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either balance the budget or spending-limitation amendment to the Constitution, because a lot of people in this society don't trust the Congress to do it, the vast majority of people.
As you know, Congress is one of the lowest organizations in the esteem of the American people as it is. They don't trust the Congress to balance the budget, and part of that is a reasonable ascertainment, and part of it isn't, but nevertheless, that is the attitude that they have.
Be that as it may, I have to say you have presented some provocative things here today. I wish I could ask you a lot more questions. Mr. KIRKLAND. Let me say, sir, even if the polls show it, I don't share that low esteem for the Congress.
Senator HATCH. And we appreciate that. I hope that proposal of a balanced budget will not change your mind on that.
Mr. KIRKLAND. Only on occasion. Occasionally, in moderation. Senator HATCH. Only occasionally. Well, let me say this to you, sir, I have great respect for you and Mr. Young, I enjoy working with Mr. Young. He is a very fine person. You also are a very fine person, and one of the true leaders of our society. You represent your people well and have articulately given your particular viewpoint on this matter. It certainly has been a provocative viewpoint.
I give great weight to your opinion, but I do feel that we have to do something to cause Congress to exercise increased fiscal responsibility. I hope that we can arrive at a wise and proper decision in this committee that will meet with the approval of all. Thank you for your testimony here today.
Senator THURMOND. Thank you, Mr. Chairman.
Mr. Kirkland, we are glad to have you with us. I believe we have something in common. I believe we were both born in South Carolina. Mr. KIRKLAND. That's correct.
Senator THURMOND. Whether we agree on anything or not, I want to congratulate you for the prominence you have attained in this country in the labor movement, South Carolinians applaud you for your outstanding leadership.
Mr. KIRKLAND. We share a common love for the State, sir.
Senator THURMOND. I just have a few questions here to propound. When you say that Congress has wisely concluded that a balanced budget would create chaos, do you really think Congress is fairly representing the views of American people on controlling runaway Federal spending?
Mr. KIRKLAND. I don't believe the spending process is carried out through the congressional procedure, sir, as runaway. I think it reflects, on the whole, a studied appraisal of the country's needs even if under the circumstances and in the light of economic conditions this results in a deficit. I do believe it is desirable to minimize that deficit, and I believe that view, as far as I am able to ascertain, generally is shared in the Congress. I think the Congress approaches the appropriation process in a responsible and careful way.
Senator THURMOND. Mr. Kirkland, in your statement, I believe you claim that an amendment to balance the budget would immobilize fiscal policies of Congress. Would not that amendment still allow Congress to decreese or increase taxes, continue deficit spending under an escape clause, or use selective spending to affect economic factors? This will not leave Congress immobilized on national economic policy.
Mr. KIRKLAND. Well, the escape clauses, I think as I pointed out, require a three-quarter vote, if I am not mistaken. I think that is extremely misguided, if I might say so.
Senator THURMOND. Without going into great detail, there have already been a lot of questions asked on this subject. I would just remind you that in the last 35 years, the budget has been balanced only 8 years. In the last 19 years, the budget has been balanced only one time. How much longer do you think we can continue such a policy?
Mr. KIRKLAND. I don't quite know how to answer that, sir. I think it depends upon the course of events. I think that directly has been heavily influenced by events, by the state of the economy, by recessions, by the imperatives of our defense requirements. For one thing, the consequences of the cost of previous wars and previous steps that we took in the interest of the national security, and a variety of other imperatives that I think demonstrate that on occasion and time to time, the order of priority shifts and a greater priority must be accorded to maintain certain endeavors and programs, even though it results in a deficit.
I do believe that the burden of that deficit must be viewed in relationship to national wealth and national production and national resources, and I don't think, relatively speaking, that that burden has become crushing or has gotten worse.
Senator THURMOND. Do you know of any individual or any corpora tion that could stay in business if it only balances its budget one time in 19 years? That has been the situation with this Government for the last 19 years.
Mr. KIRKLAND. Well, I am not sure-there are limits to the comparability. I think most businesses do maintain a capital budget and their methods of accounting and bookkeeping are quite different. So, as I say, I think the goal of balancing a budget is a worthy one.
I think there are other goals that the country is committed to that are also worthy. I think that the way in which I would like to see that balance achieved is by national growth and higher levels of employment, which would yield the revenues necessary to maintain the programs and balance the budget.
We opposed, for example, sir, we thought it was unfortunate at the time when the last tax-cut bill was passed, we, in fact, urged the President to veto it and we believed that if he had, we would be very substantially closer to a balanced budget than we are today.
Senator THURMOND. I want to ask you this question: You are an average citizen, I guess, or maybe you are an above-average citizen, but do you think if you had spent more than you had taken in 18 of the last 19 years, what would your financial situation be today? Mr. KIRKLAND. About what it is, sir. I bought a house with a substantial mortgage, I borrowed on the future for that, and I am still paying for it.
We have attached to our statement a table which shows the increase in debt for private households and the rate of increase of private household debt is substantially higher than the rate of increase in the Federal debt. And corporate debt we show increased 9.6 percent annually, the average compound annual rate increase was 9.6 percent as compared to the Federal Government's 5.1 percent. In the case of private households, it was 9.9 percent.
Senator THURMOND. A lot of people today feel they have got to go in debt more because of the inflation psychology, don't they?
Mr. KIRKLAND. Clearly that has affected not only inflation psychology, but inflation facts. The cost of providing an education for your children, if you want to send them to college, has really become an enormous burden, and I suspect there are very few people who don't have to borrow to pay for that, as well as the escalating price for houses, the cost of carrying the debt has skyrocketed.
Senator THURMOND. I believe most of the economists acknowledge that the chief cause of inflation, not the only cause, but the chief cause is when the Government spends more than it takes in. So, wouldn't the average man, the average working man, be better off if we balance this budget, because then we could bring down the interest rates, we could bring down inflation and the country would be put on a sounder basis?
Mr. KIRKLAND. Well, I can't say in the light of the facts that we perceive them in the current situation, sir, that I agree with that view. We point out in our statement that the deficit is decreased simultaneously with an increase in inflation. And we believe the sources, and the primary sources, of our current inflation can be readily perceived by an inspection of the Consumer's Price Index, and they stem from some rather specific and definable sources.
One, the cost of energy, which has just skyrocketed, around which pervades the entire economy, and I don't think is related to the national deficit, at least in any way that I can define except that the national deficit is in part a result from that cause.
Similarly, the cost of housing and shelter is profoundly influenced. by the rising cost of money, and, again, that rising cost of money very directly affects the national deficit through the cost of servicing the national debt, which is going up and has gone up very sharply.
The cost of medical care, which seems to-it's been escalating for some time in this country, and the more volatile element of the cost of food. I think those are the major components of our current inflation and I don't think we are going to be able to really do anything very effective about inflation unless we address those specific sources. Senator THURMOND. I was just wondering what plan should we adopt to pay off the national debt?
Mr. KIRKLAND. Full employment, sir, and continued national growth, the growth of our economy will clearly reduce it relatively, and will yield resources to, again, to pay it off, hopefully when we get to that if we had a full employment economy, now, well, I believe we would have a surplus and the debt could be reduced.
Senator THURMOND. Well, we have had seven Presidents since Franklin Roosevelt, and most of them have said they were balancing the budget, cutting expenses, and so forth, but what has actually happened is that the debt has increased. The debt now is about $900 billion. The interest is about $60 billion a year.
If we could balance this budget, and begin paying something on that debt, we could cut that interest and save a great deal, couldn't we? Mr. KIRKLAND. Clearly, sir, I would be delighted with a balanced budget. We have no animosity toward a balanced budget. We think it is a worthy objective. The question is ways and means and we think there are a variety of ways and means, and they have to be
adapted to the economic circumstances that exist, because if youwe believe if you proceed from a mandatory requirement of a balanced budget at a time of economic decline, the net result will be to worsen the situation. If you have to raise taxes at a time when unemployment is rising sharply and curtailing your revenues, you are going to further aggravate and accelerate that decline and further reduce your revenues, and you will be on the verge of an endless downward spiral that we think might well be catastrophic.
Senator THURMOND. Since you have attained such a prominent place in the labor movement of this country, I am sure that you are both farsighted and fair. I want to ask you this question: Do you really think it's fair to our young people, to your children-you have children, don't you? I have children-and people generally, to keep running this country in debt because our generation, your and my generation, is not paying it off. We are still increasing it and we are going to leave our children a tremendous debt. Is it really fair then?
Why doesn't each generation pay its own way as they go through this world, by either increasing taxes or cutting expenses? Don't you think it is wise to either increase taxes and pay as we go along or cut expenses?
Why should these young people have to inherit the debt that our generation is putting on them?
Mr. KIRKLAND. Well, sir, I believe many of these are necessary and desirable expenditures of Government, which are a factor certainly in a time of economic slack in reducing the deficit, are investments in children's futures. I think we would serve them very badly if we allowed the educational system in this country to decay or deprive them of access to better schools, better educational opportunities in the name of some rigid approach to balancing the budget currently.
I think many of these programs and expenditures are investments in their future to give them a better chance in life, and to defendas well as defending the country, that we want the best kind of country to pass onto them.'
Senator THURMOND. Since 1933, we have had eight Presidents, and with every one of these Presidents, we have gone further in debt. Isn't the constitutional amendment about the only thing that is going to enable us to stop spending more than we take in?
For instance, the budgets our present President, during his terms of office, will far exceed the income and his deficits will aggregate about $157.3 billion-a $157.3 billion deficit in spite of the fact that he claims he is going to balance the budget.
During Roosevelt's administration, the deficits, I believe, were $196.9 billion. Of course, we had a depression then, we had a war then, and it's understandable that in an emergency you have to spend more. The fact remains that over that period, from 1933 to 1979-some 46 years we have continued to spend more than we take in. Where is this matter going to end?
As a smart man like you are, I am sure you realize that we have got to take some steps to begin balancing this budget. We just can't keep on going like we are. Governments can become insolvent the same as individuals can, the same as corporations can, and as I said, the debt. has now risen to about $900 billion. Don't you feel that it would be the part of wisdom if we passed a constitutional amendment that would
restrict the Congress-say to the Congress, you can spend the money, but if you spend it, you have to put on the taxes or either cut down on the spending.
Wouldn't that seem to be the fair thing to do, a wise thing to do? Mr. KIRKLAND. No, sir, for the reasons we set forth, we believe that the approach of a constitutional amendment to the problems and choices involved in raising revenue and making judgments as to necessary expenditures is not the wisest approach, and would have consequences that we think would be unfortunate for the country and for future generations.
And for those reasons, we must repeat our position that we do not believe that approach is in the best interest of the country.
Senator THURMOND. Well, Mr. Kirkland, how many more years do you think we can continue to spend more than we take in?
Mr. KIRKLAND. As long, I think, sir, in practical terms, I think we have rather demonstrated from the fact that you point out that we have done it through a good many years and that the effect of it has been mitigated by a growing economy and that the sound and practical way to judge it is in terms of the strength of the underlying economy, the productivity and the growth of the country.
It is a relative matter as well as absolute matter. I do believe that there has been a tendency on occasion to leap too quickly to tax cuts at a time when it would have been better to preserve those revenues for reducing the deficit and maintaining certain programs. So as I say, we have no antagonism to the goal of balancing a budget provided that that process and the method of doing it, and the circumstances under which you do it, and under which it occurs are not damaging to the underlying economy which carries this load.
Senator THURMOND. In view of the deficits that have been running here for years and years and years-as I say, only eight times in 35 years has the budget balanced, only one time in the last 19 years has it been balanced-Presidents keep on submitting budgets that are not balanced, Congress keeps on passing appropriations without balancing the budget, it seems to me that there has to be a mandatory restraint on Congress to balance this budget. That seems to be the only way we can get it done.
Of course, we have to provide for exception in case of war or emergency, or matters of that kind. But otherwise, the Congress hasn't shown the courage or it hasn't shown the wisdom to balance this budget and how else are you going to get it done? I think you know as a businessman that we can't keep on following the course we have been following. Presidents promise to balance it, Congressmen promise to balance it, but they don't do it. They keep voting for more spending, they keep advocating budgets for more spending and, as I said, the last President who promised to balance the budget-the present President-will have the largest budget deficit of any President since Franklin Roosevelt, $157.3 billion.
I wish you would think over this. I realize that people in your organization have been long accustomed to saying more spending, full employment, more spending, go along and not balance the budget, but you are a rising man now, you will probably be the head of the AFL-CIO before long and maybe you can help change this policy. Maybe you can help this country to change this.