[Congressional Record Volume 142, Number 55 (Thursday, April 25, 1996)]
[Senate]
[Pages S4095-S4111]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
BALANCED BUDGET COMPROMISE
Mr. CHAFEE. Mr. President, 4 months ago Senator Breaux and I asked a
small group of our colleagues to get together on a bipartisan basis to
discuss how we might reenergize the stalled negotiations on a balanced
budget. At that time neither the White House nor the congressional
budget negotiators were making the compromises necessary to reach a
final balanced budget agreement.
You may recall, Mr. President, at that time there could not even be
agreement on what economic assumptions were to be used as the starting
point.
In advancing our efforts, Senator Breaux and I hoped to demonstrate
to the Republican congressional leadership and to the White House, the
administration, that a group of Senators--Democrats and Republicans,
from the middle of the political spectrum--were willing to set aside
partisanship to reach a balanced budget agreement. We strongly believe
that the single most important action that this Congress can take for
the benefit of our Nation is balancing the budget.
The members of our group come to this effort with a wide range of
perspectives on how we ought to solve the budgetary problems. Each of
us, if left to our own devices, might come up with a different balanced
budget agreement than the one we arrived at. But nonetheless, all of us
made concessions and compromises in order to forge our plan.
This chart shows the problem that faces the Nation. And by the way,
these figures come from the Congressional Budget Office. That is the
official group that provides budget projections to this body. These are
not the administration's figures, they come from our own budget office.
Here is the deficit today, somewhere around $140 billion. Left
unchecked, it will increase each and every year, until in the year
2006, which is only 10 years from now, Mr. President, it is projected
to exceed $400 billion.
Those are the bills that we are sending to our children because we
refuse to take the steps that are necessary to balance this budget.
Senator Breaux and I and our group of some 22 Senators, 11
Republicans and 11 Democrats, have come up with a proposal, and this
chart compares the different plans. The first column is the Chafee-
Breaux plan. The second is what the leadership of the Republican Party
has presented. The third is what the administration has presented.
It is a fairly busy chart so I will not go into all the details, but
I will point
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out one distinct feature in our approach that is different from the
others' approach, and that is discretionary spending.
What is discretionary spending? Discretionary spending is all the
normal things that occur in the budget--defense, libraries, the FBI,
highways, the payment for the State Department and our Ambassadors
around the world, all of those normal things. You will see that we
believe we can save out of this category $268 billion over the next 7
years.
How do we do that? We do that by some very, very tough measures. We
say that the spending in discretionary will be frozen for the next 7
years, without any increases for inflation. That is tough medicine, and
we think that is as far as we can go, and it is unrealistic to suggest
that savings can be achieved above and beyond this level.
But here you will see the administration and, indeed, the Republican
proposals go way beyond that. We consider that totally unrealistic, and
that when the appropriations bills come up in 1998 and 2000 and 2002,
Congress will not make those cuts and we will not realize these
savings.
The point I am making here is the Chafee-Breaux plan is a realistic
proposal, whereas the other budgets in this particular area are totally
unrealistic.
So how do we make up the money? Others save, as we see in the
Republican proposal, nearly $100 billion more than we do. And we do it
with an item that you will see at the bottom of this chart called the
Consumer Price Index.
What is the Consumer Price Index? The Consumer Price Index is used as
an estimate of what inflation is for the year. And the Consumer Price
Index, according to studies that have been made, overstates inflation.
In other words, the estimate of the inflation for the year is too high.
It is not accurate. And we recognize that. So we make a modest
correction in the Consumer Price Index as follows: We lower the
Consumer Price Index by five-tenths of 1 percent in the first 2 years
and by three-tenths of 1 percent in every year thereafter. Indeed, the
Advisory Committee to Study the Consumer Price Index, which was
established by the Finance Committee to study this issue, has said that
the Consumer Price Index is overstated by as much as 2 percentage
points. The Commission's range of overstatement is between seven-tenths
of 1 percent and 2 percent. So we take a more conservative approach. We
do not go as far as they do. We are not as tough, if you would. We say
we will only reduce it by 0.5 in the first 2 years and 0.3 thereafter.
That is a very, very important step, because when you deal with the
inflation index and take the steps that we have taken in the Consumer
Price Index by reducing it by a very modest amount, that yields
tremendous savings in the outyears. So this is not a budget that we
presented that only just squeaks into balance in the year 2002 and then
the lid comes off in future years; not at all. This is a budget that is
going to produce these savings in future years as well, and the country
will thus be in balance, not only in the year 2002, but 2003, 2004, and
the outyears as well.
Some of these steps are tough steps. The only way these savings can
be achieved, particularly in the Consumer Price Index, is through a
bipartisan effort. We feel very, very strongly that now is the time.
Now is the time for the Senate to set the pace, to set the standards
and to adopt a budget that will achieve balance.
Others will be talking on particular features of our plan as we go
along, but I want to take this opportunity to thank every Senator, all
22 Senators who participated in this effort. Each of them showed his or
her commitment to solving this problem. We are driven by the fact we do
not want to continue to send bills for expenditures we are making to
our children and our grandchildren.
In particular, I thank Senator John Breaux, who has been tremendous
in his dedication to this effort. Without his participation and his
leadership, this would have failed a long time ago. So, for his
unswerving dedication and invaluable leadership, I thank him. He
deserves a tremendous amount of credit.
Mr. President, there will be other speakers.
Mr. BREAUX addressed the Chair.
The PRESIDING OFFICER. The Senator from Louisiana.
Mr. BREAUX. Mr. President, I think we have an agreement of the
allocation of 1 hour, perhaps half and half. Under that, I yield myself
5 minutes.
The PRESIDING OFFICER. The Senator is correct.
Mr. BREAUX. Mr. President, I want to start by recognizing my good
friend and colleague, Senator Chafee. He was very kind and generous in
his remarks about my role. I would say exactly the same thing for
Senator Chafee. He and I have worked together because I think we were
able to put aside partisanship, and we were able to say there are a
number of Senators, a large number of Senators, who really do want to
work in a bipartisan fashion for what is good for this country. I
think, really, the majority of all Senators feel that way.
I particularly want to say to Senator Chafee, it is because of his
leadership on the Republican side of the aisle that our organization
was possible. Without his help, it would not have been possible. It is
just that simple. He has taken some very courageous stands. I think all
Members of this body should applaud him for that.
They said it could not be done. They said it was impossible,
particularly in an election year, when a third of this body was up for
election and when both parties have candidates who are now running for
the Presidency of the United States. It was said it was absolutely
impossible that Members of the Congress, Members of the Senate, could
come together in a bipartisan fashion and put together a product that
actually balanced the budget in a 7-year period, a budget that would be
scored by the Congressional Budget Office in a way that everybody can
agree with the figures.
It was said that it could not be done because this is a political
year and people fight over these things. They sometimes say the best
way to win the political battle is to blame the other side for not
doing enough. We have a centrist coalition of 22 Senators, bipartisan
in nature, who said that is not the way we want this body to govern. We
do want to work toward a balanced budget, and we know it cannot come
just from the left nor can it come just from the right; that any kind
of agreement on the big problems of the day has to come from working
from the center out, by forming centrist coalitions in the middle that
gradually build up enough support to become a majority.
That is exactly what we have been able to do. How many times have we
gone back to our respective States and have had people come up to us on
the streets and in coffee shops and before civic clubs and say, ``Why
can't you guys in Washington get together? Why can't you sit down and
do the job we elected you to do and expected you to do when you took
your oaths of office as Senators and Members of the Congress? Why can't
you reach out to each other and say, `Yes, I can't have it all my way
all the time'?'' That we do have to make compromises and that
compromise is not a dirty word, that it is the art of being able to
govern in a society that is, indeed, a democracy.
That, I think, is what we have done. Today we are announcing one of
the worst-kept secrets in this city, that there has been a centrist
coalition that has been working together since our first meeting in
October 1995, when we sat down and made a dedicated effort to try to
come up with a compromise budget that got the job done. We were
dedicated less to which party got the credit and less to which party
got the blame and more to trying to get the bottom line achieved in a
consensus recommendation. We have done that.
I am optimistic, despite all the things we have not been able to do--
and there have been a lot. There have been two partial shutdowns of the
entire Government because we have not been able to come together. We
had 13 temporary spending bills that have had to pass because we were
not able to get the job done. But, despite that, I am optimistic.
Today, this Congress will pass a budget for fiscal year 1996. That is
encouraging. It is 7 months late, but it is encouraging that, at least,
I think today we will have gotten it done. So progress is being made.
I am also encouraged by statements in the press. I see the President
yesterday suggested that it would be a good
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idea to reach a balanced budget agreement for 7 years if a centrist
coalition of moderate Republicans and moderate Democrats in favor of
deficit reductions could get together and work together to come up with
a balanced budget agreement.
Guess what? We have done that. We have put together a group of good
men and women who, in a bipartisan fashion, have dedicated ourselves,
and particularly our staffs, to days and hours and months of working
together to try to produce a document which, in fact, meets that very
goal that the President has suggested. I think everybody wins when we
get the job done, and everybody loses when we do not. It is just that
simple.
Our recommendation today addresses some very tough, hard problems
that have been out there for a long time. For instance, on Medicare, we
have made a Medicare proposal that is real Medicare reform. It reduces
the cost of Medicare by almost $154 billion. We have made some real,
major recommendations in Medicaid.
We have addressed welfare. We have a program that I think is tough on
work and yet is good for children. We have a tax cut in our package
that is larger than some would like and is smaller than others would
like, but it represents a true compromise.
Yes, we have even taken on the very difficult job of saying to the
American people that the increases you get in entitlement programs will
be realistic; they will more accurately reflect what the increase
should be. All the economists tell us that the increases have been
larger than they should have been. Our budget proposal, I think, takes
the correct and, I think, politically courageous step of saying there
is going to be an adjustment in the Consumer Price Index.
Mr. President, for all in this city who have said it could not be
done, today we stand and say it can be done. In fact, it has been done,
with our recommendation.
I ask unanimous consent that the summary of the centrist coalition
balanced budget plan be printed in the Record.
There being no objection, the summary was ordered to be printed in
the Record, as follows:
Summary of Centrist Coalition Balanced Budget Plan
For the past several months, a bipartisan group of 22
Senators has worked to craft a seven-year balanced budget
agreement that is fair to all Americans. We have made the
difficult choices and compromises necessary to reach an
agreement because we are concerned about the effect a
continuing deficit will have on the quality of life for each
and every American.
If we act, we can foster economic growth and prosperity. If
we fail to act, we undermine the future of our children and
grandchildren. This is an historic opportunity and we should
not let it pass.
Balancing the budget will spur economic growth, and help
families make ends meet by lowering interest rates on home
mortgages, car loans, and education loans.
Balancing the budget will also brighten our children's
future. Last year's report of the Bipartisan Commission on
Entitlement and Tax Reform illustrates the magnitude of the
problem facing future generations. Left unchecked, by the
year 2012, projected outlays for entitlements and interest on
the national debt will consume all tax revenues collected by
the federal Government, leaving nothing for national defense,
roads, or education. We cannot stand by and let this happen.
We formed this Centrist Coalition because we believe a
balanced budget is possible only if Democrats and Republicans
work together. We offer this proposal as a way to bridge the
gap between our two parties. We hope our effort will spur the
President and our colleagues in the House and Senate to work
together to enact a balanced budget this year.
Robert F. Bennett, Christopher S. Bond, John B. Breaux,
Hank Brown, Richard H. Bryan, John H. Chafee, William
S. Cohen, Kent Conrad, Dianne Feinstein, Bob Graham,
Slade Gorton, James M. Jeffords, J. Bennett Johnston,
Nancy Landon Kassebaum, J. Robert Kerrey, Herb Kohl,
Joseph I. Lieberman, Sam Nunn, Charles S. Robb, Alan K.
Simpson, Arlen Specter, Olympia J. Snowe.
medicare (estimated savings: $154 billion)
Expands choices for Medicare beneficiaries: Beneficiaries
can remain in the traditional fee-for-service Medicare
program or choose from a range of private managed care plans,
based upon individual need. Options include point-of-service
plans, provider sponsored organizations and medical savings
accounts (on a demonstration basis).
Promotes the growth of managed care: By creating a new
payment system for managed care--which blends national and
local payment rates--the plan encourages growth in the
availability and accessibility of managed care. Indirect
Medical Education payments would be redirected to teaching
hospitals; currently, they are paid to managed care plans.
Ensures the solvency of the Medicare Trust Fund: By slowing
the rate of growth in payments to hospitals, physicians and
other service providers, the plan extends the solvency of the
Medicare Trust Fund.
Higher income seniors should pay more: Through affluence
testing, the plan reduces the Medicare Part B premium subsidy
to higher income seniors, and asks them to pay a greater
share of the program's cost.
medicaid (estimated savings: $62 billion)
Incorporates a number of NGA's recommendations: The
proposal incorporates many of the principles of the NGA
proposal regarding enhanced state flexibility, while also
maintaining important safeguards for the federal treasury and
retaining the guarantee of coverage for beneficiaries.
Sharing the risks and rewarding efficiency: Funding is
based upon the number of people covered in each state,
ensuring federal funding during economic downturns. States
will be able to redirect the savings they achieve toward
expanding Medicaid coverage to the working poor.
Guaranteed coverage for the most vulnerable populations:
The plan maintains a national guarantee of coverage for low-
income pregnant women, children, the elderly and the disabled
(using the tightened definition of disability included in
welfare reform legislation).
Increased flexibility for the states: States can design the
health care delivery systems which best suit their needs
without obtaining waivers from the Federal Government. Under
this plan, states can determine provider rates (the Boren
amendment is repealed), create managed care programs, and
develop home and community based care options for seniors to
help keep them out of nursing homes.
welfare (estimated savings: $45-$53 billion)
Includes many of NGA's recommendations: The plan, which
includes several prominent features of the NGA proposal, is
based upon the welfare reform bill that passed the Senate by
a vote of 87-12 in September 1995.
Tough new work requirements: States must meet a 50-percent
work participation requirement by the year 2002.
Time limited benefits: Cash assistance is limited for
beneficiaries to a maximum of 5 years.
A block grant providing maximum state flexibility: States
will be given tremendous flexibility to design welfare
programs, in accordance with their own circumstances, that
promote work and protect children.
More child care funding to enable parents to work: The plan
provides the higher level of child care funding ($14.8
billion) recommended by the NGA to enable parents to get off
welfare and to help states meet the strict work participation
requirements contained in the plan.
Extra funds for states to weather recessionary periods: The
plan includes a $2 billion contingency fund to help states
through economic downturns.
Important safety nets maintained: The plan preserves the
food stamp and foster care programs as uncapped entitlements.
States must provide vouchers to meet the basic subsistence
needs of children if they impose time limits shorter than 5
years (states set amount of voucher).
Encourages states to maintain their investment in the
system: States must maintain their own spending at 80 percent
to get the full block grant, and 100 percent to get
contingency and supplemental child care assistance funds;
contingency and child care funds must be matched.
Reforms Supplemental Security Income programs: The plan
disqualifies drug addicts and alcoholics from receiving SSI
benefits, and tightens eligibility criteria for the
children's SSI disability program.
Retargets Earned Income Credit: The Earned Income Credit is
retargeted to truly needy by reducing eligibility for those
with other economic resources. The plan also strengthens the
administration of the Earned Income Credit by implementing
procedures to curb fraud.
economic growth incentives (estimated cost: $130 billion)
A three-pronged tax relief program for working families:
The plan establishes a new $250 per child credit ($500 per
child if the parent contributes that amount to an IRA in the
child's name); expands the number of taxpayers eligible for
deductible IRAs, creates a new ``backloaded'' IRA, and allows
penalty free withdrawals for first time homebuyers,
catastrophic medical expenses, college costs, and prolonged
unemployment; and provides for a new ``above the line''
deduction for higher education expenses.
Encourages economic growth: A capital gains tax reduction
based on the Balanced Budget Act formulation (effective date
of 1/1/96): 50 percent reduction for individuals; 31 percent
maximum rate for corporations; expanded tax break for
investments in small business stock; and capital loss of
principal residence. The proposal also provides for AMT
relief (conformance of regular and alternative minimum tax
depreciation lives).
Important small business tax assistance: An exclusion from
estate tax on the first $1 million of value in a family-owned
business, and 50 percent on the next $1.5 million. Increases
the self-employed health insurance deduction to 50 percent.
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Extension of expiring provisions: The plan provides for a
revenue neutral extension of expiring provisions.
Loophole Closers (estimated savings: $25 billion)
Closes unjustifiable tax loopholes: The cost of the
economic growth incentives is partially offset by the
elimination of many tax loopholes, and through other proposed
changes in the tax code.
cpi adjustment, (estimated savings: $110 billion)
A more accurate measure of increases in the cost of living:
The plan adjusts the CPI to better reflect real increases in
the cost of living by reducing it by half a percentage point
in years 1997-98, and by three-tenths of a percentage point
thereafter. The proposed adjustment is well below the range
of overstatement identified by economists.
DISCRETIONARY SPENDING (estimated savings: $268 billion)
Achievable discretionary spending reductions: Unlike most
of the other budget plans, this proposal provides for
discretionary spending reductions which can actually be
achieved. The plan proposes a level of savings which is only
$10 billion more than a ``hard freeze'' (zero growth for
inflation), ensuring adequate funds for a strong defense and
for critical investments in education and the environment.
OTHER MANDATORY SPENDING (estimated savings: $52 billion)
Balanced reductions acceptable to both parties: The plan
includes changes that were proposed in both Republican and
Democratic balanced budget measures in the areas of banking,
commerce, civil service, transportation and veterans
programs.
Additional mandatory savings: The plan adopts other
changes, including a cap on direct lending at 40 percent of
total loan volume, extending railroad safety fees, and
permitting Veterans' hospitals to bill private insurers for
the care of beneficiaries.
MEDICARE (estimated savings $154 billions)
The plan proposes a variety of reforms to the Medicare
program designed to promote efficiency in the delivery of
services and strengthen the financial status of the Trust
Fund. The proposal retains the traditional, fee for service
Medicare program, but also encourages the formation of
private managed care options for seniors and the disabled,
allowing point of service plans, provider sponsored
organizations, and medical savings accounts (on a
demonstration basis).
The plan's provider payment savings and the expanded
availability of managed care delivery of services will lower
the cost of the Medicare program over the next 7 years
thereby extending the solvency of the Medicare Trust Fund.
Program reforms
Increase choice of private health plans. Under the
proposal, preferred provider organizations (PPOs), provider
sponsored organizations (PSOs), Medical Savings Accounts (as
a demonstration project), and other types of plans that meet
Medicare's standards are made available to Medicare
beneficiaries.
Annual enrollment. The plan allows beneficiaries to switch
health plans each year during an annual ``open season'' or
within 90 days of initial enrollment.
Standards. The Secretary of HHS, in consultation with
outside groups, will develop standards which will apply to
all plans. These standards will involve benefits, coverage,
payment, quality, consumer protection, assumption of
financial risk, etc., which will apply to all plans; PSOs
will be able to apply for a limited waiver of the requirement
that plans be licensed under State law.
Additional benefits. Under the proposal, health plans would
be permitted to offer their participants additional benefits
or rebates in the form of a reduced Medicare Part B premium.
Plans would be prohibited from charging additional premiums
for services covered by Medicare Parts A&B.
Payments to private health plans. Payments to managed care
plans will be de-linked from traditional fee-for-service
payments and will be computed using both locally-based and
nationally-based rates. Future payments will grow by a
predetermined percentage and a floor will be established in
order to attract plans to the lowest payment areas.
Commission on the effect of the baby boom generation. The
plan proposes the creation of a commission to make
recommendations regarding the long-term solvency of the
Medicare program.
Conform Medicare with Social Security. The eligibility age
for Medicare is increased to 67 at the same rate as the
current Social Security eligibility age is scheduled to
increase.
Part A program savings (hospitals)
Hospital market basket update reduction. For hospitals, the
proposal sets the annual update for inpatient hospital
services at the market basket minus one and one-half
percentage points for fiscal years 1997 through 2003.
Capital payment reduction. For hospitals, the proposal
reduces the inpatient capital payment rate by 15 percent for
fiscal years 1997 through 2003.
Reduce the indirect medical education reimbursement rate.
The proposal phases-in a reduction to the additional payment
adjustment to teaching hospitals for indirect medical
education from 7.7 percent to 6.0 percent.
Reduce DSH payment. The plan reduces the extra payments
made to certain hospitals that serve a disproportionate share
of low income patients by 10 percent less than current-law
estimates.
Skilled nursing facility payment reform. The proposal
adopts a Prospective Payment System (PPS) for Skilled Nursing
Facilities by November 1997. In moving to the new
methodology, a temporary freeze on payment increases is
imposed and then an interim system is implemented until the
full PPS system is implemented.
Part B program savings (physicians)
Physician payment reform. The proposal adjusts the Medicare
fee system used to pay physicians. A single conversion factor
would be phased-in for all physicians instead of the current
three conversion factors. Surgeons would be phased-in over a
2 year period. The conversion factor for 1996 would be $35.42
and the annual growth rate would be subject to upper and
lower growth bounds of plus 3 percent and minus 7 percent.
Reduce hospital outpatient formula. The proposal adjusts
the current Medicare formula for hospital outpatient
departments to eliminate overpayments due to a payment
formula flaw.
Reduce oxygen payment. The proposal would decrease the
monthly payment for home oxygen services and eliminate the
annual cost update for this service through 2003.
Freeze durable medical equipment reimbursement. The
proposal eliminates the CPI-U updates for payments of all
categories of Durable Medical Equipment for fiscal years 1997
through 2003.
Reduce laboratory reimbursement. The proposal lowers
expenditures on laboratory tests by reducing the national cap
for each service to 72 percent of the national median fee
during the base year for that service.
Ambulatory surgical center rate change. The proposal lowers
the annual payment rate adjustment by minus three percent for
fiscal years 1997 and 1998 and then reduces the rate by minus
2 percent for remaining fiscal years through 2003.
Part A and B program savings
Medicare secondary payer extensions. The proposal would
make permanent the law that places Medicare as the secondary
payer for disabled beneficiaries who have employer-provided
health insurance. It also extends to twenty-four months the
period of time employer health insurance is the primary payer
for end stage renal disease (ESRD) beneficiaries.
Home health payment reform. The proposal reforms the
payment methodology used to pay home health services by the
beginning of fiscal year 1999. While a prospective payment
system is developed, current payments are frozen and an
interim payment system implemented.
Fraud and abuse changes. The proposal includes a number of
provisions designed to improve the ability to combat Medicare
fraud and abuse by providers and beneficiaries
Medicare part B premium reform. The plan retains the pre-
1996 financing structure for the Part B program by requiring
most participants to pay for 31.5 percent of the program's
costs. Premiums for lower income seniors are lowered to 25
percent of the program's costs. In addition, the proposal
eliminates the taxpayer subsidy of Medicare Part B premiums
for high income individuals.
MEDICAID (estimated savings $62 billion)
The proposal incorporates many of the principles of the NGA
proposal regarding enhanced state flexibility, while also
maintaining important safeguards for the federal treasury and
retaining the guarantee of coverage for beneficiaries.
Payments to States. States are guaranteed a base amount of
funds that may be accessed regardless of the number of
individuals enrolled in the State plan. Each state would have
the ability to designate a base year amount from among their
actual Medicaid spending for FY 1993, 1994, or 1995.
Approximately one-third of disproportionate share hospital
payments would be included in the base year amount, one-third
would be used for deficit reduction, and one-third would be
used for a Federal disproportionate share hospital payment
program.
In addition, states will receive growth rates which reflect
both an inflation factor and estimated caseload increases. If
the estimate for caseload in any given year was too low,
states would receive additional payments per beneficiary from
an ``umbrella fund'' to make up the difference. Conversely,
if the caseload was overestimated, the estimate for the
following year would be adjusted downward. Regardless of
caseload, a state's allocation never fall below the base year
allocation for that state. The plan retains the current law
match rates and restrictions on provider taxes and voluntary
contributions.
Eligibility. The proposal maintains current law mandatory
and optional populations with the following modifications:
states would cover those individuals eligible for SSI under a
more strict definition of disabled (tightened by the welfare
reform changes included in this proposal) as well as SSI-
related groups; states would have the option of covering
current-law AFDC beneficiaries or those eligible under a
revised AFDC program (includes one-year transitional
coverage); and, states are permitted to use savings in their
base year amount to expand health care coverage to
individuals with incomes below 100 percent of the Federal
poverty level without obtaining a Federal waiver.
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Benefits. The plan maintains current law mandatory and
optional benefits except that Federally Qualified Health
Center (FQHC) services would be optional rather than
mandatory. The proposal also gives the Secretary of HHS the
authority to redefine early periodic screening and diagnosis
treatment (EPSDT) services.
Provider payments. The proposal repeals the so-called Boren
amendment as well as the reasonable-cost reimbursement
requirements for FQHCs and rural health clinics, thus
allowing states full flexibility in setting provider rates.
Quality. States would be allowed to set provider standards.
States would no longer be required to obtain a waiver to
enroll patients in managed care plans, provided the plans met
the state's standards developed for private plans.
Nursing home standards. The proposal maintains current
nursing home standards with existing enforcement. Streamlines
certain requirements.
Enforcement. Individuals and providers are required to go
through a state-run administrative hearing process prior to
filing suit in federal court.
Set asides. The plan establishes a federal fund for certain
states that have high percentages of undocumented aliens, as
well as a fund for FQHCs and rural health clinics.
Program structure. The reforms are made to the existing
Medicaid statute.
WELFARE (estimated savings $45 billion-$53 billion)
Block grant. The proposal transforms existing welfare
programs into a block grant to states to increase program
flexibility and encourage state and local innovation in
assisting low-income families in becoming self-sufficient.
This structure provides incentives to states to continue
their partnership with the Federal Government by encouraging
states to maintain 80 percent of their current spending on
major welfare programs. While the plan provides maximum
flexibility, it requires states to operate their programs in
a way that treats recipients in a fair and equitable manner.
Contingency fund. To protect states facing difficult
economic times, the plan calls for the creation of a $2
billion Federal contingency fund.
Child care. The plan provides $14.8 billion in mandatory
federal funds for child care and ensures that those child
care facilities meet minimum health and safety standards so
that children are well-cared for while their parents go to
work.
Maintenance of effort. To encourage states not to
substitute these new federal funds for current state
spending, a 100-percent maintenance of effort and a state
match are required in order to access additional federal
money for child care and contingency funds.
Work requirement and time limit. The plan requires states
to meet tough new work requirements--50 percent by 2002--and
limits a beneficiary's cash assistance to five years, so that
AFDC becomes a temporary helping hand to those in need,
rather than a permanent way of life.
Retention of certain safety nets. The proposal retains
important protections for welfare's most vulnerable
beneficiaries, the children. It allows states to waive
penalties for single parents with children under school age
who cannot work because they do not have child care, gives
states the option to require those parents to work only 20
hours a week, and requires states with a time limit shorter
than 5 years to provide assistance to children in the form of
vouchers.
Out-of-wedlock births. The plan encourages a reduction in
out-of-wedlock births by allowing states to deny benefits to
additional children born to a family already on welfare and
rewarding states that reduce the number of out-of-wedlock
births.
Curbing SSI Abuse. The proposal repeals the Individualized
Functional Assessment (IFA) used to determine a child's
eligibility for Supplemental Security Income (SSI) and
replaces it with a tightened definition of childhood
disability. It maintains cash assistance for those children
who remain eligible for SSI under this new criteria. It also
eliminates SSI eligibility for addicts and alcoholics.
Foster care and adoption assistance. The federal
entitlement for foster care and adoption assistance (and
their respective pre-placement and administrative costs) is
maintained under the proposal. States are required to
continue to meet Federal standards in their child welfare and
foster care programs.
Food stamp and child nutrition programs. The proposal
streamlines the food stamp and child nutrition programs,
while retaining this critical safety net as a federal
entitlement. The work requirement for single, childless
recipients in the food stamp program is toughened.
Promoting self-sufficiency for immigrants. The plan
establishes a five-year ban on most federal ``needs based''
benefits for future immigrants, with exceptions for certain
categories of individuals (such as veterans, refugees and
asylees) and certain programs (such as child nutrition,
foster care and emergency health care under Medicaid). The
plan also places a ban on SSI for all legal immigrants, but
exempts current recipients who are at least 75 years of age
or disabled; veterans and their dependents; battered
individuals; those who have worked 40 quarters; and for a
five-year period refugees, deportees and asylees. Finally,
future deeming requirements are expanded to last 40 quarters,
but do not continue past naturalization.
Retargets earned income credit. The Earned Income Credit is
retargeted to the truly needy by reducing eligibility for
those with other economic resources. The plan also
strengthens the administration of the Earned Income Credit by
implementing procedures to curb fraud.
TAXES ($130 billion tax cut; $25 billion loophole closers)
Child credit. The proposal provides a $250 per child tax
credit for every child under the age of 17. The credit is
increased to as much as $500 if that amount is contributed to
an Individual Retirement Account in the child's name.
Education incentives. The plan provides two separate
education incentives. The first is an above-the-line
deduction of up to $2,500 for interest expenses paid on
education loans. The second incentive is an above-the-line
deduction for qualified education expenses paid for the
education or training for the taxpayer, the taxpayer's
spouse, or the taxpayer's dependents. Both deductions will be
phased out for taxpayers with incomes above a certain
threshold. The phaseout thresholds and the dollar amounts for
the deductions are subject to revenue considerations.
Capital gains: Individuals. The proposal allows individuals
to deduct 50 percent of their net capital gain in computing
taxable income. It restores the rule in effect prior to the
Tax Reform Act of 1986 that required two dollars of the long-
term capital loss of an individual to offset one dollar of
ordinary income. The $3,000 limitation on the deduction of
capital losses against ordinary income would continue to
apply. Under the plan, a loss on the sale of a principal
residence is deductible as a capital loss. These changes
apply to sales and exchanges after December 31, 1995.
Capital gains: Corporations. The plan caps the maximum tax
rate on corporate capital gains at 31 percent. This change
applies to sales and exchanges after December 31, 1995.
Capital gains: Small business stock. The maximum rate of
tax on gain from the sale of small business stock by a
taxpayer other than a corporation is 14 percent under the
proposal. The plan also repeals the minimum tax preference
for gain from the sale of small business stock. Corporate
investments in qualified small business stock would be taxed
at a maximum rate of 21 percent. The plan increases the size
of an eligible corporation from gross assets of $50 million
to gross assets of $100 million, and repeals the limitation
on the amount of gain an individual can exclude with respect
to the stock of any corporation. The proposal modifies the
working capital expenditure rule from 2 years to 5 years.
Finally, an individual may roll over the gain from the sale
or exchange of small business stock if the proceeds of the
sale are used to purchase other qualifying small business
stock within 60 days. The increase in the size of
corporations whose stock is eligible for the exclusion
applies to stock issued after the date of the enactment of
this proposal. All other changes apply to stock issued after
August 10, 1993.
Alternative minimum tax relief. The plan conforms the
Alternative Minimum Tax depreciation lives to the
depreciation lives used for regular tax purposes for property
placed in service after 1996.
Individual Retirement Accounts. The proposal expands the
number of families eligible for current deductible IRAs by
increasing the income thresholds. In addition, the annual
contribution for a married couple is increased to the lesser
of $4,000 or the combined compensation of both spouses.
Penalty-free withdrawals are allowed for first-time
homebuyers, catastrophic medical expenses, higher education
costs and prolonged unemployment. The plan creates a new type
of IRA which can receive after-tax contributions of up to
$2,000. Distributions from this new IRA would be tax-free if
made from contributions held in the account for at least 5
years.
Estate tax relief. The plan provides estate tax relief for
family-owned businesses by excluding the first one million
dollars in value of a family-owned business from the estate
tax and lowering the rate on the next one and one-half
million dollars of value by 50 percent. To preserve open
space, the plan excludes 40 percent of the value of land
subject to a qualified conservation easement.
Other provisions. The proposal contains a revenue neutral
package extending the expired tax provisions. The plan also
calls for increasing the self-employed health insurance
deduction to 50 percent.
Loophole closings and other reforms
The plan includes a package of loophole closers and other
tax changes designed to reduce the deficit by $25 billion
over seven years. Changes include, for example, phasing out
the interest deduction for corporate-owned life insurance,
eliminating the interest exclusion for certain nonfinancial
businesses, and reforming the tax treatment of foreign
trusts. In addition, the Oil Spill Liability tax and the
federal unemployment surtax are extended as part of the plan.
CONSUMER PRICE INDEX (estimated savings $110 billion)
The plan includes an adjustment to the Consumer Price Index
to correct biases in its computation that lead to it being
overstated. The proposal reduces the CPI for purposes of
computing cost of living adjustments and indexing the tax
code by one-half of a percentage point in 1997 and 1998. The
adjustment is reduced to three-tenths of a percentage point
in 1999 and all years thereafter.
[[Page S4100]]
DISCRETIONARY SPENDING (estimated savings $268 billion)
The plan holds discretionary spending to an amount that is
slightly below the fiscal year 1995 level for each of the
next 7 years. This is $81 billion less than the cuts proposed
as part of the Balanced Budget Act and $29 billion less than
the cuts proposed by the Administration.
OTHER MANDATORY SPENDING (estimated savings $52 billion)
Housing. The proposal reforms the Federal Housing
Administration's home mortgage insurance program to help
homeowners avoid foreclosure and decrease losses to the
federal government. It also limits rental adjustments paid to
owners of Section 8 housing projects.
Communication and spectrum. The plan directs the Federal
Communications Corporation to auction 120 megahertz of
spectrum over a 7-year period.
Energy and Natural Resources. The proposal call for the
privatization of the US Enrichment Corporation and the
nation's helium reserves. It extends the requirement that the
Nuclear Regulatory Commission collect 100% of its annual
budget through nuclear plant fees. The proposal allows for
the sale of the strategic petroleum reserve oil (SPRO) at the
faulty Weeks Island location and leases the excess SPRO
capacity. Under the plan the Alaska Power Market
Administration, various Department of Energy assets,
Department of Interior (DOI) aircraft (except those for
combating forest fires), Governor's Island, New York, and the
air rights over train tracks at Union Station would be sold.
The plan raises the annual Hetch Hetchy rental payment paid
by City of San Francisco and authorizes central Utah
prepayment of debt.
Civil Service and related. The plan increases retirement
contributions from both agencies and employees through the
year 2002, delays civilian and military retiree COLAs from
January 1 to April 1 through the year 2002, and reforms the
judicial and congressional retirement. Finally, the plan
denies eligibility for unemployment insurance to service
members who voluntarily leave the military.
Transportation. The proposal extends expiring FEMA
emergency planning and preparedness fees for nuclear power
plants, vessel tonnage fees for vessels entering the U.S.
from a foreign port, and Rail Safety User Fees that cover
part of the cost to the federal government of certain safety
inspections.
Veterans. The plan extends seven expiring provisions of
current law and repeals the ``Gardener'' decision thereby
restoring the Veterans Administration's policy of limiting
liability to those cases in which an adverse outcome was the
result of an accident or VA negligence. Pharmacy co-payments
are increased from $2 to $4, but not for the treatment of a
service-connected disability or for veterans with incomes
below $13,190. Also, the increase applies only to the first 5
prescriptions that a veteran purchases per month. The
proposal authorizes a veteran's health insurance plan to be
billed when a VA facility treats a service-connected
disability.
Student loans. The proposal caps the direct lending program
at 40 percent of total loan volume. It imposes a range of
lender and guarantor savings. The proposal does not include
fees on institutions, the elimination of the grace period, or
any other provisions negatively impacting parents or
students.
Debt collection. The plan authorizes the Internal Revenue
Service to levy federal payments (i.e. RR retirement,
workman's compensation, federal retirement, Social Security
and federal wages) to collect delinquent taxes.
Park Service receipts and sale of DOD stockpile. The
proposal raises fees at National Parks. It directs the
Defense Department to sell materials in its stockpile that
are in excess of defense needs (i.e., aluminum and cobalt)--
but not controversial materials such as titanium.
Long-Term Federal retirement program reforms. The plan
increases the normal civil service retirement eligibility to
age 60 with 30 years of service, age 62 with 25 years of
service, and age 65 with 5 years of service. Military
retirement eligibility for active duty personnel is increased
to age 50 with 20 years of service, with a discounted benefit
payable to a person retiring before age 50. No changes are
proposed for the retirement eligibility of reserve
servicepersons. These changes would not apply to current or
previously employed federal workers or anyone who is now
serving or who has previously served in the military.
Although these changes will not produce budget savings in the
coming seven years, they do provide significant savings over
the long-term.
Mr. BREAUX. Mr. President, I reserve the remainder of our time.
Mr. CHAFEE. Mr. President, I yield 4 minutes to the Senator from
Vermont.
The PRESIDING OFFICER. The Senator from Vermont is recognized for 4
minutes.
Mr. JEFFORDS. Mr. President, I rise today to speak on one of the most
critical issues of this Congress--balancing our Federal budget. I
support the effort to balance the budget over the next 7 years. It is a
task that is long overdue, one that we should have tackled long before
the Federal debt began to escalate in the early 1980's. Our
carelessness in financial planning is a terrible legacy to leave our
children and grandchildren.
First, I want to commend the two Johns, Senator John Chafee and
Senator John Breaux. The ability to develop a budget structure
agreeable to enough Senators in the middle to become a model for
passage is a daunting task. It has taken hundreds of hours. It has a
real chance to be the model to end the balance the budget deadlock. It
is probably unrealistic to expect we can get the 1996 reconciliation
package revised, but there is a real chance it can be used for the soon
arriving 1997 budget.
When I voted in the House in 1986 against the balanced budget
constitutional amendment I stated at the time we could not wait the
number of years required to get it approved by the States. However 10
years later the situation has become much worse. Now I also realize
that it is imperative we move forward without the amendment. Any
further delay will greatly increase the damage to national economic
stability.
The basic problem is the increasing cost of entitlement programs.
These are programs outside of the appropriations process. They have
increased well beyond the growth of revenues and population. In
addition it appears through generosity or otherwise they have increased
at a rate greater than the actual cost of living created by inflation.
Our proposal recognizes this for the future. This will make additional
cuts in discretionary programs such as education less necessary. But it
does so in a way which may actually protect from a greater decrease
which will be recommended this June by a panel of experts.
The entitlements that have provided the greater problems are in the
area of health care. The increasing projected costs in Medicaid and
Medicare represent about one-half of the increasing cost problem. We
cannot continue to run a Federal-fee-for service system. Trying to
control costs without controlling utilization has not worked. There are
too many ways that costs can be shifted to these programs. Progress in
this area will be controlled by more State responsibility. But those of
us on committees of relevant jurisdiction must work to move to a
Federal capitated system combined with utilization of private insurance
methodologies and Federal guidelines to get these costs under control.
It is interesting to note that in 1954 the Eisenhower administration
introduced legislation along these lines when it recognized some
Federal system was required. This was H.R. 8356. The purpose of the
bill was ``to encourage and stimulate private initiative in making good
and comprehensive services generally accessible on reasonable terms
through adequate health prepayment plans, to the maximum number of
people * * * (b) by making a form of reinsurance available for
voluntary health service prepayment plans where such reinsurance is
needed in order to stimulate the establishment and maintenance of
adequate prepayment plans in areas, and with respect to services and
classes of persons, for which they are needed.'' I believe this gives
us a possible route implemented through individual choice to get us out
of our preset health care cost mess. We must find the way to control
uncontrolled cost shifts and to spread the cost of the sick over the
widest base. Hopefully the Finance Committee and the Labor and Human
Resource Committee will join in achieving this goal.
Mr. President, like my colleagues in this bipartisan coalition, I
want a Federal budget that is balanced in an equitable manner. In
reaching a balanced budget we must be careful not to cut those programs
which could be counterproductive to balancing the budget. In other
words, cuts in one program can result in increased costs in other
programs, thus making it more difficult to balance the budget.
The bipartisan budget proposal accomplishes this goal by making the
tough decisions necessary to balance within 7 years and still maintain
a strong commitment to discretionary and mandatory spending. Unlike
other budget proposals, this plan provides for cuts to the overall
discretionary spending that are both achievable and modest. If we are
successful in getting health care costs under control it should be
possible to actually make needed increases in such accounts.
[[Page S4101]]
Mr. President, there are many important programs within the
discretionary accounts that need to be maintained. The centrist group
realizing the importance of discretionary spending provided modest cuts
to the discretionary account.
I would like to highlight just a few examples of the importance of
maintaining the discretionary accounts. One example can be seen in
Federal health research spending. We are nearing discoveries and new
treatments to the causes of many illnesses and diseases, such as
Alzheimer's and Parkinson's. The centrist coalition provides the
flexibility to maintain spending on medical research. It is well known
that for every dollar spent on health research, several dollars are
saved by the Federal Government. This spending on health research could
allow for the potential to eliminate tens of billions of dollars in
Federal health care costs over the next decade or more.
Another example of this group's commitment is in providing adequate
education funding. As a group we understand that this Nation faces a
crisis--a crisis which is costing us hundreds of billions of dollars in
lost revenues, decreased economic productivity, and increased social
costs, such as welfare, crime, and health care.
Mr. President, business leaders warn us that unless improvements are
made in our educational system, our future will be even bleaker. The
rising costs of higher education combined with the lower income levels
of middle-income families is causing thousands not to finish college,
and fewer to attend graduate school in critical areas such as math,
science, and engineering. As chairman of the Education Subcommittee, I
am particularly concerned about maintaining funding for education, and
I have worked with my colleagues in this centrist group to ensure that
adequate funding will be protected within education programs.
Finally, in order to help solve the deficit problem, and as
importantly, to prevent unnecessary hardship to individuals, this
group's plan protects the Federal commitment to education, health
research and many other discretionary spending areas by providing the
least amount of cuts of any plan yet offered.
Mr. President, I am committed to balancing this budget, but not on
the backs of the poor, the elderly and our children. This budget
proposal is the only plan that protects the neediest Americans while
balancing the budget.
THE IMPORTANCE OF PROTECTING EDUCATION UNDER A BALANCED BUDGET
The Federal role within education is vital to the continued health of
this Nation's economy. Therefore, I want to highlight the importance of
providing adequate education funding. Recently, the U.S. Bureau of the
Census released a report which states that increasing workers'
education produces twice the gain in workplace productivity than tools
and machinery. This simple but powerful finding shows that the
importance of educational investments cannot be ignored. In another
economic study, entitled ``Total Capital and Economic Growth,'' John
Kendrick corroborates this finding. He shows that education alone
accounts for over 45 percent of the growth in the domestic economy
since 1929.
Americans understand intuitively that investing in education is the
key to our future success, and the best possible national investment
that we can make as a country. The evidence is clear: Countries which
spend more on education per pupil yield higher levels of per capita
GDP. Economists estimate the returns to investment in college education
at over 30 percent in the 1980's. And some institutions, such as
Motorola University, report corporate savings of $30 to $35 for every
$1 spent on training. That is a 3000 to 3500 percent rate of return.
Several studies have concluded that a more highly educated work force
is key, if we are going to balance the budget without substantially
raising taxes. It is a crucial factor for increasing the Federal
resource base.
People, as rational consumers, also realize that investing in their
own education leads to substantially higher lifetime earnings. A person
with a bachelor's degree earns over 1\1/2\ times the income of a person
with a high school degree only. A professional degree brings over 350
percent higher lifetime earnings than a high school diploma in itself.
A recent study shows that over the past 20 years, only college
graduates have increased their real earning potential, while everyone
else lost ground. College graduates have earned 17 percent more in real
wages, while the earnings of high school dropouts fell by one-third.
Thus, it is clear that education is an important investment for
personal as well as national competitiveness.
As our economy continues to shift from a manufacturing base toward
information and services, education becomes the single most important
determinant of economic success, for the individual and the country at
large.
Finally, the plan recognizes we must delay tax cuts until we have
taken the above actions to insure getting entitlements under control,
and our priorities reordered so they are not counter productive in
their results. This is end increasing the deficit, not reducing it.
Mr. President, I yield the floor.
Mr. President, this has been a wonderful experience for those of us
who have participated with, as they have been referred to, ``the
Johns,'' John Breaux and John Chafee, that so many of us can get
together from each party and deal with the very difficult issues that
we are faced with and come up with a compromise proposal for the budget
that will reach the goals took a lot of hard work. Let me just run
through some of the areas that we have tackled and have hopefully come
up with some solutions.
As hard as the vote was on the balanced budget amendment--and I
suffered through that, having voted for it. Before, in 1986, I voted
against it, then, because I said there is no way we can wait for the
length of time for a balanced budget amendment to go through the
States--we have to do it now. It is 10 years later and we are worse off
than we were, so I voted for it. That was the easy part. Now it comes
down to how to balance the budget.
The main problems that we have to deal with are the toughest ones--
the entitlements. How do you take entitlements that people have
depended upon and bring them in so that you can possibly get through
the budget process without totally devastating the discretionary
spending?
The basic one, and the most important one, is health care reform. If
we do not have health care reform--and I am dedicated to working to do
that--there is no way we can get the budget under control. That is half
the problem. But we can get it under control if we get it out of the
fee-for-service system and get it back to where it ought to be, with
the regular private efforts with respect to the insurance and coverage
and working with providers and ensuring that there are adequate funds
for people in Medicaid and Medicare.
Other entitlements have to be brought under control, there is no
question about it. Willingness to face that also requires a willingness
to face the fact that we overstate the CPI and, therefore, create a
worse problem every year.
But the impact upon discretionary spending--and I serve on the
Appropriations Committee as well as the Labor and Human Resources
Committee--makes it clear to me we also have to reorder priorities,
because if we just mindlessly cut, we will make the problem worse
rather than better.
I have been working very hard and working with Senator Snowe. We
brought this to the Senate this year. We convinced the Senate that you
cannot cut education because one-half trillion dollars of costs in our
budget right now are due to a failing of our educational system. So we
have been successful working together. The moderates, I believe, on
both sides have brought that one under control. We have agreed not to
cut education.
Other types of things that we have to look at are training and all
the other things that go into the losses because of our poor position
in this world with respect to our competitiveness.
Let me just stop and point out that the priorities we must have is
health care reform, and this can be done and we have to work on that,
and education must be frozen. We have to start making sure that we do
not destroy the base any further than it already is. Finally, we have
made the difficult decision that you have to put your tax cuts in after
you have brought the budget under control, not before, as we did in
[[Page S4102]]
the failure to bring the budget under control in 1981.
I am proud to have worked with this group. I know there are many more
to come forward and support us when they examine what can be and must
be done.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. BREAUX. I yield 4 minutes to Senator Kohl.
The PRESIDING OFFICER. The Senator from Wisconsin is recognized for 4
minutes.
Mr. KOHL. Mr. President, I thank Senator Breaux.
The balanced budget we are presenting today is balanced not only on
the bottom line, but it is balanced in its political support, balanced
in the sacrifices it asks from all of us, and balanced in the benefits
it bestows.
Balance and fairness has not been the hallmark of previous budget
plans presented to this Senate. Let me put this on a more personal
level. I could not ask the people of Wisconsin to support a budget that
cut their benefits while it was giving me a big tax break, and I could
not ask them to support a budget designed to improve my party's chances
in the 1996 Presidential election rather than their children's chances
in the world economy of the 21st century. But I can ask them to support
the plan we are releasing today because it is fair, it is smart, and it
is bipartisan.
The budget we present today contains almost $600 billion in proposed
savings over 5 years, and that is without calculating the savings in
interest costs from reduced debt. Those savings are spread across
almost every group in society and almost every Government program.
Medicare, Medicaid, welfare, Federal retirement programs, and even
Social Security are slated for spending reductions. Corporate welfare
is cut. Payments to chronic individual welfare recipients are
eliminated. Defense and domestic spending are brought below a freeze.
Savings proposals from both Democratic and Republican balanced budget
offers, affecting areas from banking to veterans, commerce to
communications, are incorporated in our plan. If our plan was to be
enacted, most of us would contribute an amount so small that we would
not even notice, but our small contributions will add up to a big chunk
of deficit reduction.
Aside from the CPI adjustment, the spending cuts laid out in our plan
are approximately 60 percent from entitlement programs and 40 percent
from discretionary programs which we pay for through our annual
appropriations bills. According to the President's budget, our actual
spending in 1996 was 60 percent for entitlement programs and 40 percent
for discretionary programs. So our plan distributes the cuts in exact
proportion to the size of these programs in the budget. It favors no
group, no special type of program, and no political sacred cow. Again,
the cuts are evenhanded, unbiased, nonpartisan--in other words, fair.
We believe that the fairness evident throughout our plan is necessary
in a balanced budget if it is going to win popular and political
support. We need to seek the balance in our fiscal policy that I am
afraid is too often missing in our economy.
It is now a generally accepted fact that our economy is growing more
unequal. What that means for the average family is that they are
working harder, longer hours, and tougher jobs just to maintain the
standard of living that their parents enjoyed. Between 1973 and 1993,
the productivity of the American worker grew by 25 percent, and over
the same period, the hourly compensation of the average American worker
was flat.
That is not the story of an American opportunity that I, or any of my
colleagues, grew up with. We know an American economy that values a
fair day's work with a fair day's pay, and we know an America that
comes together to solve big problems by sharing our burdens. We know an
America where each generation has the opportunity to leave to their
children a better standard of living.
Mr. President, our budget is true to that vision of America. It calls
for fair and equal sacrifice. It provides for a small amount of fairly
distributed benefits and, most important, it brings our deficit down to
zero and stops the accumulation of debt that has buried the economic
opportunities of the next generation.
So I ask all my colleagues to take a good look at this plan. Let us
take this last, best chance to put aside politics and adopt a balanced
budget that is real, bipartisan and fair.
I yield the floor.
Mr. CHAFEE. Mr. President, I yield 4 minutes to the Senator from
Maine.
The PRESIDING OFFICER. The Senator from Maine is recognized for 4
minutes.
Ms. SNOWE. Mr. President, I rise this morning to join more than 20 of
my colleagues in presenting our bipartisan balanced budget proposal--
the only bipartisan budget plan in Congress. Over the past 5 months, we
have all observed the on-again, off-again budget negotiations, the two
Government shutdowns, and several close calls on the debt limit.
In the wake of these fiascoes, the unveiling of our budget offers
reassurance and hope, because, despite everything you have seen or
heard, this package proves that Republicans and Democrats can work
together and find common ground on this--the most important issue
facing our Nation.
I would like to join my colleagues in thanking Senators Chafee and
Breaux for their leadership in bringing this group together. Without
their efforts, it would not have been possible to present this
bipartisan plan today.
Mr. President, we are in danger of becoming the first generation in
the history of our Nation that will not leave a better standard of
living for the next generation. For nearly 200 years, we took it for
granted in this country that those who followed us would have a better
life than we did. Well, that is simply not the case anymore.
The fact is, the United States has not balanced its budget since
1969. And today--27 years later--our unwillingness to address its
problem in a meaningful way is the ultimate example of politics as
usual and status quo governing. And as a result of our Government's
continuing failure to live within its means, we are bequeathing a
legacy of debt and darkness to our children and grandchildren.
Mr. President, the Members of this body who are presenting this
bipartisan budget plan today believe that this reckless disregard for
our children's future is unacceptable.
Our bipartisan group has been working today with an eye on tomorrow,
because as Herb Stein of the American Enterprise Institute notes, ``The
problem is not the deficit we have now, it's the deficit we will have
in the next century.''
Well, Mr. President, the next century is only 3\1/2\ years away. And
every day we wait, deficit spending continues, interest on the debt
accumulates, and our economy moves closer to the brink. Consider these
numbers:
Under current economic policies, the debt will reach $6.4 trillion by
the year 2002. And according to estimates from the President's own
Office of Management and Budget, the deficit will double in 15 years,
then double again every 5 years thereafter. And by the year 2025, OMB
estimates that the deficit in that year alone will be $2 trillion. OMB
also forecasts that if we continue our current spending spree, future
generations will suffer an 82-percent tax rate and a 50-percent
reduction in benefits in order to pay the bills we are leaving them
today. With those numbers, it's no wonder babies come into the world
crying.
When six Republicans and six Democrats first gathered in Senator
Chafee's office last December, it was out of a shared conviction that
this Government has no right to leave such a crushing burden of debt to
the next generation. We believe that balancing the budget is not an
option, it's an imperative.
We wanted to show that if we put the interests of the American people
first, our system could work, that we could produce results. And with
that vision in mind, we have come together, split the differences
between the President's budget and the Republican plan, and have
reached agreement on a plan that balances the budget while still
maintaining the priorities shared by all Americans.
Mr. President, the benefits of passing a balanced budget are
enormous: Some economists estimate that a balanced budget would yield a
drop in interest rates of between 2.5 and 4 percent. In practical
terms, this means that the average family with a home mortgage,
[[Page S4103]]
a car loan, or student loans would save about $1,800 a year. And real
income for the average American would increase by an astounding 36
percent by the year 2002.
Furthermore, the Joint Economic Committee projects that a 2.5-percent
drop in interest rates would create an additional 2.5 million jobs. And
in terms of economic growth, CBO estimates that balancing the budget
would lead to a 0.5-percent increase in real GDP by the year 2002, and
that over time, national wealth would increase by between 60 and 80
percent of the cumulative reduction in the deficit.
More than 20 Republicans and Democrats have already agreed that this
proposal is an acceptable way to reach balance. Bipartisanship was the
key to turning our shared commitment for a balanced budget into a
plan--and bipartisanship will be the key to Congress moving forward and
enacting a balanced budget proposal this year. And, frankly, our plan
represents perhaps the last, best chance for passing a balanced budget
in this Congress.
As with any balanced budget plan, there are provisions in this
proposal that can be opposed by just about any person or any group. But
the difference between our plan and any other plan being put forward is
that this plan has bipartisan support.
Our proposal has strong bipartisan support because--unlike some other
proposals on the table--our plan does more than pay lip service to
providing realistic, long-term protection to our shared commitments to
education, the environment, and economic growth. While other proposals
rely on unrealistic cuts in discretionary spending to reach balance,
our proposal does not.
Specifically, at the time our proposal was crafted, our bipartisan
plan contained $30 billion less in discretionary spending cuts than the
President's budget offer, and $81 billion less in discretionary
spending cuts than the Republican proposal.
As a result, while other proposals would leave future Congresses with
the choice of providing adequate funding for some programs while
utterly eviscerating others, our proposal does not.
Mr. President, no issue is more critical to the economic future of
our Nation--and the economic future of our children and grandchildren--
than that of balancing the budget. In the words of John Kennedy, ``It
is the task of every generation to build a road for the next
generation.''
Mr. President, this bipartisan budget plan is the road toward fiscal
responsibility that will give our children and grandchildren a better
tomorrow. We cannot let this moment pass us by. We cannot allow the
forces of politics to overcome the forces of responsibility. We must
act now.
I am very pleased to rise and express my appreciation to both Senator
Chafee and Senator Breaux for their outstanding leadership. Without
their efforts, it would not have been possible to not only assemble
this bipartisan group but also to present the only bipartisan balanced
budget plan in this Congress.
I think over the past 5 months, we have all observed the on-and-off-
again budget negotiations, the close calls on the debt ceiling and also
the two Government shutdowns. In the wake of all those fiascoes, the
unveiling of our budget offers reassurance and hope that despite
everything you have seen and heard, that Republicans and Democrats can
come together and reach common ground on one of the most important
issues facing this country.
Frankly, Mr. President, there is no more important issue to the
economic future of this country than that of balancing the budget.
There is no more important issue to the future of our children and our
grandchildren than that of balancing the budget.
Our unwillingness to address this issue really represents,
unfortunately, the ultimate example of politics as usual and status quo
governing. We, as a bipartisan group, look to the future. As Herb Stein
of the American Enterprise Institute said recently, the problem we have
with the deficit is not now. The problem is the deficit in the next
century, and the next century is 3\1/2\ years away.
Just consider the numbers. The debt will be $2.4 trillion in the year
2002. It will double in 15 years. Then it will double every 5 years.
Then at the point in 2025, in that year alone, the deficit will be $2
trillion. It will require future generations to pay a tax of 82 percent
and see a reduction in their benefits of 50 percent based on our
current spending and economic policies of today. Our bipartisan group
considered that a reckless disregard for future generations by
bequeathing them that legacy of debt.
I want to point out, as far as this bipartisan budget plan, a very
significant factor and one which Senator Jeffords touched on, and that
is the issue of discretionary spending. We have been paying lip service
to the most important programs we have embraced in this institution,
ones that everybody talks about. That is education and the environment,
for example.
Take a look at this chart, for example, on discretionary spending. We
propose very realistic spending levels for discretionary spending. We
took a hard freeze, which is $258 billion, and only proposed $10
billion more than that in terms of discretionary spending over the 7
years.
But if you look at the GOP offer in January and the President's offer
in January, we have, for example, the January offer by GOP, $258
billion, and beyond that $90 billion in cuts beyond a hard freeze.
The President's offer is $258 billion in a hard freeze and $40
billion beyond that in terms of discretionary spending cuts. It is
unrealistic. What is worse is that they postpone many of these cuts for
discretionary spending to future Congresses, not even in the next
Congress. It will be in the year 2001 or the year 2002 that most of
those cuts will occur.
I do not think it is fair to expect that any future Congress in the
year 2001 or 2002 is going to have to cut anywhere between $40 to $90
billion in additional discretionary spending in order to reach their
goal of a balanced budget. You know exactly what will happen. It will
not happen.
So we propose a very realistic level of discretionary spending on the
very programs that we consider important to the American people, the
very programs that already have been cut significantly over the last 10
years. So I hope that the Members of this Senate will look very
carefully at this budget, recognizing that this is a major step
forward, that it is achievable, that we split the differences to reach
this common ground.
I hope furthermore that we in this Congress will not allow the forces
of politics to overcome the forces of responsibility. Mr. President, I
yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. BREAUX. Mr. President, I yield 4 minutes to the distinguished
Senator from Florida.
The PRESIDING OFFICER. The Senator from Florida is recognized for 4
minutes.
Mr. GRAHAM. I thank the Chair.
Mr. President, I strongly concur in the statements that have been
made by each of my colleagues this morning.
This is the time for public officials in Washington to stop the
procrastination, bickering, the confrontation, to start the process of
governing for the benefit of the people of America.
I am encouraged from reports this morning that indicate that we may
be on the verge of reaching a resolution to the budget for fiscal year
1996. I deplore the fact that it took until the 25th of April to reach
a budget resolution which should have been realized prior to October
1st of 1995. But later is better than never at all.
Mr. President, we are at a historic moment in terms of our
opportunity to balance the Federal budget. The leadership of the House
and the membership of the House want a balanced budget. The same is
true in the Senate. The President wants a balanced budget. We are on
the verge of producing the first balanced budget that we have had in
almost two generations.
Missing this premier opportunity, muddling along into the election
beyond, is a sure path for continued public disdain of our commitment
and our ability to achieve an important national purpose. It would be a
tragedy to let this opportunity drift away. In some ways it would be
more than a tragedy, it would be a disgrace and an outrage.
It is for exactly the avoidance of those negative perceptions that
the Centrist Coalition was formed, to see if
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it was not possible to put together a reasonable plan to bring our
Federal budget into balance and to keep it there and to do so on a
bipartisan basis.
One of our principles was that if you are going to have sustained
Government programs at the domestic or foreign level, that it is
critical that they be premised on a foundation of bipartisanship.
Let me just mention what I think are a few of the principal aspects
of this Centrist coalition budget. The budget is honest. It brings us
into balance with a reasonable annual movement towards that balance. It
does not postpone all the tough decisions to the last year. The budget
also sustains this balance by making critical structural changes. It
will help assure we stay in balance into the future.
This balanced budget will produce broad economic benefits for the
Nation. Virtually every economist agrees that if we can have a balanced
budget plan that we are committed to realizing that it will result in
noticeably lower interest rates over the next period than those
interest rates will be if we fail in this effort.
That will mean every month in the wallets of American families
additional dollars that they can spend--rather than spending on
interest--for their home mortgage. It will mean for young people coming
out of colleges, universities, that they will have lower interest cost
student loans. Virtually every American will benefit by this
contribution.
Mr. President, just briefly in the moments left to me, let me say
that I particularly worked on the section of this budget plan that
relates to Medicaid. It is a complicated area, which our
recommendations will be explained in more detail later.
But basic principles that will be preserved in this important area
include the safety net for low-income and elderly Americans. A
continuing Federal role in assuring that safety net is maintained. But
substantial additional flexibility is given to the States in order to
innovate and to assist in realizing the significant savings which we
think are possible in this program.
This balanced budget will help preserve access to health coverage to
37 million Americans. It gives Medicaid a shot in the arm--while at the
same time reducing costs by $62 billion dollars.
Some reformers have seized upon this budget debate as a way to
abolish the Federal role in Medicaid. Others steadfastly defend the
status quo, saying that Medicaid needs no medical attention whatsoever.
Both approaches are wrong. Medicaid doesn't need major surgery. But it
could use some preventative care to continue its efforts into the 21st
century. Our budget does that.
Several months ago, the National Governors Association proposed a
bipartisan plan to tend to Medicaid's infirmities. We share many of the
Governors' goals.
First, we agree that mending Medicaid--and balancing the budget--
depend on using aggressive therapy to control rising Medicaid costs.
Our plan's savings will go a long way toward making Medicaid more
efficient and balancing the budget.
We agree that one of the best ways to reduce costs is to give states
more freedom to design, create, and innovate. In our plan, that means
no more waivers for managed care, home care, and community based care.
It means repeal of the Boren amendment. And it means dozens of other
measures to encourage flexibility and state innovation.
Like the Governors, we feel strongly that the basic health care needs
of our Nation's most vulnerable populations must be guaranteed. That
means protecting the Federal-State partnership that has so successfully
provided for the health care needs of low-income Americans.
But we take this goal one step further. Thanks to Medicaid, 18
million children have access to hospital, physician care,
prescriptions, and immunizations. We can't throw that away.
So even though the Governors' plan scales back coverage to children
under 133 percent of the poverty line, we maintain Medicaid's historic
guarantee to cover children under 185 percent of the poverty line. Our
children deserve healthy and safe lives.
We also agree with the Governors that Medicaid must lose its
addiction to old budgets and old demographics. Most of the Medicaid
officials who created the program are no longer around. But their 30-
year-old statistics and funding formulas still serve as the basis for
Medicaid policy decisions.
In this new era, we must adopt new thinking. Medicaid funds should
follow health care needs. States must be protected from unanticipated
program costs resulting from economic fluctuations, changing
demographics, and natural disasters.
Because our centrist plan is all about balancing the budget, we adopt
an additional principle. We protect the Federal Treasury from Medicaid
fraud and abuse.
In the 1980's Medicaid created the Disproportionate Share Hospital
[DSH] Program to assist hospitals with large numbers of low-income
patients. Some States saw this as a way to reduce their contributions
to Medicaid. Others saw it as an opportunity to transfer Federal
Medicaid dollars to other priorities.
As a result of this abuse, Federal Medicaid costs exploded. Congress
implemented aggressive defensive therapy and cracked down on Medicaid
abuse. Yet incredibly, Congress is now considering the repeal of those
laws we passed to crack down on abuse. That won't help to control
costs. It won't help us balance the budget.
It is high time for us to produce the balanced budget the American
people deserve. For more than 20 years, Washington has been asleep at
the wheel while the Federal budget has headed over the cliff.
Let's stop being modern-day Rip Van Winkles. Now is the time for
reasonable, bipartisan compromise. Now is the time to balance the
budget.
So, Mr. President, I conclude by commending my colleagues who have
joined in this effort who have provided such effective leadership. We
do not purport that this is Biblical. This is the product of men and
women, fair-minded, trying to develop a compromise in the best
traditions of democratic government. We hope that this will serve to
stimulate others to move forward and bring a plan for a balanced budget
to the American people in 1996.
I thank the Chair.
Mr. CHAFEE. Mr. President, I yield 4 minutes to the Senator from
Maine.
Mr. COHEN. Mr. President, first I would like to pay tribute to
Senator John Chafee of Rhode Island. Whether the issue is health care
reform or indeed dealing with a balanced budget, John Chafee has been
in the forefront. He has demonstrated the kind of leadership that he
demonstrated many years ago at Guadalcanal.
He has continued to take the lead on tough issues, joined by
Democrats who show a similar amount of courage. I am thinking of John
Breaux, Bob Kerrey of Nebraska, and so many others who are here on the
floor today. Without that kind of leadership, we would not be able to
forge this bipartisan consensus. I take my hat off to Senator Chafee
for the courage he has shown over the years.
People are disenchanted with politics and politicians today. I think
there is a good reason for that. Because we have been drawing profiles
in cowardice. We have failed to tell the people, in Walter Lippmann's
words, ``What they have to know and not what they want to hear.'' As a
result, we have misled them over the years by promising them more and
more without the corresponding obligation they have to pay for those
promises.
We are where we are today because we have misled them. And so this
represents a break in that particular tradition. The role of success in
the past has been to keep promising more and more and never having to
pay for it. Borrowing from our children, sacrificing their future, all
the while paving our way to electoral success. What this group is
saying is that has to stop.
I was looking at an article last evening in the Atlantic Monthly. I
call all of my colleagues' attention to it. It was written by Pete
Peterson, the president, founder of the Concord Coalition. He has been
writing about this for years now. The article--I will just quote a
couple of things from it. It is one of the most powerful and persuasive
cases one could possibly make about the need for this kind of proposal.
He quotes from Herbert Stein saying:
``If something is unsustainable, it tends to stop.'' Or, as the old
adage advises, ``If your horse dies, we suggest you dismount.''
[[Page S4105]]
Then he goes on to cite some really overwhelming statistics. My
colleague from Maine, Senator Snowe, mentioned some of them. I am just
summarizing it. Basically it says that if the Social Security trust
fund and the Medicare hospital insurance, if they remain as they are,
the combined cash deficit in the year 2030 will be $1.7 trillion. In
other words, the horse will be quite dead. By 2040 the deficit will
probably hit $3.2 trillion, and by 2050, $5.7 trillion; and even
discounting inflation, without counting inflation, the deficit that
year for these two senior citizen programs will approximate $700
billion or nearly four times the size of the entire 1996 Federal
deficit.
The numbers are staggering. The demographics are overwhelming.
Consider the fact that in just 4 years 76,000 Americans are going to
live to be 100 years old, the baby boomers, out of the baby boomers
more than 1 million will reach the age of 100. In just four decades
one-fourth, 25 percent of our population, is going to be over the age
of 65 and our nursing home population is going the double. The
demographics are simply overwhelming.
If we are looking at tax increases, while both parties are talking
about tax cuts, tax increases by the year 2040, the cost of Social
Security as a share of worker payroll, is expected to rise from today's
11.5 percent to either 17 or 22 percent. If you add the Medicare
Program, the workers will be paying between 35 and 55 percent of their
payroll just for those two programs, not counting anything else in the
entire Federal budget.
The numbers are overwhelming. It is as if, Mr. President, we were
told by our scientists that a giant meteor is rocketing its way toward
Earth. It will arrive in about 10 or 15 years. When it strikes, it will
destroy all life in the United States--maybe the entire planet. What
would our reaction be? Ignore it? Say it is a lie? Or it is inevitable
and nothing can be done? Besides, we will be dead and it will not
matter. It is our children and our grandchildren's problem; let them
contend with it. Or would we exercise the kind of courage and vision
that, say, a John F. Kennedy did when he said, ``In the next decade, we
are going to put a man on the moon.''
That is the kind of courage and vision we need to start exercising
now. We need to say there is a giant meteor coming and we need to build
something that will destroy it before it destroys us. That is the
reason we are here today. I commend my colleagues, Senator Chafee,
Senator Kerrey, who has been a leader in facing up to the issues of the
needs of reform in our Social Security system, which is a third rail of
politics, and all the other colleagues on the floor. I commend each of
you for your effort to reach a bipartisan consensus on what we have to
do to destroy that giant meteor that is out there heading this way.
Mr. BREAUX. I yield 4 minutes to the Senator from Nebraska.
Mr. KERREY. Mr. President, I, like my other colleagues, want to
praise both Senators Chafee and Breaux for keeping this group on task
and hope that this proposal, this bipartisan proposal, equally divided
between Republicans and Democrats, will provide a foundation upon which
this Congress can act to enact a balanced budget plan sometime yet this
year.
I will focus my attention on the reforms in this proposal that
address the unsustainable growth of entitlements that the distinguished
Senator from Maine earlier referenced. There are three pieces to this
proposal that will be regarded by many as controversial and by many as
impossible to do.
This chart is not a birthday cake here to my left, as the Senator
from Louisiana joked earlier. This represents the kind of cuts that are
going to be required in discretionary spending over the next 7 years.
In the agreement just announced last night between the White House and
the Congress, rather than cutting or raising taxes, we essentially sold
4.7 billion dollars worth of assets in order to be able to balance the
budget--in order to be able to get an agreement, because nobody wanted
to cut any deeper. Very few people want to cut deeper in discretionary
programs. Next year, we will have to do 28 billion dollars worth of
asset sales. By the time you get down to the seventh year under the
President's balanced budget plan--let me applaud the President, I
appreciate very much that he has a plan on the table because I think it
is helpful--$91 billion in discretionary spending, defense and
nondefense. It is impossible.
I do not think there is anybody in this body that can come up with a
list of things they would cut today of $91 billion. What that means is
we are kidding ourselves. What it means is if you do not want to raise
taxes, you have to go under the entitlement programs to be able to take
the pressure off of discretionary spending. Even still, as the
bipartisan proposal shows, even still we are suggesting substantial
cuts in discretionary programs that will be very, very difficult to
implement.
My guess is these modest changes in entitlements that will be
regarded as draconian and difficult, and there will be a wail of
protest to change the CPI down one-half of 1 percent. That saves $100
billion over 7 years. We will hear all kinds of rationales and reasons
why that cannot be done. All kinds of numbers will be put forth, and
horror stories will be told as to why this change in the Consumer Price
Index should not be enacted.
In the alternative, you will have to do this sort of thing, or even
worse. For those who oppose it, those who say, ``No, I do not want to
do it,'' the first question for the citizen needs to be, then, does
that mean you support these deep cuts in education, these deep cuts in
investment, deep cuts in defense, deep cuts in law enforcement? Is that
what you are supporting?
You cannot merely oppose this. You have to come up with something
that you will substitute in its place. Perhaps, the Member of Congress
or the citizen supports a tax increase. Let them. Let them say so. Do
not just stand and say, ``Gee, I do not want to adjust the Consumer
Price Index because I will have an interest group or individual who
says I do not want to take less.'' That is basically the formula here.
We are on a course, as the Senator from Maine described, as a
meteorite. We are converting our Federal Government into a transfer
machine. We have an unprecedented event that begins in the year 2008:
The largest generation in the history of the country, the baby boom
generation, begins to retire. It is not like anything we faced in the
past. We cannot afford to wait until we reach crisis.
The second and third things that are done, we adjust the Medicare
eligibility age to correspond with Social Security eligibility age, and
we adjust civil and military service retirement age for future
employees of the Federal Government of the armed services.
I hope to have a chance to come back as the coalition builds. I urge
colleagues who will hear from citizens saying ``do not support the
Consumer Price Index change, do not support Medicare eligibility
change, do not support adjusting civil and military service
prospectively,'' I urge my colleagues to keep the powder dry. In the
alternative, this is the sort of thing you will end up having to
support.
I applaud the junior Senator from Rhode Island, Senator Chafee, and
the Senator from Louisiana, Senator Breaux, for their leadership.
Mr. CHAFEE. I yield 3 minutes to the Senator from Washington.
Mr. GORTON. Mr. President, with a modest degree of courage and a
generous share of good will, this bipartisan report may well be
remembered as a landmark in political and economic history of the
1990's.
Personally, I never believed that we would reach the goal of a
balanced budget except during the first 6 months of a new Presidency,
in which that President made it his highest priority. In spite of that
belief, last year we almost did so with a Republican proposal that
would, in fact, have balanced the budget. That proposal was rejected by
the President, but, nevertheless, it moved us forward on the right
road. It was followed by a proposal by the President, and another by
Democrats in this body, that moved the two sides closer together but
still left a great gulf between them.
Now, working together, we do have a proposal before the body this day
for a very real balanced budget, a very real balanced budget based on
the reform of entitlements which are both expensive and expansive and
which will ultimately destroy the financial security of this country.
Modest in some areas, dramatic in other areas, yet, nevertheless, will
do the job.
[[Page S4106]]
Now, Mr. President, to many people in the United States, all of whom
basically support a balanced budget, it is, nevertheless, something of
an abstraction--a good to be sought but not one well understood.
Perhaps the most important part of this budget proposal is the dividend
that it will pay not just to the Government of the United States but to
the people of the United States. Perhaps as much as a quarter of a
trillion dollars will end up being saved by the Federal Government in
lower interest payments on the national debt and in greater revenue
collections from a more healthy and vibrant American economy.
At least three times that much will be paid in a dividend to the
American people in lower interest rates on their homes and on their
automobile purchases and in higher wages from more and better jobs. A
good estimate will be that every family, the average family in the
United States, will be $1,000 a year better off if we do this than if
we do not do it. Of course, if we do not do it, the downside over the
decade will be immense.
We owe a great debt of thanks to the two Johns, Senator Chafee and
Senator Breaux, who have led this effort, but leading it to success
will require that courage and that good will.
Mr. BREAUX. How much time on our side remains?
The PRESIDING OFFICER. The Senator has 9 minutes and 40 seconds.
Mr. BREAUX. I yield 3 minutes to the Senator from Connecticut.
Mr. LIEBERMAN. I thank the Chair. I thank my friend and colleague
from Louisiana and my friend and colleague from Rhode Island for the
leadership of this group.
Mr. President, it has been an honor and a pleasure to participate in
this bipartisan group to achieve a balanced budget.
This group has been meeting for nearly 6 months in an effort to come
up with a budget that balances in 7 years.
We started with the premise that coming to balance in a bipartisan
way is not an impossible task. But, it certainly was painful at times.
The cost of not pressing ahead to come to balance will hurt even more
in the long run. And I very much believe the economic benefits of
trying to come to balance make those tough decisions about slowing
spending that much easier.
I am particularly pleased with the efforts this group has made to
address the growth in entitlement programs in both the short and the
long term. Some of these changes will produce no savings in the 7-year
budget window we are talking about. But they are much needed reforms
and they will save a lot of money in the longer run.
The package we are discussing here today contains smaller cuts in
discretionary spending than any of the other major budget balancing
plans that have been presented to date. The discretionary spending cut
number contained in this plan is far more realistic than the numbers
that have been floated in other plans. As we all know, these spending
cut targets will need to be met year by year through the appropriations
process. As any member of the Appropriations Committee can tell you,
making dramatic cuts in discretionary spending is like trying to get
water from a stone. There is just not a lot of slack there anymore.
We need to go where the money is and that is in the explosive growth
in entitlement spending. If we don't get a handle on this spending, we
can forget about doing all of the things we believe the Federal
Government ought to do. Things like improving education and building
roads. Like providing for a national defense. Like keeping our air and
water clean. As Matthew Miller observed in the New Republic, ``At this
rate, by 2010, when the baby boom retires, entitlements and interest on
the debt will take up all available revenue, meaning there won't be a
cent left for the FBI, the Pentagon, (or) the national parks . . . Nor
will there be a dime to bolster our lagging R&D, education and
infrastructure investments, where we've trailed Germany and Japan for
years.'' That is just the beginning. As Miller points out, ``Then if
it's possible, things get worse.''
The critical need to control entitlement spending in this bill is
growing. We learned earlier this week that Medicare's Hospital
Insurance Program lost $4.2 billion in the first half of this fiscal
year. This trust fund, which pays hospital bills for the elderly and
disabled, lost money for the first time last year since 1972. But the
loss last year was $35.7 million for the year, not $4.2 billion for
half the year.
The bipartisan plan adds an element of fairness to the voluntary
portion of Medicare. We ask those who have more to pay more for this
valuable benefit. The group has looked at recommendations made by the
Boskin Commission on adjusting the consumer price index. That
commission believed the adjustment should be in the neighborhood of 0.7
to 2. By this measure our proposal is cautious in its recommendation of
less than a 0.7 change in the CPI.
We have also consolidated the existing welfare programs into a block
grant to States which will give States the flexibility they need to
come up with innovative ways to help get the poor out of the welfare
system and into the capitalist system.
This budget package also contains a number of important tax
provisions. We have included $130 billion in tax cuts in our package as
well as $25 billion in corporate loophole closers. It is no secret that
not everyone believes we need a tax cut at this time. Indeed, not
everyone in the bipartisan group believes now is the time for a tax cut
but we all recognized the need to compromise if we intended to put
together a package that could actually pass. Personally, I think it
important to include tax cuts, particularly in the broader context of
why we want and need to balance the budget. Probably the most
compelling reason for us to balance the budget is to minimize the
dissaving which budget deficits represent. With an unsettlingly low
savings rate in this country, the last thing we need is to add to that
problem through government deficits. We very much need to boost savings
and make that money available for investment which is essential to
improving productivity, competitiveness and ultimately to creating jobs
and increasing real wages in this country. I am delighted that the tax
package we have put together contains genuine incentives for savings
and investment and I think such a package adds to, not detracts from,
this budget proposal. In the interest of full disclosure, I should also
reveal that my home State of Connecticut labors under the highest per
capita tax burden in the country, making tax relief all the more
important to me.
In particular, the bipartisan tax package contains a variation on a
proposal that Senator Bob Kerrey and I have been working on, called
``KidSave.'' The bipartisan package allows parents to take a $250
credit for each of their children under the age of 17. However, if a
parent agrees to set aside their credit in a retirement savings account
for their child, that credit is doubled to $500. These retirement
accounts would follow virtually all IRA rules with one exception: We
would allow children to borrow against them for their higher education.
Thanks to the wonders of compound interest, $500 a year invested for
17 years in a child's name at 10 percent growth a year, the average
growth over the last 70 years, will yield over a million dollars by the
time the child reaches age 60. That's great news for parents and kids.
And it is also great news for our economy since we need to take strong
steps to increase our drastically low savings rates. The bipartisan
proposal would also allow parents whose income exceeds the income
limits on the credit to set aside up to $500 in after-tax dollars in a
KidSave account and reap the benefits of the tax-free build-up of these
dollars. Under current law, it is very difficult to set up an IRA for a
child since most children do not have the earned income needed to
qualify for a retirement account.
The bipartisan proposal also contains a 50-percent reduction in the
capital gains tax for individuals as well as a drop in the corporate
capital gains rate to 31 percent. This section also allows for the
deduction of a loss on a personal residence sale and a 75-percent
capital gains exclusion for qualified small business stock. These
proposals are very similar to those contained in S. 959, a bill I have
cosponsored with Senator Hatch from Utah. We should all keep in mind
that the benefits of a capital gains cut will flow to millions of
Americans of all income groups--to anyone who has stock, who has money
[[Page S4107]]
invested in a mutual fund, who has property, who has a stock option
plan at work, who owns a small business. That represents millions of
middle class American families. And these are just the direct
beneficiaries, not even counting the many middle and lower income
people who will get and keep jobs thanks to the investments spurred by
a capital gains tax cut.
In addition, our proposal expands the availability of tax deductible
IRA's and allows for penalty-free withdrawals from those accounts for a
number of reasons. We have also included two higher education tax
incentives, some significant AMT relief, estate tax relief, an increase
in the self-employed health deduction to 50 percent and an extension of
the expiring tax provisions.
Taken together, these tax cuts will encourage investment and savings
which will in turn stimulate economic growth in this country. That
growth will generate jobs and those jobs will generate greater
revenues. And of course, that revenue will make it easier for us to
balance the budget.
When all is said and done, I believe this is a thoughtful and
meaningful set of tax provisions. They are part of a larger budget
package which is thoughtful and meaningful as well. I hope that this
Chamber will consider taking up this package, or something quite
similar to it, in the weeks and months ahead. To not do so, would be
passing up a tremendous opportunity. I hope we won't do that and I
would encourage my colleagues to join us in our effort to move this
bipartisan budget forward.
Mr. President, it is April 25, 1996, and we are pleased to note this
morning that our respective leadership and the White House have agreed,
7 months into fiscal year 1996, on a budget for fiscal year 1996.
This is unprecedented and obviously regrettable. It has been
tumultuous for those who work for the Federal Government. But, on the
other hand, I would like to think that all of us have learned something
from the travails of this year, the long and twisted path that we have
followed, to finally be at a point where we can adopt a budget for
fiscal year 1996. I hope we will take what we have learned and apply it
to the broader challenge and opportunity we have to adopt a program to
take us to real balance by a date certain.
Can we do it? Well, 22 of us are here this morning, Republicans and
Democrats who worked side by side, dropping our party labels and
agreeing that we are all Americans, and that we have a common problem
here, which is to take our country out of debt and to thereby help our
economy grow. This group of 22 was able to do it. And we hope that this
proposal that we are presenting this morning will filter out to our
colleagues in both parties and up to the leadership of the Congress and
the White House to give them the confidence that they, too, can work
together to bring our budget into balance. This is exactly not only
what America's future demands, but what the American people want today.
Mr. President, I want to focus for a moment on the provisions of this
package that deal with tax cuts. Tax cuts are controversial. Some
people say--particularly on my side of the aisle--``Why have tax cuts
if you are trying to balance the budget?'' But this group, wanting to
present our colleagues with a package that had a chance of passage,
included substantial tax cuts--$130 billion in tax cuts over the 7
years. I believe very strongly that these tax cuts are consistent with
our aim of balancing the budget and, particularly, consistent with the
desire that drives the movement to balance the budget. And that is the
desire to get America growing--to create and protect jobs for average
working Americans.
We have in here a capital gains tax cut, a 50-percent cut on the
individual side, one that I think will unleash billions of dollars of
capital in the private sector and create the kind of momentum that can
raise our national rate of growth from the anemic place we have been,
up a half point, up a full point, to create millions of new jobs and
greater wealth in our country.
Mr. President, we have some incentives here for greater savings,
expanded individual retirement accounts. And, Mr. President, we have
some relief for the middle class. People talk about wage stagnation of
the middle class. What is the best way to help overcome that wage
stagnation? Put a little more money in the pocket of working families
with children. Under our plan, parents can take a $250 credit for their
children or agree to set that money aside in a KidSave account for that
child's higher education and retirement and receive $500.
Mr. President, this is a good, strong program. These tax cuts are a
vital part of it.
I yield the floor.
Mr. CHAFEE. Mr. President, I yield 3 minutes to the Senator from
Kansas.
Mrs. KASSEBAUM. Mr. President, as I stand here today with my
colleagues discussing a new plan to balance the budget, I can guess
what many Americans are probably thinking: ``Here they go again.''
The budget has been the catalyst driving our agenda for more than a
year, from our vote on the balanced budget amendment to the debates
over the budget resolution, budget reconciliation package, and annual
spending bills. Haven't every one of us, Republican and Democrat, stood
up on this floor and professed--repeatedly--our support for a balanced
budget? Why then don't we have a balanced budget?
I can guess something else Americans are thinking, because I hear it
from many Kansans: We should run Government as we'd run a business, and
balance our books. I agree, Mr. President, but it is more complex than
that, for better or worse, and it is part of the reason we still do not
have a budget agreement.
When we discuss the Federal budget, we are discussing more than a
ledger sheet. We are discussing national priorities with real
consequences, and we do not all agree on the priorities or their
consequences. Finding middle ground becomes a challenge of its own. Yet
we cannot allow the enormity of our task--or the controversy
surrounding it-- to scare us away from trying to restore sound fiscal
policy.
Because we are discussing an endeavor of broad national significance,
I do not think we can overemphasize the importance of fairness. The
vast majority of Americans say they are in favor of balancing the
budget, whether or not they realize what it means for programs they
might like. We all talk about tough choices here, but I think we have
seen that Americans are not likely to accept those tough choices unless
they are convinced they also are fair. And that is what this budget
is--tough but fair.
It is tough on welfare, placing a 5-year lifetime limit on benefits.
But it also keeps a safety net in place for children. For example, we
would allow States to ease work requirements for parents who cannot
find child care for children who are not yet school-aged. In my mind,
Mr. President, that's fair.
Neither is the plan selective in its toughness. One thing we all hear
when we talk to constituents is that Congress must not exempt itself
from these tough choices. I agree, and have been pleased to see us turn
a discerning eye on ourselves--foregoing, for example, our automatic
cost-of-living increases for 3 years running, as well as reducing
overall spending for the legislative branch by 9 percent last year.
This budget proposal, which calls for increases in retirement
contributions from Federal agencies and employees, also reforms
judicial and congressional retirement by conforming their accrual and
contribution rates to those of all other Federal employees. Once again,
a necessary and fair step.
This budget is tough but fair when it comes to discretionary programs
as well. By holding discretionary spending to a level slightly below
fiscal year 1995 for the next 7 years, we can achieve savings without
crippling important programs, from education and crime control, to
housing and transportation. In any case, it is not discretionary
spending that poses the real long-term challenge to balancing the
budget. That challenge comes from rapidly growing entitlement programs.
We do not ignore that challenge in this budget, making significant
reforms to small and large programs, including Medicare and Medicaid.
Both of those vital programs would continue to grow, but at a more
manageable pace. And the way we would find savings would be fair. From
Medicare, for example, we have found a balance between reforms that
affect providers and those that affect recipients. Throughout this
process, I have said that we
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should not go too far in cutting provider payments. If we do, we cannot
expect that Medicare beneficiaries will continue to have access to
high-quality health care services, especially in rural settings.
Our budget proposal is tough on taxes, too, eliminating unnecessary
deductions and making other tax reforms to save $25 billion. We would
give the Internal Revenue Service authority to deduct payments from the
Federal wages, retirement checks, or Social Security checks of
delinquent taxpayers. That is a tough proposal, Mr. President, but it
is only fair to millions of conscientious Americans who faithfully pay
their taxes.
Those reforms and others in our package allow us to propose modest
but important tax cuts to middle-class families in the form of a $250-
per-child tax credit. The credit could be increased to as much as $500
if parents contribute to an individual retirement account in their
child's name. The package includes deductions for educational expenses
and the interest paid on student loans, and it also offers important
incentives to investment and growth.
A few years ago, I worked on another bipartisan piece of budget
legislation, that time with Senator Grassley and Senator Biden. You
might recall that we would have frozen all Federal spending for 1 year.
We did so knowing at the time that such a proposal might be viewed as
austere or even rash, but then, as now, our budget crisis warranted a
bold step. The idea of fairness, of every program contributing its
share toward a goal that eventually would benefit them all, was
appealing to me, as it was to many Americans.
This budget proposal, while not taking the shape of a formal freeze,
retains that appeal for me. It is a budget that calls for shared
responsibility, that neither heaps the burden of that responsibility on
a single group nor exempts others from doing their share.
Moreover, the shared responsibility will pay off in the end. The
tough choices we make today will preserve fundamental programs for the
future. But the longer we delay, the more drastic the steps will become
to keep even the most essential services viable. Senator Simpson talked
about this on the floor earlier this week, as he and Senator Kerrey
have many times before. If we do nothing, in less than 20 years our
choices will be made for us, because by then, all of our revenues will
be consumed by mandatory spending. We will be forced to react with huge
tax increases or draconian entitlement spending cuts. Then, our choices
will not be tough--they will be impossible.
We can avoid that impossible situation. There is no denying that this
bipartisan budget is tough, but it is fair --fair to seniors, fair to
working families, fair to people struggling to get back on their feet,
and above all, fair to our young people and our future. For them, the
ultimate in unfairness is inaction. Let us be fair to them and consider
this budget proposal as a serious step toward fiscal responsibility.
Mr. President, I commend Senator Chafee and Senator Breaux, who have
long been guiding lights in attempting to pull together a bipartisan
effort for a balanced budget. I am sure there are many eyes that glaze
over at this point as we talk about a budget once again and a balanced
budget and say, ``Here they go again.'' But I would like to suggest,
Mr. President, that this was a missed opportunity. We must pull
together to lay out a roadmap for our country in the future, because
everyone desires sound fiscal policy and wants to see our goal of a
balanced budget. A budget is a catalyst that really sets our agenda. It
establishes our priorities. It provides a roadmap.
Some people say, ``Well, why can you not get to a balanced budget? We
have to balance our budget in our businesses. We attempt to balance our
budgets in our homes. Why, then, do we not have a balanced budget?''
I think that one of the reasons is that when we discuss the Federal
budget, we are discussing more than a ledger sheet. We are discussing
national priorities with real consequences, and we do not all agree on
the priorities or the consequences. Finding middle ground becomes a
challenge to everyone. Yet, we cannot allow the enormity of our task or
the controversy surrounding it to scare us away from trying to restore
sound fiscal policy.
What I believe the initiative does that we have before us in this
budget presentation is fairness and tough choices. It touches
everybody, and that, perhaps, is one of the reasons that I think we can
come together and say we have not set one group or another group aside.
It makes changes that will affect everyone. This takes us to a balanced
budget.
Is it important to us today, as we struggle with many issues, but all
issues really are reflected in our budget. I think, most of all, what
it says is that we can accomplish something here and accomplish it in a
fair way, a tough way, and a bipartisan way. It will be in the best
interest not only of today, as we provide priorities and initiatives in
our policies, but for the future.
I suggest, Mr. President, that if we fail now, we will have failed
for the future generations. That is why I think this is a monumental
opportunity and a challenge.
I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. BREAUX. I yield 5 minutes to the distinguished Senator from North
Dakota.
Mr. CONRAD. Mr. President, I want to add my words of thanks to the
Senator from Rhode Island, Senator Chafee, and the Senator from
Louisiana, Senator Breaux, who led this effort to address what I
believe is the most important question facing America.
What we do here will largely determine the economic future for us and
for our children. That is the stakes of the debate that we have
embarked upon.
Mr. President, the hard reality is that we are facing a time bomb in
this country. It is a demographic time bomb. It is the time bomb of the
baby boom generation. The baby boom generation begins to retire very
soon now. They are going to double the number of people who are
eligible for Social Security, for Medicare, and the other entitlement
programs.
We know what that means. There is no mistaking the future if we fail
to act. The Entitlements Commission told us clearly, if we stay on our
current course, by the year 2012, every penny of the Federal budget
will go for entitlements and interest on the debt. There will be no
money for roads. There will be no money for defense. There will be no
money for parks. There will be no money for item after item that is
important to the American people.
Mr. President, the Entitlements Commission also told us that if we
fail to act, future generations will face either an 80 percent tax
rate--an 80 percent tax rate--or a one-third cut in all benefits. Mr.
President, that is a catastrophe. We have a window of opportunity--a
narrow window of opportunity--to get our fiscal house in order before
that calamity occurs. Our generation will be judged based on how we
respond.
Mr. President, future generations will curse our generation if we
fail to act. What this group has said is there is a way. We can do it.
We have demonstrated the way. On a bipartisan basis, 22 Senators came
together and wrote a plan that will strengthen the economic future of
America.
Mr. President, it will mean more savings, more investment, stronger
economic growth, more jobs, and a brighter economic future for our
children. We can do it. We must do it. We have the opportunity to do
it, if we have the courage to escape our narrow, political, partisan
trenches that have prevented us from doing what must be done.
I thank the Chair and yield the floor.
Mr. CHAFEE. Mr. President, I have a little bit of time. Whatever time
I have left I yield to the Senator from Louisiana.
Mr. BREAUX. Mr. President, I yield 2 minutes to the Senator from
California. We are going to do this again, I say to my colleagues,
hopefully on Tuesday morning,
I yield 2 minutes to the Senator from California.
The PRESIDING OFFICER. The Senator from California.
Mrs. FEINSTEIN. Mr. President, having been in this body for 3 years,
one thing has become a truism for me with respect to a balanced budget.
If it is a Republican plan, the Democrats are going to oppose it. If it
is a Democratic plan, the Republicans will oppose it.
We have traveled various roads to get there over the last year, but
we have
[[Page S4109]]
stumbled in our efforts to make some very difficult choices and there
will be a heavy price to pay for these mistakes.
But the ultimate price will be paid by the American people--our
children and grandchildren--if we do not put our economic house in
order.
Therefore, it seems to me that, if we believe what the distinguished
Senator from North Dakota just pointed out--and I do--that for the sake
of our future and our children's future, we must act and act now. If we
fail to take this opportunity to change the unsustainable present
course, the next generation will face either an 82-percent tax rate or
we will be cutting benefits by 33 percent across the board.
What is clear to me is that the only way to solve the problem is in a
bipartisan way. Therefore, I, too, want to salute the Senator from
Rhode Island and the Senator from Louisiana for their leadership
because without it you would not have a document to which 11
Republicans and 11 Democrats now subscribe.
The U.S. Government has not balanced its budget since 1969. Since
then, the Federal debt has risen to $5 trillion. Interest on the debt
alone is over $260 billion a year.
By one measure, all the personal income tax paid by people living
West of the Mississippi wouldn't even pay the interest on the debt.
Today, the two fastest growing parts of the budget are: First,
entitlements, such as Medicaid, Medicare, Social Security and Federal
retirement programs, and second, interest on the debt.
I think all one has to do is take a look at expenditures of the
Federal Government. In 1969, entitlements were 27 percent of the
budget. In 1995, entitlements were almost 52 percent of the budget.
Therefore, in the future, entitlements by the year 2003 and net
interest on the debt alone will total more than 70 percent of the
outlays.
Discretionary spending--the budgets for the Department of Justice,
NASA, Veterans' Affairs, the Environmental Protection Agency, to name
just a few--has shrunk from 21.3 percent of the budget in 1969 to 18.2
percent in 1995, and we are continuing to cut. Our discretionary
spending has been brought under control, but entitlement spending has
not.
What these charts tell you, is that, if we don't reign in the cost of
entitlement programs, we could not cut enough discretionary spending to
balance the budget.
Even if we eliminated the entire Departments of Justice, Health and
Human Services, Education, Agriculture, Veterans Affairs,
Transportation, the Environmental Protection Agency, and NASA--we
couldn't balance the budget without cutting entitlements.
So this is the problem we have been trying to solve. And it's not
academic--the budget deficit is a problem that affects people.
Increases in the Federal deficit mean higher interest rates. It means
buying, or refinancing a home costs more. It means borrowing money for
business, school or a new car is more expensive.
It saps the private sector's ability to borrow funds in order to grow
and create jobs and when businesses can't borrow money to modernize or
expand productivity--the economy and employment suffer. Small
businesses, who don't sell stock to raise money and may have to borrow
to fuel growth, are the ones who suffer the most.
The Centrist Coalition proposal balances the budget from the middle,
drawing from Republicans and Democrats alike.
The Centrist plan provides targeted tax cuts of $130 billion--not as
much as the Republicans wanted, but more than the administration
offered--aimed at helping families, such as a ``KidSave'' a child tax
credit coupled with an IRA, other IRA reforms, and tax breaks for
education.
It includes tax provisions to encourage economic growth, like capital
gains reform for businesses and individuals, and the extension of the
R&D tax credit.
It provides an estimated $154 billion in savings from Medicare--
again, not the steep cuts in the Republican proposal, but farther than
the Administration was willing to go.
It saves an estimated $62 billion in Medicaid, and $54 billion in
welfare spending--providing more latitude for States to further our
goals of reform, but retaining Medicaid as the health insurance safety
net for elderly, the disabled, AIDS patients and low-income Americans.
The Centrist plan maintains Federal quality standards and enforcement
mechanisms in nursing home care, such as required staff-to-patient
ratios and commitments for patient privacy.
Balancing the budget is an exercise in setting priorities. This plan
may not have everything I want. It includes some things I do not
support. However, this plan achieves our goal of balancing the budget
in 7 years, and represents a strong, bipartisan effort to do what s
right--reigning in spending, protecting our most vulnerable citizens,
and investing in our future. This is a fair and good plan. I am very
pleased to support it.
I thank the Chair.
Mr. BREAUX. Mr. President, I yield 1 minute to the Senator from
Georgia.
The PRESIDING OFFICER. The Senator from Georgia is recognized.
Mr. NUNN. Mr. President, I will try to take less time than that.
I congratulate Senator Chafee, Senator Breaux, and others who have
worked on this proposal. It is truly a bipartisan proposal. This is the
last train in town. If this does not go, if we do not get people to
rally around this, then we are not going to get a deal this year. It
does not have to be every word of this. But this is a framework, and I
think our colleagues recognize that.
Mr. President, I will add one other word. If we get the balanced
budget for 7 years, as this proposal would do, we have still a long way
to go. This Congress and this country has to look at a 20- to 30-year
fiscal picture. We will have to set in motion things now that can be
implemented very gradually and very slowly. We have to reform Social
Security. We have to reform Medicare. We can do it very gradually where
people do not get hurt, and also for those who are near retirement and
certainly for those who are already retired. But we have to address it
for generations. To balance the budget by the year 2002 is not enough
because it can get out of balance right after that and be back in the
same picture.
I thank the Chair. I particularly thank Senator Chafee and Senator
Breaux for their sterling leadership.
Mr. BRYAN. Mr. President, as one of the original 22 members of this
bipartisan coalition, I support of the Centrist Coalition's 7-year
balanced budget proposal as a sound, moderate approach to a problem
begging for a solution.
Mr. President, this balanced budget proposal came about because evey
member of the bipartisan coalition took it upon themselves to find a
solution to the budget impasse that grips this country. During last
year's budget cycle, responsible spending decisions were buffeted about
by the winds of political rhetoric. This group of Senators is concerned
about the future of this country, and about what failure to balance the
budget today can do to burden the lives of our children and
grandchildren tomorrow.
Our coalition considered a number of balanced budget proposals. We
looked at the President's budget proposal, the National Governors
Association's budget recommendations, and at the House and Senate
versions of the budget bill. We included elements of each proposal in
our final plan.
We took the time to hammer out a bipartisan compromise on every facet
of the Federal budget. I believe this plan represents the greatest
chance this country has to enact balanced budget legislation.
Our burgeoning Federal debt is the greatest crisis facing our Nation
today. It is gobbling up our savings, robbing our ability to invest in
infrastructure and education, and saddling our children with an
enormous bill that will eventually have to be paid. The interest
payments on the debt consume dollars that could otherwise go for urgent
needs such as infrastructure and education.
As late as 1980, our national debt was less than a trillion dollars.
A decade later it had more than tripled and today exceeds 4.9 trillion.
Simply limiting the Government's ability to borrow is not enough to
achieve deficit reduction or to control the compounding interest on the
national debt. According to CBO, ``significant deficit reduction can
best be accomplished by legislative decisions that reduce outlays or
increase revenues.''
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When I took the oath of office in 1983 as Governor of the State of
Nevada, the Nevada State Constitution required a balanced budget. The
necessary, excruciating task of balancing the State budget took strong
executive and legislative leadership. Those tough decisions were made,
and each year the State budget was balanced.
Nevada is not alone in requiring a balanced budget; in fact, many
States across the Nation require Governors to submit, and legislatures
to pass, budgets that reconcile revenues and expenditures. It is time
that the Congress and the President come together and make the tough
decisions that are required for fiscally responsible governance.
Not only is the Federal debt itself a problem, but annual interest
payments on the national debt are devouring precious Federal dollars.
For more than a decade, Congress and the President have had a credit
card mentality--buy goods and services today, worry about the payment
later. The public must share some of this blame as well, because there
are constant objections to cutting Government programs. When the bill
comes due, make that minimum payment and keep charging away. As any
consumer knows, if you only make the minimum payment and continue to
charge, you will never pay off the balance. The finance charges will
just keep accruing. Unlike real life, however, the use of this
Government credit card is never denied and the amount of debt continues
to grow unchecked.
History has shown that nothing is more desired and nothing is more
avoided than the will to make tough choices. The last time our Federal
budget was balanced was 1969.
The Centrist Coalition's balanced budget plan is fair; it
restructures and reforms Federal programs that are inefficient, in
addition to scaling back spending. We want to make sure we get the most
bang for the Federal buck.
For instance, our balanced budget plan preserves Medicare and
protects its long-term solvency. We expand the choices for Medicare
beneficiaries by allowing them to remain in the traditional fee-for-
service Medicare Program or to choose from a range of private managed
care plans. By creating a new payment system for managed care and by
slowing the rate of growth in payments to hospitals, physicians, and
other service providers, our plan extends the solvency of the Medicare
trust fund.
Our Medicaid reform plan protects the most vulnerable in our Nation.
We incorporated a number of the National Governors Association's
recommendations regarding enhanced State flexibility, while maintaining
important safeguards for the Federal Treasury and retaining the
guarantee of coverage for beneficiaries. Our Medicaid funding is based
upon the population of covered people in each State, thereby ensuring
adequate Federal funding in economic downturns. Our plan maintains a
national guarantee of coverage for low-income pregnant women, children,
the elderly, and the disabled. We allow States to design health care
delivery systems which best suit their needs without obtaining waivers
from the Federal Government. Under this plan, States can determine
provider rates, create managed care programs, and develop home and
community-based care options for seniors to help keep them out of
nursing homes.
Our welfare reform language includes strong work requirements and
child protections. The welfare reform package includes many of the
National Governors Association's recommendations; it is also based on
the welfare reform bill that passed the Senate overwhelmingly last year
by a vote of 87 to 12. This package calls for tough new work
requirements, a time limit on benefits, a block grant to provide
maximum State flexibility while ensuring recipients are treated fairly,
increased child care funding to enable parents to work, and a
contingency fund to backstop States during recessionary times. Finally,
our plan preserves the important safety net of food stamp and foster
care programs.
Included in our plan are provisions for tax relief to hard-working
families. Our plan establishes a new $250 per child tax credit for
every child under the age of 17. We have expanded the number of
families eligible for tax deductible IRA's. We also provide education
incentives, the first of which is an income tax deduction of up to
$2,500 for interest expenses paid on education loans. The second
incentive is an income tax deduction for qualified education expenses
paid for the education or training of the taxpayer, the taxpayer's
spouse, or dependents.
We have cut the capital gains tax by 50 percent for individuals, and
reduced the current maximum rate for corporations to 31 percent. We
provide needed economic assistance to small businesses by an estate tax
exclusion on the first $1 million of value in a family-owned business;
and by increasing the self-employed health insurance deduction to 50
percent. Furthermore, our plan closes 25 billion dollars' worth of
unjustified tax loopholes.
Our plan reforms the Federal Housing Administration's home mortgage
insurance program to help homeowners avoid foreclosure and decrease
losses to the Federal Government. It also limits rental adjustments
paid to owners of section 8 housing projects.
This budget plan provides for discretionary spending reductions that
can actually be achieved. The plan proposes a level of savings which is
only $10 billion more than a hard freeze in these programs, ensuring
adequate funds for a strong defense and for critical investments in
education and the environment.
Finally, this plan provides for an increase in Federal retirement
contributions from both agencies and employees through the year 2002.
This plan adopts the judicial and congressional pension reform
provisions that were based on a bill I introduced, and that were
included in last year's reconciliation bill.
I fully support the Centrist Coalition's 7-year balanced budget plan.
While I may not agree with every provision in it, I have accepted those
provisions in the interest of the greater good to come of its passage.
After the disastrous budget standoff of the past year, it is readily
apparent that compromise is the only game in town when it comes to
getting real work done in Washington. I am proud of the efforts and
sacrifices may colleagues have made to put this balanced budget
together.
Mr. BREAUX. Mr. President, I yield the remaining time to the Senator
from Virginia.
The PRESIDING OFFICER. The Senator's time has expired.
Mr. BREAUX. I ask unanimous consent for 1 additional minute and that
I be able to yield that minute to the Senator from Virginia.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. ROBB. Thank you, Mr. President.
I am delighted to join my colleagues on both sides of the aisle in
presenting this particular balanced budget today. I think it is a
clear, good-faith attempt to make responsible but difficult choices
that are going to have a very significant impact on the future of this
country. If we are not willing to make those choices, those difficult
choices honestly, the protracted debate and the gridlock that we have
experienced is simply going to continue.
I commend Senator Chafee, Senator Breaux, and all of those who have
worked with them in attempting to deal with this extremely difficult
and challenging matter.
I am pleased to be a part of that effort.
Mr. President, I am pleased to join my colleagues in discussing the
merits of this bipartisan plan to balance the Federal budget. I believe
this plan is an example of what can be accomplished when we put aside
partisan politics and focus instead on serious questions of public
policy.
Late last year, in the midst of a prolonged Government shutdown and a
breakdown in budget negotiations between the Republican leadership and
the Democratic administration, Senators Chafee and Breaux convened a
bipartisan meeting of Senators who were committed to finding enough
common ground to balance the Federal budget.
Finding common ground required Democrats in the group to accept
larger entitlement reductions and Republicans in the group to agree to
a smaller tax cut. We had hoped that our coming together on a budget
outline we could all support would jump-start the stalled negotiations.
When it became clear that the Republican leadership and the
Democratic administration could not bridge
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their policy differences, we dedicated ourselves to translating the
budget outline we had developed into a full blown legislative plan, and
that is what we have presented to our colleagues today.
We are not here to suggest that this is the only way to balance the
budget. We're here to illustrate that a balanced budget plan can be
drafted from the middle of the political spectrum and driven by policy.
Regardless of the outcome of the balanced budget debate, I think it is
important that we demonstrate to the administration, the congressional
leadership, and the American people what a bipartisan budget compromise
would encompass.
One of the biggest differences between this bipartisan plan and
either the Republican or Democrat plans is that both of their last
offers reached balance on paper by relying on deep cuts in
discretionary spending--cuts that would require future Congresses to
make far tougher choices than any recent Congress has been willing to
make. You only have to look at this year's appropriations process to
realize that future cuts of the magnitude proposed by the current plans
are both unwise as a matter of policy and unattainable politically.
There's no question that if we make these cuts on the defense side of
the ledger, we can't possibly maintain our ability, as the world's sole
remaining superpower, to protect our own shores, much less help defend
freedom, and maintain peace throughout the world.
Yet, if these reductions can't be made in defense--far and away the
biggest item in discretionary spending--where can we make responsible
reductions of this magnitude in discretionary spending? In
transportation infrastructure? In research and development? In
education? In job training? In medical research funding? Do we cut mine
safety inspectors, or air traffic controllers or those who ensure the
safety of our food and maintain the quality of our air and water?
Fortunately, the members of our group have not only chosen a more
realistic and achievable discretionary path over the next 7 years, but
we have done so to protect these types of important investments,
investments which are critical to raising future productivity, growth,
and incomes. We are dedicated to the belief that we should not
sacrifice these investments at the expense of taking on politically
popular entitlement programs.
And protect discretionary spending we must, since entitlements and
interest on the national debt are rapidly edging out discretionary
programs in the battle for scarce federal dollars. Entitlements and
interest on the national debt are projected to account for 70 percent
of our budget by the year 2002, up from 30 percent in 1963. Most
disturbing of all, it is projected that entitlements and interest on
the debt will consume the entire Federal revenue base by the year 2012.
With such staggering expansions of entitlements on the horizon,
significant entitlement reform has to be at the heart of any serious
balanced budget effort. This budget makes meaningful--but fair--
reductions in entitlements like Medicare, Medicaid and welfare while
also seeking to protect our most vulnerable citizens. And it requires
Medicare beneficiaries who can afford to pay more to make a larger--and
more reasonable--contribution to the Medicare Program.
For many of us, the most important part of this plan is its downward
modification of the consumer price index, which controls cost-of-living
adjustments for entitlement programs and tax bracket indexing.
A report of the Senate Finance Committee indicates that the present
value of the CPI overstates the actual rate of inflation by somewhere
between 0.7 and 2.0 percent. By making a CPI adjustment, we are better
able to control the future costs of entitlement programs, including
Social Security, which has up until now been left off the table by both
Republicans and Democrats alike.
From a policy perspective, a CPI modification is absolutely the right
thing to do since it restrains future entitlement costs, thus helping
to protect the discretionary side of the budget from unwise reductions
in the future. But it is understandable, given the approaching
political season, that the modification has become a political hot
potato for both sides, subject to an attack from Republicans as a
backdoor tax increase and from Democrats as a Social Security cut.
As I look back on the events of the last 6 months and ahead to the
Presidential campaign, I sense that political considerations are again
costing us an important and historic opportunity to begin to address
our long-term budget problems.
And if we are ever to make serious headway on these matters, I am
more convinced than ever that the American people don't need to see
important issues of public policy demogogued anymore. They don't need
to see interest groups fired-up to wage war against responsible change.
The American people need to hear and understand the truth about the
sources and seriousness of our long-term budget problems.
Patrick Henry once said, ``for my part, whatever anguish of spirit it
may cost, I am willing to know the whole truth--to know the worst and
provide for it.''
Only by separating the truth from the rhetoric can we balance our
Federal budget the right way. And the anguish will be a lot less if the
sacrificed is shared--and if we summon the courage to act now. For if
we fail to act--and if we continue down the path of cowards--we will
guarantee for our children, not the bright future we inherited, but the
dark responsibilities we refused to accept.
I thank my colleagues for the time to speak and the chance to be a
part of the Centrist Coalition. I hope that this will be the start, not
the end, of our efforts to bring bipartisan and common-sense solutions
to the legislative issues of our day.
With that, Mr. President, I yield the floor.
Mr. BINGAMAN addressed the Chair.
The PRESIDING OFFICER. The Senator from New Mexico.
Mr. BINGAMAN. Mr. President, I ask unanimous consent I be allowed to
speak for up to 5 minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
(The remarks of Mr. Bingaman pertaining to the introduction of S.
1702 are located in today's Record under ``Statements on Introduced
Bills and Joint Resolutions.'')
Mr. BROWN addressed the Chair.
The PRESIDING OFFICER (Mr. DeWine). The Senator from Colorado.
Mr. BROWN. Mr. President, I understand we are in morning business?
The PRESIDING OFFICER. That is correct.
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