I just can't get away from a concern that the majority of this Congress, given the kind of strong opinion that exists in the country, is going to demand a balanced budget, or they are going to be changed. I am concerned about the kind of constraints of letting 40 percent of the Senate, in essence, blackmail, in some instances, 60 percent of the Senate. And we are all aware of the little things that each Member of the Senate or House might want that have nothing to do with the budgetary process, and yet can become a quid pro quo to get the necessary 40 votes to pass this measure.

I salute my colleagues for including that we can have an exception when there has been a declared war, but I would remind them the two last struggles in which we lost over 100,000 Americans combined would not fit that criterion because neither were declared.

I don't want to prolong this, but I would hope all of us who are concerned about a balanced budget would look, one, at the delicate nature of this budget-balancing process; two, that we would look at the need to let a majority of the Senate and the House work its will through the statutory process instead of through the constitutional amendment process.

Each member of this committee is dedicated, I think, to a balance budget, and each of us are sincere and want the method for achieving that balanced budget to be right, but we have never done anything like this before in the history of our country, put something like this in the Constitution. We don't know whether it is going to work or not. If it doesn't work, we all know that it is a much more difficult process to change once it is in the Constitution than if it's a statutory procedure.

I honestly believe today the strongest restrictions on those who are not reasonable in their spending goals, is the constituency itself, of which I am very much aware.

I assume that there are not enough votes for a substitute like the one I just mentioned, so I will not present it.

I feel sort of duty bound, since I got a letter from our colleagues, Senator Stone and Senator Heinz, just to raise Senate Joint Resolution 56, which was their proposal. I will do so.

The Senator from Utah mentioned this. If anybody cares to bring that up, fine. If not, we will go on with Senate Joint Resolution 126. Senator DECONCINI. Mr. Chairman?

Senator BAYH. The Senator from Arizona.

Senator DECONCINI. I join the Senator from Utah in his compliments to you as chairman. I have talked with you many times about this and realize your complete dedication to attempt to bring fiscal responsibility into some kind of balancing expenditure versus income. And I share with you, Mr. Chairman, your obvious concern of whether or not this is going to do it and will it work.

I thought a great deal and I have come to the conclusion that we must take some demonstrative step.

Notwithstanding that, I want to assure the chairman that his efforts have not gone unnoticed by this Senator for the 3 years that I have been here, your continued willingness, first of all, to consider any reasonable approach, whether it be a constitutional amendment or statutory language, certainly your effort toward your substitute and your continued leadership in trying to bring fiscal responsibility to this Congress.

Senator BAYH. Thank you, Senator. We all have been working together. The question is which route are we going to take to reach the mark. Is there further comment on this? Anybody who wants to make a statement, of course, can put it in the record.

Senator THURMOND. Mr. Chairman?

Senator BAYH. The Senator from South Carolina.

Senator THURMOND. Mr. Chairman, first, I would like to say for the 25 years I have been in the Senate, I have been interested in a balanced budget. As Governor of the State of South Carolina, we kept our budget balanced. The statute of the State and the constitution of the State of South Carolina require this. Because of that, our State was required to borrow money at a very low rate of interest. We have a three-star rating, can borrow money now much cheaper than the Federal Government.

I am convinced it is only on the part of wisdom and practicality for a government to balance its budget.

We haven't balanced the budget at the Federal level but one time in the last 20 years. The budget hasn't been balanced at the Federal level but eight times in the last 40 years. No individual and no corporation can stay in business that operates in such a haphazard manner, such a fiscally irresponsible manner and that is exactly what it is.

For several years, Senator Harry Byrd, Sr., and I introduced resolutions for a balanced budget. We introduced several, but they never did pass. I later joined with Senator Harry Byrd, Jr., and worked with him on balanced budget resolutions.

Senator Goldwater, Senator Tower, Senator McClure and others have been interested in this, but we had not had the sentiment sufficient in the Congress to get action. I am very pleased that we have a number of new Senators here who are interested in this. I am very pleased that on this committee Senator DeConcini has taken such an interest here, and I want to commend him and Senator Heflin, another new member, and I want to commend also on this committee Senator Hatch who has taken a very active leading part as the ranking member of this subcommittee in this matter, and the able work done by Senator Simpson also is to be complimented.

So I think we are fortunate at this time to have people in the Senate who do have fiscal responsibility and willing to go along and take steps to bring about a permanent solution to this matter. A constitutional amendment is the only permanent solution that I see at the present.

I want to commend others like Senators Armstrong, Lugar, Boren, Stone, Heinz, Roth, Wallop, Helms, and Stennis, who are interested in fiscal matters and who I feel will all join us in supporting us strongly in the Senate.

Mr. Chairman, I want to commend you for keeping your commitment to hold this markup, and I sincerely hope this morning that we can take action to report out a constitutional amendment which I think will be a credit to you as chairman of this subcommittee, whether you favor it or not, and I hope it can get favorable action in the full committee and get the matter to the Senate.

The public is clamoring the public is clamoring, I repeat-for some action to maintain a balanced budget. The public is tired of seeing us spend more than we take in. The debt has now reached between $900 billion and $1 trillion. The interest alone is about $60

billion a year. So I think it is urgent that we take steps to bring out legislation of the kind we have here.

This legislation is not perfect. No piece of legislation is going to be perfect along this line, and we can't please everybody. But we have tried to get a consensus, as much as we can, among the various Senators in order to get some legislation here that we could support and bring to the Senate.

Mr. Chairman, I ask unanimous consent that the rest of my statement be placed in the record.

Senator BAYH. Without objection, so ordered. [The prepared statement follows:]

PREPARED STATEMENT BY SENATOR STROM THURMOND

Mr. Chairman, today we meet to consider an amendment which will help restore fiscal responsibility to our national government. Before I talk about the merits on any proposal, I would first like to thank the Chairman for his efforts in arranging the mark-up session. We are all very busy now and I am pleased that we could meet to consider this very important issue.

Most Americans are concerned about the fiscal policies of the national government. On one level they are bothered by the never-ending deficit spending by the federal government. On a second, and perhaps more important level, they are concerned that the government is not responsive to their desires. These undesirable results are the almost inevitable consequence of our present budgetary practices. Anytime Congress is faced with an appropriation bill, two groups are interested in the possible expenditure. One group is composed of those most likely to benefit from the appropriation. This group is generally well organized and usually concentrates its entire power on having the bill passed. The countering force is a general group made up of the taxpayers who must pay for the expenditure. The taxpayers are not really organized, because while the special interest group is interested in just one bill, the taxpayers would have to mount an organized effort against almost every appropriation bill. With these ground rules, it is easy to understand why the federal government always has a deficit. Then on election day it is difficult for the taxpayers to clearly express their concerns because the budgetary practices of Congress obscure the legislators' true votes and feelings on fiscal restraint. It is unfair to handicap the American public like this.

For these reasons, I support the approach of Senate Joint Resolution 126. This amendment would restore a norm of fiscal responsibility, and then it would allow the Congress to do whatever it desired, as long as those decisions are specific, conscious choices which are made in the open. Fiscal responsibility and political accountability are certainly worthwhile goals. Senate Joint Resolution 126 would help achieve those objectives, not by writing specific economic policies into the Constitution, but by improving our fiscal procedures. Senate Joint Resolution 126 offers a reasonable and workable solution to a very serious problem. I commend everyone who has joined in the cooperative effort in proposing this amendment. Senator BAYH. Are we ready for a vote here, gentlemen?

Senator HEFLIN. Yes.

Senator SIMPSON. Mr. Chairman, I just have a brief comment and I will submit my statement in the record.

I appreciate your courtesy and patience in this particular field. You have been more than fair. I know your feelings. You have shared those with me at times with regard to this issue. There has been a tremendous amount of work performed by the various staff members representing us here at the table.

I am very pleased to have seen the efforts of my own crew and others. Obviously it is a difficult thing to do. Spending limits, that has been an issue, whether we have a limit on spending or whether we have a balanced budget. We can get into some fascinating discussions of that, even down into the depths of econometric models and other novel little phrases.

I guess the thing I would want to communicate is that there are 20 new Senators here and those 20 new Senators have been out closest to the fires in 1978 and if there was one consistent question that came up throughout this country, of the 20 of us who share this view, it is "what are you going to do about balancing the budget? When are you going to get to that?"

There are going to be 34 of our brethren who are going to go out and find out that is what the people of America are saying. They are saying, "Do something." They really don't care what it is. That is then for our judgment to assist them in that.

What I have seen in my time here is we can go over and grind around over there in that chamber and save $50 million, $60 million, hack away all day long, come back to our committees where just by staff use and our own inability to follow the track because of the things we have so much to do, we find then these other things perking in these other areas and we have added $120 million here and $120 million there.

I sit on Environment and Public Works and enjoy it thoroughly. Every time I step back into the committee room the vat has been filled again with various water projects, in my State and other States, people clamoring for that. Everybody who comes in my office says, "What are you doing, Simpson? Cut it all back." Before they leave, they ask to double whatever their particular interest is that they have come to ask me about.

It is for us to do. That is what they hired us on for. This addresses issues like off-budget items, budget items and I have heard this great ritual throughout the body, all of our colleagues say that it is a great idea, but they will torpedo it as being impractical or unworkable. The excuses and arguments in that area actually boggle the mind and the intellect also. But I will tell you what they are saying. They are saying, "Your kind are a pretty lively and crafty group. We found that. You always come up with something novel and creative in figuring ways to spend money. Now, what are you going to do to save it?" It is very simple. That is the way they view it, and why not? Either we move or they will, and the key to it that everyone seems to miss is that 34 State legislatures have already done this, and the only way you pass a constitutional amendment in a State legislature is with a two-thirds vote, and there are lots of Democrats and lots of Republicans in that two-thirds vote. That is what we are all missing in this issue.

Because you can talk about it all you want and you can talk about fine tuning it and making it this and being sure it doesn't injure this or cut through this, but the real gut issue is that 34 States in the United States of America with a two-thirds vote in each body of Democrats and Republicans have done this, and the language isn't even the same. They haven't all approved the same language exactly. Some have added by amendment to it.

So to me what could be clearer, I think the tattoo will be etched on the chest of about 34 of our brethren, if they go out on the stump in 1980, I have never heard a clearer message conveyed, when 34 of the 50 States are saying it in that high degree of clarity without any question about their intensity.

Thank you. I ask the balance of my remarks be put in the record. [The prepared statement follows:]

PREPARED STATEMENT OF SENATOR ALAN K. SIMPSON

I. INTRODUCTION

Senate Joint Resolution 126 would correct a serious flaw in our political process. which today is biased toward ever increasing levels of spending and taxation, and thus toward the problems which such increases bring, including the problems of inflation and of the increasing influence of the Federal Government in our lives and a correspondingly decreasing power of individuals over their own destinies. I will not attempt today to amplify my remarks on the existence and significance of these problems. I trust that most of my colleagues already appreciate this reality. Furthermore, there will be ample opportunity later for the presentation of statistics and other evidence which will even more dramatically show the size of the hole into which we have fallen.

II. INFLATION AND EXCESSIVE GOVERNMENT POWER ARE CAUSED INL ARGE PART BY EXCESSIVE GOVERNMENT SPENDING

Mr. Chairman, it is our view that both of these problems-both inflation and excessive Government power-exist in large part because of excessive spending by the Federal Government.

The relationship between Government spending and Government power is obvious. The relationship between spending and inflation is perhaps less so. For this reason, Mr. President, I would wish to say a very few words about inflationinflation in terms of both its immediate and fundamental causes. The immediate cause of a true inflation, a general rise in prices, is the Federal Reserve Board's action in increasing the money supply faster than the American people increase their production of goods and services-in other words "too many dollars chasing too few goods." This occurs when "the Fed," instead of seeking the monetary goal of maintaining stable prices (that is, avoiding both inflation and deflation), pursues economic goals-lower interest rates, higher investment and productivity, lower unemployment, and the like-through increasing the money supply, not only faster than the production of goods and services, but faster even than what is expected by those making the economic decisions. This greater rate is necessary to the achievement of these goals since what is being attempted is in effect to dazzle people into thinking that the resources which Government uses are still available for private investment.

Therefore, although the immediate cause of inflation is the action taken by the Federal Reserve Board, the fundamental cause is related to the economic problems which the Federal Reserve's actions are intended to solve. Thus, that fundamental cause is really excessive Government spending the allocation to Government of so much of the Nation's resources that an insufficient amount is left for private capital investment. Whether such spending is financed by debt or by taxes, the economic problems associated with high interest rates and reduced capital investment will tend to result, thus causing pressure on the Federal Reserve Board to inflate the money supply.

III. EXCESSIVE GOVERNMENT SPENDING IS CAUSED BY BIASES IN THE POLITICAL PROCESS

Why have massive increases in Federal spending occurred? To some extent, of course, such increases result from a genuine shift in the will of the people-in the kind of services and control the American people want from their government. There is another reason, however, which is not quite so noble and democratic in character. In fact it is quite undemocratic. Putting it simply, our political process is defective. It is tilted toward ever increasing levels of spending because of the political advantage which can be gained from the creation of additional spending programs, and the lack of political advantage-indeed the significant disadvantage gained by opposing or repealing such programs. This situation results from the fact that the awareness and interests of special interest groups which benefit from a particular spending program are very great and so is their lobbying pressure and the credibility of their implicit threats to withhold political support.