[Congressional Record Volume 147, Number 17 (Wednesday, February 7, 2001)]
[Senate]
[Pages S1104-S1110]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
PROJECTED SURPLUSES
Mr. BYRD. Mr. President, I have listened to my distinguished friend
from New Mexico with great interest. May I compliment him on the broad
range of testimony that his Budget Committee has been acquiring through
expert witnesses. I am a new member of the committee. I am very
impressed with the well-organized, well-focused hearings that are being
conducted in that committee.
Mr. President, our Nation is facing a fork in the road. The
Congressional Budget Office is projecting a 10-year surplus of $2.7
trillion, excluding the Social Security and Medicare surpluses. These
surpluses provide us with the opportunity to invest in our future and
to deal with the long-term threats to the budget, such as the
retirement of the baby boom generation.
The administration is proposing large and ballooning tax cuts which,
if enacted, would have a significant impact on the Federal budget for
decades to come. It falls to the Congress to decide how much to
allocate to tax cuts, how much to spending increases, and how much to
reserve for debt reduction.
Before we make these decisions, we must first decide whether we have
sufficient confidence in the surplus estimates to use them to make
long-term budget decisions. In his recent testimony before the Senate
Budget Committee, Federal Reserve Board Chairman Alan Greenspan--and
his name has been referred to already by my dear colleague, Mr.
Domenici--expressed his hope that we use caution. He said:
In recognition of the uncertainties in the economic and
budget outlook, it is important that any long-term tax plan
or spending initiative, for that matter, be phased in.
Conceivably, (the long-term tax plan) could include
provisions that, in some way, would limit surplus-reducing
actions if specified targets for the budget surplus and
federal debt were not satisfied.
Now, while we all rely on the professional estimates provided by the
Congressional Budget Office, we must recognize that long-term budget
projections often have proved to be wrong. In its own report, entitled
``The Budget and Economic Outlook: Fiscal Years 2002-2011,'' released
last week, CBO characterizes its estimates as uncertain. On page 95 of
that report, CBO States that the estimated surplus could be off in one
direction or the other, on average, by about $52 billion in fiscal year
2001, by $120 billion in fiscal year 2002, and by $412 billion in
fiscal year 2006. CBO confirmed in testimony before the Senate Budget
Committee last week that this uncertainty would grow even larger for
fiscal year 2007 through fiscal year 2011.
Further evidence of the volatility of these estimates can be found on
page XV of the summary of the CBO report. In summary table 2, entitled
``Changes in CBO's Projections of the Surplus Since July 2000,'' CBO
changes its 10-year revenue estimate by $919 billion. In just 6 months,
therefore, from July of 2000 to January of 2001, CBO changed its
revenue estimate, I repeat, by $919 billion and its 10-year estimate of
the surplus by over $1 trillion for economic and technical reasons
alone.
In its report, CBO concludes that there is ``some significant
probability'' that the surpluses will be quite different from the CBO
baseline projections.
Let me now use this chart, entitled ``Uncertainty in CBO's
Projections of the Surplus Under Current Policies, in Trillions of
Dollars.'' In fact, CBO indicates that, ``there is some probability,
albeit small, that the budget might fall into deficit in the year 2006,
even without policy changes.'' So on page xviii of the report, CBO
indicates that the probability that actual surpluses will fall--we can
see that in the darkest area on the chart--is only 10 percent.
The probability that the surplus will fall in the shaded area is 90
percent. Imagine that after some 15 years of crawling and scratching to
get out of the deficit hole, the ``d'' word just might reappear in our
national vocabulary in a scant 5 years even if we stay the course. The
``d'' word of course, is ``deficit.''
Yet we are now being asked by President Bush and the Republican
leadership to use these extremely tenuous 10-year budget estimates as
the baseline for considering a tax cut that could
[[Page S1105]]
cost $2 trillion or more over the next 10 years. We have been down this
road before, and sadly I went along for the ride. In 1981, as my good
friend, the senior Senator from Maryland, Mr. Sarbanes, well knows,
President Reagan proposed a large tax cut over 5 years. There are not
many in this town who remember that his 5-year budget plan projected a
surplus for fiscal year 1984 of $1 billion; for fiscal year 1985, a
surplus of $6 billion; and for fiscal year 1986, a surplus of $28
billion.
Congress passed the tax cut bill that reduced revenues by over $1
trillion from fiscal year 1982 to fiscal year 1987. Did the Reagan
administration's projected surpluses come to pass? No. In fact,
precisely the opposite occurred. The fiscal year 1984 deficit was not a
surplus of $1 billion as projected. The fiscal year 1984 deficit was
$185 billion--using the ``d'' word, ``deficit.'' The fiscal year 1985
deficit was $212 billion. The fiscal year 1986 deficit was $221
billion.
Mr. SARBANES. Mr. President, will the Senator yield?
Mr. BYRD. Yes. I yield.
Mr. SARBANES. These figures are the actual deficit figures the
Senator is talking about.
Mr. BYRD. Yes, indeed.
Mr. SARBANES. They should be contrasted with the projections which
were made only a few years before--projections which projected
surpluses. Am I correct?
Mr. BYRD. Precisely.
Mr. SARBANES. I think this is an extraordinarily important point. We
have these projections now. We are talking about having a surplus of
trillions over 10 years, and yet two-thirds of the surplus being
projected now is in the last 5 years of the 10-year period.
Mr. BYRD. Yes.
Mr. SARBANES. Everyone has underscored that you can't really base a
policy on these projections, they are so uncertain. As the Senator
pointed out earlier in his statement, in just 6 months the
Congressional Budget Office changed its projections to raise the
surplus estimate by about $1 trillion between last summer and last
month.
Mr. BYRD. Yes. That is remarkable.
Mr. SARBANES. I want to bring one other fact to your attention, and
then I will certainly yield back to the Senator.
Just to show you how fragile these budget surplus estimates are, in
1995 CBO estimated that in the year 2000 we would have a deficit of
$342 billion. Five years out they were making that projection. Instead,
we had a surplus of $236 billion, because we restrained ourselves on
spending. We recouped taxes in order to balance the budget. That is a
swing of $578 billion from the projections to the actuality. That was
only projecting 5 years. Now we are talking about projections that go
for 10 years.
I think the Senator is absolutely right to underscore the fragile
nature, which would be the best way to put it, of budget projections.
These projections have almost an evaporating dimension to them. I think
we have to be extremely careful, cautious, and prudent in planning our
policy if we are using these kinds of projections.
Of course, the Senator just underscored it, by outlining the
projections that were made in the Reagan years to support the tax cut
and how far from the mark they were, only a few years later--not quite
immediately, but only a few years later.
Mr. BYRD. Yes.
Mr. SARBANES. I thank the Senator for yielding.
Mr. BYRD. I thank the distinguished Senator. He served with me as we
sought to have the President postpone the third year of that 3-year tax
cut until such time as we could see what the impact of the 2 previous
years' tax cuts was going to be on the budget and on the economy.
I remember going down to the White House. I was the minority leader
at that time. As I say, there in the Oval Office I said to the
President: Mr. President, you are proposing a tax cut over 3 years--I
believe it was 3 years-- 5 percent, then 10 percent, and then 10
percent? It may not be the exact sequence, but those are the correct
numbers. Why not wait until we see what the results are and the impact
is for the first 2 years? Why go ahead now and add a third year of tax
cuts? Why do it now? Why not wait?
President Reagan responded. After he responded, I said: Mr.
President, that doesn't answer my question. So he turned to Mr. Regan,
who was the Secretary of the Treasury, and asked Mr. Regan to explain
to me why we had to have 3 consecutive years all at once. Mr. Regan
sought to explain it. When he finished, I said: Well, Mr. Regan, you
still haven't answered my question.
President Reagan then turned to Mr. Meese and asked Mr. Meese to
explain it. This was all down in the Oval Office. Mr. Meese explained
it somewhat like this: Senator, in order to give to the business people
of this country certainty that there will be 3 years of tax cuts and in
these amounts, in order that they might plan ahead with certainty, we
need to package the three tax cuts in one bill.
That was a reasonable explanation. I didn't buy it. But there were
some people who might buy it. And there was something to it.
I came back to the Hill, and on the Senate floor I, with Mr. Sarbanes
and others on this side--we were in the minority then as we are now--
offered an amendment to postpone that third year until after the first
2 years of tax cuts had been implemented. We lost, of course. As we
see, the projections did not pan out.
Lord Byron said, ``History, with all thy volumes vast, hath but one
page.'' Well, the one page of history that we see today tells us very
clearly that we cannot depend upon these projections.
I know of no one who can better testify to this fact than the
distinguished Senator from Maryland, Mr. Sarbanes. He has served on the
Joint Economic Committee for several years.
Regarding the administration's 3-year across-the-board tax cut, we
tried. We lost. In order to help give President Reagan's economic
program a chance, I voted for the final bill because my people in West
Virginia who send me here said: Give him a chance. Give this new
President a chance.
``Give him a chance.'' So I did, I gave him a chance. I voted for the
Reagan tax cut. It was a mistake on my part.
On October 1, 1981, I went out on the floor as minority leader to
take a look forward to the new fiscal year. On that day I said: ``Today
is the beginning of the new fiscal year. Yesterday, there was a kind of
New Year's Eve celebration. The trouble with New Year's Eve
celebrations, we all have to wake up the next day and face reality.''
I quoted Arthur Schlesinger who wrote: ``This supply side fantasy is
voodoo economics. The witch doctors have had their day. Reality is
awaiting.''
On that October day, I noted: ``. . . The administration's brave
words and rosy predictions began to wilt.''
The reality was that deficits as far as the human eye could see were
out there. Deficits peaked in fiscal year 1992 at $290 billion. Not
until fiscal year 1998, 17 years after the 1981 Reagan tax cuts, were
we able to achieve a budget surplus. Having passed the Reagan tax cuts
in 1981, which in large part created these unprecedented triple-digit,
billion-dollar deficits, the Congress had no choice but to pass, and
Presidents Reagan, Bush, and Clinton signed, numerous bills to correct
our mistake and increase taxes in hopes of stemming the unprecedented
tide of red ink.
The Budget anachronisms of those tax increase measures are painful to
recall: TEFRA, DeFRA, OBRA of 1987, OBRA of 1990, OBRA of 1993, and so
on.
Despite all of these efforts to stem the red ink during the 12 years
of Presidents Reagan and Bush, the national debt rose from $932
billion, the day Mr. Reagan took office on January 20, 1981, to $2.683
trillion the day Mr. Reagan left office; to $4.097 trillion the day
President Bush left office on January 20, 1993. These protracted
deficits also resulted in higher interest rates for you and for you and
for you, the American taxpayer, to pay. This forced the average
American to pay more for his mortgage, more for his car, more for his
child's education because of our rush to enact a huge tax cut. Because
of our rush to enact a huge tax cut, the benefits of which went mainly
to the wealthiest taxpayer, many, many middle-class American taxpayers
were left with shrinking paychecks and shriveled dreams.
As a result of the tough votes we took on the deficit reduction bills
of 1990, Senator Sarbanes, and 1993, do you remember 1990, when we went
over to Andrews Air Force Base? And do you remember 1993 when we passed
the bill
[[Page S1106]]
for which no Republican in the House or in the Senate voted? We are now
reducing the debt held by the public, but gross debt continues to grow
to this day.
Our current gross debt is $5.6 trillion. Here is the chart: $5.646
trillion. The chart will show that, if these $5 trillion were stacked
in $1 bills, the national debt would reach into the stratosphere 382
miles.
May I ask Senator Sarbanes if he remembers when Mr. Reagan first came
into office, Mr. Reagan made a presentation to the American public on
television, and in that presentation Mr. Reagan talked about the debt
he had inherited. It was $932 billion at that time. Mr. Reagan very
graphically presented it by saying: If this $932 billion were in $1
bills, that stack of $1 bills representing the national debt of $932
billion which I inherited would reach into the stratosphere 63 miles.
When Mr. Reagan left office, that same stack of $1 bills would have
reached into the stratosphere 182 miles, three times what it was when
Mr. Reagan took office.
Our current gross debt worldwide is $929 for every man, woman, and
child. Get that: Our current gross debt comes to $929 for every man,
woman, and child around the globe! That is not pocket change. It
represents $20,062 per man, woman, and child in the United States.
Some may argue that increased Federal spending is responsible for the
deficit. That is not so, not totally so. Looking at the chart entitled
``Total Federal Spending Lowest Level Since 1966,'' I have heard my
ranking member on the Budget Committee, Mr. Conrad, refer to this chart
and to this total of Federal spending. He has said it is the lowest
level since 1966.
Federal spending this year is only 1.2 percent of GDP, the lowest
since 1966, and almost 5 percentage points less than in 1982 during the
Reagan administration, and 4 percentage points less than in 1992 during
the Bush Administration.
Once again, we face the fork in the road. We have faced it before. We
took the wrong path. We voted for that tax cut. But this time, we have
a signpost. It is easy to vote for a tax cut. I love to cast easy
votes. The easiest vote I have ever cast in my 55 years in politics has
been a vote to cut taxes. Oh how easy. It doesn't take much courage to
do that.
Mr. SARBANES. Will the Senator yield?
Mr. BYRD. I yield.
Mr. SARBANES. I want to underscore what the Senator is saying. Some
make the argument that somehow it takes great political courage to
advocate a sweeping tax cut. I have never encountered that in the
course of my public career; a tax cut is always welcome. If it is
possible, if the fiscal circumstances are such, I think we should
consider doing tax cuts. But the real problem is always how to act in a
responsible manner and how to think about the future and not rush. The
paper this morning has an article entitled ``Congressional Republicans
Seek Bush's Big Tax Cut and Think Bigger.''
Another headline says, ``Business Vows to Seek Its Share of Tax
Relief.''
Once you take the lid off the punch bowl, everyone wants to come to
the punch bowl and gorge themselves. The real challenge, the difficult
political challenge, is not to do the tax cut. The difficult political
challenge is to restrain yourself so whatever you do is done in a
responsible manner, in a manner that takes into account the future of
the country--by ``the future'' I don't just mean next year, but the
next generation and the generation after that--and in a manner that
will build the strength of the Nation over time. That is the difficult
challenge. I agree completely with the Senator in his observation.
Mr. BYRD. I thank my friend.
Does the Senator from Maryland have grandchildren?
Mr. SARBANES. I do, indeed.
Mr. BYRD. Does he have great grandchildren?
Mr. SARBANES. Not yet.
Mr. BYRD. One day we will leave this Chamber for the last time. And,
if I am able to do so, I will look in a mirror. I will say to myself:
How did you serve? Did you think mostly of yourself? Did you think in
terms of only your generation? Did you think in terms of your
children's future? Did you think about your great grandchildren? What
about that little great granddaughter? She is going to be in school one
day.
When I look into that mirror, what will I say as to my stewardship
during these years when I have served the people in the Congress? If I
haven't served well, I shall have cheated that great granddaughter. I
shall have cheated my daughters and my grandchildren.
I would say as I look in that mirror:
When you get all you want in your struggle for pelf,
And the world makes you King for a day,
Then go to the mirror and look at yourself,
And see what that guy has to say.
For it isn't your Father, or Mother, or Wife,
Who judgment upon you must pass.
The fellow whose verdict counts most in your life
Is the man staring back from the glass.
He's the fellow to please, never mind all the rest,
For he's with you clear down to the end,
And you've passed your most dangerous, most difficult test
If the man in the glass is your friend.
You may be like Jack Horner and ``chisel'' a plum,
And think you're a wonderful guy,
But the man in the glass will just say you're a bum
If you can't look him straight in the eye.
You may fool the whole world down the pathway of years,
And get pats on the back as you pass,
But your final reward will be heartaches and tears,
If you've cheated the man in the glass.
If I have cheated the people who sent me here, if I have cheated my
grandchildren, my children, your children, then I shall have cheated
myself most of all.
Senator Sarbanes and Senator Conrad, we will have to look in that
glass one day. And right here coming up, this year is one of the tests
as to how we are going to react to the challenge before us.
Mr. CONRAD. Will the Senator yield for a question?
Mr. BYRD. Yes.
Mr. CONRAD. The Senator attended the Budget Committee yesterday in
which we heard from the Comptroller General of the United States, the
head of the General Accounting Office. He warned us of precisely what
you are talking about. He warned us that this near-term outlook has
improved, but the long-term outlook has gotten worse. Does the Senator
remember that testimony?
Mr. BYRD. Yes. I do. I do. And I was very much impressed by that. We
were talking about 10 years. What was the testimony, just beyond the 10
years?
Mr. CONRAD. The Comptroller General of the United States alerted us
that just beyond the 10 years lie massive deficits. We are talking
about short-term surpluses, but there are massive deficits to come and
we ought to take this window of opportunity to strengthen ourselves for
the future.
We had four demographers today before the Senate Budget Committee
with this same message, telling us that if we would set aside some of
these acorns, instead of using them all, consuming them all in a tax
cut or spending--but, instead use some of it to pay down this long-term
debt and address this long-term demographic time bomb, the retirement
of the baby boom generation--that we will have a much stronger economy
in the future.
It is really a message that Senator Sarbanes has delivered so
powerfully in the past to the members of the committee. If we are
really thinking ahead, we will realize we ought to take some of these
funds and invest them for the future to reduce our long-term
indebtedness, to expand the pool of savings, to expand the pool of
investment, to take pressure off of interest rates, and to have a much
bigger economy when the baby boomers start to retire.
That is really the lesson that Senator Sarbanes has provided to us
day after day in the committee as well.
Mr. BYRD. Yes. Yes. I thank the distinguished ranking member of the
Budget committee, on which Senator Sarbanes and I serve.
Mr. President, once again we face the fork in the road. We have faced
it before and we took the wrong path--but this time we have a signpost.
The lesson of recent history is very clear, and we have only to review
it to see which way to go.
The choices are these: Do we rely on uncertain, 10-year budget
forecasts to pass a colossal tax cut, or do we exercise a little
caution in case the forecasts prove to be only a mirage, as they have
so often proved to be before?
[[Page S1107]]
If we pass such a tax cut and the surpluses do not materialize, what
needs of our citizens may have to be left behind?
Let's take Social Security. Currently, 44.8 million older Americans
receive Social Security. That is projected to grow to 82.7 million in
the year 2030 when the baby boom generation has retired. The ratio of
workers to beneficiaries was 42 to 1 in 1945, at the end of World War
II. Today, that ratio is 3.4 to 1, and it is projected to fall to 2.1
to 1 in the year 2040. The Social Security trust fund is projected to
be exhausted in the year 2037. If we go along with the Bush
administration's tax cut, what about our pledge to protect Social
Security?
Let's take Medicare--33.4 million Americans rely on Medicare for
their health care costs. This is projected to grow to 77 million in
2030. The Medicare--hospital insurance--trust fund is projected to have
benefits exceed receipts in 2015 and to run out of money in 2023. If we
go along with the Bush administration's tax cuts, shall we just pretend
that the Medicare problem will solve itself?
How about prescription drugs? Since Medicare was created in 1965, the
practice of medicine has changed dramatically. Prescription drugs allow
patients to avoid more expensive and invasive procedures, such as
surgery. Since 1990, national spending on prescription drugs has
tripled. The current Medicare program does not provide a prescription
drug benefit. How can we pay for a prescription drug benefit if we have
emptied the kitty with tax cuts?
Just go up to your local drugstore. Get yourself a comfortable place
somewhere over in the corner if you can, and watch that line as it
progresses along that counter. Listen to some of the people who come
there. They get their drugs, and they pay $100, $150. I sometimes
wonder, how can they do it? Drugs are so terribly expensive, and they
are becoming more expensive. And yet these people rake and scrape and
save to try to have a little money with which to buy drugs. We have
heard many stories about how some of them have to make a choice between
food on the table or drugs to keep down pain, and the problem is
getting worse. We are at a crossroads. What are we going to do about
it?
Discretionary spending--let's talk about it for a moment. I am an
appropriator. The population of this Nation grew by 33 million, or 13.2
percent, from 1990 to 2000, and according to the U.S. Census is
expected to grow by another 8.9 percent by 2010. Congress should make
sure that we allow for the future growth of our population.
There are those who argue that discretionary spending is too high.
Let me refer to this chart entitled ``Total Discretionary Outlays,
Fiscal Years 1962 to 2000.'' The distinguished ranking member of our
Budget Committee has referred to this subject matter as we have
discussed the budget surplus from day to day.
In fiscal year 2000, discretionary spending as a share of our economy
was just 6.3 percent. There it is. This share of spending has been
shrinking for decades and is less than half of the share in 1962. When
I came to this Senate, I say to Senator Conrad--I came to this Senate
43 years ago--the line on the graph would have been up between 12.7 and
14 percent. That was for discretionary spending. I was on the
Appropriations Committee. I went on it the first month I came here.
What is it today? At that time, the estimates--the latest estimates
that were available were 1962. I came here in 1959. But in that year,
68 percent of all Federal spending was discretionary. On the pie chart,
one can see how much of that chart was for discretionary spending: $72
billion; 68 percent was for discretionary spending. That was the amount
of money that went through the hands of the Appropriations Committee.
Today, only 34 percent of the Federal budget is discretionary.
Entitlement spending has grown. We heard a witness before the Budget
Committee just the other day talk about entitlement spending. Let's
look at this chart entitled ``Entitlement Spending as a Share of the
Economy.'' We see that entitlement spending has grown from 5.7 percent
of GDP, gross domestic product--the source is CBO--in 1966 to 10.5
percent today. So America continues to have real needs that are not
being met in the areas of infrastructure, education, health care,
national security, and the list goes on and on.
For example, the number of vehicle miles traveled on our Nation's
highways has grown--from 1983 to 1999--from 1.65 trillion miles per
year to over 2.69 trillion miles per year. Of the road miles in rural
America, 56.5 percent are in fair to poor condition, according to the
Federal Highway Administration; 56.9 percent are in fair to poor
condition. One does not have to go very far to see that. Just travel
along the streets in this Capital city and see the potholes, and what
is happening to traffic congestion. I came to this city 49 years ago.
Conditions are even worse in urban America, where 64.6 percent of the
road miles are considered to be in some state of disrepair.
The situation is no better when we turn our attention to the Nation's
highway bridges. According to the most recent data from the Federal
Highway Administration, 28.8 percent of our Nation's bridges are either
functionally obsolete--they can no longer handle the kind of traffic
for which they were built--or they are structurally deficient.
We all should remember the Silver Bridge disaster that took place a
few days before Christmas at Point Pleasant, WV, a few years ago. That
bridge collapsed, sending many people to their watery graves, on the
Ohio River. Do we just cross our fingers and hope that these bridges do
not collapse?
The EPA has estimated $200 billion in unmet needs for sewer,
wastewater, and safe drinking water systems construction and
maintenance, just to maintain the current systems and to allow for
necessary expansion. Clean and safe drinking water should be a basic
right of every man, woman, and child in America. We simply must address
these needs, and it will take dollars--billions of dollars--to do it.
According to the Department of Housing and Urban Development, there
are 5.4 million families, representing 12.3 million individuals, who
are in need of affordable housing. Do we sacrifice these needs on the
altar of tax-cut fever?
We are all familiar with the myriad problems confronting our military
forces today: Recruitment and retention problems, crushing deployment
burdens, aging ships and tanks and aircraft, a scarcity of spare parts,
a scarcity of ammunition--just read it in today's Washington Post, a
scarcity of ammunition--substandard housing, outdated facilities. All
of these factors affect readiness.
Beyond the current budget, we are bracing for the likelihood of
requests of major leaps in defense spending, perhaps as much as $50
billion a year just over the horizon.
When we allocate the surplus, it would be totally irresponsible--
totally irresponsible--to fail to provide enough discretionary
resources to allow us to invest in our future. Ask the mayors of the
big cities throughout this country. Ask the mayors of the little
cities, the towns throughout this country.
Debt reduction--let's talk about it for a moment. Our debt held by
the public peaked in fiscal year 1997 at $3.8 trillion. In recent
years, we have paid about $200 billion per year in interest --
interest--on that debt. As we approach the retirement of the baby boom
generation, we could do no greater favor for my granddaughter, for my
great granddaughter, for your children, for all of our people, no
greater favor than to eliminate that debt and to eliminate those
interest payments.
I know we have received testimony in the committee that we can only
eliminate it to a certain point as of a year that is not too far away.
By the end of fiscal year 2001, we expect to have reduced the publicly
held debt to $600 billion from the level in fiscal year 1997.
We should make sure that we can stay on that course. If we enact
large tax cuts that siphon away--that suck away, that draw away--the
on-budget surpluses, we could return to the days when we had to use the
Social Security surplus to help finance Federal operations rather than
using it for reducing debt.
In July of 1999, when the Republican leaders were pushing large tax
cuts, I suggested that Congress take five steps:
One, watch our investments carefully and manage them prudently.
Manage the economy and watch out for inflation.
[[Page S1108]]
Two, pay our debt. Pay down the national debt.
Three, cover the necessities. Do not shortchange our Nation's core
programs, such as education, health care, and the like.
Four, put aside what we need to put aside for a rainy day. Reserve
the Social Security and Medicare surpluses exclusively for future costs
of those programs.
Five, take prosperity in measured doses. Ease up on taxes without
pulling the rug out from under projected surpluses.
Mr. President, our present conundrum regarding budget surpluses
reminds me of that old Aesop's fable about the ant and the grasshopper.
It seems, as Aesop told it, that a commonwealth of ants, busily
employed in preserving their corn, was approached by a grasshopper
which had chanced to outlive the summer. The grasshopper was ready to
starve from the cold and hunger and begged the ants for a grain of the
corn, much like the 10 virgins in the Scripture; 5 who were wise and
who had oil in their lamps, and 5 who were foolish who had no oil in
their lamps.
In this case, one of the ant colony asked the grasshopper why he had
not anticipated the winter and put aside food, as the ants had so
wisely done. The grasshopper answered that he had so enjoyed the
abundance of summer that he had never once thought of the possibility
of winter.
So we are going to have a big tax cut. Ah, we will enjoy that. How
enjoyable. How sweet. How sweet it would be.
If that be the case, the ant replied, then all I can say is, those
who spend all day reveling in summer may have to starve in the winter.
The moral is, of course, do not fail to provide for the future.
So a prudent course would demand, Mr. President, that we anticipate a
cold and chilly downturn in our economic fortunes and forecasts and put
back something for the winter. After all, it is only a very few years
after the 10-year budget window that even these rosy estimates return
to deficits as we cope with the retirement of the baby boom generation.
Given the pressing needs of our Nation in the coming decades and the
uncertainty of the budget projections, I believe it is critical we
establish a mechanism that would put a cautionary curve on tax cuts and
new spending. In response to my question at a recent Senate Budget
Committee hearing, Mr. Barry Anderson of the Congressional Budget
Office responded that it would be prudent to establish such a
mechanism.
So I intend to work diligently with my colleagues on the committee to
craft some way to put a cautionary brake on these huge, foolhardy tax
cuts that are being proposed, until we can be more sure that the
surpluses will materialize. In my heart of hearts, I would prefer that
any tax cuts this year be limited to no more than half a trillion
dollars. That is my own viewpoint: $500 billion.
Americans believe in prudence. They would not blow the mortgage money
at the race track. Neither should we. Massive tax cuts of the size that
is being proposed, based merely on projections, merely on pieces of
paper--here they are. These are the projections. These are the
projected surpluses. There they are on paper. Can you spend it? What is
it worth? It is money not even in our pockets yet. It borders on
reckless disregard for the needs of our people and the promises we have
made to them to proceed in this manner and spend it based on 10-year
forecasts.
Even worse, we risk a return to serious budget deficits. As Mr.
Conrad has said so many times, let's not get back into the ditch which
our children would have to address. So, as we approach this fork in the
road, we owe it to our children and to our children's children to make
the right choice. We should invest in our future. We should set aside
funds for problems that we know are lurking just over the horizon. Let
us not make a risky U-turn and return to the rocky road of deficits as
far as the eye can see.
Mr. President, we will hear this refrain, that: ``It's the people's
money. Let's give it back. It's their money. It's their money.'' And it
is. But it is also their debt. It is also their deficits. It is also
their highway safety. It is also their water and sewage treatment
needs. It is also their children's education. It is theirs. It is also
their safety in the skies. It is all theirs. And we are the stewards.
How do we best serve them?
Mr. SARBANES. Will the Senator yield?
Mr. BYRD. I will yield to Senator Sarbanes.
Mr. SARBANES. As always, I think the very able Senator from West
Virginia has given us an extremely important message. Moderation in all
things is essentially what the Senator is talking about. He is saying:
Be cautious. Be prudent. These steps that the Senator set out, if one
goes over them carefully, are a balanced package which he is
recommending. He says: Watch the investments. Manage the economy. Pay
down the debt. Cover the necessities. Do those programs that are
essential to our future strength: Education, health care. Put aside
what we need for a rainy day, preserve Social Security and Medicare.
And then ease up on the taxes.
The Senator is not saying: Don't do a tax cut, in light of these
surpluses or projected surpluses. But let's be careful about it. And do
not pull the rug out from under the projections in the future.
Now that is a package that makes sense. That is what all the
commentators are telling us. The Baltimore Sun just today had an
editorial. I ask unanimous consent it be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Baltimore Sun, Feb. 7, 2001]
Calming Down Frenzy for a Big Federal Tax Cut
President Bush is a glib salesman for his massive tax-cut
program. But a closer look at the numbers should prompt
Congress to be careful.
For a conservative Republican, the president is using very
rosy revenue forecasts. The numbers he's using understate the
cost of ongoing programs. He's ignoring the extra cash needed
for his other proposals and congressional initiatives, such
as a prescription-drug plan. he hasn't factored in spending
to fix the Social Security and Medicare programs.
Mr. Bush is promising more in tax cuts than this country
can probably afford. He calls it a $1.6 trillion plan, but
other analysts say the true cost is closer to $2.5 trillion.
And that amount may not be affordable, even if large
surpluses pour in for a decade.
Congressional leaders would be wise to listen to David M.
Walker, who heads the General Accounting Office on Capitol
Hill. He said this week that ``no one should design tax or
spending policy pegged to the precise numbers in any 10-year
forecast.''
Yet this is what President Bush is doing. It's a mistake
Congress shouldn't duplicate.
Will there be a tax cut this year? Yes, indeed. The
momentum is there. But the size of the president's proposal
is unrealistic. And, sadly, some Republicans are talking
about adding even more to it in this form of capital gains
tax cuts and business tax reductions.
If there is to be a tax cut, Congress should see that it is
more tilted toward those at the lower and middle ranges of
the income scale than the president's proposal. Prudence is
essential in handling future surpluses that might never
occur. And there must be enough left on the table to deal
with other pressing needs, such as modernizing the military
and making repairs to old-age programs.
Mr. Bush has raised expectations, but Congress still must
carefully examine every aspect of this major proposal. We all
want smaller tax bills, but only if they are reasonable and
responsible.
Mr. SARBANES. ``Calming down frenzy for a big federal tax cut.
Congress should take a close look at Bush's forecast figures and a
decidedly cautious approach.''
They quote the Comptroller General from his testimony before our
committee where he said that: ``No one should design tax or spending
policy pegged to the precise numbers in any 10-year forecast''--exactly
the point that the able Senator made at the outset of his statement.
And they conclude: ``Mr. Bush has raised expectations, but Congress
still must carefully examine every aspect of this major proposal. We
all want smaller tax bills, but only if they are reasonable and
responsible.'' Reasonable and responsible--and, as the Senator has
pointed out, in the context of dealing with these basic needs:
Education, infrastructure, defense.
This administration has already sent the signal that they are going
to want a major step up in defense and of course, reserving a
significant amount
[[Page S1109]]
of the surplus to pay down the debt. When are we going to pay off the
debt, if we don't do it when we are running large surpluses and are at
a 4.2 percent unemployment rate? We have a strong economy now. We don't
want to risk the chance of knocking it off the track.
The Washington Post had an editorial entitled ``Fiscal Souffle.''
They conclude it by saying:
A rush to commit too much of the projected surplus could
take the country back to borrow and spend, just as the last
big tax cut did 20 years ago.
Mr. BYRD. Right.
Mr. SARBANES. I ask unanimous consent that that editorial be printed
in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, Feb. 1, 2001]
Fiscal Souffle
The Congressional Budget Office has raised by another $1
trillion its estimate of the likely budget surplus over the
next 10 years, and Republicans, led by President Bush, say
the new figures prove there's plenty of room to enact the
president' tax cut and still fulfill the government's other
obligations. Democrats, including notably the conservative
Blue Dogs in the House, say that's not so, that the true
surplus is unlikely to be that large and that Congress, while
it can safely grant a tax cut, should exercise caution in
doing so.
The people flashing the caution signs are right. CBO itself
warns that ``considerable uncertainty surrounds'' the
projections, and that once the baby boomers retire, the
outlook shifts from sunny to bleak. About 70 percent of the
10-year surplus is projected to occur in the last five years
of the period, for which the estimates are least dependable;
only 30 percent is projected to occur in the nearer term. The
supposed $3 trillion, 10-year surplus consists in part of
Medicare funds that both parties in Congress have said should
not be counted because Medicare is headed for a deficit. The
surplus makes no allowance for the funds that, even with
benefit cuts, will be required to avert that deficit, nor the
Social Security deficit that likewise lies ahead, nor the
increase in defense spending that both parties say is
necessary.
Make these and similar, smaller allowances, all of them
realistic, and the amount available for tax cuts quickly
falls. A realistic estimate, assuming everything goes right,
is probably well under $2 trillion, and in the past, members
of both parties have said they want to use some of that for
debt reduction. The true 10-year cost of the Bush tax cut,
meanwhile, is well in excess of the $1.3 trillion estimate
used in the campaign. In part that's because important
provisions would not take effect until toward the end of the
10-year estimating period. The 10-year cost of the Bush
proposals fully fledged would be more than $2 trillion.
``It doesn't leave room for much of anything else,'' Rep.
John Spratt, the ranking Democrat on the House Budget
Committee, said the other day. And it may grow; such
Republicans as House Majority Leader Dick Armey have begun to
say that the Bush proposal may be too small. The Blue Dogs
issued a statement yesterday warning that ``budget
projections can deteriorate just as rapidly as they have
improved in the last few years,'' and that a ``rush to
commit'' too much of the projected surplus could take the
country back to borrow-and-spend, just as the last big tax
cut did 20 years ago. That risk is real.
Mr. SARBANES. I thank the Senator. He has set out for us what,
really, is a historic decision we will be confronting. We must
recognize it as such.
Mr. BYRD. Yes.
Mr. SARBANES. It will affect generations to come. We must make a wise
and prudent decision. I thank the Senator from West Virginia for his
extraordinary leadership in this effort.
Mr. BYRD. I thank the distinguished Senator from Maryland.
Mr. CONRAD. Will the Senator yield for a question?
Mr. BYRD. Yes.
Mr. CONRAD. The Senator may recall when we had the Congressional
Budget Office personnel before us, they were the ones who made this
forecast of the surplus, and yet they themselves warned us of the
uncertainty of their projections.
Mr. BYRD. They did.
Mr. CONRAD. The Senator may recall that Mr. Anderson put up a chart
and the chart showed that in the fifth year of this 10-year forecast,
based on the previous variances in their projections, we could have a
budget that was anywhere from a $50 billion deficit to more than a $1
trillion surplus.
Mr. BYRD. Yes; here is the chart.
Mr. CONRAD. I see the Senator has that chart that shows in the year
2006, which is 5 years into this 10-year forecast, we could have
anywhere from a $50 billion deficit to over a $1 trillion surplus. That
is the uncertainty of their forecast, according to them.
Mr. BYRD. Yes, that is just 5 years out.
Mr. CONRAD. That is just 5 years out in a 10-year forecast. They are
warning, I take it--I would be interested in the Senator's reaction----
Mr. BYRD. That is my reaction.
Mr. CONRAD. That we should not bet the farm on a specific number with
a 10-year forecast because of the failure of previous forecasts to be
accurate over such an extended period.
Mr. BYRD. Exactly.
Mr. CONRAD. Isn't that the upshot of their testimony?
Mr. BYRD. That is the point we should take home with us.
Mr. SARBANES. In addition to the Post editorial from which I quoted,
I have a column that appeared in the Post written by Newsweek's Wall
Street Editor entitled ``Iffy Long-Term Numbers are Poor Excuse for
Huge Tax Cuts and Wild Spending.'' The discipline has to be on both
sides, on the tax cut and on the spending side.
No one is saying we should not do some tax cuts. Obviously, we need
to make some investments on the expenditure side if we are going to
meet the needs of our country. But they have to be responsible, they
have to be reasonable. And, as this says, iffy long-term numbers are a
poor excuse for huge tax cuts and wild spending. We need to keep that
admonition in mind as we proceed to engage in this debate.
I ask unanimous consent that this editorial be printed in the Record.
There being no objection, the material was ordered to be printed in
the Record, as follows:
[From the Washington Post, Feb. 6, 2001.]
Iffy Long-Term Numbers Are Poor Excuse for Huge Tax Cuts and Wild
Spending
(By Allan Sloan)
There are weeks when you have to wonder whether the
American economic attention span is longer than a sand
flea's. Consider last week's two big economic stories: The
Congressional Budget Office increased the projected 10-year
budget surplus by $1 trillion, and the Federal Reserve Board
cut short-term interest rates another half-percentage point
to try to keep the economy from tanking.
To me, the real story isn't either of these events; it's
their connection. The Fed is cutting rates like a doctor
trying to revive a cardiac patient because as recently as
last fall, Fed Chairman Alan Greenspan didn't forsee what
today's economy would be like. Meanwhile, although it's now
clear that even the smart, savvy, data-inhaling Greenspan
couldn't see four months ahead, people are treating the 10-
year numbers from the Congressional Budget Office as holy
writ.
Hello? If Greenspan missed a four-month forecast, how can
you treat 10-year numbers as anything other than educated
guesswork? Especially when the CBO has for years devoted a
chapter in its reports to ``The Uncertainly of Budget
Projections''?
Both the Fed's rate cuts and the CBO's projection are being
cited to justify a huge tax cut. Basing economic policy on
long-term projections is nuts, and I'd be saying the same
thing about Al Gore's campaign spending proposals if he had
become president. I sure wouldn't base my personal financial
decisions on ultra-iffy long-term numbers. I hope you
wouldn't run your life or business that way.
A stroll through the numbers would be helpful here, as
would a little history. Remember that through the mid-1990s,
experts were forecasting huge federal deficits as far as the
eye could see. Now they are projecting huge surpluses. When
you're dealing with a $10 trillion economy and looking 10
years out, relatively small changes make a huge difference--
if they come to pass.
The fact that the projected 10-year surplus grew to $5.6
trillion from $4.6 trillion a mere six months ago is an
obvious sign that these aren't the most reliable numbers in
the world.
Here's the math: The surplus grew about $1 trillion because
the CBO increased the projected average 10-year national
growth rate to about 3 percent (adjusted for inflation) from
the previous 2.8 percent or so. Another $600 billion comes
from dropping fiscal 2001 (the current year) from the 10-year
numbers and adding fiscal 2011. The 2011 number, being the
furthest out, is the shakiest one in the projection.
Those two changes add up to $1.6 trillion of higher
surpluses. But the total increased by only $1 trillion.
That's because last year's late-session congressional
spending spree knocked $600 billion off the 10-year number.
So, even though these numbers are huge, you see how
vulnerable they are to moving dramatically as taxes, spending
and economic projections change.
Now, let's subtract the $2.5 trillion Social Security
surplus, which is supposedly going to be ``saved,'' and you
have $3.1 trillion to play with. (I treat the Social Security
number as reliable because it's based on demographics rather
than on economic guesstimates.) Substract another $500
billion for
[[Page S1110]]
the Medicare surplus, because we're supposedly saving that
money, too. That leaves $2.6 trillion--provided the
projections are accurate, which they won't be.
The CBO hasn't put a cost on President Bush's proposed tax
cut package. The package supposedly costs $1.6 trillion, but
I'll bet that's way understated, which is typical of such
things. And it doesn't include the impact of the feeding
frenzy that will undoubtedly result with a big tax cut on the
table. Remember what happened when the Reagan tax cuts were
enacted in the early 1980s? In addition, Bush's campaign
proposals are ``back-loaded''--they cost far more in the
later years than in the earlier years.
The reason we used to have projected budget deficits as far
as the eye could see and now have seemingly endless surpluses
lies in the nature of projections--even those as
sophisticated and intellectually honest as the CBO's. The CBO
takes what's going on now, projects it forward and adjusts
for things such as higher or lower interest rates or debt
levels, or for programs such as Social Security. It assumes
that discretionary spending rises at a fixed rate, which
never happens, and that no major new changes in taxes will be
enacted. If things are going well in budgetland, as they are
now, projections will get better the further out you go. If
things are going badly, the projections will get worse.
Now we come to Social Security, which contributes hugely to
today's happy surplus situation but is projected to start
causing trouble, big time, around 2015. That's not all that
long after 2011, when the CBO's 10-year projection ends. In
2015, Social Security is predicted to start taking in less
cash than it pays out, so it will have to start cashing in
the Treasury securities in its trust fund. In remarkably
short order, Social Security will start running 12-figure
cash deficits unless something is done.
Until last year, the Social Security problem was projected
to start in 2013, but it's been put off because the economy
has been doing better than expected. That, combined with now-
slipping fiscal discipline, is why the federal budget numbers
turned around a few years ago. But if we go on a big tax-cut-
and-spend spree, which seems increasingly likely, and the
economy performs worse than now projected, we'll be back in
the fiscal soup quicker than you can say ``fiscal
responsibility.''
For now, I'm going to pass on what many people have taken
as Greenspan's support for tax cuts. Even if you believe him
to be semi-divine, you can parse his public utterances as
being cautious about tax cuts. (There is occasionally an
advantage to having been an English major in college.)
Finally, despite 10 years of projected huge surpluses, the
CBO predicts that the total national debt ($6.7 trillion)
would be higher on Sept. 30, 2011, than it is now ($5.6
trillion.) That's because, even though publicly held debt
shrinks to $800 billion from $3.4 trillion, the debt held in
government accounts, primarily Social Security, rises to $5.9
trillion from today's $2.2 trillion.
So if we go on a tax-cutting and spending spree, don't be
surprised to find us back in the soup a few years down the
road. Don't say that you had no way to know. The Fed and the
CBO were telling you the risks last week. You just weren't
listening.
Mr. BYRD. I thank the distinguished Senator from Maryland, a very,
very fine Senator, knowledgeable. He has had many years of experience.
I thank him for his contribution today and for the articles which he
has brought to our attention and which will be included in the
Congressional Record as he has requested. I value my association with
the Senator, and I thank him very much.
I yield the floor.
____________________