April 8, 1975
Page 9311
THE IMPACT OF THE FEDERAL BUDGET ON MAINE
Mr. HATHAWAY. Mr. President, last week our colleague, Mr. MUSKIE, made some remarks to the Maine State Legislature in Augusta concerning the budget process, a subject on which he has much knowledge, and the need to make some difficult decisions regarding fiscal policies for not only today, but for tomorrow.
In the days to come, this Chamber will see many proposals made to add to and subtract from the Federal budget. The economic situation today is difficult at best, and there are no easy solutions to the dilemma in which we now find ourselves.
Mr. MUSKIE's remarks could be useful to those of us in this Chamber who will be voting on budget measures. I ask unanimous consent that the text of our colleague's speech be printed in the
RECORD.
There being no objection, the speech was ordered to be printed in the RECORD, as follows:
REMARKS BY SENATOR EDMUND S. MUSKIE
It's a pleasure and an honor to be here with you today, and to have an opportunity to talk about budget processes and decisions and how they affect the people of Maine. The last time I spoke to a legislature about budgets, I recommended a general fund budget of $98 million.
It's been my experience in the past that talking about budgets often tends to bring a glazed look to the eyes of people in the audience.
This reaction is probably understandable. Most people have no more contact with governmental budgets than what they see on the evening news, when the commentator announces that the President has proposed spending four billion dollars for program X or the Congress has appropriated 23 billion dollars for program Y. The numbers are often so great that they defy interest or understanding.
Even so, the fact of the matter is that the day-to-day decisions which comprise budget processes are what government – at any level – is all about.
This time of year, citizens and public officials throughout Maine are agonizing over budget decisions as difficult as any they have had to make in recent years.
What comes out of those decisions will be nothing less than a statement about the social and economic priorities of every level of government, affecting every American citizen. That is a constant truth about budgets.
There is another fact about budgets that is becoming more of a truth every day – that is, that budget decisions made by any one level of government have a profound impact on those of all other levels of government as well.
This may seem obvious when one is talking about the Federal budget.
What is not so obvious is the growing interdependence of all levels of government, where budget decisions ere concerned. The Federal Government is still the dominant partner. But since World War II, State and local governments have grown far faster than the Federal Government, to the point where the budget decisions they make have both local and national implications.
Let me give you some examples of the kind of interdependence I'm talking about.
On a single day last week, a glance at the front pages of Maine's newspapers told the following stories:
1. The lead story in the Waterville Morning Sentinel quoted State officials as predicting that Maine's Unemployment Compensation Fund would be exhausted by September unless the economy dramatically improved.
2. Locally, there were reports on recent town meetings. Burnham residents voted a budget increase of over 13%, which would probably mean a hike in property taxes. The voters of Arrowsic were warned that property taxes might be increased by 50% if the State legislature did not respond.
3. The Portland Evening Express reported that the Maine Senate had passed a $19.5 million emergency appropriation to meet current deficits in health, welfare, education, and other state programs.
4. And on the same day, a wire service story from Washington reported that I had warned my colleagues on the Senate Budget Committee that it would be virtually impossible to hold total Federal spending to the level proposed by President Ford, given built-in cost increases and actions already taken by the new Congress.
All four of these stories are interrelated. All four illustrate the difficulties government at every level is having in meeting its financial responsibilities. And – although news reports do not say so – all four illustrate how budgetary decisions made at one level of government have an impact on the decisions being made at other levels.
Today, you in this chamber and we in the Congress are struggling with budgetary problems exacerbated by the worst economic situation since the great depression.
The double impact of inflation and recession is making the perennial budget gap almost impossible to close.
In human terms, the recession is increasing the demand for certain services government provides – such as unemployment compensation, health care, and food stamps – while the demand for basic services such as police and fire protection is undiminished.
At the same time, recession is draining the resources available to meet these needs. At every level of government, revenue from sales and income taxes is showing the impact of a slack economy.
It is estimated that Federal income tax revenues will fall short by a whopping $55 billion because of reduced employment.
Even property tax revenues, generally more immune to fluctuations in the economy, are not rising as rapidly as anticipated due to the standstill in new construction.
The budgetary tools for solving these problems are by no means simple or painless.
At the Federal level, we have the responsibility not only of providing resources to meet growing human needs in a time of economic distress, but also of providing the fiscal stimulus to bring the economy back to good health. This means tax cuts for the private sector and jobs programs for the unemployed. In budget terms, it unfortunately means a Federal deficit of very large proportions.
At the State level, your options are more limited. Unable to budget in the red, you can either freeze or cut back on services, or raise taxes. In the first case, you eliminate jobs, or place an even heavier burden on those who rely upon government services for their welfare – the poor, the elderly, and the unemployed. If you raise taxes, you run counter to Federal tax cuts enacted to stimulate private spending. If you do not raise taxes, you may force local governments to raise theirs. As it is, some 62 Maine communities responding to a survey I recently conducted have already had to raise taxes, or expect to have to do so very soon.
Hopefully, the immediate problem of recession will be eased by efforts at the Federal level, and the pressures of today's very unique economic illness on your budgets will lessen.
But fundamental and long-range budget problems will remain. If unattended, they pose a substantial threat to the task of government at all levels to make this country a better place in which to live.
During the decade of the sixties, the Federal Government took the lead in attacking certain problems which were national in scope, problems such as poverty, ignorance and disease which were beyond the resources of smaller units of government.
Maine, like every other State, has benefited from this decision. Federal money now accounts for 31.8% of all revenues received by the State – the largest single source of State revenues. Without this money, you in this chamber would be herd-pressed to meet current demands with your own fiscal resources.
This growth in Federal activity has hardly occurred without criticism, however. By the beginning of this decade, the philosophy of the sixties was beginning to be challenged. No longer were public officials asking whether small governments could solve large problems. Instead, the question was – can large governments solve small, local problems.
There was a fifth story in the Maine newspapers which illustrates what I mean.
The article noted that the Maine food stamp program has an unacceptably high error rate in determining eligibility for recipients.
The difficulty, according to state officials administering the program, is the complexity of Federal regulations concerning eligibility. These officials concluded by saying that "Congress ought to take a look at the complexities of the program they are proliferating." Federal funds are vital to the pattern of public services we have established in Maine. But Federal programs often come encrusted with rules and regulations which are often inappropriate to Maine's circumstances, discourage local discretion and lead to the sort of waste end inefficiency described in the food stamp article.
I see this every day. And I am sure you do almost as frequently. We find a partially disabled older worker who doesn't quite fit into any Federal assistance program. We find a rule of one Federal agency prevents another branch of the Federal Government from implementing a needed program. We see community hospitals closed down for failure to meet Federal safety standards when no alternative health care arrangements are made available because a second Federal program has not been fully implemented. We see unanticipated impoundments creating havoc for State and local budgets in Maine which are on an annual or biannual cycle.
The Federal response to the outcry over this kind of strangulation by Federal red tape has just begun.
Though there was much to President Nixon's program of new federalism that was only rhetoric, that phrase sparked an energetic and healthy re-evaluation of Federal grant programs which is still in progress. Out of that review have come such initiatives as revenue sharing, grant consolidation and anti-impoundment legislation. And I suspect that we will see considerable more fall-out from this debate in the years ahead.
Such discussion is important.
Nevertheless, I believe it is time for us to look beyond this debate, to more profound problems I see in the future.
Federal assistance has been and will continue to be important to the people of Maine.
But I see a time coming, in the not too distant future, when more Federal assistance – however desirable – may not be available. The needs of our society are expensive, and they are not likely to become any less so as society becomes more complex. We still have not eliminated poverty, ignorance or disease. And now we have to worry about major threats to the health of the environment which supports us, not to mention a growing scarcity of almost every natural resource upon which our society depends.
Whet are we going to do, as these pressures continue to close in on us?
The experience of this year's budget-making process may be a useful trial run for the future.
Recession and inflation are forcing us to make decisions we would prefer not to make, and which we might have been able to forestall under better economic conditions.
Consider the present dilemma of the Senate Budget Committee, which is currently trying to prepare a preliminary statement of what the budget ought to look like for the next fiscal year.
The President has said he wants to hold the deficit at $60 billion. As desirable as he feels this may be, let's look et the practical problems involved. The Senate Budget Committee staff is presently projecting a deficit of $68 billion, without the addition of programs which appear to be well on their way to passage – including some of the President's own proposals.
The bulk of this $68 billion is made up of automatic increases – from prior year commitments, from increased costs of unemployment compensation and other costs of recession. Also included are new energy initiatives, increased public service and summer youth jobs programs, and removal of the 5 % lid on social security increases – all worthy causes, to be sure.
Not included in the $68 billion are a number of other important measures – for example, start-up costs of national health insurance, maintenance of current levels of Federal aid to education through inflation adjustments, maintenance of the present level of Federal matching in social service grants, emergency financial assistance to State and local governments unable to make ends meet because of inflation and recession, and maintenance of current levels of Federal cost-sharing in the medicare-medicaid programs.
What to do with such measures is not as easy as simply being for or against them. For if the Federal Government decreases the amount it spends in Maine for education, or for social service programs, or for medicare and medicaid, then the burden will be on you to fill the gap. And if the Federal Government does not come to the assistance of State and local governments severely squeezed by inflation and recession, then the entire Federal effort to stimulate the economy may be undercut by tax increases and job layoffs at the State and local level.
You here in the legislature are confronted with equally tough decisions. Holding the line on State spending means cutting back in certain programs. And no matter how you slice it, somebody is going to lose out. It may be the person who qualifies for State assistance under the priority social services programs, or the person whose home town raises its property taxes because the State's commitment has been cut back. Either way, the impact of your actions is felt far and wide.
If the economy were in better health, perhaps you and I might not have these difficult decisions to make. But we do, and perhaps this is good. Because I think that this year's experience is just a taste of what is to come. And we should take stock of that possibility before it becomes a regular occurrence.
If there is one point that has been brought home to me during my brief tenure as chairman of the Budget Committee, it is that we may be rapidly approaching the limit of the resources available to Government for solving problems in this country. The size of the pie is not infinite, and the best of intentions cannot make it so. The ongoing debate over whether more Government money can solve a problem is becoming academic. For we simply may not be able to afford to try.
What all this means for public officials like ourselves is a time of rough sledding ahead. A time for recognizing the increasing degree to which we are dependent upon one another – that whatever we do in Washington affects you here in Maine, and vice versa. And a time for realizing the very great need for working with – not against – each other.
Outside this chamber, and outside the halls of Congress, this means making the American public aware of what lies ahead – that budget processes will become increasingly important to them, as a way of allocating resources that grow scarcer every year.
There may have been a time in the past when budget decisions could be left solely to public officials with the confidence that, although individual priorities might differ. there was plenty to go around.
We must begin to think about the passage of such a time.