[Congressional Record (Bound Edition), Volume 146 (2000), Part 2]
[House]
[Pages 1624-1626]
[From the U.S. Government Publishing Office, www.gpo.gov]



 IMPROVING BUDGET PROCESS--KEEPING SOCIAL SECURITY AND MEDICAID SOLVENT

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 19, 1999, the gentleman from Michigan (Mr. Smith) is recognized 
during morning hour debates for 5 minutes.
  Mr. SMITH of Michigan. Madam Speaker, I would like to talk today 
about a couple of challenges facing this country.
  One challenge is, is there a way to improve our budget process? 
Should we go to a biennial budget or other techniques that might be 
used to better serve the taxpayers of this country? And the second 
issue is the tremendous challenge of keeping Social Security and 
Medicare solvent.
  On page 46 of yesterday's Roll Call, I wrote an article: 
``Entitlement Reform the Way to Go.''
  Madam Speaker, I include for the Record a copy of the article on page 
46 of yesterday's Roll Call:

 The One Thing I Would Change About Congress . . . Entitlement Reform 
                             the Way to Go

                          (By Rep. Nick Smith)

       For 224 years, Congress has wrestled with the budget. As an 
     ex-wrestler and current Budget Committee member, I know that 
     can be both strenuous and challenging.
       This has led some Members to seek a ``quick fix'' in an 
     attempt to end the annual struggle. Biennial budgeting, 
     however, is a

[[Page 1625]]

     mirage that distracts us from the real budget problems we 
     face.
       Biennial budgeting would be an enormous change in our 
     budget processes, the biggest since at least 1974. The 
     effects on the budget struggle would be far-reaching and very 
     largely negative from the Congressional perspective. Biennial 
     budgeting will deprive Congress of much of the leverage it 
     needs to compete equally with the administration. 
     Specifically, Congress gives up.
       Reconciliation in off years. The Congressional majority 
     could lose much of its power in election years to use 
     reconciliation. This will endanger its priorities in election 
     years and would rule over the House tax cut strategy for this 
     year.
       Congress could include multiple reconciliation instructions 
     in a biennial budget resolution, but this deprives Congress 
     of flexibility needed to react to changing political and 
     economic needs. The majority would have to fashion its 
     political strategy for the next two years just three months 
     after the preceding election.
       Control over the agencies. The annual budget process allows 
     Congress to express its will to government agencies. I know 
     that we were more eager to cooperate with Congress at budget 
     time when I was a member of the Nixon administration. 
     Biennial budgeting will reduce our leverage to hold agencies 
     accountable and encourage defiance.
       Budget accuracy and flexibility. Economic forecasting is 
     highly uncertain. The Congressional Budget Office estimate 
     for fiscal 2000 two years ago was for a $70 billion unified 
     budget deficit. That's $240 billion off the current fiscal 
     2000 estimate of a $170 billion unified budget surplus. The 
     estimate has shifted by $40 billion just since October 1999.
       This uncertainty means, the President would bargain for 
     high second-year spending, and we would frequently need or be 
     tempted to reopen the budget. When we reopen the budget, we 
     would find ourselves with little leverage against a pre-
     funded administration that can resist unwanted budget 
     modification with near impunity. When revenue is lower or 
     spending is higher than projected, the pressure to increase 
     fees, taxes and borrowing, rather than cut the 
     administration, would be considerable.
       Leverage over spending. Congress will inevitably grapple 
     with supplemental spending requests in the off years. In the 
     absence of pressure to produce a complete budget, an 
     administration will always have poll-tested and politically-
     motivated requests in off years that will be hard to fend off 
     in the absence of broader budget issues.
       As a result, we will pass supplemental appropriations bills 
     in most years that will grow as Members add their own pet 
     election-year projects. All of this threatens even the very 
     modest spending restraint that we've been able to exercise 
     over the last five years.
       I find it surprising, then, to hear of growing support for 
     moving from our current annual budget to a biennial budget 
     process. It does seem sometimes that we are on a budget 
     treadmill that never stops. There is no solution, however, in 
     ducking our responsibilities to exercise the power the 
     Constitution grants us. Power atrophies unless it is used, 
     and that is what will surely continue to happen to 
     Congressional power if we adopt biennial budgeting.
       Members interested in getting a handle on the budget should 
     focus on substance rather than process. The truth is that the 
     discretionary potion of the budget--which is the substance of 
     the 13 annual appropriations bills--makes up just one-third 
     of total federal spending.
       The rest of our spending--chiefly, entitlement programs--is 
     on automatic pilot and rising faster than inflation. This 
     growth in entitlement spending puts enormous pressure on the 
     other parts of the budget and will inevitably necessitate 
     higher taxes or a return to excessive government borrowing.
       Acting promptly and boldly will bring benefits as well. The 
     unremarked secret of our current budget surplus is the 
     welfare reforms enacted in 1996 and the Medicare changes 
     enacted in 1997. To be blunt, we would still be in deficit 
     without these reforms. But in both cases, one could also 
     argue that the programs have been strengthened.
       I have long believed that there are similar opportunities 
     to improve our largest entitlement, Social Security, which is 
     now 23 percent of total federal spending. As chairman of the 
     Budget Committee Task Force on Social Security, I helped 
     develop 18 unanimous and bipartisan findings that could serve 
     as the basis for reform.
       After the completion of the task force's business, I also 
     introduced the bipartisan Social Security Solvency Act (H.R. 
     3206), which is scored to keep Social Security solvent based 
     on these findings.
       The effect of this reform (or of similar reforms such as 
     the 21st Century Retirement Act (H.R. 1793)) would be to 
     dramatically reduce the growth of government spending for 
     decades to come. The charts on this page show how significant 
     reform can be.
       The first chart shows that federal spending will rise to 
     nearly 35 percent of the nation's gross domestic product 
     without changes in our entitlement programs, about 75 percent 
     higher than it is today. Needless to say, giant tax increases 
     will be needed to sustain this level of spending.
       In contrast, the second chart shows what could happen if we 
     simply adopt the Social Security Solvency Act. Under this 
     scenario, we would experience a gradual reduction in federal 
     spending as we shift to a retirement system based partly on 
     worker-owned accounts starting at 2.5 percent of income and 
     partly on traditional government-paid benefits.
       This legislation would also fully restore the program's 
     shaky finances and create opportunities for workers to live 
     better in retirement by making full use of the power of 
     compound interest.
       This is not easy work. But if we do nothing, taxes will 
     have to rise to the equivalent of 40 percent of payroll by 
     2040 to pay for Social Security, Medicare and Medicaid. 
     Social Security and our other entitlement programs are 
     complicated and alteration carries political risk.
       The benefits from this effort, however, will also be 
     substantial. Sound reforms will allow Congress to master the 
     federal budget where gimmicky process reforms such as 
     biennial budgeting are bound to fail.

  Madam Speaker, what we are faced with in this country is an expanding 
cost of Social Security and Medicare. The two greatest challenges that 
the United States faces is the increased cost of the entitlement 
programs.
  We have played around for the last 5 years desperately trying to 
reduce the expansion and increase of discretionary programs. But the 
entitlement programs account for almost two-thirds of Federal spending. 
One-third of Federal spending, the 13 appropriation bills that we 
agonize, that we argue, that we debate for almost 8 months of the year, 
only account for one-third of total Federal spending.
  We have been successful in starting to slow down the increase in that 
expending. So some years, in fact, it has been less than inflation. 
Generally, it is about inflation.
  But the challenges that we are facing with Social Security and 
Medicaid are the hugest challenges we can say for future taxpayers. 
Because if we do not do something, Madam Speaker, if we do not force 
ourselves to deal with these kind of problems, because of the fact that 
life spans are increasing dramatically and because of the fact that the 
birth rate has substantially been reduced in the last 50 years, that 
means that fewer young people, fewer workers in this country are asked 
to pay a higher FICA tax to support the senior program.
  The actuaries give an estimate that, if we are to continue the 
programs as they exist today, within 40 years, our payroll tax, our 
FICA tax, will be approximately 40 percent. Right now it is 15.3 
percent. That is our FICA tax for senior programs.
  Some people say, well, that would be unreasonable; that cannot 
happen. All we have to do is look at what is happening in countries 
around the world. Czechoslovakia, Japan, other countries in Europe are 
approaching already 40 percent payroll tax to support their senior 
program.
  The country of France has an effective payroll charge, a payroll 
deduction, of 70 percent of what each worker in France earns to support 
their senior program. I mean, it is no wonder that France has such a 
tough time competing.
  If we allow our entitlement programs to go on the way they are 
without some modification, without some change, without greater 
priority to use the surpluses for those programs, but we cannot do it 
with the surpluses alone, put all of the $4 trillion surpluses that we 
expect over the next 10 years and it will be less than half enough to 
pay for the unfunded liability of Social Security alone, let alone 
Medicare and Medicaid.
  I just cannot urge my colleagues enough or the American people to 
look at the consequences of what is going to happen if we do not deal 
with these important programs. Number one, Social Security probably is 
the most successful program that we have in terms of making sure our 
senior population does not live out the remaining years of their lives 
in poverty. So I think we cannot afford to let it go by the wayside.
  Neither can we afford to put off the decision. The longer we put off 
the decision on Social Security, the greater and more drastic the 
changes are going to have to be.
  We should have done it 4 years ago. We should have done it 6 years 
ago.

[[Page 1626]]

How do we develop the leadership in the United States to make the tough 
decisions that need to be made to change these programs? I mean, I 
appreciate the political vulnerability that any politician goes through 
if they suggest change in a popular program. We have approximately 12 
percent of our seniors that depend almost entirely just on their Social 
Security check.
  I urge my colleagues to read this article in Roll Call. I ask my 
colleagues and the President of the United States to be more aggressive 
coming forward with programs and proposals that can be scored to keep 
Social Security solvent for at least the next 75 years.

                          ____________________