October 9, 1979
Page 27444
Mr. INOUYE. Mr. President, this amendment to reduce the amount of $825,777,153 to $163,079,165 appears to be very significant, and it is. But the $825.7 million includes $743,199,438 in callable funds.
Mr. President, the World Bank was founded 33 years ago. Since that time, the United States and other contributing countries have been responding to their requests by funding callable accounts. But during the 32 years, not a penny of the callable accounts has been called. In fact, at the present time there is an account of $11 billion remaining in the U.S. Treasury under the callable account. The only reason the full amount has to be appropriated is that the Constitution of the United States requires appropriation because of this contingent liability. It affects the credit of the United States.
All other countries contributing to the World Bank do not contribute the full amount of their share of callable capital. They do it either by paper or by a percentage amount. We hope that some day soon we will be able to find some way legally to do likewise; but as of this moment, because of the constitutional requirement, we will have to appropriate the full amount.
However, it should be noted, and I think this is very significant, that even if the numbers are huge — $743,199,438 — not a penny is set aside for outlays. In other words, nothing is spent.
However, the callables have a very significant impact upon the operations of the bank. Without the callable capital available to the World Bank, the World Bank will not be able to make the loans necessary to carry out their programs.
At the present time, a major concern of the World Bank, for the next decade or so, will be the exploration for energy. Moneys now will be made available to the developing countries to seek out energy resources, and I need not tell the Senate how important energy is to the United States, to its economy, and to its national welfare.
Furthermore, as I indicated in my opening remarks, without spending a penny, callable capital generates loans. Because of these loans the economy of the United States per year has been developing by more than $2 billion.
If we are looking for a bargain, the bargain is here. I think it would be rather foolish on the part of Congress to cut out this callable. Yes, it looks like a great feat on the part of Congress to cut off with one fell swoop $743 million, but actually, Mr. President, you are cutting out not even a penny. These are callable contributions. I wish to repeat that. It involves not a single penny in outlays. For 33 years not a penny has been called. So if we are to make cuts, it should be someplace where the cut would be significant and not damaging.
This would be damaging to our economy and damaging to our role in the bank. As I said, it is a bargain. I cannot see why Congress wants to set aside that bargain.
Mr. HARRY F. BYRD, JR. Mr. President, will the Senator yield for a question?
Mr. INOUYE. I am happy to yield.
Mr. HARRY F. BYRD, JR. I note that the House figure is $163 million. The Senate committee raised that to $825 million, an increase of $663 million. Why the tremendous increase over the House figure?
Mr. INOUYE. Ninety percent of the increase is in the callable funds.
Mr. HARRY F. BYRD, JR. Regardless of what it is in why did the House feel that the world could get along and the World Bank could get along with $163 million and the Appropriations Committee feels it cannot get along with that sum and must have $825 million?
Mr. INOUYE. As the Senator is well aware, I cannot speak officially for the House, but I suppose that the House took this action so that they could present an appropriation bill in the House which indicated a major slash. But here you are not slashing anything. We are actually slashing our own economic throat. As the Senator is well aware, for 33 years we have been appropriating callables because the Constitution requires that. Not a penny has been called. But these callables are necessary if we are to generate loans, loans which incidentally are used to purchase goods from the United States.
Mr. HARRY F. BYRD, JR. As the able Senator so well pointed out in his opening comments on this amendment, this $825 million does affect the credit of the United States.
Mr. INOUYE. That is because the Constitution says if there is a contingent liability, funds to cover that liability should be appropriated.
Mr. HARRY F.- BYRD, JR. That is right, and it is.
Mr. INOUYE. At the present time we have in the Treasury of the United States in paper $11 billion of contingent liability.
Mr. HARRY F. BYRD, JR. And this would add another $825 million to that.
Mr. INOUYE. That is money that has never been spent and never will be spent as far as I know.
Mr. HARRY F. BYRD, JR. But as the Senator indicated, it is a contingent liability of the Government.
Mr. INOUYE. We are hoping to find a means to fulfill the requirements of the Constitution without having to appropriate the full amount. No other country appropriates the full amount.
Mr. HARRY F. BYRD, JR. I prefer to see us, frankly, handle it the way we are handling it. At least we know a little bit more about what we are doing and what is going on.
Mr. GARN. Mr. President, will the Senator yield for a comment?
Mr. HARRY F. BYRD, JR. I yield to the Senator from Utah.
Mr. GARN. The Senator from Hawaii is absolutely correct. Most of this is in callables. However, there is $66 million of budget outlays that would be eliminated by defeating this amendment. The rest of it is in callables, and he is correct that they have not been called. It is a contingent liability upon the U.S. Treasury.
Mr. HARRY F. BYRD. JR. Correct.
Mr. GARN. And it may be that we should change the accounting methods to take that out. The problem that I see is even though the majority of it is not direct expenditure, it is under our accounting procedure budget authority and therefore it does rob other domestic programs. It has to. It has to be included in that entire amount.
Mr. HARRY F. BYRD, JR. I think it should be included.
Mr. GARN. So I am not speaking that this is going to be lost to the Treasury — more than $66 million — but it does reduce the budget authority about $825 million for domestic programs, and when I have to make a choice in a tight budget situation I am going to choose domestic programs that help our own country and our own economy before I get into foreign aid.
In other years I might not be objecting to this at all, recognizing many of the things the chairman has said are true that the loans are made and the purchases are back in the United States, and there is some indirect return. There is no doubt about that. But we are fighting already substantial budget cuts in many areas of domestic programs. It is budget authority, and it does entail $55 million of budget outlays.
Mr. JAVITS. Mr. President, will the Senator yield?
Mr. INOUYE. I am happy to yield.
Mr. JAVITS. Mr. President. I ask the Senator this question: If the Bank, which we have been affiliated with since its beginning, did not get this subscription, of which only 10 percent is cash, will it be able or unable to raise money in the bond market, in which the Bank's paper has currently the highest credit rating?
Mr. INOUYE. It will be unable to raise the funds.
Mr. JAVITS. Therefore, is it not true that whatever we get from our affiliation with the Bank in international economic stability and increased U.S. trade, and I will come to these points in a moment, would be missed by the United States completely?
Mr. INOUYE. The Senator is absolutely correct.
Mr. JAVITS. Coming now to the Bank's economic benefits for the United States, is it not a fact that in competing internationally with Japan and Germany and other industrialized countries that we have found that our export trade is now primarily with the developing countries which are the clients and borrowers from the World Bank?
Mr. INOUYE. The Senator is correct.
Mr. JAVITS. So that today we do 25 percent of our export trade or over $25 billion a year, and I might point out very heavily in agricultural products, with these developing countries which borrow from the World Bank?
Mr. INOUYE. The Senator is correct.
Mr. JAVITS. Also, may I point out that the Senator mentioned oil and the fact that the World Bank is now giving a high priority in exploration for oil. Is it not a fact that over the next 5 years the World Bank is projected to lend for energy development roughly $4.5 billion to $5 billion?
Mr. INOUYE. That is the plan as proposed by the World Bank.
Mr. JAVITS. And running a billion a year, they intend to raise this money out of the bond market?
Mr. INOUYE. The Senator is absolutely correct.
Mr. JAVITS. Let us leave out developmental reasons for our support of the World Bank. Is is not staggering, therefore, to contemplate that all these economic benefits to the U.S. could all be thrown in the trash can if we support this amendment?
Mr. INOUYE. The Senator is so correct. Without a single penny in outlays we can get returns amounting to about $2 billion per year.
Mr. JAVITS. That is right.
Mr. President. Senator INOUYE and the Appropriations Committee did not act in this matter without support from outside the committee. Twelve of us representing a broad cross section of various points of view here in the Senate, which included the chairmen of the Budget Committee and the Foreign Relations Committee, as well as both Republican and Democratic members, wrote to him in great detail urging him to increase the funding for the World Bank.
I would like to read that list, with the Senator's permission; and I ask unanimous consent that our letter addressed to the chairman of the subcommittee, the letter being dated September 20, 1979, be printed in the RECORD.
There being no objection. the letter was ordered to be printed in the RECORD, as follows:
U.S. SENATE,
Washington, D.C.
September 20, 1979.
Hon. DANIEL K. INOUYE.
Chairman,
Subcommittee on Foreign Operations,
Committee on Appropriations,
U.S. Senate, Washington, D.C.
DEAR CHAIRMAN INOUYE: We understand that your Subcommittee will shortly mark up the FY 1980 Foreign Aid Appropriations Bill, including funding for US participation in the multilateral development banks. As you know, our nation's participation in these international institutions is extremely important for foreign policy, economic, and national security reasons.
We are, therefore, deeply distressed about the excessive cuts made by the House in the request for the banks, particularly the reductions for the World Bank. That cut was from $1,026 million to $163 million, or 84 percent of the Administration's original request. This was a much deeper cut than made in other parts of the Foreign Assistance Bill or in other government programs,
especially when one considers that only 10 percent of the money will actually be paid in by the United States. The effect of the cut is to eliminate completely the current year's request and to prevent the United States from covering subscriptions which were fully authorized by the Congress and scheduled to be made in prior years but are as yet unappropriated. Furthermore, cuts of such a magnitude are not required by the Second Concurrent Budget Resolution, which would accommodate more than 75 percent of the Administration's request.
We are surprised and disappointed that the House would slash support for the World Bank at a time when the Bank is helping to deal with the energy crisis by greatly increasing its emphasis on the expansion and diversification of sources of energy in non-OPEC developing countries — an emphasis, we might add, that has been strongly encouraged by the United States. Over the next five years, World Bank lending for energy development is projected to reach $4.5 billion to $5.0 billion. This is expected to result in the production of energy equivalent to two million barrels of oil a day. When hydroelectric power projects are included, about 20 percent of overall Bank lending during the next five years will be for energy purposes. Use of Bank funds will also facilitate additional private investment in this critical area. The result will be to improve significantly the oil supply and demand balance for the world as a whole, including for the United States.
The amount recommended in the House bill is clearly an inadequate level of support for an organization which effectively serves US economic and political interests around the world and does so at low cost. For each dollar lent by the Bank, the cost to the US taxpayer is only two cents. Furthermore, last year, US suppliers won contracts amounting to $868 million on World Bank projects, which represents a return to US firms of 18 cents for each dollar lent by the Bank in the form of payments for contracts they win on projects financed by the World Bank.
The indirect benefits to our economy of US participation in the Bank are even greater. The less developed countries comprise the largest and most rapidly growing single export market for US goods and services. They now take a quarter of all US exports, including $6.7 billion in agricultural products. As the incomes of these countries rise, a process which is effectively promoted by the World Bank, the level of exports of US goods and services to them will also rise — creating additional jobs and income in our own economy.
While we recognize that there are some very legitimate competing domestic demands for funds as a result of the softening of the US economy, we nevertheless believe it would be particularly harmful and short sighted to cut back on US support for the World Bank when a global recession is threatening. It is urgent that we continue our longstanding and bipartisan national policy of helping the Bank promote world development, which, as explained above, will help our economy.
The request for World Bank capital stands on its own merits. It is not a substitute for US subscriptions or contributions to other multilateral development banks, none of which should be reduced from the minimum levels to which they have been reduced by the House.
We urge you to substantially restore US funding for the World Bank. The proposed level is fully consistent with the international position of the United States, and it reflects the important national interests thatwe have in continuing to support World Bank lending programs.
Sincerely,
FRANK CHURCH, Chairman, Committee onForeign Relations.
PAUL S. SARBANES, Chairman, Subcommittee on International Economic Policy, Committee on Foreign Relations.
ABRAHAM RIBICOFF, Chairman, Subcommittee on International Trade, Committee on Finance.
ADLAI E. STEVENSON, Chairman, Subcommittee on International Finance, Commit-tee on Banking, Housing and Urban Affairs.
EDWARD M. KENNEDY, Chairman, Subcommittee on Energy, Joint Economic Committee.
EDMUND S. MUSKIE, Chairman, Committee on the Budget.
DANIEL P. MOYNIHAN, Member, Subcommittee on International Trade, Committee on Finance.
JACOB K. JAVITS, Ranking Minority Member, Committee on Foreign Relations.
RICHARD G. LUGAR, Member, Subcommittee on International Economic Policy, Committee on Foreign Relations.
CHARLES H. PERCY, Member, Foreign Relations Committee.
JOHN HEINZ, Ranking Minority Member,Subcommittee on International Finance, Committee on Banking, Housing and Urban Affairs.
MARK O. HATFIELD, Ranking Minority Member, Committee on Energy and Natural Resources.
Mr. JAVITS. The Senators who signed this letter, aside from myself, Senator CHURCH, and Senator MUSKIE, whom I have already mentioned, are Senators LUGAR, SARBANES, RIBICOFF, STEVENSON, KENNEDY, MOYNIHAN, PERCY, HEINZ, and HATFIELD.
Mr. President, I deeply believe that in this particular case we are showing that hardheadedness in which we. are always berated by those in the private enterprise system for being deficient in moving out into the modem world. To cut off this method of financing of such a vast amount of trade would be very unwise for our country.
I thank the Senator.