March 26, 1975
Page 8665
NO $100 BILLION DEFICIT
Mr. MUSKIE. Mr. President, the morning newspapers report White House estimates that our country faces a $100 billion deficit for next year. I believe the Budget Committee will reject any such deficit.
But to avoid such a deficit will require that Congress and the President agree upon a clear, overall view of where we are today with regard to fiscal 1976 and where we want to go. It will require restraint as we examine our spending priorities.
Congress has its budget for fiscal year 1976 about half done now. Our revenue decisions will have been made when we complete action on the tax conference report.
The votes on spending – which is the other half of budget making – are mostly still ahead of us.
Having in mind the momentum for tax cuts we saw on the Senate floor last week and the pressure for emergency, anti-recession spending programs we feel building, I think it would be wise to take stock.
How much is there left to spend? How much of this spending is already locked in as a result of past decisions? How should the remainder be distributed among our national needs?
Ten years ago our country faced a totally different economic picture. The tax cut and calculated deficits proposed by the Kennedy administration and enacted by the Congress had produced the beginning of an unprecedented prosperity in our country.
The budget was nearly balanced. The country had embarked on an ambitious program to address long unmet needs in our national life, including such reforms as Federal assistance to education and medicare.
The war in Vietnam, which was to drain so much from our country and contribute so mightily to the staggering deficits we have experienced, seemed far away indeed. But even then a very wise man, our distinguished majority leader, MIKE MANSFIELD, cautioned us that we should "stop, look, and listen." To examine very carefully the spending programs which had been put in place, to make sure they did not exceed our resources to pay for them.
Ten years later, this advice from Senator MANSFIELD is equally applicable to a far different economic picture. We are experiencing the worst economic times since the Great Depression.
And we have no assurance things will not get worse. We are told by the President and economic experts that massive deficit spending by the Federal Government is required to pull us out of our Nation's economic tailspin. In the tax cut about to be enacted, we have taken a major step toward that solution. Other very large spending programs proposed to reverse the recession are pending in Congress.
Many of them seem to have gained an express-train-like momentum. What I mean to do today is to echo the sage advice MIKE MANSFIELD gave us a decade ago. It is time to stop, look, and listen.
The fact is that the elbow room is extremely limited if we want to remain within the bounds of what economists tell us is prudent economic policy. The prospective deficit at this point is very close to the $70 billion range the Joint Economic Committee has said is desirable for purposes of economic stimulus.
The revenue picture in fiscal year 1976 will depend on actions taken by the House-Senate Conference on the tax bill (H.R. 2166) and on the course of the economy this year and next. Our current working estimate of revenues for fiscal 1976 is almost $290 billion, depending, of course, on how the economy fares.
On the spending side, we can now see spending amounting to about $358 billion after cutting the President's proposals to the bare bones and without the addition of programs which appear to be well on their way to passage.
I would like to take the Members through an informal table to show them what this $358 billion figure includes. I think they will be surprised to see what it does not include:
Begin with projected outlays for FY 1975 which are unlikely to be cut back for FY 1976, $316.6.
Add increases which are automatic under present law, including prior year commitments, increases in unemployment insurance and other costs due to the recession, and so forth, $29.2.
I ask unanimous consent to include at the end of my statement a table which analyzes that figure.
THE PRESIDING OFFICER: Without objection, it is so ordered.
(See Exhibit 1)
Mr. MUSKIE. These amounts, Mr. President, which we seem virtually certain to spend, total $345.8 billion.
[In billions]
Now add additional items on which we can still vote
but which seem certain of enactment ----------------------------------------------------- $12.6
NATIONAL SECURITY
Remove 5-percent "cap" on military retired pay ----------------------------------------- + 0.6
Allowance for inflation in DOD nonpersonnel items ----------------------------------- 3.0
PHYSICAL RESOURCES
Additional energy initiatives (this amount recommended by the President;
Senate committees proposed $2.8 billion more; assumes at least $800
million is needed)------------------------------------------------------------------------------ +.8
Increased target prices for certain agricultural commodities (enactment
highly likely; present target prices do not cover costs and farm prices
are declining) --------------------------------------------------------------------------------- +.5
HUMAN RESOURCES
Increase for public service jobs and summer youth (President proposes
increase of $1.7 billion; highly likely Congress will add further)---------------------- 3.0
Remove 5-percent "cap" in social security ------------------------------------------------ +2.6
Remove 5-percent "cap" in Federal employee retirement and disability --------------+. 8
Public assistance legislative changes proposed by President --------------------------- 1.3
These items total $12.6 billion, Mr. President. So the outlays which are all but certain to appear in the fiscal year 1976 budget come to $358.4 billion, as against our working estimate on revenues of $290 billion, which means we are faced with a deficit of $68.4 billion.
Members should keep in mind the attractive proposals not on the list of almost certain spending.
Let me tick off a few of them:
[Fiscal year 1975 outlays in billions]
Rejection of the President's 5 percent cap on Federal pay ------------------------------- +1.6
Rejection of the President's proposals to increase medicare/medicaid
beneficiary cost sharing with States and eliminate adult dental care ------------------ +2.0
Rejection of the President's proposals to reduce Federal matching
in grants to States for social services------------------------------------------------------- +.5
Overturning of rescissions in health research and training ----------------------------- +.3
The House-passed public works bill ------------------------------------------------------- +3.0
The House-passed housing assistance bill ------------------------------------------------ +1.3-2.5
National health insurance, 1st year cost ---------------------------------------------------- +1 - 3
Emergency aid to railroads------------------------------------------------------------------- +1.6
Countercyclical revenue sharing------------------------------------------------------------ +5.0
Continue title I of ESEA and other education programs at
levels by making up for inflation------------------------------------------------------------ +1.1
More public service employment----------------------------------------------------------- +2.5
Those items certainly do not exhaust the possibilities. They total $19 billion to$20 billion.
This list of possible add-ons is merely a sample of the kind of proposals which Congress is going to see before it in the next few months — and among which we are going to have to choose. And there are plenty of other possibilities. The Budget Committee has before it reports from the authorizing committees which, taken together with the President's budget request, would bring total spending in fiscal year 1976 to about $390 billion.
And we are aware of additional proposals which would bring the total to about $410 billion.
So the White House estimate of a $100 billion deficit is not impossible, were we to exercise no restraint whatsoever, but neither is it inevitable.
What these figures mean is that Congress is going to have to exercise great restraint to avoid overshooting the mark, as we try to get our economy moving again.
It is time, I repeat, to stop, look and listen.
I have made this statement today as we are about to depart on our recess and go back to our constituents back home, so that all Members may have this perspective for guidance over that period, and as we approach the date of April 15 when Congress must adopt the first concurrent resolution establishing a budgetary and economic policy.
EXHIBIT 1
[Table omitted]
Mr. BELLMON. Mr. President. will the Senator yield?
Mr. MUSKIE. I yield to the distinguished Senator from Oklahoma.
Mr. BELLMON. Mr. President, I am pleased to join the distinguished chairman of the Budget Committee, Mr. MUSKIE, in expressing the belief that the Budget Committee will reject the forecast $100 billion deficit for fiscal year 1976. In my opinion, a deficit of this size for fiscal year 1976 would prove to be devastating to our Nation's economy both for the short and long terms.
Mr. President, restored consumer confidence is the key to ending the recession and returning to normal levels of economic activity. Even with Government spending at its present high levels, the impact of spending by the private sector is roughly five times as great as spending by the Federal Government. Therefore, ending the recession depends more upon consumer spending than upon Government spending. A deficit in the $100 billion range would, in my opinion, create consumer concern, cause further retrenchment and produce a negative effect upon unemployment and Treasury revenues.
An excessive deficit could very well demoralize America's private investors thus causing them to postpone plans for plant modernization or for new plant construction. In addition, such a deficit would lay the groundwork for further inflation and bring about an increase in interest rates which would quickly destroy the housing and construction industries. Chairman MUSKIE is wise to counsel Members of the Senate to "stop, look, and listen" before we plunge into 1976 deficit spending of the $100 billion magnitude.
Mr. President, the work of the Budget Committee cannot, at this time, be looked upon as an exact science. There is a strong element of artistry involved as we attempt to anticipate public acceptance of and reaction to the decisions we make. Already there are signs that the economy is stabilizing and that it may soon be making a turn for the better. If this happens, Government revenues should rise, the cost of recession related programs such as unemployment insurance should be reduced and the deficit picture could improve markedly.
Easter recess, which hopefully will begin at the close of business today, will provide Members the opportunity to return to their States and gain current insights into public attitudes. We may find our citizens saying that Congress should follow a path of moderation in levels of government spending. We may find the beginning of renewed consumer confidence. If that is the case, hopefully, the deficit can be held to even lower figures as the revenue picture improves due to the more normal levels of consumer and private sector spending. If such is the case, Congress would be wise to avoid overstimulation and the danger of re-inflating the economy to the dangerous levels of last summer.
I commend Chairman MUSKIE for bringing this matter to the attention of the Senate as we begin our recess. I would like to reemphasize his message that we "stop, look, and listen" during these next 10 days, our collective impressions will serve us well as we begin the serious discussion of the effect of the future of this country.
Mr. NELSON. Mr. President, will the Senator yield?
Mr. MUSKIE. Let me, before yielding, express my appreciation to the distinguished Senator from Oklahoma, who is the ranking Republican member of the committee, for his statement and for his excellent work on the Budget Committee.
Let me add this note for my colleagues–
On April 15, the Budget Committee is required, under the terms of the budget reform legislation, to report a concurrent resolution to the Senate. It will include five figures:
First. A ceiling on overall spending.
Second. A ceiling on budgeted items.
Third. A recommended deficit or surplus – in this case it will be a deficit at least in the amount of the President's proposed deficit and probably more, on the basis of the analysis I have given today.
Fourth. The resulting impact on the Federal debt.
Fifth. In addition, in the report, which will cover the whole range of the concurrent resolution, there will be indicated, as a result of this year's work program, target ceilings for the 16 functions of the Federal Government.
These will be the Budget Committee's recommendations. The Budget Reform Act provides for 50 hours of debate on these recommendations. It will then be incumbent upon any Member of the Senate to make his impact on the decisions which would finally be made by the Senate with respect to the budget resolution.
So if there are those who challenge the target ceiling or those who challenge the priorities for Government spending, that is the time to do it.
It is for this reason that I give the Senate this inkling of the nature of the challenges that will confront us so that the Senate may consider them over this next recess period.
I am happy to yield to my distinguished colleague from New Mexico (Mr. DOMENICI), who is also a member of the Budget Committee, for a brief comment.
Mr. DOMENICI. I thank the Senator.
Mr. President, I join with the Senator from Oklahoma in commending the distinguished chairman of the Budget Committee for his presentation here today.
I thought during the 3 weeks that we have been hearing from all the experts on what we ought to do, part of that time I wondered if it was right, whether it was the right time, to have a Budget Committee start in business, somewhat frustrated, wondering just how in the world we ought to decide what we ought to be doing.
But as all that work begins to come into fruition, and we find, probably for the first time in the history of the U.S. Senate, this kind of summary of where we are, it appears to me that it is indeed propitious that America, in its sort of unorthodox way last year, adopted a new Budget Reform Act and, as difficult as it is going to be, with a recession just having come out of rampant inflation, with an energy crisis and a chaotic budget system all on top of it, it appears to me that the great good will come out of this.
We are beginning here today, for those who really read what the Senator put down by way of figures, who will have to shudder, because the Senator has been indeed generous when he talks about suggested expenditures that are going to solve America's recession, as proposed by others.
We could add $20 billion to the Senator's list of 20 without much difficulty, and there are many who would say, "Why did you not put them in, for they are certainly going to help solve the recession."
But I am delighted that the Senator put some basic ones in, and in the almost rock bottom budget of the President, and then the Senator is telling all those who have the solutions in their committees and by their programs to "Stop, look, and listen."
Mr. President, I say that the road to ruin is paved with good intentions, and we are at a point in time when the temptation to solve the recession by putting new programs in place or adding new billions to those that are there is a serious temptation, because everyone is worried and everyone is quite sure that his program will solve it.
I would like to talk just a moment with our chairman about what some of the economists told us. All of them, when we have a recession, are quick to want to come before us, are they not? They all tell us how to solve the recession, and I think the chairman remembers, after hearing five or six of them, I asked them, "Where is your model for solving inflation," for many had even produced an economic model that they punched out on a machine to solve the recession, and none could produce one to solve inflation.
I asked a number of them, experts, "Is it harder to solve inflation or recession?" And they said:
From our standpoint, it is a lot easier to give advice on how to stop the recession than it is to stop inflation.
I think the chairman will remember that exchange.
Mr. MUSKIE. That is right. We all of us always perceive it is easier to look back and tell us what happened and why–
Mr. DOMENICI. Precisely.
Mr. MUSKIE. – than it is to follow and project the decision of what is coming.
Mr. DOMENICI. Then I think we can recall our distinguished ranking member, the Senator from Oklahoma, is always asking that very simple question.
Well, can you tell us what we did wrong so we will not do it again?
It seems it is one of the professional attributes that they really cannot quite do that, because things always change that they were not aware of, and they say that it might happen again.
So I conclude, Mr. Chairman, not only by complimenting the Senator, but also by saying I believe there are some good signs out there that we are coming out of the recession – not by leaps and bounds, but it is a pretty good indicator. I need not go into it, and they will be in our report, I am sure.
Everyone says, from Arthur Burns to Bill Simon as to the President's budget, that, indeed, we have to have a deficit in 1976 – no way to avoid it. They say it is built in right now. It is costing us this and that and the other, one of them being $20 billion a year for unemployment, a program which we all want to see continued as one of those stabilizers that we did not have during the last Great Depression; and the other costs that are built in.
But it seems to me that the American people are also very worried about chronic inflation, and I think they are a little more perceptive than we are. They are writing for some clear signs of stability.
Then the confidence that we want in our consumers, Mr. and Mrs. Average American, and in our private sector, if that confidence comes back, is that we are not going to need the program that people are talking about to further stimulate the economy over and above a tax cut voted in, and the basic bare-boned budget that we are talking about.
So I hope we will not put all those other programs in place out of fear that we are not going to get enough in. I think caution, and history indicate that we should do the reverse, that we should put
in the minimum and do as Arthur Burns suggested, sit back and take a little look, and if we need some more, put it in, but do not build it in and have a $100 billion deficit, and expect the American people to have confidence in their dollar, in their Government, and their future. If they do not have that they are not going to act as American consumers, and the ripple effect from unemployment will be three times greater in terms of effect than its actual numbers.
So I close by commending the chairman. I am more optimistic than ever that the Budget Committee, under a very difficult law, will have an impact. It starts today, and if we keep on doing our job and getting some to listen we might add a degree of orderliness to what has heretofore been a chaotic process of treating the resources of our Nation by the Congress of the United States for some 20, 25 years.
I thank the chairman for yielding.
Mr. MUSKIE. I thank my good friend from New Mexico for contributing so much to the Budget Committee. I am afraid what my statement today does is simply highlight the difficulty of the
choices that lie ahead, and I am not so sure that it resolves the challenge that the Budget Committee faces, but I do appreciate the Senator's comments and his contribution to the work of the committee, and I hope we can make the process work.
Mr. GOLDWATER. Mr. President, I occupied the Chair during the time that the distinguished Senator from Maine (Mr. MUSKIE), chairman of the new Budget Committee, made his report. I have to compliment him on that report. It took a lot of courage to stand up and tell the Senate the truth, and the American people the truth, as to what we might expect. There are several things, Mr. President, which intrigued and frightened me about the financial situation that this country finds itself in from the governmental standpoint.
Today we heard a discussion that indicated that the deficit might not reach $100 billion. That is a good round figure – $100 billion. It has no appeal to me, because if we have a deficit of $5 billion, or $1 billion, we are in trouble. I think we can see very clearly a deficit of $50 billion. I think in the following year, with the built-in increases that we have, we can see a deficit that could exceed $80 billion.
The question that keeps coming to my mind – and I have not heard it answered – is where is this money coming from?
Mr. President, there is not that much money left. The total debt of this country, including Federal debt, State debt, local debt, and our own personal debts is more money than we have. So it gets to be rather simple and arithmetic. The country, if it continues the spending that we are now doing, is going to have to print more money.
This is precisely the reason we are in the trouble we are in now.
This country embarked on increased credit through deficit spending about 20 years ago. In the interim we have increased credit about 400 percent, but we have only increased our productive ability about 28 percent. So we have that great surplus of credit vying for the little increase in goods that we have achieved.
This has not only affected the United States; it is now affecting the entire world. In fact, it is affecting the world to the point that many countries are beginning to take a look at some other currency than the American dollar as a currency on which they are going to peg their own money.
Mr. President, this gets serious. I stated here in the Chamber the other day that I do not believe this country can last 5 years with this continued deficit spending. I have not had one single economist offer any argument against that.
I spoke last Saturday night at a distinguished gathering of economists in New York and I repeated the statement. I was not challenged on it. I do not know any way in the world, Mr. President, that an individual can continue to spend money he does not have, or a government can continue to spend money it does not have, without eventually going bankrupt.
I recall – and I imagine many Members of this body can recall this picture – seeing a picture after World War I of a German woman going to the market to buy a loaf of bread. She was carrying a clothesbasket full of marks.
I talked to a taxi driver in New York the other night who worked in Germany at that time. He was paid a million marks a day – worth about a dollar and a half.
The question then comes to me: Do we want this? Do we Americans want to have this country in bankruptcy?
I recall that last December I voted to support the President's plea to withhold automatic increases of 5.5 percent for Federal employees, and I thought I would catch holy Ned when I got home. I had a few people complain about it, but, far and away, the great majority said they stood with me on it.
This is the argument: Would you rather be working 5 years from now at your present salary or not working at all, or working at an inflated salary – and have no welfare to fall back on, no unemployment insurance or security, no food stamps, no social security? I think these are the alternatives that the American people and particularly Congress have to face up to.
Mr. BUMPERS. Mr. President, will the Senator yield for an observation?
Mr. GOLDWATER. I yield.
Mr. BUMPERS. I heard the distinguished Senator from Arizona mention the situation in Germany in the 1920's. I happen to be sitting here going through some correspondence from constituents, and I would like to read a paragraph from a good friend of mine. He says:
In looking through some of my old memoirs, I found a 10,000 Deutsche mark. I recall that in the early 1920's I bought it from a man on a street corner in St. Louis for 10¢. The purpose of telling you this is our friends in Congress seem to think that there is no limit on the national debt and all that we have to do is turn on printing presses and print more money. We who lived during the fall of the German Empire, know that money had no value and that a bushel basket of marks wouldn't buy a loaf of bread. I would be glad to send you this old worn out 10,000 mark bill if you think it might make any impression on some of your friends there who are constantly voting for an increase in the national debt limit. I would think out greatest fear is what happens to the value of our dollar, 5, 10, or 25 years from now. Many people my age who have layed back a few dollars for old age and hope to cash them in as needed in the years to come may find that the dollar has been so devalued that they cannot live on what they have set aside. It is a grave situation and we cannot continue to spend in excess of the monies we take in.
I thought that might lend some force to the argument of the Senator from Arizona. It was pure coincidence that lie was talking about something I was reading about.
Mr. GOLDWATER. I thank the Senator from Arkansas.
Those are the examples, I have to say, that must be brought home – first to Members of Congress, many of whom do not seem to understand the American economic system, who do not understand the profit system, who have no idea of how it works.
I have heard on the floor of the Senate in arguing on behalf of the tax cut, that it will put people to work. I have heard it reported that President Roosevelt saved this country from terrible depression in the 1930's by the expenditure of Federal funds. Let me give a little background on that.
In 1934, an Englishman named John Keynes, who later was knighted, came to this country and brought with him his economic theory. This theory said that you have to have full employment legislation. Having served for 12 years on the Committee on Labor and Public Welfare and having served under the eminent Robert Taft, Sr., I never have understood what full employment is and neither did Robert Taft, and neither does anyone else. Is it 4 percent, 1 percent, or zero?
So we do not know what we are talking about when we talk about unemployment and what it has to reach in order to have an impact on the American economy. But that is a little beside the point.
We are still stuck with this idea. The Keynesian theory became very highly accepted in institutions such as Harvard, Yale, and Princeton – schools with highly regarded economic divisions – and it became the doctrine of the young liberal economists that the Federal Government can prevent depressions, can prevent inflation, can prevent recessions.
Mr. President, we are seeing the Keynesian theory flat on its back. It never has worked. It will work a little in time of war.
I remind the President that the depression of the 1930's – and I was trying to run a business during that time – was ended because we went into World War II. We would still be in that depression if we had depended upon the false idea that the Federal Government can save the economy of this country.
Today, for example, we are arguing about a farm bill. I think it is $2.8 billion. For whom is this bill designed? My cotton farmers in Arizona and the cotton farmers in California do not want this bill. If they would leave the market alone, we could sell all the cotton we could grow and make money on it, because we grow good cotton, long-staple cotton. The only other place in the world that it is grown is Egypt. This bill is designed to save the Southern cotton farmer who cannot grow, by virtue of climate, soil, and so forth, the high quality, long-staple cotton that we grow in the Southwest.
I have suggested that if we had the free market operating in agriculture, in States such as Arizona, probably New Mexico, and probably Utah where everyone thinks the cowboy reigns and the cowboy makes all the stories – we would get out of the cattle business, because we only grow one-tenth of 1 percent of all the cows and bulls – I will not include bulls – in this country. If we could allow the South to grow cattle and the South could allow us to grow cotton, we could forget all this crazy agricultural nonsense we are going through today. It involves $2.8 billion, and the farmers complain because they have to pay more for machinery and they have to pay more for fertilizer. They are lucky they are not paying more, because this kind of cockeyed economics that this country has been engaged in for the last 40 years has slowly brought this country to its economic knees.
It is not pleasant for me to stand here and talk like this. I have a business background. I have worked. I know what the profit system is; I know what the free economy is.
I sometimes agree with Tom Jefferson, when he said that we have too many lawyers in the legislature. I wish we had some farmers in the legislature, some business people, some miners, some people who have worked with their hands, who know something besides theory, besides the idiotic theory that the Federal Government can save this country from any economic trouble.
Mr. President, I never would have taken the floor, but I knew that the majority leader wanted to make a little speech, and we have a vote coming up at 5 o'clock. I appreciate the audience of the majority leader. It is always reassuring to have a fellow Westerner in the crowd. He is a fellow Westerner, too, and he helped me greatly in this argument.
Mr. President, I yield the floor.
Mr. MANSFIELD. Mr. President, if my memory serves me correctly, Arkansas is on the west side of the Mississippi River and therefore comes within the geographical orbit of the West.