[Congressional Record Volume 142, Number 112 (Friday, July 26, 1996)]
[Senate]
[Pages S8989-S8993]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




          STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS

      By Mr. DORGAN (for himself and Mr. Reid):

  S. 1993. A bill to require certain expenditures by the Federal 
Reserve System to be made subject to congressional appropriations, to 
prohibit the maintenance of surplus accounts by Federal Reserve banks, 
to provide for annual independent audits of Federal Reserve banks, to 
apply Federal procurement regulations to the Federal Reserve System, 
and for other purposes; to the Committee on Banking, Housing, and Urban 
Affairs.


         The Federal Reserve Fiscal Responsibility Act of 1996

  Mr. DORGAN. Mr. President, today Senator Reid and I are introducing 
legislation to eliminate the kinds of budgetary excesses and 
accountability lapses at the Federal Reserve Board that were recently 
uncovered by the General Accounting Office [GAO]. At a time when many 
Federal agencies are downsizing and making tough choices about their 
spending priorities, the Federal Reserve ought to be tightening its 
belt too. Regrettably, however, the opposite appears to be the case at 
the Federal Reserve.
  During the past several years, Congress has embarked on a historic 
and painful path toward deficit reduction. Since 1993, the Federal 
deficit has been slashed by more than one half.
  The Federal Reserve Board's Chairman, Alan Greenspan, has been one of 
the loudest cheerleaders for deficit reduction. But a one-of-a-kind GAO 
report about Federal Reserve expenditures between 1988 and 1994 shows 
us that Chairman Greenspan apparently hasn't been practicing what he 
preaches.
  A few weeks ago, the GAO released the final version of its 
comprehensive report about the management of the Federal Reserve 
System. This report, which took the GAO over 2 years to assemble, 
uncovers disturbing financial practices and management failures within 
the Federal Reserve System. The report is packed with examples where 
the Fed could substantially trim costs, and makes specific 
recommendations for changes in Fed operations. Unfortunately, the 
Federal Reserve has already dismissed most of the GAO's recommendations 
as irrelevant or unnecessary.
  The GAO report shows that during the late 1980's and early 1990's 
that Federal Reserve expenditures jumped by twice the rate of 
inflation. While Fed employee benefits and travel costs are out-pacing 
inflation, the rest of the Federal Government has been downsizing. For 
example, between 1988 and 1994, Federal Reserve employee benefit costs 
skyrocketed by nearly 100 percent--as compared to about 60 percent for 
the Federal Government--according to the GAO report.
  The report also reveals that over 120 Federal Reserve employees 
actually make more than Chairman Greenspan. In fact, overall personnel 
cost increases at the Federal Reserve represented over 70 percent of 
the total growth in the Fed's operating expenses during the years 
examined by the GAO. This runaway spending is remarkable given Chairman 
Greenspan's rhetoric about the need for belt-tightening in the rest of 
the government.

  Inexplicably the Federal Reserve also keeps a $3.7 billion cash 
surplus account of taxpayer's money to protect against losses, despite 
the fact that the Fed hasn't suffered a loss for 79 consecutive years.
  Senator Reid and I are introducing legislation today to address these 
problems. Our bill, the Federal Reserve Fiscal Responsibility Act of 
1996, includes many of the changes recommended by the GAO. It would do 
the following:
  First, the GAO, in consultation with the Federal Reserve, will 
identify and report to Congress a list of the Federal Reserve System 
activities that are not related to the making of monetary policy. After 
the report is completed, all nonmonetary policy expenditures, as 
identified by the GAO, would be subject

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to the congressional appropriation process. We do not intend to inject 
politics into monetary policy with this provision. However, over 90 
percent of the Fed's operations have nothing to do with interest rate 
policy according to the GAO. And there is simply no good reason why the 
Fed's nonmonetary expenditures are immune from the same kind of 
oversight and review required of other Federal agencies.
  Second, the Federal Reserve is required to immediately return more 
than $3.7 billion of taxpayer's money that has unnecessarily 
accumulated in its surplus account to the Treasury. In addition, the 
bill asks the GAO to determine the extent to which any of the Fed's 
future net earnings should be transferred to the general fund of the 
Treasury each year.
  Third, the regional Federal Reserve banks will be subjected to annual 
independent audits. This provision merely codifies what the Federal 
Reserve has been doing for the most part in recent practice.
  Finally, the Federal Reserve will be required to follow the same 
procurement and contracting rules that apply to other Federal agencies. 
These rules should help to prevent the kinds of favoritism highlighted 
in the GAO report and increase competition among contract bidders with 
the Fed. This requirement ought to substantially reduce procurement 
costs on a system-wide basis.
  I invite my colleagues to join us as cosponsors of this much-needed 
legislation.
  Mr. REID. Mr. President, I rise today with the Senator from North 
Dakota to introduce legislation which we believe will improve fiscal 
management within the Federal Reserve System.
  In September 1993, Senator Byron Dorgan and I requested a General 
Accounting Office [GAO] investigation of the operations and management 
of the Federal Reserve System [Fed]. We were concerned because no close 
examination of the Fed's operations had ever been conducted before. As 
Congress scrutinizes each Federal expenditure in an attempt to balance 
the budget, it is imperative that we be well informed on all activities 
that affect the Government's finances. Surprisingly, this GAO study was 
the very first look into the internal operations of the Fed and, to 
date, there has never been an annual, independent audit of the Nation's 
central banking system. Further, because of its self-financing nature, 
the Fed's operating costs have largely escaped public investigation. It 
was high-time we opened the door and examined the workings of this 
large and influential public entity.
  The landmark GAO report, issued in June 1996, raises serious 
questions about management within the Fed. One of the most astonishing 
findings of this comprehensive, 2-year study was that the Fed had 
squirreled-away $3.7 billion in taxpayer money in a surplus fund, which 
it claims is needed to cover system losses. In its entire 79 year 
history, however, the Fed has never operated at a loss. The GAO report 
indicates that this fund could be safely reduced or eliminated and 
returned to the Treasury Department, as is standard practice with 
surplus revenues. It is nonsensical for this cash to be sitting idle at 
the Fed instead of being used to reduce the deficit.
  While the rest of the Federal Government has tightened its belt and 
down-sized, the GAO report revealed that the Fed has enjoyed enormous 
growth in its operating costs and highly questionable growth in its 
staffing. The GAO study found that operating costs at the Fed have 
grown 50 percent between 1988 and 1994, a rate twice that of inflation 
and much greater than overall Federal discretionary spending. The study 
also uncovered salary growth at a rate of 44 percent between 1988 and 
1994. During the same time period, personnel benefits skyrocketed 
nearly 90 percent. Further, the GAO report revealed nonuniform travel 
policies and an excessive 66 percent increase in travel expenses.
  The picture the GAO report paints of the internal management of the 
Fed is one of conflicting policies, questionable spending, erratic 
personnel treatment, and favoritism in their procurement and 
contracting policies. The report makes it clear that the Fed could do 
much more to increase its fiscal responsibility, particularly as it 
urges parsimonious practices by all other Federal agencies.
  The compelling evidence offered by the GAO report indicates that many 
of the practices of our Nation's central bank should change, especially 
when their budgetary excesses represent a direct cost to taxpayers. The 
surplus fund, along with increasing bloat, perks, and benefits begs 
greater accountability. For these reasons, I rise today with my 
colleague from North Dakota, Senator Dorgan, to introduce the Federal 
Reserve Fiscal Responsibility Act of 1996. This measure follows some of 
the recommendations of the GAO report and seeks to improve the Fed's 
fiscal management.
  The Federal Reserve Fiscal Responsibility Act of 1996, requires the 
Comptroller General of United States, in cooperation with the Fed 
Board, to identify the functions and activities of the Board and of 
each Fed bank which relate to U.S. monetary policy. After September 30, 
1997, all nonmonetary policy expenses of the Federal Reserve System 
will be subject to the congressional appropriations process. 
Surprisingly, the monetary policy expenses represent less than 7 
percent of the Fed's annual expenses. Our bill would subject the Fed to 
the cost reduction pressures that affect other public agencies, and 
ensure congressional oversight over the Fed's questionable spending of 
taxpayer money.
  Further, the Federal Reserve Fiscal Responsibility Act addresses the 
disturbing matter of the surplus fund. It requires the transfer of all 
Fed surplus funds to the Secretary of the Treasury for deposit in the 
general fund of the Treasury. This would occur 30 days after enactment 
of the legislation. Annually thereafter, the Comptroller General of the 
United States will determine what percentage of the net earnings of the 
Federal Reserve banks should be deposited back in the Treasury. This 
provision would free-up this money for use in deficit reduction.
  Our bill also will apply regular Federal procurement procedures to 
the Fed Board and to each Federal Reserve bank. This will eliminate the 
possibility of favoritism and conflict of interest in procurement and 
contracting policies.
  Finally, and perhaps most significantly, our measure would require an 
annual, independent audit of the Fed. An annual audit is fiscally sound 
policy which would instill greater public confidence in our banking 
system.
  I want to make it very clear that I am not attempting to interfere 
with, or impugn, the monetary policy of the Fed. I am merely seeking 
greater accountability in the operating expenses and internal 
management of one of our most influential institutions.
  I look forward to greater discussion of this issue by Congress, and 
encourage the committee to give favorable consideration to our 
legislation.
                                 ______
                                 
      By Mr. WARNER (for himself, Mr. Ford, Mr. Robb, Mr. Moynihan, Mr. 
        Simpson, Mr. Cochran, and Mr. Glenn):
  S. 1995. A bill to authorize construction of the Smithsonian 
Institution National Air and Space Museum Dulles Center at Washington 
Dulles International Airport, and for other purposes; to the Committee 
on Rules and Administration.


the smithsonian institution national air and space museum dulles center 
  at washington dulles international airport authorization act of 1996

  Mr. WARNER. Mr. President, I am pleased to introduce legislation on 
behalf of myself, and Senators Ford, Robb, Moynihan, Simpson, Cochran, 
and Glenn. This legislation would authorize the Board of Regents of the 
Smithsonian Institution to construct the Smithsonian Institution 
National Air and Space Museum Dulles Center at Washington Dulles 
International Airport. The legislation clearly states that no 
appropriated funds may be used to pay any expense of the construction 
of the center. Funds for the construction will be privately raised and 
in fact this legislation permits the Smithsonian to move forward with a 
fundraising drive.
  In 1983, the Smithsonian Board of Regents first approved the National 
Air and Space Museum plan to expand at Washington Dulles International 
Airport. In 1993, after 10 years of hard work by the Smithsonian 
Institution, the Virginia congressional delegation, five Virginia 
Governors, and many

[[Page S8991]]

local officials, Congress passed and the President signed legislation 
authorizing the Smithsonian Institution to plan and design the National 
Air and Space Museum Extension at Washington Dulles International 
Airport.
  This legislation would serve to further the objectives of the 
National Museum Amendments Act of 1965 which directs the National Air 
and Space Museum to ``collect, preserve, and display aeronautical and 
space flight equipment of historical interest and significance.''
  I believe that it is accurate to state that the National Air and 
Space Museum now holds the most impressive and significant collection 
of air and spacecraft in the world. However, due to the limited 
exhibition space in The Mall building coupled with the size and weight 
of many of the artifacts, only 20 percent of the museum's collection is 
on display. Therefore, such significant air and spacecraft as the 
Boeing 367-80, the Saturn V launch vehicle, the Boeing Flying Fortress, 
the B-29 Enola Gay and the space orbiter Enterprise cannot be displayed 
and enjoyed by the nearly 10 million visitors the museum receives each 
year. In addition, the museum's space limitations inhibit the 
interpretation of aerospace technology's significant contribution to 
America and the possibilities which it holds for the future.
  The Air and Space Museum Dulles Center will allow approximately 65 
percent of the Smithsonian's air and spacecraft collection to be on 
display. The center will also allow visitors to view the restoration 
operations and see first-hand how historic air and spacecraft are 
preserved.
  Mr. President, I call on every Member of the Senate to support this 
legislation which will make the expansion of the National Air and Space 
Museum at Washington Dulles International Airport a reality. Air and 
space technology has and will continue to greatly impact every facet of 
our lives. The creation of this extension will enable visitors from all 
over the world to experience first-hand the magnitude and significance 
of America's technological achievements.
                                 ______
                                 
      By Mr. BIDEN:
  S. 1996. A bill to amend the Violent Crime Control and Law 
Enforcement Act of 1994 to allow certain grant funds to be used to 
provide parent education; to the Committee on the Judiciary.


                    The Healthy Families Act of 1996

  Mr. BIDEN. Mr. President, I rise to offer a bill that I believe 
represents an important step forward in the fight against child abuse 
and crime.
  This legislation will make healthy families programs eligible for 
funding under the local crime prevention block grant, in the 1994 crime 
law. Essentially, this bill would add the healthy families program to 
the list of prevention programs eligible for funding under the block 
grant.
  The link between child abuse and later involvement in violence and 
crime is becoming ever more clear. According to a 1992 Justice 
Department report, 68 percent of youths arrested had a prior history of 
abuse and neglect, and abused girls were 77 percent more likely than 
nonabused girls to be arrested as juveniles.
  The healthy families initiative has proven to be very successful in 
combating this cycle of violence. The program was pioneered in Hawaii 
in the 1980's. According to the Hawaii Department of Health, 2,254 at-
risk families received healthy families services over a 5-year period. 
Out of that total, abuse was reported in only 16 families. This success 
shows that the program was able to prevent abuse in 99.3 percent of at-
risk families in Hawaii.
  The success of this program is based on the voluntary, comprehensive, 
and culturally appropriate home visitor systems. These systems provide 
parenting education that focuses on parenting skills, child 
development, child health, and support services for new parents, in 
order to prevent or decrease the risk of child abuse.
  As a result of this success, the program has now spread to other 
communities throughout the United States. The money which would be 
provided under the block grant, would help other communities create 
these greatly needed healthy families programs.
  Spending money on child-abuse prevention is a sound investment. Not 
only will it create future savings in the judiciary system and other 
social services, but even more importantly it's an investment in the 
lives of our children.
  Mr. President, I ask unanimous consent that the text of the 
legislation I am introducing today appear in the Record.
  The being no objection, the bill was ordered to be printed in the 
Record, as follows:

                                S. 1996

       Be it enacted by the Senate and House of Representatives of 
     the United States of America in Congress assembled,

     SECTION 1. PARENT EDUCATION SYSTEM.

       Section 30201(a)(2) of the Violent Crime Control and Law 
     Enforcement Act of 1994 is amended by adding at the end the 
     following:
       ``(O) Voluntary, comprehensive, and culturally-appropriate 
     home visitor systems that provide parenting education that 
     focuses on parenting skills, child development, child health, 
     and support services for new parents to prevent or decrease 
     the risk of child abuse. To avoid duplication of services, a 
     system developed pursuant to this paragraph shall be 
     coordinated with other organizations that provide services to 
     children, particularly infants.''.
      By Mr. SIMON:

  S. 1997. A bill to clarify certain matters relating to Presidential 
succession; to the Committee on Rules and Administration.


             the Presidential Succession Clarification Act

  Mr. SIMON. Mr. President, today I introduce the Presidential 
Succession Clarification Act.
  Much has been said and written about the laws of succession following 
the death of a sitting President. In general, these laws clearly and 
precisely provide for the transfer of Presidential power.
  The laws of succession, however, do not adequately address the 
possibility that a Presidential candidate might die during the voting 
period itself--by that I mean during the period beginning roughly with 
the popular election in mid-November and ending with the formal naming 
of the President-elect in early January.
  A candidate's death during this 2-month period could seriously 
disrupt the voting process and raise doubts about the election results. 
The seriousness of these problems would depend on the precise point in 
time at which the death occurred. A hearing that was held in the 103d 
Congress on this subject highlighted the various scenarios in which 
legal ambiguities could lead to electoral crises.
  Broadly speaking, the act, which I introduced in the last Congress, 
addresses three distinct situations:
  First, let us suppose that a Presidential candidate dies after the 
electoral delegates have cast their votes but before those votes are 
counted. If the deceased would have won the election, who is now 
President elect? Scholars disagree on the answer.
  Second, suppose that a major party candidate dies immediately before 
the popular election, or immediately prior to the time that the 
electoral college delegates vote. Would it not make sense to give the 
voters a couple of weeks to adjust to this unsettled situation?
  Third, suppose that no candidate wins a majority of the electoral 
votes, and that the election is thrown into the House of 
Representatives as a result. If one of the candidates should die at 
this point, is the House permitted to consider an alternative 
candidate?
  The act provides answers for each of these, admittedly complex, 
questions. None of these scenarios, of course, is likely to occur 
during any election cycle. But any one of them could lead to confusion 
and uncertainty at a time when clarity and stability would be vital. 
Prudence dictates that we should act now, while we have the time for 
calm reflection, rather than wait for a possible crisis to catch us 
unprepared.
       By Mr. ASHCROFT:

  S.J. Res. 57. A joint resolution requiring the Congressional Budget 
Office and the Joint Committee on Taxation to use dynamic economic 
modeling in addition to static economic modeling in the preparation of 
budgetary estimates of proposed changes in Federal revenue law.


                Growth Economic Agenda Joint Resolution

  Mr. ASHCROFT. Mr. President, the joint resolution I am introducing 
lays the groundwork for the progrowth economic agenda of the next 
millennium. Senator Abraham, Senator Craig, Senator Grams, and Senator 
Kyl have joined with me in offering this proposal.

[[Page S8992]]

  The method of analysis we now use to determine how much a tax cut 
costs the Government, or a tax hike costs the taxpayers, is hopelessly 
inaccurate. For example, the 1990 luxury tax increase took in $14 
million less than the $31 million the Joint Tax Committee [JCT] 
predicted it would in fiscal year 1991. The 1986 Tax Reform Act lowered 
income tax rates while hiking capital gains taxes. The Congressional 
Budget Office at the time underestimated income tax revenues over the 
following 3 years by $56 billion and overestimated the 5-year take from 
capital gains tax revenues by $115 billion. It has also been 
established that the CBO grossly overestimated capital gains tax 
revenues by over 100 percent in most years between 1989-95. Finally, 
the fiscal year 1991 budget, issued before the 1990 budget summit at 
Andrews Air Force Base, contained a 5-year forecasting error of $1 
trillion.
  Every Member of Congress relies on CBO's and the Joint Tax 
Committee's [JCT] projections in deciding how to vote on legislation. 
Quite simply, we cannot make good decisions if we do not have good 
data.
  These flawed calculations were made using a static economic model 
that assumes generally that Americans do not change their behavior, 
such as their spending habits and investment levels when Congress 
saddles them with higher taxes. The consistent level of inaccuracy in 
static economic analysis threatens our ability to both reduce the 
deficit and reduce the current unprecedented tax burden on the American 
public.

  The problem with static economic analysis is its failure to account 
for the impact that changes in the level of taxes, or the amount of 
Government spending, will have on the average citizen's behavior. 
Static estimates assume that the economy's overall performance is 
generally unaffected for the most part by changes in policy, regardless 
of how much individuals or businesses must pay in taxes. When we assume 
that Americans will not change their spending and investment patterns 
to avoid paying new taxes, we ignore human nature. People generally 
seek to maximize the value of their dollars and their paychecks.
  One well-known apostle of the static economic model; the current 
Chairman of the Council of Economic Advisors, Laura Tyson, recently 
went so far to as to state that ``* * * there is no relationship 
between the levels of taxes a nation pays and its economic 
performance.'' Such an attitude is the equivalent of an ostrich hiding 
its head in the sand. Dynamic economic analysis is the principal tool 
used in private firms and most universities which make estimates and 
construct models for economic analysis for the private sector.
  One of the most successful economic models is the dynamic model used 
by Lawrence H. Meyers & Associates, an economic forecasting firm in St. 
Louis. Not only has this model received the Annual Blue Chip Economic 
Forecasting Award in 1993 and 1995, but Lawrence Meyers himself was 
recently appointed by President Clinton as a Governor to the Federal 
Reserve.

  By relying on static analyses, Congress is limited to a dangerously 
myopic and usually inaccurate view of how our laws and our actions 
affect the Nation. There is a formidable argument that static analysis 
has played an integral role in exploding our deficits. That is because 
static analysis often overestimates the Government's revenue from a tax 
increase and then relies on such overestimates as the basis for 
projecting decreases in the Federal deficits and the Nation's debt. As 
a result the projected revenues never materialize and annual deficits 
increase.
  This problem is compounded by the fact that static analysis also 
generally underestimates the actual cost to the Government of spending 
increases and thus contributes to even larger than expected budget 
deficits. Such inaccurate predictions of what programs will cost lead 
legislators to make bad decisions. This phenomenon helps explain why 
every dollar raised in higher taxes has traditionally resulted in $1.58 
in new Government spending since 1947.
  By adding a more accurate method of analyzing fiscal proposals, 
Congress will have better information as it evaluates legislation. 
Adding dynamic scoring analysis will help us eliminate Congress' 
institutional bias toward higher taxes, increased spending, bigger 
deficits, and a ballooning national debt.
  Mr. President, I emphasize that this resolution does not seek to 
replace the current static analysis model. It merely states that 
dynamic estimating techniques should also be used, in addition to 
current techniques, in determining the fiscal impact of proposed 
changes in Federal revenue law. Under this resolution, the Joint 
Committee on Taxation [JCT] and the Congressional Budget Office [CBO] 
would prepare an estimate of each proposed change in Federal revenue 
law on the basis of assumptions that estimate the probable behavioral 
responses of individual and business taxpayers, and the macro-economic 
feedback effects of any proposed change. This requirement will only 
apply to changes in the law which would have an effect of $100 million 
or more.

  I want to note that this proposal is a companion measure to House 
Resolution 170, introduced by Representative Tom Campbell of California 
and to a similar proposal included in the 1997 legislative 
appropriations bill passed by the House. Tom Campbell has worked 
tirelessly to promote a pro-growth agenda. He has refused to sacrifice 
the standard of living of hard-working Americans on the altar of static 
economic analysis.
  Dynamic economic analyses of tax cut proposals would take into 
account the acknowledged growth effects of tax cuts on the American 
economy. In fact, these growth effects could be used in calculating the 
amount of spending cuts needed to offset a tax cut so that we 
accurately measure any reduction in revenue and do not increase the 
deficit. For example, using dynamic scoring for the payroll tax 
deduction I proposed--The Working Americans Wage Restoration Act S. 
1741--the tax deduction would be budget neutral in the first year. In 
other words, the relief offered by the payroll tax deduction would 
generate enough new revenue by growing the economy, that the proposal 
would pay for itself.

  Here is how. Based on a preliminary analysis, the payroll tax 
deduction is projected to increase the Gross Domestic Product [GDP] by 
0.5 percent annually. According to the Office of Management and Budget, 
a 0.5 percent rise in GDP would expand the tax base and increase 
Federal receipts by $30 billion per year--more than enough to pay for 
the payroll tax deduction in the first year. However, the Budget Act 
requirement that tax cuts be paid for by spending cuts would still 
apply. Dynamic analysis would simply allow lawmakers and the public to 
understand the growth effects and judge this proposal's--and other 
proposals'--worthiness accordingly.
  In calculating a tax cut's dynamic economic effects, the government 
would be more realistic in its view of how government economic policies 
affect the economy. Under the current system of static analysis, our 
budget forecasters produce skewed numbers causing Congress to make 
flawed decisions that drain the wallets of working Americans.
  This proposed resolution also opens up the congressional economic 
analysis process to much needed sunshine. Presently, we draft changes 
to the Federal Tax Code, submit these changes to the Joint Committee on 
Taxation for a revenue estimate and wait for the magic numbers to 
appear. It is time to bring sunshine into the black box of Federal 
forecasting. This resolution would do just that. Any report made by the 
JCT or the CBO that contains an estimate of revenue effects must be 
accompanied by a written statement fully disclosing the economic, 
technical, and behavioral assumptions that were made in producing both 
the static and the dynamic estimate.
  Last, under this joint resolution the JCT and the CBO may enter into 
contracts with universities or other private or public organizations to 
perform dynamic analysis or to develop protocols and models for making 
such estimates.
  By reforming the way we calculate the economic effects of 
congressional proposals, we pave the way for an overall lowering of the 
average American's tax burden by reducing the current forecasting 
method's prejudice against pro-growth policies. This resolution will 
simply provide more information to Members of Congress and the public 
so that Congress can better determine the benefits of proposed 
legislation. It

[[Page S8993]]

will open up the budget forecasting process and permit more tools of 
measurement, so that over time we will have a clearer and more accurate 
understanding of the effects of the laws we pass.

                          ____________________