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counts are complicated because there are a number of States that have submitted different petitions to the Congress. Nevertheless every State in the Union except Connecticut and Vermont have adopted a balanced budget requirement at the State level. Approximately 80 percent of the American people—I think about the same percentage that favor direct election-support a constitutional amendment for a balanced budget.
Those who scoff at the States efforts to restore fiscal responsibility to Washington ignore the constitutional role of the States as the ultimate check against the Federal Government's abuse of authority.
The message the States are trying to deliver the Congress should be met with sober reflection, rather than threats of cuts in State aid to bring the States into line. This kind of threat is, in effect, legislative blackmail that I do not believe has much place in the argument of whether or not we submit a constitutional amendment to the States.
Over the past 50 years, Government spending has skyrocketed, although perhaps in some cases because of necessity. In 1929 total government expenditures, Federal, State, and local, amounted to 10 percent of our gross national product. Last year, that percentage was up to 38 percent. Some way has to be found, hopefully on a bipartisan basis, to break the cycle of escalating Federal spending and taxation. I have concluded that the only viable way to break this cycle is through a constitutional balanced budget amendment. Such an amendment would at last allow Congress to say “no,” and it will force Congress to make the necessary hard decisions.
The explosion of Government spending has resulted in the growing tas burden on the American people. Currently Federal taxes drain more than 20 percent of our gross national product, and Federal taxes are consuming an ever-increasing percentage of taxpayers' personal income.
Moreover, as the tax system is now structured, inflation propels taxpayers into higher and higher tax brackets, even if their real' income remains the same. One way to address that particular question is through tax indexing, which is another matter that I think needs some attention. Nevertheless, if we continue to spend, we will continue to have inflation, and therefore tax indexing will not really address the underlying cause of inflation.
When the Government runs deficits, it pumps more money into the pocketbook of citizens than it takes from them in taxes, since more money is chasing the same number of goods. In the long run, the price of goods must increase. That is one of the root causes of inflation.
Despite the repeated increases in taxes, Federal spending has persistently outstripped available revenues. Since 1950, the budget has been balanced in only 5 years. Even more alarming is the fact that the budget has not been balanced at all during this decade.
So, Mr. Chairman, there is no doubt that there is a need to address the problem. I would agree that State legislative bodies may have taken the easy way out, passed a resolution, then passed the buck to the Congress. But now the buck is here and I believe these hearings are a responsible effort to address the problem. So I commend the chairman and Senator Hatch and others for giving their time to this most worthwhile effort.
On January 15 I introduced Senate Joint Resolution 5, a proposed constitutional amendment that comprehensively addresses the problems of deficit spending, excessive Federal expenditures, and excessive taxation. This proposal pulls together the thoughts of a number of respected economists and fiscal experts.
Senate Joint Resolution 5 would impose three new limitations on the Federal Government.
First: It would directly limit Federal spending, which I think we must address. It is projected that for the next fiscal year, Federal spending will be approximately 22 percent of the gross national product. This level is simply too high,
Senate Joint Resolution 5 contains a phased-in spending limitation that would require lowering spending to 18 percent over the next 3 years. In order to maintain some flexibility to deal with unknown contingencies, spending would be permitted to rise above the limitation, if the increase is approved by a two-thirds vote of Congress. In my view the proposal would provide for more discipline, but it would still give the flexibility or the escape hatch that is necessary.
Second: Senate Joint Resolution 5 would limit Federal taxation to 18 percent of the gross national product. This limit will insure potential tax relief to the overburdened taxpayer. Again there is flexibility built into the limitation on taxation since that limit can be exceeded with the concurrence of two-thirds of both Houses of Congress.
Finally: Senate Joint Resolution 5 would require a balanced budget unless both Houses of Congress approve the deficit by a two-thirds vote.
By including an escape hatch we have tried to respond to some of the just criticisms about locking the Congress in and making an irresponsible effort to control the budget.
This balanced budget provision has two innovative features.
First: Deficits in the Federal budget can be run only 4 out of 9 years.
This will give Congress ample leeway to manage the economy and respond to economic emergencies. Second: Any deficit must be repaid within 4 years. This feature should eliminate any additional longrun growth of the national debt.
Senate Joint Resolution 5 is not a "gimmick," or a "quick fix," as some of the critics have charged. I think it does represent a fundamental philosophical shift toward greater fiscal discipline and toward a smaller, necessarily more efficient Federal Government.
By its terms, Senate Joint Resolution 5 would permit a brief transition period to permit compliance with its dictates. The proposal is also drafted with enough flexibility to permit an effective response to any unforeseen contingencies or unexpected economic circumstances. The net result, of course, is subject to refinement, change, and amendment, and fine tuning. It is a flexible and workable system that requires reasonable fiscal restraint.
Mr. Chairman, again I appreciate the chance to present my views and to talk specifically about my amendment. I thank the committee for listening.
Senator Bayh. Senator Dole, I appreciate your being here, as well as the interest that you have evidenced by introducing a proposed constitutional amendment. We will look very carefully at that proposal, as we will at all the others.
You have touched on a matter that has caused me some concern, I guess both from the standpoint of someone who has a little responsibility in this body to deal with this problem as well as the memories I hail when I was presiding officer in one of the houses of the legislature in Indiana. So, I guess it's possible to look at it from two different perspectives.
There has been a good deal of talk about buckpassing, between States and Federal Governments, and that is not really a responsible way in which problems are resolved.
Do you have any thoughts about how we can pull together the total public spending package and address the problem of public spending from the standpoint of not only the Federal Government but the State and local government?
If you look at the tendency to increase spending beyond revenue, that there has been a much larger increase percentagewise in the States. That's why I opened my rather elongated question here with the previous recognition of the size of the total spending picture.
But do you think that there is any way in which we can pull together local officials, State officials, as well as Federal officials, to try to see that there is some effort to tighten the belt at all levels?
Basically, I have always been sort of a home-rule person and think that more of this ability to raise revenues and solve problems ought to be dealt with at the State level. When I went to the State legislature, I found a lot of State problems that I was dealing with, and had the local governments stood up and done what they should have done, we wouldn't have been dealing with them at the State level. And if we don't deal with them at the State level, then they end up coming to Washington.
So, it seems to me if we're going to address this problem, we have to do more than deal with the problem of Federal spending. We have to deal with how we move some of this responsibility back to the local level. Have you given any thought to that?
Senator Dole. I do not have any specific remedy, but I have given thought to it as a member of the Budget Committee, and I sympathize. And I was not here to hear Senator Muskie's testimony but I assume he discussed some of the problems that he sees with the constitutional amendment for a balanced budget. I understand that the easiest thing for the State legislature to do sometimes is to pass a resolution to pass the issue up to the Congress. Maybe we could pass an amendment saying the States ought to cut their spending, and the States could pass one saying local governments ought to cut their spending,
But I think we have to address the entire problem. I do not have a plan whereby that would be done, but certainly we talk about responsible attitudes in the Congress. Many States, as Senator Muskie probably pointed out with specificity, have budget surpluses. Many States are able to stay within their constitutional limits and statutory limits for a balanced budget by requesting additional Federal funds.
I do not have a complete answer, but I suggest that we must address it. The problem is not confined solely to the Federal Government. The only spendthrift body is not the Congress. I assume some of the State legislative bodies could equal us on a smaller scale.
Senator BAYH. I guess together we're going to have to give a lot more thought to this whole problem. And I know, as a member of the Budget Committee, you have already given a good deal of thought to this, We appreciate your taking the time to be with us.
Senator Hatch? Senator Hatch. I appreciated your statement as well. I am intrigued by your constitutional amendment because yours appears to be the only one, at least from my cursory examination, that not only provides for a balanced-budget provision but for a spending limitation
as well, And there are many people who feel that if you balance the budget, all Congress will do is increase taxes so they can spend all they want, anyway.
But your bill has a spending limit as a percent of gross national product as well—not only the balancing of the budget, but also the restraint on spending.
So, I am very intrigued with your amendment, and I might add that Senator Muskie, who has been the major critic here today of the constitutional amendment approach and certainly a Constitutional Convention approach, was extremely concerned about these two approaches, thinking that it might be better to work within the normal budgetary process through the Budget Committees of the House and Senate.
Do you have the same opinion that Senator Muskie has, that we've got to get more restraint in the Congress and more discipline in the Congress to live w thin the budget system that we have and that would be the best system because of the economic complexities which would be disregarded by a constitutional amendment?
Senator DOLE. In fact, I was able to reserve No. 13. I have introduced S. 13, which would amend the Budget Act, which would do pretty much what I tried to do with the constitutional amendment. Of course, a different committee has jurisdiction there. Having served on the Budget Committee for 4 years, I can certainly understand.
Again, I think, we support Senator Muskie, we support Senator Bellmon, we support the Congress by giving them the legislation. Right now they're taking all the guff. You know, we all send them down our committee jurisdictional requests. We always add a few additional funds, and they have to make the tough choices.
So, I want to help Senator Muskie, and I think we can do that by amendments to the Budget Act if we can't go the constitutional route, which, I think, is preferable because it takes, under my amendment, two-thirds to increase taxes or increase spending or to have a budget deficit, through the amendment route. And, as you know, 51 percent can do it if we amend the Budget Act. We can always change it.
Senator Hatch. Do you feel that our present budget system in the Congress is really working with regard to satisfying the demands of the people that we ultimately reach a balanced budget and keep spending under control?
Senator Dole. I do not think it's working, although I believe there has been every effort to make it work. I commend Senator Muskie and Senator Bellmon for their efforts. They have got the toughest job in town. They have to say “no” more than anyone.
I believe that in the long run they will make a lot of friends in their efforts. They may not think so, but maybe history will record that they did an outstanding job. There is no doubt in my mind that Senator Muskie is totally dedicated to a balanced budget.
But it also seems to me that one way to assist him and other like-minded Members of Congress, is to pass a constitutional amendment. I do not shrink and tremble with fear that we might have a Constitutional Convention. Nevertheless I would hope to draft our own amendment—there is enough wisdom on this committee and in the Congress and send it out to the States.
I know we are a long way from having a Constitutional Convention. By the time you get the court cases resolved and some of the conflicting resolutions, it might be several years at best. One way to remove that pressure is to send an amendment from the Congress out to the several States.
Senator Hatch. Well, I appreciate your testimony. I read it, and it's very persuasive in many ways. I appreciate the efforts that you have put forth.
Senator Bayh. Thank you very much, Senator Dole. We will look forward to working with you.
Senator Dole. Could I also include in the record a series of questions and answers to those questions, which are raised from time to time with respect to Senate Joint Resolution 5?
Senator Bayh. Sure. We would be glad to have those. Senator DOLE. And a copy of my resolution? Senator Bayh. Right. (The prepared statement and materials referred to by Senator Dole follow :)
PREPARED STATEMENT OF SENATOR BOB DOLE Mr. Chairman and Members of the Subcommittee on the Constitution, I appreciate this opportunity to testify on the pressing need for a Constitutional amendment to balance the Federal budget and to reduce Federal spending and taxation.
Mr. Chairman, I subscribe to the proposition that changes in the Constitution should be infrequent and carefully considered. However, I believe that the fundamental changes that have occurred in our national fiscal policy warrant an equally fundamental change in the basic document of our Government. For a number of decades, the country has been charted on a disaster course of uncontrolled growth in Federal spending, of ever more oppressive taxation and of burgeoning budget deficits. A succession of past Presidents and Congresses have been simply unwilling or unable to reverse this course.
After years of observing and participating in fruitless efforts to stem the growth of Government, I have reluctantly reached the conclusion that a Constitutional amendment offers the only realistic prospect for restoring fiscal responsibility to Washington. Accordingly, I have introduced a proposed Constitutional amendment which is a three-prong attack on the fiscal ills that beset us. My proposal not only requires a balanced budget, but it also directly limits Federal spending and taxation. The proposal is drafted to provide the flexibility needed to manage the economy and to respond to any financial or political crisis, yet it still requires reasonable fiscal restraint.
A MESSAGE FROM THE PEOPLE
Mr. Chairman, there is broad and vigorous public support for adoption of a balanced-budget Constitutional amendment. Already 28 States have passed resolutions which direct Congress to convene a Constitutional convention to draft a balanced-budget amendment. It is noteworthy that every State in the Union, except Connecticut and Vermont, has adopted a balanced-budget requirement on the State level. Also, recent polls indicate that more than 80 percent of the American people favor adoption of a balanced-budget amendment.
Those who would scoff at the States' efforts to restore fiscal responsibility to Washington ignore the Constitutional role of the States as the ultimate check against the Federal Government's abuse of authority. The message the States are trying to deliver to Congress should be met with sober reflection, rather than threats of cuts in State aid to bring the States into line. Those in Congress must sometimes be reminded that all wisdom in this country does not reside on Capitol Hill.
EXCESSIVE GOVERNMENTAL SPENDING Over the past 50 years, governmental spending has skyrocketed. In 1929, total governmental expenditures-Federal, State and local-amounted to 10 percent of our gross national product, the sum of all goods and services produced in the