route to travel. With the limitation on Federal spending amendment, I am just not too sure that would get the results as well as the balanced budget constitutional amendment. But I want to commend you and your organization for your interest in this matter. Thank you for coming here to testify. If you have any other thoughts on this subject, I hope you will pass them on.

Mr. GRANT. Thank you, Senator Thurmond. I would say I have been farming now for 50 years, and I have watched the debt of farmers increase, escalate like a skyrocket, and I think it is time for us to do something. Farmers are comparable to other people in the economy. They have watched the cost of homes go up since we have had this runaway inflation. Frankly, I think it is time for Congress to take hold and do something about it.

Senator THURMOND. Thank you very much, Mr. Grant.
Thank you, Mr. Chairman.

Senator BAYH. Thank you, Senator Thurmond.

Just one question, Mr. Grant. I, too, have more than a passing familiarity with the farm debt situation. Do you think if we balance the budget, this will lessen the farm debt?

Mr. GRANT. A balanced budget and a constitutional amendment to limit Federal spending will limit inflation; it won't cure it. But inflation is the biggest single problem the farmers have. I went back to visit the credit council. The number of people involved in borrowing from that is probably five times what it was when I left the presi dency of that. The same crops, the same everything except that inflation has caused them to be in debt up to their ears. And we can't have that continuing indefinitely or we won't have the same system. Mrs. Grant and I have helped five young farmers start in agriculture; they used our collateral. Can we do that same thing today under today's inflation? I don't think so. I don't think it is fair to young farmers not to be able to get into agriculture. The biggest problem they have is inflation caused by excessive Federal spending which brings about the inflationary cycle. Mr. Volker is trying to do something about it, and I am pleased.

Senator BAYH. I would hope that the Farm Bureau would also address itself to some of the other cost problems confronting farmers, particularly the pressures placed on land values by certain kinds of purchases that are now taking place in rural America, where we have major corporate interests buying up large amounts of land, where we have significant amounts of foreign capital coming in. Some of us are addressing ourselves to that problem.

Mr. GRANT. It is a real problem. If I were a citizen of another country and with the value of the dollar we have now, I would be over here investing in American land. We will not stop this investing until we stop inflation because our money is worth so little compared to theirs. Senator BAYH. I suppose it would also be indicative of the faith they have in the American system.

Mr. GRANT. Yes; that is correct. And if we don't do something about the inflation, we won't have that American system, considering the amount of gross national product taken by taxes.

Senator Bayh. Thank you, Mr. Grant.

Senator HATCH. Mr. Grant, we appreciate having you in front of this committee. I have read your statement and I have enjoyed it.

Do you happen to share the concerns of a number of people who have suggested that the Heinz-Stone amendment is excessively complex and technical for a constitutional amendment? Some of these people suggest that we have sacrificed clarity and elegance of language in the case of Senate Joint Resolution 56.

Mr. GRANT. I may be speaking out of turn a little bit because I thought it was too complex when we set it up. However, there were certain committees who thought we ought to lay it out line by line and then, at the appropriate time, the House and Senate would reword it in a more simple manner. I hope that can be done, because if it is very complex, then a lot of people don't understand it. I think it is adequate if one understands it.

Senator HATCH. I appreciate your testimony, and, of course, I think you represent a very fine organization. I know that you do. Thank you for coming today.

Senator BAYH. Thank you very much, Mr. Grant. We appreciate your interest and the Farm Bureau's interest.

[The prepared statement of the American Farm Bureau Federation follows:]

PREPARED STATEMENT OF THE AMERICAN FARM BUREAU FEDERATION

The American Farm Bureau Federation is the nation's largest general farm organization, representing more than three million families in 49 states and Puerto Rico. Economic policy has a significant effect upon the well-being of farm and ranch families. We appreciate the opportunity to present our views on proposals for Constitutional amendments to limit federal spending and balance the federal budget. We can think of no issue that is more important to the average citizen or to the future growth of this nation.

Federal spending has been growing at a rate which, in our opinion, is clearly excessive in terms of the taxpayers' ability to pay. This excessive growth has had, and is continuing to have adverse consequences for our economy and for individuals. This is particularly true for farmers and ranchers who are faced with rising costs of production and relatively low rates of return for their labor, management and invested capital. Federal spending has financed the overregulation of business activities; reduced individual work incentives and productivity; increased the real burden of federal taxes; and led to continuing federal deficits which have fueled an inflation that threatens the future of our private enterprise system. The federal budget was last balanced in fiscal 1969. The cumulative federal deficit for the fiscal years 1970-79 is currently estimated at $320.6 billion. This is a record of fiscal irresponsibility and the result has been a serious inflation which, is getting worse.

Quite aside from the fact that deficit spending has fueled a rate of inflation which is now approaching 14 percent annually, we think that the federal government is preempting too much of our gross national product. Federal expenditures rose from 20.1 percent of GNP in calendar 1969 to 23.3 percent in 1975. and then fell back to 21.9 percent in 1978. While the fact that there has been a reduction in the federal share of GNP since 1975 is encouraging we think that the federal hare is still too high.

FARM BUREAU'S POSITION

Farm Bureau has long been on record in favor of fiscal responsibility. We supported the Congressional Budget and Impoundment Control Act of 1974. This Act has had a constructive effect on Congressional consideration of the President's budget, but it has not forced the Congress to face up to the fundamental fact that the ability and willingness of the taxpayers to finance federal expenditures is not unlimited. Something more is needed. As a minimum, effective action should be taken as soon as possible to prevent the federal share of GNP from rising above its present level at some future time.

Farm Bureau Policies for 1979 call for Constitutional amendments both to require the Congress to operate on a balanced budget each year and to restrict the spending authority of the federal government to a realistic percentage of the

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gross national product. We interpret this to mean that Farm Bureau can support either a balanced budget amendment, a spending limitation amendment, or some combination of these two alternatives. Our objective is greater fiscal responsibility, and we will support any proposal that moves toward this objective.

If a choice has to be made between a balanced budget and a spending limitation amendment, we prefer a spending limitation such as that proposed by S. J. Res. 56 and introduced by Senator John Heinz of Pennsylvania and Senator Richard Stone of Florida. While a balanced budget is a highly desirable objective, which the Congress and the Administration should seek to achieve as often as possible, we recognize that an amendment which required the Congress to balance the budget without observing a limit on spending would not necessarily slow the growth of the federal government. The budget could be balanced by increasing taxes. There is also a possibility that a balanced budget amendment could be evaded by changes in Congressional procedures and bookkeeping practices. The spending limitation approach recognizes the need to encourage private incentives by putting a ceiling on the percentage of our gross national product that can be spent by the federal government. If this can be done it will be much easier to balance the budget in future years than it has been in the recent past.

EXPLANATION OF PROPOSED AMENDMENT

The provisions of S.J. Res. 56 have been carefully designed to establish a meaningful limit on federal spending without either disrupting existing federal programs or penalizing state and local governments. This resolution is the outgrowth of the work of a group of citizens known as the "National Tax Limitation Committee." As President of the American Farm Bureau Federation, I served as a member of this Committee along with the eminent economist, Dr. Milton Friedman, and a number of other individuals who are concerned about the integrity of our economy and government.

The consensus of the Committee was that the proposed amendment should limit federal expenditures-more specifically, total federal outlays which are generally defined as payments made by the issuance of checks or the disbursement of cash.

The proposed amendment would not require cutbacks in existing federal programs. Under the Committee's proposal, and S.J. Res. 56, total outlays of the federal government each fiscal year would be limited to the amount spent in the previous fiscal year plus the percentage increase in gross national product (GNP) in the most recent calendar year. This formula would not require an immediate reduction in the percentage of GNP that can be spent by the federal government. It would, however, make it possible for the Congress to reduce this percentage on a gradual basis. For example, if Congress held federal spending below the applicable limit for a fiscal year, this lower level of spending would become the base for determining the spending ceiling for the next fiscal year.

The proposed amendment would encourage Congress to balance the budget. If the inflation rate in any calendar year was more than 3 percent, the permissible percentage increase in total outlays would be reduced by one-fourth of the excess of the inflation rate over 3 percent. The purpose of this provision is to encourage the Congress to bring inflation under control by imposing a penalty if it fails to do so.

The proposed amendment would not impair the ability of the federal government to deal with emergencies. Following the declaration of an emergency by the President, the Congress, by a two-thirds vote of both Houses, would be permitted to authorize a specified amount of emergency outlays in excess of the limit for the then current fiscal year. Emergency outlays authorized under this procedure would be excluded from the base figures used to determine future limitations on spending; however, the limitation on total outlays could be changed by a three-fourths vote of both Houses of the Congress.

Total outlays, as defined in S.J. Res. 56, include both budget and off-budget outlays but do not include redemptions of the federal debt or emergency outlays. If total revenues received by the federal government exceed total outlays during any fiscal year the surplus would be used to reduce the federal debt until it is eliminated.

The proposed amendment would not penalize state and local governments. Total grants to state and local governments in each of the first six fiscal years after ratification of the proposed amendment are not to be a smaller fraction of total outlays than in the three fiscal years prior to ratification. Thereafter, if grants are less than that fraction of total outlays the limitation on total outlays is to be reduced by an equivalent amount. In addition, the federal government

would be prohibited from requiring, directly or indirectly, that the states or local governments engage in additional programs or services without compensation for additional costs.

Approximately 200 proposals designed to restore fiscal responsibility in government are now before the Congress. Farm Bureau believes that the proposal offered by Senator Heinz and Senator Stone (S.J. Res. 56) represents a practical and workable solution to a very serious problem. We commend it to your favorable consideration.

Senator BAYH. We are going to go now to Mr. Jay VanAndel, the chairman of the Board of the Chamber of Commerce of the United States of America. Both of our last two witnesses are involved in testimony going on in the House at this time. I understand there are time pressures on both of them. So we will go to Mr. Van Andel and Mr. Maisel may have arrived by then.

Mr. VanAndel, you may proceed.

TESTIMONY OF JAY VANANDEL, CHAIRMAN OF THE BOARD, CHAMBER OF COMMERCE OF THE UNITED STATES OF AMERICA

Mr. VANANDEL. Thank you, Mr. Chairman. I apologize for being a little late. We just came over from the House, and we found a lot of questions on this complex subject over there and it took a little longer than anticipated.

I am Jay VanAndel, chairman of the board of the directors of the Chamber of Commerce of the United States and chairman of the board of Amway Corp., USA. On behalf of the U.S. Chamber's 88,000 members, who produce most of America's goods and services, we greatly appreciate the opportunity to present our views on proposals for constitutional amendments to restrain the growth of the Federal budget.

The U.S. Chamber has long advocated legislation similar to the Budget and Impoundment Control Act of 1974, in order to establish an orderly means by which Congress could participate in the budgetary process. We are disappointed, however, to date, with the experience under that 1974 act. There has yet to be a balanced budget, and inflation-the result of deficit spending-is still out of control..

Mr. Chairman, the American economy, we believe, is in trouble because our Government has too long operated in a fiscally reckless fashion, ignoring basic economic principles in favor of short-term political goals. The Congress did act in 1974 to assert its constitutional authority in determining the course of fiscal policy for this country, rather than relying on the piecemeal appropriation and authorization process used in the past. It was a noble attempt, but, we don't believe it has succeeded.

I suggest that this is the opportunity to make the necessary changes in the law and the revisions in procedures of the Congress to insure that the budget process next year will reflect the will of the people for responsible spending and taxation policies. Inflation could be eased somewhat if, in fact, there is a recession, but as the economy recovers, inflation will rise at an even more rapid rate than before, unless expenditures and revenues are brought into balance. When this occurs, the clamor for the constitutional limits on Federal taxing and spending will be even greater than that which you are now experiencing.

Opinion polls now show that the public realizes that it is neither business nor labor which causes inflation. They now know that it is

caused by their central government, and they expect their elected representatives to act responsibly to halt it. There are many people who think that new costs that arise in our cost of living, such as escalated cost of food or energy, are inflationary. They are not truly inflationary. They are costs and they have to be dealt with by increases in productivity. But inflation in its purist form is merely depreciation of the value of the dollar, and it is carried out by the process of Federal deficit spending.

The record of the last 5 years and the mood of the people of this country indicate clearly that it is time to critique the performance of Congress under the 1974 act and to make remedial changes in the act and in the procedures of the Congress under the act at the present time.

We think the need for full congressional involvement in the budget process is as great or greater than it was at the time the 1974 act became law. Yet, in the 5 years which have elapsed since passage of the Budget Act, there have been five budget deficits totaling more than $225 billion. The purchasing power of the dollar continues to decline almost daily. Worst of all, this has occurred during a period of overall relatively good economic growth.

Among the most important modifications to the current law, there must be enacted a limit on the authority of the Congress to spend and to tax. The U.S. Chamber endorses the concept of limits on both Federal taxes and spending. We think a statutory limit can be accomplished in a relatively short period of time. A constitutional amendment to impose such limitations could give longer term results but would take longer to implement. A statutory limitation followed by a constitutional limitation, we think, would combine quick results with long-term benefits.

I must say we think we are reaching crisis point as far as controlling prices is concerned. Therefore, statutory action by Congress may be a way of dealing with inflation.

It is not only the business community which is calling for reforms in the budget process. The chamber jointly, with the Gallup organization, sponsors surveys of consumers. In such a survey conducted last December, 76 percent of those questioned supported a constitutional amendment to limit growth of Federal spending and taxes to no more than the growth of people's income. In the same survey, consumer support for limiting budgetary growth was so strong that 77 percent favored reducing Federal services and spending if taxes declined by the same amount.

It has been argued and probably with justification-that those same people are unwilling to sanction cuts of the magnitude indicated in the survey when the result is to deny them some particular Government service or benefit. Nevertheless, the support is there for spending limitation and tax cuts, and it will be the responsibility of the elected representatives to mete out those cuts. The popular mood suggests to think otherwise is foolhardy.

I might point out here that perhaps the whole concept of a constitutional control of spending would be very beneficial to Members of Congress because it would relieve them, to some degree, from the excessive pressures of various groups to expand the particular desire