[Congressional Record Volume 145, Number 107 (Tuesday, July 27, 1999)]
[Senate]
[Pages S9335-S9337]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                    THE TRUTH ABOUT BUDGET SURPLUSES

  Mr. VOINOVICH. Mr. President, there is an old saying most of us 
learned as children that goes: If it sounds too good to be true, then 
it is. The news we have been hearing about bigger than expected budget 
surpluses for the next 10 to 15 years is precisely that--too good to be 
true.
  Why is that? After all, our economy is strong and is still growing, 
unemployment is at record lows, and the strength of our economy means 
our Government is able to take in more revenues from taxpayers and 
businesses alike. Most people would say things are wonderful. Indeed, 
just ask anyone. Ask the President. Ask Congress. They will tell you 
there is money for increased spending, there is money there for tax 
cuts, and we will be able to meet all our needs. After all, we have 
these enormous surpluses for as far as the eye can see.
  The truth of the matter is, there is no budget surplus. Let me say it 
again: There is no budget surplus. The truth is, we are actually 
running a budget deficit this year. According to both CBO and OMB, as 
this chart from CBO shows, we currently have an on-budget deficit of $4 
billion, and the only way the President, or anyone else, can claim a 
budget surplus today is by taking that surplus and accumulating the 
Social Security trust funds and using it to mask the deficit, just as 
we used Social Security to mask the deficit in 1988.
  I recall, as Governor of Ohio, everyone celebrating the great budget 
surplus. The fact of the matter is, in 1988, we were $30 billion in the 
hole, and what we did with that $30 billion in the hole was mask it 
with Social Security. For over three decades, Presidents and the 
Congresses have been using this gimmick: unifying the budget in order 
to make budget deficits smaller than they really are.

  It is disingenuous. It continues to jeopardize the stability of the 
Social Security trust fund, and it is about time we had our lockbox. 
The American people are smarter than Washington politicians give them 
credit. They know their Social Security pension funds are being raided 
for other Government spending programs. They are mad about it, and they 
want us to stop doing it.
  We need to get honest budget surplus numbers, and in order to do 
that, we need to leave Social Security alone and pay attention to 
creating an on-budget surplus.
  But here is the President's 15 years of projected surpluses. The 
whole bar is the unified surplus. The green part is the off-budget 
Social Security trust fund, and the red part is the true on-

[[Page S9336]]

budget surplus. As the President says, there is going to be $6 trillion 
by the end of fiscal year 2014. But under his projections, he will have 
an on-budget surplus of $2.868 trillion. The rest of his projection is 
Social Security.
  Look at the line on this chart. It is not until fiscal year 2011--
fiscal year 2011--before we even see 50 percent of the projected on-
budget surplus. In other words, in order to get this great surplus we 
are supposed to have during the next 15 years, it is not going to be 
until 2011 that we are actually going to have 50 percent of the on-
budget surplus available to us.
  We will have to go into the 12th year of the President's 15-year 
projections to get a majority of those surplus dollars. How can we in 
good conscience talk about spending increases or tax cuts today when we 
do not even start to get the majority of the money until 12 years from 
now? It is inconceivable. That is the next President--8 years if he 
gets reelected--and then we are into a new President.
  The most frightening aspect of all this is numbers are just 
predictions. They are not real. But both the Congress and the President 
are treating their projections as if they are gospel truth, and each is 
contemplating major fiscal decisions based on their particular beliefs 
and projections. That is not sound public policy.
  In fact, last week, CBO Director Dan Crippen said in testimony before 
the Senate Budget Committee that ``10-year budget projections are 
highly uncertain'' and that ``economic forecasting is an art that no 
one has truly mastered.'' That is from the Director of the 
Congressional Budget Office, the man in charge of making Congress' 
surplus projections.
  Indeed, as most economists will tell you, the only thing predictable 
about projections is their unpredictability. So how can we be sure that 
5, 10, 15 years from now we will actually have these budget surpluses? 
The truth is that we cannot.
  In testimony before the House Banking Committee, Federal Reserve 
Chairman Alan Greenspan said:

       . . . it's very difficult to project with any degree of 
     conviction when you get out beyond 12, 18 months.

  Twelve to 18 months--not 5 years, 10 years, 15 years. He said 12 to 
18 months.
  In addition, he stated that

       . . . projecting five or ten years out is very precarious 
     activity, as I think we have demonstrated time and time 
     again.

  When the Nation's premier economist warns Congress not to invest in 
long-range projections, it makes sense for us to listen.
  If we think back, we will remember it was only 2 years ago that CBO 
was projecting huge increased budget deficits as far as the eye could 
see. In fact, in 1997, CBO projected a $267 billion budget deficit for 
fiscal year 2000. Think of it. But today, CBO is projecting a $14 
billion surplus for fiscal year 2000--a $281 billion swing in just 2 
years.
  If you think a 2-year swing of that magnitude is incredible, in just 
the last 6 months, President Clinton's budget projections put together 
by OMB have swung by a mind-boggling $1 trillion--a trillion dollars. 
That is more than 10 percent of our national gross domestic product.
  The important thing to remember is that a $1 trillion paper surplus 
can vanish just as easily as it appeared, and if we commit to spending 
hundreds of billions of dollars we do not even have yet, we are placing 
our Nation's economic future in serious jeopardy.
  As former Senators Sam Nunn and Warren Rudman wrote in the Washington 
Post:

       The surplus is only a projection that cannot be spent. If 
     spending is increased or taxes are cut based on the 
     expectation of huge surpluses and the projection turns out to 
     be wrong, deficits easily could reappear where surpluses are 
     now forecast.

  Given all that uncertainty about whether or not we will have a budget 
surplus next year, it makes the most sense for us to remain cautious. 
We should wait and see if the budget surplus we are currently 
projecting for fiscal year 2000 even materializes before we embark on 
new spending programs, as the President and the Democrats in Congress 
want to do, or cut taxes as Republicans are proposing.
  As Chairman Greenspan said:

       I see no reason why we have to make decisions crucially at 
     this point until we are sure that we really have got the 
     surplus in tow.

  That is Alan Greenspan who has been keeping things in pretty good 
shape for us the last several years.
  Why does the President feel the need to quickly spend the surplus we 
may achieve over the next 15 years? Why are we talking about cutting 
taxes by $800 billion over 10 years when we do not have the surplus in 
hand yet? I think eliminating the death tax, relieving the marriage 
penalty, and lowering income-tax rates are great ideas, but how are we 
going to pay for them?
  Personally, I do not think we have any business talking about new 
spending increases or tax cuts so long as we have this gigantic 
national debt. Right now, our Nation faces a whopping $5.6 trillion 
national debt, a debt that has risen 600 percent over the last 20 
years.
  I remind my colleagues, with each passing day, we are spending $600 
million a day just on interest on the national debt--$600 million a 
day.
  Most Americans do not realize that 14 percent of their tax dollar 
goes to pay off the interest on the debt, 15 percent goes for national 
defense, 17 percent goes for nondefense discretionary spending, and 54 
percent goes for entitlement spending.
  Look at this pie chart: entitlements, 54 percent; interest on the 
debt, 14 percent out of every dollar. We are only spending 15 percent 
on national defense--and the President knows we need to do better in 
that regard--and nondefense discretionary spending, 17 percent.
  We are spending more on interest payments today than we spend on 
Medicare. We are spending five times as much on interest than we spend 
on education; 15 times as much as we spend on research at the National 
Institutes of Health.
  Even if the on-budget surpluses do happen to come true, then what 
better way to keep our economy humming and secure for the future of our 
children and our grandchildren than by paying down the national debt.
  Indeed, as Federal Reserve Chairman Greenspan testified before the 
House Ways and Means Committee:

       [T]he advantages that I perceive that would accrue to this 
     economy from a significant decline in the outstanding debt to 
     the public and its virtuous cycle on the total budget process 
     is a value which I think far exceeds anything else we could 
     do with the money.

  I think we have a problem. Do you really think that Congress would 
make the tough choices we are going to need to make to get rid of $27 
billion this year in order to maintain the budget caps? I do not think 
it is going to happen. I think many people today are saying that for 
defense spending, to deal with Medicare, we are probably going to have 
to break the caps.
  If we break the caps, the $14 billion surplus of next year is gone; 
it is gone. We need to recognize there is no surplus. And if the 
economic circumstances provide an on-budget surplus--and, boy, we would 
love to have that--we need to use that money to pay down the debt: no 
spending hikes, no tax cuts, just pay down the debt.
  If the President and Congress need an example, all we have to do is 
emulate what most American families do when times are good and they 
have extra money. They do not go out and start spending wildly. They 
look to pay off their debts--credit cards, loans, and mortgages. It is 
the responsible thing to do, and it is something that Government must 
do.
  It was interesting. I was at a meeting the other day and asked the 
people at the table: What do you think about reducing taxes, with this 
projected surplus? And they came back to me--conservative businessmen--
and said: You know, usually you reduce taxes when the economy is in 
trouble.
  One of the gentlemen said: You know, today what people are concerned 
about is Social Security, and they are concerned about Medicare.
  It doesn't make any difference whether they are old or young. If they 
are young, they are worrying about their parents in the future.
  At this stage in the game, it seems to me the best thing we can do is 
cool it. I urge my colleagues to stop and look at the projected numbers 
because they are not real. And if we continue to treat them as if they 
really are, the consequences of spending money we do not have will be 
very real and, I think, very bad for the United States of America.

[[Page S9337]]

  Mr. DURBIN. Will the Senator yield for a question?
  Mr. VOINOVICH. Mr. President, do I have any time remaining?
  The PRESIDING OFFICER. Two and one-half minutes remain.
  Mr. VOINOVICH. I would prefer not to yield because I promised the 
Senator from Louisiana that she would have time. So I would rather not 
yield at this time.
  I yield to the Senator from Louisiana.
  Mr. DURBIN addressed the Chair.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. It is my understanding that the Senator from Louisiana is 
going to be recognized for 10 minutes. I would like to ask, how much 
time remains on the Democratic side under this morning business 
segment?
  The PRESIDING OFFICER. The time is not allocated to the parties. It 
was allocated to the individual Senators who requested the time. The 
Senator from Ohio has been using some of the time from the Senator from 
Alabama.
  Ms. LANDRIEU. I thank the Senator from Ohio for recognizing that I 
want to speak for 10 minutes. I would be happy to yield several minutes 
to the Senator from Illinois.
  The PRESIDING OFFICER. The Senator from Illinois.
  Mr. DURBIN. Let me say at the outset to my friend, the Senator from 
Ohio, what a breath of fresh air he is. I commend him. I believe his 
statement is as forthright as any given on the floor concerning the 
state of the economy, whether we have a real surplus or we do not, and 
what is the prudent thing to do. Because what the Senator from Ohio 
learns when he goes home is the same thing I have learned as a 
Democratic Senator going home to Illinois: People do not have this 
passion for tax cuts or brand new spending programs.
  The first thing they say to me is: What are you going to do to get 
rid of this national debt, this debt that started off at $1 trillion at 
the end of President Carter's administration and is now over $5 
trillion? I say to the Senator from Ohio, it is my understanding that 
that debt costs us, as taxpayers, $1 billion a day. They net it out, 
because we earn interest as taxpayers, and state it is only $600 
million. But the debt itself costs us about $350 billion a year.
  The businesspeople and families I speak to in Illinois have the same 
response that the Senator from Ohio has spoken to on the floor: What 
are you going to do to get rid of this debt so our children are not 
burdened with these interest payments? We are really trying to square 
away the books from the last 20 years.
  What the Senator from Ohio said on the floor, I think, is a very wise 
course of action. That should be our highest priority: reducing the 
debt and keeping our obligations to Social Security and Medicare.
  I do not want to put words in the mouth of the Senator from Ohio, but 
my fear is those who anticipate surpluses that may not materialize 
could put us on a bad track. We could be headed back toward deficits, 
toward red ink, and toward an economy we do not want to see.
  The same business people I speak to say, there may come a time, if we 
have a recession, when a tax cut is the right medicine because it would 
give the American families more money to spend and bring us out of a 
recession. But certainly we are not in those days now.
  We have a strong economy, a vibrant economy; and, if anything, the 
fear is it may overheat with too much demand. If that happens, the 
Federal Reserve Board steps in and raises interest rates, which 
penalizes every family with an adjustable mortgage and business people 
who are trying to keep and expand their business.
  The Senator from Ohio has really laid the basis for a sensible 
bipartisan approach. I hope we can work together, as we have in the 
past. I have admired his independence and the fact that he has been 
very forthright in his views. I listened carefully to what he said 
during the course of his statement. I think it really provides a common 
ground for a bipartisan approach that really is good for the economy 
and good for future generations.
  As I see the Senator from Louisiana is prepared to speak, I yield 
back the remainder of my time.
  Ms. LANDRIEU addressed the Chair.
  The PRESIDING OFFICER. The Senator from Louisiana.
  Ms. LANDRIEU. I commend the Senator from Ohio for his remarks about 
the importance of our Social Security surplus and preserving it so we 
can invest and strengthen something the American people and the 
American families have come to rely on and to appreciate. It is 
actually something that sets us apart from many nations in the world, 
that we actually have a safety net that works for older Americans--to 
honor the fact that they have worked hard through their lives, 
sometimes at minimum wage jobs, for 30 and 40 and 50 years.
  We say, as Americans, if you are president of a corporation or if you 
are an owner of a small business, or even if you are a minimum wage 
laborer, we want to have a retirement system that keeps you out of 
poverty when you are simply at an age where you cannot work and 
increase your income.
  So it is important to us. It is a value. It is something more than 
just a program. It is something more than just a Government program or 
an initiative. It is a value of America. I think both sides of the 
aisle recognize that.
  Although there are some differences in the way we would approach the 
specific lockbox notion, we have made great strides in recognizing that 
$2 trillion of this $3 trillion surplus needs to be set aside for 
Social Security. It is important for our Nation. Most certainly, it is 
important to people from Louisiana. I commend him and also commend the 
Senator from Illinois for underlining some of those points.

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