has risen from $380 billion to $780 billion, doubling in less than 10

years.

Looking at that development in another way, more than half the total debt created by the Federal Government in 200 years was created in the past 8 years.

The American people are disturbed by the growing role of Government in their daily lives, and by the dominance of Government decisionmakers in the economy. In 1929 the State, local, and Federal governments comprised 10 percent of our Nation's total gross national product. Last year, total government expenditures at the State, local, and Federal levels amounted to 36 percent of the dollar value of our Nation's entire production of goods and services.

We have recently witnessed congressional attempts to manage the budget through the budget process, by trimming down Presidential budget proposals that called for a deficit of over $30 billion. But how can we characterize a budget as lean and austere when it calls for a 9-percent increase in Federal spending the proposed spending increase being even higher than the administration's projection for inflation of less than 8 percent? This administration has promised to balance the budget, but since taking office, President Carter has increased Federal spending by 22 percent.

I am not here to specifically lay blame because I think our own process is at fault as well. This is something we had better come to grips with. The budget process, as is, never provides an opportunity for us to make an appropriate business decision. This becomes obvious when you look at the Department of Agriculture for example, where they seek to reduce the money spent for building roads and making timber seams. It may look like they are reducing their demand but in effect they are drastically reducing income to the country.

I can demonstrate, and did to OMB, how the country lost nearly three-quarters of a billion dollars from 12-year-long indecision on cutting some diseased timber on the south end of the River Mountains. Had this timber been cut green it would have brought a price, over a 10-year period, of some $20 per thousand board feet and they were selling 50 million feet. That is $1 billion and they ultimately got 50 cents for it, mostly because they did not have money enough to put the timber up for sale.

We ended up without a budget alternative that made any sense. It was not possible for us under the circumstances.

Only by having a constitutional amendment like this would we force the Department of Agriculture and other agencies into finding means of judging expenditures against potential income.

The number of people aware that this increase in spending and waste must come to a halt is growing. The amount of waste created by the Federal debt cannot be fully understood unless we look at the expenditures required to service that debt. In fiscal year 1977, $38 billion was spent paying interest on the public debt, and in fiscal year 1978, 1 year later, the figure rose to $43 billion. It is anticipated that in 1980 the interest payment on the national debt will amount to $65.7 billion. This represents one-eighth of the total spending anticipated for 1980.

The United States has not only increased the national debt overall, but in recent years the composition of national debt has swung dangerously in the direction of increased indebtedness to foreign govern

ments and individuals. In 1978, some 17 percent of the national debt was held by foreign governments and another 3 percent was held by citizens of foreign countries.

In 1970, the level of national debt held by foreign governments and individuals was only 5 percent of the total.

During hearings held by the Senate Finance Committee's Subcommittee on Taxation and Debt Management, the administration testified that the United States annually pays approximately $13 billion in interest payments overseas. Our balance-of-payments position is seriously weakened by deficit-induced inflation and the flow of dollars abroad.

It seems to me that we have a responsibility not only to our own people, but to the world economy to curtail this source of international economic instability. As interest payments on foreign-held debt increase, this country will face larger and larger account deficits which can only destabilize international rates of exchange and further weaken the position of an already weak dollar as a reserve currency. We have not seen any evidence that the executive branch or the Congress will be able to reverse these domestic and international trends unless we heed the national call to adopt a balanced budget resolution. We have seen strong State and local support for balanced budget resolutions. Already some 30 States have passed resolutions which directed Congress to convene a Constitutional Convention, a circumstance I hope we do not face, however, because I do not think that is a good idea.

Recent polls indicate that more than 80 percent of the American people favor adopting a balance-the-budget amendment.

I want to stress my contention that any changes in the Constitution should be both infrequent and carefully considered. However, I believe that important functional changes have taken place in our Nation's fiscal and economic structure. Who could have foreseen that the Federal Government one day would play such a dominant role or that it would become such a driving force behind a cancerous inflationary spiral? Neither a succession of well-intended Presidents nor the Congress have been able to reverse this trend under the existing constitutional structure.

The balanced budget resolution that I introduced with the support of Senators Morgan, Thurmond, and Laxalt would require a balanced budget 3 years after ratification. The proposal would also require that once the budget has been brought into balance, 5 percent of the national debt would be paid off each year, making the Federal Government debt-free, assuming ratification by the turn of the century. Two years ago I said that putting our Nation's financial house in order is not a partisan goal and I still share that goal.

Balancing the budget and cutting spending is in everybody's best interests. It is my hope that your committee will take action to pass some sort of budget amendment in time for the Senate and House as a whole to act on that measure yet this year.

I would like to take a moment again, Senator, to emphasize the importance of giving the Senate an opportunity to vote on a balanced budget resolution.

We are all faced with busy legislative schedules, but there are few legislative issues that have the unwavering support of the American

people. I do not think we can deny the people the opportunity for a constitutional change in the fiscal structure of our Government. Mr. Chairman, I reiterate my thanks to you for the privilege of appearing before the members today. I would be happy to answer any questions to the extent of my knowledge.

Senator BAYH. Thank you very much. I know you have another 'commitment to get to shortly and I will reserve any questions I have. I appreciate your being here. I will ask your colleague if he has any questions to ask at this time.

Senator SIMPSON. I just wanted to say that I am pleased to join my colleague in concept and would embrace any form of this type of effort. I join with Senator Wallop, Mr. Chairman, in appreciation to you for your willingness to conduct hearings on this issue. We appre ciate that very much.

Senator BAYH. Thank you. We will recess our hearings pending the call of the Chair.

We have heard from many of our colleagues and I am also interested in the views of groups and individuals outside of our own membership. We do want to try to conclude this matter one way or the other by the end of this year.

Thank you very much.

Senator WALLOP. I really don't envy you. I know well some of the pitfalls you encounter in trying to address the language for what we are attempting to do, but I still think it is worth the effort.

Senator BAYH. Thank you very much. Your prepared statement and the statement of Senator Nunn will be entered into the record at this time.

[Senator Wallop's and Senator Nunn's prepared statements follow:]

PREPARED STATEMENT OF SENATOR MALCOLM WALLOP

Thank you Mr. Chairman for giving me this opportunity to testify before this committee on a constitutional amendment to balance the budget.

I want to begin by commending you and this committee for holding these hearings on an issue that must be addressed with reason and forthright action. If this nation is to regain its economic strength in the coming decade, we must examine the underlying causes of our inflationary problems and adopt measures that will guarantee sound fiscal management in the years ahead.

When I first came to the Senate and introduced a balance the budget amendment to the constitution, balancing the budget was a fiscal conservative's pipedream. Over the past 2 years we have seen a tremendous groundswell of public enthusiasm for a balanced budget amendment to the constitution. The reasons why the American people have come to support this means to fiscal accountability stem from the growing economic and social menance of inflation and the recognition of its causes. As we approach a new decade our people have learned the obvious lesson of the 1970's. Our economy cannot tolerate the accumulated deficits of the past 8 years. In the brief period between 1970 and 1978, the national debt has risen from $380 billion to $780 billion, doubling in less than 10 years. Looking at this development in another way, more than half of the total debt created by the U.S. Government in the first 200 years of our history was created in just 8 years. The American people are disturbed by the growing role of government in their daily lives, and the dominance of government decisionmakers in the economy. In 1929 the State, local, and Federal governments comprised 10 percent of our Nation's total gross national product. Last year, total government expenditures at the State, local, and Federal levels amounted to 36 percent of the dollar value of our Nation's entire production of goods and services.

We have recently witnessed congressional attempts to manage the budget through the budget process, by trimming Presidential budget proposals that called for a deficit of over $30 billion. But how can we characterize a budget as being "lean and austere" when it calls for a 9 percent increase in Federal spending--the proposed spending increase is even higher than the administration's projection of inflation of less than 8 percent? This administration has promised to balance the budget, but since taking office, President Carter has increased Federal spending by 22 percent.

There is a growing awareness that this increase in spending and waste must come to a halt. The amount of waste created by the Federal debt cannot be fully understood unless we look at the expenditures required to service the public debt. In fiscal year 1977 $38 billion was spent paying interest on the public debt, and in fiscal year 1978 the figure rose to $43 billion. It is anticipated that in 1980 the interest payment on the national debt will amount to $65.7 billion. This represents one-eighth of the total spending anticipated for 1980.

The United States has not only increased the amount of the national debt but over recent years the composition of national debt has shifted dangerously in the direction of increased indebtedness to foreign governments and individuals. In 1978 some 17 percent of the national debt was held by foreign governments and another 3 percent is held by citizens of foreign countries. In 1970 the level of national debt held by foreign governments was only 5 percent of the total. During hearings held by the Senate Finance Committee's Subcommittee on Taxation and Debt Management the administration testified that the United States annually pays approximately $13 billion in interest payments overseas. Our balance-of-payments position is only weakened by deficit-induced inflation and the flow of dollars abroad.

We have a responsibility not only to our own people but to the world economy to curtail this source of international economic instability. As interest payments on foreign held debt increases this country will face larger current account deficits which can only destabilize international exchange rates and further weaken the position of the dollar as a reserve currency.

We have not seen any evidence that the executive branch or the Congress will be able to reverse these domestic and international trends unless we heed the national call to adopt a balanced budget resolution. We have seen strong State and local support for a balanced budget resolution. Already 30 States have passed resolutions which direct Congress to convene a constitutional convention to draft a balace the budget amendment. Recent polls indicate that more than 80 percent of the American people favor adopting a balance the budget amendment.

I am a proponent of the position that any changes in the constitution should be both infrequent and carefully considered. However, I believe that fundamental changes have taken place in our Nation's fiscal and economic structure. Who could have foreseen that the Federal Government would one day play such a dominate role in the economy, or that it would become a driving force behind a cancerous inflationary spiral? Neither a succession of well-intended Presidents nor the Congress have been able to reverse this trend under the existing constitutional structure. The balanced budget resolution that I introduced with the support of Senators Morgan, Thurmond, and Laxalt would require a balanced budget 3 years after ratification. The proposal would also require that once the budget has been brought into balance, 5 percent of the national debt would be paid off each year, making the Federal Government debt free by the turn of the century.

Two years ago I said that putting our Nation's financial house in order is not a partisan goal. Whatever method we choose, balancing the budget and cutting spending is in everyone's best interest. It is my hope that the Judiciary Committee will take action to pass a balance the budget amendment in time for the Senate and the Congress as a whole to act on this measure this year.

I would like to take this moment to commend Senator Bayh for recently making a commitment giving the Senate an opportunity to vote on a balanced budget resolution this year.

We are faced with busy legislative schedules, but there are few legislative initiatives that have the attention and unwaivering support of the American people. I do not think that we can deny the people this constitutional change in the fiscal structure of our Government. They deserve no less than our total commitment to pass a balance the budget amendment as soon as possible.

PREPARED STATEMENT BY HON. SAM NUNN, A U.S. SENATOR FROM THE STATE OF GEORGIA

"CONSTITUTIONAL MANDATE NEEDED FOR BALANCED FEDERAL BUDGET"

Mr. Chairman, for the nearly 7 years that I have served in the U.S. Senate, I have been actively pursuing the adoption by the Congress of a joint resolution calling for a constitutional amendment which would require a balanced federal budget except in times of emergency. The establishment of such a basic, fiscal plan at the Federal level will, in my opinion, remove the trauma of runaway inflation and soaring deficit spending, and restore the confidence of consumers and businessmen in our Government's ability to handle its fiscal affairs.

The need for such a measure is no less urgent today than it was the day I arrived in the Senate; indeed, the total of deficits incurred by the Federal budget since I arrived in November of 1972 is $237.5 billion, excluding $38.8 billion for the current fiscal year. No Member of Congress can be proud of these figures. No Member of Congress can be proud of the fact that the Federal budget has been balanced only five times since 1950. No Member of Congress can be proud of the fact that the total national debt is estimated for fiscal year 1980 to be $887 billion. The interest alone on that figure is $65.7 billion a year.

The American people know that somewhere somebody is not exercising proper oversight of their tax dollars. And they want something done about it.

The American people took a quick course in fiscal responsibility in 1975 when New York City approached the brink of bankruptcy. New York's crisis had a tremendous psychological impact on the entire Nation. People who normally have great difficulty comprehending billions of dollars in red ink, understood New York's fiscal mismanagement.

The message began to ring loud and clear in local county courthouses, statehouses, and in the Halls of Congress: "get our fiscal affairs in order." This was nowhere more evident than in California where in June of 1978 the voters overwhelmingly passed proposition 13 and told their State government they had had enough of new spending programs, higher taxes, and ever growing state payrolls, with questionable benefits for the general populus.

Today, Americans are deeply concerned with the plumetting productivity in the United States-four-tenths of 1 percent last year. They are deeply concerned with skyrocketing interest rates-11 percent to buy the average house in America today. They are deeply concerned with a devastating inflation rate-currently running at an annual rate of 13 percent for 1979.

Americans understand what these figures mean to them. They know what recurring federal deficit spending is doing to interest rates and inflation. They know that everything is going up except their standard of living.

Mr. Chairman, regrettably, Federal budget deficits have become an economic way of life for America-a way of life that must change if we are to avoid an untenable financial burden on the lives of our children and our grandchildren. Let's leave them a few choices to make.

This resolution calls for an amendment to the Constitution of the United States to provide that, other than in a time of declared war or an extraordinary national economic emergency so declared by Congress, the aggregate amount of expenditures made by the Federal Government during any fiscal year shall not exceed the net amount of revenue received by the Government during that fiscal year.

More simply stated, this resolution would establish as a constitutional mandate the requirement that the Federal Government balance its budget. A prohibition of constitutional magnitude would be imposed upon incurring a budget deficit at any time other than during an emergency of a catastrophic nature.

This concept is one that emanates from the frustration of the people of this country with a Federal Government that for a long time has conducted what I call knee-jerk economic planning without consideration for the long-range impact of such policies.

Mr. Chairman, this is not some radical, half-baked proposal. Twenty-one states have provisions in their constitutions which either prohibit deficit spending altogether or require their budgets to be balanced by the end of their fiscal year. It is time for the Federal Government to follow their example and cease setting the irresponsible and unhealthy precedent of ever increasing deficit spending.

President Carter has reaffirmed many times his campaign pledge to achieve a balanced Federal budget by 1981. I applaud his efforts. There can be no disagreement over the merit of the goal to be achieved. We have a responsibility to the