[Congressional Record Volume 143, Number 8 (Tuesday, January 28, 1997)]
[Senate]
[Pages S713-S715]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE BALANCED BUDGET AMENDMENT
Mr. GREGG. Mr. President, I rise today to speak a little bit about
the balanced budget amendment which is being brought forward on this
floor in the near future. It is obviously one of the most significant
items that this Congress will deal with. As we all know, in the last
Congress it passed the House and unfortunately failed here in the
Senate by one vote.
So it is a matter of substantive policy which we must attend to, and
which we as a Congress should pass. There are a lot of reasons for
passing the balanced budget amendment. The most important, in my
opinion, is that we put in place procedures in this Nation which will
not allow one generation to take from another generation its
opportunity for hope and for economic prosperity. Unfortunately, every
time we go to the well and borrow money here, as a Congress, we are
requiring our children to pay that debt. It truly is unfair for one
generation, which has benefited so much from the greatness and energy
and prosperity of our Nation, to be taking from another generation its
ability to also benefit from that greatness, energy, and prosperity.
But that is what we do, we run up the debt of the United States and
pass it on to the next generation.
In dealing with the balanced budget, there has been a lot of
discussion as to how it should be structured, how this constitutional
amendment for a balanced budget should be structured. One of the
primary arguments that has been made, on the other side of the aisle
especially, is that any balanced budget amendment must not include in
its calculation the receipts that flow into the Social Security trust
fund for the purposes of determining whether or not the Government is
in balance. This is what is known as the Social Security argument.
I think it is put forward for a variety of reasons, some of them
substantive and, regrettably, some of them political. We all know
whenever you raise the issue of Social Security you not only gather the
attention of a number of Americans but, in many instances, if you raise
it in certain ways you scare a lot of Americans because many Americans'
lifestyles, their ability to exist financially and their capacity to
make it from day to day, depend on their capacity to receive Social
Security and the support of Social Security. It has been an
extraordinarily successful program.
But, in the context of the balanced budget amendment, the way it is
being presented is, I think, a bit of an obfuscation of what is
actually the situation. Because what is being represented, if you want
to get down to the simplest statement of it, what is being represented
is that today the Social Security funds are essentially being raided to
operate the Federal Government. That is the basic argument that is
being made on the other side. And the argument therefore follows that
we should not do that, we should only use revenues that are available
for the purposes of operating the Government in order to operate the
Government.
In other words, if we raise $1 of taxes to pay for defense or to pay
for education or to pay for any variety of things that we do at the
Federal level, that is where that dollar should go. But if we raise $1
for purposes of the Social Security trust fund through the withholding
tax, if we raise that dollar, it should only be spent on Social
Security. And to set up a balanced budget amendment which may in some
way use those dollars to operate the general Government is unfair and
inappropriate to seniors who deserve that money to support them.
This argument makes sense just stated in that way. But it does not
make any sense if you look at the substance of the way Social Security
works. Today, in fact, it raises some very serious concerns about what
the promoters of this argument really want to do with the Social
Security trust fund. Because today the way the Social Security trust
fund works is this. You pay $1 into the Social Security trust fund.
That $1, as a working American--whether working on an assembly line in
Detroit or whether you are working as a computer programmer in New
Hampshire --you pay $1 into the Social Security trust fund and that
dollar is immediately paid out to support somebody who is on Social
Security today. Social Security is a pay-as-you-go system. Today, under
the system as it is structured, more people are paying into the fund
than are taking out of the fund in total dollars. If you discount
interest payments as a technical thing, basically you are paying $29
billion more into the Social Security fund than is taken out of the
Social Security fund, for the purposes of paying seniors their support
under Social Security.
So the senior citizen might say, or some from the other side of the
aisle seem to be saying, ``Well, that $29 billion should be available
to Social Security and only Social Security. Because, after all, it was
raised with Social Security taxes.'' I am willing to accept that as an
argument; as an argument. But how does it actually work? How does it
actually work?
Under the law, what do the Social Security trustees do with this
extra $29 billion they will receive this year that they are not going
to pay out in benefits? Do they invest it in the private
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sector or put it in a savings account designated to a senior's name? Do
they in some other way hold that asset for the benefit of that senior
citizen, for the benefit of a senior citizen or for the benefit of the
wage earner who paid into the trust fund? No, they do not. They do not.
Why don't they? Because, under the law, the Social Security trustees
can only do one thing with that surplus, with that extra $29 billion
they are taking in this year they are not spending for benefits. They
can only lend that money to the Federal Government. They cannot lend it
to anybody else. They can only lend it to the Federal Government under
a special loan document that yields a special interest payment.
So the money goes back to the Federal Government and is spent by the
Federal Government as a loan. That means the $29 billion is not in some
special savings account for a senior citizen or for the wage earner who
paid it in. It is not in some special stock agreement, stock
certificate. It is not invested in IBM or General Motors, or not
invested in a mutual fund like the Fidelity fund. It can only be
invested in the Federal Government.
Of course, what is the Federal Government going to do with that $29
billion? Is it going to sit on it? Hold it under a mattress? Of course
not. What the Federal Government does with that $29 billion is it
operates the Government of the United States. If the $29 billion that
is being lent to the Federal Government by the Social Security system
were not available to the Federal Government, the Federal Government
would have to go out, theoretically, and borrow it from somebody else,
borrow it in the marketplace by issuing Treasury notes. So, what you
have here, essentially, is a pay-as-you-go system. Everything that is
paid in is paid out. But to the extent it is not paid out, to the
extent there is a surplus, the money has to go to the Federal
Government.
What the other side is saying is the Federal Government should not be
allowed to use that money for the purposes of accounting for its
budget, as to whether or not it is balanced. As a practical effect,
what does that mean? What does it really mean, what they are saying? It
means one of two things. It means either: First, they want all that
surplus invested in something other than Federal-issued debt, they must
want it invested in the stock market or maybe they want to invest it in
real estate, or maybe they want to invest it in futures funds or maybe
they want to buy into the Albanian Ponzi scheme. But they do not want
it invested in the Federal Government. That is the first thing it
means. That is the first alternative.
I have to say that is a very dangerous idea. Many people have
considered that idea and it has been of significant concern. But to
just arbitrarily say the Federal Government will not be able to borrow
money from the Social Security fund and therefore somebody else is
going to have to borrow the money, they are going to have to lend it to
somebody else, is to say you are going to privatize--that is what they
are suggesting--they are going to suggest privatizing the surplus of
the Social Security fund. Not designated to any individual contributor
or taxpayer, which I happen to think makes sense, but, rather, just
simply you cannot invest Social Security funds in the Federal
Government any longer, you have to invest in some other vehicle. That
is, in practice, what they are proposing. They are not saying that
because they are using the political cover of this hocus pocus about
Social Security.
But in practice, that's exactly what they are presenting as their
concept. OK.
If that isn't the alternative, if the alternative is you should have
to invest in something other than the Government with the Social
Security surplus, then the other alternative is--what they are saying--
we're looking at a bookkeeping event, because if the Federal Government
is allowed to borrow the money from the Social Security trust fund, if
the Federal Government is allowed to borrow the surplus from the Social
Security trust fund, then what is the difference from today? There
isn't any difference.
Today, the Federal Government, for the purposes of operation, borrows
the money from the Social Security trust fund, gives the Social
Security trust fund a debt instrument and pays interest on it. What
they are suggesting is either, one, that shouldn't occur under their
proposal, which means they are calling for the privatization of the
surplus, or, two, if it should occur, then there's no difference from
today, they're just talking about a bookkeeping event. Instead of the
Federal Government accounting for it one way, the Federal Government
will account for its borrowing another way. But the fact of the matter
is, the Federal Government is still borrowing the money, and there will
be absolutely no difference.
So this argument from the other side is highly specious. It cannot be
defended on the basis of substance. It can be defended on the basis of
politics, I admit to that. This is great politics: Let's trot out the
old Social Security again. Let's scare the seniors. But on the basis of
substance, it has no legs. All you have to do is look at the fact of
the matter and recognize it has no legs, because I don't think these
folks over there on the other side of the aisle who are suggesting this
are suggesting we privatize the surplus, that we allow the surplus to
be willy-nilly invested in the market.
I happen to think there are some strong arguments--this is another
whole issue--if we are taking that surplus and rather than taxing it,
rather than raising it through taxes, allowing the wage earner to
retain that surplus, give them a tax cut, basically, on their payroll
tax and let them put that surplus, that percentage of their payroll tax
that represents that surplus, which is about 1 percent, in their own
savings account so they can save for themselves for retirement. But
that is not the issue here.
The issue here is whether the other side really believes they want to
privatize the surplus, and if it is not their position they want to
privatize the surplus, essentially what they are saying is they want a
bookkeeping event to occur, because they are still going to let the
Federal Government borrow the money under one scenario, under a
balanced budget, and they borrow it under one set of books. Without the
balanced budget, they would balance it under another set of books. But
as a practical matter, the effect would be the same. The budget would
be balanced.
Is my time expired? I ask unanimous consent for 5 more minutes.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. GREGG. Mr. President, what we have here is a great political
game. There are a lot of people who don't want a constitutional
amendment to balance the budget because they don't want the Federal
Government to be put under the restraint of fiscal responsibility, and
they ought to step forward and say that. They should not be hiding
behind the Social Security argument, because it is fallacious, as I
have just mentioned.
Or--here is another point--if they are going to make this point with
the Social Security trust fund, that it should be outside the unified
budget, that it should not be part of the budgeting process and the
surplus should not be accounted for under the process, but that we
create a new accounting method, which has the same effect as a
practical matter, then why aren't they making the same point with the
Medicare trust fund?
Why? Well, I will tell you why. Because if they were to make that
point with the Medicare trust fund, you would see that their argument
would require them to fill a huge Medicare hole. Medicare is going
broke. The trust fund is going broke. It does not have a surplus.
Here is a chart that has just been put up. This chart reflects how
much the Medicare trust fund is going broke. This is a bar chart, and
we can see the Medicare trust fund began last year, I guess, actually,
in the deficit. Then next year, it is a $48 billion deficit; in 2005,
it is a $91 billion deficit, and it is a geometric progression from
there, reflecting the tremendous imbalance in the Medicare trust fund,
which we all know exists which, unfortunately, was denied during the
election and any proposals to address it. I happen to have a couple
that are fairly substantive which have been met with a bit of
demagoguery.
The fact is, this exists, and the question becomes, why wouldn't the
practical arguments that are being made on
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Social Security for taking it off budget be made on the trust fund for
Medicare to take it off budget?
The obvious reasons are that the folks on the other side who are
making this argument are not making this argument for substantive
purposes, they are making it for political purposes. The politics of
the situation require that they not talk about the Medicare trust fund
problem, but rather that they talk about a nonexistent Social Security
issue, as of today--a major Social Security issue down the road, but as
of today, a nonexistent Social Security problem.
But if they were to raise the Medicare issue, then they would have to
ask about how they are going to address the fund question, because if
you use their logic for the Medicare trust fund, they would have to
come up with a proposal this year, if the balanced budget amendment
were passed with the Social Security language that has been proposed,
but if that Social Security language was also applied to Medicare--
Medicare being a trust fund as important to seniors as Social Security,
I would argue, and, in many instances, even more important because it
is a health care insurance--well, then this year they would have to
come up with a proposal to bring into balance the Medicare trust fund
to the tune of $48 billion--$48 billion. And that would create some
significant policy questions.
That is exactly what we should do, of course, and exactly what I hope
we will do. But the fact is, the reason it is not being discussed in
this debate is because it means you have to face up to the hard policy
decisions that are involved in balancing the Medicare trust fund.
So if you are going to separate the Social Security trust fund, why
not separate the Medicare trust fund? The fact that they are not
separated, I think, shows the political nature of this Social Security
argument.
So that is just a quick recitation or response, if you will, to those
folks who got on the floor today giving us the Social Security sales
pitch.
The fact is that the initial proposal to take Social Security out of
the balanced budget amendment proposal means one of two things: One,
they either want to privatize the surplus and have it invested in
places other than the Federal Government or, two, they are just going
through a bookkeeping game, because the Federal Government will
continue to borrow the money.
The fact that they haven't included the Medicare trust fund only
reinforces the superficiality of their position and the fact that their
position is political and not substantive.
There is going to be a lot more discussion about the balanced budget
amendment before we get to the end of this road, before we get to a
vote. We are going to hear a lot about Social Security. But I do hope
that people will look beyond the language of the debate and actually
look at the substance, because on the substance, the Social Security
argument, as presented--the Social Security position, as presented--
does not have any legs. You could present it so it did have legs, but,
in this instance, that is not the case.
Mr. President, I yield back the remainder of my time. 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. WARNER. Mr. President, I ask unanimous consent that the order for
the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
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