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.
“DEFICIT REDUCTION” mentioning the Federal Reserve System was published in the Senate section on pages S7878-S7880 on July 16, 1996.
The publication is reproduced in full below:
DEFICIT REDUCTION
Mr. DOMENICI. Mr. President, let me just take a few minutes of the Senate's time to talk about something that the President of the United States put in the news a bit last night, and then his various Cabinet people today have disseminated across the spectrum, to the media, and to various committees here in the U.S. Congress. It is called the Mid-
Session Review of the 1997 Budget. I only hold that up to show you the great lengths the President and the White House are going to to make the case that the deficit reduction that has occurred in the last 3\1/
2\ years, as if that deficit reduction was attributable to things that the President of the United States had recommend as a matter of policy.
I would like to address that issue today in some detail. It has not been easy to get this point across to those who are observing the fiscal policy of our country. So let me start by saying today there is a new report out. The President's budget office suggests that this year's deficit will be reduced to $117 billion. This is more optimistic than the recent Congressional Budget Office estimate, this $117 billion.
Given that this is an election year, it should come as no surprise that the Clinton administration comes out crowing this morning. But the Clinton forces claiming credit for the deficit reduction that has occurred during the past 3 years is a little like the rooster taking credit for the sunrise.
Do not get me wrong. I am very happy that the deficit has declined these last 3 years. I have spent my Senate career working on various approaches to trying to balance our fiscal books. But I also understand why the deficit has declined. And it is not because of any dramatic action by this administration. The bulk of the deficit reduction has been due to reestimates of the money needed to bail out ailing savings and loans. Let me talk a minute about what that means.
When you put a budget together, and you have a program like the bailout of the savings and loans, which was not complete, you estimate how much it is going to cost the next year and the next year. What happened, plain and simple, is that the estimates of what it was going to cost to complete the bailout of the savings and loans across America was estimated way too high.
What happened is that eventually, on the President's watch, the reality, not the estimate, occurred. What did it actually cost, not, what was it estimated to cost. So that when the President, in this mid-
session review, says that the deficit has been reduced by $406 billion, it is saying that the estimates were wrong and that the reality is that we are spending less for certain things.
The bulk of the deficit reduction has been due to estimating the money to complete the bailout of the savings and loans. That is one aspect. Second, a very big amount is attributable to the President and the Democratic tax increases, and last, to spending curbs by the Republicans. So let me look here and give you this in a pie chart.
The only deficit reduction in this chart--in this pie graph--that is attributable to policy changes by the President of the United States is this red piece of the pie, 30 percent. I hope the occupant of the chair can see what it is. Tax hikes of the largest tax increase in history. And $121 billion of that occurred during the period of time that the President is talking about cutting the deficit in half. So we will give him one positive policy change credit. And it is $121 billion in tax increases.
But now let us look at all the rest. The 6 percent in green here is called spending cuts. Mr. President, and fellow Senators, the spending cuts are $26 billion, all of which came in the spending caps imposed by the budget that we prepared here on our side that the President ultimately accepted in the appropriations process. So I do not believe those are positive policy changes recommended by the President, because if you look at the President's budgets, he would not have had those coming down, he would have those going up. So we should get credit for that. But we said you cannot spend as much as you want. Clearly, he would not get credit for cutting the budget and cutting the deficit had we let him have his way.
Now, looking here at 48 percent, this big orange part of the chart, that is made up of reestimates. The largest one is $80 billion. That means, of the $406 billion that this Mid-Session Review says the deficit came down over 3 years, of that $406 billion, $80 billion of it comes from the fact of the inability of Government budget analysts to accurately forecast the cost of the savings and loan bailout.
In other words, it would not matter who was President, it would not matter if any budget was adopted, it would not matter if Congress did anything, $80 billion of this reduction in the estimated deficits would just happen. In other words, we got up one morning and there is $80 billion worth of savings. That is why I was kind of prompted, in analyzing this, to say that taking credit for reducing the deficit during the past 3 years is a little like the rooster taking credit for the sunrise. I stand on that. The more I think of it and explain it, the better it sounds and the better it explains what is going on.
Moreover, it is interesting to note that the policies put into place under George Bush resulted in the dramatic reduction in the S&L program costs, which the President now would like to take credit for. I do not believe there is any real credit. We spent way too much. But President Bush took the blame on the upside. When we finally resolved the problem and overestimated the cost, President Clinton would like to take credit for that $80 billion overestimate as part of deficit reduction.
Second, some in the administration say the economic improvements have brought down the deficit. The truth is, improvements in the economy over the past 3 years have had only a marginal impact on the deficit, only 13 percent, roughly. That is about $50 billion in reduction in the estimate since 1993.
Now, why is it small, some would say? Well, it is not small at all. The truth of the matter is we were estimating a pretty robust economy in those budget years, those 3 years. It did not do much better than the estimates that were in our budgets and in the documents assessing the budget by the Congressional Budget Office.
Now, there are mistakenly claims of credit for this economic dividend. But, in reality, it is tied to an economic recovery that began 7 quarters before the President's inauguration and 10 quarters before his economic plan passed the Congress. In all honesty, we must give a lot of credit to the Federal Reserve System that steered this prudent course, keeping inflation in check and economic growth positive.
Exactly what did the Clinton administration do to help lessen the deficit as reflected in this Mid-Session Review? What did the Clinton administration do? In short, it raised taxes. Now, for those who think raising taxes is the primary way to reduce the deficit, they can put this up on the credit side. They get credit for that, because the only significant policy change--that is, a President says, ``Change this,'' Congress changes it, and something good happens to the deficit--the only one that they can claim credit for, all of those assembled working for the President, is that one that I have just described, the $121 billion of tax increases during those three budgets. That $121 billion is an $8 billion tax increase, coupled with a few billion in defense cuts. That is all the deficit reduction the Clinton administration has gotten approved.
Now, frankly, Republicans, meanwhile, have been working the other side of the Federal ledger, attempting to control the incessant growth in Washington of spending programs. Republicans passed significant reforms in Federal programs and hundreds of spending cuts. We worked to eliminate needed bureaucracy, cut staff, slow the growth of Federal programs, and send more power back to the people at home in their States and communities. It has been Republican leadership that has been attempting to pressure the Clinton White House to cut spending.
Unfortunately, our attempts to reduce Federal spending have been consistently opposed and eventually vetoed by President Clinton. But we overcame their opposition and were still able to save $26 billion in appropriated accounts. Remember, a little more than a year ago, the Clinton White House was promoting a budget plan that called for $200 billion deficits as far as the eye can see. As this election year approaches, the President has turned 180 degrees now and supports a balanced budget. But imagine what the deficit would have looked like if the President's huge spending proposals had not been blocked by congressional Republicans and had become law. Remember that President Clinton planned the 1993 fiscal stimulus package that would have spent money, not saved money. The ill-fated, expensive health care plan would have spent huge amounts of money, not saved money. Had we followed the lead of the President and passed these plans, the deficit would be soaring, not coming down. There would not have been any reduction in the deficit that policies would have reflected.
Let me close by saying my greatest frustration with the budget debate has been our inability to make fundamental changes to the major Federal entitlement programs and, because the deficit has declined these last 4 years, some politicians may try to hoodwink the American public into believing the problem has been solved, but it has not because the automatic Federal spending programs have been left essentially unchanged. Despite the clamor of the last year, despite the clamor today of the Mid-Session Review, the American public early into the next century will find just how elusive any real, significant deficit reduction has been in these last 4 years.
The White House has focused solely on tax increases to reduce the deficit and taking credit for reestimates that would have happened whoever was President and whether or not a budget was even produced. This is not a real, long-term solution. Despite the White House deficit whitewash, the fact is that even with our current modest economic growth, the Federal deficit will again be growing next year and skyrocketing out of sight, burdening our children with absolutely impossible obligations in the next century.
Before we get too excited about the progress we have made on the deficit, keep in mind the real heavy lifting which has not yet been done and that the real test of leadership on the budget lies ahead. As the White House exalts the improved deficit estimates, I say to the American people in a straight-forward way, we have proposed how we would head off the real train wreck, and we anxiously wait for action.
I yield the floor.
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