November 27, 1979
Page 33579
Mr. MAGNUSON. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.
The PRESIDING OFFICER. Without objection, it is so ordered.
Mr. NELSON. Mr. President, may we have order, so we can hear the Senator?
The PRESIDING OFFICER. The Senate will be in order, so we can hear the Senator from Washington.
Mr. MAGNUSON. Mr. President, the amendment I have offered, along with 38 cosponsors, will accomplish three very important objectives that will strengthen the ability of the Congress to control Federal spending.
First, the amendment converts new entitlements to authorizations for appropriations. This removes the provisions in the bill that would establish new uncontrollable expenditures. It does not eliminate any of those programs, but makes them subject to authorizations for appropriations.
Second, the amendment eliminates the refundable portions of the new and expanded tax credits.
Refundable tax credits are entitlement spending that once in place remains outside the control of Congress. Many of those refundable programs in this bill are duplicative of authorizations in S. 932, the recently passed synthetic fuels bill.
Third, the amendment eliminates the creation of two new trust funds.
The two trust funds created in this bill and funded from the windfall profits tax set aside significant amounts of Federal money for very specific purposes.
The "low-income energy assistance fund" would get at least half of the net receipts from the windfall profit tax, as much as $40 billion for the next 5 years.
The "transportation trust fund," which is a different trust item, would get up to $15 billion in windfall profits tax revenue. That is the reasonable estimate.
If these two trust funds were to be established, decisions about the use of the funds would be outside the control of the congressional authorizing and appropriating committees and process, creating another uncontrollable spending device.
As a compromise with the Finance Committee, this amendment would retain the smaller "taxpayers trust fund."
We are making a distinction because:
Revenue for this fund will come from increased corporate taxes as a result of the decontrol of crude oil;
The funds are set aside for only 3 years;
And, most importantly, the fund is subject to the control anyway of the authorizing and appropriations committees. Congress will be able to control how much money will go to social security tax relief and how much should go to other purposes. That remains a decision and an option that will be up to the Appropriations Committee and the authorizing committee, also.
There has been a great deal of talk around this body and the House of Representatives concerning the ability of Congress to establish priorities for Federal spending.
There is equal concern — very deep concern — among Members of Congress who want to bring the Federal budget into balance.
Right now, over 74 percent of the entire Federal budget is uncontrollable through the regular annual budget and appropriations process.
Over 74 percent is uncontrollable — not just by the appropriations or budget committees, but it is uncontrollable by the entire Congress. The entire Congress could not act to control these entitlements.
This bill, without our amendment, would add to that uncontrollable part of the budget.
Over the next 5 years, this bill would add over $80 billion in uncontrollable spending. There are various estimates, but the best estimate we have is about $80 billion in uncontrollable items.
This bill contains the worst kind of spending, spending that mortgages the future, spending that prevents any future Congress having any leeway and it is the type of spending that must be stopped if Congress is ever to achieve some kind of balance in the Federal budget.
What we are proposing in our amendment is;
First, to convert new entitlements to authorizations that are subject to appropriations;
Second, to eliminate refundable portions of new and expanded tax credits, which would include the windfall profit tax; and
Third, to eliminate the new windfall profit trust funds. This will insure that the Congress does have the leeway to control the expenditure of significant amounts of Federal taxes.
And Congress will be able — this is important — to exercise that power every year.
If the Senate accepts this amendment then Congress can review things as they are each year and in the light of current events and circumstances.
If necessary, Congress could set new priorities — or reorder priorities — if that be the will of Congress to keep pace with rapidly changing events in any area.
Our amendment does not tie the hands of this Congress — during the next session — when we will have a much better idea of just what this bill does bring in revenues.
Our amendment does not tie the hands of any future Congress.
Our amendment does not eliminate those programs from future funding or remove any support for any programs or foreclose any options the Congress might want to exercise in the future.
The major thrust of our amendment is that it retains in the hands of the entire Congress the responsibility to control Federal spending.
I yield to the Senator from Maine.
Mr. MUSKIE. I thank the distinguished chairman of the Appropriations Committee, Senator MAGNUSON, for yielding.
Mr. President, the distinguished Senator from Washington has already made the case for this amendment. What Ihave to say about it will really reemphasize what he has already said.
I cannot resist commenting upon the action which the Senate just took on the McGovern amendment in the context of the pending Magnuson amendment, the purpose of which is to eliminate trust funds created in the reported bill.
The ingenuity of the Senate has devised a new way of creating uncontrollable spending in the name of reservations now. We set aside revenues which cannot be tapped for any other purpose except the purpose for which the reservation is made.
The interesting thing is that the McGovern amendment which mandates the Secretary of the Treasury to set aside $1 billion for railroads finds itself in this position.
The bill, as it came out of the Finance Committee, left only $600 million untapped by trust funds, entitlements, or tax credits. If the bill passed as reported by the Finance Committee, there would be no $1 billion available for the McGovern amendment. In other words, the committee bill created uncontrollable spending to such an extent that a new form of uncontrollable spending in the form of the McGovern amendment cannot be honored unless the Senate adopts the Magnuson amendment, the purpose of which is to eliminate uncontrollable spending from the committee bill.
So the Senate finds itself in the position of having done an inconsistent act. It created a new form of uncontrollable spending — which the Finance Committee did not — in the form of a reservation; the next step will be to eliminate the uncontrollable spending created by the committee bill in order to make room for the new form of uncontrollable spending created by the McGovern amendment. If ever there was a useless act, that is it.
The other observation I would like to make is this: If the Magnuson amendment is approved — and I take it those prospects are very bright, we will have made room not only for reservations like the McGovern amendment but others. What is to prevent other Senators from moving into the vacuum which will be created by the Magnuson amendment and create other reservations of funds for other worthwhile purposes?
Mr. President, although I am enthusiastically a supporter and cosponsor of the Magnuson amendment, I am becoming cynical enough to believe that the Senate, with its monumental capacity for ingenuity, will find other ways to get around the strictures of the Magnuson amendment if it is adopted. In any case, I would like to help make the case for the Magnuson amendment.
The Magnuson amendment would convert the bill's entitlements to authorizations for appropriations, eliminate the so-called "trust funds" established from windfall profit revenues, and eliminate the refundable portion of several tax credits in the bill, which are duplicative of spending programs authorized in the omnibus synfuels bill.
This amendment is necessary in order to restore fiscal control to the many uncontrollable spending provisions in this bill. Otherwise, billions of tax dollars will be earmarked for special uses — some of which are not even determined by this bill — and will be spent, without ever being authorized or appropriated. Congress will literally lose its power over a huge portion of the purse if H.R. 3919 is enacted as reported.
Mr. President, as Senator MAGNUSON Pointed out, three-fourths of the Federal budget is already uncontrollable. The reported bill includes over $70 billion of new spending in the next decade that would not be subject to budget and appropriations control.
The Magnuson amendment will prevent further erosion of congressional control over spending in several important ways:
First, it would eliminate two new so-called "trust funds" established in H.R. 3919 which are intended to be the financing mechanism for special spending programs.
Mr. President, these are not trust funds in any sense of the word.
Under basic principles of Federal budgeting, revenues are raised from various sources and distributed among programs based on a congressional determination of national need. The trust funds concept is an exception to the basic rule. In the past, real trust funds have been established when Congress determined that if it was appropriate to give special benefits for programs, such as highways, airports, and social security, it was also appropriate to tax the users to pay for the special benefits. No such purpose is served by these so-called trust funds that collect the windfall tax from the oil companies and make payments from those receipts to unrelated but worthy beneficiaries. Indeed, there is nothing to distinguish the proposed scheme from the normal budget principle and, therefore, no reason to divorce the revenue and payments scheme from the normal congressional procedures.
Moreover, in any real trust fund the amount collected bears a relationship to the amount spent. Here the amount collected from the windfall profit bears no relationship to the amount that should be spent on energy initiatives.
For example, the congressional budget for fiscal year 1980 provides $19.5 billion for transportation programs. This is the amount Congress believes will be necessary to meet the national transportation needs; $2.3 billion of the total transportation allocation is expected to be spent for mass transit programs.
What relationship does the existing transportation spending endorsed by Congress bear to the so-called transportation trust fund?
Mr. President, I respectfully suggest that there is no rationality to this figure or to any of the amounts allocated from the windfall profit tax into these so-called trust funds.
The establishment of the so-called trust funds raises some very fundamental questions about our contract with the American people as elected officials.
When the tax expires at the end of the coming decade and the country is hooked on massive spending for energy programs that has been determined without a rational priorities debate, what Senator at that time will stand up to say "this assistance should be reduced or eliminated?" I doubt seriously if anyone will. The real difficulty will be that Congress will have no ability to taper down spending as the trust fund runs out. The result will be that excessive energy spending will continue to be funded out of general revenues, undermining congressional efforts to balance the Federal budget and squeezing out other priority programs.
Let no one doubt, Mr. President, that this squeeze will be real and not imagined. The demands of the eighties on Federal revenues will be enormous. Efforts to improve our energy security, as well as military security and new initiatives like catastrophic health insurance and welfare reform to enhance the quality of life, will be expensive propositions. Revenues will be needed to meet these demands.
The earmarking of revenues, and the establishment of spending levels independent of any rational priorities debate through budget and appropriations action, undermines congressional control of spending and the ability to reorder priorities to meet emerging needs. Earmarking funds for a few special programs requires other worthwhile programs which may have an equal claim on our resources to compete for funding out of remaining general revenues.
Mr. President, some have argued that the language in the Finance Committee bill providing for subsequent appropriations actions or authorization for expenditures in some cases brings the bill into compliance with the budget and appropriations process.
There is no truth to that argument. Money appropriated into the trust fund is isolated from general revenues. Worthwhile spending programs for purposes other than those identified in the bill would not be eligible to compete for over $70 billion that are involved. If the transit and low-income programs are worthwhile, the Congress will authorize and appropriate funds to meet that national need.
We have already seen an example of congressional recognition of such a need in the development of a substantial synthetic fuels program which has been authorized and appropriated by the Congress in the last 6 months. No trust fund was provided. Congress acted through the regular congressional budget process and the normal authorization and appropriations processes to address a clear national need.
This is the proper approach. This is the approach sanctioned by the Magnuson amendment.
Mr. President, let me mention briefly my concerns about the taxpayer's fund, which is not affected by this amendment. I am keenly aware of the taxpayer's cry for relief from mounting tax burdens. I favor tax cuts at the right time. The Budget Committee favors tax cuts. Indeed, the fiscal year 1980 congressional budget provides for major tax cuts beginning in fiscal year 1982.
Mr. President, in developing the second budget resolution for fiscal year 1980, the Budget Committee carefully weighed the arguments for an immediate tax relief and concluded the need for fiscal restraint outweighed the need for advancing the tax cut at this time. Mr. President, the reservations of about $16 billion in the Finance Committee's taxpayer's fund reflects that committee's judgment that the tax relief action may be necessary earlier than anticipated in the congressional budget and that funds should be available to assure prompt action at the appropriate time for a maximum of 3 years.
Mr. President, the Congress will have an opportunity to reconsider this issue in the coming months. I urge my colleagues to carefully evaluate the loud public demand for fiscal restraint and a balanced Federal budget as we proceed with the tax relief debate.
Second, the Magnuson amendment would eliminate the refundable portion of the business tax credits for the use and production of alternative energy sources and for utilities impacted by conservation.
With a refundable tax credit, the taxpayer is entitled to receive a direct cash payment from the Treasury for the amount by which the credit exceeds his tax liability. Under the Senate precedents, these refundable credits provide spending authority as defined in the Budget Act.
Thus the refundable part of a tax credit is an entitlement spending program, not a tax credit.
The Magnuson amendment would eliminate this entitlement spending which is duplicative of spending programs authorized in energy legislation (S. 932) already passed by the Senate.
Although there is some duplication between the tax credits and the authorizations, the Magnuson amendment does not prejudge the merits of the credit approach, but only eliminates the refundable portions which would require a second check from the Treasury.
Mr. President, let me briefly describe the refundable portions of the credits and the reasons for their elimination. The first is the wind and solar refundable credit. H.R.. 3919 increases the rate of the refundable energy credit for commercial solar or wind property from 10 percent to 20 percent.
There is currently a debate as to whether federally subsidized low-interest loans or tax credits are a better financial incentive to stimulate commercial utilization of solar and wind systems. S. 932, the omnibus energy bill, authorizes $575 million for the loan approach which has a broad range of eligibility and allows the cost of the project to be spread out over time.
Irrespective of the relative merits of the loan versus the tax credit approach, there is no need for two spending programs for the same purpose. The Magnuson amendment therefore eliminates the spending portion of the tax credit which overlaps the spending program authorized by S. 932.
Second is the refundable tax credit for public utilities to defray the impact of residential conservation. H.R. 3919 is duplicative of the. public utilities compensation grant program found in the Senate-passed version of S. 932.
In light of Senate action on S. 932 the refundable portion of the public utilities credit represents an unnecessary, and duplicative expenditure.
Third is the refundable tax credit for alcohol fuel production. H.R. 3919 would, in effect, provide a Federal subsidy for domestically produced and used alcohol of 40 cents per gallon to make gasohol competitive in price with gasoline. This subsidy on the output of alcohol fuel projects would overlap directly with the price and purchase guarantees for gasohol in title II of S. 932.
The grants, direct loans, and loan guarantees for the construction of biomass and alcohol fuel projects in S. 932 also provide a type of subsidy on alcohol fuel by lowering its cost of production and hence increasing its price competitiveness with gasoline. Financial assistance in S. 932 totaling $5.4 billion is available to all biomass or alcohol producers including State and local governments and other tax-exempt organizations,
The Magnuson amendment would eliminate the spending portion of the credit which overlaps with the spending programs authorized in S. 932.
Finally, Mr. President, the Magnuson amendment would further strengthen Congressional control over spending by converting entitlement programs in H.R. 3919 to authorizations for appropriations.
Under the reported bill tax-exempt governmental and other institutions would be entitled to payments of 40 cents per gallon of alcohol produced. The Magnuson amendment would convert this entitlement program to an authorization for appropriations.
In addition, the Magnuson amendment would assure that funding for the low-income fuel assistance grant program in title III is authorized to be appropriated, so that the amounts provided each year can be determined through the normal priorities debate.
Mr. President, I urge my colleagues to support this amendment which is cosponsored as I understand by 40 Members of the Senate. This strong bipartisan coalition believes that budgetary and appropriations control over the new massive revenues raised by this bill are vital.
Later in the day, Mr. President, I hope to address the windfall profit tax bill that is spending before us from the perspective of the budget demands for the eighties. But for the time being I yield the floor.
Mr. NELSON. Mr. President, will the Senator yield for a couple of questions?
Mr. MUSKIE. Yes, I am happy to yield to the Senator from Wisconsin.
Mr. HAYAKAWA addressed the Chair.
The PRESIDING OFFICER. Does the Senator from Maine yield the floor?
Mr. MUSKIE. I said I would yield the floor, and at that moment the Senator from Wisconsin asked if he might address a question or two to me. If I have already yielded the floor,. I will still be happy to entertain the questions.
The PRESIDING OFFICER. The Senator from Maine has the floor, and yields for a question to the Senator from Wisconsin.
Mr. NELSON. The Senator in his remarks referred to two trust funds.
Mr. MUSKIE. There are three in all in the bill. I did not refer to the taxpayer trust fund as a trust fund which would be affected by the amendment. I have laid aside for further discussion the taxpayer trust fund.
Mr. NELSON. Is the third trust fund the one which is in the Finance Committee bill in the form of an amendment by Senator ROTH?
Mr. MUSKIE. The Senator is correct.
Mr. NELSON. And the other two the Senator referred to in his remarks were the mass transportation—
Mr. MUSKIE. Mass transit and low income assistance.
Mr. NELSON. And low income assistance. And in each of those cases, did I correctly understand the Senator to say that the amendment by the Senator from Washington would simply convert those into authorizations?
Mr. MUSKIE. The amendment would eliminate both trust funds and convert the low income assistance program to an authorization. Any new transportation programs would also be subject to the normal authorization and appropriations process.
Mr. NELSON. So that they are subject each year, then, to the appropriations process?
Mr. MUSKIE. The Senator is correct.
Mr. NELSON. Does the amendment deal with the various tax credits that were included in the bill?
Mr. MUSKIE. Only to the extent that they involved refundable payments to taxpayers whose credit exceeds their tax liability. With respect to the credit itself, the Magnuson amendment, as I understand it, does not attempt to judge the merits of that portion.
Mr. NELSON. So if the credit is not refundable, and it is simply one of the number of tax credits we adopted, the amendment does not touch that?
Mr. MUSKIE. The Senator is correct.
Mr. MAGNUSON. That is correct.
Mr. HAYAKAWA and Mr. MAGNUSON addressed the Chair.
The PRESIDING OFFICER. The Chair recognizes the Senator from California.
Mr. MAGNUSON. Will the Senator from California yield to me for half a minute?
Mr. HAYAKAWA. I am glad to yield to the distinguished Senator from Washington.
MODIFICATION OF UP AMENDMENT NO. 843
Mr. MAGNUSON. Mr. President, there has been a slight mixup here. The amendment just agreed to on railroad rehabilitation would be eliminated by my amendment unless we make a technical correction. So I modify my amendment as follows:
On page 1, line 1, strike the number 16 and insert 17.
That will leave the railroad rehabilitation amendment a separate amendment, and it would not be deleted.
The PRESIDING OFFICER. The Senator has a right to modify his amendment. The amendment is so modified.
Mr. MAGNUSON. I thank the Senator from California for yielding.
Mr. HAYAKAWA. I thank the Senator from Washington.
Mr. President, I rise to urge my fellow Senators to join me in support of the unprinted amendment introduced by our distinguished colleague from the State of Washington.
I also wish to thank the distinguished chairman of the Budget Committee, the Senator from Maine (Mr. MUSKIE) for his enlightening remarks on the subject of the same amendment.
The amendment would restore to Congress the power to control Federal spending and to direct aid where it is most needed. Congress must have control of expenditures because Government spending is a primary cause of inflation. If we give up control of the budget in trying to solve our energy problems, we could only be making our inflation problem worse. We must not withdraw from one battle in order to enter another one.
The trust funds, entitlements, and refundable tax credits that are established in the reported bill cannot be controlled through the regular budget process.
I am most concerned about the trust funds because I am not convinced the programs described by the Finance Committee need the long-term security that a trust fund provides. A trust fund guarantees a program will receive funding by freeing it from the annual discussion of priorities that occurs during the authorization and appropriations process. However, this discussion of priorities helps us eliminate wasteful spending by forcing us to decide where money is really needed. It also helps the Congress prevent overlap between similar programs.
A trust fund causes the programs it finances to become dependent on a single source of money. For this reason, any attempt by the Congress to make changes in a tax that finances a trust fund is met by strong opposition from those who rely on the revenues of that tax. The effects of the windfall profit tax on domestic production, employment, and economic growth are not accurately predictable.
Let me repeat, not predictable. Here we are entering blindfolded into the realms of the unknown with no seeing eye dog to help us. The committee has recognized our inability to see into the future by directing the President to submit a report in 1983 on the effects of decontrol and a windfall profit tax. This report is to include legislative recommendations that the President determines to be advisable at this time. Yet, how flexible will the Congress be in altering the provisions written in this bill at the present time? It is my hope that we will retain the flexibility we need to take account of the inadequacies of a program, if they do exist, and to redirect the taxpayers' money to more efficient programs, if they indeed exist.