clinton 
eliminated 83 percent of the staff at the Office of National Drug 
Control Policy. Continuing the abdication of leadership, the President 
also eliminated the drug testing program for the White House staff.
  Mr. SHADEGG. Would the gentleman yield?
  Mr. TIAHRT. I would be glad to yield.
  Mr. SHADEGG. I would like to make a few points here. I come to this 
Chamber as former assistant attorney general. I spent 7 years in the 
Arizona attorney general's office, in the fight against crime and in 
the fight against drugs.
  I think there are some points that need to be made that I am gravely 
concerned about. I am concerned about them because I am the father of a 
14-year-old daughter who is in junior high this year and next year will 
begin high school, and I am told that drug use will be prevalent and 
drugs will be available in every high school she can go to, no matter 
whether we select a private high school or a public high school.
  Today I want to compliment the chairman of the Government Reform and 
Oversight Subcommittee on National Security, International Affairs, and 
Criminal Justice, the gentleman from New Hampshire, William Zeliff. 
Today they released, and it will be made public 5 days from now, their 
``National Drug Policy: A Review of the Status of the Drug War in 
America.''
  Now, many people listening tonight might say, ``Well, we can really 
win the drug war in America,'' and they would make that argument. What 
this report shows and what is of grave concern to me is that one thing 
is clear. We may not be able to win the war against drugs, but when we 
surrender any effort to stop drugs, when we give up on that war, there 
are consequences, and I would like to talk about some of those 
consequences.

                              {time}  2000

  First let me talk about Arizona. In Arizona we are a border State. 
Seventy percent of all of the illegal drugs which come into this 
country come across the Mexican border. The efforts of Chairman Zeliff 
and of his subcommittee on which I serve could not be more timely in 
terms of Arizona.
  Let me talk about what is going on in my home State. Current use of 
all illicit drugs is up among public school students at both high 
school and junior high levels. The 1995 Substance Abuse in Public 
Schools Survey put out by the Arizona Criminal Justice Commission says 
that current use of methamphetamines, hallucinogens, and marijuana 
amongst high schoolers is at the highest level it has been since 1988: 
21.8 percent of all Arizona high school students reported using 
marijuana in the last 30 days; 16.8 percent of those students reported 
using marijuana within the last 10 days.
  Equally frightening, as the gentleman from Kansas has pointed out, is 
the link between this drug use and crime. The crime rate in Arizona has 
doubled, from roughly 19,000 in 1985 to more than 28,000 violent crimes 
by 1995.
  Ask yourself why. Why do we have this surge in violent crime? Why do 
we have this dramatic surge in juvenile drug use? Let me recite the 
record of the Clinton administration.
  First, upon taking office, President Clinton gutted 80 percent of the 
staff of the Office of National Drug Control Policy. He took the staff 
from 146 at the level when he acquired office to 25, an 80 percent 
reduction.
  One of the first announced goals of Attorney General Janet Reno was 
to reduce the mandatory minimum sentence for drug trafficking and 
related Federal crimes.
  The Clinton administration national security policy subsequently 
passed and the President signed a new directive ordering a massive 
reduction in Defense Department support for interdiction efforts.
  And, as we all recall, President Clinton's Surgeon General called 
repeatedly for serious consideration of drug legalization.
  We have a problem in this Nation. It is a serious one. It is one 
where we have abandoned the war on drugs. My friend the gentleman from 
Kansas pointed out early on that the President was AWOL in this fight. 
I think he indeed is AWOL in this fight.
  Almost a year ago, former First Lady Nancy Reagan came before our 
subcommittee and asked a very telling question. How could it be that we 
had gone from winning and making serious progress in the war to stop, 
at least to stop the ever increasing use of drugs by more and more of 
our children and the use of dangerous drugs? How could it be that we 
had in a span of just 3 years dropped so dramatically from significant 
success in that area to significant failure?
  Chairman Zeliff's subcommittee in the writing of this report held 5 
oversight hearings during 1995 to assess the status of the Nation's 
drug control strategy. While I will not belabor each of the points, 
some are worth making note of.
  First of all on March 9, 1995, Bill Bennett, a respected scholar in 
this area, a respected leader in this Nation, and the former drug czar 
and former Office of National Drug Control Policy Chief of Staff John 
Walters both testified, and I quote, if the drug use trends continue, 
by 1996 the Clinton administration will have presided over the greatest 
increase in drug use in modern American history.
  What has that led to? Let me cite just some of the sad statistics. I 
note that the President today has convened a conference to address this 
issue. I applaud him for that effort but I am concerned that it is only 
an election year effort.
  Casual drug use in America is dramatically up in virtually every age 
group and for every illicit drug, including heroin, crack cocaine, 
hydrochloride, LSD, non-LSD hallucinogens, methamphetamines, inhalants, 
stimulants and marijuana.
  Ask yourself why. For one reason, the nationwide street price for 
most illicit drugs is lower than at any time in recent history. It is 
because this administration reduced its efforts to interdict the flow 
of drugs into this country. It has also dramatically reduced its 
efforts to cut off source production.
  The potency of the drugs, the same drugs, particularly heroin and 
crack, is higher according to the nationwide survey than any time in 
recent history and nationwide drug-related emergency room admissions 
are also at an all-time high.
  It is a situation which has gone unnoticed by the press and which 
must not go unaddressed by our Nation. We are at risk of losing a 
generation of Americans and we must do something about it.

  I could cite a great deal of statistics. I am sure the gentleman has 
them of his own. For example, the nationwide Pride survey of 200,000 
students showed that 1 in 3 American high school seniors now smokes 
marijuana. There has been a 36-percent increase in cocaine use among 
students in grades 9 through 12 just since 1991 and 1992. Hallucinogen 
use by high school students has risen by 75 percent since the 1988-1989 
reporting period. Cocaine-related episodes in 1994 reached their all-
time high in U.S. history, a 15-percent increase from 1993 and a 40-
percent increase from 1988.

[[Page H1976]]

  These statistics cannot be ignored. It is time that the President 
address this issue. it is critical that the Nation do something about 
this. I think the statement of the gentleman from Kansas that the 
President has been AWOL, absent without leave, on this issue are 
exactly right. It is time that he did appoint a tough drug czar, it is 
time that we went back to working interdiction, it is time that we went 
back to examining the transit zone, it is time that we made a serious 
effort to go at source production in the source-producing countries. We 
know those countries. We had effective efforts before them to begin 
with.
  But more than any of that, it is time for this President to lead 
nationally, to set an example. He has to take the bully pulpit and talk 
about this scourge or he will be responsible for the loss of a 
generation of Americans to illegal drugs and their corrupting 
influence.
  Mr. TIAHRT. I could not agree more with the gentleman from Arizona.
  We have fundamentally three problems in the United States today:
  One is economic and that is where we are struggling to balance the 
budget. If nothing else we would create more jobs, and I think that is 
very important for people who are trying to rise out of poverty and get 
out of the situation where drug abuse is so prevalent.
  The second major problem is kind of our social structure, how we deal 
with people truly in need. Our welfare system needs to have the work 
ethic put back into it. Many people are trapped into a system that is 
hopeless. They cannot see a way of dealing with it. And so they resort 
to drugs to escape temporarily.
  One thing that we could do in our legislative process is get the work 
ethic back into the welfare system so that people can have hope. We 
have heard so much about self-esteem. But we cannot have self-esteem 
without accomplishment, and we cannot have accomplishment without work. 
It is so important that we get our work ethic back into our system.
  We also have got to provide opportunities for people as they rise out 
of poverty. That is why this Congress has supported increasing college 
loans. It is very important for the future of this country. But we must 
also, in order to effectively progress in education, eliminate the 
deadwood, like programs of Goals 2000, which has been largely 
ineffective. We spend hundreds of millions of dollars in the 
bureaucracy here inside the Beltway and do not educate one child. it is 
wasted money. That money would be more effectively spent by States 
directly in the classroom.
  But we also must look at our criminal justice system and how we deal 
with those who by their very violent acts and by their total excessive 
abuse and by pushing drugs on minors and young people, that we deal 
with them quickly and harshly.
  We must enforce the hot stove principle. When someone puts their hand 
on a hot stove, it does not take long to figure out that that is not 
the type of action that we want to follow up on or do again. So should 
our crime system be. That when someone commits an act that is not 
acceptable to our society, like pushing drugs to minors, like violent 
acts of criminals, then they should have quick and just punishment and 
not let it linger on. That is the second major problem and it is part 
of the social structure that we can deal with in some part through 
legislation.

  But the third problem in our society is a crisis of the soul, a 
problem of the heart. This is a problem, and this is not going to go 
away by spending more money on social programs. This country has spent 
since the 1960s $5 trillion on our social programs. Yet every social 
indicator that we have, drug abuse, violence, divorce, domestic 
violence, child abuse, is all getting worse. We have spent a tremendous 
amount of money.
  In order to make $1 trillion, one would have to make about $1 million 
dollars a day for 2,000 years just to get $1 trillion. It is a 
tremendous amount of money. People do not realize how much money that 
is. But yet we have spent it trying to increase the lot for people who 
are truly in need and it has been wasted. We must change the system.
  But in dealing with the crisis of the soul, the money is not going to 
be solving the problem. Instead, we are going to have to each take 
ownership of the problem and it is going to have to start with 
individual responsibility, inside our home.
  If we want a better family, we must be better spouses, better 
parents, spend more time with our children. If we want to have a better 
church, it is important that we be involved in the church, through 
attendance and through helping with classes like Sunday School. If we 
want a better neighborhood or a better community, we have to be a 
better neighbor. It is this type of ownership that is going to change 
the problem.
  There is a gentleman who owns a machine shop in Wellington, KS, just 
north of Wellington, KS. In about the mid 1960s, he grew tired of 
driving back and forth to Wichita, KS, where he had a job as a 
machinist at Boeing Company and he started his own machine shop. He had 
4 employees to start with. Now he is up to 200 employees.
  Last August I was in his brand new building which sits across the 
street from his original facility. In that building he has a machine 
that is 30 feet wide and 200 feet long. It sits on 21 tons of concrete. 
The surface which is stainless steel is totally flat. You can drop a 
marble or a ball bearing on it anywhere on that surface and it will not 
roll. It is a 3-spindle 5-axis machine, and it cost $7 million for him 
to procure the machine and get it placed in this building.
  As I looked at this machine, having come out of the aerospace 
industry, I asked him what parts was he going to manufacture on this 
machine. Bill Meredith is his name.
  He said, ``You know, I don't know at this point. I'm looking at 
several different things.''
  I was astounded. I thought, how is it that this man is successful 
when he does not even know what parts he is going to be running across 
this machine which costs $7 million?
  So I asked him, ``Bill, why is it you're so successful? Is it because 
you're willing to take the risk, to borrow $7 million and employ 
additional people? Or is it because you're on the leading edge of 
technology?''
  Bill said, ``It's really neither of that. It's not because I have 
borrowed the money or because I'm willing to take the risk. The reason 
I'm successful is because I have good people working for me.''
  I thought, that is probably the solution to our problems. We need to 
get good people involved in the process, to take ownership in the 
problems that we have in this country.
  In a book written by Marvin Olasky, who is a history professor at the 
University of Texas, called the Tragedy of American Compassion, he 
talks historically how we dealt with people who were truly in need over 
the years and how we used to require something from the people as they 
received benefits. The men would chop wood in the time when wood was 
used as a source of energy and women would sew or take care of other 
children and they learned to read and they got involved back in the 
system and it helped them rise out of their temporary position of 
poverty into successfully participating in society.
  What we have now too often is a situation where people have relied on 
the Government to provide for those truly in need. We pay taxes. It is 
the Government's problem. We have lost that ownership in solving the 
problems. Mostly it was charitable organizations that dealt with people 
who were truly in need. Now we have moved it to the Government and it 
has not worked effectively.
  In order for us to make that transition back to successfully moving 
people out of temporarily being poor as opposed to being caught in the 
welfare cycle, second and third generation being caught, get them 
involved in moving into a productive time, Marvin Olasky advocates each 
of us being involved, good people being involved.
  I think that that is what this country is going to have to do. We 
cannot rely on the Federal Government to solve our problems. We have a 
30-year history after spending $5 trillion proving that the system does 
not work. It is broke, it is anti-family, it is anti-work, it is anti-
property accumulation. It teaches the wrong example for a system of 
free enterprise. Each of us must answer the call and take ownership in 
the problem. If we do, I think that we will have a much better country.

[[Page H1977]]



                              {time}  2015
          DEBT, DEFICITS, AND BALANCED BUDGETS: THE TRUE DEBT

  The SPEAKER pro tempore (Mrs. Waldholtz). The gentleman from 
California [Mr. Horn] is recognized for 60 minutes.
  Mr. HORN. Madam Speaker, today I want to continue the discussion of 
the debt, deficits, and balanced budgets. This is a true debt speech. 
Some of the debt you hear about is only part of the debt. We are going 
to get into the unfunded liabilities again and what is really out there 
for ourselves, our children, and our grandchildren.
  ``Blessed are the young, for they shall inherit the national debt,'' 
said President Herbert Hoover in a statement made in jest over six 
decades ago. Today the young, the old, and those of us in between have 
a significantly lower standard of living than we should have.
  Why is that? Federal deficits and unfunded promises have eaten away 
at the investment capital, the seed capital, if you will, that America 
needs to grow.
  In the first chart here, we look at family income with and without 
deficits between 1980 and 1996.
  If Congress and the President for the last 26 years had run the 
country as most of us have run our family finances--matching what we 
earn to what we spend--an average family would have had at least $5,000 
more to spend each year; that is, roughly $100 per week. Or they could 
also have paid a lower rate of interest on their home and their car. 
With 2 percent savings in interest, a $100,000 mortgage payment on a 
house would be $2,000 less each year, or nearly $200 per month, and 
greatly improved family job opportunities would have resulted from 
that.
  The Federal Government deficits as well as unfunded promises, 
including the loan and credit guarantee losses experienced by the 
Federal Housing Administration, education loans, farm ownership, rural 
development loans and guarantees, insurance programs, including deposit 
insurance, the Pension Benefit Guaranty Corporation, the Federal 
Emergency Management Agency and its flood insurance, and potential 
losses from the government-sponsored enterprises have contributed to 
reducing our standard of living even though a lot of good is done by 
all of these programs.
  The intent of many Federal promises is good, but the overall result 
has been that Uncle Sam has made over $50 trillion, that is a ``t'' for 
trillion, in promises that we might not be able to afford, including a 
$4.9 trillion national debt, which is what we are grappling with this 
month, plus farm subsidy payments, inadequately funded civil service 
and military retirement, Medicare, Medicaid, an ever-widening variety 
of programs and other unfunded entitlements.

  New Federal promises have often produced costs adding to the debt and 
potential liabilities, and those costs have risen beyond their authors' 
wildest dreams.
  During the next several minutes I will explore the issues surrounding 
Federal debt, including the yearly Federal budget deficits, unfunded 
Federal promises, which together create the yearly deficits, and Uncle 
Sam's potential bankruptcy.
  Let us look a little bit at history. Ancient Athens, the world's 
first democracy, it prospered during the sixth century before Christ. 
Athenians had no notion of deficit budgeting or of a national debt. In 
brief, budgets had to be balanced. If expenditure exceeded income, then 
either revenue had to be increased or spending reduced.
  ``Prudent provision might build up reserves against rainy days,'' 
said Professor David Stockton, in his book ``The Classical Athenian 
Democracy,'' that was published by the Oxford University Press in 1990.
  Athens eventually fell to Sparta, but it was not because of any debt. 
Even though there was no notion of deficit budgeting or of a national 
debt in part of the ancient world, Rome briefly resorted to forced 
loans to the state during the Punic Wars. Coins, worth their content in 
precious metal, were the currency of ancient Rome and Greece. Printing 
of currency to finance governmental activities would be centuries away.
  In the modern era, government debt has achieved its full potential. 
As the economists noted, ever since King Edward III of England 
defaulted on his debt to the Italian bankers in 1335, international 
investors have fretted about the high levels of government 
indebtedness.
  A recurring theme throughout the history of the United States is that 
the Federal debt should be avoided. Thomas Jefferson, Andrew Jackson, 
the populists, Dwight Eisenhower, Ross Perot, and numerous others have 
decried excess Government spending.
  For instance, President Dwight D. Eisenhower, in his 1955 budget 
message, noted that ``one of the first problems of this Administration 
was to bring the budget under control.'' Jefferson, our third 
President, warned that the ``public debt is the greatest of dangers to 
be feared,'' and that ``debt and taxes were public evils of the first 
magnitude. They drained capital away * * * diverted it from productive 
enterprise, and supported a system of coercion, corruption and 
privilege that was the bane of every government and necessarily fatal 
to a free one.''

  Andrew Jackson believed that the national debt diverted funds from 
productive private uses into the unproductive ones of providing 
Government services, and taking from the poor to the rich. During the 
Jackson administration in 1835 and 1836, the Federal debt was actually 
paid off.
  President Martin Van Buren, Jackson's successor, found that the 
creation in time of peace and a debt likely to become permanent is an 
evil for which there is no equal.
  Even Franklin Delano Roosevelt, who led us out of the Depression of 
the 1930's, warned us about peacetime debt. Said Roosevelt, ``Let us 
have the courage to stop borrowing to meet continuing deficits. * * * 
Any government, like any family, can for a year spend a little more 
than it earns. But you and I know that a continuation of that habit 
means the poor house.''
  Our effort in this Congress is to stop big Federal deficits, and that 
effort has been supported for years and during most of his Presidency, 
by Ronald Reagan. He warned in his 1981 inaugural address that ``You 
and I, as individuals, can, by borrowing, live beyond our means, but 
only for a limited period of time. Why then do we think that 
collectively, as a Nation, we are not bound by that same limitation? 
For decades, we have piled deficit upon deficit, mortgaging our future 
and our children's future for the temporary convenience of the present. 
To continue this long trend is to guarantee tremendous social, 
political and economic upheavals.''
  What is past is prologue is chiseled on the front of the National 
Archives, located between Constitution and Pennsylvania Avenues in 
Washington. Ignoring our forefathers' warnings about debt and deficits 
is done at our own peril. What is past is prologue is a good guide. I 
recall one taxi driver who had an elderly lady he was touring around to 
see the sights of Washington. When she wondered what was meant by what 
is past is prologue, the driver translated it. He said, ``Lady, it 
means you ain't seen nothing yet.'' And that seems to be the situation 
we are in. How right that taxi driver was.

  The much complained about national debt under Franklin Roosevelt is 
minimal compared to the deficits run up based on 40 straight years of 
control of the House of Representatives by the Democratic majority. 
Balancing the budget, reducing debt and ending government deficits are 
part and parcel of the same economic theme. This theme has been played 
out within Congress and the White House every year regardless of party.
  In the 208 years since the adoption of the Constitution, the Federal 
Government has balanced the budget 105 times, a slight majority. 
Unfortunately, in this century, the budget has only been balanced 27 
times out of 96, and the last balanced budget was in 1969.
  Large budget deficits in the 1980's, and the 1990's have resulted in 
a soaring national debt. The debt will continue to rise precipitously 
even with the balanced budget initiatives recently enacted by Congress 
despite the veto of the Balanced Budget Act initiative by President 
Clinton.
  No matter how much of a spender the President is, he can not expend 
funds if we do not appropriate them. That is the difference between the 
Democratic and a Republican Congress.

[[Page H1978]]

  Federal debt, despite our efforts, will approach $6.7 trillion by the 
year 2002 when, if we reach final agreement with the President, we will 
have a budget with no annual deficit, and that equivalency of going 
from the $5 trillion national debt now to the $1.7 trillion more to 
reach $6.7 trillion by the year 2002 will cost over $25,000 for every 
man, woman and child in the United States.
  The Federal debt will continue to grow even after the budget is 
balanced in the year 2002, with the elimination of the annual deficit.
  And why is that? Because through accounting manipulation only part of 
the debt increases are recorded in either the President's 
recommendations, in his submitted budget, and the budget as finally 
approved by the Congress. Interest on Government trust funds, for 
example, is not included in the current budgets. That amounts to nearly 
$100 billion a year paid to the trust fund because the trust funds have 
been borrowed by Presidents, both Republican and Democratic, to give 
the illusion of reducing the annual deficit. Thus, the President's 
budget recommendation and the congressional budget hide the Federal 
trust fund yearly increase, and between 1991 and the year 2000, this 
will amount to over $1 trillion addition to our national debt.

  In 2002, after the so-called balanced no-deficit budget has been 
achieved, assuming the President signs off on it in the next few 
months, budgetary surpluses using the current checkbook budgeting 
mechanism will have to exceed $100 billion each year to end the 
increases in the national debt.
  Current debt management procedures are akin to a homeowner not 
recognizing the interest expenses on the home mortgage. After 30 years, 
the heirs will discover that accumulated interest expenses exceed by 
many times the home's purchase price.
  If we are going to continue our imprudent policies, then your 
grandchildren will have to pay for them. Imagine, your grandchild in 
the year 2050, which might seem a long way away for many, but it is 
right around the corner once you hit your 20's and the world goes 
faster and faster; let us say the grandchild in 2050 is ready to 
retire, and instead he is told, ``Your grandfather and others left this 
debt for you to pay. You cannot retire now. In fact, you own over 
$200,000 in interest and other liabilities.''
  Since 1970, the massive runup of the Federal debt has had no 
precedent in peacetime America. Major increases in Federal debt 
occurred during the Revolutionary War, during the War of 1812, during 
the Civil War, and certainly during the First World War and the Second 
World War, and of course the cold war which followed.
  As the Constitution took effect in 1788, the debt had risen to $73 
million for the cost of fighting the American Revolution. Just before 
the War of 1812, the debt had actually decreased to $45 million. 
Deficits during that war resulted in the debt increasing to $127 
million by 1815. In 1835, a Federal debt was paid off with a surplus, 
and with a surplus, an extensive debate occurred as to how that surplus 
might be returned to the people and to the States.

                              {time}  2030

  The Civil War saw the end of that talk. The debt increased from $65 
million in 1860 to over $2.7 billion by 1866 to fight the bloodiest war 
in our history.
  The debt declined to $1.2 billion just before the First World War. In 
only 2 years during that war--America's first real entry into an 
international conflict--the Federal debt rose by almost a factor of 10, 
to $25.5 billion.
  Between 1932 and 1940, during the presidency of Franklin Roosevelt, 
the Federal Government ran annual deficits between $2 billion and $4.3 
billion. With the start of the Second World War, deficits increased 
dramatically to approximately $50 billion per year between 1943 and 
1945 as the war grew to a peak in the production of armaments. By 1946, 
the national debt had reached $270 billion.
  In the 1950's, the budget was balanced three times, and in the 
1960's, it was in balance only once. Our budget has not been in 
balance, as I mentioned earlier, since 1969, the last year of the 
Johnson administration, the first year of the Nixon administration. 
Large deficits were run up in 1959 at the end of the Eisenhower period, 
almost $13 billion. In 1968, the end of the Johnson period, we had $25 
billion.
  During the 1970's, the early 1980's, large deficits in the $20 
billion to $80 billion range were experienced annually. From 1982 to 
today, deficits have averaged over $200 billion per year.
  Now the bad news. The yearly deficits as reported in the recommended 
presidential and ultimately enacted in the congressional budgets are 
only a part of the story. The total debt increase each year nears $400 
billion, when you include the interest paid on those Federal trust 
funds which I mentioned earlier. That is a cost per family of almost 
$4,000 per year.
  Our national debt is a Federal liability or a promise to pay to the 
people that hold the bonds that are needed to be issued to manage that 
debt. It is the link between Federal liabilities and budget spending 
and revenues. Other Federal promises or liabilities often reflect 
Government spending decisions, but the debt is the single-most 
important link between governmental decisions to spend and governmental 
reluctance to collect needed revenues, taxes, to cover the 
expenditures.
  The arithmetic of Federal deficits is very simple. Regretfully, it is 
an easily understood subtraction. Each year since 1969, the last year 
the budget was balanced, the Federal Government has spent more than it 
has received in revenues. Thus, yearly revenues minus spending equals a 
surplus, or, if spending has exceeded revenues, a deficit. The excess 
spending has obviously resulted in an annual deficit. So we have the 
yearly deficit plus last year's debt, plus the interest on the trust 
funds, equal what is really the national debt of the United States.
  Congress in its budget resolution projects that the debt will reach 
approximately $6.7 trillion by the end of fiscal year 2002. At that 
rate, interest will consume over 20 percent of the Federal budget by 
2002, up from 3 percent in 1955.
  As I recall, the first time we had a $100-billion, operational budget 
was 1965, the height of the Vietnam War during the Johnson 
administration, the beginning of the domestic Great Society. Now, that 
$100 billion ran the whole government and ran a war abroad that was a 
very difficult war. And yet that is what we willy-nilly provide as 
interest on the debt. Essentially what we pay for interest today is 2 
Johnson administration years at their height. That is our cost to 
manage the national debt of today.
  The debt has increased 600 percent since 1980. It will go up another 
$1.7 trillion between 1996 and the year 2002. Since the founding of the 
Republic, few issues have received the continuing attention that the 
annual Federal deficit and increasing national debt have attracted. 
Until this century, Federal deficits have been scrupulously avoided in 
peacetime. It has only been since the 1930's that Federal deficits have 
become commonplace.
  Some blame the English economist John Maynard Keynes. Keynes stressed 
that in order to revive a depressed economy government should spend 
more than it received in revenue in time of unemployment. When the 
economy was prospering, however, the debt added to regain prosperity 
would be reduced by increased taxation during that now new prosperity.
  President Franklin Roosevelt understood very well the first part of 
the Keynes theory of unemployment, the spending part, that would reduce 
unemployment. But he failed to adhere to the second part--the 
recoupment part--of recouping what you spend to get the economy moving 
again in better time.
  When the economy was booming and there was full employment stimulated 
by the Second World War, Government should have financed our armaments 
through increased taxation on individuals and corporations. Instead, 
the Government took the easy way out; it issued Government bonds. Those 
are the bonds on which we pay interest and which we use to manage the 
national debt.

  Most legislators obviously do not want to raise taxes. That is not a 
popular thing to do. So your only other choice is to cut spending. Most 
Presidents do not want to recommend new taxes. So both the Congress and 
the President, since the Great Depression of 1929, have to accept blame 
for the

[[Page H1979]]

current $5 trillion national debt. But mostly the Congress over the 
last 40 years has to accept it because, very frankly, the President 
cannot spend a dime unless Congress appropriates it or by back-door 
spending authorizes a blank check which the President can use any time 
of night or day.
  Federal deficits and debt run counter to American thriftiness. The 
``penny saved is a penny earned'' ethic is a vital part of our American 
heritage. Most of the children's stories of the 19th century stressed 
that work ethic, that ethic of a penny saved is a penny earned. We all 
know the children's story about the wise ant who prepared for winter by 
storing up on food and doing one's duty to one's family, and the 
grasshopper that blithely played and played and did not work and simply 
did not save a thing. Of course, the grasshopper had problems. The 
grasshopper froze during winter. If the grasshopper did not starve to 
death, perhaps the ant was charitable enough to provide food through 
the bad times of the storms.
  Thrift has guided our day-to-day living for many generations. Today 
Americans are demanding that the Federal Government practice thrift as 
we practice it in our families, in our businesses, in our schools, in 
our religious institutions. It is clear to most Americans that we must 
stop spending more than we take in. We must reduce taxes, and we must 
keep Federal programs that work and get rid of those that do not work.
  When will we see Federal budget makers practicing good old American 
thrift? Not until Congress and the President have the will to cut more 
spending, reduce taxes, and, thus, balance the Federal budget.
  This Congress has the will. A majority of us have the will. It 
remains to be seen if the President has the will.
  There is both good and bad news about America's debt and deficits. 
The good news is that this Republican Congress has turned away from 
deficit spending. By our votes in committee and in the full House of 
Representatives, we have cut spending and reallocated funds among 
programs. We have eliminated programs.
  The President claims he wants to cut spending, but he has vetoed 
several appropriations bills that did cut spending. Republicans, 
through our continuing resolutions, CR's, as they are called, have 
continued on the path to a balanced budget by the year 2002 or sooner.
  We have done that without passing a balanced budget amendment to the 
Constitution. We passed it in this House. We had the two-thirds vote. 
We had a number of Democrats join us on that. We could not pass it in 
the Senate by one vote because about eight members of the Democratic 
Party who promised their constituents they would vote for that 
constitutional amendment did not vote for the balanced budget 
amendment.
  The Congressional budget for the fiscal year 1996 requires that the 
Federal budget be balanced in 7 years. In his preliminary year fiscal 
year 1997 budget, President Clinton has jettisoned budget deficits of 
$200 billion for a budget surplus by 2002.
  The bad news is that waiting until 2002 to end the deficits by 
balancing the budget will add $1.7 trillion to the national debt. That 
will ensure, at a 5-percent interest rate, $85 billion in additional 
yearly interest payments. In order to manage the national debt, which 
is steadily rising from $5 trillion to nearly $7 trillion over the next 
few years, we must engage in hard choices and we must set priorities. 
We cannot do all the things we have been doing. It is simply not 
prudent.
  The test of our political system will be whether it will jettison the 
debt and the deficit strategy of the past 50 years and adopt an 
economic growth strategy that will ensure our children and our 
grandchildren's economic future.
  Why is it better to balance the budget sooner rather than later? The 
sooner the rise in the debt is stopped, the better is the chance that 
America will enjoy healthy economic and social growth. Family incomes 
would increase by many thousands of dollars if the budget is balanced 
sooner rather than later.
  Our Nation's economic health is at stake. Our Federal Government's 
health and the economy will depend on how well we manage our debt and 
the potential liabilities and promises, such as those in welfare, 
Medicare, Medicaid, and Social Security, among others.
  The members of the Social Security System deserve better than they 
have received. They deserve a better investment strategy than has been 
used for the last few decades.
  Growing Federal debt is like a fever. The higher it gets, the sicker 
the patient.
  Let us take a look at a chart that reflects the economic fever of a 
number of countries. In Europe, an economically healthy government is 
defined as having a government's debt to the gross domestic product--
some of us grew up calling that the gross national product--ratio of no 
more than 30 percent of debt to GDP. The national debt of the United 
States to gross national product ratio is 70. Belgium and Italy have 
the highest debt to GDP ratio in Europe, namely 142 and 125. They have 
a very bad fever.
  As the fever debt to GDP ratio goes up, a nation's output goes down. 
Economists estimate that doubling the current fever level of the United 
States would reduce our country's input by 6 to 12 percent. But, more 
important, as the fever rises, investor confidence falls. There is a 
limit to how much debt investors are willing to hold in Federal bills, 
notes and bonds. As the debt goes up, the risk of default goes up.
  At some point, domestic and foreign purchasers of our debt will begin 
liquidating their holdings. Disaster could strike with interest rates 
skyrocketing and the stock market falling in a panic. That will not be 
the first time or the last.
  The economic psychology could mean depressed investment, reduced 
output, declining family wages, with parallel reductions in household 
spending.
  In addition, the exchange rate declines as investors sell dollars. 
Widespread bankruptcies would occur. Even a Government default could be 
possible.
  With all this, we would be in the middle of a financial and economic 
disaster.
  Looking around the world, those nations--a few of them called the 
little and big tigers, as you know--that are economically the 
healthiest, have very low economic fevers. Let us name a few: 
Singapore, Chile in Latin America, the Republic of China on Taiwan, 
Korea, Hong Kong, Thailand, Indonesia, Malaysia. They all have low debt 
to gross domestic product ratios.

                              {time}  2045

  And guess what, these are the countries that over the last quarter of 
a century have had deficits which were less than half of those in other 
countries. The net result of budget surpluses is a stable well-valued 
currency, interest rate stability, and single digit inflation.
  Let us look at the weaker dollar and what that means for this 
country.
  Over the last few decades the dollar has crashed against the German 
mark and the Japanese yen, as foreign exchange traders around the 
world, continue to show their concern about governments with large 
debts including Mexico, Italy, France, and even Orange County, CA. The 
foreign exchange traders are shifting their anxiety to the United 
States as a whole.
  We are being taken to the woodshed by the world's foreign exchange 
managers for excessive debt and excessive promises. Historically this 
is surprising. As noted earlier, throughout most of America's history 
our political leaders have clearly opposed an increase in peacetime 
debt.
  Economists for the most part agree that Federal borrowing, over the 
last 25 years, has led to higher interest rates. Higher interest rates 
cost consumers dollars, dollars that they could have used to advance 
the good of themselves, their families, to provide for education and to 
provide for better housing whatever. For instance, a 1-percent increase 
in interest rates costs a family obviously $1,000 each year for every 
$100,000 in mortgage payments.
  If the Federal Government had balanced the budget each year since 
1980, the debt would be one-fifth of what it is today, or $1 trillion, 
not the $5 trillion that faces us during this month as we seek to raise 
the debt ceiling to manage that debt. That level of debt would have 
left trillions of dollars available for productive private sector 
investment. Balanced budgets would have 

[[Page H1980]]

meant more business investment, thus more jobs and more personal 
savings. The result would have been more revenue for Government since 
the economy would have been in good health and productive, and 
Government could have pursued relevant taxes on that economy, and the 
fever would be very low.

  Americans have over $12 trillion in corporate and individual debt 
outstanding. Just a 2-percent reduction in interest rates means a 
savings of roughly $240 billion or nearly $2,600 on average, for every 
American family. Alan Greenspan, Chairman of the Federal Reserve, has 
told congressional committees that a balanced budget--or assurance that 
we are on a glide path to a no deficit budget which would be credible--
would mean if done by 2002, a drop of 2 points in interest for the 
citizen. If you had an 8 percent mortgage, it would be a 6 percent 
mortgage. If you had a 10 percent interest on your consumer debt, it 
would become an 8 percent interest rate. If you had a student loan, you 
would save money and so on. Federal deficits mean lower investment, 
consumption, and savings.
  Personal savings are vital for citizens' retirement, for home 
purchases, for education, for health care expenses, as well as for the 
Nation's economic growth and development. Excessive Federal debt is 
cheating our citizens, it is cheating our children and our 
grandchildren out of a higher living standard by providing them with 
less money to save, less money to consume, less money to invest.
  Today, a rising Federal deficit has cheated the average citizen out 
of the opportunity to save, to consume, or to invest thousands of 
dollars since 1969. It is much more desirable for the average family to 
be able to choose among alternative goods, or to choose to save or not 
to save as they might desire. Business investment has suffered the same 
consequences--less money to save has led to less money for business 
investment. What does this mean? It means fewer jobs and lower profits.
  Now let us talk about hot money.
  The Federal debt and the unfunded promises are mostly hot money. As 
noted above, hot money are the dollars stolen from future generations. 
It is the benefits that Members of Congress and the President have 
often agreed upon in order to assure their reelection.
  This hot money expended over 25 years has significantly lowered each 
American family's standard of living. Hot money not only breeds 
intergenerational inequity, it also is simply reckless money in that it 
encourages those types of political programs and political payoffs. It 
is unjust by cheating taxpayers with higher interest rates, and it has 
immoral consequences in that it cheats the poor and the middle class 
out of jobs.
  Let us talk about the lower standard of living that results. 
According to Martin Feldstein, the President of the National Bureau of 
Economic Research, the costs of the last 16 years of deficits to an 
average American family has been a loss of $500 per month. With this 
$500 loss each month, you family could have bought a nice car, could 
have bought a house perhaps worth $50,000 more than the one you live 
in, could have paid for your children's college education, could have 
paid a lot of hospital bills.
  For each of the last 26 years of Federal deficits, which has led to a 
weaker dollar, which has led to higher interest rates, it has led to 
lower investment and lower savings. The result is a lower standard of 
living for the average American family.
  Trade deficits and the Federal debt are increasing. Federal debt and 
international trade deficits are the two major constraints limiting 
private investment. Thus, economic prosperity is closely tied to the 
Federal debt. Government surpluses are a key factor in increasing 
prosperity and raising the standard of living.
  When does Government debt become excessive? Well, debt by itself is 
only a partial measure of whether Government fiscal policy is 
sustainable.
  After the Second World War the United States and Great Britain had 
debt to gross domestic product ratios of 114 and 260 percent 
respectively. Winning the Second World War was absolutely crucial for 
democracy. By 1974, the United States had an economic fever, a debt to 
GDP ratio, reduced to roughly 34 percent for the gross Federal debt and 
25 percent for the publicly held debt. What really counts is keeping 
the peacetime debt, the economic fever, very low. A high debt growth 
rate, a rising fever, foreshadows fiscal difficulty.
  Today, besides the United States, Sweden, Italy, and Canada, several 
other so-called developed countries have rapidly growing national 
debts. Italy has one of the world's largest debts. Financial markets 
have penalized Italy for its growing debt by demanding a 5 percent 
premium on Government bonds, and this is just the beginning. The 
economic penalties for large debts can include insolvency, hyper 
inflation, illiquidity, depression, broken promises to pensioners and 
tax rate increases, and, needless to say, when you sum it up, it is a 
greatly reduced standard of living for all concerned.
  When I talk to my constituents back home in the Long Beach to Downey 
area about the Federal budget, they often wonder why we here in 
Congress cannot balance the Federal budget this year. They reason that 
their family, their business and their State and local government with 
which they are familiar in a similar position would be able to balance 
the budget in a year or maybe two at the longest.
  Let us look at the Federal deficit as an average American family 
might look at it if it was their deficit. If the Federal Government 
were an average American family, it would be earning $40,000 a year and 
spending $44,000, running a 10 percent of $4,000 yearly deficit. 
Cutting back spending by $4,000 or $350 per month could be accomplished 
with some minimal financial pain by most families.
  For instance, a family might decide to vacation at a local beach 
instead of at Disneyland or family members may decide to reduce their 
premium cable channels and their lottery ticket purchases. A new car 
purchase might be delayed for a year.
  The point here is that a 10-percent cutback in spending is not 
inconsequential, but it would have only a short-term impact on 
lifestyle. If it were the average family, the Federal Government would 
run about a 10-percent deficit of this year's congressional budget 
resolution.
  This same budget resolution balanced the budget over 7 years. This 
seems like a long time to me and many others and certainly to most of 
my constituents. The Federal dollar chain, as you look at it, and it 
gets a little complicated, it has several links which, as in many 
chains, are interrelated. The Federal dollar chain is 75 years long. It 
begins with today's taxes paid by each citizen; that is the purple part 
of the chart, and ends with social security promises to the 18 year old 
just entering today's work force. That 18 year old will probably live 
to be a 93 year old. These links also relate to what the Government 
owns. Those are the assets, the Federal revenues, income received by 
the Federal Government and over 1,300 Federal spending programs and 
accounts. Like all chains it is only as strong as its weakest link.
  The Federal dollar chain links are very critical to each other. Weak 
links limit the capability of the Federal Government to meet the needs, 
pay for the promises and perform at peak efficiency. At the top of the 
Federal dollar chain is the U.S. net worth, the black link. Attached to 
this link are assets in green and promises liabilities in red and the 
last promise in red, the link, is to the national debt.
  The debt, as I noted earlier, is the result of very simple 
arithmetic. Revenues in purple minus spending in yellow. Revenues in 
purple and spending in yellow are what we often focus on here in 
Congress. Today the link between net worth, national assets and 
promises or fiscal liabilities to spending and revenues is critical in 
our examination of what is the true national debt. Our true national 
debt, the sum of all Federal promises, including our yearly deficits, 
is overwhelming us. It is time that Government starts using a balance 
sheet to track its long-term promises. These promises must be matched 
with assets. Government's ability to pay for promises can be predicted 
by how they match up with various Government assets.
  Now most of these assets you obviously cannot sell and you do not 
want to sell. We do not want to sell any national parks or anything 
like that. But

[[Page H1981]]

we have to take a very careful look at public land and other aspects 
and see if it is not of recreational cultural historical heritage 
value, could there be some investment there that helps us reduce the 
debt. It might be minimal, but it is more than we are doing now.
  Today the Federal Government's elected Representatives and the 
President focus almost exclusively on this year's income, the revenues 
from the taxes, and its expenses, the outlays. Little consideration is 
given to long-term promises and how they will be paid. Promises have 
been made to fund entitlements; that is, mandatory spending such as 
Social Security, Government workers' retirement benefits, veterans' 
pensions, black lung programs, Federal workers' compensation, and 
welfare and unemployment benefits. Over a 25-year period these promises 
are estimated to total nearly $25 trillion according to a study 
completed by citizens for budget reform drawing on data from the 
Department of the Treasury's financial management service and other 
Federal and credible private sources. These entitlement programs are 
nearly 49 percent of the Federal Government's long-term liability. What 
about the other 51 percent?
  Other promises include Federal insurance, deposit insurance for 
banks, flood insurance administered by FEMA, the Federal Pension 
Benefit Guarantee Corporation. That amounts to about $5 trillion; those 
and similar comparable entities total 11 percent. Health includes 
Medicare which is roughly $10 trillion in financial liabilities. That 
totals 19 percent. Government-sponsored enterprises such as Fannie Mae, 
Fannie Mac, all the Federal home loan banks total $1 trillion or 2 
percent. Loans and guarantees in general amount to another trillion 
dollars or 2 percent.

                              {time}  2100

  The national debt is the direct link between the long-term promises, 
the liabilities, and income and expenses. Every year since 1969, the 
last year we had a balanced budget, Federal expenses have exceeded 
Federal income, the revenues.
  Fiscal discipline, balancing budgets, reducing promises, are key 
features for restoring our Nation's economic health and assuring our 
Nation's future prosperity. Typically, Government budget deficits 
reduce savings. Lower individual and corporate savings are a prelude to 
less investments and falling exports. Investment falls because reduced 
savings and the limits of them limits the amount of loanable funds, 
pushing the interest rates up. Exports are reduced because rising 
interest rates cause the dollar to rise in value. In the end, trade 
deficits lead to money being taken out of the United States.
  Over the long haul, the Nation's capital stock declines with lower 
investment. The net result here is less productive capacity, and the 
Nation's output declines. As investment and capital are crowded out, 
productivity grows slower and slower, and real wages decline more and 
more. The bottom line is very simple: The people earn less. A most 
disturbing trend occurs as assets are reclaimed by foreigners.
  Each of us has less and is left with less as foreigners earn our 
interest, collect our rents, earn our profits. Balancing the Federal 
budget must be combined with policies that simplify and reduce both 
individual and corporate taxes, establish adequate currency reserves, 
provide for an open economy, allow imports and foreign competition, 
strongly support American exports, provide domestic economic stability, 
and reform Federal insurance programs, the retirement security system, 
and the various health systems.
  When the Federal Government makes a promise, it should be kept. 
Promises made, promises kept. We have heard a lot of people make 
promises. They have not kept them. Many of us have tried to keep them, 
and have kept them.
  Through our oversight program in Congress, we must review every 
single program for not only its economy and its efficiency, but we also 
must assure that our customer, you, we, the taxpayers, secure what was 
promised. This is a very tall order. It is clear that for the United 
States to remain the world's major economic, military, and political 
leader, it must lead with fiscal policies that provide for a balanced 
budget. It must adopt policies that encourage economic growth and 
opportunity for all of our citizens. The Federal Government should not 
spend more than the sum of what it has, and what it can raise from 
future generations.

  The benefits of deficit reduction are in the long-term. The currency 
of the United States is strengthened. Domestic interest rates are 
reduced. Federal bond rates decrease. The standard of living for all 
American families will rise. Savings increase. Investment increases. 
Foreign trade deficits over the long-term decrease. More and better 
jobs are created.
  What must really be done to ensure that these benefits result from a 
prudent fiscal policy approved by Congress, and hopefully by the 
President? We need to balance the budget as soon as possible. If it is 
2002, fine.
  Some of think we should have balance the budget faster. We need to 
reduce the Federal interest payments as a percentage of the gross 
domestic product. We need to decrease Federal spending, keeping high 
priority programs, getting rid of low priority programs. In this, the 
average citizen, the consumer of Government services, the taxpayer, 
ought to be involved in telling us which programs are working 
satisfactorily and which ones are not working satisfactorily.
  We need to give tax reductions as the budget surplus kicks in. We 
need to match long-term promises to what the Federal revenues will be. 
Balanced budgets, reduced debt, should be sought with the following 
outcomes in mind. These outcomes should include increased levels of 
personal consumption, higher savings rates, reduced Federal Government 
spending as a percent of gross domestic product; in brief, more money 
in the pockets of the average American citizen, the American middle 
class, the working people of this country.
  We need to greatly reduce unemployment rates, with a special emphasis 
on young and minority populations. That is the proper investment 
policy, where the individual citizen can invest, where corporations, 
business--small and large--can invest. It is investment which 
stimulates the economy. We will hire more people. The result will be 
productive economy.
  I was tremendously impressed in listening to Governor Engler of 
Michigan delivered his State of the State address. He said that if 
every Michigan business hired one more individual, then the 
unemployment roll in the State of Michigan would be eliminated. That is 
probably also true for the State of California. But first we must have 
incentives to encourage entrepreneurship.

  Significant increases in economic growth throughout the Nation and 
throughout urban and rural America are absolutely essential. That will 
be one of the results of a prudent fiscal policy that balances the 
budget. We will also have poverty reduction with an emphasis on 
children--especially in the preventive health--when we balance the 
budget and provide economic opportunity.
  We will be more cost-effective, we will have higher quality health 
care, education, and housing. There will be a greatly increased growth 
in economic productivity. After these various accomplishments, and 
trimming the national debt, President Hoover could change his paragraph 
from jest to truth and say. ``Blessed are the young, for they shall 
inherit prosperity.'' That should be the new goal. No longer would the 
young inherit the national debt; that goal must be not only the guide 
for those of us in positions of responsibility and trust, but also the 
goal for all Americans.
  Deficit and debt reduction are a central part of insuring economic 
growth and individual and family prosperity. We are on the road to 
ending Federal deficits and paying down the debt. We must maintain the 
course. Our future and the future of our children and our grandchildren 
are at stake.
  Madam Speaker, I do hope that this Congress will be the first one to 
balance the budget for the 28th time, in this century. It is about 
time.

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