[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.
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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
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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.
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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.
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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
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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.
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