John Chafee

Mr. CHAFEE

Mr. CHAFEE. Mr. President, why are Federal budget deficits bad? One reason is that for every year that we run a deficit we have to borrow to pay for the shortfall. In the beginning of our country until today, we have borrowed--this Nation of ours currently is in debt nearly $5 trillion--$5 trillion with the overwhelming majority of that having occurred in the past 15 years. The cost of servicing that debt--in other words, paying the interest on that debt--is currently $240 billion a year. That is not paying the principal. That is solely paying the interest on the debt. Interest now is the third largest payment that the U.S. Government makes every year. We pay Social Security. We pay defense. And then the next largest item is interest on the debt--$240 billion a year. Suppose we did not have to pay that interest on the debt? Suppose that $240 billion was available instead to improve our education system, or to do something about better maintenance for our highways, or to clean up our environment in a better fashion than we are currently doing, or to bolster our efforts to combat crime. A whole list of very, very attractive items would be available--potential expenditures to improve our Nation if we were not paying $240 billion a year interest on the debt. The deficit places a tremendous strain on the national economy through higher interest rates. The interest rates would be far lower. And this is not just me saying this. This is testimony we have had before the Finance Committee by the Chairman of the Federal Reserve, Mr. Alan Greenspan. Investors in the United States and borrowers in the United States are required to pay higher interest because of the tremendous national debt that we have and the high interest rates that are having to be paid to service that debt. If the interest rates were low, what would happen? People would pay less on their mortgages every year, less on their borrowing for a new automobile, and less on the borrowings they have made for their children's education. The Federal deficit also places a drag on future economic growth. Our potential to expand the economy is directly linked to the amount we invest in physical and in human capital--newer and better machinery, a better trained work force with improved skills, and, thus, higher productivity and a higher standard of living if we had a pool of national savings available for that investment. Regrettably that is not true. National savings in our country has declined dramatically over the last decade--the last 10 years--in part because the Federal Government has engaged in a policy of not saving through its deficit spending. This is, in part, because now what can we do about all this? How will a constitutional amendment to balance the budget help us? What it will do principally is to impose fiscal discipline upon this Nation of ours. The Federal Government has failed to balance its budget for 26 straight years. With a balanced budget amendment in effect, this Nation of ours--and us as elected Senators, and likewise in the House of Representatives--will be required to balance the budget, would be required to face up to the tough decisions, and if we want to spend money, we have to raise the money to pay for it. We cannot borrow. So this balanced budget amendment represents a first and most important step on a long and difficult journey to fiscal responsibility and to passing this Nation on in better condition to our children than we received it. Mr. President, every previous effort to balance the budget without an amendment to the Constitution--I previously was not in favor of an amendment. Instead, I thought we could do it through Gramm-Rudman- Hollings, or through firewalls, or through caps on discretionary spending, or pay-as-you-go rules. All of these we have tried. None of them has succeeded to date. When the targets became too difficult to meet, we simply changed the law. That is the way we did it in the past. But we will not be able to do it once this amendment is in effect. So, Mr. President, it is my earnest hope that this amendment will be adopted today. I thank the Chair. Mr. WELLSTONE addressed the Chair.

Mr. CHAFEE

Mr. CHAFEE. Mr. President, I would like to pay tribute to a group of students from West Warwick High School, West Warwick, RI. These 18 young men and women deserve a note of recognition for their outstanding performance in the 1996 ``We the People. The Citizen and the Constitution'' national finals. From April 27-29, here in Washington, DC, the team from West Warwick competed against 49 other classes from throughout the Nation. They demonstrated a remarkable understanding of the fundamental ideals and values of American constitutional democracy. The ``We the People'' competition is the most extensive of its kind. Developed to help students understand the history and the principles of the Constitution and the Bill of Rights, the program has reached more than 22 million students at the elementary, middle, and high school levels in its 9 year history. I appreciate the generations of dedicated citizens who have devoted themselves to studying and interpreting, to drawing upon the principles set down in the Constitution and the Bill of Rights in order to make this Government the most effective and democratic in the world. For this reason it gives me great pleasure to pay tribute to these young people who are continuing in the fine tradition of constitutional scholarship. The group from West Warwick High School, as well as their competitors from across the Nation, not only demonstrated a remarkable understanding of the fundamental principles of the U.S. Government, but also worked together to learn to participate responsibly in our political system. For me, and I am sure for every one of my colleagues here, there can be no greater joy than to witness the emergence of a new generation of Americans dedicated to upholding those common ideals under which this Nation's leaders have convened for 220 years. I commend the achievements of these students, and congratulate their teacher and all the faculty at West Warwick High School for a job well done. I commend the achievements of these students, and congratulate their teacher and all the faculty at West Warwick High School for a job well done. Mr. President, I ask that the names of these exceptional West Warwick high school students and their teacher, Michael Trofi, be entered into the Congressional Record as follows: Susan, Bickerstaff, Joshua Brassard, Carlos Cruz, Jason Deletesky, Nicholas Dube, Brandon Hall, Paul Heatherson, Cynthia Jutras, Jennifer Lavoie, Jessica Lavoie, Jessia Lefrancois, Steven Marandola, Richard Marrese, Jesse Nason, Matthew Raiche, Walter Richardson IV, Michael Streeter, and Tara Watson.

Mr. CHAFEE

Mr. CHAFEE. I ask that everybody please give their attention to the proposal we are making.

Mr. CHAFEE. Mr. President, every Member of this Chamber believes that running up huge deficits year after year and passing the debt on to our children is just plain wrong. Every Member of this Chamber knows we must restrain the entitlement programs. The proposal I am offering on behalf of myself, Senator Breaux, and 19 of our colleagues, Republicans and Democrats, balances the budget in 7 years. It makes significant reforms to entitlement programs. It extends the solvency of the Medicare trust fund and provides modest tax relief for working families. These are all sound reasons for supporting it. But there is an additional strong reason I wish to call to your attention. The President's budget was rejected on nearly a straight party-line vote. The Republican proposal will pass on a straight party-line vote, I expect. But the implementing legislation to the Domenici proposal, the implementing legislation will undoubtedly be vetoed. Thus, its entitlement reforms will not become law, just like last year. Our budget, however, has a realistic chance of becoming law. Today with a ``yes'' vote on the alternative, we can transform talk about deficit reduction into action. If we pass the Chafee-Breaux alternative, a balanced budget agreement can be reached this year. If this effort fails, then we will go through another year without solving our Nation's fiscal problems. Mr. BREAUX addressed the Chair.

Mr. CHAFEE

Mr. CHAFEE. I will take such time as I need. Mr. President, in the years 1931 to 1938, the people of England failed to heed the warnings that their nation and, indeed, their lives were in peril. They dismissed voices, such as that of Winston Churchill, crying the alarm. They dismissed him as a warmonger and a scaremonger. Despite clear proof that Hitler was building a fierce war machine, the people of Great Britain preferred to ignore such evidence. John F. Kennedy described that in his book, ``Why England Slept.'' And in his history of World War II entitled ``The Gathering Storm''--that was the first volume--Churchill gave the theme of that volume as follows: How the English-speaking people through their unwisdom, carelessness and good nature allowed the wicked to rearm. Mr. President, a clear analogy can be drawn between the financial peril of the United States in the immediate years ahead and the military peril of Great Britain in the years referred to, with one major difference. No one disputes--no one disputes--the fiscal danger our Nation faces if we do not control these entitlements. We hear a whole series of siren-like voices, gentle voices saying, ``Don't do anything now. Let's have more study. Isn't there an easier way of correcting the situation? It's an election year, let's wait. We can't do anything because we don't have the President's support.'' Mr. President, we can follow all that kind of advice, but it will not cure the situation one iota, and the only way to solve the financial problem that this Nation faces is to do something about it now. Oh, sure, we can postpone it. Every year we postpone makes the solution that much more difficult. The solution of the centrist group has been, first, a realistic budget that we do not have any savings that really cannot be achieved. We do not say we are going to make these $300 billion savings out of discretionary accounts. We know that will not occur. Every Senator knows that will not happen. So what we have done is said the solution to this is to state the CPI, the Consumer Price Index, in a realistic fashion, and we have not taken the high side of the recommendations. Many of the witnesses that came before the Finance Committee said the CPI is overstated by 1 percent at least and as high as 2 percent. But, no, we have gone to one-half of 1 percent because that can be thoroughly justified. Has there been criticism of that? Oh, yes, there has been criticism: ``Savings from the CPI adjustment should not be used except to shore up the Social Security fund.'' That is what we do, Mr. President. We have a statement from the Social Security's chief actuary that the solvency of the Social Security trust fund, as a result of the CPI changes recommended by the centrist group, will extend the solvency of the Social Security fund. Some say that if you change the CPI or go to a realistic correct tabulation of the CPI that you are going back on promises made to Social Security recipients. That is absolutely inaccurate. Nothing in the centrist plan affects commitments we have made to Social Security recipients. Congress promised to provide cost-of-living adjustments to beneficiaries, and we continue to do that under our plan. All our plan does is make the CPI correct. Mr. President, I notice there are others waiting to speak, so I will reserve the remainder of my time. Mr. BREAUX addressed the chair.

Mr. CHAFEE. Mr. President, I yield 3 minutes to the Senator from Washington.

Mr. CHAFEE. Mr. President, I am happy to give the Senator some of my time.

Mr. CHAFEE. Mr. President, I ask the Senator look at our proposal. He will see there is $25 billion of corporate welfare cuts that he is discussing. Perhaps if he became more familiar with it we would all be better off. Mr. LOTT addressed the Chair.

Mr. CHAFEE. I wonder if I might have that 30 seconds?

Mr. CHAFEE. May I have 30 seconds?

Mr. CHAFEE. Mr. President, we have had a wonderful presentation just completed about why this Nation does nothing about facing up to the problems that confront us. Sure it is easy to trash any proposal that comes before us. That is what we see. Not one word--not one word about what to do about the crisis our country faces in these entitlement programs in the future years. I find it terribly disappointing that the Senator from Massachusetts chose this opportunity to go out of his way to trash all the proposals that we presented but not a word about doing something about it. Right here we had presented why the Congress of the United States refuses to face up to the problems we have before us.

Mr. CHAFEE. Mr. President, here we have a chance to do something. In my opening remarks, I mentioned the situation in England in the 1930's which John F. Kennedy described in his book ``Why England Slept.'' As Winston Churchill said in his four-volume history of the war, ``The Gathering Storm,'' he said the English people through their nonwisdom and carelessness allowed the wicked to rearm. We have a similar situation, not a peril from abroad militarily but a peril from within financially. The good news is we can do something about it. What we can do now is the smartest; but, if we wait, it becomes that much more difficult. All we are saying is one-half of 1 percent correction, as it should be and as every economist that has come before the Finance Committee has told us the correction should be made. Let us seize the opportunity, Mr. President.

Mr. CHAFEE. Mr. President, I will take 1 more minute.

Mr. CHAFEE. Mr. President, I yield myself 2 minutes. I have listened to the presentation of our amendment, and I must say I want to congratulate every Senator who has spoken on behalf of this amendment. I think the arguments, really, are overpowering. Here is the problem: If we continue on the path we are on now in this country, every one of the entitlement programs is going to be in a very, very severe situation. What did the entitlement commission say when they reported 2 years ago? This is what they found: By the year 2010--how far away is that? Mr. President, 2010 is 14 years away. Spending on entitlement programs--Social Security, Medicare, Medicaid, welfare, all of the entitlement programs--where they are locked in, unless we do something, the payments on those programs, plus the interest on the national debt, will exceed all the Federal tax revenues. All the money that comes into the Federal Government will be inadequate to cover those entitlement programs; not a nickel left for the Park System or for maintaining our highways or for building them or the FBI, the State Department, the Justice Department, whatever it is. Mr. President, obviously, something has to be done. I find the arguments of the opponents difficult to understand. One of the arguments is, ``Well, the President has not said he is for this thing, so we should not vote for it.'' What are we hired for? We are hired, it seems to me, to do what is best for the country, and whether the President is for it or is against it does not make any difference. He cannot vote here on the floor of the Senate. We can. It seems to me to make our vote depending on whether this is going to pass or not and whether the President is for it or not is hardly the route to go. So I plead with my colleagues to come forward and support this amendment. Mr. President, I ask for the yeas and nays on the amendment.

Mr. CHAFEE. Mr. President, I ask that the half-hour this side has be divided in half, with half to me and the other half to the Senator from Louisiana.

Mr. CHAFEE

Mr. CHAFEE. Mr. President, I have no further discussion on our amendment tonight. As I understand it, we have 1 hour equally divided tomorrow morning. The plan, as I understand it, is for us to start on our hour at 9:30. That is equally divided.

Mr. CHAFEE. Or you could always give it to us.

Mr. CHAFEE. Mr. President, on behalf of myself, Mr. Breaux, Mr. Bennett, Mr. Brown, Mr. Bryan, Mr. Cohen, Mr. Conrad, Mrs. Feinstein, Mr. Graham, Mr. Gorton, Mr. Jeffords, Mr. Johnston, Mrs. Kassebaum, Mr. Kerrey, Mr. Kohl, Mr. Lieberman, Mr. Nunn, Mr. Robb, Mr. Simpson, Mr. Specter, and Ms. Snowe, I send to the desk an amendment and ask for its immediate consideration.

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

Mr. CHAFEE. I know Senator Snowe has further engagements, so if she would like to proceed for a few minutes now before I start, she is very familiar with the amendment as a cosponsor. I will be glad to yield to her such time as she needed.

Mr. CHAFEE. Mr. President, I thank the distinguished Senator from Maine. She has been a very loyal and superb contributor to our deliberations which have gone on since last October. We greatly appreciate the fine support the Senator from Maine has given us. Mr. President, Senator Breaux and I, along with 19 of our colleagues, are offering this alternative, centrist budget resolution in the hopes that we can provide a bridge between the two parties. We strongly believe, and I will challenge anybody here to say something to the contrary, that this plan we have represents the only hope of obtaining a balanced budget. Why do I say that? Because Democrats will oppose the Republicans' proposals. And Republicans already have shot down the Democrats' proposal, the administration's proposal, the President's proposal. That leaves us in exactly the same place we were in at the end of last year, having done little to address the real reforms to put this country's fiscal house in order. The plan that the centrist coalition, which is the name of the group that Senator Breaux and I have the privilege of leading, is presenting today, offers a way to reach a consensus on fixing this problem. It balances the budget in 7 years using the Congressional Budget Office assumptions. We do not have any gimmicks here. We do not have any sunsetting of tax cuts. We do not have any triggering of additional income in the outyears. These represent both reforms in the entitlement programs and a modest tax cut for working families. I invite Senators' attention to be directed to this chart. This is 1996, where the deficit is something around $150 billion. If we do not do anything in connection with balancing this budget, this is the way it will go, up, so that 10 years from now the deficit will be $400 billion. Everybody who spent any time on this problem at all knows it keeps on going upward. Something has to be done about these deficits and nothing will occur in reducing them unless we make some changes, not solely in the discretionary programs but in the entitlement programs as well. Where does all this leave us? As I mentioned before, the Republicans have shot down the Democrats' proposal. The budget will pass here but when it comes to the reconciliation bills, undoubtedly those will have no Democratic votes and will have a high probability of being vetoed by the President. So what happens then? Republicans and Democrats both will have offered budgets that they like but which are unacceptable to the other side. Each side will proclaim itself a champion of fiscal responsibility. But at the end of the process, we will have failed to solve this problem. The country will not be on the path toward a balanced budget. Instead, higher and higher deficits will result. Now I will turn to the second chart. Here in the red at the bottom, we have what is known as discretionary spending. This is spending that deals with all the programs we are familiar with--the FBI, the State Department, the parks, health care and education. All of these are under this so-called discretionary spending. As anyone will note looking at this chart, it goes up very, very slightly. This is not where the problem is. The problem is in the green. The green is what is known as the entitlements. The entitlements are Medicaid, Medicare, welfare, Social Security, and this is where the great portion of the budget not only is now, but it increases. You can see that what goes up is not the red of the discretionary programs. What goes up is the green of the entitlement programs. In the budget that has been presented by the Budget Committee, it is projected that over the next 6 years, $300 billion will be saved from the discretionary accounts. What that means is that what you see here, these tiny little increases, will be held flat and, indeed, decrease over the next several years, over the next 6 years. The President does something quite similar and did something quite similar in his budget. He proposed that there be $229 billion of savings in these programs. I think it is safe to say that very, very few Members of this Senate believe that either of those levels of cuts in discretionary spending can be achieved. They are just plain not going to be there, particularly in the last 2 years of the plan. In our plan, which we have submitted, we recognize the near impossibility of those savings being made in discretionary accounts. Our proposal saves $179 billion from those programs over the next 6 years--$179 billion, not $300 billion as is proposed by the Budget Committee, not $229 billion as the President proposed, but a far more realistic $179 billion. We recognize that even getting the $179 billion savings represents a monumental effort to extract that money from NIH research or law enforcement or environmental protection or whatever it might be. However, we believe that these savings can be achieved. It will be difficult but certainly far easier than doing anything like $300 billion or $229 billion, as the other programs have suggested. Now let us talk a bit about the entitlement programs. As you can see, this is the great bulk of the spending of the Nation. This is where the increases are. These are very politically popular programs. The Bipartisan Commission on Entitlements and Tax Reform laid out the problem very succinctly in its August 1994 report. The commission found that by the year 2010, spending on entitlement programs--now listen to this carefully because this is very dramatic. This is not me saying this. This is a bipartisan commission. This is what they said: The spending on entitlement programs--namely Social Security, Medicare, Medicaid, welfare--and interest on the national debt by the year 2010, the spending on that will exceed all of the Federal tax revenues that come in. That will leave no money to pay for the FBI, the Park Service, or all the other discretionary programs that we previously mentioned. The centrist plan addresses that problem by making changes that will bring the entitlement programs under control. I know that my fellow Senators who are part of this will go into these in greater detail, but I will briefly touch on them. In Medicare, our plan makes substantial reforms to improve the program's effectiveness and to shore up the trust fund solvency. We maintain the traditional fee-for-service programs, but also pave the way for a broad range of managed care plans. We propose that there be affluence testing for the so-called part B premium. Others will touch on this, but that is a program that ought to be inaugurated under the Medicare Program and, thus, reduce the drain on the Federal Treasury, because what the individual does not pay for, some 70 percent, comes directly out of the General Treasury. We address the long-term viability of the Medicare Program by conforming Medicare eligibility age to the Social Security Program. Under current law, Social Security retirement age is scheduled to increase from 65 currently to 67 years beginning in the year 2003. This increase will occur gradually, taking 22 years to become fully effective. In other words, starting in 2003, it goes up. The plan we have significantly improves the current Medicaid Program. This is something that greatly concerns the States. We give the States far greater flexibility in delivering health care to the aged and to the poor. States will be able to design systems which best suit their needs without having to go through the lengthy waiver process with the Federal Government. We repeal the so-called Boren amendment, which will allow States to establish their own reimbursement rates and free them from much of the litigation that now exists. Importantly, the centrist plan maintains a national guarantee of coverage for low-income pregnant women, for children, for the elderly, and the disabled. We also have important safeguards to prevent States from shifting their Medicaid costs to the American taxpayers. We make needed improvements in the welfare system. Our plan is based upon the welfare reform bill that passed this Senate 87 to 12 last year. That plan stresses going to work. It requires States to meet a 50-percent work requirement by the year 2002. We accept many of the recommendations of the National Governors Association, particularly for greater child care funding. Over the next 7 years, the centrist plan also provides tax relief in the shape of $130 billion, much of that going to working families and to small businesses. This includes a $250 per child tax credit. We have capital gains relief, incentives for families to save by expanding individual retirement accounts, and a State tax relief for family-owned businesses. Finally, our plan incorporates a one-half percentage point correction in the Consumer Price Index. The Consumer Price Index, as most of us know, is used to calculate cost-of-living adjustments to Social Security and other Federal retirement programs and also for indexing the Tax Code. The problem is the following, Mr. President: The CPI overstates inflation. This is not just me saying this, this is not just the members of the 19 or 21 of us, it comes from lengthy testimony that we have had before the Finance Committee in the U.S. Senate. The Chairman of the Federal Reserve, Alan Greenspan, believes that the CPI is overstated by 1 percentage point. The Boskin Commission, which was established by the Senate Finance Committee to study this measure, has reported that the overstatement ranges from seven-tenths of 1 percent up to 2 full percentage points. Our proposal does not go the 2 percentage points, it does not do the 0.7 percent. We go lower than all of those. We take a modest five- tenths of a 1 percent adjustment to the CPI to correct this error. That change will reduce the deficit by $126 billion over the next 7 years and will continue to provide tremendous savings in the outyears. Over the past few months I have had the privilege, as many of us have here, to discuss this program with my colleagues and with others. Usually there is approval. But then there is the ``but,'' ``But I do not like this.'' ``I would like your proposal, except the cap on direct lending is too low'' or ``the tax cuts should be larger'' or ``there shouldn't be any tax cuts'' or ``the Medicare savings are too large'' or ``the welfare savings are too small.'' Everybody has some small reason. These are all important considerations, Mr. President. I understand that many Members have strongly held views on these subjects. But we are never going to tackle and succeed in reducing this deficit if we let the perfect be the enemy of the good. If everybody takes a way out by saying, ``I like it, but I don't like any tax cuts,'' we do not have as many tax cuts as the other programs do. We have more than the President's, but certainly less than the Budget Committee has. Yes, we do not do everything everybody likes. As the Senator from Maine indicated, she and I believe every single member of our group has some better way of doing it than this. But we all stood together and we voted, and we do not all get what we wanted, but we decided to hang together or otherwise nothing will be achieved. So, Mr. President, the alternative that Senator Breaux and I and the others present today offers the Senate the only opportunity to have a balanced budget for this Nation this year. Is it tough? Certainly it is tough. The CPI change is not an easy vote, nor is the vote to shore up Medicare and the affluence testing on Medicare, for example. But here you have a group of Democrats and a group of Republicans who have joined hands to take these important steps forward and to end the partisanship and to move forward in doing something about these horrible deficits that our country faces. So we ask each of you to join our efforts. For the sake of our children and our grandchildren, and the young people, all the young people of our Nation, we want to pass this country on in better shape than we found it. Here is the way to do it. I want to thank the Chair.

Mr. CHAFEE. I yield whatever time Senator Breaux uses.

Mr. CHAFEE. Mr. President, first, I congratulate all the speakers that have spoken so far this evening. Now I will yield such time as the Senator from Utah would like. Would he suggest 10 minutes?

Mr. CHAFEE. Mr. President, I thank the distinguished Senator for a very powerful statement. He has always made outstanding contributions and continued those contributions today. I yield 10 minutes to the Senator from Washington.

Mr. CHAFEE. Mr. President, I congratulate the Senator from Washington for a very, very powerful statement. I think it greatly helps our cause. I thank him very much.