The Congressional Record is a unique source of public documentation. It started in 1873, documenting nearly all the major and minor policies being discussed and debated.
“BUDGET REFORM” mentioning the Federal Reserve System was published in the Senate section on pages S3979-S3981 on April 21, 1999.
The publication is reproduced in full below:
BUDGET REFORM
Mr. GRAHAM. Mr. President, I prepared these remarks yesterday in anticipation that we would be debating the budget reform bill today. It is my understanding that subsequent to yesterday's offering of an amendment, which was referred to as the lockbox amendment, in lieu of the budget reform bill, that now the budget reform bill has been withdrawn.
But anticipating that that is a relatively temporary step, because we cannot avoid having to deal with the issues of budget reform if we are serious about our goal of preserving the momentum that is currently underway towards a surplus in the Federal Government fiscal accounts, I offer some comments today which I hope will be useful as we prepare for that return to the budget reform discussion.
I am very pleased that we are focusing on this issue, because it is an indication of our commitment to retain the fiscal discipline that has gotten us to the point where we have the opportunity to talk about a Federal budget surplus and how it should be appropriately used.
I want to discuss two interrelated issues. One I will call the issue of the ``vault'': How will we protect the surplus that we have once it has been attained? But the even more significant predicate issue is, How do we achieve the surplus?
I am concerned by some of the actions that were taken in 1998 which indicate a lack of resolve to protect the surplus. It is no good to have the securest vault in the bank possible if we fritter away the money we would like to place in that vault. If we do not address the underlying issues of fiscal discipline, responsibility, the Social Security trust fund will be endangered no matter how strong our lockbox is to protect it.
This Congress is in a unique position to reaffirm the stated commitment to fiscal discipline and to cure the previous willingness of Congresses to undermine that discipline through budget trickery.
As recently as 1993, the Federal budget deficit was at a record high of $290 billion. Last year, we learned that 5 years of effort, fiscal austerity, and a strong economy had transformed that staggering deficit into the first budget surplus in more than a generation. While we celebrated that success--it was a cause for celebration--it did not give Congress carte blanche authority to return to its spendthrift ways of the past. Especially daunting was the reality that 100 percent of the surplus was the result of surpluses in the Social Security trust fund.
We have a responsibility to our current generation, as well as to their children and grandchildren, to save that extra money until Social Security's long-term solvency is assured. Unfortunately, the 105th Congress stumbled in its commitment to that goal. Though it resisted a proposal to spend surplus funds on a catch-all omnibus list of tax cuts, and it similarly rejected suggestions that the surplus could be used for increased spending, it did not exercise similar good judgment during the end-of-the-year rush to adjourn. The same Congress that claimed to be saving the surplus for Social Security participated in raids on that same surplus through the back door.
In the waning hours of last year's budget negotiations, we passed a
$532 billion omnibus appropriations bill. Inserted in that $532 billion spending bill was $21.4 billion of so-called emergency spending. As we know, the fact that that $21.4 billion was designated as an emergency meant that it did not have to be offset by spending reductions elsewhere in the budget or by additional revenue. Rather, it was funded by reducing the surplus, that 100-percent Social Security-
derived surplus.
Let me illustrate with these charts what has been happening.
In 1998, the stated Social Security surplus, that is the amount of revenue into the Social Security trust fund in excess of the checks that were written to the beneficiaries of Social Security, was $99 billion. But before that $99 billion could be realized, there was a predicate called for in it, and that was for $27 billion in order to offset the deficit that the Federal Government was running in its non-
Social Security accounts. And then we added to that $27 billion an additional $3 billion in the fiscal year 1998 expenditures through that emergency appropriation that did not have to be offset by reductions in spending or additional revenue but came directly out of the surplus fund. So instead of having a surplus of $99 billion, we ended up with a surplus of $69 billion.
What is the projection for fiscal year 1999? This year, the Social Security surplus has grown to $127 billion, but, again, the first call is going to be to offset the deficit which will be projected for the non-Social Security portion of the budget, which is $3 billion, the next $13 billion, which is this year's component of last year's emergency spending bill, and in addition to that, we are now discussing the possibility of additional funding for the Kosovo emergency of $6 billion. That is the most modest number which has been suggested thus far. Others are suggesting that number might be doubled or tripled in terms of its cost.
Instead of a Social Security surplus of $127 billion, we are now at
$105 billion in Social Security surplus, with that number itself being subject to further dilution if there are additional emergency outlays allocated.
For fiscal year 2000, we are looking at a Social Security surplus of
$138 billion, minus $5 billion to pay for deficits other than Social Security in the Federal budget, $5 billion, which is the final installment on that 1998 emergency appropriation bill, and, again, the possibility of additional emergency spending for Kosovo or other purposes.
Mr. President, it is critical that we exercise constraint in terms of how we use the emergency spending power available to Congress, or we will substantially dilute the funds that are going to be locked up in this lockbox vault protected for Social Security beneficiaries. I think there are several steps we need to take.
The first is that Congress needs to commit itself to reexamining that
$21.4 billion we spent last year and determine what portions of that
$21.4 billion did not meet the standards for an emergency appropriation. With that commitment, we should restore those funds to the Social Security surplus during this year's budget consideration. I am pleased that the Senate adopted an amendment to our budget resolution which committed us to that objective. That should be a commitment in which we should be joined by the House and the President.
Over the long haul, it is critical that we institute some additional spending procedures which will allow us to respond to true emergencies without, as we did in 1998, opening the door to misuse.
Senator Snowe of Maine, Senator Voinovich of Ohio, and I have introduced legislation to permanently close these loopholes in our current budget procedure. These procedures would basically provide for a 60-vote supermajority of the Senate to be required in the event there was a challenge that items which were listed as emergencies in an emergency spending bill were not true emergencies and did not meet the statutory definition; also, a 60-vote supermajority for the passage of any bill which contained emergency spending so we could not have a repetition of what happened last year in that emergency spending was inserted into a large omnibus spending bill and, therefore, not effectively subject to removal.
Those are some of the procedural steps that should be taken in order to assure we do not have a continued repetition of a dilution of the Social Security surplus before it has a chance to get into the lockbox.
Now let me make a few points about the lockbox itself, the vault into which we intend to place these surpluses that, hopefully, we have protected with greater vigilance than we did in the fall of 1998.
I strongly support developing measures which will create a financially solvent Social Security system for current and future beneficiaries. This is not only a fiscal goal, but it is a moral responsibility, a moral responsibility to carry out the contract that exists between the American people and the American Government for their financial security in retirement. I am pleased the Senate is debating this issue, since the trustees of the Social Security system are predicting that in the year 2034 the current Social Security system will not be solvent. It is critical that we take steps now to protect long-term solvency.
However, the proposed lockbox, which was a part of the budget reform legislation, in my opinion, is not sufficient to accomplish this objective.
What are its deficiencies?
First, it allows the Social Security surplus, in addition to paying down the national debt, to be used for unspecified ``Social Security reform.''
Now, Social Security reform can mean different things, but not all of those things are related to achieving solvency in the Social Security system. Would Social Security reform include increasing the benefits which would make the program potentially even more subject to insolvency at an earlier date? Would it mean reducing revenue into the system, including such proposals as returning to a pay-as-you-go system or diverting a portion of the current revenue out of the Social Security system into some individual retirement accounts? All of those ideas may or may not have merit, but they should not be accomplished at the expense of our commitment to solvency in the current Social Security system.
I propose to offer an amendment at such time as it is appropriate that would have the Social Security surplus used solely to pay off national debt, specifically that component of the debt which is held by the public. Only this action will ensure the Social Security surplus is used for its intended purpose of meeting our obligations to the American people and, in so doing, contribute to a stronger American economy, which is the fundamental basis upon which the Federal Government will be able to meet its future obligations to Social Security beneficiaries.
There will be a cascading series of positive effects on the economy if we commit the Social Security surplus to paying down the national debt. Paying down the debt will lower long-term interest rates. These lower rates will make it less expensive for Americans to borrow money, and this lower cost of borrowing will encourage business ventures to expand, to increase their productivity, to increase their hiring.
It will encourage increased investment in long-term fundamental areas such as education. The new economic activity and increased labor productivity will lead to increased economic growth. This growth will lead to the strengthened capacity of the National Government to meet its Social Security obligations.
These points were best expressed by the chairman of the Federal Reserve System, Mr. Alan Greenspan, when he said,
. . . in light of these inexorable demographic trends, I have always emphasized that we should be aiming budgetary surpluses and using the proceeds to retire outstanding Federal debt. This would put further downward pressure on long-term interest rates, which would enhance private capital investment, labor productivity, and economic growth.
If I were allowed, I would also have offered a second amendment that would not tie the Government's ability to borrow debt from the public to a 10-year budget projection. In the legislation that was before us, there was a proposal to use future estimates of our national debt as the benchmark for determining whether we had protected the Social Security surplus. I think there is merit in that approach, but I believe this legislation had carried that merit beyond its reasonable limits.
I would provide, through the amendment I had intended to offer, for a more reasonable and credible debt ceiling target. It also would have provided enhanced flexibility to accommodate unanticipated events, both domestic and foreign. I would suggest that it is an impossible task for any person to estimate the budget and to estimate the national debt on a 10-year basis. I would offer as my basis for that statement a look-back just 5 years, not 10 years, which this legislation proposed.
In January of 1993, the Congressional Budget Office estimated what the national debt would be 5 years hence, in the fiscal year 1998, which ended September 30, 1998. Their projection was that the national debt on that date would be $4.863 trillion. At the same time, in January of 1993, the administration made an estimate of what they thought the national debt would be 5 years hence. Their projection was
$4.576 trillion. The actual number was $3.720 trillion. So the CBO was off by over a trillion dollars. The administration was off by $856 billion. That was a 5-year projection.
What we are proposing in this legislation is to use 10-year projections and to give those the sanctity of almost biblical correctness, because they would become the basis upon which our future budgets would be predicated.
Mr. President, seeing my time is about to expire, I offer these amendments as an indication of the direction which I think we should be proceeding in as we strive together to achieve a very important goal, which is to protect the Social Security surplus for its intended purpose of meeting the obligations that we have for this and future generations of Americans. I believe the amendments I will offer will help both assure that the money is protected before it goes into the vault, and that the vault itself is a reasonable and secure place in which we can place those funds.
Protecting Social Security for our children and grandchildren is one of the highest goals of the Federal Government. We can make the lockbox stronger, and we can and should control emergency spending so there will be money to put in the lockbox for future generations.
Thank you, Mr. President.
Mr. BREAUX addressed the Chair.
The PRESIDING OFFICER. The Senator from Louisiana is recognized.
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