[Congressional Record Volume 143, Number 157 (Sunday, November 9, 1997)]
[Extensions of Remarks]
[Page E2284]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


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              BUDGET SURPLUSES BELONG TO WORKING AMERICANS

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                           HON. DAVID DREIER

                             of california

                    in the house of representatives

                       Saturday, November 8, 1997

  Mr. DREIER. Mr. Speaker, by the end of this fiscal year, the Federal 
Government could run its first budget surplus in nearly three decades. 
This is certainly good news. For the past 30 years, deficit spending 
caused interest rates to be higher than they would otherwise have been, 
which in turn suppressed economic growth and reduced the living 
standards of American families. If not managed correctly, however, I am 
concerned that short-term budget surpluses could actually undermine the 
progress that Congress has made in recent years in controlling the 
growth of Government spending and reducing Government interference in 
the economy.
  With Government revenues still growing faster than the rate of 
economic growth, and without the economic and political consequences of 
having to raise taxes or expand the Federal debt to pay for new 
spending, continued efforts to restrain the growth of Government in the 
face of a budget surplus will likely crumble. Already, there is 
pressure to spend unrealized surpluses on Washington-run programs that 
are no accountable for results. That's exactly what happened in the 
late-1960's and 1970's, when inflation-driven growth created a surge in 
tax revenues, which increased the Government's appetite for new 
spending, which in turn led to the deficits of the 1980's and early 
1990's.
  To deal with this potential problem, two of our Republican colleagues 
have proposed setting up trust funds to apply projected budget 
surpluses to debt reduction and tax cuts. These are certainly important 
priorities. According to a recent Gallop poll, 41 percent of Americans 
want Government surpluses to go to reducing the national debt, while 42 
percent prefer tax cuts. But both proposals still require taxpayers to 
send their hard-earned money to a Washington bureaucracy that doesn't 
need it, and the distribution of those funds would be based on 
political incentives rather than economic incentives.
  Today, my colleague from Louisiana Representative William Jefferson, 
and I have introduced the first bipartisan bill which attempts to 
address the concerns about budgetary choices that Congress may make in 
an era of budget surplus. H.R. 2933, the Working Americans Gainful 
Employment [WAGE] Act, creates a permanent mechanism to impose 
consequences on Congress for any effort to spend a Federal surplus. It 
requires the Secretary of the Treasury to reduce the Social Security 
payroll tax rate prior to each calendar year by an amount equal to the 
Federal budget surplus for the fiscal year ending during the preceding 
calendar year. It defines ``federal budget surplus'' as the amount by 
which total Federal revenues exceed total Federal budget outlays--
unified budget. It also stipulates that any reductions in Social 
Security payroll tax rates do not affect revenues that would otherwise 
be deposited into the trust fund.
  The WAGE Act will provide desperately needed relief from a regressive 
tax on employment. Federal payroll taxes, paid in equal parts by 
employers and employees, are currently assessed at a rate of 15.3 
percent of payroll beginning at the first dollar of an employee's 
earnings. These taxes, while necessary to finance Social Security and 
Medicare hospital benefits, impose a tremendous financial burden on 
working Americans, particularly low- and moderate-income workers. 
Counting the employer portion of these taxes, which are indirectly 
borne by employees in the form of lower wages and benefits, 
approximately 75 percent of American workers pay more in Federal 
payroll taxes than in Federal income taxes.
  The WAGE Act will also promote economic growth through tax rate cuts. 
Although the payroll tax rate reductions would not be permanent--unless 
the budget surpluses are permanent--businesses will know in advance 
what the rate will be for the coming year, and will plan investment and 
hiring decisions accordingly. Since payroll taxes paid by employers 
result in reduced employee compensation, any long-term reduction will 
be funneled back into higher wages and additional jobs. A payroll tax 
rate reduction will also encourage more small business start-ups 
because such firms must pay payroll taxes even if a profit is not made.
  Payroll tax rate reductions would come from after-the-fact surpluses, 
not estimated surpluses. The WAGE Act, therefore, would not undermine 
future efforts to allocate projected budget surpluses to other 
important priorities, such as tax reform or entitlement reform. If 
Congress enacts legislation allocating future estimated surplus for 
other priorities, there is likely to be little if any after-the-fact 
surplus to apply to payroll tax rate reductions. This is the key 
incentive that is missing from those proposals which seek to wall off 
future surpluses for reducing taxes of the Federal debt. The WAGE Act 
creates a benchmark by which other proposals to allocate future 
surpluses will be measured. If Congress attempts to apply projected 
surpluses to new spending or to tax cut efforts, those efforts would 
come at the expense of a payroll tax cut for working Americans.
  And for those who are concerned that payroll tax cuts could undermine 
revenues flowing into the Social Security trust fund, the WAGE Act 
explicitly states that deposits into the trust fund will continue to be 
based on the current statutory rate of 12.4 percent of wages. In other 
words, the Social Security and Medicare trust funds will be totally 
unaffected by this legislation.
  Mr. Speaker, dedicating future budget surpluses to Federal payroll 
tax cuts will lock in fiscal restraint while providing dividends to 
low- and middle-income workers who pay the bulk of those taxes. Our 
legislation accomplishes both of these objectives in a bipartisan way, 
and I urge my colleagues to join us as cosponsors of this bill.




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