April 25, 1979
Page 8636
Mr. PROXMIRE. Mr. President, first; I want to make it clear that I have the greatest admiration and respect for the distinguished Senator from Maine. I think he has. done a marvelous job on this bill, as he always does. He has demonstrated, in my judgment, his wizardry because he has been able to persuade the Senate to reject virtually all the reductions which have been proposed.
Mr. MUSKIE. Mr. President, will the Senator yield?
Mr. PROXMIRE. I yield.
Mr. MUSKIE. I know that every time the Senator begins in that fashion. I had better sit tight and listen. [Laughter.]
Mr. PROXMIRE. I thank the Senator.
I also pay tribute to the distinguished Senator from Oklahoma; the ranking Republican member, who also has done an outstandingly fine job, as has the entire committee.
Mr. President, the fact is that we have not done enough.
The gnawing, biting problem is inflation, and this is still an inflationary budget resolution, a highly inflationary budget resolution.
Consider the economic assumptions of the Budget Committee for fiscal 1980 when this budget will be having its effect on the economy:
First: Three percent-plus growth rate — that means a period of economic expansion, certainly a time when we should have a balanced budget.
Second: Eight percent inflation — close to the highest in the Nation's history, certainly the highest that responsible Government officials have ever anticipated, and that is on top of 3 percent growth. The higher rate of inflation makes it easier to balance the budget in1980 when inflation is assumed to be near peak levels.
Third: The most explosive increase in jobs in recent history over the last 3 years, particularly in the last 3 months.
Fourth: Interest rates on riskless Government obligations averaging from 7 to 8 percent, near the record highs the country has experienced. These rates can only be moderated by an economic slump which no one wants or a truly restrained fiscal policy with a balanced budget which the Senate is about to deny the country in voting for this resolution.
Mr. President, if a student in economics I were given this scenario in fiscal policy, that is, there is 3 percent-plus growth, 8 percent inflation, rapidly expanding employment, and sky-high interest rates, and asked, "Should under those circumstances the Federal Government balance its budget?" there is no way he could get a passing grade if he said no.
This morning Dr. George Eads came before the Banking Committee for confirmation as a member of the Council of Economic Advisers.
This was a brilliant man with a doctorate from Yale and an outstanding background of economics appointed by the President as the newest member of the Council of Economic Advisers.
I asked him whether under the circumstances I described we should have a balanced budget, and his answer was, as it had to be, yes.
There are lot of alibis. We may be about to move into a recession is one. Theanswer to that is that we always may be moving into a recession. The reasons we have had the outrageous record of 16 deficits in the last 17 years of unparalleled economic expansion is because Presidents and Congressmen always feared we might be moving into a recession. Recession is hypothetical. A maybe-maybe not proposition. Inflation is here right now. It is big. It is visible. It is hurting everyone. and the Senate's answer is to foist another nearly $30 billion Federal deficit on the country.
Alibi two, a balanced budget is fine but let us reach it gradually. How gradual can you get? Ten years since the last one and 10 years of general growth and expansion. Now they say we are moving toward a balanced budget, not this coming year but 2 years from now. Next year it will be the same weary story. They tell us we will balance the budget in 1982 for sure. The fact is that if we cannot balance the budget in a year of solid growth such as we assume in 1980, we will never be able to balance the budget. Inflation is rampaging. This is no time for a gentle pitty-pat cure. but it is time for a tough. sharp, emphatic answer.
Alibi three is that the balanced budget will hurt the poor. The fact is inflation will hurt the poor much more. Less than 25 percent of the budget is of any benefit to the poor. There is no reason we cannot target and protect that 25 percent.
Alibi four, a balanced budget will gut vital Federal programs like defense, education, and public works. Some may think these programs will not be improved by reductions, which I happen to think, and they may feel that we need to increase them. If so, if we do, we need more defense or public works or other programs, we should raise the taxes to pay for them, not run an inflationary $30 billion deficit.
What we need is not a commitment that we probably will not keep to balance the budget in 1981 or 1982. Such a commitment is irresponsible as well as foolish. What we need is a commitment to enact budgets that will be in balance whenever the economy is growing at or above the historic average.
If we have stagnant growth in 1981 we should have a deficit. If we have a recession we should have a bigger deficit. But if we grow at 3 percent or better we should have a surplus, and certainly if we continue to have inflation of 6 percent or more and grow at 3 percent or better, as the Budget Committee tells us we can expect in 1980, we should have a surplus.
What this Senate is doing is saying we will not balance the budget in 1980, which begins 5 months from now and ends almost a year and a half from now, even if we have growth of the economy of 3 percent or 4 percent in that year and inflation of 8 percent, all of which are extraordinarily favorable conditions for balancing the budget, but we are being told that whatever the economic conditions are in 1981 we will balance the budget then.
Mr. President, that kind of position is unrealistic and irresponsible.
I plead with Senators MUSKIE and BELLMON to work to change the basis for balancing the budget from a particular year to particular economic conditions; that is, substantial growth — 21/2percent or 3 percent or 31/2 percent — combined with substantial levels of inflation should always dictate a balanced budget. The more severe the inflation the more substantial should be the surplus.
Consider: The committee's budget will not be in balance in 1980 with 31/2 percent growth or 4 percent growth or 41/2 percent growth even with 8 percent inflation. It would take 5 or 6 percent growth in fiscal 1980 to create economic conditions that would so increase revenue and hold down expenditures that the budget would be barely in balance, and such growth would be highly inflationary. Such rapid economic growth should be accompanied by a substantial and I mean a very substantial surplus to stem the inflationary pressures.
Why does not the committee in the future come forward with a budget that will be in balance given a reasonable growth in the economy and a reasonable level of inflation?
On the other hand, the recommended expenditures and revenues should project a deficit, yes, a deficit if growth is too slow and a larger deficit if we move into a recession.
Economic conditions in 1980 are not predictable. We have to guess. But that does not prevent us from acting responsibly. Rather than decide that we should or should not have a balanced budget in 1980, what we should do is to adopt a level of expenditure and revenue that will bring us into surplus whenever we have substantial rates of inflation and growth exceeding 3 percent, and in deficit when we are below that level. Unfortunately, we have not done this.
If we did this the budget would do what it should do economically. It would restrain inflation when growth is exuberant and inflation is threatening; and it would stimulate the economy and encourage economic growth when the economy is stagnating and unemployment is growing.
Mr. President, I withdraw my amendment.
Mr. MUSKIE. Mr. President, at this point I am pleased to engage in a colloquy with Senator KENNEDY.
Mr. KENNEDY. Mr. President, as the Senator from Maine is aware I am concerned over the fact that, although the resolution recommended by the committee contains major reductions in some forms of Federal spending, it requires no reductions at all in tax spending. The chairman has stated forcefully on many occasions in the past 3 days of this debate, all spending programs should bear some of the pain of budget cuts. If so, then tax spending programs should share in this burden, too.
In reporting the resolution, the Budget Committee said, on page 5 of the report: Under the Committee's recommendations, even the highest priority programs have not been spared a share of the pain. This is a highly disciplined recommendation. But it is an equitable one. Neither defense, nor public welfare programs, nor any of the Federal Government's other major enterprises are spared a share of the burden which must be borne if this Congress is to balance the budget in 1981.
In fact, however, one of the Federal Government's major enterprises has been spared any share of the burden. Despite its claim to vigorous restraint, the resolution asks no restraint at all in one of the largest areas of Federal spending — the spending that is carried out through the tax laws.
For fiscal year 1980, Federal spending through the tax laws will reach the record total of $168 billion, and will climb to$268 billion by 1984 if no restraint is adopted. In recent years, tax spending has been growing significantly faster than spending through appropriations. Yet the budget resolution makes no attempt to restrain this form of Federal spending.
Nothing turns on whether a Federal dollar is spent as a tax subsidy or as an appropriation. Any spending program can be enacted either as a direct outlay or a tax benefit. Last year, for example, one of the most vigorous Senate debates took place over whether the use of tuition tax credits or direct education grants was a better method of providing billions of dollars in increased Federal aid for education.
Federal law now contains 89 different tax spending programs. They exist in all of the budget functions into which appropriations are divided. In some cases, the dollar amount of tax spending programs equals, or even exceeds, the level of appropriations in the same budget function.
Large reductions would be necessary if cuts in tax spending were required in the same proportion that outlays are to be reduced by the resolution reported by the committee. I submit for. the RECORD a table that illustrates this point:
[Table omitted]
Thus, if cuts in tax spending were required in the same proportion as the cuts in outlays proposed by the committee nearly $7 billion in cuts in tax spending would be required in fiscal year 1981, and nearly $12 billion would be required in fiscal year 1982. The point is clear — the committee has asked enormous reductions in some types of Federal spending, but no reductions at all in tax spending.
Appropriations should not be required to bear the entire brunt of the spending cuts necessary to achieve our budget goals. There is no reason for a large component of the Federal budget to be made immune from scrutiny or exempted from bearing its fair share of the fiscal austerity to be imposed. Our spending targets can be met. But they must be fairly met. Does the chairman of the committee share my concern?
Mr. MUSKIE. As the Senator knows, I am sympathetic to the principle he has raised that tax expenditures must be given comparable scrutiny in developing budget resolution aggregates as is given to direct spending programs.
I would point out to the Senator that this year, in contrast to past years, the first resolution allows for no significant tax reductions which could be used to enact substantial new tax expenditures.
I am sympathetic to the Senator's desire to reduce the level of tax expenditures below current policy in a similar fashion to the direct spending reductions below current policy in this budget. However, no proposals to achieve such reductions in specific tax expenditures in fiscal year 1981 have been developed so far this year.
If substantial progress is made in the coming months to develop tax expenditure reductions to be effective in fiscal year 1981, an adjustment in the second resolution revenue floor could be made to reflect the tighter budget discipline these reductions would cause.
Mr. President, are there further amendments to be proposed?