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1 by the President, approved by a vote of two-thirds of each

2 House of the Congress.


"SEC. 7. This article shall take effect on the first day of

4 the first fiscal year of the Treasury of the United States (or

5 similar period) beginning after the date of the adoption of this

6 article.


"SEC. 8. The Congress shall have power to enforce this

8 article by appropriate legislation.”.




Washington, D.C. The subcommittee met, pursuant to notice, at 9:42 a.m. in room 5110, Dirksen Senate Office Building, Hon. Birch Bayh (chairman) presiding.

Present: Senators Bayh, Hatch, DeConcini, Heflin, Thurmond, and Simpson.

Staff present: Kevin O. Faley, chief counsel and executive director; Mary K. Jolly, staff director and counsel; Linda Rogers-Kingsbury, chief clerk and deputy staff director; Christie Johnson, assistant clerk; Keith O'Donald and Jesse Sidnor, counsel to Senator Metzenbaum; Tim McPike, counsel to Senator DeConcini; Arthur Brisman, counsel to Senator Heflin; Tom Parry, minority chief counsel; Steve Markman, minority counsel; Dennis Shedd, counsel to Senator Thurmond; and Chip Wood, counsel to Senator Simpson.

Senator Bayh. The committee will come to order, please.

Over the past several months, our subcommittee has held extensive hearings with 38 witnesses discussing and studying the some 20 resolutions which are pending in subcommittee on the topic of balancing the budget. I did say we would have a markup session on this measure, and that is why this meeting has been called. I would like to yield to someone who would like to make any appropriate remarks or argument.

Senator DECONCINI. Mr. Chairman, I would like to move consideration and approval of Senate Joint Resolution 126. I think everyone on the committee has had an opportunity to work with the various staffs and the Senators themselves.

It has been a compromise in many areas. I know my original constitutional amendment to balance the budget was far more severe and, quite frankly, ran into far more severe opposition on the floor when I tried to get it approved.

This is a joint effort by members of this committee who all have some very deep feelings and strong concern that we need to express through a constitutional amendment, a procedure that would mandate a balanced budget.


This bill, I think, speaks for itself. It sets forththat the Congress shall adopt for each year a budget that shall set forth the total receipts of expenditures of the United States and that no budget in which expenditures exceed shall be adopted unless three-fifths of each House approves on a rollcall vote and the Congress shall not pass until the President signs the appropriation bill.

It goes on in the next section to discuss receipts and based on a portion of past year's national income in order to limit the amount of tax that could be posed unless a specific bill is put forward and approved for a specific increase.

I think what it does, Mr. Chairman, is it is going to no longer permit Congress not to be extermely specific when and if they are going to submit more tax dollars than they are taking in.

In my opinion, the bill has enough substance to it to be a move in the right direction without perhaps the harshness of my bill that will impose an automatic increase in the income tax if there was a deficit and many other approaches similar to that. So I move this bill for consideration.

Senator BAYH. Is there a discussion on that? Senator HATCH. Mr. Chairman? Senator BAYH. Senator Hatch. Senator Hatch. If I could make a statement at this point. Mr. Chairman, I would like to extend a special word of appreciation to our distinguished chairman, Senator Bayh, who has consented to the consideration today of a constitutional amendment which he himself opposes, at least I understand he does. It is a credit, in my opinion, to his leadership on the subcommittee that he would do this.

I would also like to extend our appreciation for the efforts of : number of Senators outside the subcommittee who have contributed significantly to the efforts here today. Without intending to imply their support for the proposed amendment, I would like to single out a few of them.

Senators Boren, Armstrong, and Lugar. They have been leaders of the budget balancing caucus, all of whose members have been very helpful in offering their observations on our efforts; Senators Dole, Schweiker, Pryor; Senators Heinz and Stone, whose own proposal has been extremely influential in the deliberations; also, many other organizations such as the National Taxpayers Union and others who have worked hard to try to come up with a balanced budget amend

a ment.

Senate Joint Resolution 126 is the result of many months of deliberations. It proposes an amendment to the Constitution of the United States to require the adoption of new budgetary procedures by the Federal Government, combining sound economic principles, sound political principles, and sound constitutional principles. It is a product of which this subcommittee, I believe, can be proud.

I would like to describe very briefly, as the distinguished Senator from Arizona has done, the premises and provisions of the proposed amendment. Senate Joint Resolution 126 is in obvious response to the popular call for a balanced budget amendment, reflected in part by the applications of 30 State legislatures for a constitutional convention on this subject. Yet Senate Joint Resolution 126 is not primarily an economic amendment. It is primarily an amendment that affects the political and institutional processes by which our Government determines economic policy. Its major premises are twofold.

First, it rests on the assumption that the political and legislative processes ought to ge entrusted to make specific economic and fiscal decisions. We should not be writing specific economic proscriptions and policies into the Constitution forever.

Second, it rests on the assumption that the political and legislative processes cannot presently be entrusted to make these decisions in a fair manner because of political biases that exist within our system that favor higher levels of spending and higher levels of taxation. Senate Joint Resolution 126 seeks to eliminate these biases and establish a more neutral budgetmaking environment. It does not seek to establish alternative biases, biases that I would personally favor in behalf of reduced levels of spending and reduced levels of taxation.

It is the objective of Senate Joint Resolution 126 simply that the outcome of the budget process more fairly reflect public sentiment on spending and taxes.

If, as I believe, public sentiment favors lower levels of taxes and spending, that is likely to result under this agreement. It is not likely to result and has not resulted under the present system largely because of the biases that are addressed by the proposed amendment.

Section 1 would establish the constitutional norm that the Government not spend more dollars than it has. By requiring that Congress adopt a balanced Federal budget at the planning stage of the budget process, it would reestablish the traditional linkage between revenues and expenditures. Spending dollars would have to be matched by tax dollars.

This norm, however, could be waived at any time by a 60-percent majority of each House of Congress.

The bias toward which this section was addressed is twofold. First, Senators and Congressmen who make political cost-benefit analyses of spending programs are likely to opt for such programs so long as they observe they carry $1 of political benefits at the perceived cost of only 80 cents or 90 cents. Second, by establishing what in effect is a spending ceiling, this amendment would alter the well-recognized phenomenon of people who stand to gain from individual programs, are intense and direct and passionate in support of these programs, while taxpayers who stand to lose only a few cents per program are virtually voiceless. Any sort of effective spending ceiling has the benefit of altering the psychology of the budget process.

Spending interests will no longer be competing with the taxpayer to raise the total ante of the budget but will instead be competing with themselves to increase their proportional share of a fixed ante. Spending interests will no longer find it sufficient to defend their pet programs as good programs but will be required as well to defend them as “priority” programs.

Section 2 would establish the norm of another sort. It would insure that if Congress is going to raise taxes as a relative share of the national economy, it is going to have to vote on doing this. No longer will Congress be able to reap ever-increasing taxes simply by doing nothing, as is the present situation.

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The present bias toward higher taxes results simply from the fact that the system currently allows tax increases that are automatic, that are hidden and that are silent-so-called, tax bracket creep. What we propose in Senate Joint Resolution 126 is an amendment that is a tax limitation and spending limitation all within an appropriate constitutional framework.

The amendment is succinct, relatively easy to understand, and avoids the use of arbitrary numbers. It does not dictate economic results or prescriptions. It attempts simply to establish more honest and more responsive budgetary processes. It seeks to reaffirm the truth of President Jefferson's remarks nearly 175 years ago that "of all the perils facing the Nation, public debt is the greatest of the dangers to be feared."

I am in deep appreciation for my colleagues on the committee and certainly to the distinguished Senator from Arizona and others who are willing to cosponsor this amendment.

I thank you, Mr. Chairman.

Senator Bayn. May I just make a brief comment here? I must confess to you since we have this Chrysler matter on the floor in a very few minutes and it is important to my State, I hope we can dispose of this in a short period of time.

I am very limited in my capacity to try to solve all of the problems that confront us. I learned some time ago how to count-in looking at my very distinguished colleague--I don't think there is much need to prolong the counting process.

I would just like to say I share the very deep and sincere concern of my colleagues on the end result of this matter. I proceeded with no preconception. I was reinforced in my earlier brief that we have to balance the budget by listening to the witnesses, and I do not for a moment quarrel with my colleagues here on the goal.

I am deeply concerned about the process. I became more and more concerned about the constitutional amendment process as we went along. But when talking to economists on the right and left, regardless of where they came down on this matter, they painted a picture of 8 need to deal with the budget process with the utmost sensitivity Where if we are not careful, our concern about a deficit budget of any dimension makes it a self-fulfilling prophecy that we are going to have great difficulty to keep from having any larger debts, and that a delicate handling at a time, like this particular time, can keep us from getting where we were in 1974.

It is that very kind of thing that concerns me about the firmness of the constitutional amendment procedure. I have introduced, and I gave a copy to my distinguished colleague from Utah just for his perusal, not with any ideas that it would affect the outcome of today's session, because I don't know where we are going to go as far as support for this on the floor of the Senate.

I really think we ought to do something that has some consequence and the measure I would introduce, the Spending and Tax Limitation Act, would approach this from a statutory position and would require both the President and the Congress to participate and vote on a balanced budget procedure, a requirement that we have no more than a 20 percent of the GNP for spending and no more than 20 percent of GNP for revenues. So we are dealing not only with spending but taxes and would have a balanced budget as a result of this.

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