October 9, 1978
Page 34809
The PRESIDING OFFICER. Does the Senator from Wisconsin seek recognition?
Mr. NUNN. Mr. President, I have a parliamentary inquiry.
The PRESIDING OFFICER. The Senator will state it.
Mr. NUNN. We have already had a unanimous consent agreement making it possible to call up my amendment immediately after the Hart amendment and calling for a rollcall vote on that amendment, is that correct?
The PRESIDING OFFICER. The Senator is correct. It is merely that his amendment had not been stated.
Mr. NUNN. Is there anything that would not allow us to vote on the Nunn coalition amendment immediately after the Hart amendment with the yeas and nays being ordered?
The PRESIDING OFFICER. No, everything is in order now.
Mr. NUNN. I thank the Chair.
Mr. NELSON. Mr. President, I ask unanimous consent that Mr. Herbert Spira of the staff of the Senate Small Business Committee be granted the privilege of the floor during the course of debate and roll calls on the pending legislation.
Mr. MAGNUSON. Will the Senator yield? We have a new rule. Just put his name in.
Mr. NELSON. I understood that if they were from a committee, the request had to be from the floor. Am I correct on that?
The PRESIDING OFFICER. The Chair reminds the Senator from Wisconsin that there is a standing Magnuson order which permits a Senator to have two members of his staff on the floor by submission of their names to the Clerk.
Mr. NELSON. Does that include members of committee staffs?
The PRESIDING OFFICER. That includes members of the committee staffs.
Mr. NELSON. Then I withdraw my request, because the last thing I want to do is violate a Magnuson order.
The PRESIDING OFFICER. Unless, of course, the Senator from Wisconsin has requests for staff in excess of two.
Mr. NELSON. I do not know whether I do or not, but I do not want to get into a confrontation with the chairman of the Committee on Appropriations under any circumstances. If I have more than two, I shall submit this to the desk.
I want to commend the Senator from Colorado and the Senator from Georgia.
The PRESIDING OFFICER. The Chair stands corrected. The Parliamentarian informs me that it does not apply to committee staff, only to individual Senators staffs. So, without objection, it is so ordered.
Mr. NELSON. I thank the Chair.
Mr. President, I do wish to commend the Senator from Colorado and the Senator from Georgia for their thoughtful and creative proposals that are now the pending business. I ask unanimous consent to be a cosponsor of each of the proposals.
The PRESIDING OFFICER. Without objection, the commendation will be noted.
Mr. BELLMON. Mr. President, I ask unanimous consent that the distinguished Senators GRIFFIN, SCHMITT, and SCOTT be listed as a cosponsor of the coalition amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, the pending amendment, a multiyear tax cut offered by Senators BELLMON, NUNN, CHILES, and others, raises some serious questions for the budget process.
While I appreciate the concerns of these Senators for advance planning on the revenue side of the budget, I believe this approach will tie the hands of future Congresses and reduce the flexibility of the budget process in establishing a revenue floor.
The pending amendment would provide across-the-board tax rate reductions of approximately 6 percent for each of the 5 years beginning in fiscal year 1979 and extending through fiscal year 1983. The estimated revenue loss of the amendment would be $21.9 billion in fiscal year 1979 and would rise to $127.8 billion by fiscal year 1983. The tax reductions in the amendment are, however, contingent on the achievement of certain outlay restraints. Specifically, the proposed tax reduction would become effective only if:
The rate of growth in outlays did not exceed 1 percent in real terms;
The rate of growth in outlays was consistent to the achievement of a balanced budget by the end of fiscal year 1982 and;
The rate of growth in outlays was such that the ratio of Federal spending for GNP was reduced to 19 percent by fiscal year 1983.
Because this amendment provides for an additional 6-percent tax reduction first effective in fiscal year 1980, a year for which no first budget resolution is in effect, it violates the Budget Act in exactly the same fashion as the Roth and Packwood amendments. Unlike the amendments offered by Senators ROTH and PACKWOOD, the amendment offered by Senator BELLMON has also been the subject of a waiver resolution which was referred to the Budget Committee.
The Budget Committee is extremely reluctant to recommend the adoption of resolutions waiving section 303(a) of the Budget Act. One of the major purposes of the Congressional Budget Act was to bring the Federal budget under better control. Through the adoption each year of the first and second concurrent resolutions on the budget, Congress sets fiscal policies and national priorities for the fiscal year. To the extent that Congress enacts legislation affecting spending or revenues for a future fiscal year it loses control of the spending and priority decision for that year prior to the adoption of a congressional budget for that year.
The objective of a balanced budget by 1982 and a reduction in the rate of Federal spending in GNP are laudable goals. However, to tie these goals to tax reductions prior to any examination of the economy and other spending and revenue demands, reduces the effectiveness of the budget process to establish national priorities and to respond to national needs. Such formula approaches to tax reductions for example, raise the possibility that taxes may well be automatically reduced as a result under circumstances where the economy might be overstimulated and inflation fueled by such action.
I am also concerned that by establishing a fixed goal for the share of Federal spending in GNP we might encourage an expanded use of off-budget spending, loan guarantees, regulatory policies, and tax expenditures. These mechanisms can be used to provide benefits to some groups in ways which evade the regular authorization and appropriation process. In many cases the costs of these programs can be hidden almost completely from the budget.
Until the Congress has established procedures to control the use of these mechanisms we should be wary of amendments such as this one which create new incentives to hide the cost of programs.
Mr. President, the Budget Committee has this year pioneered procedures for establishing 5-year revenue and spending targets. The Budget Committee already provides 5-year projections for each spending function in the report on the first budget resolution. The committee has also initiated 5-year projections for the tax side of the budget as well. The report on the first budget resolution for fiscal year 1979 details the fiscal margin which is available for revenue and spending changes between fiscal year 1979 and fiscal year 1983 on the assumption that the economy experiences moderate growth and a balanced budget can be achieved by the end of 1983.
The 5-year budget projections are used by the Budget Committee to evaluate the impact of current tax and spending decisions on future budgets. The projections demonstrate the committee's concern that the Congress move toward a balanced budget at a moderate pace.
I am convinced that the Bellmon-Nunn-Chiles amendment would not aid the Congress in the effort to control Federal spending and move toward budgetary balance. In fact, the amendment may hinder the efforts of future Congresses to make budgets which conform to the changing needs of the economy as well as to the basic goals of budgetary balance and a moderate tax burden.
For these reasons, Mr. President, I oppose the amendment.
Mr. HAYAKAWA. Mr. President, I ask unanimous consent that my name be added as a cosponsor to Senator NUNN's amendment.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. KENNEDY. Mr. President, may I have a brief colloquy with the Senator from Georgia?
If we were to face a serious recession in this country, would the requirements under the Nunn amendment preclude us from adopting substantial tax reduction as a stimulus for the economy? If we were in a serious recession or even a depression, could we take the kind of measures that would be necessary on the spending side and the revenue side in order to bring about a restoration of the health of our economy? This is the concern I have about the amendment.
Mr. NUNN. No, I say to the Senator that Congress would have the absolute right of spending above the 1 percent in any kind of circumstances. It would not even require an emergency. What we do say is if the taxes are going to be cut, there are at last two conditions precedent and for fiscal 1982, there are three conditions precedent to the cut in taxes. If any of those conditions do not come about, then the taxes would not be cut. So Congress would have the right in the future to exceed the spending limits, in which case, the American public would not get a tax cut.
Mr. KENNEDY. Well, as we have seen in 1975 and also at the current time, there is a series of different mechanisms which different administrations have used to deal with recessions in our economy, such as increased spending for jobs programs or public works, and substantial tax cuts. There is a variety of different mixes of fiscal policy which different administrations have used in recent years.
I wonder what kind of restriction this puts on a recommendation of an administration that believes a tax stimulus would be an important measure to increase consumer spending in order to getus out of a recession.
Mr. NUNN. First of all, there is nothing to preclude a larger tax cut. Second, there would not be anything to preclude an expenditure level that exceeds the level recommended here.
What would happen in that case would be that there would be no automatic tax cuts under this proposal.
So there is nothing here to prohibit the Government from responding to any kind of emergency it might want to, whether within or foreign policy.
I would say to the Senator in fairness, though, it is the intention of the sponsors of this amendment that there be a vested interest in the American public to see for the first time that we begin to restrain expenditures here.
So this does create a degree of political interest on the part of the public to see there is a restraint in spending.
If Congress responds to that kind of political opinion, which I think will exist in normal times, we will, indeed, restrain spending.
Mr. KENNEDY. I understand the sentiment of the sponsors of the amendment. I am concerned that in hard times, such as the dramatic increase in energy costs, or the energy boycott, that a number of steps needed to be taken in order to bring the economy back into balance might be impeded.
Mr. NUNN. There are no restrictions that would preclude Congress going above the levels here.
The sanction would be if Congress goes above these levels, and this is similar to the Hart amendment, if we go above there would be no automatic tax cut.
Mr. KENNEDY. But if there is a recession, and there is a reduction of GNP, it violates the trigger in terms of Federal spending as a percentage of GNP. As I understand it, there is no actual restriction here in terms of the administration's attempting to provide additional spending with a tax reduction as one of the mechanisms in order to stimulate the economy. It seems a little odd to say that the country can not have the automatic tax cut proposed by the amendment, but it will have to have a nonautomatic tax cut to avoid a recession or stop a recession. At least, there is no restraint on a tax cut that might be required by sound fiscal policy.
Mr. NUNN. No such restraint. Only the restraint of public opinion at that time, whatever that might be.
Mr. HART. Will the Senator yield?
Mr. KENNEDY. I am glad to yield.
Mr. HART. I just want to say, on the first vote we are going to cast, which is the amendment offered by the Senator from Colorado, the same answers prevail as the Senator from Georgia gave.
It is my opinion as the principal sponsor, the fact of flexibility for the administration is somewhat greater in the Hart amendment than in the Nunn amendment.
But I think both amendments philosophically accommodate the problem of the Senator from Massachusetts.
Mr. KENNEDY. Fine.
Since the chairman of the Joint Economic Committee, I guess, is a cosponsor of both of those, I would be interested if he has any reaction to this exchange.
Mr. PROXMIRE. I am not chairman, as the Senator knows. I am chairman of the Senate Banking Committee. That is DICK BOLLING. Next year it will be LLOYD BENTSEN.
I appreciate it, though.
Mr. KENNEDY. He is a former chairman,
PROXMIRE. Well, I think I support both amendments. I think they are wise.
I questioned the Senator from Colorado earlier on this flexibility, in the event of either a deep recession or a war. In that event, of course, we might want to follow policies which might otherwise be restrained.
I think the case by the Senator from Colorado and the Senator from Georgia satisfies me, that there still is a considerable amount of flexibility left here, and I think they recognize the problem, especially in the event of a recession.
I feel I can support them because they are responsible and do work in the direction the supporters and I both want to work, to wit, to hold down Government spending and the size of Government, while at the same time permitting an appropriate response in the event of a recession.
Mr. BIDEN. Mr. President, I do not want to delay this. It seems we are arriving at a consensus on the floor to support one of these two amendments.
I realize it may be a little out of order, but I would like to pay a bit of respect to my senior colleague who, I believe, started this rolling a while ago, and, if he had not, we would not be at this point, in the first instance.
I know that is somewhat parochial, since I am a Delawarian. But I sincerely wish to compliment him because I believe we would not be at this point, which I think we are appropriately at, if not for his endeavors in moving this along.
I would like to compliment him.
SEVERAL SENATORS. Vote!
Mr. HEINZ addressed the Chair.
The PRESIDING OFFICER. The Senator from Pennsylvania.
Mr. HEINZ. Mr. President, I would just like to address to the Senator one question, if I might.
Is it correct, if I understand the difference between the Nunn coalition amendment and the Senator from Colorado's amendment with respect to the cut in individual income taxes, when two amendments are fully effective, recognizing they become effective at different time periods, does the Senator from Colorado's amendment state 29 percent cut versus present law, and the Senator from Georgia's cut is for a 26 percent from current law; is that correct?
Mr. HART. Yes, the Senator is correct.
The tax cut, the Hart proposal, cumulative 29 percent over 4 years, including, roughly, 6 percent cut this year, thereafter 9 percent, 7 percent, and 7 percent.
Mr. HEINZ. Now, the Senator from Colorado's amendment will have what effect vis-a-vis the tax cuts we have put into the Finance Committee bill at this point for individuals? Will it increase or reduce the tax cuts this year?
Mr. HART. It does not affect the tax cut at all, as does not the Senator from Georgia's amendment, also.
Mr. HEINZ. And the Senator's amendment would become fully effective during1982, assuming this conditional constraint does not exceed—
Mr. HART. The Senator is correct.
Mr. HEINZ. And, further, that the Nunn coalition amendment would become fully effective in 1983?
Mr. HART. The Senator is correct.
Mr. HEINZ. I thank the Senator.
SEVERAL SENATORS. Vote!
The PRESIDING OFFICER. The question is on agreeing to the amendment
Is the Senator from Washington seeking recognition?
Mr. MAGNUSON. The Senator from Colorado is suggesting a broad number of general programs we should cut.
Shall we cut defense? Shall we cut HEW? I have been cutting all of them and we are going to end up in the Appropriations Committee with a big cut. But which one does the Senator think we should zero in on to accomplish what he is talking about?
Mr. HART. The proposal contained in the amendment which we are about to vote on reduces the controls, the growth of Federal spending. It is not net reduction, as the amendment of the Senator from Georgia is not. Either amendment has a net reduction. These are controls on the degree of growth.
Mr. MAGNUSON. May I suggest something to the Senator from Colorado, and other Senators? Our problem in Appropriations is uncontrollable items that we cannot cut, which the Senator voted for, I voted for, the Senator from Massachusetts has voted for. I would like to know, within about a 40 percent, uncontrollable items, which one are we going to cut? Are we going to cut cancer research? Are we going to cut defense? Are we going to cut mental health?
It is a little bit difficult for us. We are trying to do a great job down there, and we are doing a good job. We are cutting everything. But I would like a little guidance, when somebody reaches up in the air and suggests that we cut something. Just which one do you want? Do you want to cut public works?
Mr. HART. I think the Senator—
Mr. MAGNUSON. Wait a minute. I asked you a question. I do not want to cut it. Everybody is talking about these things. We have to get down to the nitty-gritty about what we appropriate.
If the legislative committees would quit giving entitlements and give us a chance to take a look at it — or the Budget Committee — we could cut a lot of this. In the Federal budget is almost 60 percent of entitlements that we cannot touch. So you are talking about 40 percent, and that includes a lot of human beings.
Mr. HART. I agree with the Senator.
Mr. KENNEDY. Mr. President, I understand that some econometric tables have been introduced. I have one brief area that I would like to explore, either with the Senator from Georgia or the Senator from Colorado.
In the econometric studies has there been a projection as to what this amendment is going to mean in terms of employment and unemployment during the period when this amendment takes effect?
Mr. MAGNUSON. I want to talk about health items, which you and I are concerned about.
It is easy to say all these things, but let us find out what we are going to do. Do you want to cut some health items?
Mr. KENNEDY. No, I do not.
Mr. HART. Mr. President, I introduced on our amendment the latest tables we were able to provide. As to the employment rates if the amendment were adopted, we are presently at a 6.12 rate of unemployment nationally. By 1983, that would be reduced to 4.09 — just over 4 percent — based on econometric models, with the stimulation and the growth in productivity and investment which occur as a result of the tax cut.
Mr. CHILES. I can give the figures.
The Chase Econometric models show the gain in employment in 1983 would be a million workers, and the unemployment rate would be reduced. This is under their model for current spending, and they project 6.1, and with this they project 5.3.
Mr. KENNEDY. Has the Budget Committee any different figures on this? Aren't the Chase figures very controversial in some of their projections?
Mr. MUSKIE. I do not know that I can say
The PRESIDING OFFICER. Does the Senator from Massachusetts yield to the Senator from Maine?
Mr. MUSKIE. I yield on my own time.
The PRESIDING OFFICER. The Senator from Maine is recognized.
Mr. MUSKIE. The numbers I have are CBO numbers that we have received at the last moment. The difference over a 5-year period—
Mr. KENNEDY. May we have order, Mr. President?
The PRESIDING OFFICER. The point is well taken. The Senate is not in order. Senators will cease conversations on the floor. Senators will please take their seats and cease conversation.
Mr. MUSKIE. The Senate Budget Committee report on the second concurrent resolution is a green document which all Members have received. On page 27 are the 5-year economic objectives which are assumed by the committee with respect to the budget this year and the projections for the next 5 years.
The assumptions are that in 1983, the yearly average unemployment rate would be 4.6 percent. In the fourth quarter of 1983, the unemployment rate would be 4.5 percent, and the Consumer Price Index would increase at a 5.9-percent rate. Those are the 1983 figures.
The Bellmon amendment, according to the CBO, averages 5.6 percent unemployment over the fiscal year 1980 to 1983 period.
The second budget resolution plan averages unemployment at 5 percent over the same period. So that is a difference of 0.6 percent in unemployment over that period, or 600,000 jobs per year for 4 years.
The spread widens in the later years, so that in fiscal year 1983, the difference is 1 million jobs.
The Bellmon amendment averages 5.7 percent inflation over the 1980-83 period. The second budget resolution plan averages 5.9 percent inflation — in other words, more inflation. In 1983, the difference is .6 percent.
In addition, the difference over 5 years between the two is $33 billion in deficit. In other words, the Bellmon amendment would have that much less deficit over the period.
So the tradeoffs are .6 percent more unemployment, .6 percent higher inflation, and $33 billion more in deficit.
So the tradeoff is the classic one between inflation and unemployment over that period, according to CBO's figures.
Mr. CHILES. Mr. President, will the Senator yield?
Mr. MUSKIE. I yield.
Mr. CHILES. Is it not correct that in the 5-year economic objectives, which were set as objectives — where the committee hoped we would go in the Senate report on the second concurrent resolution — would require an additional $33 billion in spending stimulus? So that $33 billion was not part of the budget resolution for 1979, and it is not a part of the Coalition amendment we are talking about here. So, the Senator from Maine is talking about an additional $33 billion in spending stimulus to get to a lower unemployment rate.
Mr. MUSKIE. That is what I just said, yes.
Mr. KENNEDY. As I understand, it is a million more jobs lost to unemployment, five-tenths of a point on the inflation rate, and $33 billion of additional spending.
Mr. MUSKIE. It would be a six-tenths of 1 percent difference in inflation in 1983, in that 1 year. Over the 1980-83 period it averages two-tenths of 1 per-cent.
Mr. KENNEDY. And a million more jobs.
Mr. MUSKIE. And a million more jobs.
But the Senator is correct about the increased spending over that period.
Mr. KENNEDY. I should like to ask the Senator from Georgia this question: In the rate schedule, which is included in the Hart proposal or the Nunn proposal — how will that be different from what we have already accepted in the Bumpers-Kennedy amendment? Do you change the rates? How will that alter the actions we already have accepted in this debate?
Mr. NUNN. We accept the Finance Committee bill as amended by the Kennedy amendment. Our tables have no effect on that. In the future, on additional or incremental cuts, we take across-the- board cuts from the Kennedy-Bumpers schedule.