[Congressional Record Volume 149, Number 91 (Thursday, June 19, 2003)]
[Senate]
[Pages S8222-S8224]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           THE BUDGET DEFICIT

  Mr. HOLLINGS. Mr. President, it is said that editorialists can 
editorialize but can't take criticism. Not true. Chairman Donald Graham 
and editorial page editor Fred Hiatt readily accepted the following 
Washington Post editorial this morning for which I profoundly thank 
them. Otherwise, since I referred to Pete Peterson, in fairness let me 
also include his column in the Record.
  I ask unanimous consent the articles be printed in the Record.
  There being no objection, the material was ordered to be printed in 
the Record, as follows:

                [From the New York Times, June 8, 2003]

                        Deficits and Dysfunction

                         (By Peter G. Peterson)

       I have belonged to the Republican Party all my life. As a 
     Republican, I have served as a cabinet member (once), a 
     presidential commission member (three times), an all-purpose 
     political ombudsman (many times) and a relentless crusader 
     whom some would call a crank (throughout). Among the bedrock 
     principles that the Republican Party has stood for since its 
     origins in the 1850's is the principle of fiscal 
     stewardship--the idea that government should invest in 
     posterity and safeguard future generations from unsustainable 
     liabilities. It is a priority that has always attracted me to 
     the party. At various times in our history (especially after 
     wars), Republican leaders have honored this principle by 
     advocating and legislating painful budgetary retrenchment, 
     including both spending cuts and tax hikes.
       Over the last quarter century, however, the Grand Old Party 
     has abandoned these original convictions. Without every 
     renouncing stewardship itself--indeed, while talking 
     incessantly about legacies, endowments, family values and 
     leaving ``no child behind''--the G.P.O leadership has by 
     degrees come to embrace the very different notion that 
     deficit spending is a sort of fiscal wonder drug. Like taking 
     aspirin, you should do it regularly just to stay healthy and 
     do lots of it whenever you're feeling out of sorts.
       With the arrival of Ronald Reagan in the White House, this 
     idea was first introduced as part of an extraordinary 
     ``supply-side revolution'' in fiscal policy, needed (so the 
     thinking ran) as a one-time fix for an economy gripped by 
     stagflation. To those who worried about more debt, they said, 
     Relax, it won't happen--we'll ``grow out of it.'' Over the 
     course of the 1980's, under the influence of this revolution, 
     what grew most was federal debt, from 26 to 42 percent of 
     G.D.P. During the next decade, Republican leaders became less 
     conditional in their advocacy. Since 2001, the fiscal 
     strategizing of the party has ascended to a new level of 
     fiscal irresponsibility. For the first time ever, a 
     Republican leadership in complete control of our national 
     government is advocating a huge and virtually endless policy 
     of debt creation.
       The numbers are simply breathtaking. When President George 
     W. Bush entered office, the 10-year budget balance was 
     officially projected to be surplus of $5.6 trillion--a vast 
     boon to future generations that Republican leaders ``firmly 
     promised'' would be committed to their benefit by, for 
     example, prefinancing the future cost of Social Security. 
     Those promises were quickly forgotten. A large tax cut and 
     continued spending growth, combined with a recession, the 
     shock of 9/11 and the bursting of the stock-market bubble, 
     pulled that surplus down to a mere $1 trillion by the end of 
     2002. Unfazed by this turnaround, the Bush administration 
     proposed a second tax-cut package in 2003 in the face of huge 
     new fiscal demands, including a war in Iraq and an urgent 
     ``homeland

[[Page S8223]]

     security'' agenda. By midyear, prudent forecasters pegged the 
     10-year fiscal projection at a deficit of well over $4 
     trillion.
       So there you have it: in just two years there was a $10 
     trillion swing in the deficit outlook. Coming into power, the 
     Republican leaders faced a choice between tax cuts and 
     providing genuine financing for the future of Social 
     Security. (What a landmark reform this would have been!) They 
     chose tax cuts. After 9/11, they faced a choice between tax 
     cuts and getting serious about the extensive measures needed 
     to protect this nation against further terrorist attacks. 
     They chose tax cuts. After war broke out in the Mideast, they 
     faced a choice between tax cuts and galvanizing the nation 
     behind a policy of future-oriented burden sharing. Again and 
     again, they chose tax cuts.
       The recent $10 trillion deficit swing is the largest in 
     American history other than during years of total war. With 
     total war, of course, you have the excuse that you expect the 
     emergency to be over soon, and thus you'll be able to pay 
     back the new debt during subsequent years of peace and 
     prosperity. Yet few believe that the major drivers of today's 
     deficit projections, not even the war on terror, are 
     similarly short-term. Indeed, the biggest single driver of 
     the projections, the growing cost of senior entitlements, are 
     certain to become much worse just beyond the 10-year horizon 
     when the huge baby-boom generation starts retiring in 
     earnest. By the time the boomer age wave peaks, workers will 
     have to pay the equivalent of 25 to 33 percent of their 
     payroll in Social Security and Medicare before they retire 
     just to keep those programs solvent.
       Two facts left unmentioned in the deficit numbers cited 
     above will help put the cost of the boomer retirement into 
     focus. First, the deficit projections would be much larger if 
     we took away the ``trust-fund surplus'' we are supposed to be 
     dedicating to the future of Social Security and Medicare; and 
     second, the size of this trust fund, even if we were really 
     accumulating it--which we are not--dwarfed by the $25 
     trillion in total unfinanced liabilities still hanging over 
     both programs.
       A longer time horizon does not justify near-term deficits. 
     If anything, the longer-terms demographics are an argument 
     for sizable near-term surpluses. As Milton Friedman put it, 
     if you cut taxes without cutting spending, you aren't really 
     reducing the tax burden at all. In fact, you're just pushing 
     it off yourself and onto your kids.
       You might suppose that a reasoned debate over this deficit-
     happy policy would at least be admissible within the 
     ``discussion tent'' of the Republican Party. Apparently, it 
     is not. I've seen Republicans get blackballed for 
     merely observing that national investment is limited by 
     national savings; that large deficits typically reduce 
     national savings; or that higher deficits eventually trigger 
     higher interest rates. I've seen others get pilloried for 
     picking on the wrong constituency--for suggesting, say, that 
     a tax loophole for a corporation or wealthy retiree is no 
     better, ethically or economically, than a dubious welfare 
     program.
       For some ``supply side'' Republicans, the pursuit of lower 
     taxes has evolved into a religion, indeed a tax-cut theology 
     that simply discards any objective evidence that violates the 
     tenets of the faith.
       So long as taxes are cut, even dissimulation is allowable. 
     A new Republican fad is to propose that tax cuts be 
     officially ``sunsetted'' in 2 or 5 or 10 years in order to 
     minimize the projected revenue loss--and then to go out and 
     sell supporters that, of course, the sunset is not to be 
     taken seriously and that rescinding such tax cuts is 
     politically unlikely. Among themselves, in other words, the 
     loudly whispered message is that a setting sun always rises.
       What's remarkable is how so many elected Republicans go 
     along with the charade. The same Republican senators who 
     overwhelmingly approved (without a single nay vote) the 
     Sarbanes-Oxley Act to crack down on shady corporate 
     accounting of investments worth millions of dollars see 
     little wrong with turning around and making utterly 
     fraudulent pronouncements about tax cuts that will cost 
     billions, or indeed, even trillions of dollars.
       For some Republicans, all this tax-cutting talk is a mere 
     tactic. I know several brilliant and partisan Republicans who 
     admit to me, in private, that much of what they say about 
     taxes is of course not really true. But, they say it's the 
     only way to reduce government spending: chop revenue and 
     trust that the Democrats, like Solomon, will agree to cut 
     spending rather than punish our children by smothering them 
     with debt.
       This clever apologia would be more believable if 
     Republicans--in all matters other than cutting the aggregate 
     tax burden--were to speak loudly and act decisively in favor 
     of deficit reductions. But it's hard to find the small-
     government argument persuasive when, on the spending front, 
     the Republican leaders do nothing to reform entitlements, 
     allow debt-service costs to rise along with the debt and urge 
     greater spending on defense--and when these three functions 
     make up over four-fifths of all federal outlays.
       The starve-government-at-the-source strategy is not only 
     hypocritical, it is likely to fail--with great injury to the 
     young--once the other party decides to raise the ante rather 
     than play the sucker and do the right thing. When the 
     Democratic presidential contender Dick Gephardt proposed in 
     April a vast new national health insurance plan, he justified 
     its cost, which critics put at more than $2 trillion over 10 
     years, by suggesting that we ``pay'' for it by rescinding 
     most of the administrative tax legislation. Oddly, it never 
     occurred to these Republican strategists that two can play 
     the spend-the-deficit game.
       Not surprisingly, many Democrats have thrown a spotlight on 
     the Republicans' irresponsible obsession with tax cutting in 
     order to improve their party's image with voters, even to the 
     extent of billing themselves as born-again champions of 
     fiscal responsibility. Though I welcome any newcomers to the 
     cause of genuine fiscal stewardship.
       I doubt that the Democratic Party as a whole is any less 
     dysfunctional than the Republican Party. It's just 
     dysfunctional in a different way.
       Yes, the Republican Party line often boils down to cutting 
     taxes and damning the torpedoes. And yes, by whipping up one-
     sided popular support for lower taxes, the Republicans pre-
     empt responsible discussion of tax fairness and force many 
     Democrats to echo weakly, ``Me, too.'' But it's equally true 
     that the Democratic Party line often boils down to boosting 
     outlays and damning the torpedoes. Likewise, Democrats 
     regularly short-circuit any prudent examination of the single 
     biggest spending issue, the future of senior entitlements, 
     by castigating all reformers as heartless Scrooges.
       I have often and at great length criticized the free-lunch 
     games of many Republican reform plans for Social Security--
     like personal accounts that will be ``funded'' by deficit-
     financed contributions. But at least they pretend to have 
     reform plans. Democrats have nothing. Or as Bob Kerrey puts 
     it quite nicely, most of his fellow Democrats propose the 
     ``do-nothing plan,'' a blank sheet of paper that essentially 
     says it is O.K. to cut benefits by 26 percent across the 
     board when the money runs out. Assuming that Democrats would 
     feel genuine compassion for the lower-income retirees, widows 
     and disabled parents who would be most affected by such a 
     cut, I have suggested to them that maybe we ought to 
     introduce an ``affluence test'' that reduces benefits for fat 
     cats like me.
       To my amazement, Democrats angrily respond with irrelevant 
     cliches like ``programs for the poor are poor programs'' or 
     ``Social Security is a social contract that cannot be 
     broken.'' Apparently, it doesn't matter that the program is 
     already unsustainable. They cling to the mast and are ready 
     to go down with the ship. To most Democratic leaders, federal 
     entitlements are their theology.
       What exactly gave rise to this bipartisan flight from 
     integrity and responsibility--and when? My own theory, for 
     what it's worth, is that it got started during the ``Me 
     Decade,'' the 1970's, when a socially fragmenting America 
     began to gravitate around a myriad of interest groups, each 
     more fixated on pursuing and financing, through massive 
     political campaign contributions, its own agenda than on 
     safeguarding the common good of the nation. Political 
     parties, rather than helping to transcend these fissures and 
     bind the country together, instead began to cater to them and 
     ultimately sold themselves out.
       I'm not sure what it will take to make our two-party system 
     healthy again. I hope that in the search for a durable 
     majority, Republicans will sooner or later realize that it 
     won't happen without coming to terms with deficits and debts, 
     and Democrats will likewise realize it won't happen for them 
     without coming to terms with entitlements.
       Whether any of this happens sooner or later, of course, 
     ultimately depends upon the voters. Perhaps we will soon 
     witness the emergence of a new and very different crop of 
     young voters who are freshly engaged in mainstream politics 
     and will start holding candidates to a more rigorous and 
     objective standard of integrity. That would be good news 
     indeed for the future of our parties.
       In any case, I fervently hope that America does not have to 
     drift into real trouble, either at home or abroad, before our 
     leaders get scared straight and stop playing chicken with one 
     another. That's a risky course, full of possible disasters. 
     It's not a solution that a great nation like ours ought to be 
     counting on.
                                  ____

  There being no objection, the material was ordered to be printed in 
the Record, as follows:

               [From the Washington Post, June 19, 2003]

                       Delusional on the Deficit

                        (By Ernest F. Hollings)

       Nobody is paying any attention to the budget deficit. Last 
     month the House Budget Committee's Democrats forecast a 
     deficit of nearly $500 billion, and The Post reported the 
     story on Page A4. Last week the Congressional Budget Office 
     reported that the deficit would balloon to a record $400 
     billion-plus, and The Post again buried the story on A4. 
     Spending trust funds, such as Social Security, is what keeps 
     the estimate at $400 billion. The actual deficit will be 
     approximately $600 billion.
       That's a win for Mitch Daniels. The goal of the departed 
     Office of Management and Budget director was to keep any news 
     that could hurt President Bush's reelection prospects off the 
     front page, and The Post willingly aided and abetted him. In 
     fact, when Daniels left two weeks ago to run for governor of 
     Indiana, he told The Post that the government is ``fiscally 
     in fine shape.'' Good grief! During his 29-month tenure, he 
     turned a so-called $5.6 trillion, 10-year budget surplus into 
     a $4 trillion deficit--a mere $10 trillion downswing in just 
     two years. If this is

[[Page S8224]]

     good fiscal policy, thank heavens Daniels is gone.
       Congress is no better than the press. Republicans, totally 
     in control of this town, just casually raised the limit on 
     the national debt by a record trillion dollars so the 
     president could borrow more money to pay for tax cuts. I say 
     casually because the seriousness of this move was passed over 
     and hardly debated. In The Post, this story wasn't even 
     worthy of A4. It was relegated to A8.
       Bush and Daniels used to talk about how they would repay 
     the nation's debt more quickly than any administration in 
     history. Before Sept. 11, 2001, the president bragged that 
     his budget reserved $1 trillion for unforeseen circumstances. 
     Perish the thought that the war on terrorism, Afghanistan and 
     Iraq cost $1 trillion. Those factors had an impact, but the 
     real culprit, according to the nonpartisan Concord Coalition, 
     is that this president has cut $3.12 trillion in revenue 
     since taking office. These are the largest tax cuts in 
     history, yet the administration claims they have no 
     relationship to the record deficits reported on Page A4. 
     Amazingly, he asks for more.
       The London-based Financial Times, in a front-page lead 
     story, recently reported the Treasury Department projection 
     that at the present rate, fixing the deficit would require 
     ``the equivalent of an immediate and permanent 66 percent 
     across-the-board income tax increase.'' The White House deep-
     sixed the Treasury study. The Post ignored it.
       Former commerce secretary Peter Peterson, a lifelong 
     Republican, says that every time this administration faces a 
     choice, it chooses tax cuts. Between fiscal responsibility 
     and tax cuts, it picks tax cuts. Between preserving Social 
     Security and tax cuts, it picks tax cuts. Between providing 
     necessary funds to fight the war on terrorism and tax cuts, 
     it picks tax cuts. ``Again and again,'' Peterson says, ``they 
     choose tax cuts.''
       The question: How huge must the deficit grow for this A4 
     story to make the front page, and for the public to scream 
     for relief? Across the country teachers are being laid off, 
     there are more kids per classroom, the school year is 
     shorter, and tuition is up at state colleges. Bus service is 
     being cut off, volunteers are running park systems, prisoners 
     are being released, and subsidies for the working poor are 
     being slashed.
       How much more must we dismantle before the public cannot 
     stomach this? Will it take a shutdown of all the national 
     parks? Or the release of all federal prisoners because we 
     can't afford to guard them? Or will workers need to pay half 
     their salaries to keep Social Security and Medicare from the 
     chopping block?
       I dread to think how bad it has to get before Bush makes 
     some changes. But the Republican leadership in Congress is in 
     lockstep. They've just passed a budget calling for a $600 
     billion deficit each year, every year, for the next 10 years.

                          ____________________