April 3, 1980
Page 7679
BALANCING THE FEDERAL BUDGET
Mr. MUSKIE. Mr. President, I ask that my remarks to the National Association of Realtors Monday, March 31, be printed in the RECORD.
The remarks follow:
REMARKS OF SENATOR EDMUND S. MUSKIE TO THE NATIONAL ASSOCIATION OF REALTORS, MARCH 31, 1980
The very nature of the Budget Committee's work demands an ongoing dialogue with outside experts and informed advisors.
We are legislators, not economists — and yet we must make decisions which are intimately related to the state of the economy.
We deal with issues of great concern to the business community — and yet very few of us have much practical business experience.
We must budget for every aspect of Government activity — and yet it is impossible for us to be deeply familiar with all of those activities.
And so, we must rely to a large extent on the opinions and judgments of others — both in and out of Government. That is why I am very pleased to speak with you this morning, and to have your association's formal statement to the committee on the fiscal 1981 budget.
I would like to respond to that statement this morning, and I would like to share with you some of my own thoughts about the direction we are taking this year.
Mark Twain defined an expert as someone who comes from more than 25 miles away. By that standard, most of you would qualify.
But a more stringent standard must apply to those who seek to play a role in shaping fiscal policy. As representatives of one of Americas' most important industries, you are well qualified to help us consider the issues.
The well-known maxim that "the business of America is business" may be a bit overstated. But the well-being of American business and industry is centrally important to the prosperity of all of our citizens.
Yours is one of the most essential industries of all. The health of our economy depends very heavily on the builders, developers, and those who manage the buying and selling of real property.
Unfortunately, your industry is also one which traditionally absorbs much of the punishment when the economy turns sour. And the housing and real estate markets are among the first to fall.
In the end, of course, no one is safe from the twin disasters of ever higher prices and ever more expensive credit. Quite rightly, the American people look to public officeholders for answers.
I will not accept the simplistic point of view that Government alone is responsible for the current dilemma — nor that Government alone can solve it.
But Government is indeed responsible for limiting public spending to prudent levels — for shaping a disciplined long range fiscal policy — and for exercizing leadership in a national effort to turn the economy around.
I am convinced that such leadership must begin with a balanced Federal budget for fiscal 1981. I can assure you without reservation that the budget which we are now drafting will indeed reflect a balance for the coming fiscal year.
But do not be taken in by the rhetoric of those who insist that achieving such a balance is painless. To the point of monotony, catch-words like "fat," "waste," "inefficiency," and "bloated bureaucracy" have anchored the rhetoric of some who know no better and others who should. It is not that easy.
I proposed to the Budget Committee last week that spending should be $19 billion lower than the President's January budget. Believe me when I tell you that there isn't $19 billion of "fat" to trim. Real sacrifices be imposed.
In your association's statement to the Budget Committee, it is noted that a recent Gallup poll showed broad public support for fiscal restraint. That is no surprise. It is even less surprising that many of the respondents called for tax relief.
But those people were not asked where the cuts should be made. Similar polls have produced similar results on the general question of overall Federal spending. But the answers are different when specific programs are mentioned.
"Cut the budget," people say. But don't touch pensions for the elderly. Don't pull the rug out from under the colleges and universities. Don't do away with revenue sharing. Don't diminish the Federal effort to solve the energy crisis. And oh yes, be sure to allow for a huge new increase in military spending. And don't forget to provide a tax cut while you're balancing the books.
A theoretical devotion to austerity is one thing. A willingness to accept the consequences is quite another. We are now working to overcome the most serious economic challenge in recent memory. And yet, even modest sacrifice produces an uproar in many quarters of our society.
Ironically enough, public demands for Federal largesse are a prominent reason why public demands for a balanced budget are so very hard to satisfy.
That also explains why so many politicians talk in frugal generalities and vote for specific spending increases.
A variation of the same principle explains why every interest group in America couples faith in fiscal responsibility with an equally fervent demand for a bigger piece of the action.
It is to the credit of your association that the statement you have submitted to the committee is a responsible and well researched approach to fiscal policy. It is long on logic and short on rhetoric.
That is not to say that I find all of the logic to be compelling in its conclusions. But I would like to take a few moments to outline the areas in which we agree as well as those in which our perspectives may differ.
The association's first recommendation calls for 2 percent slower growth in Federal spending during the remainder of fiscal year 1980.
My recommendation to the Budget Committee calls for outlays of $567 billion in 1980. That level would actually provide a budget balance between outlays and revenues during the remainder of the fiscal year.
We are already half way through that year. Much of the money has already been spent. Much is contracted for. But much can be cut back if the committee accepts my position.
The association's second recommendation calls for 1 percent slower growth in Federal spending than proposed by the President for fiscal year 1981 in his January budget.
That would require outlays of no more than $611 billion. I am recommending an outlay total of $610.6 billion.
If the committee, and then the Congress, accept that recommendation, the association's proposal will be realized. I intend to work very hard for that result.
The association's third recommendation calls for a balanced budget for fiscal year 1981. As I said at the outset, the Budget Committee will make that recommendation to the Senate. Moreover, I will do all within my power to see it approved on the floor and respected throughout the legislative year.
The association's fourth recommendation is a bit more ambitious. It suggests that Federal spending should grow 1 percent more slowly than national income does. Presumably, the gross national product would serve as a benchmark.
It is a far more reasonable proposal than some GNP-related plans which have been offered by others. One such plan would limit Federal spending to 21 percent of GNP in fiscal year 1981.
I favor a reduction in the Federal share of GNP below 21 percent. But 21 percent is not a reasonable goal for 1981 — not if we are to increase defense spending and avoid the virtual shutdown of essential programs overnight.
By the way, the Brooke-Cranston program and other Federal housing aid would surely be among the victims.
In any case, limiting the growth of Federal spending will demand the real spirit of discipline which I hope the Congress is prepared to accept.
No one, of course, has patented a reliable crystal ball. And economists are not well known for confident estimates of the course of the economy.
The story is told that one economic wizard was asked to explain the economic impact of the American revolution. He replied that it was too early to tell.
It may be too early to tell whether the Federal growth path will indeed be as moderate as we now hope. But it is a good bet that the days of wide open spending are behind us.
The association's fifth and sixth recommendations deal with the question of tax relief. It is proposed that tax cuts should be implemented in fiscal 1981. It is then proposed that they should be targeted to encourage savings and investment.
Let me respond with several observations.
First, priority number one is to balance the books. Even in an election year, it would be unconscionable for Congress to vote a tax cut unless that can be done without sliding back to a deficit.
Last week, the Senate adopted the amendment I proposed to balance the 1981 budget and to reserve any surplus for a tax reduction. And under the amendment at least half the tax cut should be devoted to encouraging productivity and investment.
Second, my recommendation to the budget Committee as its chairman calls for balance, and for a $16 billion tax cut in fiscal year 1981.
Our people need tax relief. Investment can be stimulated by tax relief. Productivity can be enhanced.
But the tax relief which I hope we will provide in 1981 might well be described as a "good behavior tax cut." Not only the Congress, but the economy must cooperate in order to achieve it.
The Congress must be on its best behavior in accepting the discipline of outlay restraints in the budget resolution.
The economy must be on its best behavior to spare us another inflationary surge or a deep recession — either of which could gobble up a surplus without any congressional action at all. It is particularly important that wages and prices be restrained.
Finally, individual Congressmen and Senators must be on their best behavior when each separate spending vote comes up on the floor.
A balanced budget resolution is merely a balance on paper. That is hard enough to achieve. But the real test comes when the real cuts are voted upon — one by one — throughout the spending season.
Unfortunately, too many legislators are press conference misers and roll call spendthrifts.
A moment ago, I mentioned a recent Senate proposal to confine Federal spending to 21 percent of GNP. 43 Senators cosponsored that resolution. The press conference was well attended.
But just 1 month before they joined that crusade for draconian austerity, 34 of them voted to break the budget for veterans programs; 26 of them did the same for disability insurance.
No one held a press conference to draw attention to that.
As individuals, and even as a group, you can do little to prevent the economic blowups which could make a surplus vanish. But in both capacities, you can help through your own willingness to absorb some of inflation's costs instead of passing them on.
As individuals, and especially as a group, you can do a great deal indeed to help prevent political sleight-of-hand, the sort which allows some politicians to talk like budget-cutters and vote like budget-busters.
Someone has offered a bit of real world advice regarding efforts to influence Congress. It is better to make them feel the heat than to make them see the light.
I believe a majority of Congress has seen the light in regard to the need for fiscal discipline. But a little heat may well be in order as well.
That is why the achievement of a balanced budget in fact as well as on paper is largely up to you and other constituencies throughout the nation.
That is why a fiscal 1981 tax cut depends on that same variety of old fashioned political heat.
Having so far expressed substantial agreement with most of your association's recommendations, I cannot conclude without raising at least a hackle or two.
The special interests I have referred to rather disparagingly are everyone's whipping boy. Each of us belongs to a chamber of commerce, a trade union, or a professional association, but none of us would be caught dead associating with a special interest.
In the end, of course, we all have special interest in one piece of the budget or another. And if true fiscal restraint is ever to be achieved, we must all be willing to sacrifice something.
If I were to stand before this audience and rattle off a carefully prepared list of budget cuts, I know I would receive your hearty approval.
But the cuts we are considering this year are not confined to any single program.
I wonder what a show of hands would produce here this morning in regard to one particular cut which the committee has before it — the one which would save $700 million in budget authority by reducing the interest subsidy for Ginny Mae.
I can offer you the solace that this particular cut is unlikely to be adopted. And I am sure that you could give me many reasons as to why it should not be.
But I assure you that there are just as many reasons for sparing every other portion of the current Federal budget.
One person's wasteful extravagance is another's vital contribution to the welfare of the republic. One person's tax loophole is another's investment incentive.
Such is the dilemma of those who must face the voters — voters who demand a balanced budget — but not at the expense of actual sacrifice.
Everyone has a cut list — a route to balanced books. But no one completely agrees on anyone else's formula.
One is reminded of the Catholic Priest who spoke to a group of Protestant Ministers. "We are both doing God's work," the Priest told them, "You in your way, and I in His."
Let me conclude with the basic reassurance that the budget resolution will be balanced — perhaps not exactly in your way — and certainly not exactly in mine. The requirements of legislative compromise do not allow for such purity. But the requirements of meeting the current economic challenge demand more than a little sacrifice and more than a little discipline from each of us.