[Congressional Record Volume 143, Number 151 (Monday, November 3, 1997)]
[Senate]
[Pages S11599-S11601]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




 SENATE RESOLUTION 142--REGARDING THE TREATMENT OF ANY FUTURE UNIFIED 
                            BUDGET SURPLUSES

  Mr. MOYNIHAN submitted the following resolution; which was referred 
to the Committee on Finance:

                              S. Res. 142

       Whereas the current economic expansion is now in its 
     seventh year and shows no signs of ending;
       Whereas the unemployment rate is below 5 percent for the 
     first time in 24 years;
       Whereas the current official inflation rate, which may be 
     overstated, is about 2 percent;
       Whereas the deficit has been reduced from $290,000,000,000 
     in fiscal year 1992 to $23,000,000,000 in fiscal year 1997, 
     or just three-tenths of 1 percent of the Gross Domestic 
     Product (GDP);
       Whereas the Congressional Budget Office projects that, 
     under present law, the unified budget will have a surplus of 
     $86,000,000,000 in 2007;
       Whereas the Congressional Budget Office also projects that, 
     under present law, the debt held by the public will fall from 
     about 50 percent of GDP this year to about 30 percent by 
     2007;
       Whereas this extraordinary combination of good budget and 
     economic news is largely

[[Page S11600]]

     the result of budget policies included in the Omnibus Budget 
     and Reconciliation Act of 1993;
       Whereas the budget is not yet in surplus;
       Whereas the Congressional Budget Office also projects that 
     the deficit is likely to reappear after 2007, and that the 
     debt held by the public as a percentage of GDP is also likely 
     to increase as the baby boom generation begins to retire;
       Whereas, without the on-budget surpluses of the social 
     security trust funds, the Congressional Budget Office still 
     projects annual deficits of about $100,000,000,000 even after 
     the budget is ``balanced'' in 2002; and
       Whereas projected unified budget surpluses in the short-run 
     would rapidly disappear if the current expansion ends, and 
     the economy would enter a recession: Now, therefore, be it
       Resolved, That is the sense of the Senate that--
       (1) any unified budget surpluses that might arise in the 
     current expansion should be used to reduce the Federal debt 
     held by the public; and
       (2) to achieve this goal during this economic expansion 
     that there be no net tax cut or new spending that is not 
     offset by reductions in spending on other programs or tax 
     increases.

  Mr. MOYNIHAN. Mr. President, there is now clear evidence that at 
least for the short run, both the economy and the budget have attained 
to a singular degree of stability.
  Consider the following facts:
  The current economic expansion is now in its seventh year and shows 
no sign of ending; the unemployment rate is below 5 percent for the 
first time in 24 years; the current official inflation rate, which may 
be--and almost certainly is--overstated, is about 2 percent; the 
deficit has been reduced from $290 billion in fiscal year 1992 to $23 
billion in fiscal year 1997, or just three-tenths of 1 percent of our 
gross domestic product; the Congressional Budget Office projects that, 
under present law, the unified budget will have a surplus of $86 
billion in the year 2007. I repeat that unfamiliar phrase--a surplus of 
$86 billion. The Congressional Budget Office also projects that, under 
present law, the debt held by the public will fall from about 50 
percent of gross domestic product this year to about 30 percent by 
2007.
  May I suggest to my colleagues that, for the first time in 20 years 
or more, such good economic news is upon us and was previously thought 
unattainable.
  Last week, at a Finance Committee hearing on his confirmation to be 
Treasury Assistant Secretary of Economic Policy, David Wilcox quoted a 
favorite economics professor of his at the Massachusetts Institute of 
Technology--and I have the honor to say, parenthetically, a long and 
good friend of mine--the distinguished Nobel laureate Robert Solow. As 
Wilcox recalls, Professor Solow said something as follows.

       . . . the most important thing economists have to 
     communicate to the rest of the world is how effectively 
     markets work. The most important thing that economists have 
     to tell each other is the important ways in which markets 
     sometimes don't work exactly right.

  One need not engage in a long discourse on the fundamental 
differences between Keynesian and classical macroeconomic theories, to 
realize that during the last recession and current expansion, the 
deficit has changed as economists would expect, or in any event would 
hope.
  Between fiscal 1989 and fiscal 1991, as the economy entered a 
recession, gross domestic product in nominal--which is to say money 
terms--grew at an average rate of 4.7 percent. Revenues to the Federal 
Government, however, only grew at an average rate of 3.2 percent, while 
outlays grew by 7.6 percent. Now this imbalance between the growth in 
revenues and outlays--which helped moderate the recession, as we 
learned through painful experience in the middle of the century--would 
ordinarily be welcomed were it not for the fact that, in 1989, the 
Federal Government's deficit was already 3.8 percent of GDP. As it 
were, the deficit reached 5.5 percent of GDP in 1991 and 1992.
  For the next 2 years, the economy slowly recovered from the 
recession. And then, in 1993, something extraordinary happened; we 
passed what I have since acknowledged to be the largest tax increase in 
history. We also limited the growth in spending.
  The results--quite contrary to those predicted by many who opposed 
the measure--are truly remarkable. Between 1993 and 1997, GDP increased 
at an average annual rate of 5.3 percent. Mr. President, that doubles 
in something like 13 or 14 years. To double your GDP every 14 years, 
that would quadruple in a generation, which is almost unimaginable. 
Real gross domestic product--that is adjusting for inflation--increased 
at an average annual rate of about 3.5 percent, compared to almost no 
real growth for the period from 1989 to 1991. With rapid, 
noninflationary growth, revenues increased at an average annual rate of 
8.2 percent, while outlays grew at a modest 3.3 percent annual rate.
  For the fiscal year just ended, the comparison is even more striking. 
The economy grew by 5.9 percent, while revenues grew by 8.7 percent and 
outlays by a mere 2.7 percent. We have had no such experience in 
postwar periods. I don't know if we have ever had such an experience.
  Mr. President, may I suggest that while the revenues and outlays grew 
as one would expect during the various phases of a business cycle, it 
was only after a very great deal of effort, and not an inconsiderable 
amount of pain that we have brought the Federal budget into near 
balance--a deficit of $22.6 billion, a rather insubstantial three-
tenths of 1 percent of GDP.
  But, sir, in the closing days of this first session of the 105th 
Congress, we can risk it all. Perhaps we should follow the admonition 
that Hippocrates bequeathed to the medical profession, which somehow 
translated it from Greek into Latin, in the passage of the Hippocratic 
oath: ``primum non nocere''--``first do no harm.''

  Tax legislation for this session of the 105th Congress is and should 
be concluded.
  Mr. President, my remarks till now have focused on the short run and 
pleasant and unparalleled economic and budget circumstances in which we 
now find ourselves. But before we devote too much energy to tax cuts in 
the next session of the 105th Congress, we should be mindful of the 
following less-than-exuberant facts.
  First, the budget is not yet in surplus.
  Second, the Congressional Budget Office also projects that the 
deficit is likely to reappear after the year 2007 and that the debt 
held by the public as a percentage of gross domestic product is likely 
to increase as the baby boom generation begins to retire.
  Third, without the on-budget surpluses of the Social Security trust 
funds, the Congressional Budget Office still projects annual deficits 
of about $100 billion even after the budget is balanced in the year 
2002.
  I make the point, Mr. President, as Senator Dole remarked yesterday 
on ``Meet The Press,'' in 1983 we made major changes in the Social 
Security System which have made it solvent and in surplus every year 
since then and for many years still to come. But that surplus is not 
saved in any conventional sense of the word; it is expended on other 
purposes that have nothing to do with social insurance, a matter which 
I know troubled Senator Dole when he was still our most revered 
colleague and majority leader.
  And, lastly, projected unified budget surpluses in the short run 
would rapidly disappear if the current expansion ends and the economy 
were to enter a recession.
  In that setting, Mr. President, I offer a resolution which I hope to 
call up at some point in the days remaining in the first session of the 
105th Congress to express the sense of the Senate regarding the 
treatment of any future unified budget surpluses.
  Mr. CRAIG addressed the Chair.
  The PRESIDING OFFICER. The Senator from Idaho.
  Mr. CRAIG. Mr. President, I would like to associate myself with the 
remarks of the Senator from New York, who, I think, has spoken very 
clearly to what happens in large part when the Congress of the United 
States restrains spending. While I recognize that there were certainly 
added revenues by a substantially large tax increase, if the Congress 
following that had followed the practices of past Congresss, and that 
is of course, a promise to reduce spending for every so many dollars of 
increase--and, I think I had heard that promise over my years in the 
House and in the Senate--I doubt that we would be experiencing the kind 
of economic vitality that we are currently and that the Senator spoke 
to. This Congress adhered to very real spending restraints, and as a 
result of that the markets recognized that we were not

[[Page S11601]]

going to spend beyond our limits and, in fact, we would actually see a 
reduction in deficit of the kind the Senator spoke to. There is no 
question that with that kind of restraint here, the markets have 
responded and our citizens and our work force are now experiencing the 
kind of economic growth of which we are all extremely proud.

                          ____________________