[Congressional Record Volume 145, Number 107 (Tuesday, July 27, 1999)]
[Senate]
[Pages S9334-S9335]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          THE TAX ``SURPLUS''

  Mr. BAUCUS. Mr. President, when the tax reconciliation budget comes 
before the Senate tomorrow, I plan to offer an amendment which will 
provide for a lockbox on the Social Security surplus; that is, all the 
payroll tax surplus that would otherwise go to the Social Security 
trust fund would be locked into that trust fund. The amendment also 
provides that one-third of the onbudget surplus be set aside for 
Medicare.
  Why am I doing that? Very simply, Mr. President, because I believe 
that as we leave this century and this millennium and as we move into 
the next century and the next millennium, we are faced with a historic 
opportunity to make decisions that are going to either correctly or 
incorrectly affect lots of Americans.
  What do I mean? Very simply this. A little history first:
  About 18 or 19 years ago, after the 1980 elections, this Congress 
passed a very large tax reduction bill--very large--proposed by the 
President and passed by this Congress.
  What happened as a consequence of that very large tax cut in 1981? I 
think all commentators will agree--at least a vast majority of 
commentators will agree--that it caused the deficits in this country to 
shoot up and the national debt to rise. That tax cut was accompanied by 
a big increase in defense spending. I am not going to quarrel how much 
that increase was correct or incorrect. But the agreement is--and by 
far most people agree--that as a consequence of that action deficits 
rose dramatically.
  If we add up the annual deficits beginning with President George 
Washington and continuing every year through all the Presidents in 
American history, up through and including Jimmy Carter, they total 
about $1 trillion.
  In 1988, when Congress passed a tax cut, what happened? The national 
debt shot up. Why? Because deficits shot up. The national debt in 1980 
was about $1 trillion. Twelve years later, the national debt was about 
$5-, $6- or $7 trillion. It increased $4- or $5 trillion, from $1 
trillion to $6- or $7 trillion in that 12-year period--a huge national 
debt--and we are paying interest on that national debt in the 
neighborhood of $267- to $280 billion a year. That is what happened.
  What did Congress do? It passed two tax increases. The Republican 
President, Republican Congress, passed two tax increases. There was a 
significant tax increase in 1982 because the deficits were going out of 
sight and, in 1984, another tax increase with the Republican President, 
Republican Congress because the deficits were still going out of sight. 
That is what happened in the 1980s when Congress was tempted and 
succumbed to the get-rich-quick siren song with huge tax reductions. 
That is what happened: instant gratification. However, the future kids 
and grandkids paid for it in the national debt increase. We passed on 
the burden and gave it to ourselves, saddling the future with the 
burden. That is what we did in 1981, pure and simple.
  In 1999, what happened? Through a lot of factors, including the 
Democratic President and the Democratic Congress in 1993, we enacted a 
large deficit reduction, half tax increases and half spending cuts. 
Economists agree, as a consequence of that, the national deficit 
started coming down. The debt starting coming down.
  That is not the only reason the debt started coming down. The economy 
was doing pretty well. Interest rates were down, probably because the 
market saw the President was going to get a handle on spending and 
handle on the deficit because the deficits were so high. With 
increasing technology and globalization, American firms became much 
more competitive in competing in world markets. The American economy 
did very well in the last several years as a consequence of all those 
factors. Incomes have gone up, payroll tax revenues have gone up, and 
income tax receipts have gone up.
  What does that mean today? In 1999, we are projecting a $3 trillion 
surplus over the next 10 years. Mr. President, $2 trillion of that is 
payroll tax revenue increases, which we all agree will go to the Social 
Security trust fund; $2 billion of the $3 billion comes from payroll 
taxes, and we all agree it will go to the Social Security trust fund. 
That leaves $1 trillion in the surplus. That $1 trillion is generated 
by income tax receipts.
  The question before the Congress is: What are we going to do with 
that $1 trillion? That is the question. As we are poised to move into 
the next millennium, I say we ought to make careful decisions about 
that. We better not

[[Page S9335]]

blow it. We better be careful, be prudent with the taxpayers' money, 
and do what is right.
  What is right? I have two charts. The first chart shows the proposal 
that will come to the floor tomorrow, passed by the majority party, 
that will provide for a huge tax cut of $792 billion over 10 years. You 
have to add back $179 billion in interest over 10 years on the national 
debt because of the tax cut. That means the debt will go up, with more 
interest payments to make. What does that leave? That leaves $7 billion 
less after 10 years. That is all.

  Man, oh, man, I could stand here for days and days and talk about the 
problems with that proposal. Let me mention a few. No. 1, this is only 
a projection. We have no idea what the surplus will be over the next 10 
years. It is just a guess. Most commentators think the economy is 
overheated now. Maybe there is a bubble economy, and maybe the economy 
will not do so well over a good part of the next 10 years compared to 
the last 5 or 6 years.
  This is a projection. What do we do with the projection? We are 
locking in tax cuts for the future, offset by a hope that we will have 
the revenues to pay for it. That is what we are doing. That is one 
thing that is wrong with this: A tax cut in place by law, offset by a 
hope that the money will be there--and it probably won't be there.
  Second, I point out that the tax cuts are, in fancy parlance, 
backloaded. Most go into effect near the end of the 10-year period, 
meaning in the next 10 years, boy, we will really pay. That is when the 
deficit will start to increase. I said ``deficit'' increase, not 
``surplus.''
  The next chart shows that the baby boomers will start to retire about 
the year 2010, and in 2020 and 2030 most baby boomers will be hitting 
retirement age. That is when the tax cuts go into effect an even 
greater amount, meaning we have less money to take care of the baby 
boomers.
  I say the size of this tax cut is much too much. Alan Greenspan does 
not agree with it. He says now is not the time for a tax cut because he 
knows it will tend to put upward pressure on interest rates. We all 
don't want to see an increase in interest rates.
  In addition, there is nothing left over for Medicare. Medicare is an 
extremely important program for Americans. Ask Americans which national 
programs they think make the most sense, and most, I daresay, think 
Social Security is one and Medicare probably is another. Before 
Medicare went into effect, 50 percent of seniors had no health care; 50 
percent had no health care benefits or programs when Medicare went into 
effect. Now virtually every senior has some kind of health care 
program.
  What are the current problems with Medicare? There are several. Let 
me name three. No. 1, it does not provide for prescription drugs. 
Senior citizens get drugs when they are in the hospital, but Medicare 
will not pay for prescription drugs when they are out of the hospital. 
There is zero payment under Medicare for prescription drugs.
  We all know that health care is changing in America. It is changing a 
little bit more from procedures and a little more toward drugs, DNA 
benefits, and things of that nature. Drugs have become much more 
important. That is one problem with Medicare. We have to provide for 
prescription drugs. Medicare does not now provide for outpatient 
prescription drugs.
  No. 2, this Congress cut back on Medicare payments too much in 1997 
with the so-called Balanced Budget Act of 1997. Medicare payments to 
hospitals increased significantly, I think on average about 10 percent 
over the 1990s. Now it is negative, it is cut back, because of 
provisions this Congress enacted a couple of years ago, which were too 
great, too much. We all hear it from our hospitals back home, whether 
they are teaching or rural hospitals, that it has been too much. That 
has to be dealt with. The majority budget does not deal with it, which 
is another reason for my amendment.
  No. 3, Medicare is in trouble, folks. We all talk about Social 
Security. The Social Security trust fund will not reach zero deficit 
for 20 or 30 years. The Medicare trust fund will come down to zero, 
depending upon who is making the estimates, perhaps 12 or 15 years from 
now, much sooner than the Social Security trust fund.
  I say, therefore, we should pay attention to Medicare. The amendment 
I will offer will provide that one-third of the on-budget surplus, one-
third of the $1 trillion, will be dedicated to Medicare.
  I know the arguments. We have to have structural reform of Medicare 
first before we can put more money into Medicare. I think most agree we 
need both structural reform and additional money for Medicare. When we 
in the Congress begin to address structural reform in Medicare, my 
guess is we will probably not have money anyway so it is good to set 
aside one-third of the on-budget surplus for Medicare.
  If we do not need that one-third at the time, we can send it back to 
the people in tax cuts or we can use it for veterans' care or for 
education or for whatnot.
  In summation--and I thank the Chair for his patience--at the 
appropriate time, I will be offering an amendment along with Senator 
Conrad to provide that one-third of the on-budget surplus be dedicated 
to Medicare along with the off-budget surplus dedicated to Social 
Security. I thank the Chair.
  The PRESIDING OFFICER. The Senator from Ohio.
  Mr. VOINOVICH. Mr. President, I ask unanimous consent that the time 
for Senator Sessions be reserved for use later in the day.
  The PRESIDING OFFICER. Without objection, it is so ordered.
  Mr. VOINOVICH. I also ask unanimous consent that I be recognized for 
up to 15 minutes as in morning business and that Senator Landrieu 
follow me.
  The PRESIDING OFFICER. Without objection, it is so ordered.

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