June 18, 1976
Page 19109
Mr. LONG. Mr. President, I thought we had gotten to work. I thought we had an agreement that we would vote first on the Nelson amendment, which was a substitute for the committee amendment to strike out title I, and then I thought that we would vote on title I. and that after we voted on titles I and II, there were committee amendments, about 10 of them, but there would be substitutes offered, and we would vote on those, and then we would vote on the substitute for title III, or two or three substitutes, then vote on title III, and then we were going to try to get a unanimous consent agreement to expedite further consideration of those who have this package they wanted to offer.
We were going along fine, I thought, letting the chips fall where they may, and then suddenly the Senator from Maine comes up with this amendment that belongs back in title IV.
The Senator from Rhode Island has handled these big appropriation bills, and he knows that when you get to an item that deals with a certain subject, and someone has an amendment dealing with something later on in the bill, you say, "That belongs later on in the bill; please wait until we get to that section of the bill."
I thought we had an agreement. But those who support Mr. MUSKIE apparently did not include Mr. MUSKIE himself. I hope we can get an agreement including what the Senator has in mind when we get to that point.
Several Senators addressed the Chair.
Mr. LONG. I yield first to the Senator from Connecticut.
Mr. RIBICOFF. Mr. President, yesterday I said somewhat the same thing as the distinguished Senator from Rhode Island has said, though not quite as colorfully.
I think what has happened here, I was under the same impression as the chairman, but what became obvious yesterday and today is that there seems to be a clash of wills as to whether the Budget Committee will take its philosophy and force it upon the Finance Committee and the Senate.
I think that is wrong, because I think the Senate should determine that philosophy item by item, and not by the Budget Committee forcing its will on the entire Senate.
I will state, Mr. President, that I would vote for the Muskie amendment if it were submitted at title IV, but I will vote against the amendment as it is now submitted at title I, because we should have an orderly procedure here. I do not know how the vote will go, but there were other Members of this body who would have supported the Muskie proposal if it were submitted at title IV, who will vote against it at this juncture. So I would hope that the Senator from Maine could see his way along the lines suggested by the Senator from Rhode Island, and see fit to withdraw his amendment.
This is the same amendment submitted by the Senator from Minnesota in the Finance Committee, and it was my understanding that the Senator from Minnesota would submit this particular amendment as an amendment to title IV.
Mr. LONG. Mr. President, I was surely expecting the Senator from Minnesota to submit the amendment when we got to title IV. As a matter of fact, this particular subject, that $35 tax cut, was a brain child of the Senator from Minnesota (Mr.MONDALE) to begin with. I was fully expecting him to submit this amendment when we got to title IV; and I would welcome it in that order.
Frankly, I had serious doubts that it was within my capacity to defeat that amendment.
Nevertheless, I thought that would be the general order in which we were going to proceed, and I wish we could.
Several Senators addressed the Chair.
Mr. LONG. I yield to the Senator from California.
Mr. CRANSTON. I have just one simple question. What did the Senator mean when he said he would make a tabling motion in a timely fashion? Timewise, what did he mean?
Mr. LONG. Well, when the spirit moves me.
I yield to the Senator from Maine.
Mr. MUSKIE. You know, Mr. President, I hear all this talk about the big bludgeon that I carry. But here, at the very same time, I am told that I am bound by an agreement to which I was not party, about which I was never consulted by the Senator from Louisiana or the Senator from Connecticut. Does either of them recall ever talking to me about this agreement on the order of taking up amendments? And I am the bludgeon bearing Senator?
I very carefully did not cosponsor this package of amendments, because I knew that this kind of accusation would be addressed to me. I separated myself from the sponsors of any amendments. I did not cosponsor any of them, because I wanted to preserve my role as chairman of the Budget Committee quite distinctly.
I left for Maine at 5 o'clock the day before yesterday. I was not on the floor. I was not a party to any amendment. When I was in the very northernmost reaches of Maine, I was told that the Senator from Louisiana had said this. He said:
I just do not think we ought to be voting on these major amendments with the issue all fuzzed up about whether or not the committee, in proposing an amendment, is in violation of the budget law, and I think we ought to get that clear one way or the other. Once that matter has been resolved, then I think we ought to vote on these amendments on their merits.
I had nothing to do with that statement. I did not dictate it. This is the statement of the Senator from Louisiana. I had left assuming that these amendments would be brought up, because I understand the way in which the Senate operates, one by one. Therefore I would have to expect to miss the first few votes because of a commitment in Maine.
Then I get a hurryup call: "Senator, you have stopped the Senate in midpassage; they cannot get to a vote or do anything until you come back and have a debate with Senator LONG over this budget issue."
So I came back, and the debate started at 3 o'clock yesterday afternoon. I thought it was a debate that gave each side an opportunity, not to convince the others, but to state its position and to state it clearly; and I offered this amendment, which was the key policy question, as an opportunity, the first opportunity for the Senate to change its mind about the policy of the first budget resolution, and resolve this question.
And I am ready to vote. It is here, unencumbered by any extraneous considerations. It is here. This is the heart of the issue between us, the issue which the Senator from Louisiana said on Wednesday had to be resolved before we went on to vote on any other amendment.
Now, he tells me,that I am bound by an agreement, or should be bound. by an agreement that he reached with the sponsors of the amendments after I left for Maine. I am not bound by any such agreement, and I will not be bludgeoned into being bound by it.
Several Senators addressed the Chair.
Mr. LONG. Mr. President, let me say this: The amendment the Senator is offering does not face that issue at all. If the Senator wishes to move to recommit this bill with instructions to report the bill from the Senate Finance Committee according to instructions on page 6 of that Budget Committee report, and the Senate wants to vote for that, I will be willing to have a vote on it in 10 minutes, with 5 minutes for debate on each side.
But when you offer a very popular amendment, and say that we would resolve the entire issue by voting for that amendment, which I doubt anyone could defeat, giving tax cuts to that many people in an election year — that is the kind of thing you have the Budget Committee for, to join forces with Senators to try to maintain the budget. When you offer an amendment of that sort, where Senators in an election year can hardly go back home and explain why they did not vote to cut taxes, that, Mr. President, is not on the issue at all.
When we had our discussion I said I could not move to recommit the bill; as far as I was concerned, I was happy with the bill we had before us. The Senator could have moved to recommit the bill, but instead, he chose to take this course, that he will insist on a vote on a very popular amendment for tax reductions for a lot of people, and he will vote for something to tax various people that he regards as rich.
He will vote for that type of pattern. Having done that, he will then say his committee has been upheld and the Finance Committee has been repudiated, and his committee is, therefore, under
orders to instruct and mandate the committee just exactly contrary to what he said in the Chamber when he had the budget resolution before him. If the Senator wants to proceed in that fashion to offer and support an amendment he thinks has overwhelming popularity because it costs the Treasury tremendous amounts of money, then he can proceed in that fashion, but he ought to take his turn in line with other Senators.
The Senator has managed bills in the Chamber. He has managed many of them.
Mr. MUSKIE. Will the Senator explain that statement? The Senator says to me I ought to be content to take my turn. Will the Senator tell me what my turn is under the rules of the Senate?
Mr. LONG. There is no rule.
Mr. MUSKIE. What is my turn there?
Mr. LONG. There is no rule that makes him do it. I stated that when I talked to those offering amendments.
Mr. MUSKIE I already told him they were not speaking for me.
Mr. LONG. Please understand. I am saying what I said. I am not saying what the Senator said. Please let me say what I said. I told Senators who agree with me and disagree with me that I am going to try to the extent that I can to move this bill in an orderly fashion and to move these amendments in sequence because to do otherwise leads us to the chaotic situation that I have seen happen in this Senate on revenue bills and others where no Senator knows what he is talking about and every Senator is trying to grab some sort of advantage in being the first to be recognized or first to have an amendment in, engaging in all sorts of parliamentary tactics, and the Senate would save a great deal of time in the long run to simply proceed orderly, section by section, and offer the amendments to the sections as we go through. If any Senator is not happy by the time we are through offering the amendment at the end of the bill or, if he wishes, he can offer a substitute for the entire bill.
Mr. HASKELL Mr. President, will the Senator yield.
Mr. LONG. I will yield to the Senator from Colorado. I will afterwards return to the Senator from Maine.
Mr. HASKELL I mentioned to the distinguished floor manager of the bill my recollection of the meeting that the Senator refers to with the Nelson, et al, amendment. The only decision that I recollect was that the various parts of the Nelson amendment would be taken up as the sections affected appeared in the bill. I am sure that a great many of us have amendments, and I personally would not want to be bound to take things up section by section on other amendments. But my recollection was that it related to the Nelson, et al, amendment,. and I mention that to the distinguished floor manager of the bill.
Mr. MUSKIE I can understand the frustration. As chairman of the committee he brings a bill to the floor. He gets impatient with the rest of the Senate who does not follow his idea and the order in which business ought to proceed. I felt the same frustration as the chairman of the Budget Committee. I have felt it in the last 2 days. I have had my ideas of what the budget resolution states. There are procedures that ought to be followed to change it if we wish to change it.
When I say that, I am accused of trying to bludgeon the rest of the Senate into doing things my way.
The Senator is telling us his view of the way we ought to do this is to begin with the first title and go through it section by section. That makes sense to an orderly mind. But, unfortunately, the Senate is not an orderly institution.
What we are trying to do, he as well as I, is to press a point of view in which we believe deeply.
I do not think the record of the last 18 years suggests that I am a Senator who engages in frivolous parliamentary games. Indeed, I feel somewhat at a loss because I am not that familiar with the rules or that adept at using them. So I do not think the record shows that I played frivolously in the Chamber or that I like to kill time or that I like disorder.
I have raised this issue for only one reason, whether the Senator believes it or not. If he believes what he has just said, I know he will not believe what I say. I did not offer this amendment as a new tax cut. In my judgment, this policy was adopted by the Senate in May. It is not new. I know the Senator disagrees with me on that point. The Senator has to believe this. I say that not frivolously because I believe it. In believing it, I believe it to be central to the resolution of this tax bill.
I have a memo from the CBO that tells me the economic assumptions behind the revenue figures of the first concurrent resolutions are still valid. There is a policy represented by them. I requested the memorandum because of the colloquy I had earlier with Mr. PACKWOOD.
As I said in that colloquy, when there were fewer Senators in the Chamber, this is not simply one number in the resolution. What we do about revenue affects every other number in the resolution. It affects what we spend for welfare programs, unemployment compensation, and all of the programs on which the poor rely when they are out of work. It affects the pace at which the economy moves. It generates private income, private investment, and so on.
So the revenue issue is a very central one, and central to all the revenue issues in this bill is the question of what we do about the policy that was adopted by the whole Congress last May. That is why I do not expect with another speech, meaning what I said before, to persuade the Senator from Louisiana. With the Senator having said what he has said, I have to make clear in the record that my purpose is straightforward. It is not dilatory. It is not frivolous. And it is not intended, simply to frustrate him. It is to put before the Senate in the only way I know what I regard to be the key issue in a timely fashion because I think once we resolve that issue — the Senator may have the votes — as chairman of the Budget Committee, I will accept the decision, because that is my duty. But I think it needs to be resolved.
Once we do it we can then proceed in an orderly and more expeditious fashion with the rest of the bill. I think all Senators who were not party to that agreement are not necessarily going to be bound by the agenda that has been laid down, but I think they would try to respect it as best they can, and I will, also.
But if the Senator had not raised this issue on Wednesday evening, I would not be here doing this now. I would have waited in accordance with whatever scheme had been arranged in my absence on the assumption that since I was absent I forfeited some part of my right to control the order of things. But since in my absence I was challenged to meet what the chairman of the Finance Committee said was the key issue to be decided before the other amendments were to be acted upon, then I came back to do my duty, and I have tried to do it.
SEVERAL SENATORS. Vote!
Mr. PACKWOOD. Mr. President, when there were fewer Senators in the Chamber, Senator MUSKIE and I did have a colloquy, and I stated some conclusions which I think were not rebutted, about the policy implications behind the budget report — that is the report, not the resolution — because I think we are now very close to agreement. The question is, shall the Senate change, if that is what we are doing, in accordance with the economic facts which have changed since we adopted the budget resolution, or are we going to willy-nilly chip those assumptions in concrete, and say, "No matter what circumstances may have changed, we are not going to change."?
When the budget resolution was presented to this Senate, the facts of the economic projections in the report were one thing.
Today, they change. The projections on unemployment are that unemployment will be lower than when the budget resolution was before the Senate. The projections are that the real gross national product will be higher than when we considered the budget resolution. The projections are that inflation will be lower than when we considered the budget resolution. In other words, every economic consideration that went into that report — and again I emphasize "report"is now better.
Mr. KENNEDY. Mr. President, will the Senator yield on that point?
Mr. PACKWOOD. I yield.
Mr. KENNEDY. I heard the Senator make this argument earlier, and I am listening to it again. I am not really sure that it is responsive to the points that the Senator from Maine has made. I do not want to delay the opportunity for an early vote. But as I understand it, at the time of the budget resolution, unemployment was projected at 7 percent by the end of 1976, and the projection is about 6.8 percent at the present time. So not much has changed there.
GNP was estimated at $1,685 billion. Now it is estimated at $1,692 billion. So not much has changed there.
In terms of real GNP, the figure shifts from $1,262 billion to $1,270. The Senator cannot make a great deal out of this change.
However, I listened to the Senator from Oregon talking about how the economic situation is so dramatically different from what the budget resolution was actually based on. I do not believe the case has been made.
What is being proposed by the Senator and the committee, on the other hand, is a $10 billion tax increase for the economy next June. That is what the Finance Committee has recommended, with all the implications that has in terms of shifting from stimulants to restraint in fiscal policy. That could be a cold bath for the economy, which is not what the economy needs.
I, for one, was unconvinced by the earlier explanation. And in reviewing the facts and statistics more closely, I remain unconvinced at the present time as to any possible justification for such a dramatic tax increase as is being suggested by the Finance Committee — $10 billion.
Mr. MONDALE. Mr. President, will the Senator yield?
Mr. PACKWOOD. I want to respond, first.
It was not $10 billion. The Budget Committee's projection is that this tax cut terminates October 31. The Finance Committee projects the termination as of June 30. So we are talking about one-quarter and that is $1.8 billion.
Mr. KENNEDY. Could I ask—
Mr. PACKWOOD. No.
The Senator from Massachusetts confirms what I said about the economic projections. I did not use the word "dramatically." I said they are better.
Mr. KENNEDY. I just have a very brief point. They are getting better, because the budget resolution was based on the projections that they would be getting better. The numbers are coming in right on the nose. Nothing is different.
Mr. PACKWOOD. Mr. President
The PRESIDING OFFICER (Mr. BROCK.) The Senator from Oregon has the floor.
Mr. PACKWOOD. I did not say "dramatically." I said they are improved over the assumptions that we were operating under at the time the budget resolution was adopted. They may improve again. They may improve much better than our present projections. They may not. Who knows? But all we are talking about is not a $10 billion difference. We are talking about the difference of the Budget Committee's termination of this tax credit on October 31, as opposed to June 30 by the Finance Committee.
By the way, I hope we have laid to rest the argument that has been made several times, that it is inevitable that we are going to extend this tax credit — inevitable. The Senator from Maine made that comment. Yet, 2 months ago he was saying there is nothing inevitable.
Mr. MUSKIE. Mr. President, will the Senator yield on that point?
Mr. PACKWOOD. I yield.
Mr. MUSKIE. The Senator is quoting me as using the word "inevitable" in a colloquy with me last spring on the budget resolution. Now he has transferred it to something I am alleged to have said here. I did not say "inevitable." I said "highly likely," and I still think it is highly likely.
On the question of the state of the economy, I ask unanimous consent to have printed in the RECORD the testimony by Arthur Okun yesterday before the Joint Economic Committee constituting a midyear review of the economic situation. This is what he has to say about the budget program we adopted:
If that budget program is implemented, if the strength of private demand lies in the middle of the likely range, and if the Federal Reserve finances a healthy recovery at reasonably stable interest rates (even if that should require more rapid growth of money), I would expect a growth rate of about 6 percent continuing in 1977. That outcome would not be ideal; but neither would it be unacceptable, particularly allowing for the possibility of further adjustment to this fiscal program late this year or early in 1977.
That 6 percent growth rate, I think, is the same growth rate that we projected in the budget resolution of last spring.
I understand that there are other economists who may disagree with Arthur Okun, although I find that economists, even though they vary widely in the medicine they prescribe at any given moment, are pretty much in agreement about the current state of the economy over the past year and a half. So I would be surprised if they differed markedly from that.
In the preceding paragraph Mr. Okun says:
In my judgment, that criterion of prudence is met by the First Concurrent Resolution for FY 1977, which calls for $413 billion in federal outlays, the extension of the current tax cuts, and additional revenues of $2 billion through tax reform.
So he endorses a continuation of the policy that is asumed in the first concurrent resolution.
I ask unanimous consent to have Mr. Okun's statement printed in the RECORD.
There being no objection, the statement was ordered to be printed in the RECORD, as follows:
STATEMENT BY ARTHUR M. OKUN
This is one year in which most economic forecasters do not have to scrap their January forecasts in June. Indeed, for those of us who were on the bullish end of the range at the start of the year, updating the outlook involves relatively minor alterations rather than the production of a brand new model. Those minor alterations move in a favorable direction — a fractional upward revision in the rate of real growth and a fractional downward revision in the inflation rate.
As always, the economy has presented some interesting puzzles; (1) The inventory turnaround proceeded with unusual rapidity, providing a bonus in the growth of real GNP during the first quarter. But that is a onetime bonus rather than a source of sustained growth. (2) The consumer has continued to display a curious pattern of shop, stop, and shop again. In the past year, there have been two shopping sprees which occurred last spring and this winter, and two pauses, taking place last fall and again this spring. I expect the present pause to be followed by another shop-again interval. (3) Plant and equipment spending and homebuilding have been rather disappointing, offsetting some of the stronger performance of consumer buying and the inventory turnaround. (4) Unemployment has fallen somewhat more sharply than seemed likely.
The analysis of this puzzle is complicated by the recent inconsistency of our two sets of data on employment. Reports from households (on which unemployment statistics are based) show much larger job gains than the typically more reliable reports from employers. (5) Interest rates have been remarkably stable and moderate, largely because private demands for money and credit have been unusually weak. (6) Wages have behaved with exceptional moderation, providing the main basis for the slightly improved inflation outlook.
These are the kinds of subtle issues that make life interesting for economists. In the broad perspective that is relevant to policymaking, the main verdict is that the expansion has remained on track and that the range of uncertainty about its vigor has narrowed. On the one hand, it is now much safer to discount the possibility of a jack-in-the-box rebound, such as have followed some very deep recessions in the past. In particular, one can now dismiss as demonstrably wrong the criticisms of 1975 that the Congress was excessively stimulating the economy. On the other side, the recovery has refuted the pessimistic views expressed by some observers that the recession had permanently damaged the vitality of the American economy.
All in all, we are experiencing a very normal and typical recovery out of a business cycle recession. The key distinguishing feature is that this standard size recovery follows a double size recession. Consequently, the level of operation of this economy (as reflected in the unemployment rate, industrial operating rates, and the shortfall of output and real income below prosperity levels) is now similar to that at the troughs of previous postwar recessions rather than at comparable points after one year of recovery. The state of the economy is improving but, having begun at such an abysmal position, we have a long, long way to go to regain prosperity.
FUTURE PROSPECTS
From the first quarter of 1975 to the first quarter of 1976, real GNP advanced 7.1 percent. I expect the growth rate to remain fairly brisk during the remainder of 1976 — probably in the 5 to 7 percent range — but not to match the vigor of the first year of recovery. The main reason for anticipating some slowdown is that the shift from massive inventory liquidation to more normal inventory accumulation is largely behind us. The inventory turnaround was a key factor that contributed 2½ percentage points to the 7 plus growth rate over the past year. I do not welcome any slowdown at this point. A maintenance of the pace of the past year would be a desirable, indeed a conservative goal, in my judgment. Yet, to make such an encore a likelihood would require an additional stimulative fiscal and monetary program at the present time.
Taking account of the risks on all sides, I do not recommend such an initiative. For one thing, I can see the possibility — although not the probability — that a sudden revival of plant and equipment spending and multifamily homebuilding late this year could produce excessive growth if it were accompanied by additional fiscal and monetary stimulation. Furthermore, I would agree with the judgment that Chairman Greenspan expressed to you last week: "Our capacity to brake federal outlays or to raise taxes is exceptionally limited."There is an asymmetry in the adjustments that can be realistically implemented during the course of the fiscal year; a shift toward stimulus, if it should become desirable, is more readily accomplished than one toward additional restraint. Hence, it seems prudent to base our current policy planning on a very optimistic assessment of the forthcoming vigor of private demand, counting on our ability to reduce fiscal restraint subsequently if private demand proves to be less buoyant.
In my judgment, that criterion of prudence is met by the First Concurrent Resolution for FY 1977, which calls for $413 billion in federal outlays, the extension of the current tax cuts, and additional revenues of $2 billion through tax reform. As I calculate the fiscal impact of this program, it involves some $11.6 billion less of restraint than the Administration's January program. Hence, it is more restrictive than the proposal I offered in testimony to the House Committee on the Budget on January 27, when I recommended adding $16 billion to $18 billion of stimulus to the Administration'sprogram. My initial preference still stands, but I can accept the First Concurrent Resolution as a major improvement over the Administration program. It avoids an abrupt fiscal tightening; although it shifts somewhat toward restraint, it can be reasonablly characterized as a "steady-as-you-go" budget in sharp contrast to the Administration proposal. In particular, it heeds Senator Humphrey's wise warnings against "unwise or premature government policies [that would] sap ... vitality and prevent full recovery."
If that budget program is implemented, if the strength of private demand lies in the middle of the likely range, and if the Federal Reserve finances a healthy recovery at reasonably stable interest rates (even if that should require more rapid growth of money), I would expect a growth rate of about 6 percent continuing in 1977. That outcome would not be ideal; but neither would it be unacceptable, particularly allowing for the possibility of further adjustment to this fiscal program late this year or early in 1977.
THE INFLATION PROBLEM
Obviously, the reason for moderation in our targets for recovery lies in our serious concern about inflation. An objective professional economist must report that there is a trade off. Beyond a doubt, a speedy return to full employment would be followed by an acceleration of inflation. And the political backlash to intensified inflation would produce another fiscal-monetary bloodletting that, in turn, would bring on a new recession.
There are, to be sure, a great many uncertainties about the quantification of the trade off. In my judgment, the basic inflation rate today is somewhere between 5 and 6 percent for prices and close to 8 percent for wages. Such inflation rates are uncomfortably high; after so severe a recession, it is disappointing that prices are still rising at a more rapid rate than was experienced in any year between 1952 and 1969.
On the present outlook, I am projecting a continued inflation rate of 5 to 6 percent through 1977. But that reflects my feeling that it is as likely to decelerate as to accelerate rather than any conviction that it will stabilize. Most important, I do not believe that the inflation outlook can be significantly improved by slowing down the recovery. Indeed, whether the growth of real GNP between now and the end of 1977 is as low as 4 percent or as high as 7 percent would have negligible effects on the outlook for inflation.
A careful reading of the data on labor markets and on manufacturing capacity today confirms emphatically that this economy has plenty of room for brisk expansion through the 1977 fiscal year. This country is miles away from excess demand. If wages should accelerate sharply, if industrial prices should be marked up at an accelerating rate, the source must be found in the nature of our wage and pricemaking institutions rather than an overheated economy.
Indeed, if those institutions have such a strong inflationary bias that they intensify inflation even with the pervasive slack in today's economy, we ought to determine that fact, face up to it, and deal with it fundamentally. It is hard to say how much the bumpy economic ride of the seventies should be blamed on erratic fiscal-monetary driving and how much on potholes in the road caused by inflationary bias in wages and prices. If potholes are the problem, then going slow is no solution. In that event, we will simply have to repair the road. Meanwhile I would urge you to maintain a steady speed and a steady course and to test the viability of the road.
Mr. PACKWOOD. I am curious whether the Senator from Maine has altered the transcript of the reporter's notes about his comments at 12:15.
Mr. MUSKIE. I did not hear the Senator.
Mr. PACKWOOD. Has the Senator from Maine altered the transcript of the reporter's notes as to his comments about inevitability?
Mr. MUSKIE. I say to the Senator that I have not been in that office in years. My staff may have been in there, because they sometimes go back to clarify some of my bumblings on the floor.
Did I use the word "inevitable"?
Mr. PACKWOOD. Yes.
Mr. MUSKIE Then, I apologize to the Senator, but I still think he made too much of it.