[Congressional Record Volume 143, Number 57 (Tuesday, May 6, 1997)]
[Senate]
[Pages S3981-S3982]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                              BUDGET DEAL

  Mr. GRAMM. Mr. President, obviously, with the budget deal completed 
over the weekend, Members are trying now to look at the facts. What I 
would like to do in these 10 minutes is turn and look at the facts.
  I know to many people in America, it may seem too good to be true to 
believe that we could give the President the largest increase in social 
spending that we have seen in America since the 1960's, in his own 
words, that we could give Republicans a tax cut and that we could give 
the American people a balanced budget all at the same time.
  If all that seems too good to be true, it is for a simple reason: It 
is too good to be true. Let me begin by simply running through the 
budget very quickly.
  Because the economy has been growing, this year we had an easier task 
of balancing the budget than we have had before. In fact, we only 
needed about $330 billion of deficit reduction in order to balance the 
budget. Let me outline how the budget agreement achieves that $330 
billion of deficit reduction.
  As many of you know, on Thursday night, at the very point where the 
budget agreement had reached an impasse, the budgeting arm of Congress, 
the Congressional Budget Office, miraculously discovered a revenue 
windfall where they reestimated, again, the rate of growth in the 
economy and the amount of taxes taken from the economy and, in the 
process, produced a revenue windfall that lowered the deficit by $225 
billion. That one assumption of stronger economic growth provides 68 
percent of the deficit reduction required to balance the budget.
  The budget negotiators assumed a lower inflation rate which reduced 
the deficit by $15 billion, another 5 percent of the required deficit 
reduction. They assumed by balancing the budget, the economy will be 
stronger still, and we will get a balanced budget dividend with 
stronger economic growth, and they assumed that economic growth would 
provide $77 billion of additional deficit reduction, another 23 
percent. In the final analysis, the deficit reduction in this budget 
can be divided in the following way: 96 cents out of every dollar of 
deficit reduction is simply assumed; 4 cents out of every dollar, $14 
billion out of $330 billion comes from a change in public policy.
  So why is the budget balanced in this budget? It is balanced because 
the negotiators assumed that it is balanced. Only $14 billion of the 
$330 billion of required deficit reduction comes from policy change.
  What is very much real about the budget is discretionary spending. 
When the Speaker said this budget is the fulfillment of the Contract 
With America, I think if you go back and look at the 1996 budget that 
was passed by Congress, which embodied the Contract With America, you 
will see that over the 5 years of this current budget negotiation it 
spent $216 billion less on social spending than the budget deal that 
has just been completed. The budget we adopted last year spent $193 
billion less on nondefense discretionary spending. The President's 
budget from last year spent $79 billion less on nondefense 
discretionary spending. And finally, if you take the President's budget 
as scored by CBO, with the across-the-board cuts in the last year, this 
budget agreement actually gives the President $5 billion more than he 
asked for in his own budget with the CBO adjustment and the automatic 
cut mechanism in the end.
  In addition to this massive increase in discretionary spending, the 
budget entails a whole group of entitlements. It expands Medicaid in 
two different ways; it overturns welfare reform from last year and 
reinstitutes welfare benefits for illegal immigrants; it expands food 
stamps and, together with mandatory and entitlement programs, it spends 
roughly another $35 billion.

  Then the major savings claimed in the budget is in Medicare, but 
virtually all these savings come from lowering reimbursement to doctors 
and hospitals, because what the negotiators did is they not only picked 
the number of $115 billion, but they committed to the Clinton policy. 
The only problem is that on a dozen occasions in the last 30 years, we 
have assumed a lower reimbursement rate for doctors and hospitals under 
Medicare, and each and every time this policy has not worked because 
the doctors and the hospitals have found ways around it. But we take 
every penny of that $115 billion of claimed Medicare savings and spend 
it on new entitlements and on new social programs.
  Finally, we come to the tax cut which is funded by odds-and-ends, 
dogs-and-cats savings and by spectrum auction. This is selling the 
right to use spectrum. I remind my colleagues that the Appropriations 
Committee last year assumed $2.9 billion of spectrum broadcast auction 
to fund spending. When that auction actually occurred, it raised only 
$13.6 million, or, in other words, we got $1 for every $200 of spectrum 
auction we assumed last year.
  But let me talk about the tax cut. We, in the budget, have an $85 
billion net tax cut. Any tax cut beyond that we have to raise other 
taxes to pay for it. About $5 billion of that is offset by the lower 
CPI assumed in the budget

[[Page S3982]]

and its impact on taxes, and that gets the net real tax cut down to 
about $80 billion. We commit in the budget to fund the President's 
education priorities which takes another $35 billion, though it is 
unclear at this point whether this was a 5-year commitment or 10 years. 
So we are now down to a $45 billion net tax cut.
  I remind my colleagues that the full Republican tax cut cost $188 
billion. In fact, a $500 tax credit per child cost $105 billion over 5 
years. Capital gains, the way it is scored by the budgeting arm of the 
Congress, cost $33 billion. Our death and estate tax relief cost $18 
billion, and our IRA expansion cost $32 billion. The point is, if you 
read the newspaper, it is as if we got an agreement to cut capital 
gains taxes, to reform death taxes and give a $500 tax credit. The 
reality is the net tax cut available will not pay for a third of that 
policy. What we are going to end up with, invariably, is a $500 tax 
credit but excluding middle-income Americans from the tax cut. I don't 
know how you are going to end up fitting the rest of these items into 
that limited space.
  Finally, let me conclude by saying, well, what about the question, Is 
this deal worse than nothing? Let me give you two reasons why I believe 
it is and why I am going to oppose it.
  No. 1, it assumes a balanced budget and, in the process, convinces 
America that we have really done something about the deficit when we 
have not. I am very concerned that that is going to take pressure off 
Congress to control spending. We are seeing in this budget agreement 
itself the largest increase in social spending since the 1960's, and I 
am afraid that by convincing people we have balanced the budget when, 
in fact, we just assume it is balanced, that that is going to open the 
floodgates for spending.
  No. 2, and of at least equal importance, in Medicare, we reduce 
reimbursement for doctors and hospitals. We take the fastest-growing 
part of Medicare, home health care, and transfer it out of the Medicare 
trust fund, something we Republicans denounced as a fraud only 2 or 3 
months ago. By doing these things, we now claim that we have saved 
Medicare for a decade.
  I am concerned that this is going to trample on the emerging 
bipartisan consensus to do something to save Medicare. I am concerned 
that we are going to let 2 or 3 years pass where we believe we have 
done something about Medicare, or at least claim we have, when, in 
fact, Medicare, when you look at the payment for hospitals and doctors, 
will be a $1.6 trillion drain on the Federal budget in the next 10 
years. I am afraid that by claiming we have done things we have not 
done--balance the budget, save Medicare--that we are going to undercut 
those real efforts. Those are efforts that desperately need to be 
undertaken.

  Obviously, many people will have many different views on this 
subject. I am a firm believer in the Jefferson adage that good people 
with the same facts are going to disagree. But I wanted my colleagues 
to understand that I am not here this morning speaking with passion 
about some priority I have that is not contained in the budget. What I 
am trying to do is to, basically, get people to understand that we 
assume the budget is balanced, we don't institute any policy to balance 
it; that we are granting a massive increase in spending for social 
programs that someday will have to be paid for; we are creating new 
entitlement benefits; and we are continuing to talk as if we are going 
to have this massive tax cut when we have only $45 billion net 
available to pay for it. Trying to get $188 billion of tax cuts into a 
$45 billion allowable space is going to be very, very difficult and, in 
the end, a lot of people are going to be disappointed.
  Let me, again, thank the distinguished chairman of the Appropriations 
Committee for giving me an opportunity to speak for 10 minutes as in 
morning business. I yield the floor.
  Mr. STEVENS addressed the Chair.
  The PRESIDING OFFICER. The Senator from Alaska.
  Mr. STEVENS. Mr. President, Senator Durbin has asked for time to 
speak on the budget. I ask unanimous consent that he be permitted to 
speak for 10 minutes as in morning business.
  The PRESIDING OFFICER. Without objection, it is so ordered. The 
Senator from Illinois is recognized.
  Mr. DURBIN. Thank you, Mr. President. I thank Chairman Stevens for 
yielding this time in morning business.

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