[Congressional Record (Bound Edition), Volume 146 (2000), Part 13]
[Senate]
[Pages 18188-18191]
[From the U.S. Government Publishing Office, www.gpo.gov]



                     BUDGET SURPLUSES AND DEFICITS

  Mr. DORGAN. Mr. President, I come to the floor of the Senate to 
discuss the fiscal policy questions that are ricocheting around this 
Chamber, and the House as well, about what the future will hold with 
respect to tax cuts, budget surpluses and/or deficits, investments in 
education, the possibility of reducing Federal indebtedness, and other 
spending. I want to talk about that because we now have a discussion in 
this town about the potential for big recurring budget surpluses every 
single year.
  It was not too many years ago in Washington, DC, that we had the 
leading economists in the country saying the 1990s would be a decade of 
anemic economic growth. We had very large budget deficits, the country 
was not doing well, and the economists said for the next decade this 
economy is going to grow very slowly.
  The economists did not know what they were talking about then. That 
is not unusual. I always thought there should be some sort of standard 
by which we measure economists and evaluate whether what they say has 
any validity in terms of what we experience. Of course, we have no such 
yardsticks, so these economists keep on talking and people keep on 
listening. That is why I am here today: What do we expect in the 
future, and what should we do in this country as a reasonable response 
to those expectations.
  I want to for a moment talk about the early 1990s and recall where we 
were. The unified budget deficit in 1992 was $290 billion and rising--
$290 billion just for that year and rising. Now we have a surplus in 
the year 2000. Economists said we would have continual, larger and 
larger deficits. That was wrong. We now have a surplus.
  Economic growth: Then it averaged 2.8 percent. We were apparently at 
the end of, or beginning to see the end of, a recession. Economic 
growth averaged 2.8 percent annually for the previous 12 years, and it 
looked as if we were finally ending a recession. Since 1993, economic 
growth has averaged 3.9 percent a year.
  Jobs: From 1988 to 1992, we had a difficult period, one of the worst 
in history in terms of the creation of new

[[Page 18189]]

jobs. The economy did not produce many new jobs. From 1993 to date, 
over 22 million new jobs have been created in this country.
  Unemployment: It averaged 7.1 percent in the 12 years prior to 1993. 
Today it is at 4.1 percent on average, the lowest level in 30 years.
  Home ownership fell from 1981 to 1992. Now it is the highest in 
history.
  Median family income fell by about $1,800 from 1988 to 1992, adjusted 
for inflation. It has increased by over $5,000 since 1993.
  Real wages fell 4.3 percent in 12 years; real wages are up 6.5 
percent since 1993.
  Welfare rolls increased 22 percent from 1981 to 1992; since then it 
has decreased by 53 percent.
  The Dow Jones was 3,000 in 1992. It is 11,000 now.
  The point is that this has been a very interesting time. Economists 
predicted this would not happen, but it did. Our economy is growing in 
a very robust fashion, and a lot of people are claiming credit for it. 
Probably everybody deserves a bit of the credit.
  The 1993 Economic Reform Act that was passed by Congress, which 
reduced the deficit and which made tough choices, was a signal moment 
in this country's fiscal policy history. It dramatically changed what 
happened in this country. We had the courage to do what was right. It 
was politically difficult to do. In fact, my party paid a price for it 
in the next election. Guess what. It put this country back on track, 
away from the growing deficits toward economic growth and toward 
opportunity.
  It is the year 2000, and we have had a remarkable 7 years. Now we are 
told by the same economists who predicted anemic growth for that decade 
that in the next decade we will have nothing but ever larger increasing 
budget surpluses.
  Should we believe them? Is that the basis on which we should develop 
our future fiscal policy for this country? I do not think so. Because 
we are inebriated by the sound of 10 years of surpluses, we have 
politicians walking all around the political landscape saying: What we 
should do now is pass bills that call for massive tax cuts; lock it in, 
they say; put it in law; let's provide $1 trillion or $1.5 trillion in 
tax cuts.
  It is very unwise, in my judgment, to do that. We do not know that we 
will have sustained economic growth. We do not know whether there will 
or will not be a recession 2, 3, or 5 years from now. We don't know 
what the future holds. We would be very wise to be cautious in how we 
handle this issue of future surpluses.
  We face some really critical choices. Those choices can provide both 
risk and opportunity: The risk of slipping back into big deficits, 
which no one in this country wants, and the opportunity to move forward 
and build on our recent economic successes. Those are the risks: Are we 
going to move backwards or forwards?
  I am not here on the floor of the Senate to say one side is all wrong 
and the other side is all right on this issue, but I will say this. 
Those who say the only agenda in fiscal policy is to begin cutting 
taxes right now, and cut taxes deeply, and cut taxes for those who have 
the most income in this country, risk slipping us right back into big 
deficits, putting us right back into the same old deficit ditch. That 
is the last place this country ought to want to be.
  How much budget surplus is there really? Even if all the things the 
economists say might happen, how much real budget surplus do we have? 
There have been some interesting pieces written in the last few weeks 
about this. There was a wonderful piece written by David Broder, a very 
respected columnist, in the Washington Post. There was an op-ed piece 
written by Paul Krugman, an economist, in the New York Times. There was 
a good piece in the U.S. News & World Report. They raised these 
questions, which we should raise here in Congress.
  How much surplus do we really have to use, if we are honest about 
where we are headed and what we are doing? Let's look at it. CBO says, 
$4.6 trillion in surplus over the next 10 years. I come from a town of 
300 people and a high school class of 9. It is really hard for me to 
grasp what a trillion dollars might be. In fact, it is hard for me to 
grasp a billion or a million dollars--but trillions of dollars, $4.6 
trillion. So people hear that word, and it is as if they have taken a 
big bottle of Jack Daniels and started slugging it down. All of a 
sudden they are talking about all kinds of wild, irresponsible plans 
they have because we have $4.6 trillion in surplus.
  But, of course, we do not have $4.6 trillion in surplus. What we 
have, in fact, if you take the Social Security trust funds away, is 
$2.2 trillion in surplus. But we really do not have $2.2 trillion in 
surplus. If you take the Medicare trust fund away--and everybody says 
they want to have a lockbox; and I assume you would want to lock a box 
with something in it--so you take that away, then you have $1.8 
trillion available.
  And then you must adjust that figure for realistic spending, that is, 
how much money we are going to spend. The budget caps suggest that we 
will actually reduce Federal spending in domestic discretionary 
accounts in this country. However, we will have a population that is 
increasing and some inflation. And we are not going to say, with 
respect to law enforcement and education, and all the other essential 
functions of Government, that we are going to actually spend less next 
year than we are spending this year. That is not realistic. So 
adjusting for some realistic investment that makes this a good country 
to live in--building roads and teaching kids, providing for our common 
defense, all the things that make us a good country--then you have $1.2 
trillion left.
  Then using some of the money for extending the solvency of Social 
Security and Medicare, which all of us know we must do because people 
are growing older and living better lives, you have $700 billion left. 
That is the surplus.
  This analysis, incidentally, comes from the Center on Budget and 
Policy Priorities. They say, the real budget surplus is not $4.6 
trillion or $2.2 trillion. The real budget surplus is probably about 
$700 billion.
  So then how do you reconcile people coming to the floor of the Senate 
telling us they want to cut taxes by $1.3 trillion or more? The only 
way you reconcile that puts us right back in the same deficit ditch 
that we have been in before.
  Here is another analysis that comes from the Brookings Institution. 
This one says--using the exact same analysis but different elements of 
it--we do not have a $700 billion surplus, we have only about a $350 
billion surplus--about $35 billion a year. That is the real surplus. 
They made some different calculations. I will not go through them all.
  But the point is this: Under either of these analyses--confirmed and 
also discussed in the Paul Krugman piece, the David Broder piece, and 
others--under either of these analyses, we do not have trillions of 
dollars in surplus. I wish we did, but we do not. It would be terribly 
unwise for this country to decide to lock into law very large tax 
cuts--the biggest benefits of those cuts going to the wealthiest 
citizens in this country--at a time when it will result in large 
deficits in the future. We would be very smart to be very cautious as 
we approach this.
  This is from Paul Krugman, who I believe is a really interesting 
thinker. He wrote an op-ed piece in the New York Times:

       The most likely prospect is that those big surpluses won't 
     materialize. And when the chickens that didn't hatch come 
     home to roost, we will rue the days when, misled by sloppy 
     accounting and rosy scenarios, we gave away the national nest 
     egg.

  His point is a very important one. I am going to talk about it in a 
moment. But what are our priorities if we are realistic about what we 
are going to do and what we think will happen? Our priorities ought to 
be to pay down the Federal debt first and foremost. If in bad economic 
times you increase the Federal debt, in good economic times you ought 
to reduce the Federal debt. That is the import of what Paul Krugman was 
saying, among other things.
  Here is another piece from U.S. News & World Report:


[[Page 18190]]

       Still, the same lack of understanding about the budget is 
     evident today as we head into the crucial weeks of the 
     campaign with big budget numbers and big political promises. 
     If we get it wrong again, we could head back to those awful 
     years--decades of apparently insuperable deficits, slow 
     growth, and recurrent recessions.
       All of us could relate to the numbers better if we could 
     knock off a few zeros from the trillions being discussed. 
     Most American families with a lot of debt would know what to 
     do with a windfall. They'd instinctively feel better if they 
     used the money to redeem loans, freeing themselves from long-
     term obligations and insecurity, and I suggest the same 
     principle should apply to the country, which is in exactly 
     the same position.

  The point is this. With all the opportunities we have ahead of us if, 
in fact, we have budget surpluses, those will be lower than generally 
expected. And of all the opportunities ahead of us, the first choice 
and first claim, in my judgment, ought to be to reduce the Federal 
debt.
  We have a lot of proposals out there. There is one by Governor Bush 
where he talks about very substantial tax cuts. Frankly, I do not 
support them. It is not that I do not support providing some targeted 
tax cuts. Working families deserve some help in this area. But we 
cannot come around here with $1 trillion or $1.4 trillion in tax cuts, 
given what we expect the real surplus to be. It would put us right back 
in the same deficit ditch, right back in the same ditch.
  What we need to do in this political debate is to see if we can't, as 
Republicans and Democrats, understand that when we respond to this 
question of the fiscal policy of this country, and what the future 
might hold, that we be reasonably conservative and cautious, and 
protect ourselves from retreating back to the same policies we had 
previously.
  We are all responsible for those policies. There is not a set of 
fingerprints that lays the responsibility at one door with respect to 
what happened in this country. But we all ought to be responsible, as 
well, to say we are not going to let it happen again. In my judgment, 
we can do that now by saying to those who are campaigning for office--
both for this Chamber and the other body, and also for the Presidency--
let's have a real discussion about what the real surplus might be, and 
then evaluate what our priorities are with respect to that.
  Now, the tax cuts, I am not going to talk about them so much. The tax 
cuts that are being proposed around here are terrible. In almost every 
case they provide the biggest benefits to those who need them least. I 
know people will say: Well, that is all the same old class warfare. It 
is not class warfare. The bottom 60 percent of the population, earning 
incomes up to $40,000, get $227 a year; and the top 1 percent get 
$46,000 each. That is not tax class warfare, that is just a tax cut 
that should not happen.
  The question is, What should we do now? In my judgment, what we 
should do is establish a set of priorities, both in this Presidential 
campaign and in the campaigns for the Congress--the Senate and the 
House--and say, the priorities for using the actual budget surplus, 
which is much lower than the trillions of dollars being kicked around 
by some, is to, No. 1, pay down the Federal debt; No. 2, ensure the 
long-term solvency of Social Security and Medicare--we have a 
responsibility to do that--No. 3, address this country's urgent needs, 
and that means making some investments that we need in education, and 
other areas; and, no. 4, provide targeted tax relief for working 
families. All of these represent the priorities in the order that I see 
them. Others may see them differently.
  I think it is important, before we start down this road, to address 
this question of whether the trillions of dollars people are kicking 
around as expected future surpluses are going to be real. The answer 
is, with almost all thoughtful economists responding to it, to say, no, 
these are not real; the surplus is going to be much, much smaller than 
that. That ought to temper our desire and demand and appetite for these 
huge tax cuts being proposed that will result in very large future 
deficits.
  The single best thing we could do for this country and its children 
and our future is to begin paying down the Federal debt with the actual 
surpluses that will come in future years. It is the single most 
important way of strengthening this country's economy.
  I seldom ever quote Alan Greenspan because we have such disagreements 
on monetary policy, but I will break that rule today. He came to 
Congress, the Senate Select Committee on Aging, and said:

       . . . there are limited fiscal resources in this country 
     and that until we have strong evidence that there is a major 
     structural increase in the surplus, that trying to commit it 
     to various different program[s] or even tax cuts, I think, is 
     unwise.

  His point is, we ought to use the surplus to reduce indebtedness. We 
have a nearly $5.7 trillion Federal debt. If during bad times, during 
tough times, this country had to run up its debt in order to make ends 
meet, then during good times the greatest gift we could offer to 
America's children is to say we will reduce that indebtedness. It is 
not just a gift to children, it also happens to be the best way to 
assure long-term economic growth.
  I will make one additional point as we begin discussing fiscal policy 
and tax issues. My presentation here will not dim the appetite of those 
who come to the floor and say: I don't care about numbers. I don't care 
about philosophy. I was elected to Congress for one thing, and I am 
going to propose tax cuts until my last breath. I am going to propose 
tax cuts because those are the only two words I know. I don't care 
about how it all adds up or subtracts or how it all works out. Good for 
them. But they are the kind of people who steer this country into the 
deficit ditch, and I, for one, am not going to be a part of it.
  I would say to them this: To the extent that we have some ability--
and I think there is some ability, even though we are going to have 
smaller surpluses--to provide tax cuts, I would like tax cuts to go not 
just to the people who have benefited most from this economy. We have, 
after all, one-half of the world's billionaires in the United States; 
good for us--but when we talk about tax cuts, I would much sooner see 
scarce resources go to working families. They are the ones who need 
them most.
  It is interesting. Every time someone talks about a tax cut around 
here, they only talk about income taxes. Here are the taxes we collect 
in this country. This big red piece of the pie is payroll taxes. Those 
at the lowest end of the economic ladder pay a payroll tax that is the 
same tax as those at the highest end. Nobody wants to talk about these 
payroll taxes. These are the ones that have increased very 
substantially in recent years. So when we talk about tax cuts, maybe we 
could talk about trying to help those who are paying payroll taxes as 
well, rather than just those who are paying income taxes.
  Nearly 100 percent of the bottom fifth of our population are paying 
more in payroll taxes than income taxes. In fact, even the middle 
fifth, those making between $43,000 and $65,000 a year, 80 percent of 
them are paying more in payroll taxes than in income taxes. Yet every 
time you hear somebody saying let's cut taxes, all they want to talk 
about is income taxes because that means their tax cut proposal is 
going to benefit those with the most income. What about a tax cut 
proposal that says we are going to offset some of the burden of those 
folks who are going to work every day for the minimum wage and are 
paying a heavy payroll tax. How about giving them a little relief.
  So when the next time comes that we in Congress are talking about tax 
cuts, I am going to bring some of these charts out and ask: Does this 
not count, the pie chart that shows payroll taxes? Does it not count 
that the income earners at the lowest end of the scale are paying these 
things and it doesn't matter somehow? They don't deserve any help? That 
is just a tax that we won't talk about. That is not fair. It is not the 
way to do business.
  I think the warnings--perhaps the small craft warnings at this point, 
but major warnings later--by some good economists are saying: Watch out 
what you are doing here, talking about $4 trillion of tax cuts or $4 
trillion of surplus or a $2.2 trillion surplus or a $1.5

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trillion tax cut; watch what you are doing here and be careful, because 
this is not going to materialize, and if you do what you are talking 
about doing, it will pose significant dangers to the American economy.
  The best way to assure economic growth and opportunity in this 
country's future is to decide that if we have surpluses--and I hope we 
do--we will commit first and foremost those budget surpluses to 
reducing our country's indebtedness. Again, if in tough times you run 
up the debt, in good times this country ought to be able to pay it 
down. That is the greatest gift to America's children, and that is also 
the surest way to long-term economic health, growth, and opportunities.
  I yield the floor.
  The PRESIDING OFFICER. The Senator from North Carolina.

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