March 22, 1978
Page 8039
INFLATION AND THE FARM BILL
The PRESIDING OFFICER. The Senator from Maine.
Mr. MUSKIE. Mr. President, yesterday the Senate rejected by overwhelming votes Senator BELLMON's and my effort to keep the Nation's budget in perspective. By overwhelming margins the Senate voted to increase the rate of inflation by a full point. By overwhelming margins the Senate voted to increase the Federal budget deficit. And by overwhelming margins the Senate voted to reject the discipline that we imposed on ourselves with enactment of the Budget Act 4 years ago.
Mr. President, for whatever reasons the absence of a clear administration position on the legislation supported this erosion.
Mr. President, today in the Washington Post there is an article on the warning by the Saudi Arabians that continued decline in the value of the dollar will inevitably lead to an increase in oil prices. There is an inference in that article that the concern of the President with this potential has triggered renewed anti-inflation initiatives, and expanded efforts to shore up the dollar. I find this inference, in light of yesterday's results in the Senate, interesting at best.
President Carter and his Secretary of Agriculture had a unique opportunity to take a tough stand on inflation on the farm bills. They did nothing. They waffled. And it is this kind of waffling that is discrediting the value of the dollar.
In that same story, it is suggested that the administration is considering a major effort to increase exports as a means of offsetting the decline in the dollar and improving our balance of payments. I cannot, Mr. President, believe that this administration would, on the one hand, consider improving our balance of payments by increasing our exports when at the same time their silence supported passage of legislation which will significantly reduce production of the most significant exports this country has.
I will not repeat the statistics I cited on the floor yesterday, but a decline in farm production inevitably will lead to a decline in commodities available for export. Whether or not the increased price as a result of reduced output will offset that decline depends entirely on the ability of the world to pay what may become exorbitant prices for food and feed grains. In any event, a reduction of production at this time can only lead to a reduction of our capacity to meet the demands of the export market and thus could erode hoped-for increases in exports and the associated improvement in the balance-of-payments situation.
It may be that many of my colleagues, and apparently the President, do not understand the critical nature of the current economic situation. Another round of oil price increases would have a serious and perhaps disastrous impact on recovery. Another round in devaluation of the dollar will have an equally serious effect on the world economy and the growing deficit in the Federal budget can only lead to another round of double digit inflation.
Mr. President, it will take a team effort to control inflation, to reduce the budget deficit, and to shore up the dollar. I think it is well for us to recognize the importance of that fact. Those few Senators who yesterday put national interest ahead of special interest obviously cannot do it alone. The failure of the President and two leading Senate contenders for the Presidency to exercise this kind of responsibility suggests that the public should not anticipate increased confidence in the dollar, control of inflation, and reduced deficits.
Mr. President, I ask unanimous consent that that article be printed at the close of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. MUSKIE. There is an inference in that article, Mr. President, that concern of the President with this potential has triggered renewed anti-inflationary initiatives and has expanded efforts to shore up the dollar. I find this inference, in the light of yesterday's results in the Senate, interesting at best.
EXHIBIT 1
[From the Washington Post, Mar. 22, 1978]
SAUDIS LINK OIL PRICES TO A STABLE DOLLAR
(By Hobart Rowan)
King Khalid of Saudi Arabia has told President Carter that oil prices may have to be raised if the U.S. dollar continues its decline in world markets.
The Saudi leader said in a recent letter that his nation, in effect, has resisted several efforts within the Organization of Petroleum Exporting Countries (OPEC) to raise prices, but the United States could no longer be sure that the Saudi view would continue to prevail.
Authoritative sources stressed that Khalid's letter was not threatening, and that in fact, "it was very well reasoned."They said the anti-inflation program that President Carter now has under consideration had not been triggered by the Khalid letter.
The declining dollar, which contributes to inflationary pressures here by boosting the cost of imported goods, also has had an adverse impact on the oil cartel. For OPEC, which sells its oil for dollars around the world, a cheaper dollar amounts to a cut in their prices, and a loss of real revenues.
Officials conceded that a series of three government announcements of steps to shore up the dollar — most recently, an accord with West Germany — have not yet had the desired results, and that "some more definitive signal of a fundamental nature is going to be needed."
Congressional approval of an energy conservation bill is cited as the most important signal. But pressure has also been increasing on Carter for a stronger anti-inflation program that might give foreign exchange markets more confidence in the dollar.
Carter has been urged to take stronger anti-inflation steps by Federal Reserve Chairman G. William Miller, and by both Republican and Democratic members of the Joint Economic Committee. Additional anti-inflation measures have also been urged by the Government's own wage-price watchdog, Barry Bosworth, director of the Council on Wage and Price Stability.
As part of a new basket of actions dealing with inflation, the Administration reportedly is considering a Government task force to see how American exports might be stimulated.
An intensified export drive, some Administration officials believe, would cut down the U.S. trade deficit, which is one of the sources of pressure on the dollar.
An export program, officials said, could lead to some new form of tax incentives for exports, in effect reversing current Carter Administrative policy.
White House officials have been working on various anti-inflation options with the hope of making something public by tomorrow. But officials cautioned yesterday that that date might "slip," because final decisions have not been made by the President.
The idea of an export task force has been pushed by the Commerce Department, and endorsed by Special Trade Representative Robert S. Strauss.
"The answer to this nation's problems," Strauss said in an interview, "is not in restricting imports, and making the buying public pay more money when they're already choked by inflation, but the answer is a tremendous thrust from an export program."
But other officials, who concede that it would be useful to sweep away any artificial impediments to exports, caution that any benefits would not be gained in the short run, and certainly not quickly enough to ease current pressure on the dollar.
High on the list of potential actions to stimulate exports, according to informed sources, are tax incentives, even though the Carter Administration has rejected continuation of one form of export tax incentive, the DISC program, in its own tax bill now before Congress.
Other possible steps include beefed-up export financing, a bolstered export promotion drive, and an effort to persuade private businessmen that great export opportunities exist if they would put more effort into it. "We may have to act more like the Japanese do," one official said.
Not all Administration officials are sold on this approach, especially if it includes a politically embarrassing reversal on tax incentives for exports. "Besides," says one unconvinced official, "if the United States tries to pay its oil bills by pushing exports into the less-developed countries with the help of subsidies, that's hardly a contribution to global strategy."
Mr. MELCHER addressed the Chair.
The PRESIDING OFFICER. The Senator from Montana.
Mr. MELCHER. Mr. President, I think some of the points that the Senator from Maine has raised I would agree with. But there are vital points that are not mentioned at all.
When we are talking about the Government of Saudi Arabia and their part in setting OPEC-priced oil, we have to admit that the oil sent through OPEC was set at a considerably higher price than had been the case prior to 1973. We have to admit that our balance of payments is seriously aggravated by the imports of OPEC oil.
But we cannot lose sight on that oil they produce, the exports they have, the OPEC countries protected the price of their export. They set high oil prices and that is their major export. We have not done anything in setting the price for American grain that is exported. It is much too low.
Mr. MUSKIE. Will the Senator yield?
Mr. MELCHER. If the wheat that we export was not being sold at around $2.60, $2.85 a bushel, but was set at a price that would compare to OPEC oil, our balance of payments would be much better.
I am delighted to yield to the Senator.
Mr. MUSKIE. No. 1, I want to make it clear to the Senator that I was as indignant and am still indignant after 3 years about the action of the OPEC prices, in quadrupling oil prices at the time that it did. I did not try to cover the history of that situation in my brief remarks.
The point I wanted to make is a very simple one. The Budget Committee within the last 2 weeks held a hearing on inflation. The witnesses included the new Chairman of the Federal Reserve Board, and others. There is no question, based on the testimony we have had, not only in that hearing, but in the hearings throughout this budget season, that our No. 1 problem is inflation.
Why is it the No. 1 problem? Initially, of course, as the record of those hearings made clear, it was triggered by that escalation in energy prices.
But what sustains it? What sustains it, may I say to the Senator, according to the testimony of these experts — I am no economic expert — what sustains it is the determination of every individual in our economy, every group in our economy, to catch up.
The underlying catchup inflation has been steady at a 6 to 6½ percentage increase for the last 2 years.
This inflation is not some new inflationary input into the economy. It is a circular thing. Everybody is catching up with everybody else and chasing everybody else in a circle.
So, unless somebody at some point breaks out of the circle to go through the anti-inflation door, that circle is going to continue to turn.
We seem to reject every opportunity to take a deflationary action. We seem to embrace — and I am not talking about just yesterday — every attractive opportunity to help somebody catch up, refusing to recognize that that catchup effort is itself inflationary.
I do not know of any smooth, painless, nonsacrificial way for us to stop that circle from turning. But I do think, as chairman of the Budget Committee, I have a responsibility, which I am going to try to exercise more conscientiously than I have in the past, to identify those inflationary inputs that keep that inflation circle whirling at what everybody tells us, who knows anything about economics, is a faster and faster pace.
Now, Senators who made their vote yesterday, cast it as a matter of conscience, and my good friend from Montana did, as well. But to pretend, as I heard one speech on the floor yesterday pretend, that voting for that bill yesterday was in no way inflationary, is simply to ignore reality.
Mr. MELCHER. Mr. President, I voted for that bill, not just on the basis of helping farmers, not just on the basis of raising our loan rates on grains and cotton so farmers could get a higher price in the marketplace, and not just on the basis of raising target prices for these commodities so farmers could survive during this tough economic crunch, but I also voted on the basis of the long-range good for the United States.
There is no way that we can correct our balance of payments without selling American grain abroad. There is no way that we can catch up, as the Senator from Maine says that we should catch up, without recognizing that we have to have a price commensurate with our exports that will match the price of imports.
The OPEC price for oil is real. They did it for their own good. The prices set on other imports that we bring into this country are set by other countries for their own good.
We have to make sure that American grain farmers and cotton producers have some protection, too.
The long-range effect, if we do not do something to protect them, is that we lose these producers and we will be in worse shape on our balance of payments, our economy will be in worse shape. We simply cannot take it out of the hides of farmers to meet the rising costs of inflation and to assure a stability on those rising rates simply by holding down farm prices. The agriculture producers must survive or our balance of payment will worsen, the dollar will be weaker, and the American economy will be much worse.
Mr. DOLE addressed the Chair.
The PRESIDING OFFICER (Mr. HARRY F. BYRD, JR.). The Senator from Kansas.
Mr. DOLE. Mr. President, I appreciate the comments just made by the distinguished chairman of the Budget Committee and also by the distinguished Senator from Montana.
The House in a vote less than an hour ago did agree to go to conference on the farm legislation, and in the process an effort was made to instruct the conferees on the so-called flexible parity bill, that was defeated, but I think the important thing is that I understand House conferees have been appointed and the Senate conferees will be appointed and they will go to conference.
I think they will overcome some of the real fears, I might add, expressed by the chairman yesterday, because it is not possible to judge the impact of the McGovern, the Dole, and the Talmadge amendments when we did not know about the one until midnight the night before.
Perhaps I am wrong in the eyes of the chairman, but I certainly do not criticize his efforts to call it to the attention of the Senate, and to point up the problem, so long as it is done with an even hand, and that is the way the Budget Committee has been operating — with an even hand — in the school lunch programs and the farm programs. I do not think we can quarrel about that.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. DOLE. I yield.
Mr. MUSKIE. I express my appreciation to the Senator. He always applauds my efforts, even when he does not agree with them.
Does the Senator have any idea when the conference will meet before this weekend?
Mr. DOLE. I am not certain. Senator TALMADGE, I understand, may be in the process now of contacting Senators who may be appointed as conferees on the part of the Senate. We hope we can do it during the recess — perhaps not vote until after the recess, but at least assure the farmers that there will be something to vote on when we return, if there is a recess. I suppose that is another question.
Mr. MUSKIE. I assure the Senator that I will do my best to get the budget evaluation and the economic evaluation and all the other pertinent information that is was not possible for us to have yesterday, so that the conferees will have it at their disposal at the conference.
Mr. DOLE. I hope the staff of the Budget Committee will be available to some of us on the conference, because we should know what the impact will be so far as consumers are concerned and so far as inflation is concerned — not just the benefit, but also the other side.
Mr. MUSKIE. We will try to comply with the Senator's requests.
Mr. DOLE. Mr. President, I hope — as does the Senator from Montana (Mr. MELCHER) — that we can resolve the differences in conference in the next few days, either this week or next week. Whether or not there is a recess, the conferees can meet. It seems to this Senator that the need is that urgent, that the farmers need some assurance.
I also suggest that, notwithstanding certain White House pressures and other efforts to defeat the so-called flexible parity concepts, that concept is very popular with America's farmers. I was heartened today by the vote in the Houseof Representatives, when a motion to table, with instructions to the conferees to adopt the flexible parity approach, received 160 votes to some 230 votes — a difference of 47 or 57 votes. It indicates to this Senator the strong support of the voluntary flexible parity concept, which I believe many of my colleagues — Democrats and Republicans — believe would be the least costly. It would not be subject to the criticisms of paying farmers not to farm, and I think it has great appeal. I hope that when the conference does meet, this Senator and others who will be conferees can persuade the conferees to adopt that view.
Mr. President, I suggest the absent of a quorum.