February 15, 1979
Page 2587
SENATOR MUSKIE SPEAKS ON PROPOSALS TO BALANCE THE BUDGET BY CONSTITUTIONAL AMENDMENT
(Mr. BRADEMAS asked and was given permission to address the House for 1 minute and to revise and extend his remarks and include extraneous matter.)
Mr: BRADEMAS. Mr. Speaker, one of the wisest, most experienced and highly respected persons in American life is the distinguished senior Senator from Maine, the Honorable EDMUND S. MUSKIE.
Senator MUSKIE, who is chairman of the Senate Budget Committee, delivered an address this week at the National Press Club in Washington, D.C., on proposals to balance the budget through amending the Constitution of the United States.
Because I believe all Members of the House and Senate will want to read Senator MUSKIE's address on this occasion, I include the text of his address, delivered on February 13, 1979, at this
point in the RECORD:
REMARKS OF SENATOR EDMUND S. MUSKIE
In 1930 — Franklin Delano Roosevelt confided to a friend — "It's becoming harder and harder for an honest fellow with a wife and children and nineteen servants to make a decent living."
In 1979, for families and governments alike, it is still often difficult to make ends meet. And the rush is on for a quick-fix approach to the government's fiscal dilemma.
Mathematicians have a saying — solutions can't be found until problems are stated correctly.
This afternoon, I don't expect to find the solution to the difficulties we face in balancing the budget. I do hope to state the problem correctly. I hope to raise some serious questions. I hope to start some serious people thinking — particularly about the growing demand for a new constitutional convention.
That movement has attracted much attention — but little careful thought. It is considered too casually by proponent and foe alike.
To be sure, some legislatures have reviewed this proposal with appropriate deliberation. But in many state houses, prudence has given way to panic. Resolutions to change the Constitution of the United States are introduced at noon and adopted before dinner. Sometimes without a single hearing — without a review of alternatives — without as much debate as a new state song would engender they endorse a substantial revision of the fundamental law of the land.
They have lost their grip on the enormity of what they are doing. And they have taken the wrong way out of a troublesome dilemma.
A VERY POOR SOLUTION
I am convinced that a constitutional amendment is a very poor solution to our current fiscal difficulties. It is unworkable, counterproductive, and even harmful. But it is not the caricature some critics suggest. It is a very serious proposal indeed. It deserves very serious review.
A mandated balance is not the only issue. There are many variations on the theme. Some propose a balanced budget statute. Others invent formulas to limit federal spending.. Still others hope that Congress will produce an amendment for ratification by the states. All of these proposals are dangerous and poorly thought through. But the most alarming prospect of all is a new constitutional convention.
It's an uncharted course to an unknown destination. A balanced budget amendment is only one potential result. There are other popular crusades — to outlaw guns — to outlaw gun control — to make abortion a right — to make abortion a crime — to ban forced busing — to endow forced busing with a specific constitutional sanction.
Many passionate causes are deeply rooted in our nation. Many are well supported. Many are well financed. Many are eager to readjust the underpinnings of the United States of America.
A CONSTITUTIONAL CONVENTION?
At a constitutional convention, could the readjustments be limited? No one really knows. The Attorney General thinks so. The American Bar Association agrees. But there is only one precedent. And it is not a comforting one.
The only convention we've ever had was called to revise the Articles of Confederation. But the delegates didn't stop at the revision. They scrapped the system. They built a new one. And what would prevent a wholesale recasting of the document they devised? Not the Constitution itself — it simply says that Congress "Shall call a convention for proposing amendments." And depriving the states of Senate representation is the only amendment specifically ruled out. Hopefully, the agenda would be limited.
If a runaway convention exceeded the limits thought to be imposed by those who convene it and three-fourths of the legislatures, responding to the kinds of popular pressures now being generated, were to ratify the result, who could say no?
How many of us are willing to gamble that our national compass would not be disoriented? How many even perceive the risk?
There are too many questions here — and not enough answers.
We should not expose our Constitution to the prospect of substantial revision when there are other, less imposing alternatives. Neither should we trivialize it with money management schemes — particularly those which can do no good and a great deal of harm.
THE BUDGET AND THE ECONOMY
A mandated federal budget balance is just such an ill-considered contrivance. And it is largely the product of a basic misperception. The relationship between the deficit and the economy is a very close one indeed. But it is not a one-way affair. A bad budget can unbalance the economy. But a bad economy can also unbalance the budget. And no amendment could possibly cope with that.
When unemployment goes up only one percentage point — the deficit swells by some 20 billion dollars — 20 billion dollars in lost tax revenues and increased social welfare costs — 20 billion dollars drained from the federal purse without a single spending spree.
In times of severe recession, the impact on the budget can be devastating. We've had some recent experience.
In October, 1974, President Ford unwrapped his "Whip Inflation Now" Program. He pledged to hold the deficit to 9 billion dollars in fiscal 1975. But fate and recession intervened. Just 3 months later, the President revised that estimate to 85 billion dollars, and sent the Congress a fiscal 1976 recommendation for a 52 billion dollar deficit.
The men who made the WIN buttons lost their jobs — along with 2 million other Americans.
A year ago January, President Carter proposed a budget with a 60 billion dollar deficit. We worked hard to trim it — and by September, we had cut that deficit to 38 billion. But interest rates went up. Inflation pushed higher. And from September to January, the deficit increased by 5 billion dollars — when Congress wasn't even in session.
Constitutional amendments can't balance the economy. Resolutions passed in Richmond or Topeka can't dictate policy in Riyadh or Tehran. Decisions made in Washington's caucus rooms aren't always supported in the board rooms of New York.
PRUDENT FISCAL MANAGEMENT
Are we helpless then? Certainly not. Prudent fiscal management can work through the economy and lead us back to a steadier course. We are doing that job right now. But a suddenly imposed requirement for an immediate balance — or for one to be forged in the unknowable future — would have some very regrettable consequences.
Over the years, economists of nearly every persuasion have testified before our Committee. They have agreed on little more than this — you can't always catch a deficit with radical spending cuts and tax increases. That may only make it run faster.
For fiscal 1980, the President projects a 29 billion dollar deficit. But a 29 billion dollar spending cut would not bring the budget into balance. It would ripple through the economy with a tax revenue loss of many billions of dollars.
It would take a cut of at least 45 billion to put the books in balance. And that would cost more than a million American jobs. It might have an impact on inflation, but it would leave the economy far weaker than before. And where would we look for a cut of that magnitude?
Of course, a budget can be balanced by raising taxes as well as by cutting expenses. And some insist that closing loopholes would match our debits with credits.
In 1932, Herbert Hoover tried that. He rushed to balance the budget with a drastic hike in taxes. The rest is tragic history. Things got very much worse. Purchasing power had been drained from the economy exactly when it should have been injected.
1932 was not a good year for the economy. 1932 was not a good year for Herbert Hoover.
But there is a third option. When the economy is growing, taxes rise faster than spending. And unless you enact a tax cut, increased spending never catches up with revenues. So you juice up spending. You stimulate inflation. You push people into higher brackets. Your tax revenues go up. And you point with pride at a balanced budget.
That is the stuff of conservatives' nightmares. And that is yet another way to meet a balanced budget mandate.
All of these potential consequences are unattractive indeed. But perhaps the very worst result would be a failure of flexibility in times of economic downturn. Economists of every respected school agree that increased federal spending or tax cuts producing a deficit may well be the only way to boost employment, generate investment, stimulate demand, accumulate capital, and prevent a downturn from deepening into a depression.
A mandated balance would blunt our sharpest fiscal tool. And that is why thoughtful advocates are quick to point to escape clauses.
But no escape clause could be framed quite cleverly enough. How would recession be defined? Who would announce its arrival? Who would be willing to lead the escape when the signs of a trend appeared. Would two-thirds of the Senate vote to abandon a constitutionally mandated balanced budget for a deficit unless the roof was caving in? Would we have time to pop the parachute before we hit the ground?
QUESTIONS WITHOUT ANSWERS
There are too many questions with no good answers — too many holes in the theory.
And so — some map a more sophisticated route to balance. They suggest that spending should be limited to a fixed percentage of GNP, or that growth in spending should be tied to GNP growth, But have they asked the right questions?
Our Constitution does only two things. It blueprints the structures by which we govern ourselves. And it defines the human rights we respect. Do we really want to devalue that currency with algebra and bar graphs?
We wouldn't even know where to begin the equation. Which magic number would we pick? To whose projections would we tie it? The President predicts a 3.2-percent GNP growth rate for 1980. But the Congressional Budget Office says 3.9 percent. This difference of seven-tenths percent in the growth of federal spending represents three and a half billion dollars.
Perhaps we should go to a prominent private sector forecaster. But Wharton Econometrics says 1.3 percent and Chase says 4.1.
It is sometimes proposed that the number be tied to last year's growth. But like generals preparing to fight the last war, politicians preparing to deal with last year's realities are poorly prepared indeed.
Should we be writing a guessing game into the Federal Constitution? Should we bind tomorrow's needs to yesterday's performance? How can we make good practical sense out of bad theoretical blueprints?
Too many questions with no good answers — too many holes in the theory.
THE CITIES AND STATES
Perhaps the most ironic twist is the role of the states in the budget balancing controversy. 25 of them are leading us into a serious mistake. And they will pay the biggest price. If Congress must suddenly chop the deficit, it will land in the laps of the states. That is not a threat. It's a matter of arithmetic.
Where would the cuts be made? Where would we find that 45 billion dollars this year? Let me refer you to the charts we've prepared.
Our cities and states are drawing on Washington for every conceivable need — from the health and education of their children to the wages of the men who trim the state house lawn.
Over the last thirty years, federal grants-in-aid to state and local governments have grown five times faster than the gross national product.
In fiscal 1980, the average state expects to receive one billion, six hundred and fifty-nine million dollars from Washington. The legislatures seem to be unaware of the consequences an overnight balance would bring.
During its 1975-76 session, the Pennsylvania legislature passed its call for a balanced federal budget. That was Resolution 236. Resolution 235 demanded a renewal of revenue sharing.
When the Oregon legislature passed its amendment resolution, a "whereas" clause suggested that "a balanced budget would lessen the need for increased state and local taxes." That's an odd theory — particularly in view of the fact that Oregon got one billion, seventy-five million dollars from Washington in fiscal 1978.
We could save 31 billion — 2 billion more than the President's projected deficit — merely by killing revenue sharing, education grants, EPA sewage construction, community development block grants, and the CETA program.
Is that what they want in the legislatures? Do they think the Congress would slash its own perception of national needs before it touched the states? And if we did exempt the states from surgery, what would be left to cut? Social security? National defense?
There is 82.9 billion dollars in the President's budget for grants to state and local governments. In 1978, the states ran a combined surplus of 29 billion — a figure that matches the President's deficit for fiscal 1980. An appealing solution to the balance dilemma leaps very quickly to mind.
It would be easy to ask, "Whose deficit is this?" and the states would not be pleased with the answer.
Of course, if we look to the states' example, we needn't make cuts at all. We can get into balance merely by following their long-standing and well accepted method of accounting. If we put capital investments in a separate accounting category, we'd have a much smaller deficit today. And it wouldn't make a lot of difference to our income, our outflow, or the state of the economy.
That is what the states do. That's what General Motors does. That is accepted practice.
It would also be easy to balance the budget by removing various programs from it. The federal government already spends some 12 billion dollars through agencies that are not counted in the budget totals. More programs could be moved into the dark. Or, more use could be made of federal guarantees and similar devices.
The Budget Committee is determined to bring such programs under the budget's umbrella. Only then will we have a full honest picture of real federal government activity. A balanced budget requirement would surely tempt the Congress to go the other way.
Creative accounting could provide us a meaningless paper balance, but is there any point in one? Is there any good reason for attaching a charade to the Constitution of our country?
The answers are clear. So are the holes in the theory.
THE NEW CONGRESSIONAL BUDGET PROCESS
We've been perfecting a different theory since 1975 — a new Congressional budget process. It was forged in reaction to 37 years of deficit spending in the 54 years between 1920 and 1974. It was established because that record was flatly unacceptable. And for the first time in its history, Congress took explicit steps to reverse that record of deficits.
For the first time in its history, Congress established a standing committee with one exclusive mission — to set a fiscal plan — to hold the Congress to it — to pull us back from those irresponsible deficits.
Contrary to the popular rhetoric, we have made tremendous progress. And ours is no simple task.
In the popular imagination, the budget resembles an hourglass, with assets and liabilities neatly stacked at opposite ends. If an imbalance develops, what could be simpler than tilting the glass until the sands even out?
But the budget is better compared to a watch. When it runs too fast or slow, a violent jolt may relieve frustration. But it will not repair a delicate mechanism. One has to determine which moving parts to lubricate — which gears to tighten — which counterweights to adjust.
We've been making those judgments. And the record is more impressive than rhetoric.
In our first year of 1975, recession prevailed — and George Meany demanded a hundred billion dollar deficit. We held it to 66 billion. And five years later, we are keeping the pressure on.
In 1975, the deficit was 3 percent of GNP. But in 1980, it is projected at 1.2 percent.
In 1980, the level of Federal spending will be 30 billion dollars lower than it would have been if Washington took the same percentageof GNP as it did in 1975.
And during the four years of the Congressional budget process, our spring budget resolutions have called for spending targets at an average of 28 billion dollars below the requests submitted by the authorizing committees.
WE CAN DO BETTER STILL
That's not good enough. We can do better still. We intend to. And we already have all the statutes, formulas and amendments we need to get the job done. We are asking the right questions. We are sealing the holes in a workable, flexible theory. Why scrap a proven system for one that defies a working diagram? Why graft an irresponsible scheme to the fundamental law of the land?
As one Supreme Court justice said, our Constitution is not a rubber ball to be tossed about and played with by each succeeding child. It embodies the essence of our system. There is no room in it for yesterday's whim or tomorrow's fancy.
In the long run, that is the centrally important concern. But in the near term, there is nothing attractive about the. federal deficit. This is not a pro-deficit Congress. I am not a pro-deficit Budget Chairman. This is not a pro-deficit speech. But we don't need fiscal handcuffs to wipe the deficit out. We need fiscal discipline. We need to make informed, prudent judgments about hundreds of separate spending choices. We need the will to make those judgments stick. If we have that will, no formula is necessary. If we don't, no formula will work.