[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

[[Page S4096]]

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.

[[Page S4098]]

       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

[[Page S4104]]

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

[[Page S4108]]

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.''

[[Page S4110]]

  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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