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BUDGET DEAL BAD FOR EVERYONE
(Extensions of Remarks - May 23, 1997)

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[Extensions of Remarks]
[Pages E1051-E1053]
                      BUDGET DEAL BAD FOR EVERYONE

                                 ______
                                 

                           HON. BILL McCOLLUM

                               of florida

                    in the house of representatives

                         Thursday, May 22, 1997

  Mr. McCOLLUM. Mr. Speaker, with all due respect to the Republican 
leadership and many of my colleagues who earnestly and sincerely worked 
on and believe in the recently passed budget bill, I voted against it 
because as a conservative Republican I believe it is a terribly flawed 
product.
  Incredibly, this budget will produce for fiscal year 1998 a $70 
billion, or 4.3-percent spending increase from 1997, which is a bigger 
increase than Democratic Congresses passed in fiscal years 1993, 1994, 
or 1995. It is $5 billion more than even President Clinton requested.
  As for the long haul in getting to balance by the year 2002, spending 
will rise from $1.6 trillion to $1.9 trillion. The assumption of this 
budget is that Federal tax receipts will rise from $1.5 trillion in 
1997 to $1.9 trillion in 2002. Sure enough, this would make a balanced 
budget, but it would be a budget balanced by a huge increase in 
spending and an even bigger increase in taxes taken from the American 
people. I am for a balanced budget, but how it's balanced is as 
important as getting to balance.
  The accompanying May 22, 1997, editorial of the Wall Street Journal 
and the op-ed piece by James K. Glassman that I am entering into the 
Record show in great detail just how bad this budget is. The Journal 
editorial points out that the budget dealmakers have agreed to continue 
through 2002 the rule that requires any tax cuts be offset by either 
tax increases or cuts in entitlements; they can't be offset by cuts in 
discretionary spending. As the Journal states: ``the practical effect 
of this is to make future tax cuts all but impossible as a political 
matter.''
  Considered in this light, the minor tax adjustments that have been 
called cuts in this budget are simply not worth the price being paid. 
Congress should be eliminating the tax on capital gains and the estate 
taxes altogether. Because of the practical difficulty of doing this in 
the immediate future, prior to this budget deal Republicans had called 
for a reduction in the capital gains tax rate to a level of about 20 
percent, an increase in the estate tax exemption from $600,000 to $1.2 
million, and a $500 per child tax credit. It appears highly unlikely 
that anything approaching these adjustments can be made under the 
budget deal, and even if it were, the price being paid is still too 
high.
  When it was first announced, the Republican leadership's principle 
selling point was

[[Page E1052]]

that over 10 years this budget would save the taxpayers about $950 
billion. By the time the debate on the floor took place, that figure 
was down to a little over $600 billion. The fact is there are baseline 
savings, that is, actual spending will increase a lot every single year 
for the next 10 years but not by as much as it might otherwise, and 
this is labeled a spending reduction. It sounds good, but the truth is 
spending will continue to increase big time. And the proponents 
extrapolated 5 years beyond the budget deal to make the claimed savings 
sound better. Historically the only thing you can count on in a budget 
deal is the first year, because Congress passes a new budget every year 
and changes the mix.
  The other point the budget dealmakers have tried to sell is that this 
budget has finally gotten control of runaway Medicare spending. That is 
where all the savings are supposed to come from. But the Medicare 
proposal is very flawed too. It assumes a shift of the cost of home 
health care from Medicare part A (the trust fund financed by the 
payroll tax) into Medicare part B (financed by general revenues and 
with high deductibles by patients).
  This will postpone the day of reckoning of the solvency of the trust 
fund of Medicare part A, but does nothing to solve the underlying 
problems of Medicare. Fundamental reforms of Medicare--that promote 
more competition among HMO's, offer recipients new options, and create 
medical savings accounts which permit retirees to purchase low cost, 
high deductible catastrophic health insurance policies with Medicare 
contributing annually into the individual's savings account to cover 
the deductible--were not only omitted from this budget deal, but made 
less likely in the foreseeable future.
  Furthermore, the budget deal will force unspecified price controls on 
the Health Care Financing Administration that will result in more 
irrational cutbacks in services through regulations such as the ones 
that now deny reimbursement for routine preventive checkup tests. 
Cutting Medicare spending without fundamental reform is bound to reduce 
benefits and make Medicare worse.
  For all of these reasons and more, as the Washington Post headline on 
James K. Glassman's column said, the budget deal I voted against is bad 
for everyone. I wish it weren't so, but that's the way I see it.

                       [From the Washington Post]

                            Bad for Everyone

                         (By James K. Glassman)

       Let's not kid ourselves. The budget that Congress is set to 
     pass this week may succeed in showing a zero deficit on paper 
     in the year 2002, but it fails miserably in its most 
     important function--holding down federal spending.
       In the latest Washington orgy of self-congratulation, Rep. 
     John Kasich (R-Ohio), the House Budget chairman, proclaimed, 
     ``Cooperation between Congress and the president is resulting 
     in smaller government.''
       No, it's not. The way to get smaller government is by 
     spending less money. In fact, federal spending will rise 
     sharply in fiscal year 1998--that's the year that starts on 
     Oct. 1, 1997, and the only budget year that has any real 
     significance. All the other numbers for all the other years 
     are sheer fantasy. As anyone who runs a business knows, the 
     only figure you can possibly control is next year's spending.
       Also, when the government spends (whether it gets its funds 
     through borrowing or taxing), it is extracting money from the 
     private sector, money that could be used for capital 
     investment, for creating new businesses and better jobs.
       To paraphrase James Carville: It's the spending, stupid--
     not the deficit.
       And how much will federal spending increase next year? 
     That's a question that I have been asking the House Budget 
     Committee since May 2, when the original deal was announced. 
     Finally, I've managed to get the answer (from other high-
     level GOP sources). For fiscal 1998, spending will be $1.692 
     trillion. For this year, spending is estimated at $1.622 
     trillion, so the government will be spending $70 billion 
     more--an increase of 4.32 percent.
       How big is that increase?
       --It's the largest since Bill Clinton became president, 
     larger even than in the years when the Democrats controlled 
     Congress.
       --It's $5 billion more than Clinton asked for in the budget 
     he submitted in February. (By the way, the new budget also 
     calls for spending of $1.889 trillion in 2002; Clinton sought 
     only $1.880 trillion.)
       --It's well ahead of inflation, which is estimated for 1998 
     at between 2.7 percent and 2.9 percent. This increase is 
     about 1.5 percentage points (or half again) higher.
       These are hard facts. What you hear from politicians simply 
     tries to obscure them. For instance, Kasich bragged last 
     week, ``Over the next 10 years, passage of this plan will 
     save taxpayers over $950 billion.''
       What he means is that the government is now planning to 
     spend about $1 trillion less in the next decade (out of a 
     total of about $20 trillion) than it was planning to spend 
     the last time it made plans. That earlier plan is called the 
     ``baseline,'' and it's a device that both Congress and the 
     president use to make it seem that they're accomplishing more 
     than they really are.
       Many conservatives--including Kasich--used to criticize the 
     use of the baseline as a deception. Indeed, they once 
     proposed legislation to outlaw its use. Now they use it 
     themselves, with trumpets.
       The reason that the federal deficit is projected at zero 
     under the new budget is not that government will be smaller, 
     but that revenues from the taxpayers will be larger--much 
     larger. According to the president's February budget, the 
     Treasury was expected to collect $1.5 trillion from citizens 
     and businesses in 1997. According to the new bipartisan 
     budget, that figure will rise to $1.9 trillion in 2002. 
     Meanwhile, spending will rise from $1.6 trillion to $1.9 
     trillion. And there you have it; a balanced budget.
       But here's another idea. Why don't we simply increase 
     spending from $1.5 trillion to $1.8 trillion, and taxes from 
     $1.6 trillion to $1.8 trillion? Again, the deficit would be 
     zero, but the economy--and individual Americans--would be big 
     winners.
       Instead, Congress is choosing a more familiar route--spend 
     more and tax a lot more, and hope the two come out even.
       This is the same route we have been traveling for the past 
     four years, despite all the jabbering about ``smaller 
     government.'' In a January report, the Congressional Budget 
     Office looked at the dramatic decline in the deficit--from 
     $290 billion in 1992 to $107 billion in 1996--and asked, 
     ``How did this happen?''
       The answer wasn't reduced spending. In fact, spending rose 
     13 percent, roughly the rate of inflation. Instead, the 
     deficit fell because of higher revenues--a phenomenal 
     increase of 33 percent.
       Yes, the budget does call for tax cuts, but they are 
     minuscule--and, again, the word ``cut'' is wildly misleading. 
     All it means is that the Treasury will collect $85 billion 
     less over five years than it expected to collect with the 
     original baseline. That's $85 billion out of total tax 
     collections of more than $9 trillion, or less than one 
     percent.
       But far worse is that the new budget calls for an 
     acceleration in spending--well beyond inflation. It includes 
     $32 billion in new initiatives demanded by Clinton, including 
     health coverage for children in low-income (but not ``poor,'' 
     since they're already covered by Medicaid) families, 
     restoration of welfare benefits for legal immigrants and more 
     Medicare subsidies for seniors.
       Republicans have agreed to protect increased spending for 
     Head Start, the Job Corps, child literacy, etc., etc. As for 
     actually reducing government programs, don't hold your 
     breath. There is no mention in the budget of killing Amtrak 
     or the National Endowment for the Arts or the Advanced 
     Technology Program, which provides $225 million annually to 
     huge corporations such as IBM to conduct research that they 
     would undoubtedly fund on their own.
       But to cut spending is hard. To collect more taxes that are 
     the fruit of the sacrifices and genius of individual American 
     managers and workers--that's easy. It's disappointing, but 
     hardly a surprise, that this Congress has chosen the easy 
     way.
                               __________
                               

              [From the Wall Street Journal, May 22, 1997]

                        William Jefferson Kasich

       Anyone who doubts that the Republican revolution is 
     moribund on Capitol Hill should consider that its leadership 
     has just told the Heritage Foundation, the Cato Institute and 
     Citizens for a Sound Economy to get lost. They were barred 
     from GOP councils this week for daring to question the wisdom 
     of the ``bipartisan budget agreement'' now being sold in 
     Washington.
       These outfits are three of the country's more prominent 
     conservative activist groups, which means they care about 
     policy. But the budget deal is mainly about politics, i.e., 
     political survival, so Republicans don't want anyone rudely 
     telling the truth about their transformation into Democrats. 
     New Gingrich, John Kasich and company have become Clintonian 
     in their ability to call a square a circle.
       Mr. Kasich, the House budget chairman and likely 
     Presidential candidate in 2000, once railed about such 
     Beltway deceptions as phony ``cuts'' proposed against 
     imaginary budget ``baselines.'' But now he's invoking them 
     himself. ``Over the next 10 years, passage of this plan will 
     save taxpayers over $950 billion,'' Mr. Kasich said the other 
     day.
       The only problem with that sentence is that none of it 
     means anything at all. The 10-year period is fanciful, since 
     as countless budget deals have taught us the only year that 
     really matters is the current one, in this case Fiscal Year 
     1998. The 10-year boast allows politicians to claim fiscal 
     austerity, while putting off all the spending cuts for some 
     future Congress.
       The ``save taxpayers'' lingo is also worthy of our current 
     President. Mr. Kasich's ``savings'' are nothing more than 
     reductions against the automatic spending increases included 
     in a ``baseline'' that rises each year. This is an invention 
     of Democratic Congresses that designed it to more easily grow 
     the government; they knew they would be able to denounce any 
     reductions from the baseline as ``cuts.'' Republicans only 
     last year griped about this when Democrats used it to deplore 
     their Medicare ``cuts,'' but now Mr. Kasich is playing the 
     same game.
       This is no doubt because it lets him avoid talking about 
     the real budget issue, which is spending. The bipartisan deal 
     proposes to spend $1,692 trillion in 1998, or $5 billion more 
     than even President Clinton requested. That's a $70 billion, 
     or 4.3%, increase from 1997, a bigger increase than 
     Democratic Congresses passed in fiscal years 1993, 1994 or 
     1995. This is compromise?

[[Page E1053]]

       Republicans are even agreeing to bust the caps on non-
     defense discretionary spending that George Mitchell, Dick 
     Gephardt and President Clinton were forced to agree to 
     in 1993. And one more thing: Mr. Kasich and friends have 
     agreed to continue, through 2002, the rule that requires 
     that any tax cuts be offset either by tax increases or 
     cuts in entitlements. They can't be offset merely by cuts 
     in ``discretionary'' spending accounts such as arts 
     funding or legal services.
       The practical effect of this is to make future tax cuts all 
     but impossible as a political matter. Republicans will never 
     try to cut taxes by cutting entitlements, or at least they'll 
     never see it through if they try. It also makes discretionary 
     cuts that much more difficult to pass, because it means such 
     cuts can't be used to return money to taxpayers. Instead, if 
     Congress ever does zero out, say, the National Endowment for 
     the Arts, the money will merely get absorbed back into the 
     broader budget. So why should Congress bother to cut any 
     spending, since all of the political pressure will come from 
     those who oppose the cuts?
       As for entitlements, we've already written about the lack 
     of any real Medicare reform. But we can't let pass without 
     notice that Republicans have agreed to accept the same Trust 
     Fund sleight of hand they denounced when the President 
     proposed it in February. This is the transfer of fast-growing 
     home health care costs away from the Trust Fund (financed by 
     the payroll tax) onto the general revenue budget. This ruse 
     allows the pols to claim the trust fund is ``secure for 10 
     years'' when all they've done is reshuffle the accounts and 
     put the financial burden onto all taxpayers.
       And, lest we forget, Mr. Kasich and friends are hailing the 
     budget deal's $85 billion in ``badly needed tax relief.'' But 
     that number is so small, in comparison with $8 trillion in 
     federal revenue over five years, that Republicans will have a 
     hard time satisfying all of their constituents. Mr. Gingrich 
     has been privately promising ``historically accurate'' 
     scoring for the tax cuts, which would mean that a capital 
     gains cut would arise more revenue than it lost. But we'll 
     believe that when we see Republicans finally show the guts to 
     do it.
       Here and there a few Republicans are stepping up to speak 
     honestly about all of this. David McIntosh, a sophomore from 
     Indiana, was planning to offer an amendment on the House 
     floor last night to spend less on discretionary accounts in 
     return for larger tax cuts. And Phil Gramm of Texas may offer 
     something similar in the Senate today. But with the 
     Clintonized GOP leadership massed against it, neither effort 
     can do much more than educate the country about what is 
     really going on here.
       The political truth about this budget is that Republicans 
     are selling out their agenda in return for President 
     Clinton's blessing. They want cover against Dick Gephardt and 
     AFL-CIO attacks in 1998. And we can even understand their 
     reluctance to fight Bill Clinton. But do they also have to 
     emulate him?

     

                          ____________________