September 19, 1979
Page 25200
Mr. MUSKIE. I have no objection to that.
May I say whatever time the Senator takes on his amendment to debate this I will be glad to take off on my side of the amendment so we will achieve a double reduction in time on his amendment.
So I yield him 10 minutes on the bill with that understanding.
Mr. ARMSTRONG. Mr. President, I appreciate the chairman's courtesy.
I am not one of those who thinks the weight of argument depends on its length. I can sum up my support for the amendment now pending very simply.
I begin by congratulating the distinguished Senator, BILL ROTH, for bringing this before the Senate and for the support and cosponsorship of our colleague from Missouri, Mr. DANFORTH. I think they are doing a great service in addressing themselves to what I believe to be the most serious economic problem facing our country. I refer, of course, to the problem of inflation and bracket creep.
If you spent most of the month of August as I did out talking to the people at home I do not think there could be any doubt in anyone's mind that the working men and women of this country, the families of this country, and the business firms of this Nation are really hurting. Every economic indicator, every conversation, every bit of testimony from the Nation's economists underscores the fact that we are really in trouble.
It seems to me that the amendment which is proposed by the Senator from Delaware and the Senator from Missouri addresses itself in the most responsible manner, and I cannot help recalling, I say to my friend, Senator ROTH, a few years ago when he and the gentleman from New York, JACK KEMP, and a handful of others began to beat the drum for tax cuts, that it was greeted with apathy and ridicule. Gradually, as they have taken their case not only to the floor of the Senate but around the country, to the halls of the great universities and the centers of learning, to the editorial pages of the Nation's newspapers, to businessmen and consulting economists, that gradually an understanding of how right they have been has begun to dawn on people in every walk of life, and I just congratulate them not only for being right but being right early and being persistent enough to make this seemingly impossible dream come true, and I think it is going to come true. I think there is going to be a tax cut and very soon.
I hope the day we set the stage for it will in fact be today.
I stress that the concern for what is happening to our economy and the recognition that a tax cut is the right medicine for what ails our economy is not partisan and it is not ideological. In fact, I have been very much impressed by the fact that an advocacy of large substantial permanent tax rate reductions are now advocated by a very diverse group of the Nation's leading economists, representing I think a consensus which is almost without parallel in modern economic history.
Among those representing various segments of the philosophical and economic spectrum who are now calling for tax cuts are Dr. Walter Heller, regents' professor of economics at the University of Minnesota and former chairman of the Council of Economic Advisers under Presidents Kennedy and Johnson, who recently noted:
... with the country, the Congress and Mr. Carter firmly determined to hold Federal spending in check, it becomes ever clearer that tax cuts are the way to go.
And he continued in a Wall Street Journal article from which I will quote a bit more:
While it is too early to push the panic button on a tax cut, it is none too early to push the planning button.
Alan H. Meltzer, Maurice Falk professor of economics and social science at Carnegie-Mellon University, in recent testimony before a Senate committee stated:
There are some desirable changes in policy that should be taken to reduce the burden of the recent oil shock and to speed the adjustment of employment and real income to the shock. The principal policy change that I recommend in response is a reduction in the real value of Government spending and a reduction in tax rates for households and business.
Other market analysts and economists have echoed the same theme. For example, Lawrence Kudlow, writing in a recent investment company newsletter pointed out:
Inflation is caused by spending and monetary policies that create too much money. A stagnant economy is caused by excessive tax rates that produce too few goods. When too little supply is matched against too much demand, prices rise and the currency depreciates. To reduce inflation requires tight spending and monetary policy. To expand production requires easier tax policy. Monetary restraint and fiscal ease is a program for the 1980's.
Lacy Hunt, vice president of Philadelphia's Fidelity Bank, recently made a similar observation in testimony before the Senate.
Included within a policy statement by the Shadow Open Market Committee, a group of economists, was the following observation:
To encourage investment and output, Congress should further reduce the growth of Government spending (including off-budget items) below the recommendations of the President, and reduce real tax rates.
Prof. Arthur B. Laffer is, of course, a well-known advocate of tax rate reduction. He sums it up this way:
The recession that we're headed into could be much less serious if Congress adopted a tax cut of the type proposed by President Kennedy and passed in 1964. To argue that a tax cut is inflationary because it would create a deeper budget deficit by curtailing revenues is inappropriate. If you encourage more production you will lose much less in tax revenues and may even increase them.
Irving Kristol, a distinguished observer of modern thought and a leading thinker about problems not only of the economy but of the broader scope than just economic matters, pointed out:
I believe a cut in tax rates will generate more jobs, greater economic activity and an expanded tax base, which, in time, will yield the same or more revenues, even with lower tax rates.
From all across our country, from every occupation, from every walk of life, from every philosophical background there comes the hue and cry for a tax cut, and I think that the kind of proposal which Senator ROTH and Senator DANFORTH have brought before us today is not only commendable, it is something that we urgently need.
If we are going to cope with the economic malaise that is spreading across the country, it is time to cut taxes, and I urge my colleagues in the Senate to adopt the pending amendment.
Mr. MUSKIE. Mr. President, I discussed the matter of time with the distinguished principal cosponsor of the pending amendment, Senator ROTH, and I have agreed to cut my time on his amendment in half if he will reduce his remaining time of 17 minutes to 10 minutes. He has agreed to do so.
I ask unanimous consent that time on the amendment be adjusted to that effect.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. MUSKIE. I thank him for his courtesy because there are other amendments that have not yet been identified that may be called up, and I want to be sure that our colleagues have the opportunity to present them.
Mr. President, I yield myself 10 minutes, and I hope I do not need to use it all, but I can never predict.
Mr. President, I have listened with interest to the rationale for this amendment and the cosponsors have been quite candid and quite blunt and indeed quite critical of the budget resolution and the economic philosophy underlying it.
I shall try to be equally candid and blunt without being disagreeable if I can.
I listened with interest to Senator HATCH'S speech, and I am sorry that he had to leave the Chamber before I could make this comment, but he told the Senate that the Budget Committee has never explained to the Senate the uncertainties and the gaps in the information that we can expect from the econometric models.
Mr. President, I have spent more breath than I care to spend in the Chamber explaining the shortcomings of the econometric models, of economists, of would-be economists in the Senate, including the Budget Committee. I do not know anyone who has a certain view of the future economically, much as we like to speak as though we did. I certainly do not have a certain view of the future. I mean our judgments are all calculated judgments, using our best judgment-making capabilities on the facts that are available to us and the uncertainties of human behavior, and economics is a science or an art form based upon someone's calculation of human behavior in response to uncertain and unpredictable stimuli.
At least that is my understanding of economics, after listening to economists, the most eminent in this country; conservative, liberal, monetarist, and otherwise, across the board, for the last 5 years.
I have not heard any economist boast about the accuracy of his last year's assumptions about this year's economy, but they speak with considerable certainty about next year's economy, just as I have been listening to that kind of certainty expressed in this debate up to this point.
Mr. President, I would like to talk, not about the behavior of the citizenry of our country, but about senatorial behavior. That is of more concern to me with respect to the economy of our country and the problems of inflation than what the economists say about human behavior and our economy as we go into next year.
Mr. President, the sponsors of this amendment propose what? They propose a tax cut, and they emphasize the importance of a tax cut, because they say it is the kind of medicine the economy needs. Well, that is certainly one question. But in order to avoid being accused of adding to the deficit or unbalancing the budget further, they couple that with a proposal to cut outlays.
Well, now, what do they propose? They propose cutting outlays in fiscal 1980 by $16.1 billion beyond what has already been mandated by the Senate, and they propose that this be done in non-defense spending.
Mr. President, yesterday the Senate directed the Appropriations Committee and six authorizing committees to cut non-defense spending by $3.6 billion. Having saved that much money, the Senate then proposed, in the afternoon, to spend $3.2 billion of what had been saved out of domestic programs for defense, for a net savings of $400 million.
Now the proponents of this amendment undertake to tell us what they would do in addition to the $3.6 billion directed to be saved out of domestic programs yesterday. They would propose to cut an additional $16.1 billion, and they dismiss this as simply an act of will. They say if the Senate wants to balance the budget badly enough, we can cut the $16.1 billion, totally ignoring, in an exercise of either naivete or cynicism, the enormous efforts that had to be made last week before the resolution came to the floor to get the Senate to adopt the cuts reflected in the reconciliation instruction; and they put this forward as a realistic political proposition.
Well, I wish they could have been in my shoes last week, in the Democratic caucus, in meetings with committee chairmen, and in meetings with my Republican colleagues on the Budget Committee, to test the realism of the proposition they are advancing this morning.
I am not talking about national economic effects or economic philosophy, or econometric models; I am talking about senatorial behavior. The Senators who have spoken this morning all voted yesterday for the increases in defense. That is their prerogative, and I am sure they are motivated by their concerns about our national security. I do not challenge their motives.
I am challenging the realism of what they are proposing. I mean they are following a tried and true path. They describe their proposal as a new economic policy, but there is nothing new about this kind of senatorial behavior. For all the 20 years I have been here, Senators have indulged themselves in voting for tax cuts, in voting for increases in their programs, and undertaking at the same time to assure their constituents that what they were proposing was sound economic policy, even a new economic policyfor whatever period they were speaking to at the time.
I repeat, there is nothing new about that kind of senatorial behavior. And given the votes yesterday, if we should in addition vote now for a tax cut, and vote also for a cut in outlays that we have got to know will not be achieved — it just will not be achieved by this Congress.
Indeed, Mr. President — and I have had to go through House-Senate conferences on the budget resolution for 5 years — Senators who do not appreciate it ought to understand the strong impulse for protecting domestic programs that we confront in the House-Senate conference each and every year. To suggest to me, as the one who would have to lead the charge — not Senator ROTH, Senator DANFORTH, or Senator HATCH — but to suggest to me that I could persuade the House conferees to accept the reconciliation instruction, which does not exist in the House resolution, and in addition persuade them to cut $16.1 billion from domestic programs this year, is to indulge in the sort of fanciful day dreaming that one would find only in fairy-tale books.
Indeed, if I am mandated by the Senate to accomplish any such Herculean feat, I think I would yield the responsibility to someone else who had more optimism, such as the sponsors of this amendment.
Mr. President, the whole idea that one can indulge in one's own priorities and except the other fellow's priorities to accept the full burden of fiscal responsibility in order to make a tax cut of our liking possible is simply the old senatorial behavior in new clothing. There is nothing new about it.
What the cosponsors are saying is, "Look, if I could have my way completely, I would cut your taxes and I would make it possible by cutting out funds for all those deadbeats and all those drones"—
The PRESIDING OFFICER (Mr. HUDDLESTON). The Senator has used 10 minutes.
Mr. MUSKIE. I yield myself another 5 minutes; I knew I would have to.
"All those drones on the welfare rolls, all those deadbeats who are eating up the substance of the taxpayers of this country — I would give you a tax cut, and I would cut their programs, if I had my way; and at the same time I would make sure that national defense had everything that the Pentagon requests, so that your national security, your freedom, and your security will not be jeopardized."
That is the old senatorial behavior, Mr. President. I say to my colleagues who are so pleased to criticize the budget resolution — let me tell them what the budget resolution is.
The budget resolution is no Senator's idea of what his priorities would be, no Senator's. The only Senators I know of who have voted without change to support the budget resolution as it came out of the committee are Senator BELLMON and myself. My apologies if I left out someone. But I know he and I have — not because our personal priorities are accurately reflected in the resolution, but because we understand what the whole Senate has to understand if the budget process is to work. That is that we must trade off with each other our notions of what our priorities require if we are to get a responsible resolution of the differences in priorities that are represented in this body.
There is no way for Senator ROTH to have his way 100 percent with respect to the budget. There is no way for me to do so.
I have voted on the floor against positions I have taken in the Budget Committee, over and over again, because I recognize the budget process has to represent a tradeoff. That is what this budget resolution represents.
So, when you try to shove down my throat the argument that I am trying to force on the Senate some economic policy which is personal to me or some budget policy which is personal to me, I say to you that you do me an injustice. More importantly, you do the budget process an injustice, because you like to pretend that somehow I mandate the final result. Well, the votes yesterday clearly reflect what is the fact. The 20 members of the Budget Committee are not the Budget Committee. The Senate is this house's Budget Committee.
You challenged the Budget Committee last spring to balance the budget. It is clear after yesterday's vote that the Budget Committee cannot balance the budget. Only the Senate can balance the budget. The Senate can choose now to indulge in fancy bursts of rhetoric designed to put the appearance of rationality on irrationality. It is not going to work.
So I do not answer the arguments I have heard this morning by my own macroeconomic analysis, although I ask unanimous consent, Mr. President, that a brief two page analysis, which has my approval, of the macroeconomic claimed for the Roth-Danforth amendment, be printed in the RECORD.
There being no objection, the analysis was ordered to be printed in the RECORD, as follows:
MACROECONOMIC EFFECTS
Senators Danforth and Roth have argued that the outlay cuts are anti-inflationary while the tax reduction is anti-recessionary, stimulating economic activity and employment; in addition, they argue that the tax cut will increase work incentives and the incentives for saving and investment, thus adding to the supply capabilities of the economy. In fact, in the short run, cuts in transfer programs such as AFDC food stamps and medicare/medicaid and the CETA jobs program, combined with general personal tax reduction will simply transfer income from the beneficiaries of the programs to those receiving a tax cut. There is no reason to believe that the short run effects of such a redistribution of income would be anti-recessionary. Indeed, to the extent that they reduced consumption spending and increase personal saving, they would tend to deepen the recession; there would be little, if any, increased incentive to use the saving for business investment in the face of declining rates of capacity utilization. Similarly, even if the tax reduction induced more people to look for work, this would not expand employment in an environment of slack demand for labor. It would only increase measured unemployment.
There is also little reason to believe that the combined reductions in outlays and taxes would be anti-inflationary in the short run, by comparison to the fiscal policy in the Resolution. The balance of supply and demand for output would be virtually unaffected. The only possible anti-inflationary effect would be if reduced personal taxes resulted in the acceptance of lower before tax wages. The U.S. statistical evidence on this point is not conclusive and there is no direct evidence from highly inflationary periods such as the present. Britain achieved a period of wage restraint in the mid-'70's as a result of a "social contract" in which a wage guideline was accepted by labor unions in return for tax reduction. But this bears only indirectly on likely U.S. developments since it was a fairly explicit social contract between the government (Prime Minister Callaghan's Labor Government) and the labor sector which is much more extensively unionized than in the U.S.
Over the longer run, the tax reduction would enhance work and saving incentives slightly. The exact amount is very difficult to determine and the subject of contemporary controversy. Assuming some positive effect — which appears reasonable — the longer term supply capabilities of the economy would be slowly increased. This would permit an expansion of private sector demands with less inflationary pressure than would otherwise be the case.
Most evidence indicates, however, that these effects will occur very slowly. Sizeable effects on work and saving behavior require numerous individual citizens to change established habits. Furthermore, sizeable increases in the supply of productive capital take time to occur and require the use of existing capital as new machines must be built and the new structural steel must be produced and put into place.
What might be the magnitude of the supply responses once they do begin to occur? A survey and evaluation of the relevant literature was commissioned by this Committee last year. This concluded that the positive response of the labor supply to tax reduction is limited to married women, who account for only approximately 23 percent of the labor force. The amount by which saving might respond is very controversial. The most generous estimate (due to Professor Michael Boskin) indicates that the proposed tax reduction would increase personal saving by 12 or 13 percent or about $15 to $17 billion. But shifting this amount from consumption to investment would raise the capital stock by less than 0.4 percent in a given year. More rapid real growth with less inflation may be achievable in the long run but it cannot be achieved overnight.
These long term benefits of enhanced private sector production capabilities and less inflation must be weighted against the costs of government activities foregone. The merits or costs of the proposed cuts vary from case to case but it does appear that many of these cuts could be socially costly. These social costs range from delays in achieving some environmental protection objectives, to potentially serious reductions in medical care for the poor, to substantial disruption of employment and training programs with a resulting loss in our ability to make progress in countering structural unemployment. There may also be economic costs if the cuts result, as they are likely to do, in a less healthy, less educated, and less trained work force. These are serious costs which could be avoided by a more gradual and balanced approach to curtailing the role of government.
Mr. MUSKIE. I see no point in further analysis, because I think the real issue raised is the one I stated at the outset of my remarks: senatorial behavior. We face a great enemy inflation. We face the great senatorial inclinations of the past to just go each Senator's way and the threat to budgetary discipline that represents.
That is the issue.
I reserve the remainder of my time.
The PRESIDING OFFICER. Who yields time? The Senator from Delaware.
Mr. ROTH. Mr. President, I yield myself 4 minutes.
First, let me say to the distinguished chairman and ranking member of the Committee on the Budget that no one appreciates better than I the difficult role that they have played. I congratulate them for the leadership that they have provided in the budget process.
I can only speak for one Senator, but I point out that I have continually attempted to hold down Federal spending by my vote. I think I am one of only two Senators to have gone to the Budget Committee and spell out in detail, early in the year, where I think spending restraints can be made. I have offered, on the Senate floor, proposal after proposal to do so. The mere fact that we have not succeeded, in doing so does not mean that those of us who believe that this country should move in a different direction do not have a responsibility to provide an alternative budget.
Our spending restraint proposals merely restrain the growth of spending, rather than actually cutting spending. Total spending would still grow nearly $30 billion. A large portion of our spending savings can be achieved by reducing the need for welfare and unemployment spending.
A tax cut will expand the economy, save jobs, and reduce the need to spend billions on these welfare programs. Let me state clearly ,our amendment would not reduce any social security programs or benefits for senior citizens. Our amendment seeks to reduce waste in the budget, not vital programs.
Mr. President, I feel very strongly that this country does have to change its direction. I feel very strongly that we need to develop a new, cohesive economic policy for the 1980's. Today, we are facing a disintegrating economy, with higher inflation, interest rates moving up, and with the economy moving down.I think it is about time that Congress and the Senate provided some leadership in getting this economy growing once again.
I know and appreciate the problems of getting spending restraints. But this Congress or some Congress in the future is going to have to set some new priorities. I am saying that the way to balance the budget is not on the back of the American taxpayers. I am saying that the way to break inflation is not by throwing millions of people out of work. If Republicans had proposed that a few years ago, we would have been laughed off the scene.
Now, whether or not a supply side economy is new or not, I shall not argue with my distinguished chairman. I am saying that there is a growing consensus among liberals and conservatives, both in and out of government, that it is essential that we take the steps now that will lead to real growth in productivity in the future.
I am not saying that what we are proposing today is going to correct all the problems overnight. I am saying that if we just continue in the way of the past, we shall be on the same roller-coaster next year and we shall hear the same arguments that we have heard this year and we heard last year and we heard the year before: We cannot cut spending programs because it is somebody's sacred cow.
What I am saying is, let us show some restraint on the part of Government, just as we are asking from the private side, so that we can improve savings, so we can improve production, so that we can have an economy that is moving upward, so that there is more money available to attack these serious problems in the public sector.
Mr. President, we have a chance to show that the Senate can lead. It can do so by showing some restraint on spending, so that we can make a significant contribution in tax cuts. I want to point out very clearly to the Senators that we are not saying what the tax cut mix should be. We leave that for future determination by the appropriate committees and the Congress itself. What we are asking is that we seize this opportunity and show that the Senate can lead rather than follow.
Mr. HARRY F. BYRD, JR.. Will the Senator from Delaware yield for a question?
Mr. ROTH. I am happy to yield for a question.
Mr. HARRY F. BYRD, JR. The Senator from Virginia is not inclined to support a general tax reduction unless that tax reduction is accompanied by a corresponding reduction in Federal spending. Does the amendment offered by the Senator from Delaware provide for a reduction in spending which equals or exceeds the reduction in taxes?
Mr. ROTH. It does indeed, I say to the distinguished Senator from Virginia. In fact, our amendment will result in a smaller deficit than we now have as a result of yesterday's action.
We would reduce the deficit by $4 billion.
What we are saying is that we should use spending restraints, dollar by dollar, if you want to call it that, so that we can enact the tax cuts. Next year, under our proposal, I say to the distinguished Senator from Virginia, who has been such a leader in trying to hold down Federal spending, we would have a balanced budget, plus we provide for a $15 billion tax cut in fiscal 1980, $35 billion in 1981, and $75 billion in 1982, with a balanced budget in 1981 and a $10 billion surplus the following year.
Mr. HARRY F. BYRD, JR. The Senator from Virginia feels that total Federal spending is too great. The Senator from Virginia feels that the total amount of Federal spending should be reduced. As I understand the amendment offered by the Senator from Delaware, there would be a reduction in total Federal spending?
Mr. ROTH. The Senator is perfectly correct.
Mr. HARRY F. BYRD, JR. Simultaneously with that, there would be a reduction in taxes, but the reduction in taxes would not exceed and, in fact, would fall below the reduction in spending.
Mr. ROTH. That is correct.
Mr. HARRY F. BYRD, JR. As a result of that, if I read the figures correctly, and the Senator from Delaware I believe just stated, that there would be a smaller deficit in fiscal 1980. To state it another way Federal spending would be reduced by $19 billion, taxes would be reduced $15 billion and the deficit would be $27 billion instead of $31 billion.
Mr. ROTH. That is correct.
Mr. HARRY F. BYRD, JR. I thank the Senator from Delaware.
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. I yield myself 2 minutes. I would. like to respond to the colloquy which has just been held.
May I say to my good friend, it is one thing to stand here on the floor and call for a cut in spending in order to make the record look good and another to propose a cut that is realistic.
The cut proposed here, as I indicated earlier, is just not achievable politically. On a piece of paper, yes.
What is being requested here is cuts of $16.1 billion, all in domestic programs, in addition to the $3.6 billion the. Senate ordered yesterday. That is $20 billion.
Mr. President, I ask unanimous consent to have printed in the RECORD a table of the functions of the budget which would be impacted and the amounts, insofar as we can identify them under the Roth amendment, which is not altogether clear, which would be impacted under the Roth amendment.
There being no objection, the table wasordered to be printed in the RECORD, as follows :
[Table omitted]
Mr. MUSKIE. Mr. President, it would require, among other things, a reduction of $2.4 billion above that already in the reconciliation instruction in education, requiring changes in law.
It would require a reduction of $1.4 billion in health, requiring a change in law.
A reduction of $6.9 billion in income security, including social security, requiring a change in law.
The reconciliation instruction that the Senate directed yesterday modified the instruction to the Finance Committee by $300 million, because the chairman of the Finance Committee said $300 million in savings in social security was not achievable in the Finance Committee, of which the Senator from Virginia is a member.
Now to order an additional cut of $6.9 billion and seriously tell the country, with serious faces, that that is achievable?
We will vote for a tax cut because the amendment provides for a cut in spending?
Mr. President, I mean, how much cynicism can we bring to the legislative process and maintain the integrity of this political institution?
The American people are sick and tired of being fooled by politicians who tell them one thing and act another way — and I do not direct that comment to the sponsors of this amendment, I am directing it to this institution — and if we are going to try to go to the people as a result of today's activities, promising a reduction in the deficit of $4 billion on the backs of cuts like these, we are not playing straight with them.
We are not playing straight with them, and I will be willing to wager $100 to $1 that if the Senate adopts this amendment, the outlay cuts promised will not be achieved in this Congress — $100 to $1 — because I know the formidable opposition such a proposal would face in the House-Senate conference and on the House floor, let alone the resistance it would run into around the country, once the full implications of what is proposed are made known to senior citizens, to people dependent on Government health programs, to schoolchildren, and the like.
All they are proposing is to transfer these resources from the beneficiaries — and I mean the real beneficiaries, not the deadbeats, the real beneficiaries of these programs — to taxpayers in the form of tax relief, and they are not the same people.
To tell me that is a realistic proposal in response to the question of the Senator from Virginia to justify a tax cut, to me, that is the height of political cynicism.
Mr. President, I reserve the remainder of my time.
Mr. DANFORTH. Will the Senator from Delaware yield me 1 minute?
Mr. ROTH. Yes.
Mr. DANFORTH. Mr. President, the question is not whether or not we will have a tax cut.
The question is how fast our Federal tax is going to be increased on the American people.
Are we going to increase taxes as proposed by the present form of the budget resolution—
Mr. MUSKIE. Will the Senator yield on my time?
Mr. DANFORTH. Of course.
Mr. MUSKIE. This resolution proposes a $55 billion tax cut in fiscal 1982.
Now, one can raise any questions he wants to about the feasibility of that, as I have about an outlay cut this year, but at least the resolution includes that, and I have not heard that mentioned in debate on this amendment up to this point.
Mr. DANFORTH. Mr. President, taxes go up under the present state of the law without any act of Congress.
Mr. MUSKIE. I understand.
Mr. DANFORTH. Taxes go up at a rate faster than inflation, social security taxes go up, the windfall profits tax is a tax which is going up, Federal tax revenues are going up, Federal tax revenues are going up every year.
Federal tax revenue is a percentage of gross national product and is going up every year.
Federal taxes will go up in 1980 and will go up again in 1981, even under the terms of the Roth amendment. There is no question that Federal taxes are going up. The only question—
The PRESIDING OFFICER. The Senator's time has expired.
Mr. DANFORTH. One minute more?
Mr. ROTH. Yes.
Mr. DANFORTH. The only question is how fast are they going up, how far are they going up?
I would just say in conclusion that one point that has really been missed, I think, in the press and the country as a whole, is that over and above any windfall profits tax, there is going to be a substantial increase in Federal tax revenue as a result of the decontrol of oil, depending on economic assumptions, the estimates are all over the place, but a minimum of $145 billion, which is a little bit over the President's total energy package, up to a maximum of $480 billion over a 10-year period of time as a result of decontrol.
So we are looking at, probably, in the ballpark of about $100 billion over this 10-year period of time of extra tax revenue over and above the normal increases we have had in the past.
The PRESIDING OFFICER. The Senator's additional minute has expired.
Mr. MUSKIE. I yield myself 1 minute.
Of course, taxes are going up under the pressure of inflation. The Senator from Missouri tells me nothing new, does not tell the country anything new, does not tell the Senate anything new.
But he does not recognize, in the statement he has made, that the cost of living for social security recipients goes up, too. He would like the country to believe that we can cut taxes and still meet the rising cost of living of the senior citizen, because he proposes cutting $6.9 billion as though inflation has no impact on the costs of these programs.
I mean, let us give both sides of the story.
The only answer to this is to control inflation. That is the fight I have been waging for 2 days on this floor without much visible effect.
So, if we want to eliminate the force that is sending taxes up and also the force that is sending up costs to those on Government programs like social security and others, as well as costs to the Government itself, get at inflation, and do not come here promising a tax cut in the name of inflation, while cutting benefits programs like social security as though inflation did not exist.
This is what I call the height of political cynicism.
Mr. DANFORTH. Mr. President, if I might have 15 seconds, I am all for fighting inflation by reducing the deficit. The Roth amendment would reduce the deficit below what it would be under the present version of this resolution.
Mr. BELLMON. Mr. President, will the Senator yield me 2 minutes?
Mr. MUSKIE. I yield.
Mr. BELLMON. Mr. President, I believethat Senator ROTH and Senator DANFORTH provide a service to the Senate by offering this option. I would like to believe that it is politically possible to do what they suggest, but my experience is that this is not the case.
What is certain to happen is what the chairman of the Budget Committee, Senator MUSKIE, has pointed out: If we undertake to adopt this amendment, which in effect is another massive reconciliation instruction, we simply are kidding ourselves, because it never will happen.
What is most likely to happen is that we will get a tax cut and we will get an enormous increase in our deficit of somewhere around $40 billion or $50 billion, and the cuts in spending will never take place. The result of this amendment would be enormously increased inflationary pressures.
Therefore, I am convinced that the only responsible course that Congress can take to get our budget in balance and to get that inflationary pressure reduced is to stay on the course that is set in this resolution, which puts us in balance in 1981, with a small surplus, and provides room in 1982 for a large surplus, which makes a tax cut of significant proportions possible, without adding to inflationary pressures.
Attractive as the idea is which is brought to us by Senator ROTH and Senator DANFORTH, the fact is that it is politically impractical, and I believe the Senate has no choice but to reject it.
I say to my two friends on this side of the aisle that the budget resolution we have before us represents responsible fiscal policy and that we would make a serious mistake if we departed from it. Therefore, I must oppose the amendment.
Mr. HART. Mr. President, at this time I would like to offer my views on the proposal by Senator ROTH to the second budget resolution. Senator ROTH proposed to cut outlays by $17 billion in 1980, $19 billion in 1981, and $3.8 billion in 1982. Coupled with these spending reductions would be an immediate tax reduction of at least $30 billion. As I understand it, this proposal would result in a budget deficit in 1980 of about $26 to $28 billion and no deficit in 1981.
I basically agree with the direction Senator ROTH wants the budget to go. As my colleagues will remember, last fall and again this spring I proposed an amendment to reduce the rate of Federal spending, coupled with tax cuts designed to achieve budget balance in 1981. This proposal has now been integrated into the Senate budget resolution which plans for budgetary balance in 1981 and significant tax cuts thereafter. These tax cuts are achievable because of the planned reductions in the rate of Federal spending. I oppose Senator ROTH's plan, because of the severity of the cuts that would be required to allow tax cuts and budgetary balance in 1981. In particular, Senator ROTH would propose severe cuts in health of $3.3 billion, severe cuts in income security of $7 billion, and severe cuts in employment and training of $3.1 billion. I do not believe cuts of this magnitude can be made without significantly hurting people who are in need of Federal assistance. While I am committed to a balanced budget in 1981, I am also committed to the maintenance of Federal programs that are necessary for the health, welfare, and security of our citizens..
The PRESIDING OFFICER. Who yields time?
Mr. MUSKIE. Mr. President, I am willing to yield back the remainder of my time.
Mr. ROTH. I yield back the remainder of my time.
The PRESIDING OFFICER. All time have been yielded back
Mr. MUSKIE. Mr. President, I withhold that. How much time do I have remaining?
The PRESIDING OFFICER. The Senator from Maine has 6 minutes and 10 seconds.
Mr. ROTH. Mr. President, if the Senator from Maine is not yielding back his time, I will retain my time. How much time do I have?
The PRESIDING OFFICER. The Senator from Delaware has 17 seconds.
Mr. MUSKIE. Mr. President, I yield the majority leader such time as he may need.
Mr. ROBERT C. BYRD. Mr. President, I support the responsible position of fiscal moderation which has been recommended by the Committee on the Budget. The committee, after extensive analysis of this question, decided that the most important problem facing this country is inflation. It adopted a budget which is aimed at fighting this problem — a budget of restraint and fiscal integrity.
At this time, it is my belief that tax cuts without offsetting spending cuts run the dangerous risk of fanning the flames of inflation. We have a moral obligation to squeeze this inflation from the economy before its rampant growth throws us into true economic turmoil.
I respect the argument made by some that we need to "stimulate" our way out of a recession. But it is not clear to me, nor is there a consensus among economists, that the economy will not correct itself without budget-busting tactics.
Unless we receive a clearer signal that a stimulative budget is appropriate and necessary, we must continue our present course of fiscal restraint. If we are not careful, we can talk our way into a recession.
Those who urge tax cuts accompanied by offsetting spending cuts have a responsibility to explain to the American people specifically which programs they expect to cut. Mr. President, the proponents of the pending amendment have failed to provide the specifics as to where savings can reasonably be achieved.
I want to cut spending. The Senate Budget Committee wants to cut spending, but like the committee, I want to know specifically which programs are going to be pared. Realistically, where do we get the money to fund a tax cut without adding to the deficit?
I do not feel we have a satisfactory answer to this question.
I therefore urge my colleagues to reject the pending amendment and to support the responsible position advocated by the Budget Committee.
Mr. MUSKIE. I thank the majority leader. Mr. President, I yield back the remainder of my time.