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.
“THE BALANCED BUDGET AMENDMENT” mentioning the U.S. Dept of Labor was published in the Senate section on pages S3660-S3662 on March 8, 1995.
The publication is reproduced in full below:
THE BALANCED BUDGET AMENDMENT
Mr. SIMON. Mr. President, I spoke earlier today about the falling dollar. I quoted the Chicago Tribune. I ask unanimous consent to have printed in the Record some more items.
There being no objection, the material was ordered to be printed in the Record, as follows:
Currency's Slide May Mark End of Reserve Role
(By Michael R. Sesit)
London.--Undercut by years of U.S. deficits, the dollar's days as the world's reserve currency may be drawing to a close.
On Friday, eighteen central banks spent a half-billion dollars in a futile attempt to resist that notion, following a similar $250 million effort by the Federal Reserve the day before. In Germany and Japan, finance ministries scolded dollar bears as wrongheaded. In the U.S., Treasury Secretary Robert Rubin tried talking up a strong dollar as ``in our national interests.''
Traders, unperturbed by the fuss, continued to dump dollars by the billions. As the greenback fell to another post-World War II low against the yen and continued sliding against major European currencies, foreign-exchange dealers and money managers predicted more to come.
In trading Monday in Tokyo, the dollar hit a new postwar low of 92.75 yen and skidded to 1.3875 marks, just short of its historical low of 1.3870 marks. About noon Monday, the dollar was trading at 93.25 yen, and at l.4030 marks; sterling was at $1.6473.
At its lowest point Friday, the U.S. currency touched a postwar low of 93.75 yen, and a 29-month low against the mark. By late trading in New York, the dollar stood at 94.05 yen and 1.4240 marks, compared with 95.25 yen and 1.4415 marks late Thursday. The pound, meanwhile, rose to $1.6295 from $1.6135 a day earlier.
``There is a firm belief that the dollar doesn't have the reserve-currency status it once had,'' says Jeremy Hodges, head of global foreign-exchange sales for Lehman Brothers Inc. ``Globalization and diversification'' are progressively eroding the dollars's mystique, he explains. ``More and more people are adjusting their portfolios to include other currencies--yen, deutsche marks, French francs, Canadian dollars.''
Meanwhile, weaker currencies continue to lose out. Early this morning, after an emergency meeting of the European Union's monetary committee, the Spanish peseta and Portuguese escudo were devalued, by 7% and 3.5% respectively, following weeks of difficult trading.
Within the next three months, Mr. Hodges predicts the dollar could tumble another 5%, to 1.35 marks, and another 4%, to 90 yen, although he cautions not to expect a freefall. So far this year, the dollar has fallen 6% against the yen and 8% against the mark.
The basic problem for the dollar is that there are just too many of them sloshing around, says George Magnus, chief economists at S.G. Warburg & Co. in London. The U.S. current account deficit--a broad measure of trade in goods and services plus certain financial transfers--is huge and growing. In addition, ``there is still an underlying outflow of investment capital'' as U.S. companies continue to invest in plants and equipment overseas, he says.
``And don't forget that the U.S. is the world's biggest debtor nation, with external liabilities of $750 billion at the end of 1994,'' he adds. Last week's defeat of a constitutional amendment that would have required a balanced budget by 2002 only underscored the country's lack of will to reform its way.
What's more, Mr. Magnus argues, Fed policy isn't as tight as many people suspect. The evidence: strong growth in U.S. loan demand, increasing bank borrowing from the Fed and the modest pickup in bank reserves since October. And, he added,
``the Mexican bailout is going to result in the creation of additional dollar reserves, either by the Fed, the Treasury or both.''
Based on 10-year government-bond yields, U.S. inflation-adjusted interest rates are 4.35%, compared with 5.4% in Germany and 4.4% in Japan. While stronger fundamentals could propel the dollar to 110-120 yen and 1.60-1.65 marks in a year or so, for now, * * *
____
Dollar Keeps Falling Against Yen and Mark--Analysts Call Decline a
Long-Term Trend
(By John M. Berry)
The dollar continued to fall on international currency markets yesterday, hitting a new low against the Japanese yen for the third day in a row and weakening further against the German mark.
Many foreign exchange experts said the dollar's weakness is not just a temporary problem, but rather part of a long-term downward trend against the mark and yen, although the dollar is likely to rally from time to time.
There was broad agreement among experts that there is little President Clinton, the Treasury Department or the Federal Reserve can do to give the dollar a boost. Coordinated purchases of dollars on Friday by the Fed and other central banks around the world had almost no impact on the currency's value.
In late New York trading yesterday, it took just 92.80 yen to buy a dollar, down from 94.05 on Friday. Against the mark, it took 1.4048 marks to buy a dollar, the lowest level in more than two years, down from 1.4250 on Friday.
The reasons for the dollar's downward trend, the analysts said, are complex and varied. Some are real, some are psychological; some are as new as the financial crisis in Mexico and some are as old as the tendency of Americans not to save money.
First and foremost is the fact that the United States is running a deficit with the rest of the world of more than
$150 billion a year in trade, tourism and similar transactions, said economist L. Douglas Lee of NatWest Washington Analysis.
That means that each year foreigners end up with $150 billion that they may not wish to hold and so exchange for another currency, driving down the dollar's value. In the view of Lee and many other analysts, as long as the United States keeps pushing that many dollars into foreign hands every year, the currency has little chance of strengthening in a fundamental way.
A second key reason for the recent weakness of the dollar that many analysts cited is an abrupt shift in expectations about the level of U.S. interest rates compared with those in other countries, especially Germany.
``The dollar's decline this year has coincided with the evaporation of earlier expectations of future sharp increases in U.S. short-term rates,'' said John Lipsky, chief economist at Salomon Brothers Inc. in New York.
The level of interest rates is important for a currency because higher rates can encourage investors to move their money from one country to another. Until a few weeks ago, many analysts and investors had expected that the Fed would continue to raise interest rates as it did all last year to cool off the U.S. economy and prevent a surge of inflation. However, recent statistics suggest that U.S. economic growth is slowing and many analysts are no longer looking for higher rates.
A third major reason the dollar is being hammered is that its value has been declining for many years compared with German and Japanese currencies, and some foreign central banks are switching their foreign exchange reserves out of dollars.
``The track record of the dollar in recent years has been poor, and that's what these investors look at, the record,'' said Scott E. Pardee, special adviser at Yamaichi International (America) in New York. ``The U.S. economy is doing fine, but dollars that have been in other hands for many years are being converted into marks and yen.''
A fourth key development hurting the dollar, the analysts said, is the political and financial crisis in Mexico, which led the Clinton administration to forge a huge international rescue package, with the United States putting up $20 billion in loans and loan guarantees.
There is a widespread perception that the United States will suffer in a variety of ways because of its close links to Mexico, including a likely large decline in U.S. exports that will make the U.S. trade deficit worse.
Yet another reason mentioned by the analysts is the currency turmoil within Europe that led to a devaluation yesterday of the
[[Page S3661]] Spanish peseta and Portuguese escudo relative to the mark, which is seen by investors and speculators as a
``safe haven.''
Meanwhile, many Japanese firms are selling the dollars they are earning from exports to the United States in exchange for yen. They are using that yen to cover losses or operating expenses at a time when Japanese banks are reluctant to make new loans.
Analysts such as Lee noted that so long as Americans save such a small portion of total national income that they cannot finance the nation's investment costs--plus the combined deficits of federal, state and local governments--foreign investors must make up the difference. In an accounting sense, the gap between saving and investment is equal to the U.S. deficit in trade, tourism and other transactions.
``The way to address the problem is to do something to bring savings and investment closer together--such as reduce the federal [budget] deficit'', Lee said. And that pointed to yet another reason for the dollar's weakness--last week's Senate defeat of a constitutional amendment to require a balanced budget, which ``was read as a negative by the currency market,'' Lee said.
____
Dollar Falls Against Yen and Mark, But United States Declines to
Intervene in Market
(By David Wessel)
Washington.--The dollar fell again yesterday against the yen and mark, but U.S. officials kept their mouths shut in public and didn't intervene in currency markets to support the struggling currency.
The dollar set another post-World War II low against the yen yesterday, touching 92.70 yen in Asia before rebounding to 92.90 late yesterday, down from 94.05 late Friday. The dollar, flirting with its postwar low against the mark of 1.3870 set in September 1992, was trading at 1.4048 marks yesterday, down from 1.4240 Friday.
Having failed to stop the dollar's slide with rhetoric and money, the U.S. government simply watched nervously yesterday. At earlier moments of market turmoil, Treasury Secretary Robert Rubin, once a currency trader himself, has advised: ``Stay calm and focus on the fundamentals.'' Apparently he was doing just that yesterday. Neither he nor his aides would talk about the currency.
While Mr. Rubin was consulting with his German and Japanese counterparts, U.S. officials are holding off on further dollar-buying efforts until the officials sense such intervention is likely to work. Having demonstrated that the U.S. is unhappy about the sliding dollar and convinced the market has gone too far, the officials may now just wait for the market to bring the dollar back up.
two options
If words and intervention won't work, then the government has only a couple of other options should it decide to try to strengthen the dollar: The Federal Reserve could raise short-term interest rates to try to attract global investors, or President Clinton and Congress could reduce the federal budget deficit to shore up confidence in U.S. macro-economic management. Neither policy change appears imminent.
Economists' list of explanations for the dollar's decline is growing longer every day. Rudiger Dornbusch, a Massachusetts Institute of Technology economist, figures that expectations about interest-rate trends in the U.S. and Germany account for 70% of the dollar's woes. Based on comments by Fed Chairman Alan Greenspan and other Fed officials, the markets have decided that the Fed isn't going to raise short-term rates anytime soon--and might even cut them. That tends to draw investors to the mark.
The failure of the U.S. to reduce further its government budget deficit accounts for 30%, he estimates. The recent slump in the dollar coincides with the Senate's rejection of a constitutional amendment that would have required a balanced budget. ``Germany is balancing the budget without big talk over the next four years. We are widening the deficit with big talk,'' Mr. Dornbusch said. ``They are concerned about inflation at 2\1/2\%. We declare it dead at 3\1/2\%.'' Global investors, not surprising, prefer marks to dollars, he reasons.
``If you need a third [reason for the weak dollar],'' he said, referring to Mexico's economic crisis, ``the mess in our backyard gives you one more reason.''
Other economists and traders, however, aren't so confident that they can discern the causes of the dollar's fall. ``I'm puzzled. I didn't expect it. I don't claim to know [the reasons] after the event,'' said Deutschebank economist Norbert Walter. ``Wall Street doesn't like Washington. Everything that happens is considered to be negative for the dollar.''
global lack of confidence
The U.S., as Mr. Rubin made clear last week, sees ``a strong dollar'' to be in ``its national interest.'' A falling dollar does help U.S. exporters by making their goods more attractive overseas, but it tends to push up import prices. It also tends to push
up long-term interest rates in the bond market even if the Fed doesn't move the short-term rates it controls. A weaker dollar also suggests a global lack of confidence in the U.S. and its government, hardly a welcome development for Mr. Clinton or Mr. Greenspan. In Germany and particularly in Japan, strong currencies could hurt exports at a time when both nations are counting on them to buoy economic growth.
While the dollar is sinking against the mark and yen, it has strengthened against two of its major trading partners. The Canadian dollar closed at 1.4168 Canadian dollars to the U.S. dollar yesterday, compared with 1.3557 Canadian dollars to the U.S. dollar a year ago. The Mexico peso closed at 6.575 pesos to the dollar, compared with 3.25 pesos to the dollar a year ago. As a result, the value of the dollar against all its trading partners hasn't fallen much, reducing the risks of imported inflation and making it easier for the Fed to ignore the weakness against the yen and mark.
Until the dollar plunged last week, the Fed had been widely expected to hold short-term interest rates steady when officials hold their next scheduled meeting on March 28. And if signs of a slowing pace of growth continue to emerge, the Fed isn't likely to raise rates at that meeting. Just yesterday, Fed Vice Chairman Alan Blinder, speaking to bankers here, tentatively predicted the sort of ``soft landing''--an economy that slows, but not too much--that central bankers are always trying to engineer. ``There are indications, but certainly not definitive sort of indications, that makes me think we have a fighting chance of achieving this sort of soft landing.''
With the dollar weak, strong evidence that the U.S. economy hasn't cooled off--which could come as soon as this Friday's Labor Department report on employment in February--could tilt the Fed toward higher rates. Mr. Blinder wouldn't talk about the dollar, but House Banking Chairman Jim Leach (R., Iowa) did: ``Obviously a weak dollar enhances prospects of
[interest rates] going up again,'' he said. ``No one likes that. But no one likes a weak dollar either.''
Economists who are adherents to the monetarist school, gathered in Washington yesterday, cautioned the Fed against raising rates to defend the dollar. ``Why is the dollar going down? We don't know. But it isn't a monetary phenomenon,'' said Lee Hoskins, chairman of Huntington National Bank and former Cleveland Federal Reserve Bank president. ``What should the Fed do? Nothing.''
But David Hale, economist at Chicago's Kemper Corp., said the Fed could help the dollar by making clear it doesn't intend to cut rates soon.
Mr. Leach also said that the dollar ``underscores the absolutely mandatory need to get the fiscal house in order so that the monetary side doesn't have to do everything.'' Economists reason that a move to shrink the U.S. budget deficit would increase overall savings in the U.S. and that, in turn, should reduce what is known as the current-account deficit, the broadest measure of international financial and trade flows. That big and growing deficit is, economists say, a major long-run factor in the dollar's weakness.
Although the defeat of the balanced budget amendment was seen in Washington as a sign that Congress is less likely to attack the deficit this year, traders and economists disagree about its impact on the dollar. ``You can point to that as a trigger,'' said Virginia Parker of Ferrell Capital Management, Greenwich, Conn. ``But the dollar has been in a pretty significant downturn since the end of 1994.''
Mr. Hale suggested the defeat ``played a role at the margin,'' but called other factors more important. Most are beyond the Clinton administration's control. Among them: the likelihood that U.S. exports to Mexico will be hurt by the economic crisis there, the side effects on the dollar of internal European currency tensions, the evaporation of the Soviet threat (which makes investors more confident about the mark) and Japanese investors' seasonal urge to repatriate capital in advance of the March 31 end of their fiscal year.
____ Dollar Again Plunges, Setting Off Stock Selloff--Economy: Record Lows
Against Mark, Yen Stirs Doubts About Currency's Premier Status--Dow
Loses 34.9 Points
(By Jonathan Peterson)
The U.S. dollar continued its extraordinary slide Tuesday, plunging to record lows against the German mark and Japanese yen, as currency worries slammed the stock market and eroded the greenback's once-lofty status throughout the world.
For the second straight day, U.S. Government officials choose not to resist the anti-dollar mania, fueling speculation that the currency could hurtle even lower in the coming days.
And unlike recent dollar-selling stampedes, high-rolling speculators were joined Tuesday by corporations, banks and mutual funds in the selloff, traders said.
``Right now it's a panic situation--we're in uncharted territory,'' declared Frank Conte, a currency dealer at Royal Bank of Canada in New York. ``There's no sign from the Federal Reserve. There's no talk from the Administration. So traders are wondering: `Where's the bottom for the dollar?'''
Such questions spread to the stock market * * *.
The punishing treatment of America's long-trusted currency, combined with investors' decided preference for German marks and Japanese yen Tuesday, startled veteran
[[Page S3662]] traders who wondered aloud how the episode would unfold.
``It's pandemonium, isn't it?'' said Robert A. White, senior vice president at Standard Chartered Bank in New York.
``It's shocking to a lot of us old-timers in the market to see the dollar ostensibly removed as the reserve currency of the world.''
The dollar hasn't suffered alone. In what has become a massive, global shuffling of money, currencies of Canada, Mexico, Italy, Sweden, Belgium and other nations have all been walloped. Germany's surging mark, meanwhile, has reached post-World War II highs against the British pound, French franc, Spanish peseta, Portuguese escudo and Swedish krona.
In New York trading Tuesday, the dollar closed at 1.3702 marks, down from 1.4048 late Monday. It closed at 90.05 yen after falling as low as 89.05, down sharply from 92.80, the previous post-World War II low.
The buck has slipped 6% against the mark and yen this month alone, compared to an 11% loss against both currencies for all of last year.
``What can we do to stabilize the dollar or cause it to go up without doing long-term economic damage?'' asked Monica Williams, vice president and foreign exchange manager at Sanwa Bank California.
While that answer seemed elusive Tuesday, economists cited several reasons for the problem that has erupted in recent days. German interest rates are expected to rise this year, benefiting lenders. By contrast, Fed Chairman Alan Greenspan recently hinted that U.S. rates were at or near their peak levels.
The prospect of a ``soft landing'' for the U.S. economy--slower growth but no recession--suggests that U.S. consumers will continue to gobble up imports, keeping the nation's trade balance deep in the red this year.
What is more, highly visible news from Washington seems to have convinced speculators that the dollar is a less attractive haven than in the past. Traders have repeatedly mentioned the rescue plan for Mexico and the defeat of the balanced-budget amendment in Congress in recent days as reasons to abandon the dollar.
``There's a complete lack of faith in the Fed, the Administration and in Congress to get the budget in order, to get the trade balance in order,'' White contended.
The controversy spread on Capitol Hill Tuesday, as members of Congress worried about the dollar and also complained about the rescue plan for Mexico, entailing $20 billion of U.S. loans and loan guarantees for the peso.
``It appears that the currency speculators, the vultures of the world, are beginning to circle around the U.S. currency because they seem to sense that our currency is vulnerable,'' Rep., Dana Rohrabacher (R--Huntington Beach) said during a hearing of the House International Relations Committee. * * *
____
Mr. SIMON. Yesterday's Washington Post, in an article by John Berry,
``Dollar Keeps Falling Against Yen and Mark,'' quotes a Washington economist, L. Douglas Lee:
``The way to address the problem is to do something to bring savings and investment closer together--such as reduce the federal [budget] deficit,'' Lee said. And that pointed to yet another reason for the dollar's weakness--last week's Senate defeat of a constitutional amendment to require a balanced budget, which ``was read as a negative by the currency market,'' Lee said.
The Wall Street Journal, the day before yesterday, in an article by Michael Sesit, ``Currency's Slide May Mark End of Reserve Role.''
The basic problem for the dollar is that there are just too many of them sloshing around, says George Magnus, chief economist at S.G. Warburg & Co. in London. The U.S. current account deficit--a broad measure of trade in goods and services plus certain financial transfers--is huge and growing. In addition, ``there is still an underlying outflow of investment capital'' as U.S. companies continue to invest in plants and equipment overseas, he says.
Here I might add what encourages that outflow is when you do not have a decline in interest here and when it is more productive, when you get more for your capital, to invest in other countries. The balanced budget amendment, every projection said, would send interest rates in this country down.
Then the article continues, quoting this London economist:
``And don't forget that the U.S. is the world's biggest debtor nation, with external liabilities of $750 billion at the end of 1994,'' he adds. Last week's defeat of a constitutional amendment that would have required a balanced budget by 2002 only underscored the country's lack of will to reform its ways.
Here is another one, an article from yesterday's Wall Street Journal, quoting Rudiger Dornbusch, a Massachusetts Institute of Technology economist, listing the budget deficit accounts as one of the two major reasons for the drop in the dollar.
The recent slump in the dollar coincides with the Senate's rejection of a constitutional amendment that would have required a balanced budget. ``Germany is balancing the budget without big talk over the next four years. We are widening the deficit with big talk,'' Mr. Dornbusch said.
And today's Los Angeles Times, ``Dollar Again Plunges, Setting Off Stock Selloff.''
In the middle it says,
``It's pandemonium, isn't it?'' said Robert A. White, senior vice president at Standard Chartered Bank in New York.
``It's shocking to a lot of us old-timers in the market, to see the dollar ostensibly removed as the reserve currency of the world.''
* * * * *
* * * highly visible news from Washington seems to have convinced speculators that the dollar is a less attractive haven than in the past. Traders have repeatedly mentioned the rescue plan for Mexico and the defeat of the balanced-budget amendment in Congress in recent days as reasons to abandon the dollar.
``There's a complete lack of faith in the Fed, the Administration and in Congress to get the budget in order, to get the trade balance in order,'' White contended.
The reality is, if we had our fiscal house in order the $20 billion loan guarantee for Mexico would just be a blip out there. It just would not have any kind of an impact. In a $6 trillion economy that is not a big thing.
But when you compound it with our failure to address our fiscal deficit, then the little things become big things.
I hope we learn the lesson. My hope is that 1 of the 34 who voted against the balanced budget amendment will recognize that a great mistake has been made, and that we are harming our country right now. We are now talking about calling on the Federal Reserve and many other nations to come to the rescue of the dollar, and that is going to cost us a great deal. There is a much less expensive way to do it--pass the balanced budget amendment.
Mr. President, if no one else seeks the floor, I suggest the absence of a quorum.
The PRESIDING OFFICER. The clerk will call the roll.
The legislative clerk proceeded to call the roll.
Mr. HELMS. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.
The PRESIDING OFFICER. Without objection, it is so ordered.
____________________
