April 23, 1979
Page 8214
CONCLUSION OF MORNING BUSINESS
The ACTING PRESIDENT pro tempore. Is there further morning business? If not, morning business is closed.
FIRST CONCURRENT BUDGET RESOLUTION FOR 1980, 1981, AND 1982
The ACTING PRESIDENT pro tempore. Under the previous order, the Senate will now proceed to the consideration of Senate Concurrent Resolution 22, which the clerk will state by title.
The legislative clerk read as follows:
The concurrent resolution (S. Con. Res. 22) setting forth the recommended congressional budget for the United States Government for fiscal years 1980, 1981, and 1982 and revising the Second Concurrent Resolution on the budget for fiscal year 1979.
The ACTING PRESIDENT pro tempore. Under the law, debate on the concurrent resolution is not to exceed 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 1 hour on any amendment in the second degree, debatable motion, appeal, or point of order. Who yields time?
The Senator from Maine.
Mr. MUSKIE. Mr. President, a parliamentary inquiry.
The ACTING PRESIDENT pro tempore. The Senator will state it.
Mr. MUSKIE. What is the pending business, Mr. President?
The ACTING PRESIDENT pro tempore. The pending business is Senate Concurrent Resolution 22.
QUORUM CALL
Mr. ROBERT C. BYRD. Mr. President, before the distinguished Senator proceeds, I wonder if the chairman and the ranking member of the committee feel there should be a live quorum before we proceed. This is a very important piece of legislation. I believe we should have the full attendance of Senators, or as many as possible, before we get this debate under way.
Mr. MUSKIE. Mr. President, I agree. I am not sure we would necessarily attract Senators, but it is important that attendance appears to be especially necessary this morning, with the peculiar mandate the Senate gave us concerning this concurrent resolution. I would agree.
Mr. ROBERT C. BYRD. Mr. President, I suggest the absence of a quorum.
The ACTING PRESIDENT pro tempore. Will the Senator indicate on whose time he wishes the time to be charged?
Mr. ROBERT C. BYRD. The time to be equally divided.
The ACTING PRESIDENT pro tempore. Without objection, it is so ordered. The clerk will call the roll.
CALL OF THE ROLL
The assistant legislative clerk called the roll and the following Senators entered the Chamber and answered to their names:
[Quorum tally omitted]
The PRESIDING OFFICER (Mr. EXON). A quorum is present.
Mr. ROBERT C. BYRD. Mr. President, will the Senator yield me 10 seconds?
Mr. MUSKIE. I yield.
Mr. ROBERT C. BYRD. Mr. President, by virtue of the unusual order that the Senate had entered, requiring the Senate Budget Committee to bring in a balanced budget for fiscal year 1981 and a balanced budget for fiscal year 1982, I felt that the resolution before the Senate acquired an unusual significance and importance that necessitated the live quorum. It was for that reason that I entered the request for a live quorum. I think Senators should be aware of the significance of the measure that is now being taken up.
Mr. BAKER. Mr. President, will the Senator yield?
Mr. MUSKIE. I yield.
Mr. BAKER. Mr. President, I thank the distinguished Senator from Maine for yielding. I shall not take very long.
I think the Senate owes a debt of gratitude to the chairman and to the distinguished ranking Republican member, the Senator from Oklahoma, for their dedication to their duty and responsibility under the Senate resolution and under the act in bringing us this resolution in this form at this time, and with what it portends for a balanced budget in the future.
If there is anything on Earth that the country is asking for now, it is the type of fiscal restraint that is described, I believe, in these resolutions.
I take this opportunity to commend both Senators.
Mr. ROBERT C. BYRD. Mr. President,I share the expression of gratitude that has been stated by the distinguished minority leader.
The Budget Committee — the chairman, the ranking minority member, and the other members — have worked hard to fulfill their responsibilities under the order of the Senate. They have brought in a very extensive and voluminous measure. It behooves all Members to givethe closest attention to it, because I daresay that the balanced budget figures for fiscal years 1981 and 1982 will bear very close scrutiny on the part, of all Senators.
Mr. BAKER. Mr. President, they will indeed, as the majority leader correctly points out, bear the close scrutiny of theSenate. But, in a way, they are a challenge to the Senate, as well, to make sure that we do live within the requirements that will produce the balanced budget. I hope we will, and I now commit myself to do my best to see that that happy day arrives as soon as possible.
Mr. MUSKIE. I thank both my good friends for those words of praise. There may be less praise after the budgets have been scrutinized carefully, but the objective is one we all share.
I hope Senators will give this budget the attention it should be given, not because Senator BELLMON and I and the other members of the Budget Committeehave produced it, but because it is an attempt, after arduous labors, to respond to the mood of the country, to the mood of the taxpayers, as well as to the mandate of the Senate — and I will get into that in greater detail.
I see that the distinguished Senator from New Mexico would like me to yield, and I yield to him.
Mr. SCHMITT. I thank the distinguished Senator from Maine.
Mr. President, I join my colleagues in praising the efforts of the Senator from Maine (Mr. MUSKIE) and the Senator from Oklahoma (Mr. BELLMON).
I think that Congress, in spite of our debates and arguments over specific portions of the budgets of this year and the year before, must be recognized as having taken some very significant steps in gradually reducing, significantly reducing, in each stage of the budget, the overall spending levels of the Federal Government. Obviously, that is what has to be done, even though we argue back and forth on how to do it. It is clear that we have met that commitment; we met it last fiscal year. We are making it again this fiscal year, so that now a balanced budget by fiscal 1981 is clearly in sight.
Certainly, by fiscal 1982, if we continue to chop out of the budget the kinds of numbers we have chopped out during the last few years, we can achieve a balanced budget, doing at the same time what is perhaps even more significant, and that is reducing the rate of growth of Federal spending, which in itself is inflationary whether the budget is balanced or not. To have a rate of growth of Federal spending greater than the rate of growth of the Gross National Product is basically an inflationary situation. We must continue to work in the direction that will bring about a balanced budget.
Senator MUSKIE and Senator BELLMON are to be complimented for their effort.
Mr. MUSKIE. I thank my good friend very much for those comments.
Mr. President, I ask unanimous consent that the following members of the staff of the Committee on the Budget and the Congressional Budget Office be allowed to remain on the floor during consideration of and votes on Senate Concurrent Resolution 22: John McEvoy, Karen Williams, Sid Brown, Susan Lepper, George Merrill, Brenda Tremper, John Tillson, Roger Schlickeisen, Ira Tannenbaum, Bob Sneed, Charlie Flickner, Liz Tankersley, Rob Fersh, Lewis Shuster, Cornel Botheral, Jim Capra, Anne Lockwood, Tom Hogarty, Tom Sliter, Allan Mandel, Porter Wheeler, Ann Hadley, Vic Miller, Gail Picker, Rick Brandon, Chuck Riemenschneider, and John Nelson.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I ask unanimous consent that the use of small electronic calculators be permitted on the Senate floor during the consideration of Senate Concurrent Resolution 22.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. BELLMON. Mr. President, I ask unanimous consent that the following members of the minority staff of the Senate Budget Committee be allowed the privileges of the floor during the debate on the first budget resolution: Robert S. Boyd, Robert Fulton, Gail Shelp, Bob Helm, Becky Davies, Carol Cox, and Barry Kinsey.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. Mr. President, I yield myself such time as I may need to make my opening statement. I warn Senators that it will be lengthier than usual, but we had a more complicated job this time,and I will take the time to try to explain it as clearly as possible.
Mr. President, the Budget Committee recommends a first concurrent resolution on the budget for fiscal years 1980-82 which produces a balanced budget in 1981 and provides for substantial tax cuts beginning in fiscal 1982.
The budget path recommended by the committee will be painful. Fiscal discipline has its price, and the price of accepting a near term budget balance is measured in program curtailments, and in suspended tax cuts, which none of us is eager to endorse.
But unless we accept such sacrifices — unless we take the heat and tolerate the pain — the ardent demands for a balanced budget which have recently filled this chamber will not have counted for much.
The recommended fiscal 1980 aggregate totals are as follows: budget authority, $600.6 billion; outlays, $532.4 billion; revenues, $503.6 billion; deficit, $28.8 billion; public debt, $890.7 billion.
Last January, the President's fiscal 1980 budget recommendations were characterized as "lean and austere." But the committee recommends a fiscal 1980 budget which contains a deficit $11.8 billion lower than the President's when the two are estimated on a comparable basis.
Our deficit figure, moreover, is $3.6 billion lower than that proposed by the House committee — again, on a similar basis of comparison.
Mr. President, with those preliminary facts in the forefront, let me briefly summarize the essence of the message I am about to deliver.
First, a balanced Federal budget must be achieved as soon as reasonably possible. Our recommendation responds to that need.
Second, there is a price to be paid for a near term balance. The committee is convinced that the price must be paid — and that it must be evenly distributed across the wide range of Federal activity.
Third, other committees of the Senate must take cost-saving initiatives recommended by the Budget Committee if we are to reach the end prescribed in our recommendations.
Fourth, our efforts to set a stringent fiscal policy are an indispensible part of the national campaign against inflation. But that campaign will fail without the enlistment of private sector restraints and private sector cooperation.
Fifth, though overall rates of unemployment have fallen, the plight of the structurally unemployed remains desperate. Our efforts to make jobs must focus on the needs of these people.
Sixth, a combined impact of enlightened fiscal and monetary policy can and should be reflected in a moderation of economic expansion and a dampening of inflation.
Seventh, the committee fully realizes that the future course of the economy cannot be predicted with precision. But the 5-year planning we initiated last year is essential to any hope for exerting continuing control over spending, revenues, and the size of a surplus or deficit.
Eighth, while sound fiscal policy will not allow for any immediate general tax cuts, our recommended budget path would include a $55 billion tax cut in fiscal 1982 and larger cuts in the subsequent fiscal years.
Finally, Mr. President, it must be emphasized that the achievement of a balanced budget in fiscal year 1981 is much more than a goal. We have presented a workable plan. And if we are willing to suffer the sacrifices — and I emphasize that — if we are willing to suffer the sacrifices, which must be accepted in order to make it work, we can and will bring it to fruition.
THE PARLIAMENTARY SITUATION
Mr. President, this year, consideration of the first budget resolution will differ from prior years in several respects:
This year for the first time, the Budget Committee has reported and recommends a multiyear first budget resolution. In addition to setting forth the recommended budget for fiscal year 1980, Senate Concurrent Resolution 22 also contains aggregate and functional totals for the following 2 fiscal years, 1981 and1982.
Under this 3-year plan, the budget will balance in fiscal year 1981. This is the path to balance which the Budget Committee recommends to the Senate.
In addition to the 3-year budget, Senate Concurrent Resolution 22 includes revisions to the second budget resolution for fiscal year 1979. Without these revisions, needed supplemental appropriations cannot be enacted.
The revised budget aggregates and functional spending totals reflect adjustments in revenues, budget authority, and outlays which are necessary to take account of the higher than anticipated interest rates and inflation rates, and program reestimates of a technical nature.
Were it not for these changed conditions, no adjustment to the second budget resolution for 1979 would be necessary, since congressional actions on the fiscal year 1979 budget, in the aggregate, have stayed below the levels estimated in the second budget resolution.
Pursuant to the mandate of the public debt ceiling act, the budget committee has also reported without recommendation an alternative multiyear budget. I emphasize this to those Senators who may be interested. The alternative budget, Senate Concurrent Resolution 23, is on the Senate calendar and its contents are thoroughly explained in the committee's report. It leads to balance in fiscal year 1982 rather than 1981 and provides for a tax cut beginning in fiscal year 1981 instead of 1982.
If any Senator wishes to offer the alternative budget as a substitute for the pending resolution, he need only move to strike all after the resolving clause in Senate Concurrent Resolution 22 and insert in lieu thereof the text of Senate Concurrent Resolution 23 which would then be a complete substitute for the 3-year aggregate and functional numbers, as well as the revisions to the 1979 resolution.
Thus, Senate Concurrent Resolution 22 contains budget numbers dealing with 4 separate fiscal years, the most complicated budget task the committee has ever undertaken. All of these numbers are open to amendment. And I would urge all Senators who disagree with any of the numbers recommended by the committee in this resolution to debate them here in the Chamber.
Let those who would raise the budget or cut it offer amendments to that budget and get rollcall votes on those amendments. Then and only then can the Senate adopt a first budget resolution which it can support through the summer as we make individual spending and taxing decisions.
SUMMARY
The Budget Committee's recommended restraints on Federal spending will do more than merely pinch. They will hurt. Some programs will be eliminated entirely and others will be drastically curtailed. But a multibillion-dollar deficit cannot be promptly wiped out without inflicting pain.
We cannot achieve a balanced budget without accepting these consequences. But the consequences of forgoing that achievement would be far more distasteful.
Until quite recently, Federal deficits have reflected continued slack in the economy and had little if any impact on inflation. But conditions are changing. The economy is moving toward full capacity. In this situation, deficits could indeed induce additional inflation.
Mr. President, we simply cannot afford that. In this 5th year of economic recovery, a sound fiscal plan must be a restrained plan.
There is no room in a sound economic future for Federal initiatives which contribute needlessly to the fueling of inflation.
Consistent with principles of humane and prudent Government administration, the deficit should be squeezed down and out as soon as possible. In the end, that is in the interest of all Americans.
This year's budget recommendation establishes a watershed in the recent history of fiscal policy making. A few weeks ago, Congress instructed the Budget Committees of both Houses to prepare two alternative plans — one producing a balanced budget in fiscal 1981, and one producing a balanced budget in fiscal 1982. Your committee has responded aggressively to that mandate. It is now up to Congress as a whole to reciprocate.
Adoption of this plan to achieve a balanced budget could well be the most important step in responsible fiscal management since the adoption of the Budget Act itself.
In recent decades, increasingly higher levels of real Federal spending have been a fixture of American Government. But this first resolution on the budget calls for fiscal 1980 outlays below current law. It allows for no real growth in overall Government spending. It would reduce spending below current law levels by $5.2 billion in each of the fiscal years 1980 and 1981, and by $6 billion in 1982.
Compared to the cost of continuing current Federal policy at levels required to fully offset inflation, this budget reduces outlays by $11.7 billion in fiscal 1980, by $21.6 billion in fiscal 1981, and by $35 billion in fiscal 1982.
The deficit contained in this budget is $28.8 billion. If the budget prepared by the House Budget Committee were restated to reflect the economic and program assumptions of the Senate, their deficit would be $32.4 billion. On the same basis, the President's would be $40.6 billion.
Stated in the President's terms, the committee has recommended a budget which contains a deficit of $19.7 billion in fiscal year 1980. That has been accomplished at a time when many have insisted that a deficit goal of $30 billion was unrealistically low.
We have met that goal and gone further, and we have done so while using the most unflinching and objective economic forecast available. There are no smoke screens or mirrors in this committee's recommendations.
The recommended budget reduces spending proposed by Senate authorizing committees by $14.3 billion.
The budget is $1.1 billion lower than the proposal of the appropriations committee. The appropriation committee proposal would be several billion dollars higher if restated on a basis comparable with the budget committee figures.
In the committee's view, there is little room in the budget for new programs. This budget contemplates allowances for only a few of the new initiatives proposed by the President. Only by reducing or eliminating existing programs can room be made for innovations.
This very stringent budget path has not been easy to construct. It has been necessary to swallow hard before endorsing many of the cuts and restraints which the committee recommends. None of these proposals has been casually considered. The committee is fully aware of the penalties inherent in a disciplined course of fiscal policy; and these recommendations are highly disciplined indeed.
But if these restraints are harsh, it must also be said that they are equitable. The burden is widely distributed. None of the Federal Government's major enterprises is spared a share of the sacrifice.
The report details the extent to which the committee has distributed the weight of responsibility.
Let me touch on some items which demonstrate the diversity of restraint.
In the Department of Defense, the committee recommends efficiencies in operations costs totalling a $300 million savings in fiscal 1980. These savings are not achieved in readiness related operations. Another $100 million is saved in fiscal 1980 by phasing out the commissary subsidy.
For all Federal employees — civilians and military — the committee recommends a cap on pay raises. For retirees, the committee recommends once-yearly cost of living adjustments rather than twice yearly ones. These actions will save $4 billion in 1980.
The committee has found room for restraint in the energy field. Storage levels would decline for the strategic petroleum reserve based on likely fill rates. Savings there will be $1 billion. Funding for breeder reactor programs would be reduced by $200 million, and long term R. & D. would decline in real terms.
In the area of health care, the recommendations would allow for only $200 million of the President's proposed medicaid benefit expansions. No allowance is made for a program of national health insurance. Net savings of $1.8 billion are assumed in medicaid and medicare; and support for medical schools and students is cut back by $100 million.
In the field of transportation, the federal-aid highway program would be reduced by $500 million and restraint in funding for Amtrak would end passenger service in many of our states.
Cuts of $400 million would be made in public welfare programs and reform of the welfare system would have to be delayed until 1982.
Some price supports would be reduced for farmers in future years. And there is no room for the President's proposal to fund all-risk crop insurance.
And in the area of employment, the countercyclical public service jobs program would be phased out entirely by fiscal year 1981 — for a reduction in fiscal year 1980 of $1.8 billion — and summer youth jobs would be cut back with fiscal year 1980 savings of $200 million.
There is scarcely a constituency in the United States which will not be touched in some significant way by the imposition of these and other sacrifices.
There is no satisfaction in that with the subcommittee or, I am sure, with the Senate. But neither is there any chance to make good on our duty to manage the public purse in a prudent and responsible manner unless we are willing to pay the price.
Some may ask, if the budget can be balanced in 1981, why not in 1980? That would require a fundamental change in the role of Government in America — or a tax increase of great proportions.
Mr. President, at this point I ask unanimous consent to insert a table in the RECORD in order to indicate what would be required. Federal outlays would have to be cut by another $38.3 billion — or $43.5 billion below current law in order to achieve a balanced budget in 1980.
When one considers the kinds of cuts I have already described what we have in 1980, pointing to a balance in 1981, Senators may get some faint notion of the enormity of that challenge.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. MUSKIE. Total outlays would be $491.1 billion, allowing no increase at all over fiscal 1979. That is true despite the fact that increased case loads, spend-outs from prior commitments, and inflation adjustments required by law will inevitably drive the totals up.
The free lunch is as scarce in 1979 as it has ever been. And those who demand a stringent spending diet must not forget that the cost of Government can be reduced but not eliminated.
No tax cut would be provided under the recommended budget until fiscal 1982. But there would be a $55 billion cut in that year, to be followed by even more substantial reductions — $75 billion in fiscal 1983, and $100 billion in fiscal 1984.
The reality is that a balanced budget requires attention to both sides of the scales. We cannot achieve that balance solely through Draconian spending cuts.
On both sides of the ledger — in spending cuts and in tax proposals — the Budget Committee has faced up firmly to the requirements of fiscal integrity. But those commitments will have no value unless they are reflected in the decisions of other congressional committees and in roll call votes on the floor.
For example, in order to meet the budget resolution targets, other committees must recommend the following changes in existing law to achieve savings or make other cuts of equal magnitude.
The Finance Committee must save nearly $3 billion by recommending changes in existing health and welfare programs.
The Environment and Public Works Committee must produce a rescission of spending authority for the highway program — a rescission of half a billion dollars in each of the next 2 years.
The Appropriations Committee must rescind $1 billion of funds for the strategic petroleum reserve.
The Commerce Committee must approve the President's proposal to reduce Amtrak's support to levels consistent with a 43-percent reduction in passenger route mileage.
The Small Business Committee must terminate SBA disaster loans for crop losses which are eligible for FmHA assistance.
The Veterans' Committee must report legislation requiring private insurers to reimburse the Veterans' Administration for care provided to policyholders who go to VA hospitals.
The Governmental Affairs and Armed Services Committees must provide for once yearly increases in retirement benefits instead of the current twice yearly adjustments.
These will not be easy votes to cast. They were not easy to cast in the Budget Committee. They will not attract an eager flock of enthusiastic supporters. Indeed, the Budget Committee's proposals for such sacrifices are anything but gleeful. Unfortunately, our fiscal dilemma isa sobering one.
FISCAL POLICY
In theory, fiscal restraint should be a popular course of action. The public has demonstrated its general support for shrinkage in the size and scope of Government. And the popularity of lower taxes is no recent development.
In reality, however, no meaningful spending cuts will ever be imposed without producing howls of outrage from those who suffer the consequences. Therein lies the challenge to us who make this Nation's fiscal policy — because the budget is a political document as well as a fiscal plan.
But fiscal restraint is made necessary by the overwhelming importance of the fight against inflation.
The success of our past efforts to stimulate the economy has added over 12 million jobs. The gap has been substantially narrowed between what the economy can produce and what it in fact produces.
Serious attention is still required to the plight of the structurally unemployed. But with inflation currently running close to a double digit rate, the time has come to end general fiscal stimulus.
The Congress can only make a meaningful contribution to the battle against inflation if we approve a budget which avoids excessive strains on our productive capacity.
We must send a signal to the American people. We are not oblivious to the rages of inflation. We must set an example for sacrifices in both the public and private sectors which can bring inflation own.
Weighing the need to support public programs against the need to restrain public spending, a well-constructed budget can play an important role in shrinking inflation and in moving our economy in a more positive direction. The committee has recommended such a budget.
But important though a balanced budget is, it is not enough. Its impact will be blunted if wage settlements continue to break through the bounds of reasonableness.
Its moderating influence will be meaningless unless profit growth is no more than reasonable and prices are held down.
The committee has told the Senate with this budget that government must swallow some inflation if we are ever to return to a healthy balance of wages and prices. But the bitter taste of that sacrifice must also be absorbed in the private sector.
Federal budgets are not the sole sourceof inflation — far from it. And there are even limits on the impact which our private sector decision makers can have. Judgments made in Iran, in Saudi Arabia, and even in Japan or in West Germany can have as big an impact on the course of our inflation as any made here at home.
But Congress cannot dodge its responsibilities by pointing to those who must also contribute. We must carefully evaluate measures that have an inflationary impact by directly adding to the cost and price of goods and services. In a few cases, that may be necessary to accept such measures when overriding needs cry out to be served. But we must be aware of the consequences for inflation. We must be sure that every inflationary cost is balanced by a commensurate benefit.
The establishment of a new inflation monitoring capability at CBO has helped.We have already seen it working. We now know the inflationary implications of every major bill we consider. And those implications must weigh heavily as we make our choices and cast our votes.
UNEMPLOYMENT
During the past 4 years, the national unemployment rate has fallen by 40 percent from 9.1 percent to 5.7 percent. Some 12 million jobs have been created.But those statistics are cold comfort for the men, women, and young people who remain unemployed with scant hope for the future.
At least for the near term, general unemployment rates are likely to rise to 6½ percent.
But the burden of joblessness is not evenly distributed across our society. Employment rates for some labor force groups — professionals and highly skilled workers, for example — are near 100 percent. So we must not dilute Federal remedies for joblessness by spreading them equally across the job market.
Even more importantly, the plight of the structurally unemployed is genuinely appalling. The unskilled, the young, and minorities are particularly victimized. Minority teenagers, for example, are locked into a level of unemployment reaching 30 to 40 percent. A Nation committed to maximum employment, production, and purchasing power is compelled to work to minimize this waste of human potential.
Accordingly, the committee has recommended that programs addressing the needs of the structually unemployed would be expanded. But the countercyclical public service jobs would be phased out.
ECONOMIC GROWTH
The committee recognizes that real economic growth is likely to slow in 1979.
The forecast adopted by the committee calls for 1.1 percent during 1979 and for a healthier but still modest pace of 31/2 percent in 1980. The dual consequence of higher unemployment and lower inflation is reflected in the committee's assumptions.
It is necessary to make assumptions about the future course of the economy in order to know the cost of programs and the level of revenues. This was a very difficult choice to make this year.
There is a considerable divergence of informed opinion and uncertainties are widespread. We chose to adopt the objective and independent CBO forecast after careful deliberation. Mr. President, I ask unanimous consent that a table be printed in the RECORD at this point showing this forecast and comparing it to the President's.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. MUSKIE. Mr. President, let me emphasize that we did not adopt these assumptions as a desirable set of short term policy targets. Rather, we felt it necessary to be realistic about program costs and revenues.
We know that even a mild downturn entails a substantial amount of social distress. Yet an effort on our part to forestall such a downturn would be hazardous.
The effects of fiscal stimulus could easily come too late to stop a downturn and could just as easily sustain a needlessly higher rate of inflation.
Because the committee assumed that the momentum of expansion will resume during fiscal year 1980, and be sustained in subsequent years, we have overwhelmingly approved a budget path which would lead to balance in 1981.
Given a cooperative private sector and congressional determination to avoid cost-raising actions, this budget will help us turn the corner in the war on inflation. It should start us on a path which will lower the inflation rate by almost 11/2 percentage points by 1982.
Once that corner has been turned, we can begin to permit more rapid growth and a higher utilization rate of our resources. As part of a plan to lower unemployment and reduce the Federal share of our national income, the committee proposes a sizable tax reduction for fiscal 1982.
The committee is recommending a revenue floor for fiscal 1982 which would accommodate a general $55 billion tax reduction on a full year basis. Assuming that these are to be personal tax reductions, those personal taxes would be cut by more than 17 percent in 1982.
This tax cut is consistent with a balanced budget. The recommended restraint on outlay growth makes it possible. In any other context, this tax cut would be highly inflationary.
But by 1982, inflation will have boosted payroll taxes and intensified fiscal drag. A tax cut will be needed to allow for economic expansion as well as to provide relief to the taxpayer.
COORDINATION OF FISCAL AND MONETARY POLICY
Prospects for renewed and sustained growth in 1980 and 1981 will be greatly enhanced if monetary policy plays a supporting role. An easing of monetary restraint should be made possible by the easing in labor and product markets that is likely to occur over the ensuing months.
Prospects for an easing of monetary policy should be further enhanced by a fiscal policy which shifts, as this budget does, from the recent expansionary role to the recommended posture of restraint.
Reduction and elimination of the deficit will dampen Federal demands in the credit markets while restraint in Federal spending will reduce Government demands for goods and services. The combined effect should permit a lowering of interest rates.
Federal Reserve Chairman Miller testified before this committee and assured us that — given congressional spending restraint — monetary policy would be adjusted to support a moderate economic expansion. This flexible and coordinated approach to the formulation of a policy of stabilization is heartening indeed. We can and must make it work.
SPENDING RECOMMENDATIONS
Let me turn briefly now to an overview of some of the committee's major spending recommendations for fiscal 1980. At this point, I ask unanimous consent to insert in the RECORD a table setting forth the 3-year aggregate totals which are proposed in the committee's recommendation.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
NATIONAL DEFENSE
Mr. MUSKIE. Mr. President, the committee was determined to see that an overall reduction in Government spending was not achieved at the expense of a strong national defense. We have indeed recommended some substantial reductions in various elements of military spending, but we have allowed no reduction in programs which are vital to our security.
The committee recommends $137.8 billion in budget authority and $124.3 billion in outlays for defense programs in fiscal year 1980. For fiscal year 1981, it is $148.1 billion in budget authority and $135.8 billion in outlays. For fiscal year 1982, it is $157.9 billion in budget authority and $147 billion in outlays.
The committee recommendation is a responsible one and fully meets U.S. defense needs. In making its decision, the committee recognized that the growth in total defense funding is a poor measure of improvements in U.S. defense capabilities. The committee was more concerned about where the money was actually being spent. For example, this year, the Budget Committee determined that savings obtainable through 25 percent absorption of the fiscal year 1980 pay raise for civilian and military personnel of the defense department should be transferred to the tactical forces mission. This shift will improve U.S. tactical capabilities. Additionally, the committee fully supported the new initiatives requested by the President for strategic forces.
For the strategic and tactical warfare forces missions the Budget Committee's recommendation provides for real growth of over 5 percent in budget authority for Procurement, Research and Development over the fiscal year 1979 level. Since fiscal year 1978, these two missions will have grown by nearly $12 billion in budget authority.
As a part of an overall effort against inflation, the committee accepted the President's recommendation for a 5.5 percent cap on the anticipated fiscal year 1980 pay raise for civilian and military employees of the Department of Defense and employees of all other government agencies. The committee also recommended a number of management innovations. These would produce greater efficiency in defense operations and maintenance activities. Adjustment of military and civilian retired pay would be made on an annual rather than a semiannual basis. That procedure would bring Federal retirement adjustment procedures into line with the system now employed in social security.
(Mr. PRYOR assumed the chair.)
Mr. MUSKIE. Mr. President, I turn now to international affairs.
Mr. President, for international affairs, the committee recommends $12.0 billion in budget authority and $7.9 billion in outlays in 1980. For fiscal year 1981, it is $13.5 billion in budget authority and $8 billion in outlays. For fiscal year 1982, it is $12.5 billion in budget authority and $7.8 billion in outlays.
In the area of international affairs, the Budget Committee has imposed some reductions which were recommended by Senate authorizing committees.
International development programs represent about 40 percent of the international affairs function. Adjustments in this mission have produced a $1 billion cut in the budget authority figure proposed by the President. Still, this level allows for some increase over fiscal year 1979.
The committee's recommendations permit funding of the President's request for additional aid to Egypt and Israel in support of the Middle East Peace Treaty. Allowance is also made for assistance to other countries with special political or strategic ties to the United States.
In most other international programs, the committee recommends that the impact of inflation be partially absorbed. It is assumed that efficiencies and reductions will be undertaken in low priority activities in order to keep higher priorities constant in real terms.
HUMAN RESOURCES
Mr. President, for human resources programs, the committee recommends $320.6 billion in budget authority and $287.6 billion in outlays. For fiscal year1981, the recommendation is $355.0 billion in budget authority and $311.9 billion in outlays. For fiscal year 1982, it is $394.8 billion in budget authority and $338.8 billion in outlays.
This human resources budget, Mr. President, notwithstanding those numbers, is a tight one. It recommends reductions in benefits under such programsas social security, AFDC, veteran's income security, the G.I. bill, medicare, and medicaid.
It recommends phasing out the CETA countercyclical jobs program and the work incentive program, and it calls for reduced assistance to medical schools and students.
These recommendations are painful ones. They have been reached only after an intense effort by the committee to identify areas where unnecessary or duplicative spending could be reduced. It is the committee's perception that the recommended reductions would cause the least hardship to individuals.
While the committee's budget calls for restraint in human resources spending, it also allows for increases to meet some critical human needs.
Among these needed increases are the following:
First, educational assistance for low-income children at the preschool, elementary, and secondary levels;
Second, expansion of health care services for pregnant women, for low-income children, and for other low-income people — and additional health research to augment our present efforts to find cures for disease;
Third, the elimination or elevation of the present statutory ceiling on the food stamp program in order to avoid a reduction in benefits.
Fourth, reform of the Nation's welfare programs. The committee continues to be concerned about inequities, about disincentives to work, and about strains on family life. All of these concerns continue to plague our welfare system. The committee recommends reform beginning in fiscal year 1982.
Fifth, an increase in aid to refugees seeking a haven in this country:
Sixth, a full cost-of-living increase in benefits paid to veterans with service-connected disabilities and an increase in veterans education benefits.
In the CETA amendments enacted last year, Congress established an emphasis on providing employment assistance to those Americans who are structurally unemployed — primarily youths and minorities. The committee's recommendations reflect this emphasis.
The committee repeats its concurrence with the concept that Federal programs to put these people to work can have the double benefit of reducing unemployment while minimizing inflationary effects. As a result, the committee recommends continued high levels of funding for such efforts, including a new initiative to enlist the private sector in a campaign to place the structurally unemployed in unsubsidized jobs.
At the same time, the committee sees little justification in continued funding of public service CETA jobs for people temporarily unemployed due to economic downturn. Such assistance was justified during recession but, in this fifth year of sustained recovery, it is the committee's judgment that this temporary assistance should be phased out. The committee recommends that spending under title VI of CETA — for so-called countercyclical public service jobs — be eliminated by the end of fiscal year 1981.
The committee remains concerned about the rapid escalation in health care costs.
Voluntary efforts to curb hospitalization costs have been initiated by the hospital industry itself. Those efforts are gratifying. According to a recent CBO study, this effort was successful in holding down the rise in hospital costs by 1.5 percentage points in 1978. In 1979, CBO estimates that this effort will reduce the increase in costs by 2.9 percentage points.
But that is not good enough. Even with this voluntary effort, hospital costs rose by 12.8 percent in 1978. CBO estimatesthat they will increase by another 13.9 percent in 1979. Such increases in the cost of a vital service such as health care simply cannot be tolerated.
Therefore, the committee recommends that the Federal Government undertake a strong intiative in controlling hospital costs. The Federal savings to be reaped from such an initiative are reflected in the committee's budget recommendations.
The committee is also concerned about the level of fraud and abuse in domestic assistance programs. The vigorous response of both Congress and the Executive has been gratifying. The committee expects that these efforts will lead to savings in individual health, education, and income security programs totaling $3.6 billion in fiscal year 1980.
Savings can never be properly achieved through across-the-board cuts which eliminate as much substance as fraud and abuse.
The committee recognizes that fraud and abuse in Federal programs cannot be eradicated quickly through simplistic efforts. Rather, they must be fought on a sustained and consistent basis, and the fight must be carried to many fronts. We can expect some modest, immediate payoffs, but the real benefits of improved management will be sustained in future years.
COMMERCE AND COMMUNITY DEVELOPMENT
For programs involving commerce and community development, the committee recommends $51.5 billion in budget authority and $46.5 billion in outlays for fiscal year 1980. For fiscal year 1981, the recommendation is $54.1 billion in budget authority and $49.3 billion in outlays. For fiscal year 1981, it is $54 billion in budget authority and $50.4 billion in outlays.
For commerce and housing credit programs, including the Federal payment tothe Postal Service, the committee's recommendation approximates current law funding. An exception allows for possible reductions achieved through implementation of the President's proposal to use recaptured budget authority for GNMA. The recommendation includes no allowances for funding a new home ownership assistance program or for appropriation of a standby Treasury line of credit for the National Credit Union Administration's credit liquidity facility.
In the area of transportation the recommendation would permit small increases in airport development programs funded by the Airport and Airway Trust Fund. But funding for other air transportation programs would be held to current law levels.
Mass transit programs would be funded at the level requested by the President, as would most assistance to rail transportation. The allowance assumed for Amtrak subsidies is held to a level that will be adequate only if Congress approves DOT's proposal to reduce the size and improve the efficiency of the rail passenger system.
In order to provide for an equitable distribution of the budgetary sacrifices expected from the various transportation programs, the committee further recommends that highway funding increases enacted last year be reduced by $500 million in fiscal year 1980 and again in fiscal year 1981.
The committee recommendation continues funding for revenue sharing at current law levels, and provides no allowance for programs of temporary or standby countercyclical fiscal assistance to State and local governments. However, it assumes significant increases in development assistance to distressed areas and communities through full funding of the new EDA development finance program proposed by the President.
The recommendation for disaster programs reflects CBO's estimate of the funding necessary to satisfy demands for assistance. This assumes that the incidence of disaster is consistent with recent historical experience. This funding allowance will be adequate only if the Congress rejects an expected proposal to provide deep interest rate subsidies on SBA disaster loans.
Congress must also assure that disaster loans for crop losses are financed solely through the Farmers Home Administration, which has traditionally provided financing for this purpose.
For programs involving administration of justice, the funding recommendations, except for LEAA, generally approximate the administration's request. The committee recommends LEAA funding significantly below current law. In reaching this recommendation, the committee noted its concern about the program's effectiveness. The improved financial condition of State and local governments which benefit from LEAA grants, and the pressing need to reduce Federal expenditures were also factors in this decision.
General Government activities are assumed to be funded at current law levels.This will force both the legislative and executive branches to continually implement new efficiencies or to incur real reductions in program and activity levels.
NATURAL RESOURCES
Mr. President, for natural resources programs, the committee recommends $41.6 billion in budget authority and $29.0 billion in outlays for fiscal year 1980.
For fiscal year 1981, the recommendation is $29 billion in budget authority and $33 billion in outlays. For fiscal year1982, it is $31.6 billion in budget authority and $33 billion in outlays.
The committee's recommendation would continue funding basic science research at a constant real level through fiscal year 1980. But the level would decline in subsequent years. Civilian space programs would be funded above current law for the next 2 years, as requested by the President. This would assure further development and production of the space shuttle.
For energy, the committee recommends increased borrowing authority for TVA, but allows for reductions below current law for the remainder of the function. Reductions are assumed for strategic petroleum reserve oil purchases, for breeder reactor programs, and for oil exploration activities. Fossil fuel, magnetic fusion and conservation programs would be funded at current law levels. Increases are recommended for solar research and development and for regulatory activities of the Department of Energy.
The committee recommends funding below the current law level for natural resources and environment programs. While water resources projects would be funded at current law, cuts would be made for new park acquisition and for EPA construction grants.
For agriculture, the committee's recommendation allows increases above current law funding. Among these are increased export credit sales of agricultural commodities, and continued support for agricultural research and services at constant real levels.
Mr. President, much further detail regarding each of these individual areas of spending can be found in the committee's report.
REVENUES
A full discussion of the committee's revenue recommendations is also contained in the report. But let me summarize some of the most important features.
The committee recommends a revenue floor of $503.6 billion for fiscal year 1980.This assumes receipts under current law to be $503.5 billion. The floor also assumes enactment of legislation which, on a net basis, would increase fiscal year 1980 revenue collections by $100 millionabove current law.
In order to attain a balanced budget in fiscal year 1981, the committee assumes that no general tax reductions will be enacted in fiscal year 1980 or in fiscal year1981. However, the committee recommends a major tax reduction of $55 billion in fiscal year 1982, and total tax reductions would offset the impact of social security tax increases scheduled to occur in the fiscal years 1981-84 period. They would also offset the extent to which inflation otherwise would push taxpayers into higher tax brackets.
The committee revenue floor also assumes additional revenues beginning in fiscal year 1981 derived from administration tax initiatives.
These initiatives could include various presidential cash management proposals or a new general requirement of withholding on interest and dividend payments. Implementation of these proposals would improve the efficiency or our tax collection system, and reduce the Federal budget deficit, just as efficiency initiatives affecting various spending programs would cut outlay levels.
Although these administration tax proposals would significantly increase fiscal year 1981 and fiscal year 1982 revenue collections, they would not require any ultimate increases in tax payments by law abiding persons. Withholding on dividends and interest would generate additional revenues only from persons presently evading tax on interest and dividend income.
The cash management proposals would accelerate payments to the Treasury of amounts already required to be paid, and thus would significantly reduce Federal Treasury borrowing needs. This would reduce the level of payments necessary to service the national public debt.
CONCLUSION
Mr. President, since its inception, the Budget Committee has been faced with the unenviable task of setting a strict fiscal plan and holding the Congress to it. This year, that responsibility has made it necessary to produce fiscal recommendations which are more stringent and demanding than ever before. Our report and our resolution are replete with sacrifices, constraints, and limitations. Such is the tenor of the times.
But we have not abandoned a conception of government as a national institution with a continuing obligation to promote the enhancement of American society. We are convinced that the bitter medicine of fiscal discipline will help meet that obligation. But we are also convinced that some of our needs are too great to be overlooked — even for a while.
In spite of its stringency, this budget recommendation provides for some important new spending initiatives: Economic development, meaningful increases in the delivery of health services to the poor, better veterans education and disability benefits, no cap on funding for food stamps, real growth in national defense.
But the mission of those who shape our fiscal policy for 1980 and beyond is essentially one of restraint. It has become necessary to find a short route to balance in the Federal Government's budget. The budget process has met that challenge in the fairest and most equitable manner possible.
Our proposal for a balanced budget in 1981 is much more than the statement of a goal. It is more than an exercise. It is more than a rhetorical device. It is a serious, honest, and workable plan.
It has been made possible only by the fact that after 4 years of evolution, the budget process has reached a new level of maturity. One year ago, the committee established 5-year budgeting as the basis for its revenue and spending decisions.
This year, that innovation has been joined to a new mandate for producing a balanced budget. The results are presented in the committee's report.
The committee fully recognizes that the future course of the economy cannot be predicted with precision — even in the short term. But the dynamism of multiyear budgeting is a dramatic advancement over the static limits of single year planning. Multiyear planning alone can allow Congress to exert firm control over spending, revenues, and the size of a deficit or surplus. And multiyear planning alone can bring us into a balanced budget.
The budget process has been on trial since the beginning. But this year, the Senate, too, is on trial. There are those who argue that Congress is unwilling or unable to manage public funds responsibly. There are those who insist that we must alter the fundamental law of the land and deprive the Congress of one of its most vital powers — the power to exercise discretion in determining whether the national interest demands a deficit, surplus, or balance in the Federal Government's budget.
Congressional acceptance of the fiscal plan set forth in our report would lay those arguments to rest.
Our budget recommendations will lead to balance in the shortest practicable time. They are the sound assertive product of a mature and well established process. They are an answer to those who look for some assurance of the Federal Government's determination to put its books in order and to lead this Nation back to a balanced and equitable prosperity.
(The following proceedings occurred earlier and are printed at this point by unanimous consent.)
Mr. MUSKIE. Mr. President, at this point I am happy to yield to my good friend from Nebraska, who is a very valued member of the Budget Committee. He asked for 3 or 4 minutes at this time.
Mr. EXON. Mr. President, I am pleased to rise today in support of Senate Congressional Resolution 22, the first concurrent budget resolution for fiscal year 1980.As a freshman member of the Budget Committee, I am impressed with the hard and thorough work which was exhibited by the committee members in the development of the budget resolution before the Senate today. From my 8 years of experience as Governor, I am well aware of the necessity of hours and hours of detailed and difficult decision making necessary to adequately examine and produce a viable, sound budget document. It is a stiff challenge. Let me assure my colleagues that your Budget Committee has met that challenge.
Mr. President, the American people are demanding fiscal responsibility from the Congress in the form of a balanced Federal budget. Spiraling inflation which is attacking each American household presents ample justification for this demand. Unfortunately, it is much easier to be in verbal support for the "concept" of a balanced budget than to actually balance the budget in fact.
In the last 19 years the Federal budget has been balanced only once. The average annual deficit in fiscal years 1969 through 1977 was $24.7 billion. In 1978 it was $48.8 billion, was reduced to an estimated $36.2 billion for the current year and further reduced to approximately $19.8 billion for fiscal year 1980, if the President's economic assumptions hold. But most importantly in my mind, Mr. President, is that because of the Budget Committee's work we can realistically see the light at the end of the dark tunnel of deficit spending beginning in fiscal year 1981.
The Budget Committee's blueprint for a fiscal 1981 balanced budget was not developed by idle rhetoric and posturing. Nor was it developed by sacrificing the legitimate needs of our country. It was accomplished only by hard work, priority setting, and difficult decisions made on a program by program basis,
Those who call for a constitutional amendment requiring a balanced Federal budget have an opportunity, by supporting the Budget Committee resolution, to provide for a balanced budget in fiscal year 1981. It is not easy, saying no to spending requests, is not easy; it is much easier to tell the American public you are for a balanced budget while still saying yes to all of the favorite spending programs.
Mr. President, the time for this fiscal hypocrisy is over. The Budget Committee has laid before the Senate a blueprint for fiscal responsibility. Time will tell if this body is ready to shoulder this responsibility.
Under the leadership of the distinguished chairman (Mr. MUSKIE) and the distinguished ranking minority member (Mr. BELLMON) I salute both of them for their efforts, their dedication, and their courage. I will be in support of the restrictive budget totals because I know it is what we have to do, and I know that other Senators will have to join those of us who will be supporting this budget.
It is going to take some painful votes, some unpopular votes, but we must maintain the integrity of the balanced budget document. I thank the Senator from Maine.
Mr. MUSKIE. I thank the Senator from Nebraska. The Senator has a very fine attendance record in the Budget Committee meetings, but more than that he has contributed from his knowledge and experience as chief executive of a fine State. I am not using a play on words, but he has balanced benefits against cost in every case.
One must balance benefits against costs in every case. There are thousands of numbers that are involved in order to achieve these totals.
I commend the Senator for his statement, but even more for the work he has contributed to the Budget Committee.
Mr. DOMENICI. Will the Senator yieldfor a unanimous consent request?
Mr. MUSKIE. I am happy to yield to my good friend from New Mexico.
Mr. DOMENICI. I thank the Senator.
Mr. President, I ask unanimous consent that Steve Bell of my staff may have the privilege of the floor.
The PRESIDING OFFICER. Without objection, it is so ordered.
(Conclusion of earlier proceedings.)
Mr. MUSKIE. Mr. President, at this time I express my special appreciation to my good friend and long time and indispensable associate on the Budget Committee, the Senator from Oklahoma (Mr. BELLMON).
No one received with greater regret his announcement of his decision not to run again in the coming election year. I would have said this before he made the decision as well as after.
However, in any case, I am delighted that he has been with us in this most challenging of the tasks we have undertaken under the budget system, and I thank him again.
Mr. BELLMON. I yield myself such time as I may require.
Mr. President, I thank my friend, Chairman MUSKIE, for his kind comments. I assure him that my decision not to seek reelection had nothing to do with the work of the Budget Committee. In fact, one thing that made my decision difficult was the fact that I would not see it carried on even further.
Mr. President, the budget resolution which is before the Senate represents an enormous amount of hard work over many long days, and some of those days went into late hours of the evening. The committee attendance was excellent. There was a high level of participation.
Even so, the achievement of this resolution would have been impossible without the leadership of Chairman MUSKIE, and I would like to begin by commending him for the enormous patience he showed and the strong leadership he provided our committee. The chairman exercised his usual cool headed, even handed — in this case, sometimes indulgent — techniques. In doing so, he was able to bring about a consensus in many cases in which initially one seemed to be impossible.
This has been a truly monumental task,and it would have been impossible without the leadership of our chairman, who, in every case, was fair and was dedicated to obtaining a result that the committee could support; and he exercised the strong leadership for which he is known.
Chairman MUSKIE deserves the thanks and the commendation of the Senate and of the American people, and he will get their thanks once they understand the importance of this resolution.
Our chairman has described fully and accurately the provisions of the resolution, and I am not going to make any effort to go over the same territory, but I shall add briefly to what he has said.
Mr. President, the first concurrent resolution for fiscal year 1980 is a marked departure from past budgets. Since the economy has been in a state ofrecovery in recent years, congressional budgets under the 1974 Budget Act have focused on increasing the level of private and governmental demand in the economy. They have been aimed at increasing employment and more fully using idle plant capacity. Control of inflation was given a lesser priority.
In many respects these budgets were appropriate for the economic circumstances of those years. However, economic conditions have changed dramatically during the past 4 years. The economy is now operating at near full capacity.
However, Mr. President, it is unlikely that any Member of the Senate is entirely pleased with the current state of the economy. The rate of inflation is far too high and threatens to slow housing, commercial, and industrial construction, producing high unemployment and to bring on another recession. The objective of the resolution is to respond to current economic realities and thus help induce both current and future fiscal stability.
As easy — and appropriate — as it is to be critical of the current state of the economy, there are good features which should be recognized:
First, we are now entering our 50th month of sustained economic growth. This is a new record for peacetime growth for this country.
Second, unemployment has come down from the high of 9.1 percent in May 1975 to 5.7 percent in March 1979.
Third, almost 60 percent of the American population is gainfully employed. The economy has generated 12 million jobs since 1975, 31/2 million in thelast 12 months.
Fourth, the economy has absorbed the multiple shocks of enviornmental clean up, more stringent health and safety regulations and vastly increased energy costs without rupture.
Now, a different kind of budget, one that is not "demand" oriented, is needed. Many economists inside and outside government are now concerned about "over-heating" in the economy and are calling for higher interest rates and other measures to restrain demand. These concerns are directed particularly to the alarming acceleration in the inflation rate which has accompanied the movement of the economy toward full employment.
The strength of non-Federal demand in the economy and the need to combat inflation have led the Budget Committee to propose a significant shift in fiscal policy in 1980 and subsequent years. The proposed First Concurrent Resolution contains a spending target of $532.4 billion for fiscal year 1980 — $11.6 billion below the spending required to maintain current policy, and $5.2 billion below the so-called current law level.
Never before has the Budget Committee recommended a level of spending below current law. In fact, in 2 of the last 4 years the spending totals recommendedin the first budget resolutions exceeded the current law levels by about $12 billion. I call the attention of my colleagues to a table which appears on page 335 of the committee report, which I ask unanimous consent to have printed in the RECORD.
There being no objection. the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. BELLMON. Mr. President, this chart shows the dramatic turnaround reflected in the Budget Committee's fiscal year 1980 recommendations.
By recommending significant spending reductions, the Budget Committee was able to stay under the President's January budget recommendation of a $29 billion deficit, even though our estimates of program costs and revenues are based on considerably more pessimistic economic assumptions than were used by the President. If the budget estimates in the first resolution were adjusted for the President's economic assumptions of higher economic growth, lower inflation, and lower unemployment, revenues would be $2.6 billion higher, outlays, $6.4 billion lower, and the deficit before us now would be less than $20 billion.
The Budget Committee's proposals also restrain spending in fiscal years 1981 and 1982. The fiscal year 1981 budget authority total is almost $23 billion lower than the projection for that year included in the report on the second budget resolution for fiscal year 1979. Both the fiscal year 1982 budget authority and outlays targets recommended by the Budget Committee as part of Senate Resolution 22 are also well below those projected in our report last fall on the second budget resolution for fiscal year 1979 — budget authority about $28 billion lower and outlays about $8 billion lower.
These lower spending levels are responsive to the budget balancing mandates included in the recent Debt Limit Act. These spending targets are also in line with the goals in last year's tax bill of gradually reducing Federal spending as a percentage of GNP. Approval of this budget resolution would provide Federal outlays of about 19.4 percent of GNP in fiscal year 1982, as compared with a goal of 20 percent of GNP in that year as set forth in last year's tax bill.
Mr. President, last year the Senate Budget Committee began budgeting on a multiyear basis by describing in the report of the budget the outyear implications of the current year decisions.
Now the inclusion of future year budget targets in the resolution itself — as opposed to their being only in the Budget Committee's reports — is another major step forward in the development of the congressional budget process. Dealing with the budget on a multiyear basis gives Congress a much better opportunity to appraise economic and program trade-offs.
I am pleased, Mr. President, that the 3-year budget path recommended by theBudget Committee leads to balance in fiscal year 1981 and provides for substantial tax reductions or debt retirement
in fiscal year 1982 and beyond. As recently as last September, the earliest year in which budget balance appeared reachable was fiscal year 1982. The 5-year budget path contained in the second budget resolution report for fiscal year 1979 indicated that a balanced budget might not be achieved before fiscal year 1983.
Today the Budget Committee is recommending to the Senate a balanced budget in fiscal year 1981, and this is a substantial improvement for which we should all be appreciative.
This more optimistic outlook results from several developments: The strength which the economy has demonstrated in recent months; the higher revenues produced both by the strong economy and by inflation; and, most important, the increasingly critical look being taken in both the executive branch and Congress at the various Federal programs. Clearly,balancing the Federal budget is both a matter of will and of growing national economic strength.
Mr. President, I am now very optimistic that Congress is on the way to ending the chronic budget deficits of the past 20 years. Congress can and will respond to public demands for a balanced Federal budget. Of course there will be years in which deficits will be necessary and appropriate. But those years must be offset by other years in which the Federal budget is in surplus.
I am convinced, Mr. President, that the achievement of budgets which are balanced over time is not only responsive to the voters, but that is is also "good economics." A review of the successes and shortcomings of fiscal policy in recent years indicates that Congress frequently has fallen short of the economic objectives it sought to achieve through activist fiscal policies — often at the cost of large and cumulative deficits.
In fact, the stimulative policies we have applied in past years have often served to increase economic stability rather than stabilizing the economy as anticipated. Moreover, there are very serious longer term consequences from inflation and the high interest rates that plague the Nation today. For example, the CBO forecast that a recession will occur in the last 1979 – early 1980 period is based heavily on the destabilizing effects of inflation and high interest rates on housing, investment, and consumer purchasing.
A recent Data Resources, Inc., study for the Congressional Research Service compares the economic effects of activist fiscal policies to the probable path of the economy in the absence of such policies. This study is entitled "Economic Stabilization Policies: The Historical Record, 1962-1976," and was published in November 1978. The study concludes that:
the policies were potent as countercyclical devices, achieving at least part of the macroeconomic goals set for them, but that timing, permanent effects on aggregate output, and coordination with monetary measures were often less than desirable.
In other words, the study indicates that past fiscal policies heightened inflation or increased unemployment beyond what would have occurred without such policies, and that the lack of a long run Federal perspective had negative effects on economic growth and inflation.
Mr. President, this budget is intended to deal with those omissions of past years.
Mr. President, I ask unanimous consent that excerpts from the CRS report be printed in the RECORD at the conclusion of my remarks.
The PRESIDING OFFICER. Without objection, it is so ordered.
(See exhibit 1.)
Mr. BELLMON. Mr. President, what appears to be required both for "good budgeting" and "good economics" is a less erratic approach to fiscal policy — an approach in which the Federal sector as a share of the overall economy shrinks somewhat and in which Federal budget deficits are offset by surpluses over time. Under this approach, the Federal Government would no longer commit a rapidly growing slice of its budget to interest costs, and it would be free to respond selectively, and in a more timely manner, to cyclical or external shocks to the economy.
The proposed first budget resolution for fiscal year 1980 acknowledges the limits of fiscal policy as a tool for achieving economic objectives. This resolution is also the first congressional budget which aims, as an explicit goal, to achieve balance. I believe that the fiscal year 1980 budget will become the way of the future.
This proposed budget, like all budgets in the past and undoubtedly all future ones, is not totally satisfactory to any of us who have worked on it; nor will it be totally satisfactory to every Member of the Senate. Minority members of the Budget Committee sought deeper cuts than the committee approved. We wanted to provide both a balanced budget and a modest tax cut in fiscal year 1981. We proposed some additional cuts which would have accomplished that goal.
Likewise, I feel that some of the increases endorsed by the committee — such as for Economic Development Administration and Environmental Protection Agency programs — should have been denied or at least reduced. But, on balance, I believe this is as good a budget as we could produce, given the many conflicting perspectives and pressures which surround the congressional budget process.
I want now to expand briefly, Mr. President, on my earlier comments about the need to reduce the Federal share in the economy. A reduced Federal share is essential, in my view, in order for fiscal policy to be effective in helping provide greater economic stability in the future.
Because the growth in Federal spending has generally exceeded the growth in GNP since about 1960, the ratio of Federal outlays to gross national product has increased from 18.5 percent in 1960 to about 21.6 percent in 1979. The first concurrent resolution and the Budget Committee's report project a reduction in the federal share of GNP to 19.4 percent in fiscal year 1982 and to less than 18 percent in fiscal year 1984.
Mr. President, there can be little doubt that the recent recession and current high rate of inflation both have their roots in excessive levels of Federal spending over past years. Beginning with the "gun and butter policies" of the Vietnam war years Federal deficits have totaled $359.8 billion.
The inevitable result has been the cheapening of the value of our currency resulting in higher prices. Lacking a sound fiscal policy, it became necessary for interest rates to be raised. The result was a sharp decline in construction and an increase in unemployment. It should not be necessary to repeat these mistakes of the past. This budget resolution, which sets spending patterns for the next 3 years and which produces a balance in fiscal year 1981 and a surplus in 1982, is intended as a major step toward economic stability. However, Members should not be misled into believing that achieving a balanced budget will automatically and immediately stop inflation.
There are many forces which feed inflation. Mr. Walter Hoadley, executive vice president and senior economist of Bank America, stated in testimony before the Budget Committee, almost half of the economy currently is indexed. Through either explicit cost-of-living escalators or implicit wage policy, many Americans are held harmless for inflation. A second cause of inflation is the loss of productivity and efficiency in the American economy. We also have had structural changes in our economy and rising costs in the basic resources we use. For example, increased food, energy and other material prices have contributed to inflation. The decline in the-value of the dollar as a result of recent fiscal and energy policies also has pushed up the inflation rate.
Finally, there is some feeling that fear of mandatory controls currently is adding to price increases in the industrial sector. A balanced Federal budget will not alleviate these diverse and important sources of inflation, but it is a first step toward bringing inflation under control.
Therefore, Mr. President, while the budget is a necessary first step, let the Senate understand that the battle against inflation will be long and difficult. It took a decade of deficit spending combined with an energy crisis to bring on the current high rates of inflation. It will take many years of fiscal restraint plus implementation of policies to assure far greater energy self-sufficiency to reduce inflation to historic levels.
I am pleased that the Budget Committee has recommended a fiscal policy path that is generally in tune with today's realities. Let me point to a few examples in which the Budget Committee has recommended restraint and retargetting of Federal activity:
The Budget Committee recommends a major reduction in the countercyclical jobs program under CETA (title VI) in fiscal year 1980, followed by complete phase-out of the program in fiscal year 1981, because there is little justification for this program in the economic climate that now exists. The committee's recommendations, however, assume that there will be no cuts in employment and training programs directed toward alleviating structural unemployment.
The Budget Committee also recommends a reduction in budget authority for housing assistance programs, amounting to about $9 billion below the current law level and $12 billion below the level recommended by the Banking Committee. This recommendation reflects the committee's concern about both design problems in current Federal housing programs, and about inflationary pressures in the housing construction industry, which receives over $65 billion annually in Federal support through loan guarantees, direct program activity, off-budget agency activity and mortgage interest tax expenditures.
The Budget Committee also recommends about $2 billion in cost savings in medicare and medicaid programs to be achieved through a variety of legislative changes in reimbursement policies, improved administrative practices, and the increased introduction of competitive techniques into the purchase of health care services.
It is my opinion that this is a more effective approach to reducing the rate of inflation in medical services than the enactment of complex cost containment legislation which I am convinced would be difficult if not impossible to administer.
The Budget Committee's recommendations for function 270 — energy — assume a cut in the strategic petroleum reserve program that will save $1 billion in outlays below the level recommended by the President. This reduction recognizes both the problems the strategic reserve program has encountered and the misgivings about the desirability of buying oil during a period in which it would exacerbate shortages and price pressures.
For function 400 — transportation — the Budget Committee's recommendations assume savings totaling $1.5 billion in budget authority in fiscal year 1980 and $0.6 billion in outlays in highway and rail programs. Many of us wish these cuts were not necessary, but there is no way we can hold spending down unless we cut popular programs.
In function 750 — administration of justice — the Budget Committee assumes a cut of $300 million in budget authority in fiscal year 1980. This is an example of a relatively small savings in fiscal year 1980 that will add up to a savings of over $1 billion over the next 5 years. Some of us felt the track record of the LEAA called for an even deeper cut — or even elimination of the program. The Budget Committee's recommendation is a reasonable compromise.
These and other Budget Committee recommendations are steps toward greater fiscal responsibility and more efficient use of the Nation's resources. In many instances they will be difficult to achieve. However, the Congress has received a clear public mandate to reduce Federal spending, to balance the Federal budget, and to alter the mix of Federal spending to address public needs more effectively while helping reduce inflation. The first concurrent resolution addresses each of these concerns and represents a thoughtful compromise among the various views in the Senate as to how this mandate should be executed. I urge my colleagues to support this resolution.
Again I commend our chairman for the extraordinary efforts he put forth, and the great leadership he displayed in making it possible for a consensus of the Members to be reached, which made it possible to bring this resolution to the floor.
I also would like to compliment and commend the staff of the Budget Committee which put forth almost superhuman effort to prepare the markup materials, to prepare the report, and to provide the enormous amount of factual backup needed by the members of the committee as various decisions were reached.
The majority staff, led by Director John McEvoy, Sid Brown, and Karen Williams, the minority staff, led by Bob Boyd and Bob Fulton, certainly showed that they are able to work together in the highest meaning of the term "professional" and they gave both majority and minority members of the committee the kind of support that was absolutely essential in this endeavor.
[EXHIBIT 1]
FISCAL POLICY: THE SCORECARD BETWEEN 1962 AND 1976
A study prepared for the Committee on the Budget of the U.S. House of Representatives, the Joint Economic Committee, and the Congressional Research Service (by Data Resources, Inc.)
August, 1978.
The decade-and-a-half between the inaugurations of President Kennedy and President Carter witnessed a dramatic array of modern stabilization policies. Measures ranged from traditional shifts in tax rates to liberalized depreciation allowances, an investment tax credit, and the unprecedented peacetime use of wage and price controls. Monetary measures were also far from dormant. Such an active pursuit of balanced growth, combined with the lingering fallout of the economic events of recent years, has long kept public debate over the efficacy of stabilization policies at center stage.
Traditional stabilization theory views economic fluctuations as inherent to the private, capitalist economy, and focuses on measures to counteract them. One is to believe that without such measures the economy would be far less stable.
The opposite view sees the government as a major source of instability. The private sector is presumed to settle on a stable growth path only if there is a stable fiscal-monetary framework.
Each diagnosis carries with it different implications. The following study evaluates these conclusions for selected major Federal fiscal policies implemented between 1962 and1976, in particular: the 1964 Tax Reduction Act, the 1968 Tax Surcharge, the 1975 Tax Reduction Act, and a set of expenditure programs enacted in the early 1960s, including the Housing Act of 1961, the Public Works Acceleration Act of 1962, and the increase in Social Security benefits in 1965. This is done through simulations of the Data Resources Model of the U.S. Economy. Each episode is analyzed from two perspectives. First, what would have resulted if the particular policy had not occurred? Second, how does the given policy episode compare with one in which all policy parameters followed a stable path?
The results show that policies were potent as countercyclical devices, achieving at least part of the macroeconomic goals set for them, but that timing, permanent effects on aggregate output, and coordination with monetary measures were often less than desirable.
The 1964 tax cut helped to restore the economy to full employment in less than a year-and-a-half with only a moderate rise in prices. One year after enactment, real GNP was up 1.3 percent over what would have been the case without the cut, and 1.4 percent after two years. Increases in consumer prices averaged an extra 0.3 percent by the end of 1965. The fiscal drag of $10 billion full employment budget surplus in late 1963 was thus eliminated by late 1964.
The acceleration in non-defense spending between 1962 and 1965 helped ease the impact of a slowdown in other Federal expenditures. The net result was a mildly stimulative effect, with the rate of growth of real GNP up 0.6 percent in 1962 over what would have occurred had spending growth continued at trend rates, and an average 0.1 percent between 1963 and 1965. The unemployment rate would have been an average 0.3 percent point higher over the period without the expenditure buildup.
The 1968 surcharge helped to restrain excess demand pressures, though by less than was expected. The impact on consumer and business spending was particularly disappointing, with the rate of growth of real consumption lower by 1.1 percent after the first year compared to a path without the surcharge; business fixed investment was slowed by 0.9 percent after one year. The belated enactment of the program and eased credit conditions in the second half of 1968 did not help.
The 1975 tax cut helped to speed the recent recovery, raising real GNP by 1.0 percent in the first year over a no-tax-cut case, and an average 1.2 percent through 1977. The temporary nature of the largest single element of the cut, a rebate on personal tax liabilities, proved effective, contrary to the warnings of permanent income and life-cycle critics.
Comparing results with stable framework policies, however, shows that serious miscalculations were made. The long over-expansionary posture of fiscal policy after the 1964 tax cut contributed to the excess demand pressures of the mid-1960s: under the stable framework path, the unemployment rate dips below its full-employment equivalent between 1966 and 1968, but the drop is smaller than actually occurred. The excessively restrictive fiscal and monetary policies in the late 1960s were also a costly mistake: the run-up in the unemployment rate in the 1970 recession is less severe under stable framework policies. Finally, the 1974-1975 recession would not have been as painful had policy neutralized the inflation-induced surges in effective personal and corporate tax rates. The unemployment rate would have peaked at 7.2 percent compared to the actual peak of 8.8 percent.
The implications of the findings are clear. While most of the policies produced desirable short term effects, a long run perspective was lacking. Countercyclical stabilization policies have a role to play in maintaining an orderly macroeconomic environment. However, developing successful policies involves more than meeting traditional short run criteria. It involves coordination of policies and a greater eye toward the long term. Not to recognize these requirements is naive policies to brush-fire tools. The opposite view that the economy is better off left to its own, is equally naive, and not supported by the present evidence. The stable framework path suggests that economic instability will not be solved by simply stabilizing the government sector.