[Congressional Record Volume 143, Number 96 (Wednesday, July 9, 1997)]
[Extensions of Remarks]
[Pages E1379-E1380]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               THE BUDGET

                                 ______
                                 

                          HON. LEE H. HAMILTON

                               of indiana

                    in the house of representatives

                        Wednesday, July 9, 1997

  Mr. HAMILTON. Mr. Speaker, I would like to insert my Washington 
Report for Wednesday, July 2, 1997 into the Congressional Record.

                           Major Budget Votes

       Last week the House passed two major budget bills--one to 
     reduce spending in order to balance the budget and the other 
     to provide tax relief for Americans. Many hurdles lie ahead 
     for both, as differences with the Senate and President need 
     to be worked out. But the House action at least moves the 
     process forward as we continue our effort to finally balance 
     the federal budget.


                               Background

       The overall package was based on the May 2 budget agreement 
     between President Clinton and congressional leaders which 
     outlined a plan to balance the budget over the next five 
     years as well as provide some tax cuts.
       Balancing the budget would be a major accomplishment. For 
     the past several years, deficit politics have dominated the 
     congressional agenda. Finally balancing the budget would show 
     that the federal government can get its fiscal house in order 
     and it would help the economy in a variety of ways: lowering 
     interest rates and the trade deficit, while boosting savings 
     and economic growth.
       Major progress has already been made in reducing the budget 
     deficit. The 1993 deficit reduction package, which I 
     supported, has helped reduce it from a record $290 billion in 
     1992 to around $60 billion this year. The May budget 
     agreement would finish the task and produce a balanced budget 
     by 2002. Yet that agreement was only a broad outline. The 
     specifics were worked out by various congressional 
     committees, and that is what we voted on last week.


                         Budget Reconciliation

       Most of the savings needed to balance the budget would come 
     from the budget reconciliation bill making changes in various 
     entitlement programs. Changes in Medicare represent the bulk 
     of the bill's savings--$115 billion out of a total of $140 
     billion. The Medicare savings come largely from reducing 
     payments to hospitals and other health providers and from 
     opening the health insurance program to greater competition. 
     Other changes in the House bill deal with Medicaid payments 
     to hospitals and federal retirement plans.
       With my support, this bill passed by a solid margin. It is 
     by no means a perfect package. But I strongly believe in 
     balancing the budget--particularly through spending 
     reductions rather than tax increases--and this was the main 
     bill for achieving those savings. The changes were much more 
     modest than those proposed in recent years; the Medicare 
     savings were well below half of the $270 billion in cutbacks 
     Speaker Gingrich tried to get through last Congress. The 
     Medicare savings are projected to keep the program solvent 
     over the next 10 years, and they have been supported by key 
     older persons' groups.


                            Majority Tax Cut

       The second major vote last week was on the Republican tax 
     cut bill. It contained $133 billion in tax cuts over five 
     years, offset by $48 billion in tax increases, for a net tax 
     cut of $85 billion. It would provide a $500 per child tax 
     credit, give new tax credits for education costs, expand 
     penalty-free withdrawals from IRAs, reduce capital gains 
     taxes, and gradually raise to $1 million the amount exempt 
     from federal estate taxes. To increase revenues it would 
     expand existing taxes on airline tickets.
       Although this bill had several good features, I opposed it. 
     Its benefits were tilted far too much to the wealthy. 
     According to Treasury Department estimates, the wealthiest 
     20% of Americans would get almost 70% of the tax cuts when 
     fully phased in. In addition, the costs of the tax cuts 
     increase sharply in the outyears, seriously undermining our 
     effort to have a balanced budget. The various tax cuts were 
     designed to have modest costs between now and 2002--$85 
     billion--but they would double over the next five years and 
     then explode to an additional $650-700 billion over the next 
     10 years. That means we could balance the budget in the year 
     2002 but then run large deficits after that. We need to 
     balance the budget and keep it balanced.


                            Minority Tax Cut

       The alternative tax cut plan proposed by the Democrats 
     would provide greater tax breaks for education. It would 
     retain the $500 per child tax credit, but limit it to 
     families making less than $75,000, rather than $110,000 under 
     the Majority bill. It also targets the capital gains and 
     estate tax cuts to small businesses, family farms, and 
     homeowners. Most of the tax cuts in this plan would 
     benefit middle-income Americans.
       This was the toughest vote of the three for me, but I 
     supported this plan. Unfortunately it was defeated and the 
     other version passed. My preference is not to have a tax cut 
     at this time: It is quite possible that all of the spending 
     cuts won't materialize to give us a balanced budget, and 
     balancing the budget is a higher priority than cutting taxes. 
     We shouldn't be paying for a tax cut by borrowing more money. 
     However, the debate has moved beyond that, and the question 
     before us was what kind of tax cuts are preferable.

[[Page E1380]]

       The Democratic package was the better of the two. It was 
     much less expensive in the outyears, better targeted to the 
     middle class, and it provided significant tax relief for 
     families and their education expenses. Education is a key 
     investment in our young people's future, but it currently is 
     one of the least favored areas in the tax code.
       so overall I voted for this tax cut package in order to 
     move the process along, with the hope of improving it as it 
     moves through the next stages of the legislative process. 
     Improvements in the bill can yet be made in a joint House-
     Senate conference committee by targeting more of the cuts to 
     moderate-income families; reducing its outyear costs; 
     simplifying it so we don't greatly increase the complexity of 
     the tax code; and providing that if for some reason we won't 
     be reaching a balanced budget by 2002, then some of the tax 
     cuts should be trimmed back.
       In short, I support a balanced budget plan. Although tax 
     cuts should not be our top priority, the issue today is not 
     whether to cut taxes, but who gets the tax cuts. My view is 
     that the Republican bill disproportionately benefits the 
     rich. We need to better target tax cuts to moderate-income 
     families and capital gains and estate tax reductions to small 
     businesses and family farms. I have been most uneasy about 
     the pattern of this and the previous Congress to cut programs 
     for the poor and provide tax cuts for the rich. That is the 
     wrong legacy to leave, and the wrong way to balance the 
     budget.

     

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