September 19, 1979
Page 25211
Mr. BELLMON. Mr. President, will the Senator yield for a question?
Mr. ARMSTRONG. I yield.
Mr. BELLMON. As I understand the information we have relating to the Armstrong amendment, function 600 would be cut by some $6 billion. That is the income security function.
Mr. ARMSTRONG. No. If I may refer the Senator to the functional summary, there will be a reduction from what is recommended by the Budget Committee but actually an increase of some $21 billion over the current year.
Mr. BELLMON. The Budget Committee resolution does not anticipate any new spending programs. It simply makes room for the lawfully mandated cost-of-living adjustments in the income security function.
The PRESIDING OFFICER. The Senator's 5 minutes have expired. Does the Senator yield himself more time?
Mr. ARMSTRONG. Yes, I am happy to.
Mr. BELLMON. We have plenty of time. I am glad to yield 2 minutes.
Mr. ROBERT C. BYRD. Mr. President, will the Senator yield to me for a request at this moment?
Mr. ARMSTRONG. I yield.
Mr. ROBERT C. BYRD. I thank the Senator.
This request is very pertinent at this time.
Mr. President, I ask unanimous consent that any roll call vote ordered on this amendment and other amendments to follow in relation to the motions, et cetera, begin at the hour of 2:15 p.m.; the first roll call vote is ordered to begin at the hour of 2:15 p.m., and any subsequent roll call votes be ordered back to back thereto.
Mr. MUSKIE. Could we provide that the second and third votes be 10-minute votes?
Mr. ROBERT C. BYRD. Yes. I add that to my request.
The PRESIDING OFFICER (Mr. EXON). Without objection, it is so ordered.
Mr. ROBERT C. BYRD. I thank all Senators.
Mr. BELLMON. Mr. President, the point of my question is that the Senator from Colorado has been saying his amendment does not contemplate actual cuts and that really it is a substantial add-on from the 1979 budget level, and that simply is not the case. If we were to accomplish the $6 billion reduction from the budget resolution that the amendment of the Senator from Colorado recommends, we would have to amend the law and reduce the spending for all the income security programs below the cost-of-living levels presently mandated. I think that point should be made.
Mr. ARMSTRONG. I think we can agree that the amendment which Senator DOMENICI and I have recommended is in fact a $21 billion increase over last year. I think the Senator's point is correct, that it would require program changes to hold the rate of increase in spending to a $21 billion increase. The justification for the program changes, that is, the changes in existing programs that are required, are detailed beginning at page 163 of the committee report.
In my opening remarks I pointed out that these were not off-the-wall suggestions that someone had thought up on the spur of the moment. The proposed changes which are incorporated in the Armstrong-Domenici amendment are, with very few exceptions and none I think in function 600, changes that have been recommended by such agencies as HEW, the Senate Finance Committee, and the General Accounting Office, so the assumption underlying our figures is simply we are going to enact the needed reforms which have been agreed to by these groups and even then, even with the reforms, permit spending to go up in this function by $21 billion.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, how much time do I have?
The PRESIDING OFFICER. Forty-eight minutes.
Mr. MUSKIE. How much time does the distinguished Senator from Colorado have remaining?
The PRESIDING OFFICER. Fifteen and one-half minutes.
Mr. MUSKIE. I am willing to reduce my time to, say, 12 minutes if the Senator is, and I ask if the Senator will be inclined to reduce his in any degree? I am simply trying to save time for other amendments, as the Senator knows.
Mr. ARMSTRONG. Mr. President, my understanding is that we are going to now lay this amendment aside and take up the amendment of the Senator from Kansas. I have nothing more to add at this point and I am happy to reduce the time remaining to me. I have 15 minutes.Let me say I will reduce it to 10 minutes and will expect to yield back most of that unless for some reason it is needed at the time.
Mr. MUSKIE. Then let me make my argument which will not be long and if the Senator from Colorado at that point desires to use some of his time to respond, then at that point we might be able to agree on yielding back time.
I make the suggestion, may I say to the Senator from Colorado, not because I underestimate the significance of his amendment, either from his point of view, or the point of view of his cosponsor, or the country, but I think we have covered a lot of ground that should be covered in the debate, in the debate on the Roth amendment before, at least from my side of the debate.
Mr. President, there is one observation I shall make about these two tax reduction proposals that I neglected to make in the debate on the Roth amendment; that is, unlike the tax cut proposal, or many of them, of last year, which rested wholly upon the merits of a tax cut or no tax cut policy, these have been tied to cuts in outlays. As I understood the debate last year, the debate was that a tax cut would serve the public interest, one, by reducing the share of the Government in the income of the country; second, that it would have a beneficial effect upon the economy which in the long run would not have the effect of reducing the Government's revenues, and would have the effect of stimulating economic activity. That may be an oversimplification of the arguments for last year's tax cuts but this was the perception of them that I had.
I opposed them last year in part because I felt the short run effect would be to increase the deficit, the reflows to be expected would not be so quickly realized that they would offset the risk of a larger deficit resulting from the tax cut and, second, that the reflow effect hoped for by the proponents would not be realized, that the effect they hoped for was really exaggerated in terms of our actual experience.
But this year what we have before us, and I think that we have it in this form this year because of the preoccupation with the size of the deficit by the public as well as Members of this body, is tax cuts tied to reductions in outlays.
I do not want to get into a detailed debate on the specifics of the outlay reductions proposed by the Senator from Colorado. In the first place, I am not sure I have 100-percent accurate information on that, and I do not want to be in the position of distorting his amendment. I am even hesitant to put in the RECORD the table I have which represents the staff's best effort of getting the details as to where the cuts would fall if the Senator's preferences were followed. I think they are reasonably accurate. There may be a sufficient discussion of them in the RECORD so that I need not put this in the RECORD lest it be inaccurate in any degree.
What concerns me is the total of the proposed cuts. As I understand what the proponents of the amendment are saying, as in the case of the Roth amendment, it is about $17 billion.
Again repeating, as I have nothing new to say, the prospect of getting this Congress to reduce outlays, wherever they fall — and $6 billion of them would fall in the income security sector — the prospect for outlay cuts of an additional $17 billion, in addition to the $3.6 billion the Senate mandated yesterday, is totally unrealistic. It is not going to be done. And, as my good friend Senator BELLMON said in the debate on the Roth amendment, what we would probably get if this amendment passed is the tax cut, with its impact in raising the deficit, without the outlay reductions which would offset that potential increase in the deficit, so that the net result would be an increase in the deficit, whatever was achieved by way of outlay cuts. That, I think, the national economy cannot stand; that, I think, the national budget ought not to reflect; that ought not to be the signal we send out to the country, at a time when the country is preoccupied with inflation to the almost total exclusion of other national issues.
Inflation is the enemy. Inflation is the fight we ought to be fighting. The people are saying that. They are saying it to me whenever I go back home. They are saying it in the polls. They are saying it whenever they can get one of our ears to speak to.
So our policy must be one of restraint; and on the issue of tax cuts, what I get from my people is this: Tax cuts can wait until we balance the budget. They are willing to make that contribution to balancing the budget. I am willing to make that contribution to balancing the budget. After all, tax cuts would benefit me; I am a taxpayer as well as the constituents I represent. But we can wait on tax cuts, and that is what the budget resolution says.
The budget resolution says that if we practice the restraint that is reflected in this resolution in fiscal 1980 and fiscal 1981, we can have a $55 billion tax cut in 1982.
That is not an absolute certainty, because we cannot be sure what the fiscal policy represented in the second concurrent budget resolution, or in that resolution as modified by the Armstrong amendment, would achieve in terms of the national economy in 1982. There are uncertainties about the future impact of whatever policy we adopt.
But I say to the Senate — and it is backed up, I think, by the net effect of the testimony we received in the Budget Committee — that if we follow a policy of restraint such as is represented in this budget, that is our best hope of reducing inflation, slowing it down, avoiding a deep recession, and coming up, in 1981 or 1982, with an economic environment which would make a balanced budget possible, with a tax cut to follow.
That is what we are advocating to the country. We cannot guarantee it, any more than Senator ARMSTRONG can guarantee the beneficent economic effects he predicts if his policy were adopted.
I must say, Mr. President, I often wish these days, as I listen to the debate in the Senate, that someone else's policy would prevail, so that I could then be on the outside, criticizing the results of that policy. The chances are that I would have opportunities to criticize if Senator ARMSTRONG's policies were adopted, just as he will probably have an opportunity to criticize the results of mine, if mine is adopted. That is the nature of the economic science, if you can call it a science.
But at any rate, I think asking for an additional $17 billion in outlay cuts in1980 is not realistic. In fact, I think, given the increases mandated yesterday in defense, the chance of achieving the cuts provided in the reconciliation instruction is less likely. The fact that we voted reconciliation yesterday to the point of $3.6 billion does not mean we have yet realized $3.6 billion in savings.
After all, those savings were assumed in the first concurrent resolution and have not been realized, because the committees have not made it possible to realize them.
Now we are asking the committees to take another look at them, and to make it possible to realize this $3.6 billion in savings. But they have not yet been realized, and they may not be; and if there is the reaction in the House-Senate conference on the budget to the increases in defense that the Senate ordered yesterday that we have had in previous conferences, the House may be very reluctant to agree to the reconciliation instruction and the savings embodied in the reconciliation instruction.
So, Mr. President, I say to my good friend from Colorado — and he has been, despite our disagreements on policy, on theory, and on objectives, a constructive, positive, and very congenial, I may say, member of the Budget Committee; and it is a pleasure to have opposition of that caliber and that quality on the committee, because these issues must be raised, they must be debated, and they must be resolved. It is always more of a pleasure to be engaged in that kind of a debate with a gentleman like the Senator from Colorado than it is with more abrasive opposition. So I welcome his membership on the committee, and I think he is performing a useful public service in the committee by raising those questions there, as he has on the floor.
My disagreement with him is wholly on the merits. We have different perspectives and convictions about what can be done, as well as what ought to be done.
It is in that spirit, Mr. President, that I oppose his amendment, for largely the same reasons that I opposed the previous amendment.
I reserve the remainder of my time.
Mr. ARMSTRONG. Mr. President, I rise only briefly, first, to express my appreciation to the chairman for his kind words, and to say to him, as I have on other occasions, that I admire his leadership and very much appreciate his friendship.
I have only two or three brief points. First, by way of clarification, I ask unanimous consent to have printed in the RECORD at this point a functional comparison of the pending amendment with the pending budget resolution, and, also a comparison with last year's figures, for whatever help it may be to those who are interested.
There being no objection, the table was ordered to be printed in the RECORD, as follows:
[Table omitted]
Mr. ARMSTRONG. Second, the distinguished chairman pointed out quite correctly that I cannot guarantee the specific beneficent economic results which I would hope for as a result of the tax cut. Professor Laffer has one set of calculations, someone else has another set, I have my own ideas about the nature and extent of the reflows flowing back into the Federal Treasury as a result of tax cuts with increased productivity, and so on and on.
The specific formulation which would be the most favorable to my amendment is the concept advanced by Professor Laffer. I have not used that as the assumption in my amendment. In fact, for the very reasons which Senator MUSKIE pointed out yesterday, the dangers of using four or five different sets of economic assumptions, I have, instead, relied upon the data furnished to us by the staff. We have assumed in our amendment the CBO multiplier for tax cuts and transfer payment reductions and also for the reductions in Federal outlays relating to transfers and grants.
In other words, we are using a set of figures which, frankly, handicaps the appreciation of our amendment. At the appropriate time, I should like to join with others who have some real questions about the economic assumptions that are built into the CBO model. In the meantime, it seems wise to me for us all to use the same basic economic assumptions. That is what we have done.
Finally, I appreciated the chairman's discussion that, perhaps, at some time, my point of view will prevail. Mr. Chairman, I would bet you the biggest lunch in town that my point of view will prevail in 1980, that there will be a tax cut. I do not know whether I am going to win on this amendment, but I think there is going to be a tax cut in 1980. I think this body will enact a tax cut in 1980. The very essence of my argument is that we ought to leave room for it. Time will tell whether I am right, but I am pretty sure that with the recession in full bloom, with unemployment rising, with productivity declining and with a big election looming in November of next year, there is going to be a tax cut.
Senator DOMENICI and I are just saying, let us leave room for the tax cut in our budget projection.
I reserve the remainder of my time, Mr. President.
Mr. MUSKIE. Mr. President, I yield myself just 2 minutes.
I am glad the distinguished Senator from Colorado has raised the question of whether or not, sometime in the next 6 to 12 months, there will be or ought to be a tax cut. It is quite conceivable that, if the economy continues to deteriorate, and especially if it deteriorates to a greater degree than appears now to be the consensus of the Congress, the Budget Committee will reconsider its own view of the need for a tax cut, for the purpose of fighting a deep recession. That is a different question, at least from my perspective, than the decision that we must make today.
We should not always try to anticipate, just in order to be the first, the need for a change in economic policy, whether it is a tax cut or an increase in spending for some emerging problem that had not been anticipated. Of course, we need to be flexible enough to respond, but we should not necessarily be premature in making such judgments. So timing is a very important question.
The Budget Committee, in the last 5 years, has advocated and supported tax cuts. I think we have had two major ones since the beginning of the budget process. The first one was for the purpose of countering the recession. The second one was for the purpose of stimulating the economy.
And we may need a third. We should never foreclose that possibility and the Budget Committee does not. foreclose it at this time. For the time being, we think that the changes in the economic indicators that we have experienced since the spring do not suggest that this is the time to move from a policy of restraint to a policy of stimulus.
The big change that has taken place since the spring has been in the rate of inflation. I think it was the Senator from Colorado or one of his associates who used 14.9 percent instead of 13-plus percent as the current rate, on an annual basis, of inflation. So inflation has been the dramatic change since the spring, above the forecasts of CBO and above the forecasts upon which the first concurrent resolution was based.
Unemployment has not changed as much as even the July forecast of CBO has projected. So when you have economic indicators that emphasize the changes in inflation rather than the dangers of recession, what do you do at that point? I think that if you want to maximize the clout, whatever clout fiscal policy has against inflation, this is the time to hold steady on that policy. If it changes, if it worsens, and we cannot control that with fiscal policy altogether, then we consider what we do at that time. And the budget process is flexible enough. We do have available to us the possibility of a third concurrent resolution if that becomes important. We have used the third concurrent resolution before for a similar purpose; we can use it again.
At the moment, I think the restraints in the second concurrent resolution are the appropriate and the relevant and the wise course for us to follow at the present time.
Mr. STEVENS. Mr. President, I applaud both Senators ROTH and ARMSTRONG for their proposals which reduce the 1980 spending levels to provide for a tax cut. The Budget Committee recommendation to postpone any tax relief until 1982 will result in unprecedented and dangerously high tax levels. Between fiscal years 1980 and 1984, for instance, Federal taxes will increase by $193 billion, bringing revenues, as a percentage of GNP, to their highest levels in history.
I believe that a strong case can be made for immediate initiation of tax cuts. The Budget Committee argues that this would exacerbate inflation and postpone our goal for a balanced budget.The very structure of the pending amendments, however, discount this argument. Tying any tax cuts to spending limits will leave the total deficit figures unaffected and thus will not contribute to a higher rate of inflation. In addition, to the extent that our progressive tax system allows inflation to automatically increase the tax burden, a portion of any substantial tax cut would not greatly increase personal spending, but would simply allow taxpayers to maintain their present standard of living. We owe our constituents at least that much.
Besides the benefits afforded to individual taxpayers, properly structured reductions in income and payroll taxes will be needed to counter the effects of the current recession. Increasingly disturbing economic data demonstrates the need for incentives to improve capital investment, personal savings, and job producing business growth. A recent GAO report revealed that taxpayers are very responsive to changes in their after-tax incomes and many have found their work incentive dwindling with the size of their take-home pay. By cutting taxes and allowing workers to retain a larger portion of their earnings, we would stave off a further deterioration of the work incentive; a vital component for recovery from this recession.
Mr. President, although I do not agree with the conclusions endorsed by the Budget Committee, I understand their reluctance to support a tax cut in 1980. But if history is any indication, political pressures in the upcoming election year will be such that a tax cut will pass Congress. We would be naive to think otherwise. Given political reality then, it would seem prudent for us to provide for the inevitable in the budget resolution. By identifying now, those areas where spending can be cut, we will mitigate any possible inflationary effects an unplanned tax cut could bring to the economy.
Mr. President, inflation has been targeted as this Nation's No. 1 problem.
There are many causes and aspects of inflation, some of which, such as OPEC price increases or the weather's effects on food costs, are beyond our control. Where control can be exercised, however, we have a responsibility to act. I doubt if anyone would contest the Federal Government's complicity in the exacerbation of inflation. We have a responsibility, therefore, to exercise fiscal restraint by reducing both taxes and spending and demonstrating to the people we serve that Congress is serious about its commitments.
Mr. HART. Mr. President, at this time I wish to state my views regarding Senator ARMSTRONG's proposed amendment to the second budget resolution. Senator ARMSTRONG has proposed that Federal outlays be cut $15 billion or so in 1980 and about $15 billion in 1981. He has also proposed that taxes be cut $13 billion in 1980 and $24 billion in 1981. This proposal would produce a budget deficit of approximately $28 billion in 1980 and a balanced budget in 1981.
I cannot support this proposal because it decreases — by a severe amount — Federal spending on health, income security, employment and training, and natural resources. It also proposes that categorical grants to State and local governments be cut 5 percent across the board without specifying which grants would be cut. Furthermore, it would increase revenue sharing at a time when the States are asking the Federal Government to reduce its spending.
Mr. President, we should balance the Federal budget in 1981. We must reduce Federal spending as much as possible, and we should grant tax cuts wherever possible. But, I don't believe Federal spending can be reduced by this large amount without severely hurting recipients in great need of these programs.
As my colleagues know, last fall and again this spring, I offered a proposal to trim the rate of growth of Federal spending, coupled with tax cuts as large as possible in 1982, consistent with balancing the Federal budget in 1981. That proposal is now part of the Senate budget resolution.
The question is whether we should trim Federal spending by very severe amounts in order to cut taxes before 1982. Many people claim we should not balance the budget on the backs of the taxpayers. By the same token, we should not balance the budget by increasing the hardships of low income and unemployed people. Adequate medical care, adequate food, adequate education are very important Federal objectives, and outlay cuts as proposed by the other Senator from Colorado are inconsistent with these objectives.
Mr. MUSKIE. Mr. President, I am prepared to yield the remainder of my time on this one so we can turn to another amendment, but I do not want to put pressure on the Senator to do so.
Mr. ARMSTRONG. Mr. President, I think the case has been well stated on both sides and I yield back the remainder of my time.
Mr. MUSKIE. Mr. President, I yield back the remainder of my time.