July 9, 1979
Page 17532
PROPOSED CONSTITUTIONAL AMENDMENTS MANDATING A BALANCED FEDERAL BUDGET
Mr. MUSKIE. Mr. President, I rise today to speak once again on the subject of balancing the budget — this time to oppose proposed constitutional amendments for this purpose which may come before the Senate in the next few weeks.
Mr. President, the timeless simplicity of our Constitution is its greatest inherent strength. It is designed to serve just two essential functions. It outlines the architecture of our Government and it defines our fundamental rights. There is no room in it for back-of-the-envelope schemes, nor for complex mathematical calculations.
There is certainly no room there for deeply flawed fiscal gimmicks such as the"balanced budget" amendments to Senate Joint Resolution 28, a proposed constitutional amendment to provide for the direct popular election of the President. I would like to review some of the deficiencies of such amendments.
I will also touch briefly on the fiscal innovations which have passed the Congress in 1979. These new measures have made it all the more apparent that there is no need and no justification for a new constitutional amendment to balance the Federal books.
Mr. President, the proposed constitutional amendments mandating a balanced budget or imposing a surtax following years when a balanced budget is not achieved are simply without merit. But the public anger and frustration which gave birth to the balanced budget movement is another matter entirely. A government which seems to grow endlessly without delivering demonstrable benefits raises dangerous questions whether the government is in control.
The public's frustration with seemingly endless inflation is also genuine: It is certainly understandable. Inflation can destroy the fruits of a lifetime's labor and undermine an entire social order.
But Federal deficits, harmful though they sometimes are, are not the root of the problem. More importantly, changing the fundamental law of the land to mandate an unworkable Federal balance in good times and bad is not the solution. On the contrary, it could provoke an even deeper dilemma.
We as legislators must respond to the public anger and frustration — but with leadership, poise, and responsible solutions. I believe that we are doing so.
Indeed, the Congress has already institutionalized a formal mechanism for promoting balanced budgeting — a mechanism which is more important than any fiscal innovation since the enactment of the Budget Act itself.
With the adoption of the Long amendment to the debt ceiling bill, the Congress instructed the Budget Committees to formulate two alternative paths to balance. Ultimately, Congress accepted the more stringent of the two. We chopped the deficit more dramatically than many thought possible. We adopted a budget path leading to balance in fiscal 1981.
I do not need to tell you that the Long amendment originated in the Senate and that the House gave it a different interpretation than was intended by those of us who authored it here. It is worth noting, however, that the final conference agreement adopted by both Houses did include a budget plan for balance in 1981. The Senate conferees, in the statement of managers of the conference spelled out the detailed functional breakdown for such a plan.
With adoption of the Packwood amendment to the debt ceiling bill, the Congress instructed the President to follow a similar course at the other end of Pennsylvania Avenue. If the administration submits a budget for fiscal 1981or for fiscal 1982 which is not in balance, the President must also submit an alternative, detailed budget which is in balance.
Thus the administration has been required by the Congress and the Congress has committed itself either to balance the budget or to know why not. Only by examining the multiyear process of achieving and maintaining a balanced budget and the consequences of doing so can we truly understand whether there are contingencies which warrant putting aside the discipline imposed by the presumption of a balanced budget. We cannot responsibly substitute a formula for this process of careful evaluation.
We need no new constitutional alterations to get our job done. We need only discipline and a sustained commitment to fiscal responsibility. No statute or amendment can supply those ingredients for us.
Many people assume that a balanced budget mandate would constitute a simple, effective, and efficient way to restrain the growth of Federal spending and limit future budgets, but these new ideas are anything but simple or effective.
A nightmare of semantics, administration, accounting, potential evasion, and other inherent flaws are integral elements of any of the sweeping proposals for a year-to-year balance under all conditions.
For example, consider the amendment offered by the senior Senator from Virginia. That amendment would specify that total outlays of the Federal Government not exceed total receipts.
The defects of his approach are as simple as its language; it limits or even eliminates the Federal Government's ability to respond quickly and flexibly to changing economic conditions. If the cost of indexed programs goes up during the year, how can the Government respond?
Moreover, a balanced Federal budget may be flatly impossible to achieve in times of severe recession. In a deep recession millions of individuals could lose their jobs, and consequent sharp reductions in personal income cause sharp reductions in Federal tax collections.
The Byrd amendment would allow Congress to waive this requirement "in the case of a national emergency." Curiously, though, the amendment fails to provide a definition of a state of "emergency." Because it fails to do so, we could anticipate prolonged debate and confusion just when prompt, effective action might be most necessary. And the end of that debate might well come too late to allow for meaningful responses to economic conditions.
Of course, since this proposal would require a two-thirds vote of Congress to open the escape hatch, we might never have to concern ourselves with responding at all. A two-thirds vote is difficult to obtain on any issue. That is why the cloture rule now calls for a three-fifths vote instead of the traditional two-thirds.
Who would take the lead to suspend the Constitution, to unbalance the Federal budget?
Furthermore, this proposal poses serious enforcement problems. What would happen if the economy weakened suddenly, causing an unexpected loss of tax revenues, or if uncontrollable spending exceeded projections? We control the budget by controlling budget authority, and budget authority spends out over a period of 1 to 40 years, depending upon whether the budget activity is for salaries or housing subsidies. If our spend-out projections are slightly off, should social security benefits be suspended in the last weeks of the fiscal year so that outlays do not exceed receipts? Who should go to jail if outlays in fact exceed receipts?
Finally, the real test of congressional determination to balance the budget is not in votes on proposed constitutional amendments but in the cold realities of constructing a balanced budget that confront us each year as we adopt congressional budget resolutions. Just 2 months ago this body took a hard look at the 1980 budget and concluded that a deficit of $23 billion was the tightest realistic budget we could achieve for next year.
The proposed DeConcini amendment mandates that Congress attempt to balance each year's budget, and in addition specifies that any deficit that did occur would have to be erased by the end of the next fiscal year by imposition of a proportionate surtax.
Apart from promoting a spend now, pay later mentality, that idea would impose a terrible economic burden in times of recession. A deficit year caused by an unexpectedly weak economy would be followed by a subsequent attempt at budget balance and a surtax. That combination might plunge us into a raging depression by forcing a tax increase at precisely the time when tax reduction is needed to stimulate the economy and create jobs.
Herbert Hoover tried to tax us into balance once. The year was 1932. It was not a good year for the economy. It was not a good year for. Herbert Hoover.
Mr. President, I hope this brief analysis is adequate to demonstrate that the good intentions which stand behind these proposals are poorly served in practical effect.
These good intentions are rooted in the desire to respond to the public frustrations that I noted earlier. But real as those frustrations are, they are also wrapped up with some misconceptions.
Not long ago, Dr. Walter Heller testified before the Senate Budget Committee and added his name to the growing consensus of leading economists who oppose the mandatory balance concept.
Dr. Heller identified six fundamental misconceptions which lie at the heart of public anxiety about the Federal budget and its role in our society. I believe that Dr. Heller has captured the essence of the popular perception. He has also formulated some cogent responses. Let me summarize them here.
Fallacy No. 1 — Households have to balance their budgets. Why can not Uncle Sam do the same?
Dr. Heller points out that most households run proportionately huge deficits when families buy a home, a car, a boat, or even send their children to college.
And unlike the household, the Federal Government must budget not only for its own expenses, but also for unemployment and recession on the one hand, or for an overheated economy on the other.
Fallacy No. 2 — Consumers, it is said, must pay back their debts, but Washington's debt just keeps on growing.
The truth bears no resemblence to that mythology. Since World War II, the Federal debt has been the slowest growing form of major debt in America. The Federal debt today is less than 3 times the size it was in 1950. Consumer debt is nearly 14 times its 1950 level.
American consumers who cluck their tongues and shake their heads about the size of the Federal debt are the very individuals who once paid cash and now carry five or six well worn credit cards.
Fallacy No. 3 — it is argued that State and local governments must balance their budgets — why not the Federal Government?
Unlike the States, Washington throws capital and operating budgets into the same pot. If these expenses were separated out, the way the States separate them, the deficit would indeed be lower. But the desirability of that sort of budgeting at the Federal level has been seriously questioned.
Moreover, a State or local budget can be balanced by tax hikes or spending cuts without jarring the entire national economy — not so for the Federal budget.The Federal budget is called upon by business and labor alike to provide a balance wheel to moderate swings in the economy, to reduce the length and depth of recessions, to dampen the effects of inflation.
Fallacy No. 4 — it is almost a matter of faith that Federal deficits are the major, if not the only source of inflation.
The record says otherwise. During hard times, the deficit is anything but destructive. It helps the economy back to its feet by activating additional demand for goods and services and by putting idle workers and machines in business again.
Moreover, in the 1970's, the deficit has had little bearing on the real prime movers of inflation — such as the cost of food and energy.
In the post World War I era, rapid inflation was accompanied by Federal budget surpluses. From 1959 to 1965, Federal deficits were the order of the day yet price inflation was little more than 1 percent per year.
There simply is no strong historical correlation between deficits and inflation.
Fallacy No. 5 — it is taken for granted that the Federal budget has run wildly out of control, and that a constitutional limitation is the only possible restraint.
Again, the facts fail to support the mythology. Statistical measures ranging from Federal spending as a proportion of GNP to Federal spending growth patterns show that the upward trend of the 1960's and early 1970's has been reversed.
The congressional budget process has brought an historically unprecedented level of discipline and control to the Hill's budgeting procedure and capabilities.
We have begun to see the results. In 1975, the first year of operation for the new budget process, Federal spending represented 22.4 percent of our GNP. In 1980, we are budgeting for 21 percent — in 1981, for 20.4 percent, and in 1982, for19.2 percent.
It took the most extraordinary kind of discipline and responsible restraint to produce a budget path leading to balance in fiscal 1981. But this Congress accepted that discipline and embraced that responsibility. And if our economy behaves in a manner reasonably consistent with our projections, the budget will be balanced long before a constitutional amendment could be passed and ratified.
Mr. President, this spring we adopted a budget resolution for fiscal 1980 and a 3-year budget plan which will take us to balance in the shortest practicable time and in the most responsible manner possible. It is workable and eloquent rebuttal to the rhetoric of those who insist that Congress cannot manage the fiscal affairs of the Nation unless its hands are tied and its constitutional powers of discretion are eliminated or sharply constrained.
Our job now is to carry forward the plans put in place in the first concurrent resolution. We must make good on our earlier commitment with responsible spending decisions that follow the fiscal blueprint which is before us. We have a demanding job to do that requires the earnest efforts of every committee and every Senator. Our resolve in accomplishing that job — not a mechanical contrivance attached to the Constitution — will allay the public unrest so evident today.
The Constitution of the United States is one of the most impressive achievements of our Republic. It is the foundation for all the achievements which followed it. There is no room there for simplistic gimmicks, nor for the permanent legitimization of transient schemes.
The framers of our Constitution have left us a remarkable legacy — a model for republics which followed and for those yet to be born. We owe the Founders much more than patchwork addenda to the elegant structure they built.
We owe more than that to ourselves.
I strongly urge my colleagues to vote against amendments for a constitutional mandate to balance the Federal budget.