September 14, 1978
Page 29399
Mr. PROXMIRE. Mr. President, will the Senator from Oklahoma yield me some time, yield me 20 minutes?
Mr. BELLMON. I yield 20 minutes to the Senator from Wisconsin.
The PRESIDING OFFICER. The Senator from Wisconsin is recognized for how long?
Mr. BELLMON. Twenty minutes.
Mr. PROXMIRE. Mr. President, just 40 minutes ago the Appropriations Committee acted favorably on the New York City fiscal guarantee, the $1.6 billion guarantee that had passed the House and Senate a few weeks ago. Twenty minutes ago I took it to the desk, and I understand the leader will be able to motion it up when he can next week as soon as time is available for it.
I think we should recognize this was an extraordinary action, unprecedented, the only time the Federal Government has ever done this for any city under any circumstances anywhere except, of course, when we helped New York in 1975.
I think we should take that into consideration in this context. Mr. President, I want to come back to that a little later in my statement.
First, I want to say how strongly I support the position of the Senator from Maine and the Senator from Oklahoma in the resolution they have introduced to instruct the conference to stand firm against adding $2 billion in public works and in new construction in the resolution.
In my view that stand does not go far enough. At this time public works should be cut far, far more. Mr. President, this country faces rising, galloping, endemic inflation. It is a period in which we should be cutting budgets, not adding to them.
WE SHOULD CUT DEEPER
The answer to 7 to 8 percent inflation, to huge budget deficits, and to rising interest rates is not to add fuel to the fires by pouring out more money for questionable projects in an untimely fashion. We should be cutting even deeper.
To add $2 billion now for public works of any kind — soft, hard, or intermediate — is wrong. It would show we have learned nothing about economics, the budget process, or inflation if we did so.
In the 1930's we were at the bottom of a depression. Tens of millions of people were unemployed. Prices were dropping, not rising. In such a period additional public works projects can be supported and should be supported if they are labor intensive and are built where the unemployed live. Further, there is no danger in such a period the economy can be harmed by fueling inflation.
UPSIDE-DOWN POLICY
But to propose at this time that we add public works projects to the budget, is an upside-down, wrong-headed if not idiotic policy. Here is why.
First, we should be cutting the budget, not adding to it. Cutting the budget is virtually the only anti-inflation weapon we have left. What else is there? No one wants wage and price controls. Tax incentives to business and labor to keep wages and prices in line are extremely complicated and would take too long to get passed. Monetary policy is limited in what it can do.
What we should be doing is cutting the Federal budget, not by a mere $2 billion but by 5 to 10 percent. Adding to it is the height of folly.
We just had before the committee the new appointee to the Federal Reserve Board, Nancy Teeters, a superb economist, who testified yesterday that the Federal Reserve Board is now severely limited in what it can do to fight inflation. Generally, their function is confined to limiting credit by increasing interest rates, but she testified that if the interest rates go up another half percent, the result on the national economy could be devastating.
But the worst of all worlds is to add public works projects at a time like this, and especially projects which have a phenomenal cost per job, $71,000 to $175,000 a year as the Senators from Maine and Oklahoma point out.
Finally, we should be cutting out many of the public works projects we have already approved in the Senate.
BENEFIT-COST RATIO EXAGGERATED
There is something called the benefit-cost ratio. The Army Engineers tell us what the costs of a project are and what the benefits are, and if they are at least 1 to 1, it is said to be a favorable cost-benefit ratio.
But that is not really true. Historically, the costs of most projects double from the time they are authorized until they are built.
Further, historically, the benefits are inflated. Everything but the kitchen sink is thrown in as an alleged benefit.
So while costs are underestimated, the benefits are exaggerated. In the view of many economists, for a project to break even the cost-benefit ratio must be at least 2 to 1 and 3 to 1 is really more like it.
DISCOUNT RATE TOO LOW
Further, historically, the Government has always used a discount rate which is far too low. The discount rate is nothing more than applying to the money taken from the private sector and used in the public sector. The rate of return it should get to equal the disadvantages of taking it out of the private sector and using it in the public sector.
Obviously, when money can earn 12 percent — and now the average return is about 15 percent before taxes, and that is a fair comparison — or if money can earn at least 8 percent if loaned out privately, the Government is acting in a wholly uneconomic way if it takes money from the private sector which could earn 8 to 15 percent and spends it in the public sector where its real return is only a fraction of that.
That is a misapplication of resources, Mr. President, and an obvious misuse of the taxpayers' money, as any responsible economist will tell you.
But that is what we do in the public works sector. The present discount rate is only 6 and three-eighths. And when that is applied to only half the funds, because project costs usually double, one can see how inefficient public works projects can be.
Therefore, because the cost-benefit ratio of most public works projects is greatly exaggerated and because the discount rate applied to public works projects is far too low, spending taxpayers money on public works projects is one of the stupidest and most uneconomic and wasteful things that can be done.
Yet the public works bills, year by year, are weighed down with wasteful projects. Their benefit-cost ratios are too low. They are built in the wrong places. They are not labor intensive. Leaving the money with the taxpayers in the private sector would provide more jobs, more economic stimulus, and more economic sense than spending it for public works.
For all these reasons we should be cutting back on public works spending not adding to it.
I not only support the Senators from Maine and Oklahoma, but I say dig in, hold firm, fight them in the trenches, and never say die.
And my further word is that after you win this battle come back to the Senate and cut several billions more from the public works projects, because they are wasteful, uneconomic, and unjustified and the path we should follow is in no doubt.
We should cut spending and cut it hard.
In the face of the obvious, there is only one answer. We should support the Senate Budget Committee. After we do that, we should then cut much harder.
A TEST OF GOVERNMENT
The test of government is whether it can act in intelligent and constructive ways. Here is one area of economics where the facts are clear, the situation is fraught with danger, prices are rising and the path we should follow is in no doubt.
We should cut spending and cut it hard.
In the face of the obvious, there is only one answer. We should support the Senate Budget Committee. After we do that, we should then cut much harder.
EXAMPLES
In support of my general statement I want to cite a couple of specific examples of recent projects which we in the Senate have approved, to show why this is such a complete disaster.
Take the Savery-Pot Hook Bureau of Reclamation project in Colorado. This consists of two dams and conveyance systems to supply irrigation water on the Little Snake River. The remaining costs and benefits at the current rate of 6 ⅜% percent would be four-tenths — in other words, it is less than half of the unity average. I consider this much too low a discount factor; the costs exceed the benefits by better than 2 to 1. The estimated total Federal cost is $75.8 million, and the amount allocated to date is $4.1 million, so it is one we could walk away from and be much better off.
The project as planned will benefit only 106 existing farms, at an average irrigation cost per farm of almost $700,000.
High dissolved salt concentrations in project return flows would increase existing water quality problems downstream in the Colorado River.
Project lands are at 6,500 feet altitude, and thus have a short growing season. As they say, it is like growing bananas on Pike's Peak; sure, you can do it if you provide all the necessary facilities at a phenomental cost, but it is totally unjustified.
Approximately 20,00 acres of wildlife habitat would be modified or eliminated, affecting deer, elk, antelope, and sage grouse. While these losses are substantially mitigated by development of additional habitat, significant losses in sage grouse and antelope population would occur.
Then this one further project, Mr. President, by way of example: The Fruitland Mesa, a Bureau of Reclamation project in Colorado.
This is the Soap Park Dam and conveyance system to provide irrigation to 11,940 acres of dry-farmed land and supplemental irrigation to 6,310 acres.
The remaining costs and benefits at the current rate, three-tenths. What that means is that even using the discount factor of 6 ⅜ percent, the costs will exceed the benefits by more than 3 to1.
The estimated Federal cost is about $88 million. Allocated to date is only $5 million. Today we can walk away from it without losing anything like what we would lose by not walking away from it.
The irrigation investment per acre is very high. We are spending $4,600 per acre. I do not think you could find any place in the country where you would can spend $4,600 per acre for agricultural land. In my State, prime agricultural land is selling for less than half that. It is a
backward investment; to spend this additional amount is absolutely wrong. The project area is farmed or ranched by only 69 landowners. This amounts to an irrigation investment per landowner of $1.2 million. By definition, these landowners are millionaires, or on an average they are millionaires, and for us to subsidize them under the circumstances would be ridiculous. The project would convert 12,000 acres of rangeland to irrigated crop land, inundate 584 acres of land, and destroy 4½ miles of good fishing streams; and there are other objections to it.
DAMS, JOBS, AND UNEMPLOYMENT
Studies at the University of Illinois Center for Advanced Computation show that spending money on Army Corps of Engineers water projects actually creates fewer jobs per dollar than almost any other Federal program. If more money were shifted from dam building to mass transit, waste treatment plan construction, national health insurance, or social security programs, to name a few, many more jobs would be created.
Spending on water project construction results in a decrease in jobs nationwide in the sense that more jobs would be created by not taxing people for these projects and just letting them spend the money as they desire.
What this means is that money spent on water projects aggravates the unemployment situation across the country. And I say it aggravates it in New York City, to return to my initial point. New York City is in dire straits. They do have massive unemployment, and while they would get $125 million, clearly, from this bill, and additional sums, I am sure, even with the most optimistic assumptions I think it is doubtful that they would get $200 million.
I say frankly to the Senator that if I were in his shoes, representing New York City, I would be fighting hard against this bill on the ground that my State would be better off if the Budget Committee were sustained and the $2 billion were not spent. We will be taking more money out of New York than would go back into New York.
We have just acted on the New York City loan guarantee, and will soon act on a fiscal relief bill. To take this kind of action in the face of that, at the cost of all taxpayers of the country, I think is absolutely inexcusable.
Mr. MOYNIHAN. Mr. President, will the Senator from Maine yield me 2 minutes to respond to my good friend the Senator from Wisconsin?
Mr. MUSKIE. I yield the Senator 2 minutes.
Mr. MOYNIHAN. I understand that the vote in the appropriations subcommittee on the New York City loan guarantee was 8 to 6.
It does somewhat remind me of the get well card that was approved by the Board of Directors by an 8-to-6 vote. I would think that comes out. "I like New York," more than otherwise. I remind the Senator that the guarantee was necessary, but that it does not provide a nickel to the city of New York — not one nickel. It is true that we use that money, but we must also provide money to the Treasury, in return, as well as the extra moneys the interest rate requires.
I grant that the rather unimpressive programs which the Senator described have cost-benefit ratios which are appalling, but I remind him that none of them are in New York City, or, for that matter, within 2,000 miles of New York City.
Mr. PROXMIRE. But they are public works.
Mr. MOYNIHAN. Yes. But year after year those public works appropriations have come to the floor and we have voted for them — $4,000 an acre, $1 million a ranch Now our time has come and we ask for such appropriations and it turns out to be too late.
Mr. PROXMIRE. If the Senator will permit me to respond—
Mr. MOYNIHAN. Explain that 8-to-6 vote.
Mr. PROXMIRE. Well, the 8-to-6 vote was just a matter of not having all members there. As the Senator will recall, the vote in the Senate itself was something like 2 to 1 in favor of New York. I am sure if all members had been present it would have been about the same in the Appropriations Committee.
The point is that the Senator from New York, both Senators from New York, worked so hard to get that fiscal relief bill. They wanted it, they needed it, we gave it to them. They said this is what they needed. They said:
Give us this and we will not be back. This is all we need at the time. Give us this and we will not be back to ask you for more.
We want to take New York up on that. In this particular public works bill, we feel, as I tried to document, that the Senator is worse off by going into the $2 billion than he would be if he supported Senator MUSKIE.
Mr. MOYNIHAN. The Senator from New York would very much like to confirm that it is his view that New York, for example, and any State, for that matter, must ask, "What do we contribute in taxes as compared to what we receive in return? What is the effect on the local economy?" I agree with the Senator and I hope to pursue that topic.
I would like to make the further point that this is not a measure such for New York City or for any one city, but instead it is an essential feature of the President's overall urban program. I rose to defend it and to say that ours is a vote of confidence on the President's program. I happen to come from New York, but I am aware of the national purpose embodied in the President's program. I am not overly hopeful about the outcome, but it would have been irresponsible if we had failed to make our point as persuasively as we could. I understand the depth, the conviction, of the opposing viewpoints, and I certainly do not want to disassociate myself from anything the Senator from Wisconsin has said about the benefit-cost ratios in these matters. Not to attend to them is to fritter away our responsibility and our reputation.
Mr. MUSKIE. Mr. President, I would like to comment on this and then I will yield to my good friend, the chairman of the Environment and Public Works Committee. I want to comment about this vote being a vote of confidence on the President's program.
The $2 billion in the House budget resolution bears almost no resemblance to the President's urban message. In the first place, we should remember that the President first rejected public works as part of his urban initiative. He restored it at $1 billion only after he was assured that the public works would be targeted on the unskilled, long-term unemployed.
What we have in the House budget resolution, which is intended to reflect the work of the House Public Works Committee, is a $2 billion-a-year program. It would be spending at the same level that we funded public works during the recent severe recession. It is hard public works. It is not targeted toward the unskilled long-term unemployed, and it would admit projects with labor intensity of at little as 10 percent. So it is not the President's program although it is being marketed in his name and, I understand, being lobbied in his name in the corridors today. That is all right. Presidents, I guess, as practical politicians, have to accept even pale shadows of what they ask for in the name of what they originally requested.
From my point of view, I know that what is in the House budget resolution is only a pale shadow of what the President requested, and it is a shadow that comes at twice the price.
Mr. PERCY. Will the Senator yield for a brief question?
Mr. MUSKIE. I yield.
Mr. PERCY. I fully support both the chairman of the Budget Committee and the ranking Republican member. Does the Senator know how soon we will vote?
Mr. MUSKIE. I have an idea we may vote before 4 o'clock unless there is a sudden eruption of oratory.
Mr. PERCY. The Senator from Illinois would have to leave the floor soon to catch a plane.
Mr. MUSKIE. Does the Senator from West Virginia wish to make a brief 2 minute statement?
Mr. RANDOLPH. It will take a little longer.
Mr. MOYNIHAN. Will the Senator yield 30 seconds?
Mr. MUSKIE. I yield.
Mr. MOYNIHAN. I would like to say it is quite true, as the Senator has stated, that the President's program has been modified. But it remains the President's program. I have been in communication with the President's aide in the White House and in the Cabinet on this matter. I would like it to be clear that the administration has fought for this program and has not abandoned it, even though we may not succeed in obtaining it at this time.
Mr. MUSKIE. I just would remind the Senator that I continually read stories about the administration's new veto policy to eliminate excessive congressional spending. At the President's request we have been trying to cut $5 billion more than he did in his mid-session review budget. This is part of it. The President cannot have it both ways. That is my whole point.
I am happy to yield to the distinguished chairman of the Environment and Public Works Committee such time as he may wish.
The PRESIDING OFFICER. The Senator from West Virginia is recognized.
Mr. RANDOLPH. I thank the Senator for yielding.
Mr. President, the Senate is being asked to instruct conferees from the Budget Committee on an item for which authorization is pending in the Committee on Environment and Public Works. I understand the desire of the conferees to obtain an expression by the Senate on this issue. The question of funding for the proposed labor intensive public works program is a major impediment to the completion of the conference.
I commend the Senator from Maine (Mr. MUSKIE), chairman of the Senate Budget Committee, for his desire to keep Federal spending within reasonable limits. Under his leadership, the Budget Committee has not approached its task with a single minded, meat-ax approach of indiscriminately cutting program levels. The committee has attempted to assign priorities so that adequate support is given to worthwhile programs while funding is reduced for activities for lesser importance.
I was joined with Senator MUSKIE and the Budget Committee last week, in voting for a budget resolution that would substantially reduce the Federal deficit during the next fiscal year.
On the matter before us, however, I shall vote not to instruct the conferees to retain the Senate position of no funding for the labor intensive public works program. I will do so for several reasons.
To become adamant on this position would increase the difficulty of the task faced by the conferees. I believe that members of the conference committee must have the latitude to reach an agreement. This is particularly important at this late period in the congressional session. I do not advocate that the Senate should accept the level of $2 billion proposed by the House. A realistic compromise is possible.
Nor do I intend to indicate that I believe the authorization legislation now pending in both the House and Senate is properly drawn. I have serious reservations, in fact, about the thrust of the proposals before us. I have long believed that strong Federal presence in public works activities is essential to the continued growth and development of our country.
I think the Senator from Wisconsin (Mr. PROXMIRE is absolutely wrong on public works. He votes against public works programs and projects of whatever size and kind. Yet, he is always interested — and I would say this if he were here — in having certain public works projects in Wisconsin.
I remember when the Appalachian Regional Development Act was before us in 1965. My dear friend, Senator Willis Robertson of Virginia, was voting and speaking against it. I went to him and said: "You are a native of Virginia, and you know Virginia and West Virginia are in the Appalachian region of 13 States. It is a position you should not take."
He said he felt very keenly about it. The legislation passed and was signed into law. I had a telephone call from Senator Willis Robertson, and he said, "Jennings, I have just the project in Virginia that fits into the Appalachian program."
I said, "Willis, you spoke against it." He said, "Yes, but it is now the law." I hope the Senator from Wisconsin would not get upset, if he were on the floor, as I would speak on that as a corollary.
Public works programs have a demonstrated record of value in stimulating recovery from periods of economic stagnation — depression, recession, what not. In the past 2 years, Congress twice enacted the local public works program. This effort channeled $6 billion into the economy, money which is creating thousands of jobs and helping to provide needed public facilities.
The chairman of the Budget Committee (Mr. MUSKIE) and the ranking minority member (Mr. BELLMON) have circulated to Members of the Senate a letter which contained interesting information on the labor intensive public works proposals. I studied them with great care. Their assertions provide us with further reasons for carefully considering the authorization legislation in the Committee on Environment and Public Works, of which Senator MUSKIE is the ranking Democratic member. I believe that that forum is the place where a program must be devised that is truly responsive to current national needs. Further, we must be careful not to establish a new program that is similar or duplicative of ongoing activities. The Comprehensive Employment Training Act (CETA) or activities of the Economic Development Administration could be the proper vehicles for carrying out some of the purposes of the proposed labor intensive public works program. We cannot make these decisions nor can we address similar public works needs if there is no budget authority for the fiscal year.
I repeat that these decisions must be made in the authorizing committee not through the process proposed here today.
Mr. President, our Subcommittee on Regional and Community Development chaired by the able Senator (Mr. BURDICK) , is scheduled to meet September 19 on the labor intensive public works program.
The articulate Senator from New York (Mr. MOYNIHAN) has participated in earlier discussions of this program as a member of our committee, and he has been very helpful. I hope that the Senate will permit the conferees on the budget resolution to return to their work and reach a compromise with the House on a funding level for this activity. The authorizing committees must have the ability to determine if there will be a labor intensive public works program and, if so, what form it should take. Adoption of the pending resolution would tie our hands now and complicate our task even if we decide to postpone action until the next session of Congress.
Mr. President, for these reasons I have stated, I will vote against the resolution to instruct the conferees to insist on the Senate position.
Mr. MOYNIHAN. Well said, sir.
Mr. RANDOLPH. I thank the Chair.
Mr. BURDICK. Mr. President, will the Senator yield?
Mr. MUSKIE. How much time does the Senator want?
Mr. BURDICK. Three minutes.
Mr. MUSKIE. I yield 3 minutes to the Senator from North Dakota.
Mr. BURDICK. Mr. President, I rise in support of the President on this vote. He has proposed the so-called "soft" public works bill now before the Environment and Public Works Committee.
I do not believe it duplicates other programs. I do not believe it is inflationary, since its unique thrust is to put idle hands to work.
The bill is targeted to a very specific group, the long-term unemployed, whether in cities or rural areas.
It is said that the Senate Environment and Public Works Committee is turning the labor intensive proposal into a modified version of the LPW programs of 1976 and 1977.
As chairman of the Subcommittee on Regional and Community Development of the Committee on Environment and Public Works, I want to report that we have not yet marked up the bill. Until the subcommittee and the full committee acts, no one can say that we have altered the administration's bill.
There are pending proposals before the subcommittee that do relax the labor intensity requirements the first year, primarily in the rural areas of the Nation.
But the subcommittee has not acted on these proposals. I think it is therefore, premature to say what the authorizing committee will recommend.
I would say, Mr. President, that this debate should be instructive to us on the authorizing committee, should we decide to move ahead with S. 3186, the labor intensive public works bill proposed by the President as part of his urban program.
I believe the second budget resolution should contain $1 billion for this program. We can then report the bill. If the Senate does not like the bill it can either amend it or vote it down.
I, therefore, suggest to my colleagues that a vote against this resolution gives the Senate future options. I shall vote "no".
Mr. MUSKIE. Mr. President, lest the Senate entertain the illusion that this is the only jobs creating provision in the two budget resolutions, I should like to read off a list of amounts that are available in the budget resolution which have job creating implications. It is a rather long list:
CETA at $10 billion; countercyclical revenue sharing at $500 million; a subtotal of $10.5 billion. Then there is direct State and local aid, which, by and large, results in employment: Revenue sharing, $7 billion; community development block grants, $4 billion, for a subtotal of $11 billion.
EPA construction grants, $4.5 billion; Corps of Engineers and Bureau of Reclamation public works programs, $2.5 billion; highway construction, $9 billion; mass transit construction, $1.8 billion; military construction $2 billion.
That is a total, Mr. President, of $40.3 billion — $40.3 billion which distributes job creating potential across this country from coast to coast, border to border, and in every State. That is an enormous infusion of Federal dollars to create and support the construction industry and other kinds of public jobs.
The distinguished Senator from South Carolina earlier made the point that this particular program is focused on soft public works and that that is needed by cities. He cited, as an example of a similar program that was helpful in this respect, countercyclical. But countercyclical, Mr. President, turns on at the depth of a recession and turns off as we pull out of it. These public works programs, as a practical matter, do not.
The House proposes $6 billion in 3 years, which is as much as the $6 billion we provided in the 4 years of the depth of the depression. In other words, the proponents of public works seem intent on making this level of public works spending a permanent feature of our Federal budget. It is to that which Senator BELLMON and I have objected.
Mr. President, unless there are other requests for speeches, I am prepared to yield back the remainder of my time and go to a vote.
Mr. BELLMON. I yield back the remainder of my time.
The PRESIDING OFFICER. All time having been yielded back, the question is on agreeing to
the resolution. The yeas and nays have been ordered. The clerk will call the roll.
The assistant legislative clerk called the roll.
The result was announced — yeas 63, nays 21, as follows:
[Vote tally omitted]