Bill Bradley

Mr. BRADLEY

Mr. BRADLEY. Madam President, I rise in support of the amendment offered by the distinguished Senator from Delaware and as an original cosponsor. I think this is one of the most important amendments that we will consider in this entire debate on a balanced budget amendment. It goes to the question of truth in budgeting. I read in the paper constantly how the proponents of the balanced budget amendment say, why can we not balance the budget? Our average citizen in New Jersey has to balance his or her budget, and so does the citizen in Maine or South Dakota or Utah. In fact, I have heard people say, if the factory worker can do it, why can we not do it? If the insurance salesman can do it, why can we not balance our budget? Madam President, I suggest that average people out there in the country today, by a surprising margin, do not balance their own budgets, in the way we would have to under this balanced budget amendment. I think there is a very important distinction to be made between people who spend money for consumption and people who spend money for investment. The average person today, assuming that he has a credit card, spends money by using that credit card and piles up debt. This type of spending is primarily for consumption. At the same time, my guess is that there are millions of Americans who have mortgages on their homes. Madam President, under the rules established by this balanced budget amendment, any American who has a mortgage on his or her home would not have a balanced budget. Under the balanced budget amendment, all capital expenditures have to be funded currently, which means that if you were going to buy a home under the balanced budget amendment, you could not get a mortgage; you would have to pay for the whole house in 1 year. How many people in this country do that? Not very many. They go to the bank and they get a mortgage, and as a result of this mortgage, they pay the house off over many years as they use it, and as the benefit of the asset accrues to them. They also pay the interest charges every year. Madam President, let me suggest that there is a great difference between a mortgage and credit card debt. Similarly, there is a great difference at the Federal level between operating expenses and capital expenditures. Operating expenses fund consumption, the day-to-day costs of running the Government, including everything from veterans' programs to the FBI to employees' salaries. The benefits of this type of spending are used up almost immediately. However, when the Federal Government makes a capital expenditure, meaning an investment in a physical asset such as a building, a highway, or a port, the benefit from that asset does not accrue to the country in that first year. It accrues over time. Yet, the balanced budget amendment, as it currently stands, would require us to put the whole cost in the budget up front, unlike the average citizen. Therefore, Madam President, the first point I want to make is that there is a real distinction between financing day-to-day expenses and financing long-term investment. American families know that distinction. That is why they have credit cards and mortgages--one to pay for day-to-day expenses; the other, to finance long-term investments. The Federal Government should operate the same way American families do. We should have a Federal budget that balances our operating expenses. We should not have a Federal budget that requires short-term balance on long-term investments. So that is the first point I would like to make. Under this amendment, capital expenditures are listed in a separate budget from the operating expenditures. And while a three-fifths vote would be needed to allow borrowing for the operating budget, if you want to borrow on the capital budget, it would take only a majority. The other argument we have heard in this debate, is that States balance their budgets, so why can the Federal Government not balance its budget? Madam President, States do not balance their budgets as the Federal Government would be required to balance its budget under the terms of this amendment. We all live in different States. Let us take my State of New Jersey. We have a balanced budget requirement in New Jersey. The State must balance the budget. That is what it says. However, we also realize the importance of making long-term investments for our State's future. Therefore, notwithstanding the balanced budget requirement, the State has the authority to borrow to finance capital investments. In addition to general obligation bonds issued directly by the State of New Jersey, we have a number of State authorities that are authorized to borrow to finance long-term investment projects. These authorities include the New Jersey Economic Development Authority, which as of November 1994 had $3.6 billion in debt outstanding; the New Jersey Turnpike Authority, $2.8 billion; the New Jersey Educational Facilities Finance Authority, $1 billion; the New Jersey Sports and Exposition Authority, $900 million; the New Jersey Building Authority, $700 million; the New Jersey Highway Authority, $640 million; the New Jersey Waste Water Treatment Trust, $620 million; the South Jersey Transportation Authority, $590 million; the New Jersey Water Supply Authority, $150 million; and the South Jersey Port Corp., $40 million. In total, Madam President, New Jersey had 19.8 billion dollars' worth of debt in 1992 which was used to finance capital projects. The total annual New Jersey State budget is around $16 or $17 billion. If New Jersey had to balance its budget as the Federal budget would have to balance its budget under the balanced budget amendment, New Jersey would have to spend more in annual debt payments than it now spends. Madam President, despite the importance of investing for our Nation's future, the balanced budget amendment does not distinguish between operating and capital expenditures. Instead, the amendment, unlike the balanced budget requirements in New Jersey and 42 limiting the Federal Government from borrowing to finance long-term investment. The balanced budget amendment would require that the full cost of each investment project be paid immediately regardless of the term of the investment's life. In other words, in New Jersey, $19 billion would be due next year because that is how much New Jersey is in debt with the so-called balanced budget amendment at the State level. If this rule were applied to families, they would be forced to pay off their entire mortgage immediately and they could never again borrow to buy a home, pay for college, or finance any other long-term investment. Do we really want to hamstring the Federal Government in this manner? I think not. American families do not do it; our States do not do it. What is good for families and States should be good for the Federal Government. We ought to have a separate capital budget. Therefore, the capital budget amendment that the distinguished Senator from Delaware has offered would do nothing American families, businesses, and States do not already do. By allowing the Federal Government to borrow to finance long-term investments, this amendment would allow the Federal Government to manage its finances in the same way that most States, families, and businesses manage theirs. That is what this amendment is all about. Why treat the Federal Government differently? Who would argue that families in this country should be prevented from taking out mortgages? Why should we say to New Jersey taxpayers, ``Pony up for the whole State budget plus the total for all State borrowing, all $19 billion worth, to pay that debt off?'' Why should we say to businesses that borrow to finance capital investments in plant and equipment, ``Nope, you can't do that. You have to pay it all off in the same year you buy it.'' The reason that we do not do that, of course, with regard to families, businesses, and State governments, is that we recognize the connection between long-term investment, economic growth, and job creation. The more investment you have, the more jobs you have. The more long- term investment you have, the broader your foundation for economic growth is over time. How often do we hear about the balanced budget amendment, ``We need to reduce the deficit. We need to eliminate the debt. We need the balanced budget amendment because it is through debt passed on to subsequent generations of taxpayers that the ultimate unfairness comes in.'' However, these same concerns about intergenerational cost shifting do not seem to come into play when we discuss the possibility of issuing debt to finance long-term capital projects that provide benefits over a number of years. Why pay for the benefits of a bridge in 1 year when those benefits are going to flow over 50 years? Why pay for the benefits of your home in 1 year when the benefits are going to flow over 50 years? American homeowners do not pay for all those benefits in 1 year. They pay over 10, 20, 30 years. Why should the Federal Government be different? In short, it should not. But there is a bigger point here and the bigger point is that capital investment, whether you are running a company or a government, is enormously important because it is through investment that we increase productivity which provides a foundation for long-term economic growth. That increased productivity is critical if we wish to enhance long-term job opportunities, improve our standard of living, and keep our Nation competitive in an increasingly international marketplace. Capital investments are investments in the long-term productivity of our economy and in the living standards of our citizens. However, because these advantages do not become apparent until several years after the funds have been invested, they are often underfunded, particularly when funds are tight, as they are now. Budget decisions tend to focus on immediate, operating needs. As a result, long-term investments get shortchanged. By separating capital expenditures from operating expenditures, we ensure that these long-term investments are not overlooked in the budget process. By allowing them to be financed through debt, we can ensure that the long-term economic vitality of our country will be preserved. The threat of insufficient capital investment is very real. Recently, a group of 435 economists signed a statement that warned: There is a danger in the current antigovernment tone of our national discourse that we as a Nation will forget the essential economic contribution made by public investment in our people and in our infrastructure. ``Public investment.'' Ask anybody who lives on the east coast, west coast, or gulf coast of the United States how important ports are. Those are big capital investments. Ask anybody that lives anywhere in the United States how important highways are. Ask anybody who lives in a larger metropolitan area how important mass transit is. Ask anybody in the West how important dams are. Ask anybody in the dry West, beyond the 100th meridian, how important irrigation is. Ask anybody beyond the 100th meridian in the West how important public investment in power are. Ask anybody, and they will tell you that it is on the strength of investment, both public and private, that long-term economic growth is based. Madam President, I would simply suggest that if we look at the public investments in the 19th century. The distinguished Senator from Idaho is here. He knows how important the dams are in the West. He knows how important the irrigation systems are in the West. Madam President, if we could not finance those systems with debt, we would have to account for it all in the first year. We would have to pay the entire cost upfront. Most of those projects would not have been built had it not been for the Federal Government's ability to borrow and, in the future, many projects such as these will not be built. We need to liberate capital spending from these requirements. We can do so by having a separate capital budget, a capital budget that would be capped at 10 percent of the total operating budget outlays. If we were able to do that, I believe that we would all benefit--our country would benefit and our children would benefit. Madam President, I would like to close by emphasizing that the problem we are seeking to resolve by creating a separate capital budget is a real one with significant repercussions for our children and grandchildren. Like those economists said, if we do not make those investments, then our future will not be secure. How we choose to finance long-term public investments will have enormous consequences on the economic well-being of future generations. It is just as irresponsible to leave children and grandchildren with an enormous debt burden as it is to leave them without the infrastructure necessary for them to build their future. I believe it is this concern about the impact of our decisions on future generations that is really driving the balanced budget amendment. If we are truly concerned about our children and their economic well-being, then it is clear that the time has arrived for a capital budget. I yield the floor.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, I rise in support of the effort by the Senator from South Carolina. I think that, at a minimum, we have to limit the amount individuals can contribute to their own campaigns. The Senator's analysis is very clear that in order to do that, given Buckley versus Valeo, we must have a constitutional amendment. Mr. President, my own personal view is that the problem that lies at the heart of the political process is the money in the political process. There is no doubt that this is true. And I believe that while the Senator's amendment is necessary, and a constitutional amendment is necessary to achieve the end of preventing those with enormous resources from buying elections, I do not think it is sufficient. I support it because I think it is an important step that plugs up one gigantic loophole in this process that allows those with means to buy the microphone. When you have a system where only the rich can buy paid media in sizable amounts, you directly impede political equality. That is what has happened, and this is the only way under our current circumstances to change that. Mr. President, if we do this amendment and leave all the rest there, we still have a major problem: too much money in politics. So I offer, in support of the amendment and in addition to the amendment--and a very simple idea that our only way to get money out of politics is to get money out of politics--two very simple proposals. One, that anybody in America, on their Federal income tax form, above their tax liability, can designate an additional $200 to go to a political fund. In July, or at sometime after the primary election for Federal office in a particular State, that fund is divided between Republican, Democrat, and/or qualified independent, and the only money that is permissible is the money from that fund. And the money in that fund can only be contributed from citizens in your State. If citizens in a particular State chose to give very little, they would be less informed, no doubt in my mind. They would be less informed, but they would be in charge. And the system would adjust. And, who knows, maybe we would end up with a system in which attack ads would go and public discourse would grow. Unless we are prepared to cross the path to the side that says the only money available is money contributed by citizens in your State--no PAC's, no party conduits, no big contributors, and no wealthy individuals able to buy the means and the microphone in an election --unless we are prepared to do all of that, we are just kidding ourselves. We are going to be arguing around the edges about this political reform or that political reform. But unless we take, I think, this radical step, we will not end money in politics. It is as simple as that. So the Senator's effort is not only laudable but central to getting control of the democratic process. I see the distinguished Senator from Pennsylvania is on the floor and is going to speak, and he has the opportunity, given what his activities are these days on the national scene, to champion fundamental campaign finance reform. I hope that we will cross that line and say: No individual contributions, no big contributions, no PAC's, no party conduits, and no millionaires buying elections. You can put up to $200 above your tax liability into a fund several months prior to the general election, which is divided among Republicans and Democrats and qualified independents, and that is the only money; it is only the money from tax returns in your State. If we do not do something that radical, we will not have fundamental campaign finance reform. I salute the Senator for his amendment.

Mr. BRADLEY

Mr. BRADLEY. The national sport.

Mr. BRADLEY. Baseball?

Mr. BRADLEY. Madam President, will the majority leader yield? He said he wanted to make a statement about baseball?

Mr. BRADLEY. Not basketball.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, I thank the Chair and I thank the distinguished Senator from Vermont for his statement. I also thank the manager of the bill for yielding the floor at this time. Mr. President, I intend to take the next hour or so, maybe a bit longer, to try to lay out the case for at least letting the people know what might be entailed in a balanced budget amendment. But let me try to put this balanced budget amendment in a broader context. We will shortly get into a lot of numbers, because if you are going to deal with the balanced budget amendment, you have to get into numbers. However, before we get into those numbers, let me try to establish what I think is the proper context for the balanced budget debate. During the 1992 campaign, the Clinton campaign had a theme song by Fleetwood Mac, called ``Don't Stop Thinking About Tomorrow.'' This song hope, ``don't stop thinking about tomorrow''; tomorrow is coming, think about it, it is important. Yet, if you actually thought about that song and you thought about what has been happening in the country, it is clear that we have not been thinking about tomorrow and we have not been thinking about tomorrow for a long time. Every speaker needs a text, or theme, for his or her statements. I would like to take as the text for my remarks today one of Aesop's fables. It is an old fable. All of us knew it when we were children. This is about the grasshopper and the ant. The fable goes like this: It was wintertime. The ants' stored grain had gotten wet and they were laying it out to dry. Along came a hungry grasshopper and asked them to give him something to eat. One of the ants said, ``Why didn't you gather food in the summer like us?'' The grasshopper replied, ``I didn't have any time. I was busy making sweet music.'' The ants laughed and said, ``Very well, then, since you piped in the summer, now dance in the winter.'' The moral of the story: In everything, beware of negligence if you want to escape distress and danger. Now, that is the Aesop fable. It is a pretty clear message: If you do not work in the summer and put the food away, you are not going to have the food in the winter. And I think that it basically is saying that not thinking about tomorrow means being negligent, acting like the grasshopper instead of the ant. Too many of us, I think, have been grasshoppers for too long, not thinking about tomorrow. Let me just give you a couple of examples. Let us just think about urban America. Each year it gets poorer, more violent, more populated with families in distress. If we stopped to think about this reality, the reality that is there, we would be compelled to act because of the morality. If you are your brother's keeper, you have to walk your talk. Because of self-interest, I mean, we are never going to compete and our living standards will be lower with a larger and larger unskilled population on our collective backs. And as for world leadership, how are we going to lead the world by the power of our example after the events that occurred in Los Angeles a couple years ago which popped across television screens from Tokyo to London? Or where 40 percent of the people in America who wanted to vote were denied this basic right because they were not registered. Clearly, on this issue, Mr. President, we have not been thinking about tomorrow. If we were thinking about tomorrow, we would see the human and national tragedy that is building in our cities and we would act to change those conditions. But we have not. Like the grasshopper, we have been playing our sweet music in the suburbs, while things have just gotten worse in the cities. Then, Mr. President, there is the plight of our children. Not just poor children, but all children. How can we say that we are thinking about tomorrow but continue to neglect our children? In 1975, one-third of married couples with children had both spouses working. By 1993, that percentage had doubled, as nearly two-thirds of all married couples with children had both spouses working. It is no mystery as to why that is the case. Without the second paycheck, many families just would not make it. Yet with it, their children are often alone and without supervision from an early age. Parents in this Chamber and in this institution know the pressures. Certainly I know the pressures. Certainly the distinguished Member from Vermont in the Chair knows the pressure. Certainly the staff knows the pressure. Certainly those who are listening know the pressures. If parents are lucky, they have a loving relative living in the neighborhood who can help take care of the children. If you are upper income, you can hire somebody to provide full-time care. If you do not have a relative in the neighborhood or you do not have enough money, then it becomes a little more difficult. There are only a few possible answers to this. For a spouse of either gender to have the option of staying at home, the salary of the spouse that continues to work outside of the home has to be a lot higher than it is now, or companies are going to have to give family leave that is measured not just in weeks but in years, or everyone will have to pay more taxes so Government can subsidize day care at the company, union, neighborhood center, the church, the synagogue or the mosque. Those seem to me to be the options. The only given, the only imperative, is that someone has got to provide loving care for our Nation's children. Too often, this does not happen. We have not given child care a priority. Like the grasshopper, we have been dancing toward winter. Not facing the reality that is staring everyone in the face. We have not been thinking about tomorrow. So, Mr. President, there is urban America, the plight of our children, but by far, probably the best obvious example of our failure to think about tomorrow is the enormous debt that we have amassed over the last 12-14 years. It is not only public debt. Between 1980 and 1987 consumer credit increased 90 percent. People under economic stress did not consume less, they borrowed and consumed more. And they borrowed and in some cases to speculate. However, in 1989, 1990, 1991, the bubble burst and it was over. People cut back, businesses started to pay debt down and, gradually, the private sector began to come back. Here in Washington the bubble has never burst. It just keeps getting bigger and bigger. The national debt went from about $800 billion in 1980 to about $4.5 trillion by the end of 1994. Over the next 5 years, unless we change our ways, the debt will exceed $5.5 trillion. Over 58 percent of all personal and corporate savings go to finance the interest on this debt. It is as though in 1980 you owed about $10,000 on the credit card and now you owe $43,000 and the interest you have to pay is money that you do not have to spend on your kids' college education, to buy a house, to buy a car, to put an addition into your factory and hire more workers. People do not have the money and they cannot borrow it because it is being sucked up by the Government to pay interest on the debt. In other words, Mr. President, we have placed the burden of our irresponsibility on the backs of our children. Someone once said democracies are pretty good dealing with today's problems, but sometimes they are not very good thinking about tomorrow. By amassing this debt and passing this burden onto our children, I believe we have shown that we are not very good thinking about tomorrow. So, Mr. President, this brings us to the question, ``What do we actually do about this debt?'' I will not talk about remedies for urban America or child care. This is a balanced budget amendment debate, a debate about Federal spending. Therefore, today I would like to focus the rest of my remarks on the Federal budget and what do we can do about this debt. I would also like to point out how facing reality means actually facing the numbers in this budget. First, Mr. President, we will take the analogy that we often hear-- that is, the family household. Every family manages its income and the Federal Government has things way out of whack. A giant deficit--that does not happen in a family, at least not for very long. However, before we begin with this analogy, we need to think about what a budget is. A budget is not a snapshot of what happened yesterday. It is a guess about what is going to happen in the future. It is not a picture of what happened last year with respect to spending or taxes, it is a guess about what will happen in the future on spending and taxes. We will take it to the household level. You sit around the kitchen table, trying to figure out what will your budget be for the coming year. What is the first thing you do? You figure out what is your income likely to be. Some basic questions come up. Are you going to work? Am I going to work? Is he going to work? How many people in the household are going to work? How many incomes are we going to count? Do we count the husband and the wife? How about the teenage son? Is that the family income? Do we count the husband, the wife, and the wife's older sister who is living with the family? Is fairly central to devising a budget. What is the income that we can count on? Second, there is the issue of growth. Well, do you anticipate, will there be bonuses in the year? Will you work overtime? Will you get a raise? Will the company, because it is doing well, give you a 15 percent increase? All of these would provide more income. Each family has to figure these out in an effort to decide what is likely to happen. Each family also has to figure out where are prices going. What can we afford? What should we spend our income on? Last year you might have spent x on food; what will it be this year? What will the price of food be? If there is inflation, if there is a crisis in the coffee market and you have to buy coffee and it goes up three times from the cost of last year, suddenly you have to deal with inflation. It increases prices. It also has the effect of increasing taxes, often. It pushes you into a higher bracket. Less so at the Federal level, but more so at the State level. Then there is interest. How do you calculate your interest expenditure? You could say well, I have a variable rate mortgage. I got that variable rate mortgage at 9 percent and during the last couple of years interest rates had been going down. Interest rates were down around 7 percent. However, in laying out a budget, each family has to think about how much it will pay next year. Maybe interest rates will go back up. If the Federal Reserve continues on its current path, clearly the interest rates will go back up and that means more pressure on the family budget. With a variable rate mortgage, the family will have to pay more in interest charges to pay back the bank. So every family, Mr. President, when it makes a set of budget decisions, has to figure out what is the income coming in, and what it is going to spend money on. The income depends on how many people are working and depends on whether you think times are good or times are bad. Will you get a raise? Are interest rates going up? What is the inflation rate going to be? How much can I actually spend? How much can I actually buy? These are factors in any kind of household decision. Mr. President, these types of factors apply equally to the Federal budget. Let us assume that you miscalculated on your variable rate mortgage and you have to pay 1 percent more in interest because the rates have gone back up. Well, if you are the Federal Government and you miscalculate your interest on your projected budget, you add $20 billion to the deficit that year alone. If a family is counting on the income of one of its members, that family will have a big problem if that family member loses his or her job. Similarly, in the country as a whole, if a number of people unexpectedly lose their jobs, we will have a big problem: a much bigger deficit. Just a 1-percent increase in unemployment, adds $60 billion to the Federal deficit. What about growth? Let us assume that our economy grows 1 percent less than we predicted. This small change in the assumptions adds $32 billion to the deficit. These are aspects of budget policy that change in the course of a year. If unemployment is higher, that costs the Government more. If inflation is higher, that costs the Government more. If interest rates are higher, that costs the Government more. If growth is lower, fewer people have a chance to work, less money is earned, and the Government receives less revenue and pays more in benefits. All of this adds to the deficit. So let us begin this by simply laying these points out that when you do a budget, you are basically making a projection and the projection is affected by things that are out of your control in your household. For example, there are plenty of people in this Congress who know the Federal Reserve's efforts to raise interest rates are out of our control. These things, over time, will have an impact on your family's budget, just as they have a dramatic effect on the Federal budget. Let us discuss for a few moments what is the Federal budget. What I want to do today is to lay out clearly what is the Federal budget. What do we spend taxpayer's money on, and where do we get these funds. Every year we debate a budget resolution, 50 hours equally divided. Our colleagues get up, read their opening statements, and a couple hours are already gone already. As a result, despite the debates, I am not sure that the American public gets an opportunity to fully understand what is in the Federal budget. If we are going to consider balancing the budget, I think the American public should know what is in the budget. They are entitled to know what things are likely to be cut or what taxes will be increased. You cannot decide what things will be cut or what taxes will be increased until you know what is in the budget and how the Government raises the money to pay for its spending. So let us go with the basic point, a very basic point. The expenditures of the Federal Government in 1994 were roughly $1.5 trillion. The revenue, the total of all taxes that have been collected, are $1.3 trillion. Because the $1.3 trillion in revenue was less than what was spent, we ended up with a deficit, an annual deficit, of $200 billion. It would be important to know what are the taxes? Where does the Federal Government get its $1.3 trillion? Who pays the $1.3 trillion? Taxes are broken down into the following categories: The individual income tax is, in total, 43 percent of all revenues, and it raised $545 billion in 1994. Now remember, we spent $1.5 trillion. The individual income tax raises $545 billion. The next largest set of taxes is what are called social insurance taxes. Those are the Social Security taxes, the FICA tax, and unemployment insurance collections. Of the $460 billion that was raised with social insurance taxes, $430 billion of that was the Social Security FICA tax. Everybody has it deducted from their wage statement each pay period. The total of that is $430 billion. Unemployment insurance taxes made up the remaining $30 billion. So you have individual taxes, social insurance taxes, and corporate taxes. Corporate taxes raise $140 billion a year. All of the corporations in America pay in total $140 billion a year. And then you have a category called other, which totaled $60 billion. That consists of essentially estate taxes. You die, you pass on your estate, you pay a tax on that; customs duties, you import something into the United States, you pay a tariff or a duty. Those taxes equal $60 billion. And then finally, the smallest amount of total taxes are the excise taxes, like the gasoline tax and the cigarette tax, which raise approximately $55 billion. So in total, the U.S. Government raised $1.3 trillion in 1994 --$545 billion come from the individual income tax; $460 billion come from the Social Security and unemployment insurance taxes; $140 billion from all of the corporations in America; $60 billion come from estate and gift taxes; and $55 billion come from the gasoline tax, cigarette tax, and other excise taxes. So that is it, that is where the money comes from. That is the money that the Federal Government has to spend from taxpayers. Total: $1.3 billion. Now the question is, What do we spend this money on? Well, first, I would like to give you a quick overview, and then I will provide a more detailed explanation. Broadly speaking, there are three big categories of Federal expenditures. In total, the expenditures are $1.5 trillion. One of the three main types of Government spending is on what are called mandatory expenditures. Mandatory expenditures are really expenditures for which Congress does not appropriate a specific amount of money every year. Instead, we write into the law certain eligibility rules and benefit levels. For example, if you are over 65 and have made certain minimum payments into the system, you are entitled to Social Security benefits. If you are poor, you may qualify for certain benefits to help you meet a minimum income level. Or, if you are a veteran, you may be entitled to other benefits. These are mandatory expenditures that automatically flow to eligible recipients. The total amount of mandatory expenditures is $790 billion. In other words, nearly half of the Federal budget is for mandatory expenditures. Next are the discretionary expenditures. These total about $545 billion. This amount includes spending on things such as national defense, education, housing, transportation--$545 billion. These are discretionary expenditures, meaning that Congress, if not have to appropriate that amount of money, unlike a mandatory spending which occurs almost automatically. A discretionary expenditure is the Federal Government deciding whether it wants to spend a specified amount each year on national defense or education. The third category after mandatory and discretionary spending is interest--interest on the national debt. Last year, we paid roughly $205 billion in interest on the national debt. As the debt has grown-- especially since 1980--the more we have paid in interest, because the more you have to borrow, the more people you have to pay interest to those who have loaned you, the Government, money. Now, an interesting caveat about interest is that when the Government collects all of those taxes, the first call on these funds, the first place that money has to be spent is not defending the Nation or feeding children or providing for education or building highways or sending money to Social Security recipients. The first place that money has to be spent is to pay those bondholders who have loaned us money. So right off the top, $205 billion goes to people in this country--and others-- who buy Government debt, people who have enough money to buy Government securities, Treasury bills, Treasury bonds, people who are not spending all of their money every year just to get by, but rather people who have enough money to buy Government bonds. The more we have to pay in interest, the more that interest flows to those bondholders. So in terms of total expenditures, you have $790 billion in mandatory spending, $540 billion in discretionary spending, and $205 billion in interest payments. Mr. President, this is a rough overview of the Federal budget: where the revenues come from and where they go. What I would like to do on the spending side--because we are discussing a balanced budget amendment, and the American public should know how this budget is going to be balanced--is to take a closer look at Federal spending so that we can determine what Federal spending must be cut in order to balance the budget. First, let us look again at the mandatory spending programs, again about half of all Federal spending. These funds go to eligible recipients at preset benefit levels--at a total of $790 billion worth of benefits. Well, what is this $790 billion spent on? First, we need to make one distinction on the mandatory programs. Some mandatory spending programs flow to everybody who is eligible. Others flow only to those who have lower income; in other words, means tested and non-means tested. Take the biggest mandatory program, Social Security. Social Security is not means tested. Everybody in America who meets certain age and contribution requirements, gets Social Security. If you are a millionaire and you worked 30 years and paid into Social Security, you receive these benefits, just as the guy that worked in the GM plant in Detroit or in the neighborhood drugstore who paid Social Security for 30 years. In fact, these folks all probably get the same amount. It is not a means tested program. The next largest mandatory program, Medicare, is the same thing. If you are over 65, you are eligible for Medicare. The Federal Government will pay your health costs under the provisions and rules of the system. If you are a multimillionaire and you check into a hospital and you stay several days and you have a hospital bill of $10,000, send it to Medicare. It is a non-means-tested program. This means that a millionaire gets the same amount of money as somebody, a husband or wife, who worked for 30 years, gets sick, goes to the hospital, and needs that same $10,000 treatment. Then there are other mandatory programs. You take $25 billion in unemployment benefits. If you are unemployed in the United States, you are eligible for unemployment compensation. We have had that in place for 50 years or more. It is one of the things we learned from the Great Depression. Because we have an automatic stabilizer, we are less likely to have as deep of a recession. We are all better off if we have an automatic stabilizer, this one being unemployment compensation, because the economy then will not go down so far. People will at least have enough money to buy some food or begin to keep themselves until they get another job. We also spend $70 billion automatically each year for the civilian and military pension and disability systems. Every member of the military, every member of the Federal Government who has a retirement plan pays into that plan, and that plan then pays benefits. Last year, those benefits were $70 billion. Then there is Medicaid. Medicaid is a means-tested program. This means that if you are dirt poor in America and you get sick and you go to the hospital, somebody is going to take care of you. And because somebody takes care of you, somebody has to pay, and the Federal Government will chip in its share if the State agrees to pick up some part of the cost as well. But it is a mandatory spending program based on income, and it accounts for roughly $80 billion in annual spending. Now, in this category of other mandatory spending are such things as food stamps--again, means tested. If you are poor, you are eligible for this type of assistance. This is $25 billion. Supplemental security income, again, goes to the poorest, overwhelmingly elderly, overwhelmingly female population, who just cannot get by without some assistance. In addition, there is child nutrition which totals about $7 billion. So the mandatory portion of the Federal budget is the amount of money that flows simply because of certain eligibility criteria--you are over 65 and eligible for Social Security, you are over 65 and eligible for Medicare. Thus, $460 billion of mandatory expenditures, nearly one-third of the whole budget, goes to people over 65 who have paid into the Social Security and Medicare systems throughout their lifetimes. You are eligible, regardless of income, if you have paid into the system. The other areas of mandatory spending are Medicaid, food stamps, supplemental security income, retirement, and unemployment benefits. So when we talk about cutting the Federal budget and we decide that we are not going to touch any entitlements--meaning the mandatory spending--we have to realize that this leaves a much smaller portion of the budget and this remaining portion will have to cut a lot more to balance the budget. But to cut those mandatory expenditures, we would have to change the eligibility rules and we would have to change the benefit levels. We could say that you have to be poorer to get food stamps or Medicaid, or we could say that you have to pay more, if you are above a certain income level, for Medicare. But we would be changing the rules. That is the way that entitlements would be cut. Mr. President, let us look for a moment at the next biggest chunk of Federal expenditures. First, we have mandatory expenditures. Now we have approximately $545 billion of discretionary expenditures. This is the money that the appropriations committees appropriate every year. The tax dollars come in. The appropriations committees meet, and they decide that this program or that program merits funding. What do the appropriations committees spend $545 billion on? Overwhelmingly, the money in discretionary programs is spent on the national defense. It is $280 billion a year out of the total of $545 billion which is spent on discretionary programs. What are the other big discretionary expenditures in addition to national defense? You have $40 billion for education, training and social services. This includes education for the handicapped--it used to be that if you had a child that was autistic, the child had no chance of getting into any school anywhere, and had no chance of going to the public school. Now because of a Federal program for handicapped education, we are able to challenge that child and develop that child's potential. In addition, there is transportation spending, primarily for mass transit, highways, and airports. There is spending for income security which is essentially housing assistance. There is also spending to support Government activities which cost $30 billion. This amount is basically what it costs to run the Federal Government. Of this $30 billion, the Congress activities include running the Department of the Interior, the Park System, the FBI, keeping guards in our prisons, and making sure that the IRS collects taxes. Some people do not like that. But spending for these, and other, Government activities represents what it costs to run the Federal Government, $30 billion out of $1.5 trillion. In addition to all of this is foreign aid. Foreign aid--for both humanitarian and security assistance--represents $20 billion out of $1.5 trillion. So discretionary spending is divided among defense, education, training, social services, transportation, income security, Government activities, foreign aid, and other domestic non-defense programs. Mr. President, there is a point that should be made on discretionary spending. I have implied that discretionary spending is whatever the appropriations want to spend money on. That is true. Yet, since 1991 this spending has been capped. We have said by law that the Congress and the Government cannot spend above a certain amount. It has been capped. As we discussed earlier, inflation is not capped. Inflation continues to eat away at the purchasing power of American families, and it continues to eat away at the purchasing power of Government. So when you cap spending programs, all $545 billion in discretionary spending, that means it will buy less. Essentially the caps on discretionary spending shrink in real terms what this will buy, by about 9 percent between now and 1998. There are no caps on mandatory spending; no caps at all. How could there be? You do not know how many people are going to be unemployed. You do not know how many people are going to be poor. You do not know how many people are going to qualify for the mandatory spending programs. However, for those things that the Congress and the Government have direct control over, there has been a cap since 1991. You can argue the caps should be lower. But there has been a cap. With the next chart I would like to demonstrate how Federal spending has changed over the years. Back in 1963, a long time ago, discretionary spending represented 70 percent of what the Federal Government spent. Entitlements--the so-called mandatory expenditures, such as Social Security--represented 22 percent. Net interest represented 6 percent. In 1965 we added in Medicare and Medicaid, and in 1972, we indexed Social Security. In 1973, discretionary gets a little smaller, entitlements get a little bigger. In 1983, entitlements have grown to 45 percent of the budget and discretionary has dropped. But 1983 was, of course, 2 years after the Reagan defense buildup and tax cut and the start of gigantic deficits. So interest rates and the amount we spent on interest are higher. In 1993, suddenly entitlements are up to 47 percent. Discretionary expenditures are down to 39 percent. It is projected that if current law continues, by 2003 mandatory spending--those things we talked about earlier, such as Social Security, Medicare, income security--will eat up almost 60 percent of the budget, and interest will be almost 14 percent. And all of the rest of the money that the Government spends, such as for transportation, education, and defense, will be 28 percent of the budget. So, Mr. President, what clearly we see is that over the years those mandatory portions of spending have increased dramatically. So dramatically that, by 2003, interest payments on the debt will equal almost half of all discretionary spending. Mr. President, I think that it is important here to talk about another kind of spending, and that is essentially what I call off- budget spending through the Tax Code. You have $1.5 billion of Federal expenditures. We talked about that already. And we raise $1.3 billion through all taxes. If you recall, we raise $545 billion from the individual income tax. But, of course, the income tax does not apply to everybody in the same way. You would think that under an income tax system the same rules and rates would and apply to everybody. No, no, no, not the case. Over the last several years, much to my own distress, we have returned to aggressive spending through the Tax Code, meaning we tell people that if they simply do this activity, they will pay less in taxes. Some of these activities that we tell people will lower their taxes have been long established in the Tax Code. If you buy a house and pay mortgage interest, that interest is deductible, so you pay less taxes because you have mortgage interest. If your employer pays health insurance premiums for you, those premiums are not included in your taxable income. If you have a pension plan that builds up, or investment income building up, you do not pay taxes on those. If you pay State and local taxes, like property taxes and State income taxes, you deduct those and you do not pay Federal taxes on them. The more taxes you pay, or the bigger your pension plan is, or the more generous your employer-paid health benefits are, or the bigger your mortgage interest is, the less you pay in taxes. Those are some of the well-known, biggest tax expenditures. And then there are, of course, the little special ones that are not used by the vast majority of Americans. These are not in the Tax Code because of a particular public policy reason--whether flawed or not--but because a lobbyist had a way to insert into a tax bill a special exclusion for a particular category of people. For example, I do not know how many people in America know that if you rent your home for 2 weeks a year, you do not pay any income tax on that income. That is a special exclusion. It costs $50 million a year in foregone income. How did that happen? Well, the story goes that a guy who had a big house close to the Masters Golf Tournament also had a friend on the Finance Committee. During one of those late night sessions, the friend slipped in an amendment to a bill which said if you rent your house for 2 weeks a year, you do not pay any income tax on that income. This is not going to help me and probably will not help a lot of other people, if they are living in your house. But if you have a big house next to a big international event, you might make a little money. How about the $12 million a year that we use to essentially subsidize the production of some of the most toxic chemicals and minerals in the world? On the one hand, you have the Federal Government telling people to take asbestos out of the schools and workplaces. We have ads on television about lead contamination telling how it makes our children's intelligence lower than it otherwise should be. Meanwhile, you have the Tax Code telling people that if you mine asbestos or if you mine lead, you pay less tax. Mr. President, the point is that $545 billion is raised from personal income taxes. But that Tax Code that sets rates is riddled by exceptions to those rates. And because of all those exceptions, the people who use those exceptions end up paying less tax and the rest of us end up paying a higher rate of tax than we otherwise would have to pay. And the question is raised, since this is a balanced budget amendment debate, how much would revenues be if we did not have any of those loopholes? We have had a little debate about a flat tax led by Congressman Armey on the other side. If we did not have any of those loopholes, how much more money would the Federal Government raise? The answer is $455 billion a year. In 1986, we trimmed this amount back dramatically. Since then, it has exploded. It is one of the fastest growing Government programs and accounts for $455 billion a year in tax expenditures. So, Mr. President, you can see if you had a deficit of $176 billion-- as is projected for 1995--if you simply trimmed a third off of the tax expenditures, you could eliminate the entire budget deficit. Earlier we talked about mandatory spending, discretionary spending, and interest on the debt. Now, we have seen that we also spend off budget through the Tax Code. Mr. President, if I could, I think that it helps to get a picture of how these deficits have changed over time. I have interns who come into my office thinking that the deficit is a little like oxygen. They would not know how to exist if the deficit did not exist. It has been there their whole lives. People say that the Federal Government has always run a deficit. Are politicians not always spending more money than they have? Are we not always living beyond our means as a absolutely not. In the 1940's and 50's, Harry Truman had a few surpluses. Dwight Eisenhower had surpluses in a couple of years. In fact, Lyndon Johnson had a surplus in 1969. As hard as that is to believe, they collected more than they spent. No depressions occurred in the late 1940's and early 1950's. No depressions occurred in the mid-1950's. In the early 1960's when we had a tremendous economic boom, the deficit was minuscule, and the debt was minuscule, and policymakers were thinking about tomorrow. But the story changes in 1980. And we all know that story--defunded Government, dramatic tax cuts. A lot of the hotels in this town were built after 1980 because the Federal Government said in that tax bill, ``If you build this hotel for $20 million, you can write $1.5 million off a year of income taxes.'' We gave depreciation in 15 years on structures that were going to last 30 and 40 years. So a lot of lobbyists decided they would become hotel investors and pay no tax. We also were going to trade tax benefits from one corporation to another corporation. We also gave dramatic individual income tax cuts, 30 percent across the board, and defunded Government. At the same time, we began a massive defense buildup--not to say we should not spend more on defense--but unlike Lyndon Johnson in the 1960's, Ronald Reagan in the 1980's did not finance his defense buildup. And as a result of these facts--a dramatic decrease in tax revenues, a dramatic increase in defense expenditures, and a continued growth of mandatory spending--the deficit took a dramatic turn for the worse. In the 1940's, 1950's, and 1960's, not much of a deficit; there was even a surplus in some years. But then what happened in the 1980's? Well, you can see what happened. Here is the passage of the tax bill, around August 1981. See what happens to the deficit? It starts going up and up, and soon becomes over $200 billion. It only took a couple of years for the national deficit to grow larger than the whole debt of the country in the previous 15 to 20 years. The deficit then dropped a little in 1984, came back up in 1985 and 1986, and then dropped significantly for 1987 and 1988 due to cosmetic and process changes such as the Gramm-Rudman Act, which arguably kept things under control for a short while. But the deficit then exploded again after 1989, and kept rising until 1992. As a result, from 1980 to 1992, the national debt of this country grew from $800 billion to $4.3 trillion. Is that thinking about tomorrow? Hardly. Since 1992, what has happened? Because of the 1993 deficit reduction package, the national deficit has dropped dramatically. My point here is simply that these deficits have not always been a part of our history. They are a part of bad public policy, and they have placed a gigantic burden on the backs of our children. And if we do not face up to this burden all of our tomorrows will be darker than they otherwise would have to be. And it is also important to note that these deficit figures actually mask the seriousness of the problem. This is because we have been using the surpluses that are accumulating in our trust funds to hide the true size of the deficit in the rest of the budget. Because of changes we made to Social Security in the mid-1980's, this program now raises more funds than it pays out. Prior to 1983, Social Security was a pay-as- you-go program. Money would come in, stay a few months, and immediately be paid out to eligible recipients. But in 1983, we changed the program so that it would start accumulating surpluses, so we could supposedly guarantee that there would be enough money there for my generation when we retired. But right now we are actually spending these surpluses, by borrowing them to pay for deficits in other parts of the Federal budget. And, Mr. President, if action is not taken to stop this practice, the Federal Government will borrow an additional $636 billion from the Social Security trust fund between 1996 and 2002. So let us be candid about that. So, once again, Mr. President, here is the history of our national debt. The situation was pretty good during the late 1940's and 1950's, with surpluses under both Truman and Eisenhower. Under Kennedy and Johnson we had solid fiscal policy. Under Nixon, Social Security was indexed and high inflation began. This inflation accelerated throughout the decade, and was accompanied by oil shock repercussions, but the deficit still remained relatively under control, with the national debt less than $1 trillion. But the 1980's heralded the sudden arrival of tax cuts, increased defense expenditures, and out-of-control mandatory spending, which have led to today's debt of nearly $5 trillion. Mr. President, that is a cautionary tale. What would the ant say to the grasshopper if at this point the grasshopper said, ``Let me come in from the cold into the house that you prepared, because you were not spending beyond your means''? The ant would say, ``Play your sweet music in the summer, dance in the winter. You're on your own.'' Unfortunately, this is the position we all find ourselves in as a result of this profligate activity. Mr. President, how do we make this situation real to people? How do we get them to understand? It is such a complicated issue. People do not want to think it through. They want to sound bite it. They want to have a quick answer. They want to believe if they vote for the balanced budget amendment they do not have to make any of these tough choices about cutting spending. Mr. President, that is the furthest thing from the truth. Think of it this way: If the average taxpayer's share of Federal spending and revenues were arranged in the form of a credit card statement, it would look something like this table entitled ``Uncle Sam Says Charge It.'' Mr. President, the first line shows the balance due. Take the national debt, divide it by all the taxpayers in the United States, and the result is that every taxpayer in this country had a debt of $37,838 at the start of this year. Each one of us. That is just to get to where we are right now. Each one of us has to pay that debt. And it is getting larger all the time. So the first line shows the outstanding balance. As you can see, at the start of 1994, it was $37,838. But what about Government spending during 1994? Well, we ran a big deficit again, about $200 billion, in that year. How did that break down for each citizen of the United States? Well, each citizen is spending about $4,000 per person on Social Security; about $2,400 for national defense; about $1,900 for income security and welfare; about $926 for health; about $389 for education, training, and employment programs; $313 for agriculture and natural resources; $320 for transportation; and $133 for the administration of justice. Now, that comes to a total of about $2,273. What about the money that we have taken in, per person? Well, average, this totaled about $4,700 in income taxes, $3,700 in Social Security taxes, and about $2,484 in other forms of payments to the Government, such as customs, estate taxes, and excise taxes. This comes to a total of $10,932 for each taxpayer. Compare this to total spending per taxpayer of $12,700. The result is $1,765 added to the credit card bill of every taxpayer--and remember that this is added on top of the $37,838 that every taxpayer owes from previous years. Now, Mr. President, what happens in this kind of situation? We cannot continue down this path. Something has to give. About 3 years ago, the distinguished chairman of the Budget Committee, the Senator from New Mexico, and I asked the General Accounting Office to tell us what would happen if we do nothing about this deficit situation. They came back with a report that said if we do nothing, every one of our income will be 40 percent less than it otherwise would be by the year 2020--40 percent less. That is understandable, given all the money which must be sucked in from the economy just to pay interest to bondholders, in order to keep financing our $5 trillion in national debt. None of that money is available to create jobs, pay raises, buy cars, or purchase homes. Things have changed since that GAO report. If we recall the last graph, the deficit came down in 1993. We took action in 1993, passing the biggest deficit awful lot to do. So, Mr. President, having discussed what is in the federal budget, we now come to the more difficult part. We clearly need to reduce the deficit, but the question is, What are we going to do to cut spending? Let us start by asking how much spending cuts will be needed in order to balance the budget. If we do not implement the tax cuts that are included in the Contract With America, we would need to cut on average $922 for every resident of my State. If the contract tax cuts are enacted, then this number rises to about $1,265. What does this mean? These are vague numbers. All the budget debates eventually turn into numbers, and people turn them off. What is the real impact of cutting $922 or $1,265 per person in New Jersey, and of making similar cuts in other States? What does this mean in terms of the Federal spending that we have talked about? Given our current fiscal policies, balancing the budget would require a 13-percent cut in every spending program--13 percent. The question is, Are we willing to tolerate cuts in every one of those programs? Are we willing to take a 13-percent cut in Social Security? Are we willing to take a 13-percent cut in the national defense? Of course, we cannot take a 13-percent cut on interest. The bondholders get paid, regardless. However, if Social Security is off the table, and everybody in this Chamber has given speeches that have resonated across America promising that there will be no cuts at all in Social Security, then the size of cuts needed in all other programs goes up to 18 percent. Take Social Security off the table, and everything else is cut 18 percent. Medicare, defense, grants to State and localities, and all other spending--18 percent. Let us carry this a little further. I know no one in here wants to make the United States vulnerable, even in the post-cold-war world. So in addition to taking Social Security off the table let us take defense off also. And remember that interest is automatically off the table because we have to pay the bondholders. If we say that there are to be no cuts in any of these three areas, then the remaining programs are subject to across-the-board cuts of 22 percent. And if the tax cuts outlined in the Contract With America are implemented, then the level of cuts needed to balance the budget rises to 30 percent. That would be a 30 percent cut in all non-Social Security entitlements, including Medicare, and in every other existing program except Social Security and defense. That would mean a 30-percent cut in grants to state and local governments. It would require that we cut areas such as investment in infrastructure and unemployment compensation by 30 percent. Now, Mr. President, it is not really likely we will cut 30 percent of the FBI or 30 percent of the Immigration Service or 30 percent of the Internal Revenue Service or 30 percent of Federal prisons or 30 percent of military pensions or 30 percent of veterans programs. To be honest, we will take certain things off the table in the same way that Social Security and defense will be off the table. We will have to take these other programs off the table as well. As a result, the cuts in the other programs are going to be even deeper. This means cuts of over 30 percent in Medicare, State and local grants, environmental programs, automatic stabilizers like unemployment compensation, and many other programs. What would cuts of at least 30 percent mean to these remaining programs? Well, in 1993, Medicare payments to doctors were approximately 40 percent less than private- sector payments. Imagine cutting them by at least another 30 percent. And cutting back on many of the other programs would be penny-wise and pound-foolish. We could cut back on programs for early childhood but end up paying more later for prisons. Mr. President, going to this next table, what if we decided to cut grants to State and local governments? We give them $200 billion a year. The Federal Government gives it right to the States, many of whom are advocating the balanced budget amendment. Well, going after those grants for States, what are they for? Highways, airports, and other forms of transportation spending total 11 percent, or over $20 billion in Federal spending. Then take education, training, employment and social services, such as the handicapped education program, special education, foster care. These total about $25 billion in Federal spending, or 16 percent of grants to State and local governments. Cut it. What about income security, welfare, section 8, school breakfast, WIC, nutrition, and related programs--these total 24 percent. Cut it. Medicaid is 40 percent. Cut it. So say that we cut all these programs that go to States, and in doing this we balance the budget. Then the State has to make the decision: Does it increase taxes, or does it forget about the education programs, the health programs, the housing programs? So, Mr. President, what would significant cuts to States and localities look like? As I said, grants to States and local governments totaled $200 billion in 1994. In New Jersey, we received about $6 billion in Federal grants. This money funded a significant number of programs. Roughly 40 percent of the Federal funds went to health, 16 percent to education, 24 percent to welfare, and 11 percent to fund transportation. On average--this is an important point--on average, Federal grants to support programs administered by States comprise 25 percent of all State revenues--25 percent. Remove those. This is money that Governors have to spend--States get more money from the Federal Government than they raise with the personal income tax, more money than they raise with the general sales tax, more money than they raise with any other kind of taxes. If the Federal Government eliminated this 25-percent contribution, it would either lead to a dramatic increase in State or local taxes or else essentially eliminate many of these programs. I think people have not really focused on what the impact of this will be. I know that people in this body have not focused on impact, but I guarantee you the State legislatures will. In my State of New Jersey, only about 20 percent of our State budget comes from the Federal Government. We have a diverse State, with a broadly based economy and rapid growth. New Jersey is quick to rebound from recessions, heavily export oriented, dramatically changed from manufacturing to services, and it has a very flexible work force with very talented people. The Federal Government gives us 20 percent of our State revenues. This percentage is a little different in other places: in Arizona, it is 30 percent; in Michigan, 30 percent; in California, 34 percent; and in Idaho, 32 percent. This raises a very interesting question. Your people send tax dollars to Washington. They get dollars back from Washington, in terms of Federal expenditures. My State has the second-highest income in the country. We pay a lot of taxes, because a lot of people with high income pay taxes. We do not have a lot of big defense expenditures in the State. We do not get back much relative to what we give the Federal Government, but a lot of other States do pretty well. For every dollar that New Mexico sends to Washington it gets back $1.96; Mississippi gets back $1.63; West Virginia gets back $1.45; North Dakota, $1.41; Virginia, $1.38. What do these figures mean? They mean that more Federal dollars are being spent in these States than are being sent to Washington from those States. So here we have the West, the site of some of the strongest supporters of the balanced budget amendment. In the West, the Federal Government still plays as big a role as the Governor plays; for example, in Arizona, 30 percent of State revenues come from the Federal budget; the percentage is 32 percent in Idaho; 34 percent in California. Some of these States are owned by the Federal Government. Ninety percent of the land in Nevada is owned by the Federal Government; 1 percent of the land in New York is owned by the Federal Government. I think 9 percent of the land in Michigan is owned by the Federal Government; 90 percent of the land in Nevada is owned by the Federal Government. So the point, Mr. President, is that if we are going to cut spending and we are going to do it across the board 30 back from the Federal Government than they are contributing are going to be disproportionately cut. It is not only going to be poor people who are going to be affected. So you might want to look at some of the other ways to raise revenue. For example, right now we have public lands all over the West. Let us say I want to mine gold. Well, I pay about $500 to $1,000 max. I go in and mine the gold, and I do not pay the Government anything, I do not owe the Government anything. If we are asking individuals to pay more in taxes or we are cutting money to help them send their kids to college, do you think we might want to ask some of the mining companies to pay more if they mine minerals on public lands? So the advocates of the balanced budget amendment have to understand the disproportionate impact that these cuts or additional revenue increases will have on their respective States. So, Mr. President, I think that the analysis makes two points very clear, and they are that we have to balance the budget for the sake of our children's long-term economic prospects and that doing so is inevitably going to be very painful. What looks like a cheap move or an easy move here--cutting back that State and local Government transfer-- will translate into, in some cases, higher taxes in many States. Finally, as much as it is necessary to reduce the deficit--and it will be a bitter pill for the country--I think that it is absolutely essential that we do so. Trying to rush a balanced budget amendment through the Congress without a thorough discussion of how the budget will be balanced is, in my view, unfair and undemocratic. So a lot of those Western States are probably going to have second thoughts when they look at the numbers. Alabama, with about $2.38 on every dollar, is going to look at it and have a second thought. The amendment will have dramatic effects on the lives of American citizens and every one of these citizens has a right to know what these effects will be before their elected representatives are asked to vote on this issue. Mr. President, I have heard an awful lot of people saying, particularly States: Oh, you ought to balance your Federal budget; we want the balanced budget Federal amendment. And yet, Mr. President, Governors do not have to balance their budgets in the way we have to balance our budget here in Washington. Governors have the right to, and in many cases do, have capital budgets, which means that instead of raising taxes and spending money, they simply borrow from these bondholders that we are borrowing from to create a Federal deficit, except when they borrow, it does not count in their State because they have a capital budget. I do not know about all States, but if you look in total, public indebtedness has dramatically increased at the State level. So, increasingly, what the State governments are doing is the same thing the Federal Government did in the 1980's except they do not need a balanced budget amendment because they have simply defined the problem away. What if we had the same capital budget at the Federal level that exists in most States, mine included? Do you know what portion of the Federal budget would be included as a capital budget? And that includes all physical infrastructure, defense and non-defense, and all education programs. Do you know what that would be? $225 billion. If we simply defined our Federal budget as most States do, in one stroke of the pen we would have no Federal deficit this year. We would have a $25 billion surplus. So when Governors tell me that they want to have a balanced budget amendment, I say to them: Give me the same capital budget. Give me the same capital budget you have, and we will have a surplus. So, Mr. President, I think before we get a vote on the balanced budget amendment, we ought to have the specifics. I have spent almost 2 hours here today laying out what this budget is. The proponents of the amendment have not stepped forward and told us what they are going to cut. Which of the mandatory programs are they going to cut? Which of the discretionary programs are they going to cut? I have a suspicion that there might be another game going on here. I do not mean to cast aspersions on anyone, and I do not. But my guess is that the other side will not take my suggestion of defining the problem away with a capital budget. A capital budget would make a lot of sense. It would be like State governments. I mean it would be like most businesses that have a capital budget. It would be like most families. You have mortgage interest. You have a mortgage on your house. You are in debt. But you can make your debt payments. You do not have to pay the whole thing immediately. Everybody in America has debt. The question is how you manage the debt and, most importantly, how you structure the debt. Let us make a reform: a capital budget. Then we have a surplus. Then we have a surplus. That is a change that I could certainly support. I am concerned there is going to be another approach, though. I already see it rumbling out there. And that is going to be to redefine CPI, saying that the deficit is not as big as you think it is because we have exaggerated inflation. Inflation is really lower, and if you calculate it in this different way, we will save $150 billion over 5 years just like that, so the deficit is much less. Well, to those who are contemplating this, I would simply say beware, because--I am almost inviting the people to do this--the result is you pay about $21 billion in higher taxes every year if you do that. Why? You pay $21 billion in higher taxes because we have indexed the rates. But if you understate what inflation is, then people are going to be pushed into higher rates and pay more taxes. And about $28 billion less, in terms of less benefits, will go out because the CPI is calculated at a lower level. That is my fear. If you really wanted to come out of this with significant reform that would be right to every legislator, it would be to implement a capital budget, take Social Security out and focus on the operating expenditures. My hope is that, before this is over, at least we will have a chance to think about that. If we are serious about cutting the budget, at the minimum why not do it on a basis of some principle as opposed to lobbyists mud wrestling? Why not say, look, here is the deficit. We looked at this gigantic budget deficit we have. We have to do something about it. We are tired of being grasshoppers. We want to start to be the ant. We want to start to think of our future. We want to start thinking of tomorrow. What we are going to do, maybe what we will say is, ``What principle could we use?'' Well, we have a principle for liberals and a principle for conservatives. If we join the two principles, we might actually have a way to proceed here. The principle for liberals would be, I would say, well, why not make income a principle? You get a Federal benefit up to a certain income level. Above that level you get less or you get none. Why should the millionaire who goes to the hospital get the same payment from Medicare as my struggling uncle who went to work every day in the lead factory for 40 years? Why should that happen? Why should a wealthy farmer who makes $3 million a year get the same farm subsidy or the same water subsidy that a struggling family farmer with 600 or less acres such as in the great State of Iowa or even the cotton farmers in Arizona gets? Why should it be the same for the millionaire as for the average person? Well, that is one principle. Maybe make income a criterion. The other principle, for my conservative friends, would be to ask: How about the market? Everybody talks about the market. Yes, we want the market to allocate resources. Well, great, get the Government away from the market. Let the market allocate the resources. Cut the budget by eliminating all these subsidies that impede the function of the market. If we join those two, having a principle of income and a principle of no subsidies, then you would have a way to proceed and explain to people why we are cutting this and not that. Otherwise, it is going to be that the agriculture people are stronger than the mass transit people, who each have their lobbyists trying to figure what So, Mr. President, as I tried to demonstrate today in this talk, it is not going to be easy to cut the Federal budget. It is not going to be easy at all to balance this budget. It is going to require bigger cuts in expenditures than anyone has heretofore contemplated. And as we proceed, if we proceed, I hope we will have not only a suggestion from the proponents of the amendment as to how they would balance the budget, but I think also those who oppose it might raise specific questions of how they would reduce the budget deficit. I believe that reducing the budget deficit is an imperative, second only to getting growth started in our economy. That is a big debate. What comes first, growth or deficit, savings or investment? I think you have to first get growth; second, reduce the deficit, and reducing the deficit has the potential of improving the prospects for growth. It requires some tough choices. Mr. President, to go back to the cautionary tale, we are living in a time when the grasshopper and the ant continue to look at each other across the great divide. The grasshopper says to the ant, the ant that has worked all through summer and put food away for the winter, ``Please, please, Mr. Ant, let me come into your warm home in the winter.'' And the ant says to the grasshopper, ``What did you do all summer?'' ``I made sweet music.'' ``If you make sweet music in the summer, you die in the winter, and you are on your own.'' More and more are we saying that. And more and more have we acted as the grasshopper and not the ant. Less and less have we thought of tomorrow. As I hope the last hour and a half has made abundantly clear, less and less have we thought of tomorrow with regard to our urban centers, with regard to our children. It is about time we start thinking of tomorrow and tell the truth to the American people. I yield the floor. reply to senators leahy and bradley

Mr. BRADLEY

Mr. BRADLEY. Mr. President, on December 31, 1994, a very special man, Frank E. Rodgers, served his last day as mayor of Harrison. After 48 years of public service, Mayor Rodgers is being honored for his life- time commitment to the citizens of Harrison, NJ. Mayor Frank Rodgers won his first term as mayor of Harrison after the war in 1946 and began the distinguished career that would make him the longest-serving mayor in the history of the United States. Epitomizing the old adage that all politics is local, Mayor Rodgers campaigned door-to-door all 24 times he sought reelection and maintained an open- door policy at town hall. In addition to his time as mayor, Frank Rodgers held a variety of elected and appointed jobs in government, including 6 years from 1977 to 1983 as a State Senator and 10 years as a town councilman. Frank's service in the Army during World War II did not interfere with his commitment to public service; he was reelected as a councilman while in basic training at Fort Dix and managed town affairs through calls and letters to his wife and family while working as a military intelligence officer on assignment along the east coast. Diligence, dedication, and a true commitment to his constituency were the hallmarks of Frank Rodger's career. In his retirement letter to the residents of Harrison, Frank wrote, ``I believe our years together hint at a mutual respect and caring that goes far beyond the requirements of governing.'' Frank Rodgers possessed both the insight to know what it means to govern and the willingness to devote himself wholeheartedly to the task. While his retirement will be a great loss to those who have worked with him and for those he has served, he has left an exemplary legacy of excellence in public service.

Mr. BRADLEY

Mr. BRADLEY. Unfortunately, our vulnerability is deeper than this. Many emerging markets have gotten out of control and are due for a readjustment. Investors have been blinded by high returns in many developing countries. Thus far, outside of Mexico, investors are merely chastened, not panicked. We can expect to see a sounder evaluation of the risk-reward trade off that will play out over time. But, if Mexico melts down, we could well see the bubble burst in a global withdrawal from emerging markets. We and our OECD partners are not equipped to handle a worldwide panic that would produce a collapse in the fastest growing export market we now have and, prospectively, the biggest source of continued worldwide growth. who should view Mexico as a wake up call. We in the OECD and the international financial institutions must begin now to put in place the institutional arrangements to handle the next Mexico. The United States simply cannot be the permanent ad hoc lender of last resort. The current Mexico faces a long road as it pursues democratization and economic reform. During the NAFTA debate, we heard why Mexico's success is important to us in the United States. We need a stable, democratic and prosperous neighbor to our south for reasons of our own stability, democracy, and prosperity. Nothing that has happened since December 20 has changed that calculation. We cannot turn our backs on Mexico, and Mexico cannot lose faith with itself. Mr. GRAMS addressed the Chair.

Mr. BRADLEY. Mr. President, anyone attuned to the news over the past 6 weeks has been subjected to a daily barrage of articles and statements on Mexico's economic crisis. We read of devaluations, floats, and market slides. We hear of lines of credit, loan guarantees, IMF programs, and conditionality. We follow the daily barometers of President Clinton, Secretary Rubin, Majority Leader Dole, and Congressman Leach. What we have not been getting, however, is an adequate sense of the social and political context for Mexico's troubles. But Mexico is not just an economist's case history. Mexico is a country, with people and history. Unless we understand how the current financial crunch grew out of and, in turn, affects Mexico's political and social dynamics, we will not be capable of developing a response that works for Mexico or in the Congress for us. The financial dimensions of the Mexico problem are well understood. Like many developing countries--such as the United States in the 19th and early 20th centuries--Mexico imports foreign capital to finance growth. However, because of its relatively low domestic savings rate, Mexico's appetite for foreign capital is exceptionally high. In a sense, Mexico is similar to the United States in the 1980's, financing investment from the savings of foreigners. In 1994, for example, Mexico imported a net $28 billion in foreign capital, 8 percent of its GDP. Less than half of that $28 billion was invested in productive assets, such as plant and machinery. The rest was volatile portfolio investment, known with justification as hot money. What made this money even hotter was the fact that much was invested in short-term debt that matures in bunches. As a result, the Mexican Government must find the resources to redeem or rollover around $52 billion in debt in 1995. Mexico, like any other country, can attract capital from abroad only as long as investors remain confident that the return compensates for the perceived risk. This requires investor confidence in Mexico's economic, political, and social stability. It also requires relatively high interest rates, declining inflation, and a stable currency--in other words, relatively high return for relatively low risk. The Salinas government in the late 80's cut their internal budget deficit by the equivalent of three Gramm-Rudmans. Inflation plummeted, privatization exploded. Protectionist barriers and government subsidies came tumbling down. Mexico pursued a strong peso policy both as an end in itself and as a symbol of the new Mexico. This led the Salinas government to resist the economic forces that threatened to push the peso down and, in the short run, it was successful. Just over a year ago, the North American Free-Trade Agreement came into force and gave a huge boost to investor confidence in Mexico. However, on the very day NAFTA took effect--January 1, 1994--the Zapatista revolt began in Mexico's Chiapas State. That revolt was an attack on democratic forces from the left. Thus began a year in which social and political, as well as economic, events undermined investor confidence in Mexico. As the year unfolded, we witnessed the assassination of the ruling party Presidential candidate, and the assassination of the ruling party secretary-general amid allegations of involvement by party dinosaurs. These were attacks on democratic forces in Mexico from the right. At the same time, the peso came under increasing economic pressure as the PRI-dominated Government turned on the fiscal and monetary taps for the elections to win the first really contested election in Mexico's history. There was another joker in the pack, one the Mexican Government could not control. That was the Federal Reserve's decision to raise United States interest rates. The higher yields made American securities more attractive relative to Mexican securities. Because a high percentage of the capital flowing into Mexico came not from banks, as in the 1970's and 1980's, but from mutual funds and pension funds, the impact of higher American rates was magnified. According to a study by Guillermo Calvo, professor of economics at the University of Maryland, much of the mutual fund money that flowed into Mexico came more as a response to lower interest rates in the United Mexican economic fundamentals. When interest rates rose in the United States during 1994, this money was ready to bolt out of Mexico. So, when the Zapatistas moved again last December, jittery foreign investors began converting their money into dollars and taking it out of the country. Mexico's foreign reserves melted away. The Government botched the resulting peso devaluation. The markets smelled fear, and the rout was on. Governments and international financial institutions, viewing the problem as a liquidity crunch, have prescribed standard fiscal and monetary responses, which are designed to reduce domestic consumption and make exports more competitive by lowering real wages. In other words, the economists are prescribing recession to reduce the demand for foreign capital. That is why the economists oppose political conditionality so strongly. For inserting a requirement that Mexico's wages rise in line with productivity or that Mexico try to repeg the peso at 3.5 to the dollar destroys the economic underpinning for eventual recovery. However, the economic cure ignores Mexico's political and social context. It ignores both the pacto which lay at the heart of the Mexican model, and the new social pact upon which President Zedillo based his legitimacy. Ernesto Zedillo was elected head of state of a country exhausted by a decade of economic reform--three Gramm-Rudmans in a matter of 4 or 5 years--and hungry for justice. He took over a population unwilling to continue to sacrifice for the benefit of others. Zedillo promised the Mexican masses a share in the prosperity bought with their sacrifice. He promised more open politics and an overhauled justice system. He promised a secondary education to the 45 million Mexicans under age 19. In short, unlike Boris Yeltsin in Russia, he promised his people a vision. However, Zedillo's vision threatened old-line entrenched interests in Mexico. It threatened an end to the old PRI-government gravy train. Since Zedillo does not head an old-style Leninist party, he lacks the brute party power of his predecessors to override opposition and implement his vision. In fact, he is presiding at the time when a regime is in greatest danger, the time when it tries to reform. The only way to square the circle is economic growth, not just the 5 percent necessary to create a million jobs a year, but enough to spread the benefits to the masses and at the same time buy off the party dinosaurs, who would like nothing more than to regain their subsidies and deny the people a real voice. This growth was the instrument promised by NAFTA. It is the instrument which the crisis has taken out of Zedillo's hands. Having lost the instrument, Zedillo will be hard pressed to restore the vision. We see the erosion already. Chiapas is active. The opposition PRD party has taken new life. As have the PRI dinosaurs. For example, when President Zedillo concluded a pact with three opposition parties that would have removed the PRI Governors of Chiapas and Tabasco States, who won disputed elections, the Governor of Tabasco brought his supporters into the streets. When President Zedillo was scheduled to announce the new social compact, the industrialists and labor leaders balked, forcing him to cancel a nationwide TV address and reveal the extent of his obligation. This, then, is the context for the loan guarantee debate. How can the Mexican Government negotiate the fine line between financial meltdown and social-political meltdown? Let me suggest a few guidelines. First, the United States needed to act quickly to shore up Mexico's financial system. The President has acted because the Congress delayed. If Mexico's financial system collapses, there is no hope of generating the needed growth, now or in the future. The President's support package is not to bail out Wall Street, or even individual American investors, but to give Mexico the chance to grow into social and political stability and become an even better market for American exports that create American jobs. If Mexico's financial system collapsed because the Americans reneged on a promise--if having announced the $40 billion loan guarantees, the administration was unable to deliver anything--we would have put at risk a decade of changing Mexican attitudes toward the United States. We would have confirmed Mexico's traditional anti-Americanism that is now latent, but still lurks just beneath the surface. Now we have a support package, we have a support package. But that package only buys time. It is up to the Mexican Government to put that time to work to generate popular support for the continued sacrifices necessary to overcome this financial setback. So the second step must be for the Mexican Government to return decisionmaking on Mexico's economy to Mexico City. The Mexican Government must develop, announce, and implement itself a plan to pull Mexico through the crisis and prevent this problem from happening again. That plan must not simply prescribe recession as the cure for Mexico's current account ills. It must hold out a way to grow and reduce the risk of hot money at the same time. Otherwise, Mexico is consigned to a continuing cycle of recession and currency crisis-- social crisis and economic crisis. To grow without generating a crisis, Mexico must finance more of its growth itself. That means the Mexican Government plan must increase Mexico's savings rate. The Asian dragons, for example, enjoy sources of domestically generated capital resulting from savings rates twice as high as Mexico's. The Government plan must also encourage foreign direct investment over portfolio investment. Investment in productive assets both implies an understanding of the underlying fundamentals that reduces volatility and is more difficult to pull out with a panicked phone call. There are many ways to do this, as countries as diverse as Chile, Indonesia, and Thailand have shown. Capital controls, however, are not an option. The means to shift the balance in favor of foreign direct investment must increase the integration of the Mexican economy, not its isolation. It should be clear that this plan cannot be dictated by Washington. No Mexican Government can allow Washington to load up support with a wish-list of conditions and still generate the popular support required to carry it out. If we need a support package to make the economic plan work, we need a clean package to let the economic plan work. Third, and finally, the Mexican Government must broaden its legitimacy among the Mexican people. Only democracy or dictatorship will see Mexico through the sacrifices President Zedillo will be asking of his people. Mexicans who are asked to sacrifice for the good of the system will also want a say in that system. Zedillo made an important statement with his four-party pact to open up the political system, but may be backing away in the face of resistance from the dinosaurs. That simply cannot happen. There are those who say that we can contain the fallout if Mexico goes belly up, that, despite dire predictions of systemic risk, this is a problem, not an emerging market problem. Mexico's crisis results from the market's misjudging of the balance between risk and reward in Mexico's financial markets, this argument goes. An investment that was profitable in, for example, the Philippines 2 months ago should still be profitable. I ask unanimous consent for 1 minute.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, we are about to finish work on S. 1, the unfunded mandates legislation. This has been a difficult process, and I regret to say that I cannot support the final product. In the final analysis, I feel it will create a real obstacle to the kind of laws that we need to protect my State and my constituents. Earier, I offered an amendment to the bill that highlights the way all governments--Federal, State, and local--often pass on the costs of supplying needed services and that we need to work together to reduce the total bill paid by the taxpayer. I was pleased that this amendment was adopted nearly unanimously. In a nutshell, my point was: What difference does it make to a taxpayer if we cut Federal taxes, or refuse to raise them to pay for needed programs, and the taxpayers' State taxes increase? What difference does it make to the taxpayer if State taxes decrease or stay the same, when local taxes or property taxes increase in lock step? to This bill's stated purpose is to slow a process that is becoming all too common. We face a deficit that we all decry. We are loath to raise taxes or truly cut spending. Yet, we all see in our States problems, issues that require a Federal response. The result is: We pass a law, and we pass on the bill. This cannot go on. It has to change. We have to take into account the full cost--along with the benefits--of the laws we propose. And the legislation before us attempts a response. On the other hand, I represent my State of New Jersey. We know too well why national programs are often needed. For years, another State dumped sewage off our shore that polluted our shoreline. Without a Federal law, and Federal water quality standards, how could we protect our own? Air currents likewise have no respect for State boundaries. We're downwind of too many States that, frankly, aren't very concerned about our problems with air quality and our status as the second worst region in the country. It doesn't surprise me that the Governor of Ohio is strongly against Federal air quality regulations. But we in New Jersey can not clean up for them, too. This legislation makes it far too easy to block the creation and implementation of Federal laws intended to protect a State like New Jersey. We need a better accounting of the costs that are sometimes too slyly passed along. We need to give the Governors and mayors more funding and more regulatory flexibility to reduce costs. But, we need national programs, from time to time, and we don't need new ways for naysaying legislators or bureaucrats to keep us from protecting our own. Mr. President, eliminating or minimizing unfunded mandates is a laudable goal. But it cannot provide a straitjacket for the Congress or be the excuse for legislators to stop needed laws for the protection of the public. This bill should drive a rational decision on public mandates. It does much more. Last Congress, the Senate Government Affairs Committee reported an unfunded mandates bill that almost all of us would have supported. It wasn't as aggressive a bill as some would argue for. But that bill did require authorizing committees to recognize and acknowledge explicitly the cost to State and local officials of regulatory mandates. It represented real progress, and was strongly endorsed by Governors and mayors around the country. The Senate, however, has now complicated the issue immensely. Two weeks ago, we began the consideration of legislation that was substantially altered from the bill reported last Congress. Hearings on the bill were simply perfunctory and many of my colleagues have come to the floor with basic questions of how this bill will work in the future. Let me illustrate some of my own concerns about this legislation by talking about a specific piece of legislation, not a hypothetical, that I've introduced. It's a bill that I'm very proud of, that has strong bipartisan support, and is even implicitly part of the Contract With America. The bill is, frankly, a collection of mandates on States. It is the Interstate Child Support Enforcement Act, which I introduced last Congress as S. 689 and will reintroduce this year. A single parent has lost her ability to support her children when an absent parent moves out of State to evade court-ordered child support. This bill would repair all the holes in the interstate system of child support, to make those absent parents take responsibility for their children. This is a new bill, and these are new mandates, so there is no question that this legislation would apply to it. Child support enforcement exemplifies a certain type of Federal mandate on States: The mandate that smooths and improves relationships among States, to make an effective Federal system possible. Some advocates for improving child support enforcement argue that States don't do a good enough job of collecting, because $6 billion or so of court-ordered child support goes uncollected. They advocate replacing the State-based system with a fully Federal system, a whole new bureaucracy. I would rather make the State-based system work. If States are required to give full faith and credit to child support orders from another State, if they are required to use comparable support order forms, if they are required to withhold lottery winnings, for example, from deadbeat parents no matter where the children live, then the State-based system can work efficiently and cheaply. The mandate to California improves the program in New Jersey, and vice versa. The only alternative to this kind of mandate, which will be undercut by passage of this bill, is a new Federal bureaucracy. I do not imagine that a new bureaucracy would ever be the option preferred by the manager of this bill. Second, my colleagues have raised questions about whether it is practical to ask the Congressional Budget Office to estimate costs to States and localities. In the case of child support enforcement, we have already asked CBO to estimate the costs to States, and they have worked hard at the project. They have surveyed States, asking what they are already doing and asking them to estimate the cost of the new tasks that the legislation would require. Not only do we not yet know the exact cost, but I doubt that we know for sure, after more than a year of research, whether the total cost of the mandates, offset by savings, would even exceed $50 million, and thus fall under the purview of this bill. CBO doesn't get these figures out of thin air, after all. We are unfortunately overly dependent on States' own estimates, sometimes their overestimates, of the costs, and we are also forced to depend on outside advocacy organizations or State bureaucrats, both of which may have their own ideas about policy. The point has been made several times: Let's not treat this CBO analysis with a reverence that even the CBO would have to admit is undeserved. Third, S.1 will track and complicate all legislation for years beyond when the authorizing committee acts. I'm sure many of the bill's supporters look at this as a positive feature of the bill. But I join the many Senators who have raised questions about the possibility of shifting legislative authority to regulators and bureaucrats, if authorized funding--needed to offset the mandate costs--is not fully forthcoming from the appropriators. The response to these concerns has generally followed one line. Under the terms of S.1, the authorizing committee will lay out ``procedures under which such agency shall implement less costly programmatic and financial responsibilities * * * to the extent the an Appropriation Act does not provide for the estimated direct costs of such mandate.'' In other words, we expect the authorizing committee to lay out which mandates become inoperative if the appropriators fail to provide 100 percent of the amount. Mr. President, I'm sorry, but this just doesn't pass the straight face test. Do we really expect the authorizing committees to provide a complete or even partially complete roadmap to account for all of the infinite possibilities open to future appropriators? The appropriators might provide 10 percent of the money, then go to 30 percent, then back to 20 percent--do we really expect that guidance provided by the authorizing committee will answer the issues raised? If this bill wasn't so important, we'd be laughing about this provision and its ludicrous implications. If we take this idea seriously, every authorizing committee will have to come up with a complex decision tree for every law. If the appropriations are 30 percent, it would say, then implement regulation X, but only partially implement regulation Y. If appropriations are 40 percent, enforce X and Y but not Z. If we cannot map this out, we're leaving it up to bureaucrats to decide which laws to enforce. And this is a simple case. One appropriation directly funds three mandates. What happens in a more complex case, such as a block grant that States can use as they choose to fund mandates or their own priorities? I hope my colleagues will consider the implications of this question before they begin their parallel drive to convert categorical Federal programs into block grants. Again, I will use child support as an example. Federal funds help States collect child support from the absent parents of children on 75 percent of the cost of the mandate; in other cases there is an enhanced match to provide an incentive by rewarding success. The formula is complex, but in no case does the Federal Government pay 100 percent which is appropriate because it is the responsibility of the State to enforce child support and minimize welfare costs. I have seen reports that the latest Republican proposal on welfare reform will involve consolidating hundreds of individual programs into one, open-ended block grant. Presumably this would include the $2.2 billion IV-D program for States to collect child support. What happens if that program is folded in with many other welfare programs into a block grant of $20 or $30 billion, with no more matching rate or incentive payments? States could spend all the money to collect child support, or none of it? Is the mandate now to be considered totally unfunded, since there is no money specifically directed to it? Or is it now fully funded, since States could pay for it by shifting welfare funds away from other needs? Mr. President, yesterday, we passed an amendment offered by Senator Byrd which tried to address these two issues by creating yet another legislative procedure. While I appreciate the intent of the amendment and endorse it, let no one think that this amendment solves these problems. Even if the authorizing committees act responsibly, even if the appropriators do everything they can, this new process still does not mitigate against real possibilities that have nightmarish implications. What if there is an across-the-board sequester of funding? Does every agency stop implementing regulations? The Byrd amendment was agreed to and improved the bill. But amendment after amendment was voted down, often on a party line. We tried to prevent regulations from targeting the private sector. This was rejected. We tried to prevent new roadblocks to legislation protecting children and the elderly. Rejected. We tried to make workable the point of order. Rejected. Mr. President, I say today that I would have supported a bill to protect the States and local governments against unfunded mandates. I would have supported the legislation from last Congress, which was loudly endorsed on a bipartisan basis and by all the State and local government groups. But I cannot endorse S.1. In the past, we have passed legislation to clean the air and water. We've passed legislation to protect the public health and safety. We've passed legislation to ensure the preservation of our oceans, our beaches, our public lands. We do not do this because we desire to pass costs on to the States. We do this because this is what the public demands. Certainly, we have to consider the costs to the States and local governments when we pass important legislation. This bill goes much farther. I believe that this bill will, if passed, be used to undercut fundamental laws that exist or will be created to improve our world and safeguard the public. I cannot support such a step.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, I ask unanimous consent I be able to proceed for 2 minutes.

Mr. BRADLEY. Mr. President, I think the unanimous consent agreement allotted 1 hour for debate of the underlying amendment.

Mr. BRADLEY. Mr. President, as I said earlier, this is a very simple amendment.

Mr. BRADLEY. Mr. President, I ask unanimous consent that Senator Dorgan, Senator Dole, and Senator Nickles be added as cosponsors to the amendment, the Bradley amendment.

Mr. BRADLEY. Mr. President, I ask unanimous consent that the order for the quorum call be rescinded.

Mr. BRADLEY. Reserving the right to object further, I do not intend to object. Could we order the yeas and nays on the Bradley amendment? I ask for the yeas and nays.

Mr. BRADLEY. Reserving the right to object, Mr. President, I would simply like to make the point that it is the Bradley-Chafee amendment.

Mr. BRADLEY. I ask for the yeas and nays. I want a rollcall vote on this.

Mr. BRADLEY. Mr. President, the amendment I propose is an amendment I talked about both with the majority and the minority staff. They understand that it is a simple sense-of-the-Senate resolution. It says very simply that this is a bill that deals with unfunded mandates of the Federal Government on the State government, and it would be the sense of the Senate that States should not apply unfunded mandates on local governments that lead to increased property taxes. Mr. President, so far in this debate, we have focused primarily on the unfunded mandates that the Federal Government is said to impose on the States. However, I would like to take a moment to draw the Senate's attention to an equally important set of mandates. I am referring to the unfunded mandates that Governors and State legislators impose on local governments and, more important, the burden that these mandates impose on taxpayers. Taxpayers' main concern is their total tax burden, not how this burden is divided among Federal, State, and local governments. As elected officials at every level can attest, cutting taxes and expanding services are far preferable to the converse--especially if someone else picks up the tab. However, as we all know, the person who ultimately picks up this tab is the taxpayer. Mr. President, in order to address the burden that this form of cost shifting imposes on taxpayers, I have sent to the desk a sense-of-the- Senate resolution in the form of an amendment to this bill. This resolution simply states that just as the Federal Government should not, in the absence of careful consideration, shift costs to the States, local governments, which frequently has the effect of raising local taxes. When Governors and State legislators shift costs to local governments in an effort to cut taxes and balance their operating budgets, they are not reducing the overall tax burden; they are merely changing the collection point. Instead, what happens is that local authorities who have no other source of revenue are forced to either raise property taxes or cut services. As a practical matter, however, these services-- such as fire, police, trash, and water services--are often essential to the safety and well-being of our communities. Therefore, the effect of cost shifting by State governments is, all too often, to increase local property taxes. These State-imposed mandates and the impact they have on taxpayers are by no means inconsequential. In New Jersey, the State imposes no less than 36 separate unfunded mandates on local governments. These unfunded State mandates cost New Jersey taxpayers over $150 million each year. In my State, as in many others, the main source of local tax revenue is the property tax. In fact, local property taxes make up over 98 percent of all local tax revenue in New Jersey. Therefore, for every dollar in costs that the State shifts to local governments, these governments are forced to raise property taxes by an equal amount. In 1991, the cost of New Jersey's property taxes was over $1,250 per person, not even per household. Since then, property taxes have only gone up. In fact, over the last 7 years, property tax collections in New Jersey rose over 64 percent and, this last year, property taxes rose faster than during any year since 1990. The upshot is that in Orange, NJ, the average homeowner saw an $800 increase in property taxes in 1994. Sadly, these homeowners were not alone. In Mansfield, the average homeowner saw a $600 increase in her property taxes in 1994. In Teaneck, the increase was $237; in Lyndhurst, $479; in Lodi, $100; in Dumont, $139; and in Alpine, the average homeowner paid over $1,000 more in property taxes in 1994 than in 1993. Property taxes affect everyone: while homeowners pay them directly, renters pay them indirectly. In addition, high property taxes disproportionately affect those who are often the most at risk in our society. For many older citizens, especially those who live on a fixed income, high property taxes threaten their ability to remain in their homes. For many younger, middle-class families, high property taxes often mean that they must defer or abandon their dreams of owning a home. Ultimately, Mr. President, this resolution is about honesty and responsibility. It is about honesty in how governments fund the services that they provide. It's also about responsibility and the need for government at all levels to take responsibility for its actions. Government officials are loath to raise taxes. Yet, we also see problems in our States that need to be addressed. The result, too often, is that we pass a law, and we pass the buck. Mr. President, I am not passing judgment on specific mandates, at either the State of Federal level. In fact, many of these mandates have helped to ensure the safety and well-being of our fellow citizens. Instead, I am simply stating that if government officials, at any level, intend to pass a new regulation, they should be honest about the cost that this regulation will impose on taxpayers. They should not attempt to hide the cost by shifting it downstream. Unfortunately, rather than being honest and taking responsibility for their actions, too many government officials appear to have signs on their desks that read, ``The Buck Stops * * * Over There.'' In order to call attention to the need for government officials at all levels to fully consider the impact that cost shifting has on taxpayers, I urge all of my colleagues to vote in favor of this amendment. Mr. President, I am joined in sponsoring this amendment by Senator Chafee and others. Mr. President, I hope we will be able to get a vote on this as the pending business before the Senate. I am prepared to move to a vote at any time. A Senator has the right to the floor when he is recognized, and I certainly would like to respect the agreements that have been struck between the minority and the majority. At the same time, when there was an open slot in the amendment process, I took advantage of that amendment slot. It is a very simple amendment, a sense-of-the-Senate resolution. I hope it will be adopted. I have checked with both the minority and the majority, and it deals simply with the issue of State unfunded mandates on local governments leading to higher property taxes.

Mr. BRADLEY. Mr. President, I ask unanimous consent that reading of the amendment be dispensed with.

Mr. BRADLEY. Mr. President, the amendment we are going to be voting on at 7:30 is an amendment that simply says while we are debating Federal unfunded mandates on States, it is the sense of the Senate that there should not be unfunded mandates from the States to the local governments of this country requiring increases in property taxes. The fact is the property taxes are much too high in most States, and there is a significant reason for that involving unfunded mandates from the State government to the local government. This simply allows the Senate to go on record saying that we do not want high property taxes from unfunded mandates. There are many Governors in the country who do not want any mandates from the Federal Government but they are not reluctant to apply unfunded mandates to the local governments. They are very clear on that. I am very pleased to have Senator Chafee as a key cosponsor. I yield the floor. If Senator Chafee wants to speak, I hope he will come over for the remaining 30 seconds of my 2 minutes. Mr. President, I ask unanimous consent that Senator Robb be added as a cosponsor.

Mr. BRADLEY. Mr. President, I send an amendment to the desk and ask for its immediate consideration.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, I am pleased to announce that today I am introducing legislation to allow the preservation of the Sterling Forest. My colleague, Senator Lautenberg, is joining me as a cosponsor on this important bill. Although located entirely in New York, the area affected by this bill represents some of the most critical New Jersey watershed still left undeveloped and in private hands. Sterling Forest represents the largest unbroken, undeveloped tract of forest land still remaining along the New York-New Jersey border. This 20 square mile parcel represents a complete range of wildlife habitat, hills, and wetlands. It is home to a large number of threatened and endangered species. The Forest is crossed in the north by the Appalachian Trail and is easily accessible by the 1 of every 12 Americans that lives within a 2 hour drive of its boundaries. Most important for New Jersey, though, are the billions of gallons of fresh, clean drinking water that flow from its boundaries. The Monksville/Wanaque reservoirs, which draw from the Sterling Forest Watershed, serve one in four New Jerseyans. Let me be perfectly clear: I am talking about the water supply for roughly 1.5 million Americans. To threaten this watershed is to threaten the livelihood and well-being of an extraordinary number of my constituents. Of great concern to me and my constituents are development plans for this region. One proposal offered by the Sterling Forest owners calls for over 14,000 homes and 8 million square feet of commercial space to be built by 2020. Even if this development were concentrated in the least environmentally critical and most accessible tracts, this construction will irrevocable alter this land. You can't move 100,000 people into a pristine 20-square-mile parcel and predict a minor impact on the environment. This bill is a necessary step if we are to protect this habitat and watershed. It allows an appropriation of up to $17.5 million for land acquisition. Furthermore, it designates the Palisades Interstate Park Commission [PIPC] a Federal commission created in 1937, to manage this land. One of the issues that has to be addressed in any expansion to park land is management. We all know how taxed is the National Park Service. The presence of the PIPC eliminates any concerns over competence and capability. Right now, the PIPC manages 23 parks which spread over 82,000 acres and host in excess of 8 million visitors annually. The PIPC has the interest and track record necessary to give us all a level of comfort that these Sterling Forest tracts, once acquired, will be well managed and protected. Mr. President, last Congress we had a hearing on this bill before the Senate Energy Committee. At that hearing, I believe a convincing case was made that the Sterling Forest represents the highest priority target for land acquisition: It has critical habitat and interstate watershed values; it protects a National Park unit of international significance, the Appalachian Trail; it is parkland accessible to tens of millions of Americans an area dominated by pavement; and it is directly threatened by near-term development and loss. At that hearing, I believe a convincing case was made that this was a unique instance, with a clear need for Federal involvement and a Federal interest. The critical shortage of habitat has been documented by the U.S. Fish and Wildlife Service and the U.S. Forest Service. The Federal Government has been acquiring habitat of similar characteristics to the Sterling Forest in a newly established national wildlife refuge, the Wallkill Refuge, about 20 miles away. I have already mentioned the Appalachian Trail and the federally authorized PIPC. And I return one last time to the issue of water supply. Mr. President, I have been in past Congresses the chairman of the Senate Subcommittee on Water and Power. Over the past few years, I have learned quite a bit about the relationship between water and the Federal interest. This Sterling Forest tract is crucial watershed to more people than live in any 1 of 13 States. Does anyone here believe that if the water supply of the State of Montana or Wyoming or South Dakota were seriously threatened that the Federal Government wouldn't contribute $17.5 million towards a remedy? The fact is that 10 times or 100 times this amount would be forthcoming. I believe that both New York and New Jersey are ready to endorse-- with their wallets--this project. We are ready to go. What is needed, what has to happen, is Federal leadership and Federal support. Mr. President, I urge my colleagues to consider this legislation and act positively, with all possible speed. I ask unanimous consent that the text of the bill be printed in the Record.

Mr. BRADLEY

Mr. BRADLEY. Mr. President, I rise today to introduce a measure designed to ban any handgun bullet capable of piercing body armor, regardless of the bullet's physical composition. Mr. President, this legislation grows out of the recent controversy over the Black Rhino bullet, which allegedly penetrates tightly woven fibers of bulletproof vests and, upon impact with human tissue, purportedly disintegrates much more rapidly than a conventional bullet, causing massive damage. Mr. President, Federal law currently outlaws cop-killer bullets based on the physical description of the bullet. For example, under the Violent Crime Control and Law Enforcement Act of 1994, Federal law currently bans cop-killing ammunition that is: constructed from one or a combination of tungsten alloys, steel, iron, brass, bronze, beryllium copper or depleted uranium; or is larger than .22 caliber with a jacket that weighs no more than 25 percent of the total weight of the bullet. The Black Rhino bullet is allegedly made of ground powdered plastic and coated with a plastic polymer. Based on its alleged physical characteristics, this bullet would evade the Federal ban. Mr. President, the Bureau of Alcohol, Tobacco and Firearms [ATF] has not tested the Black Rhino bullet; thus, I am not sure that this ammunition can do what the manufacturer claims. Indeed, ATF has not even been given sample ammunition to test. Therefore, I am not certain that this ammunition even exists. However, even if these bullets do not perform as advertised, it is clear that with the downsizing of the military and the resulting application by the defense industry of military defense technology for use in the private sector, it is only a matter of time before ammunition that can pierce body armor will be developed utilizing construction material that does not fall within the current Federal ban. Mr. President, every year about 60 sworn police officers are shot to death in the line of duty. By industry estimates, body armor has saved over 500 officers from death or serious injury by firearm assaults. Most police officers serving large jurisdictions report they have armor and wear it at all times when on duty. Mr. President, because body armor saves lives, the development of armor-piercing bullets that sidestep the Federal ban-- whether it be the Black Rhino bullet or any other bullet employing high-technology material--will serve one purpose and one purpose only-- to put the lives of American citizens and those in blue sworn to defend American citizens in jeopardy. As a result, Mr. President, I introduce this bill which will establish a performance standard such that any ammunition that is designed to penetrate body armor will be banned irrespective of its physical characteristics. The bill specifically directs the Department of the Treasury and the Justice Department to promulgate a uniform performance standard for testing a bullet's capacity to pierce armor within 1 year of the enactment of the bill. The manufacture, importation, and sale of any ammunition that fails to pass the performance standard to be promulgated will be banned. Mr. President, cop-killing ammunition that has no purpose other than penetrating bulletproof vests has no place in our society. At a time when gun violence is becoming a national epidemic, the last thing we need is ammunition expressly designed to terrorize our police and instill fear in neighborhoods across New Jersey and this country. I therefore introduce this legislation to ensure that the 24,000 annual deaths attributable to handgun use do not senselessly increase. Mr. President, I ask unanimous consent that the text of the bill be printed in the Record.