April 24, 1978
Page 11113
CONGRESSIONAL BUDGET, 1979
The PRESIDING OFFICER. Under the previous order, the hour of 12 noon having arrived, the Senate will now proceed to the consideration of Senate Concurrent Resolution 80, which the clerk will state.
The legislative clerk read as follows:
A concurrent resolution (S. Con. Res. 80) setting forth the congressional budget for the United States Government for the fiscal year 1979.
The concurrent resolution is as follows:
Resolved by the Senate (the House of Representatives concurring), That the Congress hereby determines and declares, pursuant to section 301(a) of the Congressional Budget Act of 1974, that for the fiscal year beginning on October 1, 1978
(1) the recommended level of Federal revenues is $443,300,000,000 and the amount by which the aggregate level of Federal revenues should be decreased is $29,200,000,000;
(2) the appropriate level of total new budget authority is $566,100,000,000;
(3) the appropriate level of total budget outlays is $498,900,000,000;
(4) the amount of the deficit in the budget which is appropriate in the light of economic conditions and all other relevant factors is $55,600,000,000; and
(5) the appropriate level of the public debt is $853,800,000,000, and the amount by which the statutory limit on such debt should accordingly be increased is $101,-800,000,000.
SEC. 2. Based on allocations of the appropriate level of total new budget authority and of total budget outlays as set forth in paragraphs (2) and (3) of the first section of this resolution, the Congress hereby determines and declares pursuant to section 301(a) (2) of the Congressional Budget Act of 1974 that, for the fiscal year beginning on October 1, 1978, the appropriate level of new budget authority and the estimated budget outlays for each major functional category are as follows:
(1) National Defense (050) :
(A) New budget authority, $129,800,000,000;
(B) Outlays, $116,600,000,000.
(2) International Affairs (150)
(A) New budget authority, $12,800,000,000;
(B) Outlays, $7,200,000,000.
(3) General Science, Space, and Technology (250):
(A) New budget authority, $5,200,000,000;
(B) Outlays, $5,000,000,000.
(4) Energy (270):
(A) New budget authority, $10,200,000,000;
(B) Outlays, $10,100,000,000.
(5) Natural Resources and Environment (300):
(A) New budget authority, $13,700,000,000;
(B) Outlays, $12,500,000,000.
(6) Agriculture (350) :
(A) New budget authority, $12,400,000,000;
(B) Outlays, $7,800,000,000.
(7) Commerce and Housing Credit (370) :
(A) New budget authority, $5,900,000,000;
(B) Outlays, $3,600,000,000.
(8) Transportation (400):
(A) New budget authority, $19,500,000,000;
(B) Outlays, $17,500,000,000.
(9) Community and Regional Development (450):
(A) New budget authority, $10,400,000,000;
(B) Outlays, $9,000,000,000.
(10 Education, Training, Employment, and Social Services (500) :
(A) New budget authority, $31,600,000,000;
(B) Outlays, $31,200,000,000.
(11) Health (550) :
(A) New budget authority, $52,700,000,000;
(B) Outlays, $49,500,000,000.
(12) Income Security (600) :
(A) New budget authority, $192,500,000,000;
(B) Outlays, $159,900,000,000.
(13), Veterans Benefits and Services (700) :
(A) New budget authority, $21,000,000,000;
(B) Outlays, $20,800,000,000.
(14) Administration of Justice (750) :
(A) New budget authority, $4,300,000,000;
(B) Outlays, $4,200,000,000.
(15) General Government (800) :
(A) New budget authority, $4,100,000,000;
(B) Outlays, $4,100,000,000.
(16) General Purpose Fiscal Assistance (850):
(A) New budget authority, $9,700,000,000;
(B) Outlays, $9,600,000,000.
(17) Interest (900):
(A) New budget authority, $46,800,000,000;
(B) Outlays, $46,800,000,000.
(18) Allowances (920) :
(A) New budget authority, $700,000,000;
(B) Outlays, $700,000,000.
(19) Undistributed Offsetting Receipts (950):
(A) New budget authority, —$17,200,000,-000;
(B) Outlays, —$17,200,000,000.
The ACTING PRESIDENT pro tempore. Under the law, the time for debate on this concurrent resolution is 50 hours, to be equally divided and controlled by the majority and minority leaders or their designees, with 2 hours on any amendment in the first degree, and with 1 hour on any amendment in the second degree, debatable motion, or appeal, with all time on any amendments, debatable motions, or appeals to come out of the 50 hours on the concurrent resolution. Motions or requests to further limit debate are not debatable.
Mr. MOYNIHAN. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. The clerk will call the roll.
The second assistant legislative clerk proceeded to call the roll.
Mr. MUSKIE. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
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 80:
John McEvoy, Karen Williams, Sid Brown, Van Ooms, George Merrill, Dan Twomey, Tom Dine, Ira Tannenbaum, Jacques Cook, Elizabeth Tankersley, Bob Sneed, Barbara Levering, Charles Flickner, Terry Finn, John Giles, Rodger Schlickeisen, Don Campbell, Tony Carnevale, Rob Fersh, Gail Picker, Ann Lockwood, and Brenda Tremper.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I ask unanimous consent that the presence and use of small electronic calculators be permitted on the floor of the Senate during the consideration of Senate Concurrent Resolution 80, the first concur-rent resolution on the budget.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, Senate Concurrent Resolution 80, the first concurrent resolution on the budget for fiscal year 1979, is a moderate budget. This budget has been carefully crafted to support continued national economic recovery at the lowest possible risk of inflation.
The deficit this budget contains is lower than the deficit in the President's budget and lower than this year's deficit.
Before discussing the particular features of this budget resolution, I am compelled to make certain observations about the state of the congressional budget reform process itself.
Congress has begun the fourth cycle of the budget control reform we enacted in 1974. Many of the features of that reform which were considered radical or unrealistic when we enacted it have become commonplace since in both the Senate and the House.
Every Senate committee except one makes meaningful March 15 reports about its legislative plans and the Budget Committee bases its budget resolution on those reports.
Almost all new authorizing legislation is reported by May 15 to facilitate a very tight Appropriations Committee schedule.
The Appropriations Committee has admirably succeeded each year in enacting almost every appropriations bill before the second budget resolution in September. The only exceptions have occurred in a few cases where legislative matters have deadlocked the conference process.
The Budget Act mandated all these reforms and more. Ironically, while the procedural reforms it contained continue to prosper, budget control itself has begun to falter.
The Senate must recognize that we cannot take for granted that this try at budget reform will survive to achieve its principal objective of budget control and an orderly priority setting process.
THREATS TO THE BUDGET PROCESS
As this fourth year of the budget process begins, we confront two critical threats to budget reform.
First, we confront a resurgence of a free spending mentality, even in the face of our worst peacetime deficits.
Some Senators apparently believe that there is no harm in exceeding the budget resolution, when the politics of the moment move them.
They seem to believe that a little excess is not a dangerous thing. That we can afford to have everything that attracts us, all of the time.
A congressional budget process reduced to an accounting system for what Congress would do anyway is not a reform. It is a hoax.
Second, we face a growing resentment — even contempt — on the part of certain committees and some members toward the clear requirements of the budget act itself.
This scorn of the budget process threatens to bring down the entire structure of the budget reform that we have worked so hard to achieve.
We intended the budget reform process to help us get real congressional control over the budget — with all the hard and painful choices that responsibility implies.
But recently some Members have replaced support for the Budget Act with disdain and rejection of the discipline which is the very heart of budget reform.
Some Senators — and some committees — seem to view the budget process simply as a series of roadblocks to evade rather than guideposts to replace the bankruptcy of the free spending mentality which prevailed before the Budget Act.
We need to go back no further than a month ago when the Senate — with full knowledge of its action — chose to violate the second concurrent resolution for 1978. The Senate voted for a multibillion-dollar agriculture bill in a legislative stampede at the expense of the public and the budget process.
Two weeks later, the Agriculture Committee trampled the clear and easily-complied-with requirements of the budget act regarding its conference report. That committee successfully moved to suspend the Budget Act itself, and the Senate passed the multibillion-dollar conference report over the broken remnants of the budget process.
Fortunately, the House acted responsibly and overwhelmingly rejected the bill.
Last year's farm bill — which, incidentally, was given no chance to work before this new one was rammed through the Senate — presents another painful case in point.
In fact, it illustrates two of the most dismaying trends we confront in the budget process. First is the spectacle of Senators who vote for budget resolutions with apparent intention to violate them later.
Even more discouraging is the apparent cynicism of those who vote against budget resolutions as being too extravagant and then vote for bills which exceed them.
These Senators' votes on budget resolutions seem to be infected by mental reservation and purpose of evasion.
Their effect is to prevent us from bringing spending under control.
They threaten to carry us back to the free spending chaos of the pre-Budget Act period.
Two bills — one a small agriculture bill; the other a major tax bill — dramatically demonstrate these trends.
In setting the agriculture limits in the second resolution last fall, the Budget Committee raised the first resolution targets by more than a billion dollars — to $5.6 billion — to accommodate the full cost of the Senate-passed agriculture bill.
And we included a "reconciliation instruction," as required by the Budget Act,to reduce any conference agreement which exceeded the $5.6 billion figure.
The very day after the Budget Committee went along with the $5.6 billion cost of the Senate-passed bill, the agriculture conference committee reported a conference report costing $6.3 billion.
And the Senate supported that conference bill and defeated the Budget Committee recommendation. By a vote of 64 to 27, the Senate voted to raise the second budget resolution — and the deficit it contained — to pay for this new agriculture bill. Then, just 3 weeks later the Senate voted to break this new ceiling the Agriculture Committee had added to the budget resolution.
The Agriculture Committee reported another bill which breached the ceiling Congress had just adopted. This new bill provided a new and unanticipated $29 million payment program for some of the wealthiest, largest farmers in the United States. It gave them money to cut their crop losses from this year's drought, even though loan programs are available from the Government for the same purpose.
When Senator BELLMON and I took the floor against this budget-busting bill, we were defeated by a vote of 61 to 26.
And — mark my words — 10 Senators who had voted against the budget resolution only weeks before because it was too high, voted for this new agriculture bill which broke that very budget.
What happened to the fiscal responsibility these Senators claimed in voting against the budget resolution when it came time to hold the line on the budget which was adopted? But the worst was yet to come.
During the debate last year on the energy tax bill we witnessed again this eagerness to sacrifice budget reform in favor of spending proposals when political opportunity becomes more attractive for the moment.
As they were reported, the provisions of the Senate energy tax bill would have violated the revenue floor of the second concurrent resolution by more than $1 billion.
They would have cut taxes by more than $1 billion in excess of what the congressional budget would allow. Under the rules of the Budget Act that legislation should have been subject to a point of order.
But the Committee on Finance included a gimmick in its bill to create a new loophole in the discipline of the budget process. The bill contained a provision that the Secretary of the Treasury could delay the implementation of the tax-losing features of the legislation long enough to postpone for 1 year the revenue loss which would violate the budget resolution.
The bill created an actual $47 billion, 8 year revenue loss. But the Finance Committee instructed the Secretary of the Treasury to change the law after it was enacted so it would lose no more the first year than the $1 billion the budget resolution allowed.
By delaying these huge revenue losses for 1 year, the Finance Committee intended to evade the congressional budget,which is written on a 1-year basis.
No matter about the huge revenue losses which mortgaged the future. The future — and the congressional budget — be damned.
Clearly, acceptance of this kind of procedure by the Senate or the House means the end of the budget process.
If the rules of the Budget Act, designed as guideposts for spending and tax discipline, are treated as mere parliamentary roadblocks to be gotten around by such raw gimmicks, there is nothing left of the Budget Act.
THE SENATE'S CHOICE: BUDGET REFORM OR BUDGET CHAOS
The Senate must decide whether to choose the side of those who are more comfortable with the chaos of the pre-Budget Act period.
I hope the Senate will accept the harder discipline of the budget reform and fiscal responsibility, even at the expense of temporary parochial political advantage.
Those who would treat the Budget Act as a burden to be dropped whenever it interferes with personal or committee advantage surely are saboteurs of fiscal responsibility.
If Senators wish the Budget Act to be trampled by one committee, or for a few votes on a pet project, then let us be frank and open about it.
I, for one, am prepared to accept the Senate's judgment on this issue.
This year's budget resolution presents a critical test case of the Senate's willingness to accept budget reform as more than political propaganda.
It contains very significant reductions in the spending and tax cut plans recommended by other committees. Without these adjustments, the deficit could exceed ninety billion dollars this year alone.
Let those who disagree with our recommendations debate them here on the floor. Let those who would raise the budget or cut it offer amendments to that budget and get rollcall votes on those amendments.
Then let us all be bound by the result. Let none who vote for the budget resolution vote later to violate it.
Let none who vote against it as being too extravagant vote later for bills which exceed it.
Let us clearly face the choices the budget puts before us.
Let us be judged by the result.
Let us see if we are really equal to the budget reform we have enacted.
MAJOR FEATURES OF THIS YEAR'S BUDGET
Now, Mr. President, let me discuss some of the most significant parts of the budget resolution the Budget Committee recommended.
The budget contains the following overall totals:
Total budget authority of $566.1 billion;
Total budget outlays of $498.9 billion;
Total revenues of $443.3 billion;
A deficit of $55.6 billion, and a public debt level of $853.8 billion.
The committee's recommendations for fiscal year 1979 include the following major highlights:
A substantial income tax reduction of $19.4 billion to become effective January 1, 1979.
Continued real growth in spending for national defense, particularly in support of our commitment to NATO.
Continued strong emphasis on energy programs, reflecting the Budget Committee's belief that these programs are an important national priority.
Substantial support for the Nation's farmers and increased agricultural research.
Major new efforts to assist the Nation's distressed cities.
A college tuition tax credit.
Continuation and improvement of efforts to provide jobs for the structurally unemployed, including youth, unskilled workers, and welfare recipients.
Continued efforts to control health costs as part of the fight to reduce inflation.
Limitations on Federal pay increases for civilian and military personnel in recognition of the need for Federal leadership in the anti-inflation fight.
No reduction of social security taxes in 1979 and no financing of social security benefits through appropriated general revenues.
THE BUDGET DEFICIT AND PROSPECTS FOR BALANCE
This is a moderate budget designed to promote continued expansion of our national economy and reduction in unemployment at the lowest possible risk of inflation.
Although the economic recovery has not reached a point where the budget can be balanced this year, the deficit which will result from this budget is lower than of the current year or the deficit contemplated by the President in his budget submitted in January.
This budget substantially reduces the spending increases and tax cuts recommended by the other committees in their March 15 reports.
The $55.6 billion deficit which will result from adhering to this budget is $36 billion less than the deficit which would result from the recommendations made to the Budget Committee by the other standing committees.
It reflects a $9 billion reduction in outlays compared to the request of the Appropriations Committee alone. It recommends $15 billion less in tax reductions than were suggested by the Finance Committee.
Notwithstanding these reductions, Mr. President, this budget is not unduly restrictive. It provides for a real increase in budget authority of $18.2 billion, and allows for major new initiatives in fiscal year 1979 in the areas of energy, urban initiatives, the national defense, and agriculture.
In order to allow room for the continued growth of these new fiscal year 1979 initiatives, the Budget Committee believes that agencies should absorb some inflation costs and maintain program levels through increased efficiency rather than enlarged budget requests.
The simple fact is that we cannot fight inflation or balance the budget if we start with the premise that every Federal program will always be increased to match the rate of inflation in the private economy.
We cannot fight inflation or balance the budget if we take a $50 or $60 billion deficit as the starting point for adding to the budget.
The Federal deficit projected in these recommendations, as were the deficits of the three preceding fiscal years, is largely a result of a recession-plagued economy operating below its full capacity. A weak economy shrinks Government revenues at the same time that it raises costs of unemployment compensation and other income support programs. This budget is designed to provide sufficient economic support to achieve sufficient recovery in the private economy to reach a balanced budget by 1983. Deeper deficits stemming from spending increases or tax cuts greater than proposed in this budget threaten to ignore significantly increased inflation and to shatter any hope for budget balance in the next 5 years.
BUDGET CONTROL
Mr. President, I have described some of the main features of the 1979 budget resolution.
But the Budget Committee has learned during its first 3 years of activity that control over the budget cannot be accomplished if budgets are planned 1 year at a time.
In a 1-year time frame, it is almost impossible to influence future directions and costs of spending or tax legislation. I have already illustrated those points by a couple of dramatic examples of the last year. In truth, 1 year budgeting has become obsolete.
More than 75 percent of this year's budget is required to pay the costs of legislation enacted in prior years. Only the remaining 25 percent is "controllable" this year. And much of that 25 percent left over after we pay the bills for previous legislation goes for a few major programs, like national defense and education.
In the same way, much of the cost of legislation Congress enacts in 1979 will not be felt until future fiscal years. It is not reflected in this budget.
It has become popular to describe these mortgages on future spending as "uncontrollable spending," because you cannot reduce it in any particular year except by repealing a prior year's laws.
It is also popular to complain about uncontrollable expenditures but to do nothing about them.
The simple fact is that we probably cannot save much money this year by repealing laws we have already enacted.
Sunset legislation, such as I have proposed, will help us weed out existing programs which have lost their utility or efficiency. Not even sunset, however, will reduce the percent of the budget in any particular year which results from laws still on the books.
But if we cannot gain greater control of this year's budget by repealing last year's laws, surely we can gain greater control of next year's budget and the years after that by carefully reviewing the future-year impact of this year's spending decisions.
Realizing this fact, the committee this year has adopted a major innovation aimed at more nearly achieving the broad goals of the congressional budget process.
The committee has built a 5-year Federal budget. By examining the future year implications of its revenue and spending decisions for fiscal year 1979, the committee has projected the costs of those decisions over the period fiscal years 1979-83. Moreover, it has related those decisions to future year budget margins in the light of the longer run outlook for the economy.
Let me say, Mr. President, that most of the standing committees of the Senate have provided excellent cooperation and supplied 5-year data on the programs within their jurisdiction to assist the Budget Committee in this effort.
Incidentally, Mr. President, no attempt has ever been made in the Federal Government to get control of Federal spending by viewing our budget commitments 5 years in advance.
Until now.
By looking forward 5 years and outlining the budget framework for fiscal year 1983, Congress can regain substantial control of today's uncontrollables.
Now the assertion has been made that 5-year budget numbers are "meaningless," that they are mere guesses about the unknown. A charge of this kind ignores the fact that if we do not try to look ahead, recognizing that there are uncertainties, we will quite simply never gain control over the budget.
The projections we have used in building the 5-year budget have been developed by the Congressional Budget Office based on the best cost estimating techniques available. Dr. Alice Rivlin and her staff are to be commended for their cooperation and hard work on this project.
By looking at what future year budgets could realistically look like, the committee was able, I believe, to make more rational and orderly budget choices for fiscal year 1979.
In other words, looking ahead 5 years helped to discipline our choices for fiscal year 1979.
Mr. President, the message is clear. Only by being aware of the future implications of present budget choices can we ever hope to regain control of the congressional budget.
To disregard these cost projections is to prefer the chaos of ignorance over rational decision making that can bring the budget under control.
So Mr. President, we will be making frequent reference to the 5-year projections of the cost of this year's legislation as each major bill is considered. And I hope other committees will do so too.
For the plain fact is that if we are to have a chance to balance the budget during the next 5 years, we can enact only a relatively small amount of new tax cuts or spending beyond the commitments contemplated by this budget — less than $90 billion, as a matter of fact, Mr. President, during the entire next 5 years.
And let no one doubt that we already face plenty of demands to spend this fiscal margin. During the committee's markup of this budget resolution, we also took note of some of the major spending decisions we will face in the next 5 years, quite apart from this year's budget. These possible future spending demands are itemized in a table appearing on page31 of the committee's report.
These future year choices could range from $74 billion up to $416 billion, during the next 5 years alone, compared to the $86 billion total we now can project may be available to meet them during that period.
I am talking about numbers in addition to the projected future cost of the current budget. And if we use all of this fiscal margin for spending increases, we will have no room for additional tax cuts during the same period.
Mr. President, I ask unanimous consent that the table setting forth these amounts be printed in the RECORD.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. MUSKIE. Mr. President, so the challenge is clear. Either we clear some of the deadwood through sunset and comparable efforts or we must simply forego most attractive new additions to spending for the foreseeable future.
To spend more than this fiscal margin may force us to pay twice for those new programs — once in legislation and again in inflation.
INFLATION
Mr. President, inflation is a critical and increasing concern for all Americans.
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.
What sustains inflation, Mr. President, is the determination of every individual in our economy, every group in our economy, to catch up, refusing to recognize that that catchup effort is itself inflationary.
This underlying inflation should decline gradually over time. However, price and wage changes also respond to inflationary expectations. This makes it especially necessary to follow steady fiscal and monetary policies.
The committee's recommendations embody two principles that must be followed if Congress is to act responsibly to help reduce inflation.
First, Congress must start to exert stricter control over spending today if it is to prevent the budget from over-stimulating the economy late in 1979 and in 1980 as we approach full employment.
The budget deficits resulting from the successful congressional fiscal policy which produced recovery from the deep recession have not been a significant source of inflation. Testimony before the committee was very clear on this point. In the early stages of the recovery deficits provided jobs programs and tax cuts to support private consumption, employment, income, and investment.
But we cannot continue similarly large deficits as expansion proceeds in the future. That would be inflationary.
Large budget deficits as the economy nears full employment will stimulate the demand for goods and services beyond the economy's capacity to produce them. The result will be an acceleration of inflation.
If we are to trim the size of the budget deficit in the future, we must get a firm grip on Federal spending now.
Let me sound a clear warning: Congress must resist the unending pressures for additional spending.
Each committee must closely examine each new policy proposal and exercise considerable self-restraint as it reports new legislation to the floor.
Moreover, each committee must diligently evaluate ongoing programs and consider discontinuation of programs which — even though they may have merit — are of lower priority. This process of continual reevaluation is central in the sunset legislation now being considered by the Congress.
Congressional budget discipline is vital to a successful fight against inflation.
The second principle Congress must adopt is careful consideration of the inflationary impact not only of individual tax and spending bills, but also bills that cause inflation by restricting supply and directly raising costs even though they do not add significantly to Federal expenditures.
For example, just 2 weeks ago this body passed a farm bill which, together with the administration's recent actions, would have added another half of a percent to consumer prices.
Fortunately, I sense a growing awareness that we cannot afford to continue to legislate inflation.
The committee's recommendations include a 5-percent cost-of-living pay raisefor white collar employees, one-half percent deeper than the President's recommended pay cap. This action indicates the committee's determination to signal the private sector that the Federal Government will attempt to hold down price and wage increases.
Mr. President, before I leave the topic of inflation, I would like to state my concern over a very disturbing tendency I have noticed in the Congress and elsewhere in the Federal Government — the tendency to disregard the inflationary impact of a bill if it is "only" a few tenths of a percent.
Mr. President, I would like to illustrate how serious a "few" tenths of a percent of inflation is.
Consider the Nation's consumers: Two-tenths of a percent of additional inflation cuts $2.5 billion from the purchasing power of their incomes. It cuts another $1 billion from the purchasing power of their savings.
Furthermore, this two-tenths of a percent inflation leads to cost-of-living adjustments, higher wages, and a second round of higher prices. Even consumers fortunate enough to get pay increases to recover their lost purchasing power end up worst off, because they find themselves in higher tax brackets.
Two-tenths of a percent of inflation means a lot to consumers.
Consider the Nation's businesses. The expectation of more rapid inflation is quickly reflected in higher interest rates, greater uncertainty in investment decisions, and a weaker stock market. The inflation itself leads to greater tax burdens,because it artificially inflates taxable business profits. The result is less business investment.
Two-tenths of a percent of inflation means a lot to the Nation's businesses.
Consider foreign exchange markets. More rapid inflation will be partly reflected in a future depreciation of the dollar. The status of the dollar as a reserve currency will be weakened, import prices will increase, and the inflationary spiral will go on.
But perhaps the most serious danger inignoring a "little inflation" is that a little inflation "here" and a little inflation there add quickly up to a full percentage point or more of inflation here and a full percentage point or more there.
Last year in Congress, we ignored a few tenths on the inflation rate on numerous occasions, and we added a full percent or more to inflation, as a result, through such bills as minimum wage, farm price supports, and increased payroll taxes.
Congress must begin to examine the inflationary impact of proposed legislation. The Budget Committee will explore mechanisms for doing so, with the assistance of the Congressional Budget Office.
CONGRESSIONAL FISCAL POLICY
Mr. President, over the past 3 years, Congress has adopted a moderately expansive fiscal policy in order to promote economic recovery.
It has also been a bipartisan fiscal policy. That policy has been strikingly successful in maintaining growth and reducing unemployment. The economic expansion it fostered has already continued for over 3 years, longer than the average postwar peacetime expansion.
The unemployment rate has fallen from 9 percent in 1975 to 6.2 percent today. While this unemployment rate is still unacceptably high, it has been consistently reduced in line with the goals established by the committee fully 2 years ago in the early stages of recovery.
In drafting the Federal budget for fiscal year 1979, the Budget Committee hashad to consider new and difficult economic circumstances.
Full employment remains a major concern. With the decline of cyclical unemployment, structural unemployment has become a major focus of employment policy.
As I have mentioned, inflation has now emerged as a paramount economic concern of most Americans.
In addition, Mr. President, we now face a complex international situation involving slow economic growth abroad, huge trade deficits, and dangers from a declining dollar.
The budget resolution we put before the Senate today reflects our response to this changing economic environment.
The levels of revenue and spending in the proposed budget support a policy of moderate growth consistent with further reductions in unemployment, but not so rapid as to require larger budget deficits or to accelerate inflation.
Mr. President, the committee's fiscal policy recommendations are consistent with the economic forecasts of the Congressional Budget Office, the Joint Economic Committee, and the administration. All these forecasts projected sharply lower growth and rising unemployment by the end of 1979 in the absence of tax reductions: This slowdown would result in part from increasing tax burdens on individuals and businesses, from higher payroll taxes, and the fiscal drag caused by inflation and growth.
To achieve continued expansion, the committee has recommended that the revenue floor in the first concurrent resolution be reduced to accommodate general income tax reductions of $25 billion on a full-year basis.
With the fiscal policy recommended by the committee, the economy should grow at about a 4½ percent rate in both 1978 and 1979. With this continued economic expansion, unemployment will fall to about 5.7 percent by the end of 1979, and about 4¾ million jobs will be created by the expansion of the economy during the 2-year period. This moderate growth is not expected to add significantly to inflationary pressures.
Mr. President, I ask unanimous consent to have printed in the RECORD at this point a table which shows the economic objectives and assumptions underlying the committee's recommendations and compares them to those of the President.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
COORDINATION OF FISCAL AND MONETARY POLICY
Mr. MUSKIE. Mr. President, the committee's fiscal targets are consistent with real economic growth in the gross national product of about 4½ percent through the end of 1979. This growth rate assumes moderate growth in investment, expanded foreign markets for U.S. exports, and monetary growth at the upper end of the ranges projected by the Federal Reserve.
Federal Reserve Chairman Miller appeared before the committee a month ago and offered his views on monetary policy, fiscal policy, and inflation. He assured the committee that the Federal Reserve would maintain a flexible approach, putting the long-run performance of the economy above the pursuit of any fixed monetary target.
Chairman Miller and the committee share the belief that monetary and fiscal policy must work together to reduce both unemployment and inflation.
He has made it clear that coordination of fiscal and monetary policy is a two-way street. I find this flexible approach reassuring.
Responsible fiscal policy must not be aborted by excessive monetary restriction. At the same time, Congress cannot — and should not — expect the Federal Re-serve to compensate with excessive monetary growth a loss of fiscal discipline by Congress. That could only lead to accelerating inflation and eventually to credit restriction, high interest rates, and recession.
Policy coordination can work in the present economic environment only if fiscal and monetary policies are moderate and responsible. That is why the Congress must exercise great fiscal restraint in its budget for fiscal year 1979.
The recommendations of the Budget Committee reflect prudence and fiscal restraint. I am confident that if we hold to these recommendations Federal Reserve monetary policy will complement congressional fiscal policy.
I am confident that the terrible costs of the excessive monetary restraint which was applied a few years ago are as apparent to the Federal Reserve as to Congress.
SPENDING RECOMMENDATIONS
Mr. President, let me now turn to an explanation of some of the committee's major spending recommendations for fiscal year 1979.
But before I do, let me describe another major innovation in this year's budget which will make it both more meaningful and understandable.
The Budget Act mandates that Congress should determine our national priorities. To provide a coherent framework within which to determine those priorities, the Budget Act requires that, beginning this year, the budget must be presented in mission terms, meaning that each function is subdivided into the major "missions" that the Federal Government is pursuing in order to meet the major national need addressed by the function itself.
By examining each mission within each function, the Congress can decide which missions should be encouraged and which might be cut back, without deciding the amount to be allocated to individual programs within the missions.
In the past, Mr. President, we have been frustrated by consideration of bill after bill, with no real notion of how that bill relates to any coherent effort to address any of our national needs.
Each bill was considered in isolation from most others. Scores of bills designed to provide relief or promote activity in the same area are passed without comparison of their relative efficiency or their relationship to existing law.
The mission budget concept permits Federal budgets to be built on an understanding of just how Federal spending is addressing and meeting the needs of our Nation.
It is the committee's hope that through the innovations of the mission concept and 5-year economic, spending, and revenue projections in its report, the Senate will be better able to understand and debate the committee recommendations for fiscal year 1979.
In drafting this budget, the Budget Committee examined each spending category on both the mission and 5-year bases. Let me detail some of our major recommendations in that context.
NATIONAL DEFENSE
In the national defense field, the committee has tried to bridge two conflicting problems.
First is the committee's deep concern about the steady strategic and tactical arms build-up by the Soviet Union. This is particularly manifested among Warsaw Pact nations which confront NATO forces and challenge the security of Western Europe.
Second is the high cost of defense and the effect this price tag has on America's fight against inflation.
The Budget Committee, beginning in fiscal year 1976 and continuing through fiscal year 1979, has voted for real growth in the defense budget. But while spending more, we also must keep in mind the burden of restraint which defense and every other category of the Federal budget must bear.
It is in this context, Mr. President, that the committee arrived at its recommendation for national defense in fiscal year 1979.
The committee recommends $129.8 billion in budget authority and $116.6 billion in outlays for fiscal year 1979. It is anticipated that these amounts will total $782.2 billion in budget authority and $720.5 billion in outlays over the fiscal year 1979-83 period.
The committee believes that the strategic and tactical warfare missions warrant top priority in determining the level of defense funding.
In the strategic mission, the committee's recommendation for fiscal years 1979-83 exceeds the President's projections, because of two basic concerns:
First. The vulnerability of U.S. ICBM forces in the early 1980's due to improved Soviet accuracy on its ICBM's, and
Second. The delay of Trident submarines into the force at a time when the Polaris and Poseidon submarines are being phased out of the fleet.
The committee determined that the funding levels in the President's budget request did not provide the quick fiscal response required to alleviate these two problem areas. The committee has recommended, therefore, a level of real growth in strategic spending that is intended to overcome potential force deficiencies.
In the tactical mission, the committee believes that it is essential for the United States to meet the pledge made by each NATO government in May 1977. Each member nation pledged to plan an increase of about 3 percent in total defense expenditures over the several years.
To insure that the United States will meet its pledge in fiscal year 1979 and throughout the 5-year period, the committee has recommended spending totals that would provide funds for land, air, sea, and mobility force modernizations. In addition, the committee's recommendation is intended to provide a decent standard of living for our forces abroad, particularly in geographic areas where the U.S. dollar is declining in value.
As part of its anti-inflation effort, the committee recognizes the need for the Federal Government to exercise fiscal responsibility. The committee's recommendation assumes a 5-percent "pay cap" on the anticipated October 1978 pay raise, along with a 20-percent absorption of the cost of the pay raise. The cap and absorption are to be applied equally to civilian and military employees of all agencies of the Federal Government.
INTERNATIONAL AFFAIRS
Mr. President, let me now turn briefly to the international affairs budget.
Mr. President, the committee's recommendation is $12.8 billion in budget authority and $7.2 billion in outlays for fiscal year 1979. The committee anticipates that these figures will total $71.2 billion in budget authority and $42.1 billion in outlays for the fiscal year 1979-83 period.
The committee's recommendation allows for 5-percent real growth in most foreign economic assistance programs to help the world's poor and to facilitate long-term capital flows for development.
Much of this economic assistance will be used to purchase American goods and services. The committee recommendation allows for appropriations of up to 90 percent of the President's request for these banks in fiscal year 1979. The remainder can be funded in fiscal year 1980 when U.S. commitments would otherwise be smaller than this year's request.
Two other areas of the international affairs function should be mentioned: The International Monetary Fund's Witteveen Facility and security supporting assistance. The committee's recommendation allows for full appropriation in fiscal year 1979 of the $1.8 billion U.S. share of the Witteveen Facility. This balance-of-payments facility was originally proposed as a fiscal year 1978 off-budget item. The legislation is expected to come before the Senate this spring or summer.
For security supporting assistance, the committee recommends an allowance of about $100 million in both budget authority and outlays for an increase later this year in the President's request for base agreements with several NATO members.
HUMAN RESOURCES
Mr. President, the committee's recommendation for human resources programs is $297.8 billion in budget authority and $261.4 billion in outlays for fiscal year 1979. The committee anticipates that these figures will total $1,851.6 billion in budget authority and $1,557.0 billion in outlays for the fiscal year 1979-83 period.
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 human needs of citizens.
The Budget Committee recommended substantial funding increases in several critical areas:
Improvements in elementary and secondary education programs;
Improvements in the provision of health care and nutritional services to low-income pregnant women and young children;
Improvements in veteran's income security programs and the veterans' medical care system;
Improvements in health care services and research for the general population; and
Increased social services grants to help the neediest and most vulnerable groups in our society.
Mr. President, the first budget resolution for fiscal year 1979 will continue the strong congressional commitment to put unemployed Americans to work. The Budget Committee recognizes that, as the economic recovery continues and the inflation threat looms large, the focus of Federal employment efforts should shift from the cyclically unemployed to the structurally unemployed.
Thus, while the committee assumes that the funding which is now spent on the provision of public service jobs will be continued at a constant level over the next 5 years, the committee recommends that half of that funding be directed toward employment and training services for the structurally unemployed.
The committee's recommendations will also allow full funding for youth employment initiatives as well as new initiatives designed to help move CETA workers to private sector employment.
The committee also recommends increases for the WIN program, as part of an effort to move AFDC recipients off the welfare rolls and into jobs.
Further, the committee's resolution recommends that the Federal, State, and local welfare system be reformed. As part of this effort, the committee recommends that the earned income tax credit be expanded in fiscal year 1979, with subsequent changes becoming effective in future years.
The committee expects that such reform will provide fiscal relief to State and local governments against the cost of welfare. The committee's recommendation rejects the notion of fiscal relief in isolation from overall reform. Such a measure would fail to address the most glaring shortcomings in the welfare system.
The committee believes that increased Federal efforts to put the structurally unemployed to work will result in reductions in expenditures for welfare programs.
The committee continues to be concerned over the rapid escalation in health care costs that has occurred in recent years.
The committee is gratified by the voluntary efforts initiated by the hospital industry to curb hospital costs. The committee believes these efforts will be successful during fiscal year 1979, producing substantial savings in Federal programs which finance the cost of health care.
The committee recognizes, however, that these private efforts may not be fully adequate to stem the rise in hospital costs in future years. As a result, Federal cost control efforts may be necessary in the future.
The committee recommends that the Congress enact legislation providing such fallback controls in the event the private efforts should fail.
Finally, the committee has identified programs, such as medicaid, veterans' readjustment benefits, child nutrition programs, and health professions education grants programs, in which savings can occur due to administrative or legislative reform. We urge the authorizing committees and the President to adopt such reforms.
PHYSICAL RESOURCES AND GENERAL GOVERNMENT
Mr. President, the committee's recommendation for physical resources and general Government programs is $95.4 billion in budget authority and $83.4 billion in outlays for fiscal year 1979. The committee anticipates that these figures will total $477.3 billion in budget authority and $450.4 billion in outlays for the fiscal year 1979-83 period.
In the physical resources area, the committee recommends continuing the major increases of recent years for energy supply research and development and for the strategic petroleum reserves. It also recommends moderate increases to levels of support for natural resources and environment programs.
For agriculture, the committee's recommendations would permit a major increase above current law funding for farm income support programs (including the latest administration actions) , as well as increased support for agricultural research.
The committee's recommendation would permit funding for Federal disaster assistance for the average level of disasters of recent years, but would require tighter administration to target benefits better on those truly in need in all sectors of the economy, including America's farmers.
The committee's recommendations continue Federal budget support for the Postal Service at the level recommended by the Postal Service itself, which will need to improve its operations to achieve financial viability.
For transportation, the committee's recommendation would accommodate increased funding for highways, including funding for bridge repair and replacement. The levels recommended are the maximum that can be accommodated by the highway trust fund without future increases to gasoline and other highway taxes.
The committee's recommendation would also accommodate further funding for the financially troubled ConRail. For mass transit, the committee's recommendation would accommodate approximately the current activity levels, but with the revised funding mechanism proposed by the President.
With respect to the President's urban initiative, the committee's recommendations would accommodate significant expansion in economic development activities for existing and new major grant programs and labor-intensive public works proposals. In addition, the committee recommended targets that are adequate to increase support to fiscally distressed areas through increased direct Federal aid and through the State incentive program designed to increase State assistance to such areas. However, legislative details of the credit-related components of the National Development Bank were considered to be too unclear to merit increases to the budget totals at this time.
REVENUES
Mr. President, much further detail regarding each of these individual functions in the budget resolution can be found in the committee's report. I ask unanimous consent that portions of that report detailing the specific recommendations of the committee by function be included at this point in the RECORD.
There being no objection, the material was ordered to be printed in the RECORD, as follows: