[Congressional Record Volume 143, Number 66 (Monday, May 19, 1997)]
[Senate]
[Pages S4688-S4690]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         DECEPTIVE BUDGET DEAL

 Mr. KYL. Mr. President, I suggest that before we begin 
thinking about patting ourselves on the back for the budget agreement 
that was finalized last week, we consider the hard work ahead. The 
agreement is merely a broad outline--a blueprint--for the spending and 
tax bills yet to come. We still need to consider how it is supposed to 
be implemented before claiming any sort of victory.
  We need to consider, for example, whether it will actually lead to a 
balanced budget by the year 2002. Is it good for families? Will it 
ensure that the Medicare Program is protected for today's generation of 
retirees and for our children and grandchildren? Will it help the 
economy produce the jobs needed for those trying to get off welfare, or 
those entering the work force for the first time? Will it help more 
young people get a college education? Will it provide the resources 
needed to safeguard our country from immediate and future threats from 
abroad?
  Mr. President, as the broad outline of the budget agreement with the 
White House has been filtering out over the last 2 weeks, I could not 
help but think of the budget deal that was brokered by President Bush 
and congressional Democrats 7 years ago.
  Here is what President Bush said when he announced that agreement in 
a broadcast on October 2, 1990:

       It is the biggest deficit-reduction agreement ever; half a 
     trillion dollars. It's the toughest deficit-reduction package 
     ever, with new enforcement rules to make sure that what we 
     fix now stays fixed. And it has the largest spending 
     savings ever, more than $300 billion.

  Of course, the agreement produced no such thing. Looking back, it 
produced bigger deficits, not smaller deficits--221 billion dollars' 
worth of red ink in 1990, rising to $290 billion in 1993. Federal 
spending increased from $1.2 to $1.4 trillion--up nearly 17 percent in 
just 3 years. So the mere fact that there is an agreement with the 
President is not reason enough to believe that the problem has been 
solved. As Gen. George S. Patton once said, ``if everybody is thinking 
alike, then somebody isn't thinking.'' We need to look objectively at 
the details, and whether the plan is reflective of values that our 
constituents sent us here to uphold.
  Right now, people are not sure. A CNN/USA Today/Gallup Poll released 
on May 8 indicated that an overwhelming majority of Americans--roughly 
8 in 10--do not believe the deal will actually result in a balanced 
budget by 2002. Obviously, we need to take a careful look at what is 
being proposed here before deciding whether or not to support it.
  Mr. President, let me quote some of the words President Clinton used 
on May 2 when he announced the latest budget agreement. I think they 
will show why people have reason to be skeptical. While suggesting that 
``it will be the first balanced budget in three decades,'' the 
President went on to note that it would ``continue to increase our 
investments,'' ``expand coverage,'' ``restore cuts,'' ``extend new 
benefits,'' and ``increase'' spending, while ``moderating excessive 
cuts.'' My friends, we cannot balance the budget by increasing spending 
and funding a whole host of new programs and benefits. Let us be honest 
about that. If it sounds too good to be true, it probably is.
  As I recall, the goal in 1990, as it was again in 1997, was to devise 
a plan to balance the budget, while providing long-term Federal 
spending constraints and incentives for economic growth. I opposed the 
1990 agreement, believing it was seriously flawed on all those counts, 
and I see similar problems looming in the latest agreement.
  Let me focus first on the issue of taxes. The deal with the Clinton 
White House is different from the 1990 plan in that it includes some 
very modest tax cuts. But because the amount of tax reductions 
President Clinton would agree to is so small--less than 2 percent of 
the revenue that the Federal Government expects to raise over the next 
5 years--it remains to be seen whether there is any tax relief here 
worthy of the name.
  I know that some might ask why we even need a tax cut when the 
economy continues to grow at a relatively healthy clip. There are two 
reasons. First, think of families. A $500-per-child tax credit can make 
a world of difference to a mom and dad sitting around the kitchen table 
trying to find a way to pay for their daughter's education, to pay for 
summer camp or braces for the kids. What single mom could not use a 
$500-per-child credit to help make ends meet?
  Yes, the Federal Government could keep the money and try to provide 
some kind of aid to these families. But if families could keep more of 
their hard-earned money to do for themselves, we probably would not 
need government to do so many things. It seems to me that we ought to 
put our trust in families to do what is right by their own children. 
And unfortunately, it is not clear we can accommodate the full $500-
per-child credit under this plan.
  What about tax relief for small businesses, including the new 
businesses started by women and minorities? After all, that is where 
most of the new jobs around the country are created. Provide a 
meaningful tax cut, and small businesses and family farms could expand, 
hire new people, pay better wages, and do the things necessary to 
become more competitive.

  Alternatively, Government can keep the taxes. But remember, it then 
turns around and provides a whole host of subsidies to businesses 
because they do not have the resources to do for themselves.
  It is an endless cycle. When people are not left with enough to care 
for themselves, the Government tries to do more. When it does more, it 
taxes more, and people are left with even less. It has to stop 
somewhere. Americans need some relief.
  Mr. President, it is also important to understand how important a 
healthy and growing economy is to balancing the budget. We just 
received word from the Congressional Budget Office [CBO] that this 
year's deficit is expected to decline to $70 billion. That is $55 
billion less than President Clinton's budget assumed as recently as 
February. And it is largely the result of two things:

[[Page S4689]]

 robust economic growth during the last few months, and Congress 
finally beginning to restrain spending growth during the last 2\1/2\ 
years.
  Limiting spending just takes some discipline, but how can tax policy 
help the economy to grow and prosper? It may come as a surprise to 
some, but lower tax rates not only help make people better off, but can 
produce more tax revenue for the Treasury as well. Just think what has 
happened during the last few months. The growing economy helped reduce 
the deficit $55 billion just since the President's February 
projections. CBO estimates that economic growth will produce an extra 
$45 billion a year for the next few years. So it is important to 
sustain that growth into the future.
  The economy grows like any prudent business enterprise grows. It is 
like a weekend sale at the Target store. When prices are slashed, 
people buy more goods, and the increased volume of sales more than 
makes up for the price reduction. The converse is also true--higher 
prices cause people to shop elsewhere. Higher taxes cause people to 
shelter income, or make less, to avoid paying more taxes.

  Mr. President, based upon what we know about the current agreement, 
it does not seem to me that we will be able to achieve either of these 
goals: providing families and small businesses with tax relief, or 
keeping the economy growing at a healthy rate. But what about spending? 
Does it do anything to constrain Federal spending--since it was 
excessive spending that caused the 1990 budget agreement to fail?
  Well, here is how domestic spending totes up compared to the levels 
Congress approved a year ago in the fiscal year 1997 budget resolution. 
These are figures developed by our colleague, Senator Phil Gramm, a 
member of the Budget Committee. And I will note that the Budget 
Committee will not begin marking up the budget resolution until this 
afternoon, so these numbers may change. But they suggest an alarming 
trend in any event.
  According to Senator Gramm's figures, domestic spending in this deal 
will amount to $193 billion more over 5 years than we were willing to 
approve just 1 year ago. It is $79 billion more than President Clinton 
himself asked for just a year ago, and $5 billion more than he asked 
for in February.
  Mr. President, the budget agreement with the White House would 
provide an additional $16 billion for new Government-provided health 
insurance, and another $18 billion to repeal parts of welfare reform 
and expand the Food Stamp Program. It puts more money into education, 
but because of the way this is done, the extra resources are likely to 
be eaten up by tuition increases. Or they will simply help those who 
had the means to go to college anyway.
  Medicare savings in the plan come largely from reductions in provider 
reimbursements, which either will diminish the quality of care provided 
to older Americans or drive more doctors and hospitals out of the 
Medicare Program altogether, leaving seniors with limited health-care 
choices. Medicare solvency occurs as a result of shifting the costs of 
home health care from part A to part B--a gimmick that we roundly 
denounced when the President proposed it before.
  The Medicare savings are enough to forestall the bankruptcy of the 
program for a few years, but they are not enough to ensure that 
Medicare remains safe and sound to take care of Americans in the baby-
boom generation who will begin retiring within the next decade. The 
Medicare features of this agreement certainly will not protect the 
system for young people who are just entering the work force today.
  Defense spending in this agreement is also insufficient to protect 
future generations. We have cashed in on the much-heralded peace 
dividend so many times that our military service chiefs have been 
warning about increased risks due to budget cuts.
  I know that many believe this is a time when the United States can 
cut back its defense budget. But history teaches us the opposite. We 
have always enjoyed a period of calm before a storm. With the 
proliferation of weapons of mass destruction that is occurring today, 
and the emergence of movements hostile to the West, we do not have the 
luxury of waiting until after we have been threatened to invest in our 
military. We must remain ready and fully capable, both to deter and to 
defeat any aggression against American citizens.
  Mr. President, it is instructive that the first piece of legislation 
on the Senate floor after this deal was struck was the supplemental 
appropriations bill, which will add $6.6 billion to the deficit over 
the next few years. In other words, we have already added to the 
deficit before the ink on the budget agreement is even dry.

  We had the chance to change that with the amendment that Senator 
Gramm offered--an amendment which I supported. But it did not pass, and 
so for all practical purposes the budget agreement will have to be 
modified to account for this extra spending. At least that part of it 
will need to be fixed.
  I think we need to learn a lot more about the agreement this week 
before signing off on it. Unless parts of it can be modified down the 
line as the House and Senate begin writing the tax and spending bills 
to implement it, I believe it will not lead to balance. It will 
certainly not lead to balance after the $6.6 billion that was added to 
the deficit by the supplemental spending bill.
  Mr. President, it may even usher in a bigger, more powerful Federal 
Government, as happened in 1990. And that is not what many of us came 
here to do.
  We can compromise on details without compromising our principles. We 
should never be afraid to take legitimate differences to the American 
people when we are unable to resolve them here. I ask that a column by 
Senator Phil Gramm, which includes some additional information about 
the budget agreement, be printed in the Record.
  The column follows:

                [From the Washington Post, May 9, 1997]

                         Deceptive Budget Deal

                            (By Phil Gramm)

       After two years of partisan confrontation on the budget, 
     the president and Congress have reached a bipartisan deal 
     that appears to be all things to all people. The president 
     gets more social spending, Republicans get a tax cut, and the 
     American people get a balanced budget. If it all seems too 
     good to be true, that's because it is.
       Because the budgeting arms of both the administration and 
     Congress assumed--before the budget debate even started--that 
     the strong economy we now enjoy would produce sustained 
     growth beyond the year 2002, the amount of deficit reduction 
     required to achieve a balanced budget immediately declined 
     from $642 billion over the next five years to $330 billion. 
     Then it got even better. At the very moment of impasse in the 
     budget negotiations, the Congressional Budget Office 
     discovered that even its previous estimates of an improving 
     economy understated the revenue windfall expected in the next 
     five years and predicted that windfall alone would lower the 
     deficit another $225 billion. Negotiators then rolled up 
     their sleeves and assumed $15 billion of additional savings 
     from lower consumer prices and $77 billion in additional 
     savings from the even stronger economic growth that would be 
     generated by balancing the budget.
       The net result is that before a single change in public 
     policy became part of the budget compromise, deficits of $317 
     billion--96 percent of the total deficit--had simply been 
     assumed away. Only $14 billion, or 4 percent of deficit 
     reduction in the budget compromise, comes from actually 
     changing policy.
       The most distinctive feature of the budget compromise is 
     the size of domestic discretionary spending increases. While 
     it is fashionable for Republicans to claim that this budget 
     deal achieves the goals of the Contract With America, in 
     reality it spends $216 billion more on domestic discretionary 
     programs than the contract contained. The compromise 
     increases domestic discretionary spending by $193 billion 
     above the 1997 budget resolution and by $79 billion above 
     President Clinton's actual budget request for 1997. In fact, 
     if you look at the president's 1998 budget as scored by the 
     Congressional Budget Office, the budget deal actually gives 
     the president $5 billion more in discretionary spending than 
     his own budget would have provided.
       The most permanent feature of the bipartisan budget 
     compromise is an increase in domestic spending on social 
     programs, which the president has rightly compared to the 
     explosion of social spending that occurred in the 1960's.
       In addition to these increases in discretionary spending, 
     the budget compromise contains new entitlement benefits in 
     Medicare, Medicaid, food stamps and SSI, and it overturns 
     part of the one major reform of the 104th Congress: It 
     reestablishes welfare benefits for legal aliens.
       The budget compromise proudly trumpets $115 billion of 
     savings in medicare, but by committing to accept the 
     president's plan to simply cut reimbursement for doctors and 
     hospitals, Congress buys into a policy that has been 
     implemented over and over again in the past 30 years without 
     achieving substantial savings. Like other forms of price 
     controls, reducing reimbursement for physicians

[[Page S4690]]

     and hospitals has historically been circumvented as the 
     recipients have invented ways to work around the limitations. 
     In addition, the compromise requires that the fastest growing 
     part of Medicare, home health care, be taken out of the 
     Medicare trust fund and financed from general revenues.
       Perhaps the most perverse aspect of the compromise is that 
     this budget will trample an emerging bipartisan commitment to 
     real Medicare reform. This budget agreement virtually 
     guarantees that five years from now Medicare will be in much 
     worse shape than it is today. Moreover, virtually every penny 
     of the $115 billion claimed from Medicare savings will be 
     spent on increases in social programs and new entitlement 
     benefits.
       That brings us to my party's favorite part of the deal, the 
     much-discussed $85 billion tax cut. The cut is largely funded 
     by odds-and-ends measures, the largest of which is at least 
     $25 billion of revenues assumed to be derived from auctioning 
     off broadcast and non-broadcast spectrum--the right to use 
     public airways for everything from broadcasting the 6 o'clock 
     news to setting up a cellular phone system.
       Last year Congress assumed a limited spectrum auction of 
     $2.9 billion as an offset to new spending. When actually 
     auctioned, the spectrum brought in just $13.6 million, or 
     roughly $1 for every $200 that Congress had assumed would be 
     raised. Given our experience of last year, it is highly 
     unlikely that anything like $25 billion will be raised from 
     spectrum auction unless television stations are forced to buy 
     spectrum to broadcast their new digital signals, something 
     the Federal Communication Commission, the White House and 
     Congress have opposed.
       The budget agreement claims a net reduction in taxes of $85 
     billion. Some $5 billion of that tax cut will be lost to the 
     public because the assumed reductions in the consumer price 
     index will raise income taxes by $5 billion. Of the remaining 
     $80 billion, the Clinton administration's education tax 
     credit will absorb roughly $35 billion, leaving Republicans 
     some $45 billion in net tax cuts to fund their tax-cut 
     priorities.
       Unfortunately, the full Republican tax package costs $188 
     billion. Republicans on the House and Senate tax-writing 
     committees now will be forced to try to stretch a net tax cut 
     of $45 billion to cover a $500-per-child tax credit that 
     costs $105 billion, capital gains relief that costs $32 
     billion, estate and death tax relief that cost $18 billion 
     and individual retirement account expansion that costs $32 
     billion.
       Even if $50 billion of offsetting tax increases can be 
     found, it is a certainty that the individual tax credit will 
     be dramatically curtailed, probably by ensuring that many 
     middle- and upper-middle-income working families don't get 
     any child tax credit. Capital gains and estate tax relief 
     will be similarly truncated. In the end, despite all the talk 
     of achieving a major tax cut, it is hard to see a substantial 
     impact in a $7 trillion economy being created by a $45 
     billion tax cut.
       Obviously, in a budget deal such as this, the logical 
     question is: ``Is it better than nothing?'' And, as is 
     usually the case, beauty is in the eye of the beholder. But 
     in the final analysis, two factors ultimately make this 
     budget agreement worse than no agreement. The first is the 
     false perception it creates that the deficit problem has been 
     fixed. This notion already has given rise to the largest 
     increase in social spending since the '60s in this budget 
     agreement and is likely to further open the floodgates as 
     Congress convinces itself and the American public that the 
     deficit is behind us. Second, by claiming to have solved the 
     Medicare problem for 10 years, we will take the pressure off 
     the president and Congress to reform Medicare even though the 
     trust fund is careening toward bankruptcy, and Medicare will 
     produce a $1.6 trillion drain on the federal Treasury over 
     the next 10 years.
       Historically, America has looked to its two great political 
     parties to contest over principles and new ideas so that the 
     highest principles and best ideas could become the governing 
     consensus for the country. But divided government often 
     produces massive pressure for bipartisanship, and the current 
     budget deal is an example of how bipartisanship sometimes can 
     manifest itself not in compromise policy but in a decision to 
     join together to mislead the public. The opposite of gridlock 
     is not necessarily efficiency, it is sometimes 
     deception.

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