[Congressional Record Volume 142, Number 72 (Tuesday, May 21, 1996)]
[Senate]
[Pages S5397-S5410]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
RESERVATION OF LEADER TIME
The PRESIDING OFFICER. Under the previous order, Senate leadership
time is reserved.
[[Page S5398]]
CONCURRENT RESOLUTION ON THE BUDGET
The PRESIDING OFFICER. The Senate will resume consideration of Senate
Concurrent Resolution 57, which the clerk will report.
The assistant legislative clerk read as follows:
A concurrent resolution (S. Con. Res. 57) setting forth the
congressional budget for the U.S. Government for fiscal years
1997, 1998, 1999, 2000, 2001, and 2002.
The Senate resumed consideration of the bill.
Pending:
Boxer amendment No. 3982, to preserve, protect, and
strengthen the Medicaid program by controlling costs,
providing State flexibility, and restoring critical standards
and protections, including coverage for all populations
covered under current law, to restore $18 billion in
excessive cuts, offset by corporate and business tax reforms,
and to express the sense of the Senate regarding certain
Medicaid reforms.
Wyden/Kerry amendment No. 3984, to express the sense of the
Senate regarding revenue assumptions.
Wellstone amendment No. 3985, to express the sense of the
Senate on tax deductibility of higher education tuition and
student loan interest costs.
Wellstone/Kerry amendment No. 3986, to express the sense of
the Senate that funds will be available to hire new police
officers under the Community Oriented Policing Service.
Wellstone amendment No. 3987, to express the sense of the
Senate that Congress will not enact or adopt any legislation
that would increase the number of children who are hungry or
homeless.
Wellstone amendment No. 3988, to express the sense of the
Senate with respect to maintaining current expenditure levels
for the Low Income Home Energy Assistance Program for fiscal
year 1997.
Wellstone amendment No. 3989, to express the sense of the
Senate with respect to the interrelationship between domestic
violence and welfare.
Kerry amendment No. 3990, to restore proposed cuts in the
environment and natural resources programs, to be offset by
the extension of expired tax provisions or corporate and
business tax reforms.
Kerry amendment No. 3991, to increase the Function 500
totals to maintain levels of education and training funding
that will keep pace with rising school enrollments and the
demand for a better-trained workforce, to be offset by the
extension of expired tax provisions or corporate and business
tax reforms.
Kyl amendment No. 3995, to express the sense of the Senate
regarding a supermajority requirement for raising taxes.
Kyl amendment No. 3996, to providing funding for the Low
Income Home Energy Assistance Program through fiscal year
2000.
Kennedy amendment No. 3997, to express the sense of the
Congress that the reconciliation bill should maintain the
existing prohibition against additional charges by providers
under the medicare program.
Kennedy amendment No. 3998, to express the sense of the
Congress that the reconciliation bill should not include any
changes in Federal nursing home quality standards or the
Federal enforcement of such standards.
Kennedy amendment No. 3999, to express the sense of the
Congress that provisions of current medicaid law protecting
families of nursing home residents from experiencing
financial ruin as the price of needed care for their loved
ones should be retained.
Kennedy amendment No. 4000, to express the sense of the
Senate relating to the protection of the wages of
construction workers.
Byrd amendment No. 4001, to increase overall discretionary
spending to the levels proposed by the President, offset by
the extension of expired tax provisions or corporate and
business tax reforms.
Lott/Smith amendment No. 4002, to express the sense of the
Congress regarding reimbursement of the United States for the
costs associated with Operations Southern Watch and Provide
Comfort out of revenues generated by any sale of petroleum
originating from Iraq.
Simpson/Moynihan amendment No. 4003, to express the sense
of the Senate that all Federal spending and revenues which
are indexed for inflation should be calibrated by the most
accurate inflation indices which are available to the Federal
government.
Graham amendment No. 4007, to create a 60 vote point of
order against legislation diverting savings achieved through
medicare waste, fraud and abuse enforcement activities for
purposes other than improving the solvency of the Medicare
Federal Hospital Insurance Trust Fund.
Ashcroft modified amendment No. 4008, to provide for an
income tax deduction for the old age, survivors, and
disability insurance taxes paid by employees and self-
employed individuals.
Gramm amendment No. 4009, to express the sense of the
Congress that the 1993 income tax increase on Social Security
benefits should be repealed.
Brown amendment No. 4010, to express the sense of the
Senate that there should be a cap on the application of the
civilian and military retirement COLA.
Harkin amendment No. 4011, to provide that the first
reconciliation bill not include Medicaid reform, focusing
mainly on Welfare reform by shifting Medicaid changes from
the first to the second reconciliation bill.
Harkin (for Specter) amendment No. 4012, to restor e
funding for education, training, and health programs to a
Congressional Budget Office freeze level for fiscal year 1997
through an across the board reduction in Federal
administrative costs.
Bumpers amendment No. 4013, to establish that no amounts
realized from sales of assets shall be scored with respect to
the level of budget authority, outlays, or revenues.
Bumpers amendment No. 4014, to eliminate the defense
firewalls.
Thompson amendment No. 3981, to express the sense of the
Senate on the funding levels for the Presidential Election
Campaign Fund.
Murkowski amendment No. 4015, to prohibit sense of the
Senate amendments from being offered to the budget
resolution.
Simpson (for Kerrey) amendment No. 4016, to express the
sense of the Senate on long term entitlement reforms.
Snowe amendment No. 4017, to express the sense of the
Senate that the aggregates and functional levels included in
the budget resolution assume that savings in student loans
can be achieved without any program change that would
increase costs to students and parents or decrease
accessibility to student loans.
Chafee/Breaux amendment No. 4018, in the nature of a
substitute.
Domenici (for Dole/Hatch/Helms) amendment No. 4019, to
express the sense of the Senate that the Attorney General
should investigate the practice regarding the prosecution of
drug smugglers.
Feingold amendment No. 3969, to eliminate the tax cut.
Mr. HATFIELD. Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. Without objection, the time will be charged
equally, and the clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. EXON. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. EXON. Mr. President, I ask unanimous consent that the pending
amendment before the Senate be temporarily set aside so that we can
entertain two amendments by previous agreement, the first to be offered
by the Senator from Michigan, the second to be offered by the Senator
from North Carolina. Both have been cleared, and we can move ahead on
them. I would appreciate very much if the Chair would see fit to
recognize the Senator from Michigan at this time for his statement and
the introduction of the amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
The Senator from Michigan [Mr. Levin] is recognized.
Mr. LEVIN. I thank the Chair. I thank my good friend from Nebraska.
Amendment No. 4020
Mr. LEVIN. Mr. President, the sense-of-the-Senate amendment which I
will offer in a moment will put the Senate on record in support of
sufficient funding in order that the National Institute on Drug Abuse,
or NIDA, be able to continue to increase the pace of discovery of an
antiaddiction drug, or drugs, in order to block the craving for illicit
addictive substances.
This sense-of-the-Senate amendment expresses our sentiment that
amounts that are appropriated to the National Institutes of Health
should be increased by amounts above the fiscal year 1996
appropriations for this form of NIDA research. This effort is to
discover antiaddiction drugs so that the craving which exists for them
can be blocked. The amounts in this sense-of-the-Senate resolution are
based on meetings and discussions with NIDA officials about what
resources would be necessary to expedite the development of these
illicit drug blocking agents, and the increase that would be
recommended here in the sense-of-the-Senate amendment would be $33
million in fiscal year 1997, $67 million for fiscal year 1998, and $100
million for each of the fiscal years 1998 through 2002.
There have been some significant breakthroughs already by NIDA. NIDA
researchers have recently shown that activation in the brain of one
type of dopamine receptor suppresses the drug-seeking behavior, whereas
activation of another triggers drug-seeking behavior. Another
significant finding in this past year is the successful immunization of
animals against the psychostimulant effects of cocaine. In 1993, NIDA
announced the FDA approval of a medication called LAAM for heroine
addiction. One of LAAM's
[[Page S5399]]
advantages over methadone is that it does not need to be taken daily.
These are but a few of the exciting discoveries in drug abuse
research that have been made over the past several years.
Stemming the tide of drug addiction by trying to find these
anticraving substances is in the best interests of all of us,
particularly the innocent victims of drug-related offenses. We spend at
the State and local level and at the Federal level billions and
billions and billions of dollars to incarcerate people who commit drug-
related offenses.
A 1992 report by the Bureau of Justice revealed that three out of
four jail inmates reported illicit drug use in their lifetime and more
than 40 percent had used drugs in the month before their offense, with
27 percent under the influence of drugs at the time of their offense. A
significant percentage also said that they were trying to obtain money
for drugs when they committed their crime.
More than 60 percent of juveniles and young adults in State-operated
juvenile institutions reported using illicit drugs once a week or more
for at least a month during some time in the recent past and almost 40
percent reported being under the influence of drugs at the time of
their offense.
The National Institute on Drug Abuse has presented us with some
unprecedented opportunities to understand and to treat addiction and to
block craving. We should support that effort and the progress which has
been made with a funding level which will enhance the efforts of NIDA
to achieve these breakthroughs. We will all benefit. We will benefit in
terms of our safety. We will benefit in terms of the Nation's resources
if we can finally discover agents which will block the craving for
cocaine and for other illicit drugs. NIDA does the majority of research
in this area in the world.
So I hope that this sense-of-the-Senate amendment will be adopted
which will put us on record as encouraging these additional funds so as
to promote the efforts of the National Institute on Drug Abuse. I now
will send this amendment to the desk.
The PRESIDING OFFICER. The clerk will report the amendment.
The assistant legislative clerk read as follows:
The Senator from Michigan [Mr. Levin] proposes an amendment
numbered 4020.
Mr. LEVIN. Mr. President, I ask unanimous consent that reading of the
amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place, insert the following new section:
SEC. . SENSE OF THE SENATE REGARDING THE NATIONAL INSTITUTE
OF DRUG ABUSE.
(a) Findings.--Congress finds the following:
(1) The National Institute on Drug Abuse (hereafter
referred to in this section as ``NIDA'') a part of the
National Institutes of Health (hereafter referred to in this
section as ``NIH'') supports over 85 percent of the world's
drug abuse research that has totally revolutionized our
understanding of addiction.
(2) One of NIDA's most significant areas of research has
been the identification of the neurobiological bases of all
aspects of addiction, including craving.
(3) In 1993, NIDA announced that approval had been granted
by the Food and Drug Administration of a new medication for
the treatment of heroin and other opiate addiction which
breaks the addict of daily drug-seeking behavior and allows
for greater compliance because the patient does not need to
report to a clinic each day to have the medication
administered.
(4) Among NIDA's most remarkable accomplishments of the
past year is the successful immunization of animals against
the psycho-stimulant effects of cocaine.
(5) NIDA has also recently announced that it is making
substantial progress that is critical in directing their
efforts to identify potential anti-cocaine medications. For
example, NIDA researchers have recently shown that activation
in the brain of one type of dopamine receptor suppresses
drug-seeking behavior and relapse, whereas activation of
another, triggers drug-seeking behavior.
(6) NIDA's efforts to speed up research to stem the tide of
drug addiction is in the best interest of all Americans.
(7) State and local governments spend billions of dollars
to incarcerate persons who commit drug related offenses.
(8) A 1992 National Report by the Bureau of Justice
Statistics revealed that more than 3 out of 4 jail inmates
reported drug use in their lifetime, more than 40 percent had
used drugs in the month before their offense with 27 percent
under the influence of drugs at the time of their offense. A
significant number said they were trying to get money for
drugs when they committed their crime.
(9) More than 60 percent of juveniles and young adults in
State-operated juvenile institutions reported using drugs
once a week or more for at least a month some time in the
past, and almost 40 percent reported being under the
influence of drugs at the time of their offense.
(10) This concurrent resolution proposes that budget
authority for the NIH (including NIDA) be held constant at
the fiscal year 1996 level of $11,950,000,000 through
fiscal year 2002.
(11) At such appropriation level, it would be impossible
for NIH and NIDA to maintain research momentum through
research project grants.
(12) Level funding for NIH in fiscal year 1997 would reduce
the number of competing research project grants by nearly
500, from 6,620 in fiscal year 1996 to approximately 6,120
competing research project grants, reducing NIH's ability to
maintain research momentum and to explore new ideas in
research.
(13) NIH is the world's preeminent research institution
dedicated to the support of science inspired by and focused
on the challenges of human illness and health.
(14) NIH programs are instrumental in improving the quality
of life for Americans through improving health and reducing
monetary and personal costs of illnesses.
(15) The discovery of an anti-addiction drug to block the
craving of illicit addictive substances will benefit all of
American society.
(b) Sense of the Congress.--It is the sense of the Congress
that amounts appropriated for the National Institutes of
Health--
(1) for fiscal year 1997 should be increased by a minimum
of $33,000,000;
(2) for fiscal year 1998 should be increased by a minimum
of $67,000,000;
(3) for fiscal year 1999 should be increased by a minimum
of $100,000,000;
(4) for fiscal year 2000 should be increased by a minimum
of $100,000,000;
(5) for fiscal year 2001 should be increased by a minimum
of $100,000,000; and
(6) for fiscal year 2002 should be increased by a minimum
of $100,000,000;
above its fiscal year 1996 appropriation for additional
research into an anti-addiction drug to block the craving of
illicit addictive substances.
Mr. LEVIN. I yield the floor.
Mr. EXON addressed the Chair.
The PRESIDING OFFICER. The Senator from Nebraska [Mr. Exon] is
recognized.
Mr. EXON. I thank my good friend and colleague from the State of
Michigan, Senator Levin, for the amendment that I had indicated earlier
has been cleared on both sides. This is an important sense-of-the-
Senate resolution, and I appreciate the cooperation we have had from
Senator Levin and his staff on this matter.
We are about ready to have proposed in behalf of Senator Helms from
North Carolina an amendment that likewise has been cleared on both
sides. Then we can move the adoption of those by voice vote. Awaiting
the arrival of one Member on the Senate floor, I suggest the absence of
a quorum.
Mr. LEVIN addressed the Chair.
Mr. EXON. I withhold.
Mr. LEVIN. If the Senator will withhold, let me simply thank my good
friend from Nebraska and his staff and the staff on the Republican side
who have worked with us to clear this amendment. As always, I have had
great response from my friend from Nebraska and the Republicans on this
issue. It is an important issue for all America. I am grateful for
their help.
Mr. EXON. I thank the Senator.
Mr. President, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The assistant legislative clerk proceeded to call the roll.
Mr. BROWN. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 4018
Mr. BROWN. Mr. President, I wanted to add a word of support for the
very diligent effort of the Senator from Rhode Island and the
bipartisan group he has gathered together to offer a budget
alternative. I am very mindful of the remarks made by the distinguished
Senator from New Mexico when he observed yesterday that such a change
in budget, to be enacted, would literally require the President's help
and support. Certainly we have learned this last year; that, indeed,
progress for reconciliation has to include the President. But I intend
to vote for the Chafee amendment. I think it brings two factors to it
that are worth considering.
[[Page S5400]]
First of all, it is bipartisan. It is the only major bipartisan
proposal that is here and, I think, as such, has a chance of making it
all the way through reconciliation.
Second, I am going to support it because, of the alternatives, it has
the strongest impact long term, that is beyond the 6-year window or the
7-year window. Long term, it is significantly better in deficit
reduction.
For those two reasons I salute the efforts of Senator Chafee, and I
will probably vote for it.
Mr. President, I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. EXON addressed the Chair.
Amendment No. 4020
The PRESIDING OFFICER. The Chair will inform the Senator that the
pending amendment is the amendment offered by Mr. Levin.
Mr. EXON. Mr. President, I am back to see if possibly we could at
this time clear the two amendments agreed to earlier. Has the amendment
by the Senator from North Carolina been offered?
I am prepared to yield back time on the Levin amendment, which we
will agree to by a voice vote. I likewise assume we will move forward
with the amendment of the Senator from North Carolina, which I assume
has been cleared on both sides.
I yield back the remainder of the time on the Levin amendment.
Mr. DOMENICI. Do I have the time in opposition? I yield back the time
in opposition to the Levin amendment.
THE PRESIDING OFFICER. If there be no further debate, the question is
on agreeing to the amendment.
The amendment (No. 4020) was agreed to.
Amendment No. 4021
(Purpose: To express the sense of the Senate regarding the extension of
the employer education assistance exclusion under section 127 of the
Internal Revenue Code of 1986)
Mr. DOMENICI. Mr. President, I send an amendment to the desk on
behalf of Senator Helms. I ask for its immediate consideration.
The PRESIDING OFFICER. The clerk will report.
The assistant legislative clerk read as follows:
The Senator from New Mexico [Mr. Domenici], for Mr. Helms,
proposes an amendment numbered 4021.
Mr. DOMENICI. Mr. President, I ask unanimous consent that reading of
the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
The amendment is as follows:
At the appropriate place insert the following:
SEC. . SENSE OF THE SENATE REGARDING THE EXTENSION OF THE
EMPLOYER EDUCATION ASSISTANCE EXCLUSION UNDER
SECTION 127 OF THE INTERNAL REVENUE CODE OF
1986.
(a) Findings.--The Senate finds that--
(1) since 1978, over 7,000,000 American workers have
benefited from the employer education assistance exclusion
under section 127 of the Internal Revenue Code of 1986 by
being able to improve their education and acquire new skills
without having to pay taxes on the benefit;
(2) American companies have benefited by improving the
education and skills of their employees who in turn can
contribute more to their company;
(3) the American economy becomes more globally competitive
because an educated workforce is able to produce more and to
adapt more rapidly to changing technologies;
(4) American companies are experiencing unprecedented
global competition and the value and necessity of life-long
education for their employees has increased;
(5) the employer education assistance exclusion was first
enacted in 1978;
(6) the exclusion has been extended 7 previous times;
(7) the last extension expired December 31, 1994; and
(8) the exclusion has received broad bipartisan support.
(b) Sense of the Senate.--It is the sense of the Senate
that the revenue level assumed in the Budget Resolution
accommodate an extension of the employer education assistance
exclusion under section 127 of the Internal Revenue Code of
1986 from January 1, 1995, through December 31, 1996.
Mr. HELMS. Mr. President, this sense-of-the-Senate resolution calls
for the extension of a critical education tax provision that enables
American workers to further their education and better provide for
their families. I have vigorously supported this education tax credit
since its initial authorization in 1978. This provision has allowed
millions of American men and women to acquire new skills and pursue
their educational goals.
Our Government, being a republic, relies on the promotion of a moral
and principled citizenry, education is central to the continued
vitality of America. President Thomas Jefferson put it this way: ``If a
nation expects to be ignorant and free, in a state of civilization, it
expects what never was and never will be.''
The Federal Government has promoted education and individual choice
through the educational assistance exclusion, codified at section 127
of the Internal Revenue Code, a provision that allows employees to
receive up to $5,250 a year, tax-free, in educational benefits from
their respective employers.
When this provision expired on December 31, 1994, it left many
workers and companies uncertain about the Federal Government's
commitment to the promotion of worker education and retraining. That
uncertainty increased last year, when President Clinton vetoed the
Balanced Budget Act that would have extended the credit through
December 31, 1996.
Mr. President, over the years, this provision has enjoyed wide
bipartisan support, resulting in its reauthorization seven times. I
hope Senators will once again support extension of this education tax
credit which has done so much to help our Nation's workers and
employers alike. Accordingly, I offer today a sense-of-the-Senate
resolution that provides that Congress should include, in any
appropriate tax legislation, an extension of this critically needed tax
credit.
Neither the need for education nor the need for acquiring new skills
stops when a young person receives a high school diploma. Increasingly,
education and worker training have become lifelong pursuits.
My home State of North Carolina has been hit hard by plant closings
during the last few years. The textile industry in my State has been
particularly hard hit as thousands of workers have lost their jobs. I
could cite eye-popping statistics as to the number of lost jobs but
what is important to realize is that each one of these lost jobs
represents an individual man or woman, often the lone breadwinner in a
family.
Many workers are understandably concerned about job security. They
worry about the possibility of losing their job and wonder how they
would provide for their loved ones if they did suddenly become
unemployed. If this education provision is not reauthorized then
many more workers and their families, across the country, will suffer
needless anxiety and uncertainty.
Mr. President, while the Federal Government cannot set up programs to
guarantee that every American has a job, we can act to ensure our Tax
Code encourages workers and companies to act in their own interest by
promoting education and training.
Without this exclusion, many employers may choose to end these
benefits for their employees. Those employers who do offer these
benefits will subject their employees to additional Federal and State
taxes. A fortunate few may be able to meet a complex IRS test to
demonstrate that the benefits are sufficiently job-related so as to be
deductible. These additional taxes can easily exceed 40 percent of the
amount paid by the employer. This enormous tax burden can be decisive
in preventing an employee from pursuing an education to improve his or
her career prospects and earning ability.
I support reauthorization of this provision because it empowers
individual employees and businesses by encouraging and promoting
education not through a monolithic Government bureaucracy but through
the removal of a harmful and destructive hurdle to the pursuit of an
education.
Over the years, this provision has helped more than 7 million working
Americans to further their education and to acquire additional skills.
While the importance of this achievement to those individuals, their
families and their companies cannot be overstated, it is also true that
this accomplishment has served our Nation well.
Last week, the House Ways and Means Committee included an extension
of the tax credit for employer provided education assistance in its
markup of the Small Business Job Protection Act.
Mr. President, I do hope Senators will demonstrate their support for
the
[[Page S5401]]
continuation of this important provision and vote for this sense-of-
the-Senate resolution to reaffirm the Congress' commitment to improving
the education of American workers.
Mr. DOMENICI. Mr. President, I understand this amendment is
acceptable to Senator Exon, as the Levin amendment was to us; is that
correct?
Mr. EXON. It is, and I yield back any time in opposition that we may
have on this side.
Mr. DOMENICI. And I yield back time Senator Helms has on the
amendment and ask for its adoption.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered. The amendment is agreed to.
The amendment (No. 4021) was agreed to.
Mr. EXON. Mr. President, I move to reconsider the vote by which the
amendment was agreed to.
Mr. DOMENICI. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. EXON. Mr. President, I ask for a vote on the Levin amendment that
is now the pending amendment.
Mr. DOMENICI. We have adopted it.
Mr. EXON. Did we adopt that?
The PRESIDING OFFICER. The Levin amendment was adopted.
Mr. DOMENICI. I move to reconsider the vote by which the Levin
amendment was agreed to.
Mr. EXON. I move to lay that motion on the table.
The motion to lay on the table was agreed to.
Mr. DOMENICI. Mr. President, how much time do we have on the Chafee-
Breaux amendment?
The PRESIDING OFFICER. There is 1 hour of debate equally divided.
Mr. DOMENICI. I yield the floor.
Mr. CHAFEE addressed the Chair.
The PRESIDING OFFICER. The Senator from Rhode Island, [Mr. Chafee],
is recognized.
Mr. CHAFEE. Mr. President, I ask that the half-hour this side has be
divided in half, with half to me and the other half to the Senator from
Louisiana.
The PRESIDING OFFICER. Without objection, it is so ordered.
Amendment No. 4018
Mr. CHAFEE. I will take such time as I need.
Mr. President, in the years 1931 to 1938, the people of England
failed to heed the warnings that their nation and, indeed, their lives
were in peril. They dismissed voices, such as that of Winston
Churchill, crying the alarm. They dismissed him as a warmonger and a
scaremonger. Despite clear proof that Hitler was building a fierce war
machine, the people of Great Britain preferred to ignore such evidence.
John F. Kennedy described that in his book, ``Why England Slept.'' And
in his history of World War II entitled ``The Gathering Storm''--that
was the first volume--Churchill gave the theme of that volume as
follows:
How the English-speaking people through their unwisdom,
carelessness and good nature allowed the wicked to rearm.
Mr. President, a clear analogy can be drawn between the financial
peril of the United States in the immediate years ahead and the
military peril of Great Britain in the years referred to, with one
major difference.
No one disputes--no one disputes--the fiscal danger our Nation faces
if we do not control these entitlements.
We hear a whole series of siren-like voices, gentle voices saying,
``Don't do anything now. Let's have more study. Isn't there an easier
way of correcting the situation? It's an election year, let's wait. We
can't do anything because we don't have the President's support.''
Mr. President, we can follow all that kind of advice, but it will not
cure the situation one iota, and the only way to solve the financial
problem that this Nation faces is to do something about it now. Oh,
sure, we can postpone it. Every year we postpone makes the solution
that much more difficult.
The solution of the centrist group has been, first, a realistic
budget that we do not have any savings that really cannot be achieved.
We do not say we are going to make these $300 billion savings out of
discretionary accounts. We know that will not occur. Every Senator
knows that will not happen.
So what we have done is said the solution to this is to state the
CPI, the Consumer Price Index, in a realistic fashion, and we have not
taken the high side of the recommendations. Many of the witnesses that
came before the Finance Committee said the CPI is overstated by 1
percent at least and as high as 2 percent. But, no, we have gone to
one-half of 1 percent because that can be thoroughly justified.
Has there been criticism of that? Oh, yes, there has been criticism:
``Savings from the CPI adjustment should not be used except to shore up
the Social Security fund.'' That is what we do, Mr. President. We have
a statement from the Social Security's chief actuary that the solvency
of the Social Security trust fund, as a result of the CPI changes
recommended by the centrist group, will extend the solvency of the
Social Security fund.
Some say that if you change the CPI or go to a realistic correct
tabulation of the CPI that you are going back on promises made to
Social Security recipients. That is absolutely inaccurate. Nothing in
the centrist plan affects commitments we have made to Social Security
recipients. Congress promised to provide cost-of-living adjustments to
beneficiaries, and we continue to do that under our plan. All our plan
does is make the CPI correct.
Mr. President, I notice there are others waiting to speak, so I will
reserve the remainder of my time.
Mr. BREAUX addressed the chair.
The PRESIDING OFFICER. The Senator from Louisiana, [Mr. Breaux] is
recognized.
Mr. BREAUX. Mr. President, it is my understanding we have 30 minutes
for the proponents and 30 minutes for the opponents.
The PRESIDING OFFICER. That is correct.
Mr. BREAUX. And we have agreed to divide 15 and 15 to each side?
The PRESIDING OFFICER. That is correct.
Mr. BREAUX. I yield 5 minutes to the Senator from Florida.
The PRESIDING OFFICER. The Senator from Florida, [Mr. Graham] is
recognized for 5 minutes.
Mr. GRAHAM. Mr. President, I thank my friend from Louisiana. It is a
pleasure to have worked with the centrist coalition in the last several
months in an attempt to develop a balanced budget based on a realistic
set of principles.
In my limited time, I would like to make two points. First, if this
Congress is serious about achieving what is stated to be its No. 1
priority, which is to develop a multiyear balanced budget plan that
would reduce the Federal deficit to zero at the earliest practical date
and then to keep that deficit at zero for the foreseeable future, I
suggest that the vote that we are about to take on this centrist
coalition will be the ultimate test of our fidelity to that principle.
There is no other opportunity to pass a balanced budget in 1996 other
than that which is presently before the Senate. The reality is a
balanced budget will not be passed which is totally written by
Democrats. We established that fact in the early 1990's. A balanced
budget proposition will not be passed which is written and supported
totally by Republicans. We validated that truth in 1995.
We now have an opportunity to vote on a plan which represents a
moderate centrist perspective with support from significant numbers of
Senators from a variety of philosophical and regional and economic
backgrounds which does have a meaningful chance to be adopted. That is
the fundamental question: Are we going to reject the good because it
falls somewhat short of our own personal view of the perfect, or are we
to say that this good is so much better than the alternative, which is
to continue to have these enormous Federal deficits and all of the
damage that they do to our Nation and to our individual lives? Are we
going to miss the opportunity to get the benefits of a balanced budget,
including the very substantial benefits of a lower interest rate over
the next decade than that which we will have if we do not exercise this
act of discipline?
I believe, Mr. President, that the course of action which commends
itself to this Senate is to adopt the centrist budget.
I would like to speak to one element of the budget which has received
some comment which I think is illustrative of the principles that
underlie the centrist approach. And that is that it is pragmatic, it is
compassionate and it
[[Page S5402]]
builds in structural changes that will help keep a budget once brought
to balance in balance for the foreseeable future.
Our Medicare Program is in two parts. One part relates to hospitals
and is financed through a trust fund supported by payroll taxes. The
other part relates to physician's payments, and it is supported by a
premium paid by the beneficiaries voluntarily.
If they do not wish to receive those physicians' services, they can
elect not to do so and not to pay the premium. The balance is paid by
the general tax revenue of the Federal Government.
That premium has been set for most of the 1990's to be 31.5 percent
of the cost of providing the physicians' services. Today it has dropped
back to its pre-1990's level of 25 percent of the cost. That 31
percent, or today's 25 percent, is applied to all of the some 35
million-plus Medicare beneficiaries, the most affluent to the most
indigent.
Our plan is based on, first, that we should raise from the part B
premium, the premium for physicians' payments, the equivalent of 31.5
percent if that amount were applied to all of the 35 million
beneficiaries. But we should not distribute the premium across all
beneficiaries equally. Rather, it should be affluence tested.
We propose to have those Social Security beneficiaries who are under
200 percent of poverty, which represents approximately 70 percent of
the beneficiaries, pay the current----
The PRESIDING OFFICER. The Senator has used his 5 minutes.
Mr. BREAUX. I give 1 additional minute.
The PRESIDING OFFICER. The Senator has 1 additional minute.
Mr. GRAHAM. Pay the current 25 percent. Those who are between 200
percent of poverty and $50,000 for an individual or $75,000 for a
couple will pay the 31.5 percent, which had been the premium level for
the first half of this decade. Those above the $50,000 or $75,000 per
couple, will pay a higher premium based on their income.
Mr. President, I believe that is fair, equitable, and compassionate
and makes an important structural change in the Medicare system which
will help to preserve the long-term solvency of our Medicare system.
I cite this one example as illustrative of the approach that has been
taken throughout the centrist coalition budget. But the fundamental
thing that recommends it is its bipartisan nature, the fact that it is
reality, both economically and politically. This has a chance to
actually pass, become law and make a difference in the lives of
Americans. I urge its adoption.
The PRESIDING OFFICER. Who yields time?
Mr. BREAUX. Mr. President, I yield 4 minutes to the Senator from
Wisconsin.
The PRESIDING OFFICER. The Senator from Wisconsin has 4 minutes.
Mr. KOHL. Mr. President, with this week's debate on the budget
resolution, I believe the Senate has moved a giant step closer to
implementing a balanced budget. We are no longer debating whether we
should balance the budget. We are actually choosing between three
separate, complete balanced budget proposals: the Republicans' budget
resolution, the President's balanced budget submission, and the
centrist coalition's bipartisan budget plan now pending as an
amendment.
The President's plan has already been defeated in a party line vote--
not a surprising result in an election year. We now have to decide
whether to adopt the Republicans' budget or the only bipartisan
balanced budget plan presented in the Senate.
If we are serious about setting the course for a balanced budget this
year, I think we must choose the centrist plan. The Republicans'
budget, as Yogi Berra said, is ``deja vu all over again.'' It is
virtually identical to last year's vetoed budget bill.
The Republican budget puts forth the same plan that was rejected last
year by the public and the President. This is the plan that guided us
through a year of vetoes, gridlock, Government shutdowns, and stopgap
spending measures.
Mr. President, we have a chance to redeem ourselves in the eyes of
the American public. They have seen 2 years of partisanship, bickering,
and gridlock. In one vote we can send a message that we can work
together in the spirit of bipartisanship, that we can bridge our
differences and pass a budget that is honest, balanced, and fair.
That plan is the centrist budget now before us as an amendment.
First, and most important, this is the only plan on the table that is
bipartisan. It has been developed over the last half year by 11
Democratic Senators and 11 Republican Senators. We have worked in a way
that I believe the American people want us to work. We have put aside
our own political needs and party positions. We have compromised. Our
primary goal was a balanced budget--not a partisan victory. And the
result is an equitable budget plan that can win the support of a
majority of the American people.
The budget the centrists present today contains $679 billion in
proposed savings over 7 years. Those savings are spread across almost
every group in society and almost every Government program. Our plan
has lower Medicare cuts than either the Republican or Democratic plans
but enough cuts to guarantee the longrun solvency of the program. Our
plan contains a modest tax cut--$130 billion--that will allow us to do
some targeted tax credits for children and give businesses some capital
gains relief. Our plan caps the out-of-control growth of entitlements
through an adjustment in the CPI. And, most importantly, our plan
achieves real and sustainable deficit elimination.
Mr. President, the centrists have put together a solid, bipartisan
balanced budget plan. I believe it is the best--and perhaps the only--
choice for those Members who want to see a balanced budget enacted this
year.
Mr. President, we know partisanship does not work. If we go down that
road again with a budget that only gets Republican votes, then we may
see some interesting campaign ads, but we will not see a balanced
budget.
We have a clear choice before us today. Vote for the centrist
amendment, and vote for bipartisanship, honest budgeting, shared and
fair sacrifice, and the last, best hope for a balanced budget in this
Congress. I yield the floor.
The PRESIDING OFFICER. Who yields time?
Mr. CHAFEE. Mr. President, I yield 3 minutes to the Senator from
Washington.
The PRESIDING OFFICER. The Senator from Washington [Mr. Gorton], is
recognized for 3 minutes.
Mr. GORTON. Mr. President, the remarks beginning the debate this
morning on the part of the Senator from Rhode Island were directly on
point. Now is the time and this is the place for the oratory to end and
the true work in balancing our budget and building a brighter future
for our own generation, for our children and our grandchildren, is to
begin. There are no longer any real excuses.
A year ago, for the very first time for 20 or 30 years, this Congress
actually passed a balanced budget that was then vetoed by the
President. But that balanced budget changed the entire nature of the
debate. The President himself proposed a budget that was balanced, as
inadequate as it was unfair, but nonetheless lip service to this
proposition.
Again, this year we have before us from the Budget Committee, with my
support, a budget that is truly balanced, but the execution of which
will almost certainly receive another veto from a President in an
election year.
This group, for the first time in a decade, two decades, three
decades, has gotten together, on a bipartisan basis, to solve the
greatest problem facing the United States of America, Democrats and
Republicans working together. It has a proposal that in the long run
creates a greater degree of financial stability and security for the
people of the United States than do any of the other proposals. Most
Members in this body would like to vote for it if they only believed
that it would become law.
But, Mr. President, we cannot tell whether or not it will pass the
House of Representatives unless we pass it here in the Senate. We do
not know whether a President would respond to the dynamic of it passing
both Houses until it has passed both Houses. So the ball is in our
court. If this is simply a good try that fails, we will be debating the
same issues over and over and over again, but we will not have done
what we were supposed to do for the people of our country.
[[Page S5403]]
If we pass it, maybe it will be defeated in some future place in this
political debate in this election year. But maybe it will not. Perhaps
it will build its own dynamic. Let us give it that opportunity, Mr.
President. That is what we were elected to do.
The PRESIDING OFFICER. The time has expired.
Mr. BREAUX. Mr. President, I inquire of the Chair how much time our
side has.
The PRESIDING OFFICER. The Senator from Louisiana has 6 minutes left.
Mr. BREAUX. I yield myself 2 minutes.
Mr. President, yesterday a great deal of discussion was held about
the CPI adjustment. I just want to make a couple comments because many
Members said, ``We like your budget, but the CPI is something that we
can't handle. We don't think it's the right thing to do.''
We have had three hearings in the Senate Finance Committee--March 13
of last year, April 6 of last year, and June 5 of last year--we had a
parade of economists before the Finance Committee. Every one of them to
a person said that we are making a mistake as a country. The
distinguished Senator from North Dakota said that yesterday.
Every year we make a mistake. Every year we give every person who is
on an entitlement program more than they should get, by every
economists' professional judgment. They say we overestimate what their
increase should be from anywhere between 0.7 and 2 percent.
So we have had the courage to make a decision that we will fix the
problem. We will correct the mistake. We will say that every person in
America who is entitled to an entitlement increase--Social Security,
railroad retirees, Federal retirees--we will give you a more accurate
increase in your benefits. For instance, in Social Security it says
instead of getting a $20-a-month increase, you will get a $16-a-month
increase. They still get an increase, a substantial increase. It is $4
less than they would have gotten under the incorrect formula, but
everybody knows the formula is wrong. The formula has made a mistake.
Are there not enough people in this Congress to say that when we make
a mistake, we should correct it and recognize it? That is what we do in
CPI.
I think everybody should enthusiastically stand up and say we want to
guarantee everybody in this country gets an accurate increase based on
inflation. When the formula is wrong, Congress should have the courage
to at least correct the mistake. That is the only thing we do. It is
supported by a Republican economist, by a Democratic economist, and by
everybody who has testified before the Senate Finance Committee. I
think it should be adopted.
I reserve the balance of my time.
The PRESIDING OFFICER. Who yields time to the Senator from North
Dakota?
Mr. BREAUX. I inquire, Mr. President, how much time do we have
remaining?
The PRESIDING OFFICER. The Senator has 4 minutes.
Mr. BREAUX. Senator Lieberman requested some time.
Mr. CHAFEE. Mr. President, I am happy to give the Senator some of my
time.
Mr. BREAUX. We will give 3 minutes to Senator Conrad.
Mr. CONRAD. I thank Senator Chafee and Senator Breaux for this time.
Mr. President, what can be more clear? We are headed for a cliff.
Everyone who has examined this question tells us we are headed for a
circumstance in which if we do not change course, we will either face
an 82-percent tax rate in this country or a one-third cut in all
benefits. That is where we are headed. Make no mistake.
There are many things that must be done in order to prevent that
calamity from occurring. We must generate savings out of the various
entitlement programs. We must cut other spending. All of those things
must be done.
Mr. President, with respect to the CPI that was criticized on the
floor last night, the technical correction in the Consumer Price Index
that our group has advocated on a bipartisan basis, this is a question
of a mistake--a mistake. The Consumer Price Index is being used to
adjust for cost-of-living increases, not just with respect to
entitlement programs but also with respect to the revenue base of this
country.
The economists have come to us and said, overwhelmingly, ``You are
overcorrecting by using the Consumer Price Index. It is not a cost-of-
living index.'' Even the people who draw it up at the Bureau of Labor
Statistics will tell you it is not a cost-of-living index. Yet, that is
what we are using it for. The economists tell us, because we are doing
that, we are making a mistake. They say the mistake is between 0.7 and
2 percent a year, with the most likely overstatement being 1 percent.
What does that mean? Over 10 years, that means we are spending $600
billion by mistake--by mistake. If we cannot correct a mistake around
here to address preventing the calamity that is going to occur, what
can we do? If this body and the other body and the President of the
United States cannot correct mistakes to prevent a fiscal calamity,
what can we do?
Mr. President, I think the question has to be, if not now, when? If
not us, who? If we cannot correct a mistake to prevent a financial
calamity, then we fail in our responsibility.
Mr. BREAUX. Mr. President, I yield the remaining time we have, 4
minutes, to the Senator from Connecticut, Senator Lieberman.
Mr. LIEBERMAN. I thank my friend and colleague from Louisiana. I
thank my friend from North Dakota, who I am pleased to see this morning
paraphrasing the words of the Talmud, which come strongly from his
lips. I appreciate that sentiment.
Mr. President, I want to thank Senators Chafee and Senator Breaux for
convening this so-called centrist coalition. Frankly, it has been one
of the most satisfying experiences I have had in the 8 years I have
been in the Senate, because we did what I thought we came here to do,
which was to forget that we are Democrats or Republicans, focus on the
responsibility that we have as Americans, elected by people from all
parties in our State, and deal with central and obvious problems--and,
in this case, most especially, the imbalance in our budget.
Sometimes when I look at the course that both parties are taking
here, frankly, on matters such as the budget, it seems to me it has
become so highly politicized that we might as well have our press
secretaries staffing us on budget questions.
This centrist coalition attempted to find a third way. The group was
driven by the knowledge that if we truly want to balance the budget, it
is going to take Members of both parties, working cooperatively, to do
so.
Our group understands, I think, the first rule of compromise. It
means you cannot always have your way, or, put more eloquently, as the
junior Senator from Utah, Senator Bennett, did in quoting his father,
``It means that you attempt''--and I love this expression--``to
legislate at the highest level at which you can obtain a majority.''
That is perfect. That is just what we attempted to do in this group.
What does this proposal have? It faces the big problem in the budget
which is that the so-called entitlements are skyrocketing. If we let
them go, they will eat up our Government and make it impossible for us
to continue to do what people want us to do without grossly overtaxing
them. It approaches entitlement reform not in a weak and defensive way,
but by understanding that there is another side to this question.
Yes, as Medicaid and Medicare go up, people are benefiting, but
people are paying for them. Just to state it briefly in the time I
have, how can we explain to a worker, how can I explain to a factory
worker in Connecticut making $30,000 a year that through his paycheck
he is paying for part A and through his tax bills, 75 percent of part B
Medicare for a senior citizen retired, making $30,000 a year, with no
kids to send through college or feed and clothe; or forget the
$30,000--a senior citizen making $50,000 or $100,000 or $1 million. It
is unfair to the people.
We have a reasonable number on discretionary spending, the most
reasonable of any of the budget packages. Mr. President, we have a
sensible tax cut program that will create growth, that stimulates
savings and investment through capital gains cuts and through some very
creative programs to encourage people to save more. Also, to
[[Page S5404]]
help the middle class in targeted areas, such as offering a deduction
and help in sending their kids to college, which, at least in
Connecticut, is the greatest burden I find the middle class is
shouldering as I talk to them when I go around the State.
This is a solid, balanced, thoughtful program. Mr. President, 22 of
us--11 Democrats, 11 Republicans--have put it together. I hope a lot of
our colleagues surprise us and join us in getting this moving in the
right direction toward balanced growth for our country.
I yield the floor.
Mr. CHAFEE. Mr. President, I yield myself 2 minutes.
I have listened to the presentation of our amendment, and I must say
I want to congratulate every Senator who has spoken on behalf of this
amendment. I think the arguments, really, are overpowering.
Here is the problem: If we continue on the path we are on now in this
country, every one of the entitlement programs is going to be in a
very, very severe situation.
What did the entitlement commission say when they reported 2 years
ago? This is what they found: By the year 2010--how far away is that?
Mr. President, 2010 is 14 years away. Spending on entitlement
programs--Social Security, Medicare, Medicaid, welfare, all of the
entitlement programs--where they are locked in, unless we do something,
the payments on those programs, plus the interest on the national debt,
will exceed all the Federal tax revenues. All the money that comes into
the Federal Government will be inadequate to cover those entitlement
programs; not a nickel left for the Park System or for maintaining our
highways or for building them or the FBI, the State Department, the
Justice Department, whatever it is.
Mr. President, obviously, something has to be done. I find the
arguments of the opponents difficult to understand. One of the
arguments is, ``Well, the President has not said he is for this thing,
so we should not vote for it.'' What are we hired for? We are hired, it
seems to me, to do what is best for the country, and whether the
President is for it or is against it does not make any difference. He
cannot vote here on the floor of the Senate. We can. It seems to me to
make our vote depending on whether this is going to pass or not and
whether the President is for it or not is hardly the route to go.
So I plead with my colleagues to come forward and support this
amendment.
Mr. President, I ask for the yeas and nays on the amendment.
The PRESIDING OFFICER. Is there a sufficient second?
There is a sufficient second.
The yeas and nays were ordered.
Mr. CHAFEE. Mr. President, I will take 1 more minute.
The PRESIDING OFFICER. The Senator has 1 more minute.
Mr. CHAFEE. Mr. President, here we have a chance to do something. In
my opening remarks, I mentioned the situation in England in the 1930's
which John F. Kennedy described in his book ``Why England Slept.'' As
Winston Churchill said in his four-volume history of the war, ``The
Gathering Storm,'' he said the English people through their nonwisdom
and carelessness allowed the wicked to rearm.
We have a similar situation, not a peril from abroad militarily but a
peril from within financially. The good news is we can do something
about it. What we can do now is the smartest; but, if we wait, it
becomes that much more difficult.
All we are saying is one-half of 1 percent correction, as it should
be and as every economist that has come before the Finance Committee
has told us the correction should be made. Let us seize the
opportunity, Mr. President.
Mr. SIMPSON. Mr. President, I am so very proud to join my colleagues
in the centrist coalition in declaring my support for this bipartisan
budget resolution. Everyone in this Chamber should take a close look at
our amendment. Reading this plan will be a frustrating and vexing
experience for the critics who are always anxious to label legislation
as ``extreme'' or ``timid'' or ``too conservative'' or ``too liberal.''
None of those tired old labels apply to this budget resolution.
This is truly a blueprint for a mainstream budget. It is the product
of many weeks and months of compromise and negotiation and good old-
fashioned ``give and take.'' On issue after issue, Republicans and
Democrats in the centrist coalition have resolved areas of disagreement
by ``splitting the difference'' or ``meeting each other halfway.'' That
is what legislating is all about.
For every element of this plan that Republicans don't like, there is
another provision that is equally troubling to Democrats. Under this
budget resolution, neither party would score a clear ``political
win''--but the Congress as a whole and, more importantly, the American
people would benefit tremendously if we adopt this mainstream approach
to balancing the budget.
The most striking feature of our plan is that we do not shy away from
correcting the inaccuracies in the Consumer Price Index [CPI]. We now
have almost universal agreement that the procedures currently used for
calculating the CPI are flawed, thereby resulting in a CPI that
overstates inflation, according to the ``experts,'' by at least seven-
tenths of a percentage point and perhaps as much as 2 percentage
points. Yet neither Republicans nor Democrats want to be the first to
include a CPI correction in its budget.
By advancing such a correction in a bipartisan budget, neither party
will receive the full blame or the full credit, depending on how the
public responds, for addressing this issue. It is no secret that the
American Association of Retired Persons [AARP] and other seniors groups
are almost violently opposed to a correction of the CPI. But we haven't
heard yet from the masses of working people who will continue to ``pick
up the tab'' for as long as we continue to use an overstated CPI.
We may well be pleasantly surprised by the public's reaction when
they find out that we can save $126 billion--as this centrist coalition
plan proposes--by adopting a modest five-tenths of a percent reduction
in the CPI over the next 7 years. This reduction is well below the
official range, which extends from 0.7 to 2.0, by which the experts
tell us the CPI is overstated. We adopt this modest figure precisely
because we want to make clear that our motivation is to have an
accurate CPI--and that our actions are not driven solely by budgetary
pressures.
Nonetheless, it is impossible to ignore the fact that this step would
save $126 billion over 7 years and, furthermore, that this represents
$126 billion we would not have to cut from education, child care,
health care, transportation, infrastructure, and other important
priorities as we work to balance the budget.
It seems to me that all 100 Members of the Senate would leap in
unison at the chance to embrace this provision, as well as the broader
package we are proposing. Being a realistic creature, however, I would
be satisfied if only 51 of us do so on this particular vote. I urge my
colleagues to join us in this bipartisan effort.
The PRESIDING OFFICER. The Senator's time has expired.
Who yields time?
Mr. DOMENICI addressed the Chair.
The PRESIDING OFFICER. Senator Domenici is recognized.
Mr. DOMENICI. I yield myself 5 minutes off the resolution.
The PRESIDING OFFICER. Is there objection? Without objection, it is
so ordered.
Mr. DOMENICI. I want to give a report to the Senate about where we
are and what things look like.
When we started this morning, we had 8\1/2\ hours on the resolution.
How much of that have we used this morning?
The PRESIDING OFFICER. Fifty-seven minutes.
Mr. DOMENICI. So essentially we are now down to about 7\1/2\ hours.
Assuming that time runs uninterrupted throughout the day, all time will
have expired pursuant to the unanimous consent request at 5:30 p.m.
today. Pending at the start of today were 33 amendments that have been
laid aside. We have disposed of 15 amendments either by rollcall vote
or voice. Therefore, as of this morning, we have considered 48
amendments.
The consent agreement for first-degree amendments of last Thursday
night listed about 75 amendments. Therefore, there could be as many as
27 first-degree amendments still to be considered. I am not at all
sure, nor do
[[Page S5405]]
I in any way hold Senators to the amendments that they listed, but I
think we still have to find out a little more about them.
So I encourage Senators who have first-degree amendments left on this
list as of last Thursday night which we have not acted on yet to let
the managers know this morning if you still intend to offer the
amendments. I assume Senator Exon would join me in urging that they try
to let us know this morning if they are going to call up amendments.
Mr. EXON. If we are going to have any order at all, we will have to
have that.
Mr. DOMENICI. So as I look down this list of amendments that have not
yet been brought up, I conclude that after removing the duplicative
amendment--this is my own assessment--there are only 10 or 12 first-
degree amendments left. But I cannot reach that conclusion without the
help of some Senators who are on that list.
Not counting any second degrees that may be considered, this should
give us hope that we can finish discussing all the amendments in the
50-hour time period and maybe even start voting late this afternoon.
That depends upon whether it will be more accommodating to the Senate
to vote all day tomorrow rather than to start tonight.
We need some guidance from Senators whose names and amendments are
still on this list. I think I can say as of now that there are very few
Republican amendments that are going to be called up off the list.
So I urge that the Democrat Senators that have amendments listed to
let us know. We are going to stay here during the funeral of Admiral
Boorda right up until 12 o'clock when we recess for the policy, and we
will be in recess until 2:15. During that time, we will obviously do
nothing here on the Senate floor. We are back in at 2:15.
If I have not used my 5 minutes off the resolution, I yield back
whatever time remains and yield the floor.
Mr. EXON addressed the Chair.
The PRESIDING OFFICER. Does the Senator from Nebraska yield time on
the pending amendment?
Mr. EXON. The Senator from Nebraska seeks time off the amendment.
Mr. DOMENICI. I yield the Senator as much time off that as he needs.
I am in charge of the opposition time. I will give him as much time as
he wants.
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. EXON. I am about ready to yield 15 minutes to the Senator from
Massachusetts, half of the time.
I will be allotted the half hour remaining on the pending matter. Is
that correct?
Mr. DOMENICI. If you want Senator Kennedy to have 15 minutes in
opposition, I yield him 15 minutes.
Mr. EXON. Maybe we could settle something right now. I am not sure
that we should be in session during the important matter that is going
to be taking place at the Washington Cathedral. I was just wondering if
I might have the attention of my colleague. I am wondering if it might
be better for us to recess during the time of the memorial service with
the time being charged along the lines just outlined by the chairman of
the committee. I just say let us take that under advisement for now.
With that, if the Senator from Massachusetts could be recognized at
this time as previously arranged.
Mr. DOMENICI. Let me take a minute off the resolution to respond.
I will be glad, in the next 10 minutes or so, to discuss this issue
with you. I think it is probably more important to your side than ours
because we do not have very many amendments left. But if you want to
use time while the Boorda funeral is going on and charge it equally
rather than a few of us remaining in the Senate, if you think that
through and want to offer it to us, I am thinking I will probably agree
to that.
Mr. EXON. We will visit about it. I hope the Senator from
Massachusetts could be recognized at this time for 15 minutes.
The PRESIDING OFFICER (Mr. Santorum). The Senator from Massachusetts
is recognized.
Mr. KENNEDY. Mr. President, I thank my friend, Senator Exon, for
yielding 15 minutes. I yield myself 12 minutes.
Mr. President, during the course of this budget debate, there have
been several proposed amendments expressing a fundamentally bad idea,
and that is legislating a change in the Consumer Price Index. These
amendments have been offered as stand-alone, sense-of-the-Senate
amendments and as part of the centrist coalition budget. In fact, 20
percent of the total cuts in this budget come from a legislative
reduction in the CPI.
That kind of arbitrary action by Congress would break faith with the
elderly and make a mockery of the commitment of both parties not to cut
Social Security. It would raise taxes on low-income, working families
qualifying for the earned-income tax credit and other working families
as well. It would lead to lower wage increases for millions of workers
throughout the country at a time when one of the most serious
challenges our society faces is the decline in the living standards for
all but the wealthiest families. Such a change would be harshly
regressive in its impact. It would be unprecedented political meddling
of what has been an impartial factual determination of the CPI.
Reducing the CPI would reduce cost-of-living adjustments for millions
of Americans receiving Social Security benefits, military pensions,
veterans pensions and civil service retirement. It would reduce the
amount of supplemental security income payments to the needy, and
because of indexing of tax brackets, it would raise income taxes for
most taxpayers and reduce the earned-income tax credit.
Some may see a cut in the CPI as a magic bullet to balance the budget
and avoid other painful choices, but it is a bullet aimed at millions
of Americans who need help the most and who do not deserve this added
pain. It makes no sense to fight hard to save Medicare and then attack
Social Security. Legislating an arbitrary reduction in the CPI would
clearly break the compact of Social Security. That compact says work
hard, play by the rules, contribute to the system, and in turn you will
be guaranteed retirement security when you are old.
An essential part of that compact is a fair Social Security COLA so
that senior citizens can be sure that their hard-earned Social Security
benefits will not be eaten away by inflation. Overall, more than three-
quarters of the lower spending under the change would come from cuts in
Social Security alone. Nearly all the rest would come from other
Federal retirement programs. It is the elderly who pay heavily if
Congress adopts this change.
Over the next 10 years, a half-percent cut in the COLA would reduce
the real value of the median income beneficiary Social Security checks
by $2,650. By the 10th year, the real purchasing value of that check
would be 4.5 percent lower, making it even harder than it is today for
senior citizens to stretch their limited incomes to pay the bills for
housing, food and medical care, and other necessities.
Under the centrist budget, the median Social Security beneficiary
will see the value of the benefits they have earned cut by $1,200 over
the next 7 years. Let me repeat that. Under the centrist budget, the
median Social Security beneficiary will see the value of the benefits
they have earned cut by $1,200 over the next 7 years.
Reducing the Social Security COLA is a direct attack on the
retirement benefits that senior citizens have earned. If Congress is to
respect family values, it has to value families, especially the
millions of elderly families all across America.
Changing the CPI also affects the deficit by increasing taxes because
income tax brackets and the earned income tax credit are indexed to
inflation. If the tax brackets are not adjusted for inflation, taxes go
up and the earned income tax credit goes down.
Failing to adjust the tax bracket hits middle-income families the
hardest. A family earning $36,000 would face a tax increase that as a
percent of income would be more than four times as large as the tax
increase faced by a family earning $100,000. Hardest hit are the low-
income, hard-working families; 13 percent of the total tax increase, $6
billion, would be paid by these low-income, hard-working families under
the centrist budget. Has not income inequality grown enough without
legislating another tax increase that disproportionately harms working
families?
[[Page S5406]]
The impact of cutting the CPI reaches well beyond the Federal budget.
It is also a direct attack on the wages of working families. Many
workers have CPI adjustments in their collective bargaining contracts,
but every pay increase is affected by CPI. If the CPI is reduced by
Congress, wages will be lower, too, for virtually all workers across
the country.
There is no greater source of dissatisfaction in American families
than the continuing erosion of their living standards. Except for the
wealthy, the story of the past two decades has been, work harder and
earn less. Cutting the CPI will make a bad situation even worse by
putting even greater downward pressure on the wages of every American.
One argument made by the proponents of this idea of lowering the CPI
is that it is merely an overdue technical correction that should be
supported as a matter of good government. This claim cannot pass the
truth-in-advertising test. The technical argument for lowering the CPI
has been made by the Boskin Commission, which was appointed by the
Senate Finance Committee to examine the issue. The commission issued a
report in September of 1994 which identified several biases in the
calculation. The commission asserted that the CPI had overstated
inflation by 1.5 percent a year. For the future, the commission
predicted the CPI would be 1 percent a year too high.
The major problem with the commission's analysis is that the sources
of bias it identifies are also identified by the nonpolitical,
professional economists at the Bureau of Labor Statistics in the
Department of Labor. They have the responsibility for setting the CPI
each year. They do so fairly and impartially. They make periodic
corrections to take account of any biases up or down that affect the
index. The Bureau already plans to reduce the CPI by about two-tenths
of 1 percent in 1997. This reduction is already assumed in the budget
projections for the next 7 years.
The issue is not whether there should be changes in the CPI but who
should make them and how large they should be. The Boskin Commission's
work is a poor basis for changing the CPI. As the Commission itself
acknowledged, it did little original research. The Commission's
membership was stacked with economists who believed that the CPI was
overstated. According to Dean Baker, an economist at the Economic
Policy Institute, all five members had previously testified they
believed the CPI was overstated. Economists who gave contrary testimony
were excluded.
According to Joel Popkin, another expert on the CPI, the Commission
comprised five of the six witnesses before the full Finance Committee
who gave the highest estimates of bias. As Mr. Popkin also pointed out,
the interim report of the commission falls far short of presenting
adequate justification for its conclusions, and therefore provides no
basis for Congress to change tax policies or entitlement policies such
as Social Security.
In fact, for the elderly, the group most affected by any change, the
most authoritative study by the Bureau of Labor Statistics suggests
that the CPI may understate rather than overstate the true increase in
the cost of living because of the rapid increase in the medical costs
for the elderly.
To legislate an arbitrary change in the CPI would be unprecedented.
In the entire history of the CPI, the Congress has never tried to
impose a politically driven adjustment, and there is no excuse for
imposing one now. Senior citizens and working families across the
country depend on a fair CPI, and Congress should keep it that way.
Mr. President, I believe that that provision is unwise and
unjustified. It provides, according to their own proposal, total cuts
of $126 billion over 7 years. That will be a Social Security cut of
some $47 billion. It is going to amount to $1,205 for the median Social
Security recipient, and it is going to reduce the value of the earned-
income tax credit by $6 billion.
Who are these people? They are men and women who are working, making
$25,000 to $28,000 a year. That is where it is gradually being phased
out. It is going to take $6 billion out of their resources.
The Democrats are over here talking about increasing the minimum
wage. That is $3.2 billion a year. They are talking about taking $6
billion out of families with children that are on the lower economic
ladder. To believe that these families are part of the problem in terms
of what we are facing in this country, I think is unjustified and
unwise.
Mr. President, I think the basic concept of legislating an adjustment
in the CPI, that some are willing to accept and interject based upon
the Boskin Commission, which was basically flawed, is sending a very
powerful message to our seniors. The elderly in this country are going
to have a very real reduction in terms of their income over a period of
years.
It is sending a message to workers who are below the average median
income in this country that it is OK if they are going to lose some of
the protections they have now primarily focused on their children. It
is going to send a general message to all workers across this country
that it is OK that they will see a reduction in their wages because
most of the contracts that are signed are tied to the CPI. Here we are
in the Chamber of the Senate with just some votes effectively saying to
workers all across this country that their incomes are going to go
down.
So this is a very, very important aspect of what is allegedly the
compromise proposal. It is unwise. It is unjustified. I hope for that
reason as well as others that the Senate will not accept that proposal.
I yield the remainder of my time.
The PRESIDING OFFICER. The Senator from Rhode Island.
Mr. CHAFEE. Mr. President, we have had a wonderful presentation just
completed about why this Nation does nothing about facing up to the
problems that confront us. Sure it is easy to trash any proposal that
comes before us. That is what we see. Not one word--not one word about
what to do about the crisis our country faces in these entitlement
programs in the future years. I find it terribly disappointing that the
Senator from Massachusetts chose this opportunity to go out of his way
to trash all the proposals that we presented but not a word about doing
something about it. Right here we had presented why the Congress of the
United States refuses to face up to the problems we have before us.
Mr. KENNEDY. Mr. President, may I reclaim time to be able to respond
for 3 minutes? May I have 3 minutes to respond to the assault that the
Senator from Rhode Island made upon me?
Mr. EXON. Reserving the right to object, we are trying to get
something done here before 10:30. I thought we had an orderly process
going on. But the Senator from Massachusetts, I think, is entitled to
reclaim the time he yielded back, given the insertion of the remarks by
the Senator from Rhode Island.
The PRESIDING OFFICER. Who yields time?
Mr. KENNEDY. How much time did I yield back?
The PRESIDING OFFICER. The Senator yielded back 3 minutes.
Mr. KENNEDY. Mr. President, I reclaim that time.
Mr. President, with all respect to my good friend from Rhode Island,
in the various Republican proposals they had $4.4 trillion in,
effectively, tax breaks for the wealthiest corporations and companies
in this country. And, instead of finding that $100 billion over the
period of the next 7 years from corporate welfare, from tax breaks that
go to the wealthiest individuals and corporations and drive American
jobs overseas, he is taking it out on the elderly and workers in this
country. So I do not yield to those words of the Senator from Rhode
Island. When you start to get after corporate welfare, Senator, when
you start to support even what the administration talked about, $60
billion, when we start having, in your proposal, something that is
reducing that corporate welfare, then you will have some credibility in
speaking about that. Your proposal eliminates a minuscule $25 billion
in corporate tax loopholes--$25 billion versus a tax cut of $100
billion. In total, your proposal cuts over $270 billion in spending for
the elderly and the less well off through the Medicare, Medicaid,
welfare, and EITC programs. I have not heard you speak about these
particular issues and I reject the criticisms of the Senator from Rhode
Island.
[[Page S5407]]
Several Senators addressed the Chair.
Mr. CHAFEE. May I have 30 seconds?
The PRESIDING OFFICER. The Senator from Nebraska.
Mr. EXON. Mr. President, much has been said about CPI. I ask
unanimous consent that at this point an article by Mr. Jim Klumpner on
CPI bias be printed in the Record.
There being no objection, the article was ordered to be printed in
the Record, as follows:
Fact and Fancy: CPI Biases and the Federal Budget
(By Jim Klumpner \1\)
Does the consumer price index have an upward bias? The
author believes that, while substitution and formula biases
exist, together they might amount to 0.3 to 0.5 percentage
points. Other alleged causes of bias are not considered
significant. The budget negotiators already have incorporated
substitution and formula adjustments in their baseline
assumptions. To go beyond this is an attempt to camouflage an
increase in taxes and a cut in Social Security, which could
be regressive and call for excessive sacrifice by the
elderly.
---------------------------------------------------------------------------
Footnotes at end of article.
---------------------------------------------------------------------------
On January 10, 1995, Federal Reserve Chairman Alan
Greenspan suggested that adjusting the Consumer Price Index
(CPI) for alleged upward biases might produce federal budget
savings measures in hundreds of billions of dollars.
Understandably, politicians and political commentators found
this very exciting, being largely unencumbered by technical
knowledge about it. Gobs of free money? Why didn't we notice
this before.
Within days, Speaker of the House Newt Gingrich let loose
with a typically vesuvial outburst: ``We have a handful of
bureaucrats who, all professional economists agree, have an
error in their calculations. But we can't tell these people
to get it right? If they can't get it right in the next
thirty days or so, we zero them out, we transfer the
responsibility to either the Federal Reserve or the Treasury
and tell them to get it right.'' \2\ Like his colleagues, the
Speaker was untroubled by subtleties, such as the conflict of
interest posed by having the nation's primary inflation
fighter control the data by which its performance is judged.
No matter; the quality of federal statistics had hit the
bigtime.
The situation to which this has now led holds rich ironies
for me. Both at the Senate Budget Committee and at the Joint
Economic Committee where I served previously, I have worked
with a few far-sighted Democratic members of Congress to
promote the integrity of the federal statistical system. By
and large, this effort consisted of defending agencies like
the Bureau of Labor Statistics (BLS) from penny-wise but
pound-foolish budget cuts. We were privileged to have the
National Association of Business Economists as allies in this
effort, even though most NABE members probably wouldn't count
themselves as Democrats. Now all of a sudden, the cause of
quality statistics seems to have acquired a horde of new
allies, many of them Republican politicians. It reminds me of
a response that Robert Redford once gave when asked what it
was like to have gorgeous women flock to him: ``Where were
they before I became rich and famous?''
Unfortunately, the new allies of statistical integrity are
pursuing their cause with zeal and urgency typical of recent
converts. Politicians and journalists have been hazarding
wild, research-free guesses about the size of CPI bias and
proposing nonsensical ways to apply their new enthusiasm to
the budget. In this murky atmosphere, it is important that
economists at least see the issues clearly. As someone who
worked to address the problem of CPI bias before it became so
fashionable, I offer in this paper one view of the technical
issues, as well as some thoughts about how COLA adjustments
might figure in a deal to balance the budget.
how big is the bias?
Various reputable analysts have made guesses about the size
of possible CPI biases, and their guesses span a rather broad
range. The BLS, which not only produces the CPI but also has
pioneered much of the research on potential biases, tends to
be at the low end of the range. They estimate very small
effects for the individual components of the overall bias,
which in their view totals about a half percentage point of
the annual inflation rate. This is similar to the conclusions
of the Congressional Budget Office (CBO), which argued for a
range of 0.2 to 0.7 percentage points in early 1995. Other
economists have advanced much higher estimates. Most
noteworthy is the 0.7 to 2.0-percentage-point range proposed
last September by a commission headed by Michael Boskin who,
I hasten to note, has long been an ardent advocate for
quality statistics.\3\
It should not be too surprising that respected economists
cite such a large plausible range for CPI biases, going from
almost nothing to 2.0 percent per year. After all, we are
trying to estimate the extent of our ignorance. This is the
classic boot-strap problem in philosophy. How can you measure
what you don't know, when you don't know what you don't know?
Of course, this uncertainty among the experts does little to
temper the certitude of others.
I tend to line up with the smaller bias estimates endorsed
by the BLS and CBO, and I find the very high estimates of the
Boskin commission implausible. Fortunately, there is fairly
wide agreement on what kinds of biases might exist. By going
through these components one by one, we at least can isolate
where differences in opinion lie.
substitution bias
The substitution bias is one component of this problem on
which most analysts can agree. When the CPI is used as a
measure of the cost of living, it fails to capture consumers'
ability to change the ``market basket'' of things that they
buy. If the price of entertainment rises, for example,
consumers can offset the impact of this on their well-being
by purchasing more of something else, like food. A price
index with fixed expenditure weights like the CPI will
overstate the impact of rising prices for some items because
it fails to account for consumers' substitution of other
items whose prices have risen slowly or fallen.
When prices change by relatively small amounts over short
periods of time, substitution bias isn't much of a problem.
Over long periods of time, however, prices can drift
substantially up or down, leading to correspondingly large
changes in consumers' purchasing patterns. Thus, the
substitution bias grows over time. A widespread consensus
exists that the substitution bias averages about 0.2
percentage points over the course of a decade.
BLS argues that they never intended the CPI to be a cost-
of-living index and that they are well aware that a fixed-
weight index suffers from substitution bias when used as a
cost-of-living proxy.\4\ Nonetheless, they have accommodated
the problem in the only way possible, i.e., with periodic
revisions of the expenditure weights to reflect more current
purchasing patterns. In the past, this was part of the BLS'
regular decennial rebenchmarking of the CPI.
Unfortunately, funds were not appropriated in a timely
fashion for the most recent rebenchmarking. As a consequence,
the new index will not be ready until 1998 rather than this
year, when it normally should have been introduced. Perhaps,
the newly found urgency concerning quality price statistics
will lead to more frequent and more regular rebenchmarking in
the future. For now, all of the participants in the budget
debate are assuming that the reported CPI will rise at least
0.2 percentage point less than it otherwise would have after
1998.
formula bias and outlet bias
Formula bias results from the sample rotation procedures
used by BLS. The Bureau updates 20 percent of its surveyed
outlets each year in an effort to keep their mix of both
outlets and items more current. Past BLS procedures, in
combination with fixed expenditure weights, gave improper
weights to items whose prices are especially volatile. For
instance, if an item happened to be on sale when the update
was made, its fixed expenditure share corresponded to a
temporarily overstated number of units, because of its
temporarily depressed price. When the item's price returned
to a more ``normal'' level, the impact of that price increase
was overstated because it was multiplied by an inflated
number of units. Similarly, items whose prices were
temporarily high were undervalued, as was the subsequent fall
of that price to a ``normal'' level.
The BLS became aware of the formula bias some time ago and
has been working to correct if for the past couple of
years.\5\ They are replacing their previous procedures with a
``seasoned'' sample, which should more accurately distinguish
short-term price volatility from enduring price change. BLS
expects that this work will be complete by January 1997. When
the budget negotiators became aware of this, Senators Dole
and Domenici and Congressmen Gingrich and Kasich officially
requested that BLS predict what the future results of their
current research would show. Though somewhat uncomfortable
with the request, BLS responded that they guessed the formula
bias was between 0.1 and 0.3 percentage points, and the
budget negotiators have now built this assumption into
their baselines as well.
The Boskin commission's September report also argued that
there is an outlet bias, distinct from formula bias, that
they believe adds another 0.2 percentage points to reported
inflation. As noted above, the sample rotation procedure is
intended partly to ensure that the outlets surveyed are those
at which consumers actually shop. BLS is confident that there
is no outlet bias independent of the formulas bias. Indeed,
it seems unbelievable that the price division at BLS could
remain ignorant of K-Mart, Price Club and CompUSA when these
firms spend millions of advertising dollars to make certain
that the rest of us are aware they exist.
The commission's incorrect ideas about outlet bias and
somewhat higher estimate for formula bias probably are the
inadvertent results of the haste with which the September
report was put together. It is unfortunate that the
commission had time for only the briefest of briefings from
the BLS analysts who work full-time on the CPI. Greater
familiarity with what the Bureau actually is doing might have
avoided these misunderstandings, as well as some of the
unrealistic notions about quality adjustment discussed below.
quality change bias and new products bias
Most of the differences between economists' estimates of
CPI bias stems from different views about quality change bias
and new products bias. For instance, the Boskin commission's
September report claimed that
[[Page S5408]]
these two effects probably accounted for about 0.5 percentage
point of bias and might account for as much as 1.3 percentage
points. I would argue that the effect of these two factors is
close to zero.
The basic concept underlying these two effects is quite
straightforward. Quality change bias occurs when the
characteristics of an item change at the same time that its
price changes. Some of the price change should be attributed
to the new characteristics, but some should be interpreted as
a change in the price of the old characteristics. If the new
item is in some sense twice as good as the old item and its
price is also twice as high, the item's quality-adjusted
price should not change.
The issue of new products bias is conceptually similar
because consumers face a new range of offerings in the
marketplace, just as they do when product quality changes.
For instance, the proper way to analyze the introduction of a
new drug that replaces a surgical procedure might be to
compare the characteristics of these two treatments, both of
which are expected to have the same therapeutic result. With
both quality adjustment and new products, we need to
distinguish ``pure'' price change from the part that reflects
consumers' enhanced welfare due to new market options.
One notable paper argues that the flux of new offerings
available in the marketplace is itself a significant
contributor to consumer welfare, even if the items are not
all that new.\6\ The paper arrives at this conclusion by
examining the case of Apple-Cinnamon Cheerios. The conclusion
seems to derive from estimating the considerable surplus
generated by marching down the demand curve from its
intersection with the price axis to the place where it
intersects the supply curve.
What appears to drive the analysis, however, is the
assumption of imperfect competition, which implies that
increased purchases of Apple-Cinnamon Cheerios don't merely
displace other cereal purchases and the consumer surplus
associated with them. It seems unreasonable to believe that
households stock an ever-increasing quantity of breakfast
cereal to accommodate the dizzying variety of new offerings.
Most people can only eat just so much cereal.
Discussion of quality adjustment and new products bias
raises a similar metaphysical puzzle to the one mentioned
earlier in this article. After all, ``quality'' is usually
distinguished from ``quantity'' because it is essentially
nonquantifiable. How then should we measure something that we
already have defined as essentially unmeasurable? For
example, one of the most striking aspects of Windows software
is the fact that its prettier than DOS. There is no obvious
way to attribute a specific portion of the program's price to
this improvement in quality.
In addition, economists like to believe that everything can
be reduced to market prices, even though this clearly is
untrue for a wide range of public goods for which markets
fail. For instance, the required installation of smog
controls on autos raises their price. It is doubtful that
individual consumers perceive this as an improvement in the
quality of their cars, though all of us may benefit from the
cleaner air that results. How does one put a value on the
improvement in air quality when there is no private market
for clean air? How should we evaluate new antitheft devices
on cars that compensate for rising fear of crime?
As a practical matter, BLS already makes a serious attempt
to adjust for quality changes where they believe them to be a
problem.\7\ If both the old and new models of some item exist
in the market at the same time, the difference between the
prices can be used to estimate the proper quality adjustment.
For some other items, the BLS attempts to measure directly
the additional cost of added attributes, as they did with
smog equipment on autos. Neither of these procedures is
perfect, but the imperfections necessarily result from the
inherent unmeasurability of quality itself.
One procedure for handling quality adjustment that BLS
sometimes employs and that appeals to most economists is
called the ``hedonic'' technique. This involves regressing
past prices of an item on past changes in its
characteristics. The coefficients from such a regression are
then used to attribute some of the item's current price
change to current changes in characteristics, with the
residual being ``pure'' price change. It is fairly tricky to
decide on a comprehensive set of independent variables so
that the results do not suffer from omitted variables bias.
This is a particular danger because any important
unmeasurable factors necessarily will be omitted by their
very nature.
Another serious practical difficulty in making quality or
new product adjustments, whether hedonic or not, is cost.
Large quantities of auxiliary data must be collected for each
adjusted item, and highly trained econometricians must be
hired to do the analysis. Furthermore, it is hard to know
where to stop, short of comprehensive quality adjustment for
every item in the CPI. It is safe to say that BLS does as
much quality adjustment as their appropriations allow. The
political process should provide the necessary funds if there
now is a burning desire for more.
arguing from anecdote
Because there hasn't been a comprehensive research effort
to adjust a broad range of items in the CPI or to account for
newly introduced goods, arguments in these areas usually rely
on anecdote. The danger in arguing from anecdote, of course,
is that an anecdote may seriously misrepresent the more
general case. I believe that this is the source of error in
the very high estimates for quality adjustment and new
product biases of the Boskin commission and others.
The commission's September report explicitly notes that
most of the evidence for upward price bias due to these two
factors comes from nonauto consumer durables. The report
cites VCRs, televisions, microwave ovens and PCs as hallmark
examples. However, Table 1 shows that nonauto consumer
durables account for only 4.2 percent of the expenditure
weights in the CPI. House furnishings, which can hardly be
said to show rapid increases in quality, account for 3.5
percent of spending, leaving only 0.7 percent of monthly
expenditures for the whiz-bang stuff. This very low weight
stems not from low prices for these items but from the fact
that they are infrequently purchased.
Such tiny expenditure weights for the goods with which we
typically associate quality improvement must imply
astronomical rates of improvement in order to justify the
quality bias assumed by the Boskin commission and others. For
example, if goods imparting quality bias to the CPI represent
only 1 percent of the index, then their quality would have to
improve at 100 percent per year in order to arrive at a 1.0-
percentage-point bias. The new PC that I bought this year
certainly is better than the one I bought six years ago, but
it's not sixty-four times as good. Advertisers' gaseous
claims notwithstanding, the new PC has not revolutionized my
life nor had an important impact on my well-being.
The problem of small expenditure weights is especially
important for new products bias. Newly introduced items
necessarily have tiny expenditure weights because they are
novelties. The Boskin commission's report complains that
``the microwave oven was introduced into the CPI in 1978 and
the VCR and personal computer in 1987, years after they were
first sold in the marketplace.'' \8\ Even now, however, these
items have weights measured in hundredths of a percentage
point and properly so. Many households do not even own PCs,
microwaves and VCRs, let alone Salad-Shooters. Those who do
own such items purchase them only infrequently. It is this
that gives them a tiny weight compared to things like rent
and food, which loom large in the average consumer's budget.
BLS must make a judgment about when new items comprise a
sufficiently large proportion of expenditures to justify
inclusion in the CPI. The evidence for these high-profile
examples suggests that the Bureau's judgment has been
correct.
Table 1.--CPI expenditure weights, 1995
Durable Goods......................................................10.6
________
New Vehicles......................................................5.1
Used Vehicles.....................................................1.3
House Furnishing..................................................3.5
Other Durables....................................................0.7
========
Nondurable Goods...................................................32.8
________
Food and Beverages...............................................17.4
Apparel...........................................................5.1
Other nondurables................................................10.3
========
Services...........................................................56.6
________
Shelter..........................................................28.0
Utilities.........................................................7.0
Medical Care Services.............................................6.0
Other Services...................................................15.6
Source: Bureau of Labor Statistics.
I have focused my arguments about quality adjustment and
new products bias on the 0.7 percent of the CPI that the
proponents of large bias adjustments usually cite. Perhaps
there are other components of the CPI with larger expenditure
weights that have had significant quality improvements but
have been ignored. Let's see.
new motor vehicles account for 5.1 percent of the CPI. The
Boskin report itself notes that the case for quality
adjustment bias here is murky. They cite the ambiguity of
balancing the negative quality adjustment for decreasing auto
size with the positive adjustment for improved fuel
efficiency, itself a function of the (declining) price of
gasoline. Used vehicles, which make up 1.3 percent of the
index, probably did show some upward drift in quality in
the past, but BLS has taken steps to account for this
since 1987. As mentioned above, household furnishings (3.5
percent of expenditures) probably haven't shown
appreciable quality improvements, and new furniture in
particular seems to have become cheesier in my opinion.
What about nondurables? Food and beverages account for 17.4
percent of the index. Staples like meat, poultry, fish, eggs,
milk, cheese, fruits, vegetables, sugar, flour, etc. may have
seen some improvements in freshness and selection, although
rising salmonella contamination should give pause. Prepared
foods may have shown some quality improvements but not much.
Other nondurables are mainly apparel (5.1 percent) and
various other goods like fuels, tobacco and school supplies
(10.3 percent), for which quality improvements would seem
trivial.
[[Page S5409]]
What about services, which account for 56.6 percent of
expenditures? A whopping 28.0 percent of the typical
consumer's budget is taken up with shelter. Here, the Boskin
report acknowledges that there was a serious downward price
bias in the past that resulted from BLS' inadequate
adjustment for aging and depreciation. This downward bias in
the CPI's largest single item has been corrected by the
Bureau. Utilities account for 7.0 percent of spending, and
there certainly has been little improvement here except for
phone service.
Medical care services are another 6.0 percent, and the
situation here is a bit ambiguous. Services for medical
crises clearly have improved, although these expenditures are
infrequent by their very nature, and the out-of-pocket costs
for the average consumer are rather small on a monthly basis.
On the other hand, routine visits to the doctor have become
pretty annoying. Certainly, if there has been progress in the
quality of medical care, it has had only marginal effects on
morality, morbidity and lost work time.
The anecdotal evidence for the remaining 15.6 percent of
spending that goes to other services suggests deterioration
as often as improvement. Declining test scores certainly
aren't reassuring to consumers wondering if they're getting
their money's worth for out-of-pocket education expenses.
Smaller airplane seats and deteriorating public
transportation also suggest declining quality. Shoe-box movie
theaters with dinky screens and stale popcorn have not
brightened the movie-going experience. The shopping
experience itself is less pleasant, and haircuts are about
the same. Of course, there are improvements in the quality of
some consumer service, notably ATM banking.
The point here is not whine nostalgically that nothing is
as good as it used to be. Rather, I am arguing that once we
get away from a few high-profile examples related to
infrequently purchased household appliances, even the
direction of quality adjustment is ambiguous at best. There
is no question that modern market economies produce a great
deal of flux in the range of products offered, but many of
the offerings are meretricious rather than meritorious. To
say that all of this change represents an inexorable
improvement in the average consumer's quality of life is
panglossian.
Once one looks at the relative importance of different
items in the CPI and the actions that BLS already has taken
to address quality adjustment and new products problems, the
very high estimates of these biases become unbelievable. I
would argue that, if these factors do impart an upward bias,
it is a couple tenths of a percentage point at most. The most
important spending for the average household still has to do
with basic human needs: shelter, food, clothing,
transportation and basic health care. The great quality
improvements in these areas were achieved long ago. Current
quality advances largely are limited to items that clearly
are accessories to our lives or to situations that occur only
rarely.
In sum, then, I believe that the very large overall bias
that some analysts allege distorts the official CPI is about
one-third science and about two-thirds virtual reality. A
firm consensus exists regarding the substitution and formula
biases, both of which BLS already is working to eliminate.
With regard to the alleged outlet bias, some analysts appear
to be misinformed about what BLS actually does. And with
regard to quality adjustment and new products bias, large
effects appear to result from overly enthusiastic
extrapolation, if not wishful thinking.
the cpi's effect on the federal budget
As noted at the beginning, the whole reason that these
issues have come to popular attention is that small changes
in the rate at which government spending programs and taxes
are indexed can have huge effects on the federal deficit. The
great attraction of fiddling with the CPI is that it can be
used to extract money from literally millions of taxpayers
and benefit recipients. Table 2 shows CBO's official
estimates of the budget savings that would result from
reducing CPI indexing by a full percentage point. Seven-year
cumulative savings amount to $281 billion, with an impact of
almost $82 billion in FY 2002. About a third of the money
comes from higher income taxes, another third comes from
Social Security, almost a fifth comes from reduced debt
service and the rest comes from other federal retirement
programs, EITC and SSI.
It is easy to see how attractive it is for
budget negotiations to scale back indexing under the guise
of statistical integrity. The budget negotiators already
have incorporated baseline changes corresponding to a 0.4-
percentage-point adjustment to account for BLS's existing
efforts to eliminate substitution and formula biases. The
arguments above suggest that going beyond this is
scientifically questionable. However, this is exactly what
is being debated as this is being written in December
1995: an additional ad hoc adjustment to account for
purported (though unmeasured) quality and new product
bias. This seems to be an attempt to use statistical
subtleties as a figleaf for increasing income taxes and
cutting retirement benefits.
TABLE 2.--REDUCTION OF DEFICIT FROM 1.0 PERCENTAGE POINT CPI ADJUSTMENT
[In billions of dollars]
----------------------------------------------------------------------------------------------------------------
1996 1997 1998 1999 2000 2001 2002
----------------------------------------------------------------------------------------------------------------
Revenues.................................. 1.8 5.5 9.8 13.1 17.7 23.0 27.1
Outlays................................... 3.1 8.4 14.1 20.2 26.5 32.7 39.8
SS, RR retirement....................... 2.6 6.2 10.1 14.1 18.4 22.8 27.4
Other retirement........................ 0.3 1.2 2.1 3.1 3.8 4.7 5.6
SSI, EITC............................... 0.2 1.0 1.9 3.0 4.3 5.2 6.8
Offsets................................. 0.0 -0.1 -0.2 -0.4 -0.7 -1.0 -1.4
Debt service.............................. 0.2 0.8 2.0 4.0 6.7 10.2 14.7
Total deficit reductions.................. 5.0 14.7 25.9 37.3 50.9 65.9 81.6
----------------------------------------------------------------------------------------------------------------
Source: Congressional Budget Office.
That's not to say that reducing indexing should be
considered a totally unacceptable tool for deficit reduction.
It does mean that we should be honest about what we are
doing. What is being proposed this year used to be called a
``diet COLA,'' a catchy term that distinguishes nicely
between ad hoc changes and those based on scientific
research. Scaling back indexing is not a ``correction'' of
the CPI and does not ``reduce'' the CPI. One Republican
senator offered and then withdrew an amendment to this year's
Budget Resolution that BLS ``shall reduce the annual percent
change in the consumer price indexes by 0.7 percentage
points.'' (emphasis added) No mention here about just how
that might be done, but plenty of confidence that science was
on his side.
the effects of a diet cola on the income distribution
Whether or not a diet COLA ought to be included in a
comprehensive budget deal depends upon the same criteria as
any other deficit reduction tool: How is the burden of
deficit reduction apportioned across society, and will there
be collateral effects that are unpalatable? Thus, we don't
ask that the budget be balanced by eliminating the Defense
Department, because it would be unfair to ask the defense
sector to bear the entire burden of deficit reduction and
because it would leave the nation without defenses.
In this regard, it is important to note that the diet COLA
is regressive on balance, extracting relatively large budget
savings from low-income households and relatively small
amounts from the well-to-do. Table 3 shows CBO's estimates of
a diet COLA's impact. It is important to note that the
adjusted family income concept used in the table includes the
employer's share of payroll taxes for Social Security and
unemployment insurance as well as CBO's attribution of the
corporate income tax by income class. As a consequence, the
income concept also is adjusted for family size, but that has
a much smaller impact on the distributional conclusions.
TABLE 3.--DISTRIBUTIONAL EFFECTS OF REDUCED CPI INDEXING
----------------------------------------------------------------------------------------------------------------
Share of Share of Share of
revenue spending total Number of
Adjusted, pretax family income \1\ change change change families
(percent) (percent) (percent) (millions)
----------------------------------------------------------------------------------------------------------------
Less than $10,000.................................................. 0.9 10.5 6.0 14.6
$10,000 to $20,000................................................. 7.7 20.1 14.2 18.5
$20,000 to $30,000................................................. 11.6 17.5 14.7 16.6
$30,000 to $40,000................................................. 9.5 14.4 12.1 13.5
$40,000 to $50,000................................................. 7.7 10.3 9.1 10.8
$50,000 to $75,000................................................. 18.3 14.3 16.2 17.7
$75,000 to $100,000................................................ 16.1 6.0 10.8 8.6
$100,000 to $200,000............................................... 17.0 5.4 10.9 7.0
Over $200,000...................................................... 11.3 1.2 6.0 1.0
----------------------------------------------------------------------------------------------------------------
\1\ Adjusted income is the sum of wages, salaries, self-employment income, rents, taxable and nontaxable
interest, dividends, realized capital gains, and all cash transfer payments. Income also includes the employer
share of Social Security and federal unemployment insurance payroll taxes, and the corporate income tax.
Source: Congressional Budget Office.
The table shows that, even with this inflated income
measure, more than a third of the diet COLA's total burden is
borne by families below $30,000 per year, or about 45 percent
of all families. Fully 56 percent of the burden falls on
families below $50,000 per year, who constitute 57 percent of
all families. The table also shows that the effect on the tax
side is mildly progressive, but this is offset by both the
regressivity and larger impact of the spending side.
Clearly, this creates problems for those politicians who
care about the income distribution. It is one thing for the
diet COLA to be included as one part of a deficit reduction
plan that is progressive in its overall profile. However, it
is quite another thing to
[[Page S5410]]
add a diet COLA to a budget plan that already is regressive
in its overall effect.
As this is being written, a group of fiscally conservative
Democrats, known as the Coalition or Blue Dogs, has proposed
a clever device that mitigates the regressive effect of the
diet COLA on the spending side. As with other diet COLAs,
they suggest that the cost-of-living adjustment for
various spending programs be keyed to the official CPI
minus some specified factor, like 0.5 percent. However,
they would also stipulate that the reduced COLA received
by all individual beneficiaries of a program be equal to
the dollar amount for the average beneficiary. This means
that those beneficiaries who are better off would receive
a diet COLA that also was a smaller percentage adjustment
than otherwise. Some beneficiaries well below the average
would actually come out ahead.
the effects of the diet cola on the age distribution
Part of the reason that the diet COLA has such a severe
effect on very low income families is that the indexed
spending programs are almost entirely retirement programs and
elderly households tend to have low incomes. This highlights
another distributional issue for those who care about such
things: the impact of the diet COLA on the age distribution.
Here again, the question is not just its effect on the
elderly but whether that effect compounds sacrifices called
for elsewhere in the deficit reduction plan.
The proposals being offered in the budget negotiations
already get the bulk of their savings from Medicare and
Medicaid. All Medicare spending and about a third of Medicaid
spending goes to support health care for the elderly. In
fact, about half of all nursing home expenditures are paid
for by Medicaid. The most severe budget plans propose sharp
cuts in service at the individual level because projected
program growth would be insufficient to cover increases in
the medical costs and the number of beneficiaries.
Adding a diet COLA, with its heavy impact on retirement
programs, to any budget plan with large Medicare and Medicaid
cuts would be doubly severe for the elderly. These are
citizens who have few options with regard to working longer
or harder to offset the effect of cuts. They also tend to
have fewer health care options, because the medical attention
that they usually need is acute care and it often is too late
for preventive care. Expecting the elderly to take a leading
role in medical cost containment through individual choice
also seems unrealistic, because they may see choice as
threatening and confusing rather than liberating. Using a
diet COLA to get additional budget savings on top of the
sacrifices from the elderly already being contemplated
strikes me as unjust.
There is another important reason to think that price
indexing should not be scaled back for retirement programs.
Research suggests that these programs actually have been
underindexed in the past because spending patterns for the
elderly differ from those of consumers in general. Two years
ago, the BLS reformulated the raw data underlying the CPI to
take account of the different expenditure weights in the
``market basket'' of the typical older consumer.\9\ The
results shown in Table 4 indicate that this reconfigured
index for the elderly increased by 4.1 percentage points, or
8.2 percent, more than the official CPI between December 1982
and December 1993. This resulted from the greater weight of
out-of-pocket medical expenses for the elderly and the
smaller weight for transportation, apparel, and restaurant
meals. Of course, out-of-pocket medical expenses for the
elderly would become an even larger item in the household
budgets of the elderly under most of the deficit reduction
plans being discussed.
TABLE 4.--DECEMBER TO DECEMBER CHANGE IN OFFICIAL CPI AND EXPERIMENTAL
PRICE INDEX FOR THE ELDERLY
------------------------------------------------------------------------
Experimental
price index
CPI-U for the
(percent) elderly
(percent)
------------------------------------------------------------------------
1983.......................................... 3.8 3.7
1984.......................................... 4.0 4.1
1985.......................................... 3.8 4.1
1986.......................................... 1.2 1.8
1987.......................................... 4.4 4.5
1988.......................................... 4.4 4.5
1989.......................................... 4.6 5.2
1990.......................................... 6.3 6.6
1991.......................................... 3.0 3.4
1992.......................................... 3.0 3.0
1993.......................................... 2.7 3.1
1982-93....................................... 49.7 53.8
------------------------------------------------------------------------
Source: Nathan Amble and Ken Steward, ``Experimental price index for
elderly consumers,'' Monthly Labor Review, May 1994.
The BLS researchers stressed that one would need a much
more comprehensive effort to create a reliable CPI for the
elderly. In particular, one would have to discern whether
they shop at the same kinds of outlets as younger consumers
and whether they purchase the same kinds of items. Anecdotal
evidence suggests that they don't and the divergence between
the CPI and the cost of living for the elderly might be even
greater if these factors were taken into account. It appears
that the elderly tend to shop more at neighborhood stores
rather than discount outlets and that they have limited
options to save by buying in bulk.
conclusion
As a longtime proponent of better statistics, the sudden
awakening of interest in price measurement issues is
gratifying. However, I am dismayed that this has not been
accompanied by an equal commitment to fund or even to
acknowledge the analytical effort needed to address these
issues sensibly. The public discussion of the CPI's biases
has been carried away on a tide of outrageous claims that
have little scientific basis. Most disturbing is the
apparent willingness to make arbitrary adjustments to one
of our most important economic indicators rather than
improve it with more frequent updates and careful
research.
Very large estimates of CPI bias that range as high as two
percentage points appear to result from ignorance about what
the CPI actually contains and what the BLS actually does.
Full-time professionals responsible for properly surveying
the mix of outlets certainly are aware of the giant discount
chains familiar to the rest of us. Claims that BLS has not
addressed the most important quality adjustment issue are
patently false. Speculations about huge quality bias seem to
result from extrapolating the characteristics of household
appliances that average consumers buy once every few years to
the much larger and more prosaic spending that they do every
month. Arguing that the CPI ignores the great benefits of new
product introductions probably fails to note that most such
``new'' products are merely new styles.
A solid scientific consensus does exist regarding
substitution bias and formula bias. Not surprisingly, BLS
already is moving to correct these biases. The Bureau also
attempts to correct for quality adjustment and new product
biases within the constraints of their budget. Although there
is no convincing evidence that quality biases are large for
items that they do not adjust, BLS undoubtedly would welcome
additional resources for more extensive and sophisticated
research. Presumably, they also would be happy to have funds
for more frequent rebench- marking and more frequent sample
rotation.
The budget negotiators already have incorporated
adjustments in their baseline assumptions to account for the
two most firmly established components of the CPI bias;
substitution and formula bias. Going beyond this is not
justified by firm evidence. To do so while claiming a
scientific justification amounts to an attempt to camouflage
an increase in taxes and a cut in Social Security. A diet
COLA should not be adopted as part of a deficit reduction
plan that already is likely to be fairly regressive unless
some effort is made to counter the regressive effects. In
addition to remediating the income regressivity of the diet
COLA, one also would need to ensure that it was not part of a
deficit reduction plan that called for excessive sacrifice by
the elderly, whose retirement benefits may well have been
underindexed in the past.
footnotes
\1\ Jim Klumpner is chief Minority Economist, U.S. Senate
Budget Committee, Washington, DC. The opinions expressed in
this paper are those of the author and do not necessarily
represent official positions of the Democratic members of the
Senate Budget Committee.
\2\ Quoted in Washington Post, January 18, 1995.
\3\ Michael J. Boskin, Ellen R. Dulberger, Robert J. Gordon,
Zvi Grilliches, and Dale Jorgenson, ``Toward a more accurate
measure of the cost of living,'' September 15, 1995, Senate
Finance Committee.
\4\ Bureau of Labor Statistics (BLS), ``Report from the
Bureau of Labor Statistics for the House Budget Committee,''
House Budget Committee, p. 13.
\5\ BLS, op, cit., p. 14.
\6\ Jerry A. Hausman, ``Valuation of new goods under perfect
and imperfect competition,'' NBER Working Paper No. 4970,
December 1994.
\7\ BLS, op, cit., pp. 21-23.
\8\ Boskin et al., op. cit., p. 21.
\9\ Nathan Amble and Ken Stewart, ``Experimental price index
for elderly consumers,'' Monthly Labor Review, May 1994.
Mr. EXON. Mr. President, I hope we could move ahead now, if we might,
with the agreement.
Mr. CHAFEE. I wonder if I might have that 30 seconds?
Mr. KENNEDY. Then I would ask for 30 seconds, too.
The PRESIDING OFFICER. Who yields time?
Mr. CHAFEE. Mr. President, I ask the Senator look at our proposal. He
will see there is $25 billion of corporate welfare cuts that he is
discussing. Perhaps if he became more familiar with it we would all be
better off.
Mr. LOTT addressed the Chair.
The PRESIDING OFFICER. The Senator from Mississippi.
____________________