[Congressional Record Volume 144, Number 141 (Friday, October 9, 1998)]
[Senate]
[Pages S12216-S12217]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE BUDGET SURPLUS

 Mr. KYL. Mr. President, September 30 marked the end of fiscal 
year 1998, and, for the first time since 1969, the news is written in 
black ink, not red. Although the final numbers will not be available 
for a few more weeks, it appears that the federal government will end 
the year with a unified budget surplus of about $70 billion.
  Mr. President, this is truly a dramatic turnaround. After all, it was 
only three years ago that President Clinton submitted a budget plotting 
$200 billion deficits well into the next century. I recall that 
skeptics back then often derided a balanced budget as a risky idea, 
something that could even threaten Social Security. Now, however, the 
skeptics seem to concede what many of us have been saying all along--
that a balanced budget is good for America and good for Social 
Security.
  What does a balanced budget mean for hard-working Americans? For one 
thing, it means lower interest rates. The rate on a 30-year fixed-rate 
mortgage might be as high as 9.5 percent, instead of the current 
average of about 6.6 percent, had Washington continued to rack up 
deficits as large as those experienced in the early 1990s.
  The savings from lower interest rates can be substantial. Just a one 
point drop on a $100,000 mortgage amounts to monthly savings of $67, or 
more than $24,000 over the 30-year term of a mortgage. We are talking 
here, not about just a one point drop, but rates that are two to three 
points lower than just a few years ago.
  Lower interest rates on student loans make a college education more 
affordable for young people, and lower rates on car loans mean that 
hard-working men and women all around the country can stretch their 
budgets a little farther. A balanced budget literally means money in 
people's pockets.
  The first thing we should do at the beginning of this new fiscal year 
is commit that we will maintain a balanced federal budget for the 
American people. We can certainly debate what to do with emerging 
budget surpluses, but there should be no longer be any debate that our 
national policy ought to be to keep the budget in balance.
  Mr. President, now that the budget is finally in balance, we have the 
unique opportunity to consider other issues without the cloud of big 
deficits hanging overhead. For example, we ought to consider whether 
tax rates are at their optimal level, or whether they are too high. By 
definition, a budget surplus means that our government is collecting 
more than is necessary for current operations. People are paying simply 
paying more than they need to.
  Perhaps, instead of keeping tax rates higher than they need to be, we 
ought to reduce income-tax rates across the board--for single people 
and married couples, people with children and those without, young 
people just getting a start and seniors trying to make ends meet on 
fixed incomes. It seems to me that every taxpaying American deserves a 
break.
  We could also reduce taxes on savings and investment--lower the tax 
on capital gains and eliminate the death tax--two things that would 
help keep the already lengthy economic expansion from petering out. If 
we have learned anything from recent experience, it is that a strong 
economy, more than tax-rate increases or modest spending cuts, is what 
it takes to turn budget deficits into surpluses. The booming economy 
has been pouring billions of extra tax dollars into the Treasury. If we 
want that revenue flow to continue, we need to be sure that tax policy 
is conducive to sustained economic growth.
  But the fact is, tax relief is not going to pass this year. President 
Clinton has

[[Page S12217]]

already indicated he will veto the modest tax-relief bill approved by 
the House, and we do not have the votes to reach the two-thirds 
majority that it would take to override a veto. So discussion of tax 
relief is really academic this year.
  Aside from tax relief, the surplus gives us a chance to pay down the 
national debt. Less federal borrowing frees up funds for businesses and 
consumers, and as I indicated earlier in my remarks, that has already 
led to lower interest rates. Further reductions in the debt would 
continue that virtuous cycle. Moreover, it seems to me that we have a 
moral obligation to relieve our children and grandchildren of some of 
the burden of paying off the debt that our generation has accrued.
  Another option is to use the budget surplus for Social Security. We 
all recognize the huge costs that will be associated with getting back 
to what most people thought Social Security was supposed to be--a safe 
and secure account where their contributions could be deposited and 
where they could grow to produce a nest egg for retirement. Applying 
the budget surplus toward those transition costs will make it much 
easier to make the required changes and ensure that Social Security is 
there for our children and grandchildren.
  And of course, the surplus we have in the unified federal budget 
really exists only as a result of the surplus that Social Security 
generates anyway. Take Social Security out of the calculation and the 
federal budget would show not a surplus of $70 billion, but a deficit 
somewhere in the range of $30 billion.
  Mr. President, there is some merit in each of these ideas: tax 
relief, debt repayment, and Social Security reform. The problem is, 
before we can even begin the debate about which of these options is 
best, the budget surplus is being steadily frittered away.
  Earlier this year, Congress, at the Clinton administration's behest, 
dipped into the surplus, spending about $6 billion on a variety of 
programs. Within the next day or two, action is expected on another 
Clinton request to draw down the surplus by at least another $14 
billion--with not a dime going to Social Security. We are talking about 
the President's request to spend billions of dollars of the surplus on 
Bosnia, embassy security, farm aid, and the Year 2000 computer problem.
  Of course, funding requirements for Bosnia and these other needs were 
certainly foreseeable and could have been accounted for when the 
President sent his budget to Congress eight months ago. After all, 
troops have been deployed in Bosnia since 1995, and last year, the 
President extended their deployment there indefinitely. The need to 
beef up embassy security was brought up months ago, and we have known 
about the Year 2000 computer problem for some time. None of these 
things should have come as a surprise to the White House or anyone 
else.
  But by failing to account for them when he submitted his original 
budget in February, President Clinton was able to inflate spending on 
other programs and claim that his budget still fell within the 
constraints of last year's budget agreement. Now, the President wants 
all of this declared emergency spending so that it does not have to be 
offset elsewhere in the budget. The reality is that he wants to raid 
the Social Security surplus to pay for these other things.
  Many Americans will ask what happened to the pledge President Clinton 
made in his State of the Union Address earlier this year. That was when 
he looked the American people squarely in the eye and said:

       I propose that we reserve 100 percent of the surplus--that 
     is every penny of any surplus--until we have taken all the 
     necessary measures to strengthen the Social Security system 
     for the 21st century.

  Eight months have passed, and the President has yet to send us any 
plan to protect Social Security. Worse yet, while publicly claiming to 
try to protect the surplus for Social Security, he has already been out 
drawing it down for other programs. The House-approved tax-relief bill 
that the President has criticized would use only $6.6 billion of the 
budget surplus for tax relief next year. That compares to the $20 
billion or more of the surplus that the President wants to spend on 
other programs.
  If it is wrong to use part of the surplus for tax relief, is it not 
wrong to spend at least three times as much on government programs? It 
seems to me that this is just another example of the President trying 
to have it both ways.
  Mr. President, it is too bad we did not achieve any consensus about 
what to do with the budget surplus this year, because, by default, as 
of October 1, any surplus automatically went to reduce the national 
debt. If we are really serious about protecting Social Security, as to 
future surpluses, we should wall off the Social Security surplus so 
that it cannot be spent on other programs--not by the President, not by 
Congress.
  The Senator from Texas, Senator Gramm, has one idea about how to do 
that. As I understand it, funds would be invested in genuine assets, 
not just government IOUs, under the supervision of the Federal Reserve. 
The money would be off-limits to Congress and the President, and when 
Congress and the President agree on a plan to save Social Security, it 
could be put to use for the purpose for which it was collected.
  In addition to protecting the Social Security surplus, in my opinion, 
we should provide broad-based tax relief to the American people with 
any other surplus. It is, after all, their hard work and their tax 
payments that have created the surplus we enjoy today. We ought to 
return any excess revenue to the people who earned it and paid 
it.

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