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.
“STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS” mentioning the Federal Reserve System was published in the Senate section on pages S8989-S8993 on July 26, 1996.
The publication is reproduced in full below:
STATEMENTS ON INTRODUCED BILLS AND JOINT RESOLUTIONS
By Mr. DORGAN (for himself and Mr. Reid):
S. 1993. A bill to require certain expenditures by the Federal Reserve System to be made subject to congressional appropriations, to prohibit the maintenance of surplus accounts by Federal Reserve banks, to provide for annual independent audits of Federal Reserve banks, to apply Federal procurement regulations to the Federal Reserve System, and for other purposes; to the Committee on Banking, Housing, and Urban Affairs.
The Federal Reserve Fiscal Responsibility Act of 1996
Mr. DORGAN. Mr. President, today Senator Reid and I are introducing legislation to eliminate the kinds of budgetary excesses and accountability lapses at the Federal Reserve Board that were recently uncovered by the General Accounting Office [GAO]. At a time when many Federal agencies are downsizing and making tough choices about their spending priorities, the Federal Reserve ought to be tightening its belt too. Regrettably, however, the opposite appears to be the case at the Federal Reserve.
During the past several years, Congress has embarked on a historic and painful path toward deficit reduction. Since 1993, the Federal deficit has been slashed by more than one half.
The Federal Reserve Board's Chairman, Alan Greenspan, has been one of the loudest cheerleaders for deficit reduction. But a one-of-a-kind GAO report about Federal Reserve expenditures between 1988 and 1994 shows us that Chairman Greenspan apparently hasn't been practicing what he preaches.
A few weeks ago, the GAO released the final version of its comprehensive report about the management of the Federal Reserve System. This report, which took the GAO over 2 years to assemble, uncovers disturbing financial practices and management failures within the Federal Reserve System. The report is packed with examples where the Fed could substantially trim costs, and makes specific recommendations for changes in Fed operations. Unfortunately, the Federal Reserve has already dismissed most of the GAO's recommendations as irrelevant or unnecessary.
The GAO report shows that during the late 1980's and early 1990's that Federal Reserve expenditures jumped by twice the rate of inflation. While Fed employee benefits and travel costs are out-pacing inflation, the rest of the Federal Government has been downsizing. For example, between 1988 and 1994, Federal Reserve employee benefit costs skyrocketed by nearly 100 percent--as compared to about 60 percent for the Federal Government--according to the GAO report.
The report also reveals that over 120 Federal Reserve employees actually make more than Chairman Greenspan. In fact, overall personnel cost increases at the Federal Reserve represented over 70 percent of the total growth in the Fed's operating expenses during the years examined by the GAO. This runaway spending is remarkable given Chairman Greenspan's rhetoric about the need for belt-tightening in the rest of the government.
Inexplicably the Federal Reserve also keeps a $3.7 billion cash surplus account of taxpayer's money to protect against losses, despite the fact that the Fed hasn't suffered a loss for 79 consecutive years.
Senator Reid and I are introducing legislation today to address these problems. Our bill, the Federal Reserve Fiscal Responsibility Act of 1996, includes many of the changes recommended by the GAO. It would do the following:
First, the GAO, in consultation with the Federal Reserve, will identify and report to Congress a list of the Federal Reserve System activities that are not related to the making of monetary policy. After the report is completed, all nonmonetary policy expenditures, as identified by the GAO, would be subject to the congressional appropriation process. We do not intend to inject politics into monetary policy with this provision. However, over 90 percent of the Fed's operations have nothing to do with interest rate policy according to the GAO. And there is simply no good reason why the Fed's nonmonetary expenditures are immune from the same kind of oversight and review required of other Federal agencies.
Second, the Federal Reserve is required to immediately return more than $3.7 billion of taxpayer's money that has unnecessarily accumulated in its surplus account to the Treasury. In addition, the bill asks the GAO to determine the extent to which any of the Fed's future net earnings should be transferred to the general fund of the Treasury each year.
Third, the regional Federal Reserve banks will be subjected to annual independent audits. This provision merely codifies what the Federal Reserve has been doing for the most part in recent practice.
Finally, the Federal Reserve will be required to follow the same procurement and contracting rules that apply to other Federal agencies. These rules should help to prevent the kinds of favoritism highlighted in the GAO report and increase competition among contract bidders with the Fed. This requirement ought to substantially reduce procurement costs on a system-wide basis.
I invite my colleagues to join us as cosponsors of this much-needed legislation.
Mr. REID. Mr. President, I rise today with the Senator from North Dakota to introduce legislation which we believe will improve fiscal management within the Federal Reserve System.
In September 1993, Senator Byron Dorgan and I requested a General Accounting Office [GAO] investigation of the operations and management of the Federal Reserve System [Fed]. We were concerned because no close examination of the Fed's operations had ever been conducted before. As Congress scrutinizes each Federal expenditure in an attempt to balance the budget, it is imperative that we be well informed on all activities that affect the Government's finances. Surprisingly, this GAO study was the very first look into the internal operations of the Fed and, to date, there has never been an annual, independent audit of the Nation's central banking system. Further, because of its self-financing nature, the Fed's operating costs have largely escaped public investigation. It was high-time we opened the door and examined the workings of this large and influential public entity.
The landmark GAO report, issued in June 1996, raises serious questions about management within the Fed. One of the most astonishing findings of this comprehensive, 2-year study was that the Fed had squirreled-away $3.7 billion in taxpayer money in a surplus fund, which it claims is needed to cover system losses. In its entire 79 year history, however, the Fed has never operated at a loss. The GAO report indicates that this fund could be safely reduced or eliminated and returned to the Treasury Department, as is standard practice with surplus revenues. It is nonsensical for this cash to be sitting idle at the Fed instead of being used to reduce the deficit.
While the rest of the Federal Government has tightened its belt and down-sized, the GAO report revealed that the Fed has enjoyed enormous growth in its operating costs and highly questionable growth in its staffing. The GAO study found that operating costs at the Fed have grown 50 percent between 1988 and 1994, a rate twice that of inflation and much greater than overall Federal discretionary spending. The study also uncovered salary growth at a rate of 44 percent between 1988 and 1994. During the same time period, personnel benefits skyrocketed nearly 90 percent. Further, the GAO report revealed nonuniform travel policies and an excessive 66 percent increase in travel expenses.
The picture the GAO report paints of the internal management of the Fed is one of conflicting policies, questionable spending, erratic personnel treatment, and favoritism in their procurement and contracting policies. The report makes it clear that the Fed could do much more to increase its fiscal responsibility, particularly as it urges parsimonious practices by all other Federal agencies.
The compelling evidence offered by the GAO report indicates that many of the practices of our Nation's central bank should change, especially when their budgetary excesses represent a direct cost to taxpayers. The surplus fund, along with increasing bloat, perks, and benefits begs greater accountability. For these reasons, I rise today with my colleague from North Dakota, Senator Dorgan, to introduce the Federal Reserve Fiscal Responsibility Act of 1996. This measure follows some of the recommendations of the GAO report and seeks to improve the Fed's fiscal management.
The Federal Reserve Fiscal Responsibility Act of 1996, requires the Comptroller General of United States, in cooperation with the Fed Board, to identify the functions and activities of the Board and of each Fed bank which relate to U.S. monetary policy. After September 30, 1997, all nonmonetary policy expenses of the Federal Reserve System will be subject to the congressional appropriations process. Surprisingly, the monetary policy expenses represent less than 7 percent of the Fed's annual expenses. Our bill would subject the Fed to the cost reduction pressures that affect other public agencies, and ensure congressional oversight over the Fed's questionable spending of taxpayer money.
Further, the Federal Reserve Fiscal Responsibility Act addresses the disturbing matter of the surplus fund. It requires the transfer of all Fed surplus funds to the Secretary of the Treasury for deposit in the general fund of the Treasury. This would occur 30 days after enactment of the legislation. Annually thereafter, the Comptroller General of the United States will determine what percentage of the net earnings of the Federal Reserve banks should be deposited back in the Treasury. This provision would free-up this money for use in deficit reduction.
Our bill also will apply regular Federal procurement procedures to the Fed Board and to each Federal Reserve bank. This will eliminate the possibility of favoritism and conflict of interest in procurement and contracting policies.
Finally, and perhaps most significantly, our measure would require an annual, independent audit of the Fed. An annual audit is fiscally sound policy which would instill greater public confidence in our banking system.
I want to make it very clear that I am not attempting to interfere with, or impugn, the monetary policy of the Fed. I am merely seeking greater accountability in the operating expenses and internal management of one of our most influential institutions.
I look forward to greater discussion of this issue by Congress, and encourage the committee to give favorable consideration to our legislation.
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By Mr. WARNER (for himself, Mr. Ford, Mr. Robb, Mr. Moynihan, Mr.
Simpson, Mr. Cochran, and Mr. Glenn):
S. 1995. A bill to authorize construction of the Smithsonian Institution National Air and Space Museum Dulles Center at Washington Dulles International Airport, and for other purposes; to the Committee on Rules and Administration.
the smithsonian institution national air and space museum dulles center at washington dulles international airport authorization act of 1996
Mr. WARNER. Mr. President, I am pleased to introduce legislation on behalf of myself, and Senators Ford, Robb, Moynihan, Simpson, Cochran, and Glenn. This legislation would authorize the Board of Regents of the Smithsonian Institution to construct the Smithsonian Institution National Air and Space Museum Dulles Center at Washington Dulles International Airport. The legislation clearly states that no appropriated funds may be used to pay any expense of the construction of the center. Funds for the construction will be privately raised and in fact this legislation permits the Smithsonian to move forward with a fundraising drive.
In 1983, the Smithsonian Board of Regents first approved the National Air and Space Museum plan to expand at Washington Dulles International Airport. In 1993, after 10 years of hard work by the Smithsonian Institution, the Virginia congressional delegation, five Virginia Governors, and many local officials, Congress passed and the President signed legislation authorizing the Smithsonian Institution to plan and design the National Air and Space Museum Extension at Washington Dulles International Airport.
This legislation would serve to further the objectives of the National Museum Amendments Act of 1965 which directs the National Air and Space Museum to ``collect, preserve, and display aeronautical and space flight equipment of historical interest and significance.''
I believe that it is accurate to state that the National Air and Space Museum now holds the most impressive and significant collection of air and spacecraft in the world. However, due to the limited exhibition space in The Mall building coupled with the size and weight of many of the artifacts, only 20 percent of the museum's collection is on display. Therefore, such significant air and spacecraft as the Boeing 367-80, the Saturn V launch vehicle, the Boeing Flying Fortress, the B-29 Enola Gay and the space orbiter Enterprise cannot be displayed and enjoyed by the nearly 10 million visitors the museum receives each year. In addition, the museum's space limitations inhibit the interpretation of aerospace technology's significant contribution to America and the possibilities which it holds for the future.
The Air and Space Museum Dulles Center will allow approximately 65 percent of the Smithsonian's air and spacecraft collection to be on display. The center will also allow visitors to view the restoration operations and see first-hand how historic air and spacecraft are preserved.
Mr. President, I call on every Member of the Senate to support this legislation which will make the expansion of the National Air and Space Museum at Washington Dulles International Airport a reality. Air and space technology has and will continue to greatly impact every facet of our lives. The creation of this extension will enable visitors from all over the world to experience first-hand the magnitude and significance of America's technological achievements.
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By Mr. BIDEN:
S. 1996. A bill to amend the Violent Crime Control and Law Enforcement Act of 1994 to allow certain grant funds to be used to provide parent education; to the Committee on the Judiciary.
The Healthy Families Act of 1996
Mr. BIDEN. Mr. President, I rise to offer a bill that I believe represents an important step forward in the fight against child abuse and crime.
This legislation will make healthy families programs eligible for funding under the local crime prevention block grant, in the 1994 crime law. Essentially, this bill would add the healthy families program to the list of prevention programs eligible for funding under the block grant.
The link between child abuse and later involvement in violence and crime is becoming ever more clear. According to a 1992 Justice Department report, 68 percent of youths arrested had a prior history of abuse and neglect, and abused girls were 77 percent more likely than nonabused girls to be arrested as juveniles.
The healthy families initiative has proven to be very successful in combating this cycle of violence. The program was pioneered in Hawaii in the 1980's. According to the Hawaii Department of Health, 2,254 at-
risk families received healthy families services over a 5-year period. Out of that total, abuse was reported in only 16 families. This success shows that the program was able to prevent abuse in 99.3 percent of at-
risk families in Hawaii.
The success of this program is based on the voluntary, comprehensive, and culturally appropriate home visitor systems. These systems provide parenting education that focuses on parenting skills, child development, child health, and support services for new parents, in order to prevent or decrease the risk of child abuse.
As a result of this success, the program has now spread to other communities throughout the United States. The money which would be provided under the block grant, would help other communities create these greatly needed healthy families programs.
Spending money on child-abuse prevention is a sound investment. Not only will it create future savings in the judiciary system and other social services, but even more importantly it's an investment in the lives of our children.
Mr. President, I ask unanimous consent that the text of the legislation I am introducing today appear in the Record.
The being no objection, the bill was ordered to be printed in the Record, as follows:
S. 1996
Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,
SECTION 1. PARENT EDUCATION SYSTEM.
Section 30201(a)(2) of the Violent Crime Control and Law Enforcement Act of 1994 is amended by adding at the end the following:
``(O) Voluntary, comprehensive, and culturally-appropriate home visitor systems that provide parenting education that focuses on parenting skills, child development, child health, and support services for new parents to prevent or decrease the risk of child abuse. To avoid duplication of services, a system developed pursuant to this paragraph shall be coordinated with other organizations that provide services to children, particularly infants.''.
By Mr. SIMON:
S. 1997. A bill to clarify certain matters relating to Presidential succession; to the Committee on Rules and Administration.
the Presidential Succession Clarification Act
Mr. SIMON. Mr. President, today I introduce the Presidential Succession Clarification Act.
Much has been said and written about the laws of succession following the death of a sitting President. In general, these laws clearly and precisely provide for the transfer of Presidential power.
The laws of succession, however, do not adequately address the possibility that a Presidential candidate might die during the voting period itself--by that I mean during the period beginning roughly with the popular election in mid-November and ending with the formal naming of the President-elect in early January.
A candidate's death during this 2-month period could seriously disrupt the voting process and raise doubts about the election results. The seriousness of these problems would depend on the precise point in time at which the death occurred. A hearing that was held in the 103d Congress on this subject highlighted the various scenarios in which legal ambiguities could lead to electoral crises.
Broadly speaking, the act, which I introduced in the last Congress, addresses three distinct situations:
First, let us suppose that a Presidential candidate dies after the electoral delegates have cast their votes but before those votes are counted. If the deceased would have won the election, who is now President elect? Scholars disagree on the answer.
Second, suppose that a major party candidate dies immediately before the popular election, or immediately prior to the time that the electoral college delegates vote. Would it not make sense to give the voters a couple of weeks to adjust to this unsettled situation?
Third, suppose that no candidate wins a majority of the electoral votes, and that the election is thrown into the House of Representatives as a result. If one of the candidates should die at this point, is the House permitted to consider an alternative candidate?
The act provides answers for each of these, admittedly complex, questions. None of these scenarios, of course, is likely to occur during any election cycle. But any one of them could lead to confusion and uncertainty at a time when clarity and stability would be vital. Prudence dictates that we should act now, while we have the time for calm reflection, rather than wait for a possible crisis to catch us unprepared.
By Mr. ASHCROFT:
S.J. Res. 57. A joint resolution requiring the Congressional Budget Office and the Joint Committee on Taxation to use dynamic economic modeling in addition to static economic modeling in the preparation of budgetary estimates of proposed changes in Federal revenue law.
Growth Economic Agenda Joint Resolution
Mr. ASHCROFT. Mr. President, the joint resolution I am introducing lays the groundwork for the progrowth economic agenda of the next millennium. Senator Abraham, Senator Craig, Senator Grams, and Senator Kyl have joined with me in offering this proposal.
The method of analysis we now use to determine how much a tax cut costs the Government, or a tax hike costs the taxpayers, is hopelessly inaccurate. For example, the 1990 luxury tax increase took in $14 million less than the $31 million the Joint Tax Committee [JCT] predicted it would in fiscal year 1991. The 1986 Tax Reform Act lowered income tax rates while hiking capital gains taxes. The Congressional Budget Office at the time underestimated income tax revenues over the following 3 years by $56 billion and overestimated the 5-year take from capital gains tax revenues by $115 billion. It has also been established that the CBO grossly overestimated capital gains tax revenues by over 100 percent in most years between 1989-95. Finally, the fiscal year 1991 budget, issued before the 1990 budget summit at Andrews Air Force Base, contained a 5-year forecasting error of $1 trillion.
Every Member of Congress relies on CBO's and the Joint Tax Committee's [JCT] projections in deciding how to vote on legislation. Quite simply, we cannot make good decisions if we do not have good data.
These flawed calculations were made using a static economic model that assumes generally that Americans do not change their behavior, such as their spending habits and investment levels when Congress saddles them with higher taxes. The consistent level of inaccuracy in static economic analysis threatens our ability to both reduce the deficit and reduce the current unprecedented tax burden on the American public.
The problem with static economic analysis is its failure to account for the impact that changes in the level of taxes, or the amount of Government spending, will have on the average citizen's behavior. Static estimates assume that the economy's overall performance is generally unaffected for the most part by changes in policy, regardless of how much individuals or businesses must pay in taxes. When we assume that Americans will not change their spending and investment patterns to avoid paying new taxes, we ignore human nature. People generally seek to maximize the value of their dollars and their paychecks.
One well-known apostle of the static economic model; the current Chairman of the Council of Economic Advisors, Laura Tyson, recently went so far to as to state that ``* * * there is no relationship between the levels of taxes a nation pays and its economic performance.'' Such an attitude is the equivalent of an ostrich hiding its head in the sand. Dynamic economic analysis is the principal tool used in private firms and most universities which make estimates and construct models for economic analysis for the private sector.
One of the most successful economic models is the dynamic model used by Lawrence H. Meyers & Associates, an economic forecasting firm in St. Louis. Not only has this model received the Annual Blue Chip Economic Forecasting Award in 1993 and 1995, but Lawrence Meyers himself was recently appointed by President Clinton as a Governor to the Federal Reserve.
By relying on static analyses, Congress is limited to a dangerously myopic and usually inaccurate view of how our laws and our actions affect the Nation. There is a formidable argument that static analysis has played an integral role in exploding our deficits. That is because static analysis often overestimates the Government's revenue from a tax increase and then relies on such overestimates as the basis for projecting decreases in the Federal deficits and the Nation's debt. As a result the projected revenues never materialize and annual deficits increase.
This problem is compounded by the fact that static analysis also generally underestimates the actual cost to the Government of spending increases and thus contributes to even larger than expected budget deficits. Such inaccurate predictions of what programs will cost lead legislators to make bad decisions. This phenomenon helps explain why every dollar raised in higher taxes has traditionally resulted in $1.58 in new Government spending since 1947.
By adding a more accurate method of analyzing fiscal proposals, Congress will have better information as it evaluates legislation. Adding dynamic scoring analysis will help us eliminate Congress' institutional bias toward higher taxes, increased spending, bigger deficits, and a ballooning national debt.
Mr. President, I emphasize that this resolution does not seek to replace the current static analysis model. It merely states that dynamic estimating techniques should also be used, in addition to current techniques, in determining the fiscal impact of proposed changes in Federal revenue law. Under this resolution, the Joint Committee on Taxation [JCT] and the Congressional Budget Office [CBO] would prepare an estimate of each proposed change in Federal revenue law on the basis of assumptions that estimate the probable behavioral responses of individual and business taxpayers, and the macro-economic feedback effects of any proposed change. This requirement will only apply to changes in the law which would have an effect of $100 million or more.
I want to note that this proposal is a companion measure to House Resolution 170, introduced by Representative Tom Campbell of California and to a similar proposal included in the 1997 legislative appropriations bill passed by the House. Tom Campbell has worked tirelessly to promote a pro-growth agenda. He has refused to sacrifice the standard of living of hard-working Americans on the altar of static economic analysis.
Dynamic economic analyses of tax cut proposals would take into account the acknowledged growth effects of tax cuts on the American economy. In fact, these growth effects could be used in calculating the amount of spending cuts needed to offset a tax cut so that we accurately measure any reduction in revenue and do not increase the deficit. For example, using dynamic scoring for the payroll tax deduction I proposed--The Working Americans Wage Restoration Act S. 1741--the tax deduction would be budget neutral in the first year. In other words, the relief offered by the payroll tax deduction would generate enough new revenue by growing the economy, that the proposal would pay for itself.
Here is how. Based on a preliminary analysis, the payroll tax deduction is projected to increase the Gross Domestic Product [GDP] by 0.5 percent annually. According to the Office of Management and Budget, a 0.5 percent rise in GDP would expand the tax base and increase Federal receipts by $30 billion per year--more than enough to pay for the payroll tax deduction in the first year. However, the Budget Act requirement that tax cuts be paid for by spending cuts would still apply. Dynamic analysis would simply allow lawmakers and the public to understand the growth effects and judge this proposal's--and other proposals'--worthiness accordingly.
In calculating a tax cut's dynamic economic effects, the government would be more realistic in its view of how government economic policies affect the economy. Under the current system of static analysis, our budget forecasters produce skewed numbers causing Congress to make flawed decisions that drain the wallets of working Americans.
This proposed resolution also opens up the congressional economic analysis process to much needed sunshine. Presently, we draft changes to the Federal Tax Code, submit these changes to the Joint Committee on Taxation for a revenue estimate and wait for the magic numbers to appear. It is time to bring sunshine into the black box of Federal forecasting. This resolution would do just that. Any report made by the JCT or the CBO that contains an estimate of revenue effects must be accompanied by a written statement fully disclosing the economic, technical, and behavioral assumptions that were made in producing both the static and the dynamic estimate.
Last, under this joint resolution the JCT and the CBO may enter into contracts with universities or other private or public organizations to perform dynamic analysis or to develop protocols and models for making such estimates.
By reforming the way we calculate the economic effects of congressional proposals, we pave the way for an overall lowering of the average American's tax burden by reducing the current forecasting method's prejudice against pro-growth policies. This resolution will simply provide more information to Members of Congress and the public so that Congress can better determine the benefits of proposed legislation. It will open up the budget forecasting process and permit more tools of measurement, so that over time we will have a clearer and more accurate understanding of the effects of the laws we pass.
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