May 3, 1977
Page 13310
FIRST BUDGET RESOLUTION, 1978
The ACTING PRESIDENT pro tempore. Under the previous order, the Senate will now resume the consideration of Senate Concurrent Resolution 19, which the clerk will report.
The legislative clerk read as follows: A concurrent resolution (S. Con. Res. 19) setting forth the congressional budget for the U.S. Government for the fiscal year 1978.
The Senate resumed the consideration of the concurrent resolution.
Mr. MUSKIE. Mr. President, has the first committee amendment been reported?
The ACTING PRESIDENT pro tempore. We have no committee amendments.
Mr. MUSKIE. Mr. President, the Senate today begins debate on Senate Concurrent Resolution 19, which is the first concurrent resolution on the budget for fiscal year 1978.
The first concurrent resolution, Mr. President, is the most comprehensive measure we will examine in this session. Our deliberations on it will shape the economic and budgetary priorities for the next year. The funding levels we adopt will test the ability of the Congress to follow a consistent policy and exercise restraint.
In sum, the committee recommends the following targets for fiscal year 1978:
Total new budgetary authority of $497.4 billion.
Total budget outlays of $458.8 billion.
Revenues of $395.6 billion.
These result, Mr. President, in a deficit of $63.2 billion and a public debt level of $789.6 billion.
As we begin the third cycle under the congressional budget process, it is appropriate to recall once again that the process is not merely a bookkeeping device.
Mr. HARRY F. BYRD, JR. Mr. President, will the Senator from Maine yield for a unanimous consent request?
Mr. MUSKIE. I yield.
Mr. HARRY F. BYRD, JR. Mr. President, I ask unanimous consent that John I. Brooks of my staff be granted the privilege of the floor during the consideration of the concurrent resolution.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. BELLMON. Mr. President, will the Senator yield for a unanimous consent request?
Mr. MUSKIE. I yield.
Mr. BELLMON. Mr. President, I ask unanimous consent that the following members of the staff of the Committee on the Budget be allowed to remain on the floor during the consideration of and votes on the concurrent resolution: Robert S. Boyd, Letitia Chambers, Becky M. Davies, Robert E. Fulton, Edmond (Ted) Haggart, Barry A. Kinsey, S. Gary Kuzina, Charles D. McQuillen, David M. Shilling, and William L. Stringer.
I also ask unanimous consent that the following members of various Senators' staffs be granted the privilege of the floor :
Mark Bisnow of Senator HEINZ' staff, Gary Dickenson of Senator DOLE's staff, Charles Gentry of Senator DOMENICI's staff, Jan Olson of Senator HAYAKAWA's staff, Michael Maloof of Senator GRIFFIN's staff, Judith Schwartz of Senator STEVEN's staff, and Michael Shorr of the staff of the Committee on Human Resources.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I, ask unanimous consent that the following members of the staff of the Committee on the Budget be allowed to remain on , the floor during consideration of and votes on Senate Concurrent Resolution 19: John McEvoy, Karen Williams, Sid Brown, Van Ooms, Jim Storey, Dan Twomey, Tom Dine, Faye Hewlett, Mary Jane Checchi, Bob Sneed, Charles Flickner, Terry Finn, John Giles, Rodger Schlickeisen, Don Campbell, Tony Carnevale, George Merrill, Becky Beauregard, Pat Gwaltney, Mike West, Ira Tannenbaum, and Peggy Watts.
The ACTING PRESIDENT pro tem pore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I, ask unanimous consent that the following members of the staff of the Committee on the Budget be allowed to remain on the floor during consideration of. and votes on Senate Concurrent Resolution 19: Mike Joy, on behalf of Senator HOLLINGS; Hal Gross, on behalf of Senator CRANSTON; Rick Brandon, on behalf of Senator CHILES; Alan Chvotkin, on behalf of Senator AB0UREZK; Dick Andrews, on behalf of Senator BIDEN; Alan Yuspeh, on behalf of Senator JOHNSTON; John Haynes, on behalf of Senator ANDERSON; and Paul Clark, on behalf of Senator SASSER.
The ACTING PRESIDENT pro tem pore. Without objection, it is so ordered.
AMENDMENT NO. 248
Mr. MUSKIE. Mr. President, on behalf of the Committee on the Budget, I call up amendment No. 248 and ask for it immediate consideration.
The ACTING PRESIDENT pro tempore. The amendment will be stated
The legislative clerk read as follows:
The Senator from Maine (Mr. MUSKIE) proposes an amendment numbered 248.
The amendment is as follows :
On page 2, line 8, delete "$799,800,000,000".`
and insert in lieu thereof "$789,600,000,000"
On page 2, line 10, delete $81,400,000,000"
and insert in lieu thereof "$89,600,000,000"
After page 4, line 26, insert the following new section:
Sec. 3. Pursuant to section 304 of the Congressional Budget Act of 1974—
(a) Section 1 of S. Con. Res. 10 is revised to read as follows:
"That the Congress hereby determines and declares, pursuant to section 304 of the congressional Budget Act of 1974, that for the fiscal year beginning on October 1, 1976—
"(1) the recommended level of Federal revenues is $349,300.000,000 and the amount by which the aggregate level of Federal revenues should be decreased is $10,200,000,000;
"(2) the appropriate level of total new budget authority is $469,800,000,000:
"(3) the appropriate level of total budget outlays is $408,800,000,000;
"(4) the amount of the deficit in budget which is appropriate in light of economic conditions and all other relevant factors is $59,500,000,000; and
"(5) the appropriate level of the public debt is $708,300,000,000."
(b) Section 2 of S. Con. Res. 10, paragraph 1 to 10, 13, 16, and 17, is revised as follows:
"(1) In paragraph (1) (B) (outlays for National Defense) strike out "$100,100,000000" and insert "$98,900,000,000".
"(2) In paragraph (2) (B) (outlays for International Affairs) strike out "$6,800,000,000"and insert "$6,500,000,000".
"(3) In paragraph (3) (B) (outlays for General Science, Space, and Technology) strike out "$4,400,000,000" and insert "$4,600,000,000".
"(4) In paragraph (4) (B) (outlays for Natural Resources, Environment, and Energy) strike out "$17,200,000,000" and insert "$15,800,000,000".
"(5) In paragraph (5) (B) (outlays for Agriculture) strike out "$3,000,000,000" and insert "$4,500,000,000".
"(6) In paragraph (6) (B) (outlays for Commerce and Transportation) strike out "$16,000,000,000" and insert "$14,900,000,000".
"(7) In paragraph (7) (B) (outlays for Community and Regional Development) strike out "$10,550,000,000" and insert "$10,100,000,000".
"(8) In paragraph (8) (B) (outlays for Education, Training, Employment, and Social Services) strike out "$22,700,000,000" and insert "$20,900,000,000".
"(9) In paragraph (9) (B) (outlays for Health) strike out "$39,300,000,000 and insert "$39,000,000,000".
"(10) In paragraph (10) (A) (new budget authority for Income Security) strike out $170,900,000,000 and insert "$167,300,000,000"; and (10) (B) (outlays) strike out "$141,300,000,000" and insert "$136,900,000,000".
"(11) In paragraph (13) (B) (outlays for General Government) strike out "$3,500,000,000" and insert "$3,700,000,000".
(12) In paragraph (16) (B) (outlays for Allowances) strike out "$800,000,000" and insert "$700,000,000".
"(13) In paragraph (17) (A) (new budget authority for Undistributed Offsetting Receipts) strike out "— $15,600,000,000" and insert "—$15,100,000,000"; and (17) (B) (outlays) strike out "—$15,600,000,000" and Insert "—$15,100,000,000"."
Mr. MUSKIE. Mr. President, I ask unanimous consent that the committee amendment be agreed to and that the resolution, as thus amended, be treated as original text for the purpose of further amendment.
The ACTING PRESIDENT pro tempore. Is there objection?
Mr. HARRY F. BYRD, JR. Reserving the right to object, will the Senator from Maine elaborate just a bit on what this amendment is and why he is asking unanimous consent?
Mr. MUSKIE. Yes, of course. May I say to the Senator this amendment reflects changes in the third concurrent budget resolution for 1977, which the Committee on the Budget has agreed to and submitted to the Senate, so that we may consider them as part of one document, Senate Concurrent Resolution 19.
Mr. HARRY F. BYRD, JR. The purpose of the unanimous consent request is to put both the amendment and the resolution simultaneously before the Senate; is that correct?
Mr. MUSKIE. Yes. Of course, any part of it is subject to amendment, any number may be subject to amendment. It is as if it had been reported out as a separate budget resolution or a fourth one for fiscal 1977. The committee thought it would simplify procedure to report them both as one document for consideration by the Senate.
Mr. HARRY F. BYRD, JR. Does the amendment offered by the Senator from Maine take the place of the third concurrent resolution?
Mr. MUSKIE. That would be its effect. It will be a lower outlay number, a lower deficit number, and other numbers will be adjusted accordingly. What it reflects is a reduction in the outlays reflecting the reestimates which the Office of Management and Budget reported and which the Senator and I discussed earlier this year, adjusted somewhat by the committee in response to an analysis made by the Congressional Budget Office. But the net result is a reduction in outlays for fiscal 1977 so we may have the discipline of a lower ceiling to apply for the remainder of fiscal year 1977.
Mr. HARRY F. BYRD, JR. In the amendment which the Senator from Maine has just sent to the desk, does that call for a $60 billion deficit?
Mr. MUSKIE. For fiscal 1977 the deficit number I believe is lower than that. I believe it is $59.5 billion. That is on page 2, line 13. Does the Senator have a copy of the amendment?
Mr. HARRY F. BYRD, JR. I do not have a copy of the amendment.
Mr. MUSKIE. It is amendment No. 248.
Mr. HARRY F. BYRD, JR. I now have a copy.
Mr. MUSKIE. Will the Senator turn to page 2, line 13. He will note the new deficit number, which is, I think, roughly $9 billion lower.
Mr. HARRY F. BYRD, JR. I used $60 billion. I rounded it off. The Senator's is $59.5 billion. Does this deal also with fiscal 1977?
Mr. MUSKIE. This is fiscal 1977. This amendment is fiscal 1977. Senate Concurrent Resolution 19 is fiscal 1978. The deficit figure I have just given the Senator is $10.25 billion less than the deficit reflected in the third concurrent resolution, which this would amend.
Mr. HARRY F. BYRD, JR: So the resolution itself deals with 1978 but the amendment will deal with 1977?
Mr. MUSKIE. It will deal with 1977.
Mr. HARRY F. BYRD, JR. Is it correct that the committee recommends that the revenue figure be raised by $2 billion and not by the $10 billion which the OMB suggests because of the withdrawal of the tax rebate plan?
Mr. MUSKIE. That is right. The revenue figure is raised by $1.6 billion. The bulk of that is the increase in estate and gift taxes due to accelerated collections by the Treasury Department. Four hundred million dollars is the result of the postponement in the effective date in the change in the standard deduction which the administration recommended and which the Senate has approved. We did not change the revenue number for fiscal 1977 to reflect the withdrawal of the rebate.
Mr. HARRY F. BYRD, JR. That was my next question.
Mr. MUSKIE. We did not, for the reason that we still believe the economic projections are such as, in our judgment, to require that kind of stimulus, and we needed to leave room in that figure to reflect the committee's conviction. That clearly will not reflect action by the Congress at this time on the pending tax bill. The tax bill has been passed by the Senate. It is in conference and the rebate is dead, for that purpose. Nevertheless, our reading of the state of the economy tells us that it was a mistake to abandon the proposal and that we should have stimulus of such magnitude. The only effect of holding the revenue figure at the figure stated in this amendment is to indicate our conviction on that point.
That does not in any way affect the outlay ceilings. The outlay ceilings are limited and have been reduced as indicated in the proposed amendment.
Mr. HARRY F. BYRD, JR. But the budget authority, if I read it correctly, is proposed to be increased by $9 billion?
Mr. MUSKIE. The budget authority has been reduced by $3.1 billion.
Mr. HARRY F. BYRD, JR. By $3 billion. But the Senator proposes to increase the budget authority over the OMB figures by $9 billion?
Mr. MUSKIE. For 1977? No. The changes from the third budget resolution are as follows, and I will list them for the Senator: Budget authority is down by $3.1 billion. That is largely a reflection of the fact that the payments in excess of tax liability and payments to others who would have received payments if the $50 tax rebate had been approved are not likely, so we have eliminated those on the outlay side of the budget and on the budget authority side. We reduce that figure by minus 3.1.
Outlays have been reduced by $8.65 billion.
Revenues have been raised by $1.6 billion.
The deficit has been reduced by $10.25 billion.
The public debt estimate has been reduced by $10.1 billion.
So all the numbers go down except revenues which go up $1.6 billion.
Mr. HARRY F. BYRD, JR. To get back to the unanimous consent request, which is the pending request, if that request is agreed to both the third concurrent resolution and the amendment will be before the Senate for consideration and amendments could be proposed to either, I assume.
Mr. MUSKIE. Yes. The purpose of the amendment, may I say to the Senator, is to simplify the procedure for considering. There is no limitation that I am aware as to amendments Senators may offer to either.
Mr. HARRY F. BYRD, JR. I thank the Senator.
Mr. MUSKIE. I thank my good friend from Virginia for giving me that opportunity to explain the amendment. Mr. President, I renew my request.
The ACTING PRESIDENT pro tempore. Is there objection?
Without objection, it is so ordered. The amendment was agreed to.
Mr. CRANSTON. Will the Senator yield for a unanimous consent request?
Mr. MUSKIE. I yield.
Mr. CRANSTON. I thank the Senator. I ask unanimous consent that Hal Gross of my staff may have the privilege of the floor during the consideration of the pending legislation.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I now return to my opening statement.
As we begin the third cycle under the congressional budget process, it is appropriate to recall once again that the process is not merely a bookkeeping device. It is a policy tool that helps to give us control over the fiscal direction America takes. Without this process, the Congress would lose its ability to assess overall economic and fiscal policy and influence the course of the economy. Without a means to agree on total spending and major priorities before commitments are made, the Congress would be unable to examine critically the difficult policy choices made necessary if we are to limit total Federal spending.
Establishing realistic economic and fiscal policies and making choices among competing priorities are difficult tasks, but, as I have stated before, I have confidence in the ability of this body and the Congress to live up to the expectation and the promise of the Congressional Budget Act.
Over the past 2 years, the Congress has accepted the need for an expansive fiscal policy to promote economic recovery. Our need today is to shape a policy for next year which will continue that steady growth.
We have proven in the first 2 years of the budget process that we can establish and enforce aggregate fiscal targets which maintain a floor under revenues and a ceiling on spending. The establishment and maintenance of an effective fiscal policy is a central purpose of the Budget Act. Equally important, we have begun to examine the content of the Federal budget and arrange priorities to meet national needs. Both of these tasks are equally important aspects of the budget process.
In drafting the Federal budget for fiscal year 1978 the Budget Committee has had to consider the overriding economic circumstances the Nation now confronts: a continued high rate of unemployment, an inflation that could reignite to an accelerated pace if imprudent policies are followed, and a complex international situation, which the American people have only recently come to respect.
The committee has also had to deal with broad demands for increased Federal action in such areas as national defense, energy research, agriculture, veterans, education, as well as in grants to States and local governments.
In attempting to reconcile the demands of fiscal policy with issues of Federal priority, the committee has benefitted from the guidance and analysis of expert opinion, both in the field of economics and in broad areas of public policy. The Budget Committee report which we debate today reflects, however, much more than an exercise in budgetary and fiscal management. It reflects the concerns of the American people as we have endeavored to represent them.
While there are differences in emphasis among individual members of the committee, I believe that the budget reselution we put before the Senate today reflects a number of broadly recognized concerns. These were evident throughout the course of our hearings and markup sessions which were preparatory to our report. They included:
A continued, and wide ranging public concern as to the need to return our Government to a balanced budget as soon as this is consistent with our Nation's overall economic circumstances.
A growing public concern that the size of government itself has become unwieldly and that we should be skeptical of any new initiative for which financing is not clearly available.
During the course of our markups, it has been the Budget Committee's difficult responsibility to balance the concern of economy with these clearcut needs for public action. I am hopeful that as we debate this resolution, and as the Senate considers the upcoming legislative calendar which this resolution is designed to guide, that we be aware that this will be a shared responsibility.
The temptations to relax the disciplines of the budget process may be stronger now because the economy is again on the upswing, due in large part to congressional policies of the last 2 years. Pressures for additional spending can be expected to grow.
Let me sound a clear warning: Congress must continue to resist these pressures. Each committee must diligently evaluate ongoing programs and consider discontinuation of programs of lesser merit. This is central to an effective congressional budget process and is embodied in the sunset legislation now being considered by the Congress.
PRIORITIES FOR FISCAL 1978
With a new President and a continuing economic recovery, I am cautiously optimistic that we can:
Achieve a steady rate of growth which will keep America moving toward full employment and a balanced budget;
Avoid action which would increase the rate of inflation:
Provide real growth in the defense budget that will make clear to other countries our commitment to our national security;
Maintain adequate Federal support for health, education, and other social services;
Provide for an energy program that meets our needs.
Mr. President, all of these priorities are reflected in Senate Concurrent Resolution 19.
No Member of the Senate — I emphasize that, no member of the Senate — will like all of the figures in the first budget resolution. There may well be amendments to the resolution as reported by the Budget Committee. The committee's recommendations are not carved in stone. The resolution reported by the committee is the best compromise the committee can put before the Senate. It is our reflection of national priorities. We may be wrong. The Senate must now work its will using the committee resolution as a reference point. I am anxious to see the Senate accept the discipline of its decisions. Let us make our changes now, in a conscious and orderly fashion, so that we can later then enforce the result as we pass individual spending and tax measures.
FISCAL POLICY IN FISCAL YEAR 1978
The levels of revenue and spending in the proposed budget reflect the committee's choice of a policy for steady long term growth.
The American economy is still only partially recovered from its worst postwar recession. After nearly 2 years of recovery, the unemployment rate in all segments of the labor force remains close to postwar record highs, while production and real income remain far below capacity.
In the latest recession, real output fell by over twice as much as in other postwar recessions, but thus far it has recovered at only an average rate. As a result, real output is now only about 4 percent higher than it was 3 years ago, and industrial production has barely passed its previous quarterly peak. Over 7 million Americans, including about 21/2 million heads of households, remain without work.
The message is clear. If this unaccept able situation is to be overcome, we must adopt policies that maintain a steady and continuing economic recovery.
If full employment is to be reached, the current recovery must be extended over a much longer period than the 34 months averaged by other peacetime recoveries since World War II. On the basis of the previous average, the present recovery would end early in 1978, leaving the economy stranded with high unemployment, unacceptably low utilization of plant and equipment, and continuing inflation We cannot allow this to happen. The costs of failure are too high. The committee has determined to follow policies for fiscal year 1978 that offer the bet hope for prolonged recovery.
Mr. President, in reporting the third concurrent resolution for fiscal year 1977 2 months ago, the committee aimed at an average growth rate of real GNP of 51/2 to 6 percent over the next 2 years. This is an ambitious goal, given the present weakness in investment and export demand and the recent demise of the tax rebate. Growth at a 51/2 to 6 percent rate is unlikely unless a strong 1977 economy revives investment demand in 1978 and renewed growth abroad expands markets for U.S. exports. Otherwise, real growth may be about 5 percent and unemployment will fall less rapidly. The administration's economists anticipate an acceleration of investment activity, although present economic data does not provide much support for this optimism.
Mr. President, I ask unanimous consent to have printed in the RECORD at this point a table which shows the economic assumptions underlying the committee's recommendations in comparison with those of the administration's current budget estimates for fiscal year 1978.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. MUSKIE. Mr. President, the unemployment rate has fallen from 7.9 percent in the fourth quarter of 1976 to 7.3 percent in March 1977. A continuing reduction in unemployment will occur over the next 2 years if a steady recovery is maintained. Total employment from the end of 1976 to the end of 1978 should increase by about 5.2 million as a result of the expansion of the economy and the jobs programs provided in the fiscal year 1977 third concurrent resolution and proposed in the committee's recommendations.
THE BUDGET DEFICIT
The Federal deficit projected in these recommendations, as those of the three preceding fiscal years, is largely a result of unacceptably low levels of economic activity and high levels of unemployment. A weak economy shrinks Government revenues at the same time that it raises costs of unemployment compensation and other income support programs.
The Budget Committee is committed to achieving a balanced budget. Since large budget deficits result from a weak economy, steady economic growth must be maintained The unacceptably large budget deficits can be eliminated only by a strong economy.
The committee recognizes that large budget deficits are inevitable when the economy is weak.
However, a return to full employment, with a strong private sector may make budget surpluses necessary in future years. When private investment demands become sufficiently strong — and I hope the administration's optimism in this respect is confirmed by events — budget surpluses will be required to reduce private and public consumption and release resources for needed investments in energy, environmental quality, and other areas.
The committee has exercised considerable fiscal restraint in holding its recommendations for outlays at the levels proposed in the resolution and in reducing the size of the projected deficit. Indeed, the committee found it necessary, after preliminary agreement on functional totals, to engage in a "second round" of cuts in budget authority and outlays, in spite of its recognition that this might adversely affect the funding of programs with considerable merit.
This resulted in a reduction of $2.5 billion in budget authority and $1.9 billion in outlays from the preliminary totals. Taken together with an addition of $.1 billion to the revenue floor, the second round of cuts reduced the projected deficit by $2 billion.
REVENUES
The committee's revenue target of $395.6 billion assumes enactment of $18.4 billion of tax reductions.
However, H.R. 3477, the tax bill passed by the Senate just last Friday, would provide $20.2 billion of tax reductions in fiscal year 1978, or $1.8 billion more than was assumed in the first budget resolution. I urge the Senate tax bill conferees to return with a conference version which comes as close as possible to the level of tax reductions targeted in the budget resolution, and thus hold any resulting budget deficit increases to a minimum.
Although the revenue target set in the budget resolution is slightly over $9 billion lower than the level of budget receipts recommended by the administration, almost half this gap is attributable to different economic assumptions and estimating and accounting differences. Half of the remaining $4.6 billion of lower revenues stems from the President's recommendation to delete any new tax relief for business — a now unrealistic assumption in light of subsequent congressional action to retain the business tax reductions.
FEDERAL OUTLAYS
The committee's recommended outlay target reflects considerable fiscal restraint.
The $458.8 billion outlay total is $1.5 billion below what would be spent if the same policies and laws contemplated in the third concurrent resoution were continued through fiscal year 1978. Had the committee simply taken the same policies, adjusted them for inflation and changes in various beneficiary groups, the level of outlays now recommended for fiscal year 1978 would have been $460.3 billion. The committee's recommendation falls $15.6 billion below the total outlays recommended by the authorizing committees in their March 15 reports, $6.0 billion below those of the appropriations committee, and $2.9 billion below the level recommended by President Carter in his April budget update.
Though the committee's recommended outlay target is lower than current policy, it would permit increased funding for critical programs to support energy research, agriculture, education, and local and State governments.
The committee is proposing a tight budget which clearly has not accommodated all of the suggestions from other committees and the administration. This means that committees will be obliged to weigh priorities among programs within their jurisdiction and to set program levels that conform to the totals finally adopted in the congressional budget.
CONTROLLABILITY OF BUDGET OUTLAYS
Mr. President, the difference between budget authority and outlays is crucial to understanding and controlling the budget. The terms are sometimes used interchangeably, as if they meant the same thing. But to the extent that most oulays in any particular fiscal year result from commitments under budget authority enacted months or even years before, the outlays and deficit of any current fiscal year are largely predetermined by past events. They are largely not controllable by legislation in the current year; they are bills that must be paid. Moreover, an exclusive emphasis on the outlays and deficit in a particular year may obscure the fact that new budget authority enacted in the same year actually fuels the engine of future outlays.
During the 3 years of existence of the budget process, the Budget Committee has sought to formulate a Federal fiscal policy which takes account of these realities. That fiscal policy has been designed to limit the otherwise unrestricted growth of budget authority and direct it toward the most urgent national priorities, and to encourage the sound, steady economic growth in the private sector necessary for national employment and prosperity and generation of tax revenues adequate to balance the budget.
Mr. President, the Senate should recognize that almost $3 out of every $4 in fiscal 1978 outlays recommended in Senate Concurrent Resolution 19, as reported, are of the type classified as "relatively uncontrollable under present law." These relatively uncontrollable outlays include spending that is mandatory under present law — for example, social security and unemployment benefits — which will account for almost three-fifths or 60 percent of fiscal year 1978 outlays, as well as outlays resulting from contracts and obligations entered into in years prior to fiscal year 1978.
These proportions have remained fairly constant for the 3 fiscal years for which the congressional budget process has been in effect.
INFLATION
Inflation is a constant concern to all Americans. While the inflation rate has fallen from the levels of 2 or 3 years ago, it continues to be unacceptably high.
Our present inflation results primarily from inflationary momentum that has been incorporated into the system. Wage demands reflect previous increases in prices, and prices are increased to cover higher wages. This underlying inflation should decline gradually over time. However, inflationary expectations make it especially necessary to follow steady fiscal and monetary policies.
Recognizing both the necessity for a steady recovery and the risks involved in excessive stimulation of the economy, the committee has recommended a prudent fiscal policy designed to produce moderate and steady growth. It does so in the hope that this fiscal responsibility will lower inflationary expectations, improve confidence, and contribute to a strong private sector.
In addition to general fiscal restraint, the committee's recommendations are designed to discourage specific actions which increase prices and inflation rate in particular sectors.
The committee recognizes, for example, an urgent need for Congress to move quickly to curb the rapid inflation in medical care costs and recommends lower outlays in the health function to reflect enactment of legislation to reduce such inflated costs. The committee endorses the targeted public service jobs plan, which emphasizes employment and training for structurally unemployed, unskilled workers, youth, and welfare recipients.
COORDINATION OF FISCAL AND MONETARY POLICY
Mr. President, the committee's fiscal targets are consistent with real economic growth of about 5 – 4 percent through the end of 1978. This growth rate assumes a revival of investment demand, expanded foreign markets for U.S. exports and an accommodative monetary policy.
Fiscal and monetary policies must be coordinated to insure that congressional fiscal policy is not thwarted. It is essential that monetary policy support the fiscal policy enacted by the Congress to prevent a substantial rise in interest rates which could choke off badly needed investment and impair the recovery.
I believe that the Federal Reserve Board will cooperate fully in insuring theNation's economic recovery because of the fiscal restraint and avoidance of inflationary spending in the first concurrent resolution.
Now, Mr. President, let me summarize the major thrusts of the committee's spending recommendations.
NATIONAL DEFENSE
Mr. President, the committee recommendation for the national defense budget — function 050 at page 30 in the report — continues the trend begun in fiscal year 1976 of providing significant real growth in defense programs. This growth is primarily aimed at the modernization of our forces and insuring the readiness of equipment.
The committee recommends for national defense $120.3 billion in budget authority and $111.6 billion in outlays. This level of spending is based on the committee's belief that progress must be made at the strategic arms limitation talks with the Soviet Union. At the same time it is essential as I stated earlier, that no doubt exist about our commitment to the national security of the United States.
It is apparent that the Soviet Union has made significant gains in increasing the size and in improving the capabilities of its defense forces. Two main reasons for the present Soviet position are their desire to achieve parity with the United States in the capabilities of strategic offensive forces and to improve the strength of their general purpose forces for activity beyond the U.S.S.R. The U.S.defense budget counterbalances these Soviet gains by establishing a foundation for substantial increases in U.S. strategic and general purpose force capabilities, some already achieved or planned over the next decade.
Revisions in defense manpower policies could provide savings in the fiscal year 1978 budget which could be made available for increased funding for the procurement of weapons systems and the improved readiness of equipment. Moreover, the committee's recommendation assumes that 15 percent of any October 1977 pay raise will be absorbed through savings in Department of Defense activities, which is consistent with previous experience.
INTERNATIONAL AFFAIRS
The committee recommends budget authority of $9.3 billion and outlays of $7.3 billion for the international affairs function — function 150 at page 36 of the report. The committee believes that this country's stake in the economic well being of its allies and friends is increasing and multilateral and bilateral assistance should reflect that stake.
Exports of goods and services now account for almost 10 percent of our gross national product. One quarter of those exports go to developing countries. Almost all of the growth in this function is for development assistance to those countries whose economies have been hard hit by the recession and the high cost of energy. Without timely financial support from the United States and other industrial nations, international trade and U.S. markets will be severely disturbed. Without U.S. leadership, the multilateral development banks which administer much of this assistance are less likely to obtain larger contributions from other industrial countries and the richer OPEC nations.
I would observe in passing that detailed justification for several administration initiatives was not provided until the committee's markup was underway. In the future, adequate and timely consultation with the committee will greatly facilitate the consideration of new programs.
PHYSICAL RESOURCES
Mr. President, the committee's recommendations in the physical resources areas include a major commitment to the continued acceleration of energy research and development programs essential to treating the serious long term energy problem, widely discussed in recent days. At the same time, our recommendations provide the basic support to achieve the clean water goals the Nation has set for itself, through continuation of Federal grants for construction of wastewater treatment facilities.
The committee has tried to allow for full funding for those disaster and commodity price support programs which maintain the viability of the family farm and the agriculture sector of our economy. The committee is concerned, however, about the possibility of sharply increasing and uncontrollable future farm subsidy programs under proposed long term legislation being considered this year. The distinguished ranking member of the Budget Committee, Senator BELLMON, has rightly pointed out that the loan programs for farmers can be designed to have no net budget cost and that farm subsidy programs can be limited to predictable spending levels when averaged over several years. But, Mr. President, the direct subsidy programs must be controlled by legislation now if we are to avoid losing control in future years.
Under the committee's recommendations, grants to State and local governments for the environment, transportation, community and regional development, and revenue sharing, as well as for human resources programs, would increase in total over 10 percent compared to the level of this fiscal year. This would be an important step in improving the capital infrastructure of our vast country.
HUMAN RESOURCES
In the human resources area, the budget resolution as reported to the Senate makes room for additional Federal efforts in several high priority programs serving the Nation's human needs.
The Budget Committee assumed substantial funding increases will be provided for education programs; the veterans' medical care system and other veterans' benefits; cost-of-living increases for recipients of social security and other such payments; programs aimed at improving health care services, planning, and research for the general population; and social services grants to help the neediest and most vulnerable groups in our society.
Mr. President, the first budget resolution for 1978 will continue the strong congressional commitment to public service jobs for unemployed adults and strong initiatives to combat youth unemployment. The pending economic stimulus supplemental for 1977 will fund 725,000 CETA jobs by the end of fiscal 1978, to be targeted mainly on the long term unemployed and persons with low income. It will also fund a major expansion of youth jobs and training programs.
A major problem confronting all Americans the past several years has been the rapid inflation in health care costs. As I mentioned earlier, the Budget Committee urges Congress to take measures this year to bring these costs under control. Senate Concurrent Resolution 19 assumes such an effort will yield outlay savings of $800 million for the medicare and medicaid programs.
The resolution sets an outlay figure for income security programs that is $1.4 billion below the estimated current policy total, based on possible administrative and legislative savings that have been proposed by the President or suggested by other committees. Increases for new legislative initiatives, of course, would not be precluded.
BACKGROUND TO COMMITTEE RECONSIDERATION
On April 12, the Budget Committee reported the first budget resolution for fiscal year 1978. The 1978 resolution is designed to limit Federal spending to the maximum extent consistent with continuation of the steady economic growth planned and encouraged throughthe congressional budget process for the past 3 years.
A number of events, however, have occurred since the 1978 resolution was reported, which led the committee to further consider that resolution and the third resolution for 1977 adopted by
congress in March. These events include:
First. The long awaited special report by the Office of Management and Budget, as evaluated by the Congressional Budget Office, on reestimates of outlays to be expected during the current fiscal year.
Second. The appearance of new economic data reflecting a sharp rebound in the economy after the harsh winter prevailing at the time the third resolution was considered, raising the question of whether the economic assumptions of the resolution were still valid.
Third. President Carter's withdrawal of the rebate and associated special payment portions of his economic stimulus program.
Fourth. President Carter's submission of a broad ranging set of proposals for a national energy program.
In order to analyze the significance of these events for the congressional budget, the committee met four times in recent days. These meetings included a hearing with the President's chief economic and budget advisers.
FIRST RESOLUTION RECOMMENDATION REAFFIRMED
Based on this thorough review, the committee has voted to reaffirm its spending recommendations of $497.4 billion in budget authority and $458.8 billion in outlays and a revenue floor of $395:6 billion set forth in S. Con. Res. 19 for the coming fiscal year — fiscal year1978. We made no changes.
Regarding the current fiscal year — fiscal year 1977 — the committee recommends the following revisions in its committee amendment which reduces the deficit forecast for the present fiscal year by $10.25 billion to $59.5 billion.
First. A reduction of $3.1 billion in budget authority which reflects minor technical adjustments and elimination of the funds that would have been required for the refundable rebates to taxpayers and the special payments to non-taxpayers originally proposed as part of the President's stimulus program in January. It is the committee's judgment that these payments will not be enacted.
Second. A net reduction of $8.65 billion in expected Federal outlays, based on the most recent OMB/CBO forecasts.This reduction also includes elimination of the amounts for the rebates and special payments mentioned above.
Third. An increase of $1.6 billion in expected revenues based on the latest Treasury/CBO estimates of tax receipts. These increased tax collections largely represent more rapid than anticipated collections of estate and gift taxes.
Fourth. A reduction of $10.25 billion in the deficit predicted for the current fiscal year, reflecting these reduced outlay and increased tax collection estimates.
Fifth. A reduction in the predicted Federal debt for both fiscal years 1977 and 1978 as a result of this lower deficit estimate.
The committee has, however, reaffirmed the revenue floor established in the third resolution, which contemplated significant temporary tax relief during the fiscal year. Although the President has indicated he no longer supports such a proposal, the committee's evaluation of the economic circumstances confronting our Nation today leads it to reaffirm its judgment about the advisability of tax stimulus in some form in 1977. The committee believes it would be imprudent at this time for the congressional budget to eliminate the possibility that such legislation can be enacted.
The committee believes that the fiscal policy provided in the third concurrent resolution for fiscal year 1977 was sound. Fiscal policy must be steady in order to be effective and should not be altered in the absence of significant changes in economic circumstances. The committee is not persuaded that significant changes in economic prospects for 1977 and 1978 have taken place since the adoption of the third budget resolution for fiscal year 1977. Although many economic indicators rose sharply in February and March, these changes largely reflected a rebound from severely depressed January levels caused by the severe weather, not a resurgence of underlying economic strength.
The committee thus believes that the economic evidence available does not justify a significant change in course for the congressional budget for fiscal year 1977 or 1978 at this time.
On the other hand, the latest available data about the actual rate of Federal outlays and tax collections — which indicates a lower deficit will occur in fiscal year 1977 than had previously been anticipated — should be reflected now in the congressional budget. These reestimates do not reflect any major change in the program or priority assumptions in the congressional budget. Rather, they simply are a technical reestimate by the OMB and CBO of tax collections and outlays during fiscal year 1977 for these programs and priorities, based on actual experience to date.
THE PRESIDENT'S ENERGY PROGRAM
The committee considered the advisability of making changes to the reported first budget resolution for fiscal year 1978 in response to President Carter's proposed energy plan which he outlined to the Congress on April 20. Several considerations have led to the committee's decision not to adjust the first budget resolution at this time as a result of the President's energy proposals:
First. No official budget estimates or program details are available at this time to support the President's plan;
Second. No congressional analyses of the President's plan have yet been made, nor have possible congressional alternatives been considered;
Third. Some of the President's proposals could be accommodated within the reported targets, such as his energy research and development recommendations; and
Fourth. After full congressional consideration of the energy situation, any required adjustments can be made in the second budget resolution later this year.
DEBATING THE RESOLUTION
Mr. President, let me conclude with a word of caution about debating priorities.
As my Budget Committee colleagues know well, it is easy to drift into a discussion of individual programs or line items in a budget discussion. Favorite programs or areas of expertise are prime candidates for programmatic debate.
The Budget Committee has successfully avoided this pitfall. We recognize that program jurisdiction belongs to the authorizing and appropriations committees.We have focused our attention, instead, on aiding Congress in establishing its broad national priorities.
Of course, we discuss individual programs and utilize the special expertise of our members. But we do not vote to include or exclude a given program or even an amount for such a program except in rare cases where the program is of such magnitude as to constitute itself a significant national commitment.
In the course of this debate, I urge each Senator to avoid colloquies in support of funding for this or that program. No such guarantee can be made in the budget resolution. That will take place in other committees and on the floor through the summer. This debate should focus on broad totals and on any changes necessary to implement the national priorities of the Congress.
AMENDMENTS
The Budget Act does contemplate the possibility of amendments to this resolution, which is the budget committee's considered recommendation to the Senate. The purpose of this debate is to allow the Senate to work its will in creation of an appropriate and comprehensive congressional budget.
The Budget Act provides a few important changes in Senate procedure affecting this debate. As you know, in creating the Budget Act, we limited debate on this first budget resolution to 50 hours, with no more than 2 hours allowable to each amendment and no more than 1 hour to amendments to amendments, debatable motions or appeals.
There are also several special rules affecting amendments. Amendments must be germane. In addition, amendments will be in order, even to sections of the legislation which have already been amended, as long as those further amendments propose to change a figure or figures then contained in the resolution so as to make the resolution mathematically consistent or to maintain such consistency.
Mr. President, as I have done often since the Budget Committee began its work 18 months ago, I commend my fellow committee members for their diligence, for their hard and successful work in a new field, and for their political courage in coming to grips with the conflicting demands that budgeting always entails.
I particularly commend and thank Senator HENRY BELLMON, whose bipartisan objectivity and support, more than any other single ingredient, have guaranteed our success to date.
Finally, I wish to commend the staff of the Budget Committee for their highly professional support to the members of this committee in the preparation of the first concurrent resolution and in the operation of the budget process.
Through constructive, informed debate, and through compromise I am convinced that we can produce a congressional fiscal policy and a congressional budget addressed to national needs.
Mr. President, I yield the floor.