Ron Paul

Mr. PAUL

Mr. PAUL. Mr. Chairman, I rise in opposition to the automatic continuing resolution amendment to H.R. 1469, the so-called Supplemental Appropriations for Fiscal Year 1997. Nestled within all the rhetoric and debate surrounding H.R. 1469, the Supplemental Appropriations for Fiscal Year 1997, is an amendment offered to fund national government operations throughout Fiscal Year 1998. Funding that is, at 100 percent of the current level of overspending. This amendment abdicates the responsibility of Congress to legislate and appropriate; that for which Congress was elected by citizens of this country. Rather than accepting the responsibility and corresponding accountability to constituents for voting in favor of or against particular appropriations, this amendment allows Congress, in the name of strategizing against the President and averting blame for a government shutdown, to approve in an autopilot-type approach, Federal spending through the end of fiscal year 1998. This strategy sets a dangerous precedent of bypassing the constitutional checks on governmental powers by minimizing the separate roles of the executive and legislative branches. Rather than a Presidential veto on congressional appropriations--thus demanding a new consensus between the Congress and the Executive--the veto power of the President becomes merely the power to continue funding at a level already burgeoning with spending on constitutionally suspect programs. Once again, Congress grants to the executive branch, powers never intended by the Constitution. The amendment also introduces a dangerous ratchet-up feature in Federal Government spending. For should this precedent be later followed and should Congress ever decide to make amends for its habit of spending beyond its means, the Presidential veto power then becomes a tool by which the President can ignore the will of Congress absent a two-thirds majority to override the veto. Recent history suggests that Congress is rather unlikely to decrease its spending and this certainly would be much more unlikely in the event a two-thirds majority is required. For these reasons and others, I oppose abdication of congressional responsibility, putting the Federal Government appropriation process on autopilot, and, therefore, approval of the automatic continuing resolution amendment to H.R. 1469.

Mr. PAUL

Mr. PAUL. Mr. Chairman, we, the Congress, are once again asked to reenact Federal housing legislation that is unconstitutionally, philosophically, economically, and practically unsound. Prior to the Constitution-circumventing New Deal policies of the Fed- induced Depression era, such redistributionist policies whereby Government takes money from one citizen to pay the housing costs--or some other cost--of another was forbidden. Supreme Court Justice Samuel Chase, in Calder versus Bull, opined that ``a law that takes property from A and gives it to B: It is against all reason and justice, for a people to intrust a legislature with such powers.'' Yet, this redistributionary scheme, rather than the exception, has become the rule as well as the rule of law in this 20th century, special interest state. But even setting aside the unconstitutionality of Government's 20th century housing policy for the moment, such redistributionary schemes are philosophically bankrupt as well. A right to housing, as espoused by proponents of this legislation, or a right to more than the fruits of one's own labor, by definition must deprive some other the right to keep the fruit of his or her own labor. Moreover, such a right cannot be a right as it is not enjoyable by all simultaneously. For if each is entitled by right to more than the fruit of one's own labor, one must then ask from where this additional production will come. It is this fallacy that prompted Frederic Bastiat, the brilliant 18th century political-economist to remark: ``The State is the great fictitious entity by which everyone seeks to live at the expense of everyone else.'' Bastiat understood that Government was an agreement entered into for the purpose of protecting one's own property rather than the tool by which individuals could collectively band together to deprive others of theirs. The problems with Government housing extends even beyond these not- so-insignificant barriers. The economic and practical aspects of such a policy warrant serious scrutiny as well. One must not forget that individuals respond to incentives and incremental measures moving this country further in the wrong policy direction must be actively opposed. There are those in this Congress who concede that there are serious problems with our Federal housing policy but argue that we must reform it to correct these problems. By incrementally moving in the right direction we can look out for those affected--not just the tenants but the others dependent upon the Government miscreant as well. This incrementalist approach has not worked in the past and will not work in the future. This bill will not move us incrementally in the right direction. The direction in which this legislation will lead us could be referred to as a continuation of mission creep. An idea for a small program or expenditure, no matter how deserving or well meaning, will only feed an ever-growing appetite for more Government money. This bill will demonstrate yet again the innate nature of a Government subsidy to grow exponentially. Despite the confident assurances of flatlining the HUD budget for a few years, Government subsidized housing will continue to grow. A GAO report points out that there are an additional $18 billion in FHA insured mortgages at risk. While not a part of H.R. 2 directly, the liabilities associated with the subsidized mortgages on the housing projects and other factors virtually assure it, even if it were not the nature of Government's quest to sate its ravenous consumption of our money. The social reformers of the New Deal era persuaded a pliant Government to address the issue of unemployment and the needs of the slum dwellers. Presumably, no one bothered to address the responsibility issue. John Weicher of the Hudson Institute explains well the logic that brought us the current situation. The social reformers of that era chose to ignore market forces, human nature, and the nature of Government. If Government spends enough of other people's money, Government can change lives. ``We know better for them than they do--and just how to do it,'' was the condescending implication. They claimed that poor tenement housing largely caused the social ills of the urban dwellers. These so-identified breeding grounds of crime, delinquency, disease, mental illness, and worse were regarded as the result of the poor living conditions, not the cause. If Government could give them decent housing, Government could eliminate these problems, they dreamed. That dream has become a nightmare for all too many people--both for the people trapped by the constraints of the public dole and those forced through taxation to pay for it. The erstwhile social reformers thought Government could eliminate the slums, create jobs in a depression and even encourage home ownership. Through Government, they could realize their dreams. They were wrong. The United States Housing Act of 1937 established public housing, our oldest subsidy program, in order to create affordable, Depression-era housing for those temporarily unemployed or underemployed, eliminate slums, and increase employment through make-work construction jobs. The Great Depression has long been over, but its misguided largesse and Constitution-circumventing redistribution schemes continue. Of course, we are still paying the deficit--with compound interest--for those jobs despite having institutionalized slum life. The War on Poverty demonstrated the mission creep. In 1965 government created the Housing and Urban Development [HUD] Agency following the beginning in 1961 of federally subsidized construction of privately owned housing projects. Subsidized housing has now mutated into three forms: public housing, privately owned projects and, section 8 certificates and vouchers for use in privately owned housing. Each of these three forms of Government-subsidized housing makes up roughly one-third of the subsidized housing stock. Of the public housing projects, over 850,000 of the 1.4 million units were built between 1950 and 1975. Only about 100,000 new units were added to the public housing stock in the last 10 years. These units are built entirely with public funds, and the Federal Government pays part of the cost of operation. Over time, the Federal Government has to pay to modernize these developments too. However, the local Public Housing Authorities [PHA's] run the projects with such ineptitude in so many cases they are literally run into the ground. Costs to operate the public housing projects are comparable to private housing, according to HUD numbers, only if one does not consider the cost of building the units in the first place--as if the cost of the mortgage on a private housing building should not be a factor in setting the rent. The Federal Government then picks up the tab for the so-called modernization, or rehabilitation, of the projects as they deteriorate. With this setup, there is no incentive for the local PHA officials to reinvest the rental income back into the units. As a consequence, the local PHA does not maintain them sufficiently, and the tenants suffer a life in substandard housing. Standards that are deemed unacceptable in private housing are somehow good enough in the Government's eyes for those on the lower rungs of the socioeconomic ladder. The privately owned projects also bilk taxpayers on a grand scale, according to HUD Secretary Andrew Cuomo. He lambastes the fact that the Government is overpaying rents compared to what his department considers Fair Market Rent. HUD is subsidizing rents of $849 a month in Chicago neighborhoods where the market rate is only $435 a month; paying $972 a month in Oakland, CA, against a market rate of $607 a month; and in Boston, Government is paying $1,023 a month vis-a-vis $667 monthly in the private market, he says. Mr. Cuomo attacks these abuses and decries the State of subsidized housing, but he does not recognize that these abuses are symptomatic of the system he is trying to preserve. ``For years we have been trying to grapple with this issue,'' he tells us and dangles promises of huge future savings if Government tinkers around the edges of an ill- conceived system that tries to cheat the market, tries to circumvent human nature, and ignores the nature of Government subsidies. His current promises are as false as the promises of his predecessors. One of his successors will 1 day lament the horrible State of subsidized housing he inherited and will promise grandiose reforms that will save billions if Government only passes a future subsidized housing bill. One of the worst complications of this approach is the builtin disincentives to proper management. Under a convoluted setup, these privately owned projects rely on FHA insurance and a Federal subsidy paycheck to pay for it. Too often, these ill-managed projects deteriorate so quickly that the units are torn down before they pay for their own construction. Under Mr. Cuomo's directives, HUD will decide the market rate concerning its subsidies. The market distortions of the tax code and FHA insurance make the situation worse. Vouchers and certificates are the best of the inherently flawed approaches. About 80 percent of people with vouchers find suitable housing of their choice--very often at only 40-60 percent of the cost of less desirable public housing. After enacting certificates in 1974 and vouchers in 1983, about 1.5 million households have been served by this approach--1.1 million through certificates and 400,000 through vouchers. The benefits of the tenant-based approach include the reliance of a quasi-free market competition with the attendant bonuses of lower costs, great efficiency, rewards for personal initiative, and individual choice. Under tenant-based rental assistance, recipients are less likely to live in concentrated poor urban communities that often lack basic necessities: safety, good schools, employment opportunities, access to financial services, and so forth. They have a way out of the trap of project-based public housing units that have become a way of life. Market incentives through tenant choice put the renters in charge of their housing decisions. They may find the housing of their choice and even keep the difference between the rent and the voucher if they find housing for less than their voucher enabled them. This is not the case with the certificates. Unfortunately, the household remains tied to the State with the contingent constraints and perverse incentives that this arrangement implies. Unfortunately, H.R. 2 does not address these concerns. It leaves uncertain the ``proper'' approach to subsidizing housing despite the fanfare of a ``new'' approach. While formally repealing the 1937 housing act, the mentality remains along with the compendium of problems inherently associated with it. The bill leaves uncertain whether a ``tenant-based approach'' or a ``project-based approach'' will be instituted. In the Washington tradition, a compromise is offered. Again, in the Washington tradition, this bill embraces the worst aspects of both approaches and fuses them together. This bill tries to ``target'' their social reforms now. By this Government's attempts to force social reforms through osmosis by luring better role models into the modern slums. Perhaps the Ellen Wilson housing project in Washington, DC, just blocks away from the Capitol, would reassure us as to the benefits of incrementalism. In a city with a waiting list of 16,000 people, Government is spending about $186,000 per unit to build subsidized housing instead of spending less per unit and housing more people. One would hope that at least such incredible sums are going to the most needy of the 16,000 people waiting for subsidized housing. Yet even those earning up to $78,000 a year could qualify. Incremental social reform is not cost efficient. The Washington Post wrote on April 24, 1997, that Valley Green, a Washington, DC, housing project built in early 1960's, was launched ``to house people displaced by `slum clearance,' [and] soon became a slum itself, poisoned over the decades by a toxic brew of poverty, rampant vandalism, violent drug dealing, and government neglect * * *. The resulting wasteland, which stretches across 20 acres of silent concrete courtyards and rutted city streets, has come to serve in recent years as a convenient backdrop of politicians looking to cast blame for decades of despair.'' This story is very indicative. It is one that has been retold far too many times in too many places. This expenditure has not even provided decent housing to those Government was trying to help. According to HUD inspection general reports, up to 80 percent of the units fail inspections. It is a story that will be retold again and again if this bill passes. It is a testimony of the effects of Government-engineered social reform of housing. One must not forget the lofty goal of slum elimination of the 1930's that spawned this misadventure. That lofty goal of the 1960's spawned the dreamily named Valley Green. One can only wonder what name Government shall bestow upon the next housing project born under H.R. 2's new legislative regime. Aside from the simple accounting costs associated with Government subsidized housing, there are other real costs. Unfortunately even this simplicity eludes HUD which routinely demonstrates that it is incapable of understanding basic accounting and accountability. Just this month, a congressionally instigated investigation of section 8 contract reserve accounts discovered $5 billion in addition to the $1.6 billion in excess reserve funds recaptured late last year. I sincerely doubt that the residents of Valley Green, other housing projects and taxpayers think this is a well-run program. Just since HUD was created, Government has appropriated over $572 billion to the agency. Of course, this figure does not include rents and fees collected by the agency, so that it could be argued that total funding for public housing has been much higher. HUD is budgeted annually around $21.7 billion for each of the next 5 years, but the figure for last year was only $19.4 billion. More money will be wasted. For fiscal years, 1965-75, the agency's budget authority totaled less than $40 billion. In other words, Government has spent over half a trillion dollars of taxpayers' hard-earned money on subsidized housing in the last 20 years. Nor has this half a trillion dollars increased the home ownership rates of Americans. The fourth quarter averages of home ownership between 1965-74 averaged 64 percent. Despite such Governmental largesse, fourth quarter rates of home ownership averaged 64 percent between 1965-96. Certainly HUD has not made a significantly positive contribution to the goal of home ownership. They will be able to point to the easily identified few who have been helped at the expense of the less easily identified many who were negatively affected. One must not forget that the increased Government expenditures derived through taxation have stifled the ability of many would-be homeowners to save for the down payment and purchase the home of their dreams. Instead, they pay the taxes to bankroll the dreams of the social reformers, past and present. They are paying not only the bills of today but the taxes necessary to pay for the deficit spending dreamed up by previous social reforms. There is a real economic cost to these deficits. The distortions to the free market whereby the most efficient allocations of resources are made. HUD shows us the alternative--and considered enlightened--path to allocating resources better. The HUD bureaucracy consumes valuable resources that are best spent elsewhere. Even the new HUD Secretary concedes very readily that HUD is inefficient and wasteful. Government just needs to give it more time and more money, the Secretary pleads. Of course more time and more money have already cost us too much. This irresponsible pipe dreaming has contributed to unsound fiscal and monetary policies and introduced new iterations in the business cycle. As the market tries to factor in these Government-spending- induced booms and busts, security against its ravages of higher unemployment and higher interest rates takes their toll. This added cost fuels the cycle which exacerbates the problem. Not only the taxpayers suffer under this approach. The civil rights of the tenants of subsidized housing are discarded as housing sweeps violative of the fourth amendment are conducted in the name of a misdirected war on poverty and lack of affordable housing. Of course, it is the middle class and working poor who pay the cost most directly. The rich shelter their money from many income taxes and have their FICA taxes for Social Security capped. This regressive Social Security tax takes an unfair toll on the working poor and middle class. Many more people could afford better housing absent paying for the inefficiencies of the Government's approach to housing. H.R. 2 is not the solution to our problems. Rather, it is an illustration of the creeping mission of more Government for a longer period of time not fulfilling the dreams of its engineers. This bill is more of the same incremantalism that began in the 1930's. Despite proof that it was not working, we are asked to vote again to throw more money at the problem, give government more control of our lives and reap the rewards. In the 1960's, Government acknowledged again the failure of the mission and expanded the reach of Government exponentially. With those promises demonstrably unfulfilled, Government find itself again at a crossroads. Continue creeping incrementally towards more Government spending and a loss of civil and economic liberties or the path of freedom. I urge Government to offer liberty. I do not doubt the compassion and intentions of many of the social reformers, then or now. They are, indeed, well-meaning folks. The problem is that the effects of their good intentions run counter to the aims of their endeavors. Instead of a safety net that merely prevents a newly unemployed single mother from falling, the public housing project traps her and her family in its net and holds them hostage to the whims of the local Public Housing Authorities. These PHA's are not accountable to her. She has sacrificed her liberty to PHA's that are too often sinecures provided by political cronyism. Tales of their abuse are legendary. This corrupt scenario produces crime statistics proportionately twice as high in and around subsidized housing projects as in the communities as wholes, according to HUD's Office of Public and Indian Housing. Without the accountability inherent in a market situation, abuses are almost predictable. The public housing projects are but one of the worst examples of flouting the free market and the loss of accountability. H.R. 2 attempts to improve the lot of those benefiting from subsidized housing and make the bureaucracy less burdensome. Unfortunately, by the time this proposal goes to the floor, so many changes will have been made, compromises accepted and political deals consummated that we end up with a bill in some ways worse than the status quo, as bad as that is. The end result of this well-meaning attempt to care for those less fortunate is higher taxes, especially on the working poor, slower economic growth, fewer job offers and a reaffirmation of Government's determination to keep tenants trapped in substandard housing whose managers are not accountable to them. At the same time, those politically astute suppliers of Government housing encourage the continuation of such programs at the expense of the more productive suppliers whose political polish does not place them in he ambit of those doling out the grants. We should end this misguided approach to such legislation. It punishes all taxpayers with the future additional expense of increased eligibility requirements while limiting further the availability of subsidized housing for those who currently qualify. It rewards special interest favors for the politically connected--both unaccountable subsidized housing managers, department bureaucrats, politically contributing public construction businesses and the landlords cashing above market Government rent checks for substandard housing. The opportunity that H.R. 2 provides is squandered in an extension of more of the same. While consolidating programs could make oversight easier and bureaucrats and local PHA's more accountable, it is unlikely that this bill will go far enough to address the problems with our subsidized housing programs. New problems resulting from targeting are almost certain. Many of the critics of the left are correct to point out this mean misallocation of funds from the working poor and middle class to tenants with higher incomes than current tenants despite the waiting list. Only by rewarding individual initiative, choice, responsibility and the resultant accountability can Government reforms better serve the recipients. Of course, only less Government and lower taxes will truly meet those aims.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I rise to oppose H.R. 5, the Individuals with Disabilities Reauthorization Act of 1997 [IDEA]. I oppose this bill as strong supporter of doing all possible to advance the education of persons with disabilities. However, I do not think that a huge bureaucracy is the best way to educate disabled children. Parents and local communities know their children so much better than any Federal bureaucrat, and they can do a better job of meeting a child's needs than we in Washington. There is no way that the unique needs of my grandchildren, and some young boy or girl in Los Angeles, CA or New York City can be educated by some sort of ``Cookie Cutter'' approach. At a time when Congress should be returning power and funds to the States, IDEA increases Federal control over education. According to the Congressional Budget Office Federal expenditures on IDEA will reach over $20 billion by the year 2002. This flies in the face of many Members' public commitment to place limits on the scope of the Federal bureaucracy. H.R. 5 imposes significant costs on State governments and localities. For example, the new bill requires one regular education teacher to take part in each individual education plan [IEP]. According to certain education experts, this could require as many as 10 to 15 teachers be present at each IEPO meeting. This bill also requires States to include disabled students in all statewide assessments by 1998 and develop alternatives for students unable to participate in the regular exams by the year 2000. According to the National Association of State Boards of Education [NASBE], this mandate will increase assessment costs by 12 percent. NASBE's May 9 letter to Congress identifies several other provisions in H.R. 5 that will impose new financial burdens on the States. I ask that the letter be read into the Record. As I see Members of Congress applaud the imposition of more mandates on States, I cannot help but think of a letter I received from the high school principal asking for some relief from Federal mandates imposed on her by laws like IDEA. I would ask all my colleagues to consider whether we are truly aiding education by imposing new mandates or just making it more difficult for hard-working, education professionals like this principal to properly educate our children? The major Federal mandate in IDEA is that disabled children be educated in the least restrictive setting. In other words, this bill makes mainstreaming the Federal policy. Many children may thrive in a mainstream classroom environment, however, I worry that some children may be mainstreamed solely because school officials believe it is required by Federal law, even though the mainstream environment is not the most appropriate for that child. On May 10, 1994, Dr. Mary Wagner Testified before the Education Committee that disabled children who are not placed in a mainstream classrooms graduate from high school at a much higher rate than disabled children who are mainstreamed. Dr. Wagner quite properly accused Congress of sacrificing children to ideology. Mr. Speaker, it is time to stop sacrificing children on the alter of ideology. Every child is unique and special. Given the colossal failure of Washington's existing interference, it is clear that all children will be better off when we get Washington out of their classroom and out of their parents' pocketbooks. I therefore urge my colleagues to cast a vote for constitutionally limited government and genuine compassion by opposing H.R. 5. National Association of State Boards of Education, Alexandria, VA, May 9, 1997. Dear Representative: The National Association of State Boards of Education (NASBE) is a private nonprofit association representing state and territorial boards of education. We are writing to express our opposition to the changes made to the state set-aside formula in the compromise agreement on the individuals with Disabilities Education Act (IDEA). Under the new legislation, the state share is capped at the FY97 level, with all future increases equal to the rate of inflation or the federal appropriations increase--whichever is less. This new formula also applies to the state's 5% administration reserve. This limit, especially as applied to state administration, will place severe burdens on already strained state education budgets and will result in an enormous federally unfunded mandate. IDEA is a highly prescriptive law requiring vigilant state monitoring and evaluation to ensure disabled students are receiving all appropriate educational services. The new mandates will create even more administrative and oversight responsibilities for state education agencies (SEAs), while at the same time significantly decreasing the federal funds necessary to carry out such functions. Because of the artificial limits placed on the states' administrative share, the excess costs of administering the programs, distributing grants and ensuring local education agency (LEA) compliance with the law will be borne solely by the SEA. In addition, the proposed legislation directs the states to implement the following new programs: (1) Include disabled students in all state-wide assessments by 1998 and to develop alternatives for students unable to participate in regular exams by the year 2000. (At the very least, this mandate will increase state assessment costs by 12%, the national average of disabled students in the general school population); (2) Establish and operate a mediation system for use by LEAs and parents; (3) Develop and implement state performance goals and indicators for disabled students. The states are responsible for all of the costs incurred by creating and maintaining the above programs. The federal government is providing absolutely no new financial assistance to help offset these expenses. The reduction of the state set-aside severely undermines the historic federal, state and local partnership and 20-year old cost-sharing arrangement that have worked so well in delivering a free, appropriate public education to disabled students. We urge you to amend the IDEA compromise agreement by allowing funding increases of up to 5% annually for state administration. Sincerely, Brenda L. Welburn, Executive Director.

Mr. PAUL

Mr. PAUL. Mr. Chairman, I rise today in opposition to the Juvenile Crime Control Act of 1997. This bill, if passed, will further expand the authority of this country's national police force. Despite the Constitutional mandate that jurisdiction over such matters is relegated to the States, the U.S. Congress refuses to acknowledge that the Constitution stands as a limitation on centralized Government power and that the few enumerated Federal powers include no provision for establishment of a Federal juvenile criminal justice system. Lack of Constitutionality is what today's debate should be about. Unfortunately, it is not. At a time when this Congress needs to focus on ways to reduce the power of the Federal Government and Federal spending, Congress will instead vote on a bill which, if passed, will do just the opposite. In the name of an inherently-flawed, Federal war on drugs and the resulting juvenile crime problem, the well-meaning, good-intentioned Members of Congress continue to move the Nation further down the path of centralized-Government implosion by appropriating yet more Federal taxpayer money and brandishing more U.S. prosecutors at whatever problem happens to be brought to the floor by any Members of Congress hoping to gain political favor with some special-interest group. The Juvenile Crime Control Act is no exception. It seems to no longer even matter whether governmental programs actually accomplish their intended goals or have any realistic hope of solving problems. No longer does the end even justify the means. All that now matters is that Congress do something. One must ask how many new problems genuinely warrant new Federal legislation. After all, most legislation is enacted to do little more than correct inherently-flawed existing interventionary legislation with more inherently-flawed legislation. Intervention, after all, necessarily begets more intervention as another futile attempt to solve the misallocations generated by the preceding iterations. More specific to H.R. 3, this bill denies localities and State governments a significant portion of their autonomy by, among other provisions, directing the Justice Department to establish an Armed Violent Youth Apprehension program. Under this program, one Federal prosecutor would be designated in every U.S. Attorney's office and would prosecute armed violent youth. Additionally, a task force would coordinate the apprehension of armed violent youth with State and local law enforcement. Of course, anytime the Federal Government said it would ``coordinate'' a program with State officials, the result has inevitably been more Federal control. Subjecting local enforcement officials, the result has inevitably been more Federal control. Subjecting local enforcement officials, many of whom are elected, to the control of Federal prosecutors is certainly reinventing government but it is reinventing a government inconsistent with the U.S. Constitution. This bill also erodes State and local autonomy by requiring that States prosecute children as young as 15 years old in adult court. Over the past week, my office has received many arguments on both the merits and the demerits of prosecuting, and punishing, children as adults. I am disturbed by stories of the abuse suffered by young children at the hands of adults in prison. However, I, as a U.S. Congressman, do not presume to have the breadth and depth of information necessary to dictate to every community in the Nation how best to handle as vexing a problem as juvenile crime. H.R. 3 also imposes mandates on States which allow public access to juvenile records. These records must also be transmitted to the FBI. Given the recent controversy over the misuse of FBI files, I think most citizens are becoming extremely wary of expanding the FBI's records of private citizens. This bill also authorizes $1.5 billion in new Federal spending to build prisons. Now, many communities across the country might need new prisons, but many others may prefer to spend that money on schools, or roads. Washington should end all such unconstitutional expenditures and return to individual taxpayers and communities those resources which allow spending as those recipients see fit rather than according to the dictates of the U.S. Congress. Because this legislation exceeds the Constitutionally-imposed limits on Federal power and represents yet another step toward a national- police-state, and for each of the additional reasons mentioned here, I oppose passage of H.R. 3, the Juvenile Crime Control Act of 1997.

Mr. PAUL

Mr. PAUL. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, it is a very interesting debate trying to decide how many vouchers we should have and how we can fairly distribute these vouchers. I think it would be fair to say that it would be very difficult ever to come up with a completely fair answer for everybody. I do not think there is a right answer. I think the whole debate over public housing is an interesting debate and, for me, a very disappointing debate. I do not know what number day this is, but it must be the 4th or 5th day we have been into the debate over public housing, and the differences between the two major debates here seems to be so little, from my viewpoint. Mr. Chairman, what we are really dealing with, and I think everybody is concerned about it, and that is how do we provide the maximum number of houses for poor people. That is what we want to do. We have different versions of this effort, but the detail on how to do this, and this micromanagement, even like who gets vouchers and how to declare and what is happening, this is just a very, very strange debate for somebody like myself who comes from a free market constitutional position. But nevertheless, I hear this debate. I do know, though, that if we look in general terms throughout the world, the more socialized a country is, the more interventionist it is, the more the government is involved in housing, the less houses we have for poor people. The more freedom a country has, the more houses there are. We have only been in the business of really working to provide housing for our poor people in the last 30 years, and I do not think we have done that good a job. I think we have plenty of poor people. As a matter of fact, there are probably more homeless now than there were even 30 years ago. However, I think someday we might have to wake up and decide that public housing might not be the best way to achieve housing for poor people. The basic assumption here in public housing is that if somebody does not have a house and another person has two houses, if we take one house from him and give it to the other one, that this would be fair and equitable. For some reason, this is not very appealing to me and to many others. As a matter of fact, if there was some slight degree of success on this, it would create a very dull society; it would cause a very poor society as well. But the efforts by government to redistribute houses never works, and we have to finally, I think, admit to this. Mr. Chairman, the effort to pay for public housing is another problem. It is always assumed that there is going to be some wealthy individual that will pay for the house for the poor individual. But the assumption is always that the wealthy will pay for it, but unfortunately, due to our tax system and due to the inflationary system that we have, low, middle income and middle class individuals end up paying the bills. This whole process is a snowball effect. The more effort we put out, the more problems it leaves, the more deficits we have, the more inflation we have, the more people become unemployed, and the more poor people we have, and the more pressure there is to build houses. This is what is going on. That is why people decry the fact that there are more homeless than ever before. And I grant, I believe there probably is, but I also believe that we are on the wrong track. I do not see how public housing has been beneficial. I believe, quite frankly, that it has been very detrimental. The two approaches that I hear, one wants to raise the budget by $5 billion on our side of the aisle, and the other side complains it is not enough. I mean, how much more money? Is money itself going to do it? The basic flaw in public housing is that both sides of this argument that I hear is based on a moral assumption that I find incorrect. It is based on the assumption that the government has the moral authority to use force to redistribute wealth, to take money from one group to give to another. In other words, it endorses the concept that one has a right to their neighbor's property. This, to me, is the basic flaw that we accept, we do not challenge. I challenge it because I believe a free society is a more compassionate society. A free society can produce more houses than any type of government intervention or any government socialization of a program. Compassion is a wonderful thing, but if it is misled by erroneous economic assumptions, it will do the opposite. The unintended consequences of government intervention, government spending, government inflation is a very serious problem, because it literally creates more of the problem that we are trying to solve. So I would suggest that we should think more favorably about freedom, the marketplace, and a sound currency.

Mr. PAUL

Mr. PAUL. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, we have been debating the housing bill now for quite a few days. And it seems like we spend most of our time, probably 99 percent of our time, debating two versions of government housing. For those of us who believe that more houses and better houses could be produced in a free market and in a free society, it is a bit frustrating. But the debate goes on. I sincerely believe that everybody in the debate has the best of motivation, the desire is to be compassionate and to help poor people get homes. The tragedy is that we have been doing this for a good many years and have had very little success and this attempt now, again well motivated, to change the management of the housing program to a more local management program really leaves a lot to be desired. On one side of the aisle we find out that the biggest complaint is that we do not have enough money, and the complaint is that the budget has been greatly reduced. But the way I read the figures, the numbers are going up over $5 billion this year, so there is going to be a lot more money in this HUD program compared to last. It is said on the other side that we are going to save $100 million in management at the same time we are spending a lot more money. Much has been said about how do we protect the rights of the individuals receiving public housing, and I have recognized that this is a very serious concern. Yet when we have a government program, it is virtually impossible to really honor and respect. And straightforward protection of individual rights is very difficult. I am concerned about the victims' rights, those people who lose their income, who lose their job because of government spending and government programs. It is said that we are trying very hard to take money from the rich and give it to the poor so the poor have houses. But quite frankly, I am convinced that most of the taxation comes from poor people. We have a regressive tax system. We have a monetary system where inflation hurts the poor more than the rich. And there is a transfer of wealth to government housing programs. Unfortunately, everybody agrees the poor are not getting houses. And so many of the wealthy benefit from these programs. It is the rich beneficiaries, those who receive the rents and those who get to build the buildings are the most concerned that this government housing program continues. Until we recognize the failure of government programs, I think we are going to continue to do the wrong things for a long time to come because there is no evidence on either side that we are really challenging the concept of public housing. There are two visions of one type of program on government housing. Some day somewhere along the line in this House we have to get around to debating the vision of a free society, a free society with a free market and low taxes, and a sound monetary system will provide more houses for the poor than any other system. Much has been said about the corporate welfare and much has been recognized that corporations do benefit. But I am on the record very clearly that I would not endorse anything where a corporation or the wealthy get direct benefits from these government programs, whether it is the housing program or Eximbank or whatever. I am also very cautious to define corporate welfare somewhat differently than others. Because when we give somebody a tax break and allow them to keep some of their own money, this is not welfare. It is when we take money from the poor people and allow it to gravitate into the hands of the wealthy, that is the welfare that has to be addressed and that is the part that we seem to fail to look at endlessly whether it is the housing program or any other program. It is true, I think that it is very possible for all of us to have a vision which is designed to be compassionate and concerned about the injustice in the system. I do not challenge the views of anyone, but neither should my motivations be challenged because I come down on the side of saying that a free society and a constitutional government would not accept any of these programs because they have not worked and they continue to fail. The real cost of this program and all programs unfairly falls on the poor people. Yet we continue endlessly to do this and we never suggest that maybe, maybe there is an alternative to what we are doing. We have so many amendments tinkering with how we protect the rights of the poor. I think that inevitably is going to fail because we are not smart enough to tinker with the work requirements. Quite frankly, I have been supportive of a work requirement as an agreement to come into public housing, very, very reluctantly and not enthusiastically, because I am convinced that the management of a work program of 8 hours a month is going to outcost everything that we are doing.

Mr. PAUL

Mr. PAUL. Mr. Speaker, using the CPI to measure cost of living adjustments is nothing more than a feeble attempt to measure dollar depreciation. This is no more accurate than using stock and bond prices to measure inflation. I have a lot of reservations and think we are making a serious mistake by delivering to the Bureau of Labor Statistics the authority to manipulate the CPI numbers. This is ducking our congressional responsibility, and it is a back-door way to raising taxes and manipulating the entitlements. I think, most importantly, it fails to recognize the basic flaw in our system, and that is the monetary policy and a depreciating of currency. But we have a lame duck President quite willing to accept the responsibility and to accept more executive legislative powers from the Congress, something the Constitution does not authorize. But here we have a President quite willing to, behind the scenes, raise taxes and manipulate the cost of living. The truth is there is no accurate way to measure the cost of living index.

Mr. PAUL

Mr. PAUL. Mr. Chairman, I think that is a minor point and something we should be concerned about. But I am also concerned about those individuals who have been evicted from their homes because they have been taxed. The system that we have today works on a regressive tax system. We talk about the Social Security tax that goes into the general revenues. Those are on individuals that have a greater tax burden than the wealthy. And this is the reason this country is getting poorer. But you are taking money from poor people and giving it to another group of poor people and in the transition, the wealthy get more money. So we do not have a very good system here.

Mr. PAUL. Mr. Chairman, I move to strike the requisite number of words. The amendment offered by the gentleman from Illinois, I think, raises some very interesting ideas. The point being, how do we protect civil liberties once somebody accepts welfare? This is not unique to just public housing, because in many ways this happens in our public schools. Public schools, we go there, but we still want to protect our civil liberties and we cannot overly dictate, and yet we have rules and regulations. Although I think these points are very important that the gentleman brings up, I am inclined not to support his amendment, but I think they are worth talking about. First, I think the point about the other recipients of the welfare in the housing program is very important. Last week there was a rumor going around that I might introduce legislation that would repeal all of HUD, which would be a proper, good economic position and a proper constitutional position. I had a lot of phone calls. But none came from the poor people. They all came from the wealthy people, those who were receiving $850 rents for $400 houses, those who get to build the buildings, those who are the contractors and those who do the financing. They are very interested in this program. I think the gentleman has a very good point. If we are going to punish people receiving welfare or have requirements, put the requirements on the others as well. I think this is very legitimate. But I think the idea of civil liberties, the whole notion here, the definition, has been distorted, because the one thing I think so many people forget, we should have concern about the civil liberties of those in a housing development. For one, I have seen great danger about the abuse of the fourth amendment when it comes to the tenement houses, where they can go in without the proper issuing of a search warrant. I think that is very, very bad and seems like maybe that would put me over the line and say we should not permit this. Just because they belong, or they are living in Government housing, that should not allow us to say they have sacrificed their protections. So I think this is important. But there are some civil liberties also of others that we have not discussed at all, because we are talking about the protection of the civil liberties of those who are receiving a house. What about the person who is paying for the house? It is assumed by so many that the wealthy are paying for these houses, but under our very regressive tax system, if we look at the amount of money the poor people pay through FICA, they are the ones who are paying. The wealthy do not pay the taxes. So the poor individual, the low, middle income, the individual who is capable of still taking care of himself, is hurt the most by what we do here in the Congress. Whether it is public housing or the deficit or our monetary system, these are the individuals who are hurt and are pushed aside. But they are losing their homes because we are pretending to do good to others and provide houses for them. So we should be concerned about their civil liberties as well, but it seems like we forget that. But this whole notion about work condition, how many people can stay in a room, the search and seizures, I think these are very, very important and should not be ignored. But again we should not ignore the civil liberties of those who had to work and pay for these houses because quite frankly I think we should ask the question. It is assumed by so many that we have a constitutional, natural right to a house. That is not in the Constitution. We have a right to our liberty, we have a right to our life, we have a right to pursue our happiness, and we ought to have the right to keep what we own. So think of the civil liberties of those who suffer when you take. I agree that we should think of the benefits accrued to the welfare recipients and what kind of conditions we have, but I think we should think about the benefits accrued to the businessman who really is benefiting from these programs as well.

Mr. PAUL. I yield to the gentleman from Illinois.

Mr. PAUL. Yes; and I have great sympathy for the gentleman. It is just I believe that some conditions do exist in everything we do in Government. You do not go into a public school without conditions. You cannot come in there and be disruptive, or you get thrown out. So if there are conditions, you come in, and the contract is the person who accepts the housing comes in, voluntarily accepting Government housing under the conditions that they will do A, B, and C.

Mr. PAUL. I yield to the gentleman from Massachusetts.

Mr. PAUL. Mr. Chairman, I move to strike the requisite number of words. Mr. Chairman, there has been a lot of talk here that there has been an attack on the poor. Quite frankly, I do not believe that either side of the aisle is really attacking the poor. Even in this bill, which is supposed to be a radical change in direction on public housing, I find that in the budget we are appropriating $5 billion more, so that is hardly an attack, in an effort to help the poor. But I do think the poor are suffering. I think there are a lot of people in this country who are suffering. I think the recipients of public housing are suffering. I think those who are paying for it are suffering. There is a problem much more perceived in the hinterlands of America than we seem to realize. The poor in this country are suffering, but this is a result of the type of policy that we have here in the Congress, the policy of spending too much, the policy of inflating, the policy of destroying the currency. When a Nation destroys its currency, it transfers wealth from the poor and the middle class to the wealthy. Even in this very bill where we are appropriating more money, it is to the benefit of many wealthy people: the people who build the houses, the people who receive the rents. So there is a transfer. There is a transfer of wealth, but the achievement on public housing policy has never been successful. This is what we are facing today. But we are also facing the fact that the consequence of a 30- to 50- year welfare state is coming to an end. This is why the great debate is on. We have this every 30 years. We were much wealthier in 1965 and subsequently spent $5 trillion on a welfare state. Now we are facing a bankruptcy. The concern for the poor is justified. The poor are suffering. The poor are suffering because they pay the bills. I would like to see the challenge of the welfare for corporate welfare in this very bill itself. There are wealthy beneficiaries from this.

Mr. PAUL. I yield to the gentleman from Illinois.

Mr. PAUL. I yield to the gentleman from North Carolina.

Mr. PAUL. Mr. Chairman, I think so. This is the reason I have great concern about most of the details of this bill and also the reason I will be voting against the bill. I think the gentlemen make many good points.

Mr. PAUL. I will think about that and think about the ramifications, but I certainly will consider it.

Mr. PAUL. Mr. Chairman, I think that would be a very good suggestion. Seeing that I think the Export-Import Bank is welfare for the very wealthy businessman, I think the conditions would be very good.

Mr. PAUL

Mr. PAUL. Mr. Chairman, unfortunately for this country, few Members of the 105th Congress have received word that the era of big government is over. While I rise today in opposition to passage of H.R. 867, The Adoption Promotion Act, I could be referring to any number of bills already passed by this Congress. As a medical doctor, I share with other Members of Congress the strong distaste for the needless suffering of helpless, displaced, and orphaned children. As a U.S. Congressman, I remain committed to returning the Federal Government to its proper constitutional role. Fortuitously, these two convictions are not incongruous. This country's founders recognized the genius of separating power amongst Federal, State, and local governments as a means to protect the rights of citizens, maximize individual liberty, and make government most responsive to those persons who might most responsibly influence it. This constitutionally mandated separation of powers strictly limited the role of the Federal Government and, at the same time, anticipated that matters of family law would be dealt with at the State or local level. Legislating in direct opposition to these constitutional principles, H.R. 867 would impose additional and numerous Federal mandates upon the States; appropriate $138 million over the next 5 years to be paid to States that obediently follow Federal mandates; and further expand the duties of the Health and Human Services Department to include monitoring the performance of States in matters of family law. Even as a practical matter, I remain convinced that the best interests of children are optimally served to redirecting tax dollars-- which under this legislation would be sent to Washington in an attempt to nationalize child adoption procedures and standards--to private charities or State and local child advocacy organizations. For each of these reasons, I oppose passage of H.R. 867, the Adoption Promotion Act.

Mr. PAUL

Mr. PAUL. Mr. Chairman, I thank the gentleman for yielding time to me. Mr. Chairman, it was mentioned earlier that we have two visions about the housing program. Unfortunately, I see so little difference between these two visions. One, I see that the bureaucracy is centralized, spending a lot of money and not doing a very good job. The other vision is that if we decentralized bureaucracy and spent even more money, that somehow or another we will improve the public housing of America. However, I do want to challenge the statements here that all of a sudden something is being cut, because the way I read the figures, actually we are increasing the amount of money. That should satisfy some opposition, but it would not satisfy me if we are spending more money. We are supposed to be spending less money. But according to the CBO figures, we spent $25 billion last year on HUD funds, most of it going into public housing, and this year the proposal is that there will be $30 billion. As we look at these figures on out, by the time we get to the year 2002 we are up to $36 billion. So there are no cuts. There is a 20-percent increase this year. So I do not see how these funds are being slashed. I would like to see the funds cut and spent a different way. I think private enterprise is a much better way to build houses. There is no proof that this 30-year experimentation of $600 billion has been worth anything. We have spent $5 trillion on the war on poverty, and rightfully so. There are a lot of people complaining there is still a lot of poverty, still a lot of homeless, still a lot of people not getting medical care. I think that is true, but I think it represents the total failure of the welfare state. It is coming to an end. Unfortunately, no matter how well intended, and the gentleman from New York [Mr. Lazio] has done tremendous work, and has worked very hard to improve this situation, I wish I could share his optimism. There is no reason, Mr. Chairman, to be optimistic about this bill, if it is passed or not passed. We have to address the subject of how we deal with this problem.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I appreciate very much the gentleman's yielding time to me. Mr. Speaker, I am very pleased to be able to support this rule coming to the floor, and pleased that it is an open rule. We will have a chance to debate housing. I think it is a very important debate. We have had this debate going on now for several weeks in the Subcommittee on Housing and Community Opportunity. Unfortunately, as far as I am concerned, the debate has not keyed in on the real important issue of whether or not public housing is a good idea. This particular piece of legislation does very little more than juggle the bureaucrats in hopes that it will do some good. Public housing started in 1937 with the U.S. Housing Act, and we have been living with public housing ever since. In 1965 HUD was created, and since that time, we have spent literally hundreds of billions of dollars. We have no evidence of any sort to show that public housing is a good idea. It causes a great deal of problems and actually takes housing away from many, many poor people. But it costs a lot of money and costs a lot of hardship to a lot of people. The principle of public housing is what needs to be debated. Hopefully, in the general debate and in the debate over the amendments, we will be able to direct a debate in that area. One thing that I think our side, the side that I represent, that is the free market and the constitutional approach to housing, we have, I would grant you, done a very poor job in presenting the views on how poor people get houses in a free society. Since we have had 30 years of experience and there is proof now that it leads to corruption and drug- ridden public housing projects that do not last very long and it costs too much money, we ourselves who present the market view have not done a good job, emphasizing lower tax, less regulation and growth economy, sound monetary policy, low interest rates; this is what will eventually give housing to the poor people. But I think it is very important that we not construe anybody who opposes this bill as being one that has endorsed the notion or rejects the idea. Mr. Speaker, the one other point that I would like to make is one of the arguments in favor of this bill is that it is going to be saving some money in the bureaucratic process. But if this is the case, one must look very closely at the CBO figures, because last year the HUD budget took $25-plus billion. This year, with this wonderful new program, we will be asking, according to CBO, $30.4 billion, an increase of about $5 billion. And this is not the end, it is just the beginning. So this is an expansion of the spending on public housing. By the year 2002, it goes up to $36 billion. So the best I can tell is we were working on the fringes, we are not dealing with the real issues, we are not dealing with the principle of whether or not public housing is a good program. I, for one, think we can do a lot more for the poor people. There are more homeless now, after spending nearly $600 billion over these last 20 years, than we had before. So I am on record for saying we must do more but we can do more by looking more carefully at the market.

Mr. PAUL

Mr. PAUL. Mr. Speaker, today I would like to talk about the subject of monopolies. The American people historically have been very much opposed to all monopolies. The one thing that generally is not known is that monopolies only occur with government support. There is no such thing as a free market monopoly. As long as there is free entry into the market, a true monopoly cannot exist. The particular monopoly I am interested in talking about today is the monopoly over money and credit, and that is our Federal Reserve System. The Federal Reserve System did not evolve out of the market, it evolved out of many, many pieces of legislation that were passed over the many years by this Congress. Our Founders debated the issue of a central bank and they were opposed to a central bank, but immediately after the Constitutional Convention there was an attempt to have a central bank, and the First Bank of the United States was established. This was repealed as soon as Jefferson was able to do it. Not too long thereafter the Second National Bank of the United States was established, another attempt at centralized banking, and it was Jackson, who abhorred the powers given to a single bank, that abolished the Second National Bank. Throughout the 19th century there were attempts made to reestablish the principle of central banking, but it was not until 1913 that our current Federal Reserve System was established. Since that time it has evolved tremendously, to the point now where it is literally a dictatorship over money and credit. It works in collaboration with the banking system, where not only can the Federal Reserve create money and credit out of thin air and manipulate interest rates, it also works closely with the banks through the fractional reserve banking system that allows the money supply to expand. This is the source of a lot of mischief and a lot of problems, and if we in the Congress could ever get around to understanding this issue, we might be able to do something about the lowering standard of living which many Americans are now suffering from. If we are concerned about repealing the business cycle, we would have to finally understand the Federal Reserve and how they contribute to the business cycle. Recently it has been in the news that Alan Greenspan had raised interest rates, and he has received a lot of criticism. There were some recent letters written to Greenspan saying that he should not be raising interest rates. That may well be true, but I think the more important thing is, why does he have the power? Why does he have the authority to even be able to manipulate interest rates? That is something that should be left to the market. Not only is this a monopoly control over money and credit, unfortunately it is a very secret monopoly. Mr. Speaker, I serve on the Committee on Banking and Financial Services and I am on the Subcommittee on Domestic and International Monetary Policy, and I myself cannot attend the open market committee meetings. I have no access to what really goes on. I have no authority to do any oversight. There is no appropriation made for the Federal Reserve. The recent news revealed that the chief of the janitorial services over at the Federal Reserve makes $163,000 a year, and yet we have no authority over the Federal Reserve because it is a quasi-private organization that is not responding to anything the Congress says. Yes, they come and give us some reports about what they are doing, but because Congress has reneged, they no longer have much to say about what the Federal Reserve does. This, to me, is pretty important when we think how important money is. If they have the authority to manipulate interest rates, which is the cost of borrowing, which is the price as well as the supply of money, this is an ominous power because we use the money in every single transaction. It is 50 percent of every transaction. Whether it is the purchase of a good or whether it is the selling of our labor, it is denominated in terms of what we call the dollar, which does not have much of a definition anymore, and yet we have reneged on our responsibility to monitor the Fed to determine whether or not this dollar will maintain value. Things have not always been this bad, and it did not happen automatically in 1913 when the Federal Reserve was established. It took a while. But it is worse now than it has ever been. Matter of fact, a well-known former Chairman of the Federal Reserve, William McChesney Martin, had interesting comments to make about this very issue in 1953. Mr. Martin said this: ``Dictated money rates breeds dictated prices all across the board.'' Well, it is abhorrent to those who believe in free enterprise and the marketplace. He goes on to say, ``This is characteristic of dictatorship. It is regimentation. It is not compatible with our institutions.'' So here we have a former Chairman of the Federal Reserve System coming down very hard on the concept of control of money and credit, and yet today it is assumed that the Federal Reserve has this authority. And so often it gravitates into the hands of one individual. So those who are levying criticism toward the Federal Reserve today are justified, but if it is only to modify policy and not go to the source of the problem, which means why do they have the power in the first place, it is not going to do much good. So we will have to someday restore the integrity of the monetary system, and we have to have more respect for the free market if we ever expect to undertake a reform of a monetary system which has given us a great deal of trouble, and it is bound to give us a lot more trouble as time goes on. How will this be done? Some argue that the Federal Reserve is private and out of our control. That is not exactly true. It is secret, but it is a creature of Congress. Congress created the Federal Reserve System and Congress has the authority to do oversight, but it refuses and has ignored the responsibility of really monitoring the value of our currency and monitoring this very, very powerful central bank. There is no doubt in my mind and in the minds of many others that this has to be done. To say that we must just badger a little bit to the Fed and to Mr. Greenspan, and say that interest rates should be lowered or raised or whatever, and tinker with policy, I think that would fall quite short of what needs to be done. What is the motivation behind a Federal Reserve System and a central bank? Indeed, there is some very interesting motivation because it does not happen accidentally. There is a good reason to have a central bank that has this power to just with a computer create billions of dollars. It is not an accident that Congress more or less closes their eyes to it. Between 1913 and 1971 there were a lot more restrictions on the Federal Reserve to do what they are doing today, because at that time we were still making a feeble attempt to follow the Constitution. The dollar was defined as the weight of gold. There were restrictions in the amount of new money and credit one could create because of the gold backing of the currency. Although Americans were not allowed to own gold from the 1930's to 1971, foreigners could. Foreigners could come in and deliver their dollars back onto the United States and say, ``Give us $35 an ounce.'' But that was a fiction, too, because by that time we had created so many new dollars that the market knew that it took more dollars to get one ounce of gold. In the process, we gave up a large portion of our gold that was present in our Treasury. Why would the Congress allow this and why would they permit it? I think the reason is Congress likes to spend money, and many here like to tax, and they have been taxing. But currently, today, the average American works more than half the time for the Government. If we add up the cost of all the taxes and the cost of regulations, we all work into July just to support our Government, and most Americans are not that satisfied with what they are getting from the Government. The taxes cannot be raised much more, so they can go out and borrow money. The Congress will spend too much because there is tremendous pressure to spend on all these good things we do; all the welfare programs, and all the military expenditures to police the world and build bases around the world. It takes a lot of money and there is a lot of interest behind that to spend this money. So, then, they go and spend the money and, lo and behold, there is not enough money to borrow and not enough tax money to go around, so they have to have one more vehicle, and that is the creation of money out of thin air, and this is what they do. They send the Treasury bills or the bonds to the Federal Reserve, and with a computer they can turn a switch and create a billion or $10 billion in a single day and that debases the currency. It diminishes the value of the money and alters interest rates and causes so much mischief that, if people are concerned about the economy or their standard of living or rising costs of living, this is the source of the problem. So it is not only with the Federal Reserve manipulating the money and the interest rates, but the responsibility falls on the Congress as well because the Federal Reserve serves the interests of the Congress in accommodating the Congress as we here in the Congress spend more than we should. Before 1971, when there were still restraints on the Federal Reserve, there was not as much deficit spending. Since that time, since the breakdown of the final vestiges of the gold standard in 1971, we have not balanced the budget one single time. So there is definitely a relationship. Now we have a national debt built up to $5.3 trillion, and we keep borrowing more and more. We have a future obligation to future generations of $17 trillion, and this obligation is developed in conjunction with this idea that money is something we can create out of thin air. Now, if it were only the accommodation for the excess spending that was the problem, and we just had to pay interest to the Federal Reserve, that would be a problem in itself but it would not be the entire problem that we face today and that we face in the future. As the Federal Reserve manipulates the economy by first lowering interest rates below what they should be and then raising interest rates above what they think they should be, this causes the business cycle. This is the source of the business cycle. So anybody who is concerned about unemployment and downturns in the economy and rising costs of living must eventually address the subject of monetary policy. As a member of the Committee on Banking and Financial Services, I am determined that we will once again have a serious discussion about what money is all about and why it is so important and why we in the Congress here cannot continue to ignore it and believe that we can endlessly accommodate deficits with the creation of new money. There is no doubt that it hurts the working man more so than the wealthy man. The working man who has a more difficult time adjusting to the rising cost of living is now suffering from a diminished standard of living because real wages are going down. There are many, many statistics now available to show that the real wage is down. Between 1973 and 1997, the wages of the working man has gone down approximately 20 percent. This has to do with the changes in the economy, but it also has to do with changes in the value of the currency and the wages do not keep up with the cost of living. The increase in the supply of money is called inflation, even though there are not very many people in the news world or here in the Congress would accept that as a definition, because everybody wants to say that inflation is that which we measure by the Consumer Price Index. The Consumer Price Index is merely a technique or a vehicle in a feeble attempt to measure the depreciation of our money. It is impossible to measure the money's value by some index like the Consumer Price Index. There are way too many variables because the individual who is in a $20,000 tax bracket buys different things than the individual who is in a $200,000 tax bracket. Wages are variable and the amount of money we borrow, the amount of money we spend on education as well as medicine varies from one individual to another. So this Consumer Price Index which we hang so much on is nothing more than a fiction about what we are trying to do in evaluating and accommodating and adjusting to the depreciating value of the dollar. The critics of the Fed are numerous, as I said. The recent criticism has erupted because a few weeks ago, after warning of about 3 or 4 months by the Chairman of the Federal Reserve that interest rates were going to go up and, lo and behold, he did. The overnight interest rates that banks pay to borrow money just to adjust their books went up one- fourth of 1 percent. This is very disturbing to the markets. But Alan Greenspan mentioned this for 3 or 4 months. He started talking about the threat to the marketplace and the threat to the stock market back in December. But instead of him being entirely in control as he would pretend to be, actually market interest rates were already rising. Because if we look carefully at the monetary statistics from December up until the time he raised interest rates, he actually was doubling the growth of the money supply. What does this mean? This means that there were pressures already on rising interest rates, and the way to keep interest rates down is to create more and more money. It is the supply-and-demand effect. So if you have more money, make it more available, interest rates come down. So this was his attempt to keep interest rates down rather than him saying, today we have to have higher interest rates. But the real problem is why does the Federal Reserve have this much power over interest rates? In a free market, interest rates would be determined by savings. People would be encouraged to work, spend what they want, save the rest. If savings are high, interest rates go down, people then are encouraged to borrow and invest and build businesses. But today we have created an environment that there is no encouragement for savings, for tax reasons and for psychological reasons, very, very little savings in this country. Our country saves less money than probably any country in the world. But that does not eliminate the access to credit. Because if the banks and the businesses need money, the Federal Reserve comes along and they crank out the credit and they lower the interest rates artificially, which then encourages businesspeople and consumers to do things that they would not otherwise do. This is the expansion or the bubble part of the business cycle, which then sets the stage for the next recession. So people can talk about how to get out of the next recession when the next recession hits and they can talk about what caused it, but the next recession has already been scheduled. It has been scheduled by the expansion of the money supply and the spending and the borrowing and the deficits that we have accumulated here over the last 6 to 8 years. And so, therefore, we can anticipate, and we in the Congress will have to deal with it, we anticipate for the next recession. But unfortunately, because we do not look at the fundamentals of what we have done and the spending and the deficits, the next stage will be what we have done before. That is, if unemployment is going up, the government has to spend more money, there has to be more unemployment insurance. We cannot let people suffer. So the deficits will go up, revenues will go down and as we spend more money to try to bail ourselves out of the next recession, we will obviously just compound the problems because that is what we have been doing for the past 50 years. We have not solved these problems. As a matter of fact, what has happened, because we eventually get the economy going again, what we do is we continue to build this huge financial bubble which exists today. It is a much bigger bubble than ever existed in the 1920's, it is international in scope and it is something never experienced in the history of mankind. Yet we have to face up to this, because when that time comes, we have to do the right things. The 64 Members of Congress recently that signed the letter to Alan Greenspan said, Mr. Greenspan, you should not raise interest rates. Of course I just mentioned that maybe interest rates were rising, anyway, maybe he was accommodating the market pressures. But when 64 Members of Congress write to Greenspan and say do not let interest rates rise, or lower interest rates, what they are really saying is crank out more money, because if there is a greater supply of money, then interest rates will be lower and everybody is going to be happy. That is true, for the short run. On the long run, it causes very serious problems. Stiglitz, who used to be the chairman of the council of economic advisers, is a very strong critic of Alan Greenspan right now. He said that there are no problems, there is no cliff we are about to go over, do not worry about the future. I do not fault Mr. Greenspan's concern, believe me. I think he knows what is coming and why adjustments have to be made. But his critics are saying, when they talk about do not raise interest rates, what we have to remember is what they are saying to him is make sure there is more inflation, more money, lower interest rates and, of course, that will add to our problems in the future. Not only do we have Members of Congress telling the Fed what to do, and the former Chairman of the Council of Economic Advisers telling them, many others all have an opinion on what to do, but nobody really asks the question, why are they doing all this in secret and where did they get all this power and why do we tolerate this system of money? Even the IMF, something I am very much concerned about is the internationalization of our credit system, the IMF now has issued a recent report, but they do not agree with the 64 Members of Congress and they do not agree with the critics who say lower interest rates, create more money. They are saying to our Federal Reserve, you are creating too much money and you are having too much growth. Who ever heard of anything like too much growth? What is wrong with too much growth? Some people think that too much growth causes inflation, which is an absolute fallacy. If there is a lot of growth and a lot of production, prices would come down. Prices go up when the value of the money goes down. But the IMF is saying that should not even be involved in our domestic policy, and they are more involved than ever before, they are telling our Fed, this is good, what you are doing is good, keep raising your interest rates, turn off the economy, have a little slump here. We do not need that kind of advice from somebody. We have enough problems taking advice from our own people and our own Congress about what has to happen, but we certainly do not need the advice from the IMF telling us that we ought to have more inflation, that we should involve overheating and that for some reason growth is bad. In a free market, sound monetary system, growth is good. If you have sound money and you have economic growth of 6 or 7 or 8 percent a year, you do not have inflation. That does not cause the inflation. It is only the debasement of the money that causes prices to rise. Why do we hear so much concern about interest rates and price? Well, there is a specific reason for this according to some very sound economic thinkers, and, that is they would like for us here in the Congress to think only about prices, either the price of money, which is the interest rate, or other prices, because so often it leads to the conclusion that, well, maybe what we ought to do is have price controls, which they tried in the early 1970's and it was a total disaster, but this is essentially what we have in medicine today. We create new credit, the money goes in certain areas, the Government takes this money and channels it into education in medicine, so you have more price inflation. So what do you do? You have price controls. That is what is going on. That is what we are having today in medicine, rationing of health care. That is what managed care is all about. Patients suffer from this because they have less choices, and they do not have as much decisionmaking on what care they are going to get. This is a consequence of Government manipulation of money and credit. Those who want to perpetuate this system do not want us to think of the real cause, and that is, the real cause is the monetary system. They would like us to think about the symptoms and not the cause, because it is not in the interest of a lot of people, not only not in the interest of the big spenders here in the Congress who love the idea that the Federal Reserve is able to accommodate them on deficits, but there are business and banking interests and international interests and even some military production interests who like the idea that the credit is readily available and that they will be accommodated. The little guy never benefits. The little guy pays the taxes, he suffers from the inflation, he suffers from the unemployment, but there is a special group of people in an inflationary environment that benefits. Today of course there are a lot of people on Wall Street benefiting from this environment. If this type of system were real good, we would all be very, very prosperous, and if we listened to the Government statistics, we would say there are no problems in this country. But I know differently. A lot of people I talk to, they tell me they are having a lot of problems making ends meet. Sometimes they work two and three jobs to get their bills paid. It is not all feminism that makes women go to work. A lot of women go to work because they have to do it to make ends meet and take care of their families. So there are a lot of problems. But one key point that I think is important and, that is economic growth. If we have no economic growth and there is no productivity growth, we cannot maintain the standard of living, we cannot have increasing wages. If you do not produce more, you cannot have wages going up. Unfortunately, that is where we are really hurting in this country. We are living prosperously because we borrow a lot of money, by individuals, by corporations, and our Government borrows a lot from overseas. But we are not producing. Productivity growth in the last 5 years has averaged 0.3 percent. This is very, very low. It is equivalent to what happened before the Industrial Revolution, and it is going to lead to major problems in this country unless we understand why we are not producing as we had in the past. We need to address this if we have any concern about the people who suffer from these consequences. The economic growth is slow. Predictions are that they, according to the Government statistics, are going to slow even more in time, whether it is the end of this year or next. We will have a recession. Even by some Government statistics now, we are seeing signs that there is a rising price level in some of our commodities. There is belief that these prices will go up and we will be suffering more so, even measured by the Consumer Price Index. This story that is being passed out here in the Halls of Congress and in other places in Washington that we do not have to worry about the Consumer Price Index, it overstates inflation, therefore we can make the adjustment, I do not think that is correct at all. I think the Consumer Price Index probably way underestimates inflation. If you have private sources, there are many people who suffer the cost of living much higher than the 3 or 4 percent that the Government reports. But there are some commodity indices that in the past 2 years have gone up over 50 percent. This is a sign of the consequence of the inflating of the money supply and it is starting to hit, or will hit some of our consumer products, because it is already hitting our commodities. This idea that if there is a sign that prices are increasing, what we have to do is take it under control and we have to suppress economic growth and raise interest rates, this says something about our policy that shows the lack of understanding. Because if we look at all the recessions that we have had since World War II, in spite of the seriousness of many of these recessions, prices still go up. The one that we remember most clearly is in the 1970's, where they even coined the word ``stagflation.'' This is not an unheard of economic phenomenon. It is very frequent in many other nations, where you have a lot of inflation and poor economic growth. We have not had a serious problem with that, but it is very likely that that is eventually what we will get, because we have absolutely no backing and no restraint on our monetary system. When we have an economic and monetary system as we have today, I mention how it encourages Congress to spend beyond its means. It spends too much, it borrows too much, it inflates too much, and it leads to serious long-term problems, that as long as you can borrow again and borrow again, you sort of hide the problems, delay the consequences of the problem and prevent the major correction that eventually comes. But what have the American people been doing? Well, they have been encouraged by this. They see the credit is available out there. They keep borrowing, living beyond their means. Government lives beyond their means, and individuals live way beyond their means. But some of the statistics are not very good about what is happening with our consumers, the American citizens. In 1996 personal bankruptcies were up 27 percent. It is at record high; well over a million bankruptcies were filed in 1996. This is a reflection of loose credit policies, but it also is a reflection of a moral attitude. There was a time in our history where bankruptcy was looked down upon, that we had a moral obligation to do our very best. If we have a bad turn in our businesses, what we did was we notified everybody, we went back to work, and we systematically did our very best to pay off all our debts. There is no incentive for that today. So it is very easy today to see the bankruptcies filed, and they are increasing rapidly. I suspect that they are going to continue to increase even more dramatically. Credit card delinquencies are at an all time high. They were at 3.72 percent in 1996, and those who are late payments, they are also a historic high, well over 5 percent. So the credit conditions of this country are not very good. Now what do we see as the signs of things changing to sort of take care of this problem? So far, not too many good things happening. In 1995, the latest year we have measurements for, we find out that credit card issuers, credit card companies, issued 2.7 billion credit cards, preapproved. Preapproved credit cards, 2.7 billion, and it was equivalent to sending every single American between the ages of 18 and 64, 17 preapproved credit cards. Nothing like throwing out the temptation there, and many Americans fall into the temptations. Congress does it. They keep borrowing, and they exist. So the individual keeps borrowing, takes another credit card, rolls them over. Eventually, though, the banker will call. The banker will call the individual. Who calls the Congress? Who calls a country when it spends beyond its means and it is way past the time when they should be cutting back? The problem that develops then is not so much that the Government, our Government, quits taxing and quits paying the bills. We will always do that. We have control over that because we now have this authority by Federal Reserve to create the money. The checks will always come. The one thing that we do not have in the Congress and we do not have in the Federal Reserve, and the President does not have, is to guarantee the value of the money, and that is the problem. Today all we hear about is the strength of the dollar, but if you look at the dollar from 1945 on, the dollar is on a downward spiral, and we are on a slight upward blip right now. Ultimately the dollar will be attacked by the marketplace, and it will be more powerful than any of the policy changes that our Federal Reserve might institute. There is a couple other things that have happened in our financial system that is different than in the other ones. Some would argue with me and say you are concerned about the supply of money and credit. Well, I can show you a statistic measured by M-1, M-2 and M-3, and the money supply is not going up all that rapidly. And this is the case compared to other times, that money supply as measured by the more conventional methods are not--those measurements are not going up as rapidly as they have in the past. But there are other things that can accommodate the lack of expansion of money as measured by, say, M-2 and M-3. First, if an individual has an incentive not to hold the money and save the money, but spend their money the day they get it, that is called the velocity or the propensity to spend the money, and if you use it more often, it is like having more dollars, and that is one statistic that has gone up dramatically. Between 1993 and 1996 it has gone up 45 percent, so there is more desire to take the money and spend it, and it acts as if there is a lot more money, and we will also put pressure on the marketplace and cause the distortions that can be harmful. The other thing that we have going that is different than ever before is that because there is no definition of the money, the dollars, no definition of the dollar, we have introduced the notion of all kinds of hedges and all kinds of speculation, and some serve financial and economic interests to do hedging, but because there is no soundness to the currency there is a greater need all the time to hedge and to try to protect against sudden changes. Some of that would be economically driven, but other activity of that sort is driven by speculation. So in an age when you have tremendous excessive credit, money and credit, you have more speculation. Consumers speculate they spend too much money, a businessman speculates, invests in things he probably should not, but also governments do the same thing. They spend money that they should not have. But in this area of derivatives, we have things like swaps and futures and options, repos, and the foreign currency market. Right now there is $20, $21 trillion worth of these derivatives floating around out there outside of the measurement by our conventional money supply, which means that this participates in this huge financial bubble that exists around the world. There is also a measurement that we make on a daily basis which is called through the clearinghouse interbank payment system, and this is all the electronic money that is traded throughout the world every single day, and this again reflects how quickly we are spending our money and how fast we are circulating and how quickly it moves among and through our computers. Today it is estimated that $1.4 trillion is transferred over the wire service. Now, if there were a sound dollar and it was created only with a proper procedure rather than out of thin air, this would not be as bad, but the fact that this is contributing toward a financial bubble I think is a very, very dangerous condition. We live in an age called the Information Age; we live in a computer age, and this technology is all very, very helpful to us. As a matter of fact, it has served us in many ways to accommodate this age of the paper money systems of the world. No money is sound today in history in the entire world. So there is what we call the fluctuating currency rates. Every single day, every single minute, the value of the dollar versus the yen, versus the mark, versus the pound is changing instantly. Now in the old days each currency was defined by a weight of gold. There was less speculation even though under those conditions governments manipulating, and there were periodic times when certain countries would have to devalue. But now the computer system has really been a free market answer to those individuals who like the system, and it does work, it does work to a large degree for a time. But it also allows the system to last longer, and it allows us to create more of this financial bubble. This is why we have been able to go along with the system of government where we have made commitments to our future generations of $17 trillion; otherwise we could not have made these commitments that would have had to be a correction. We would have had to cut back and live within our means, just as individuals do; they have to live within their means, and they have to live probably less high than they were when they were borrowing all the money. A country will have to do that, too, that has lived way beyond its means, and this is why what we are doing is so dangerous. The fact that we had these floating exchange rates for years has permitted many of our paper currencies to last a lot longer than they otherwise would have. We in the United States have a dollar which is considered the reserve currency in the world which lends itself to even more problems because the dollar is held in higher esteem and it is considered the reserve that other countries are more willing to hold, and this came out of the World War II because we had essentially all the gold, the dollar was strong, our economy was strong, so the dollar was good as gold. So people took dollars and they would hold them, and they still do that to a large degree today. So what does that encourage us to do? It encourages here in the Congress and elsewhere to create this debt, and then as the money circulates, we go and we say, oh, we have a lot of credit, we can borrow this money, we will buy foreign products, and that is what we do. We buy a lot of foreign products, and everybody is decrying, you know, this foreign deficit. We owe more money to foreigners and we have a greater foreign deficit than any other country in the world, and it is encouraged because they are willing to take our dollars, and we are willing to spend the money and we are willing to run up these deficits and not worry about the future. But where do these dollars go? They go into the central banks, they buy our Treasury bills, and they are quite satisfied at the moment. But when they get unsatisfied and dissatisfied with it, they are going to dump these dollars, and they will come back. But the trade deficit is running more than a hundred billion dollars a year, which means we buy more products from overseas than we sell to the tune of a hundred billion dollars. This in many ways has allowed our Federal Reserve to get off the hook a bit because if we had a $100 billion that nobody wants to loan us and they had to create that new money, that would be very, very damaging to the psychology of our market, and it would be very, very inflationary. So it is still inflationary, but it is delayed. So as long as foreigners will take our dollars and let us buy their goods and we live beyond our means and hold our dollars and we keep creating new money and paying the interest, this thing could go on for a while. But eventually though in all monetary systems which are based on fiat, the creation of money out of thin air, eventually comes to an end, and when it comes to an end, there is the rejection of the dollar, and then the dollars come home, interest rates will go up, inflation will be back with a vengeance, and there will come a time, and nobody knows when that time will come, it will not be because of us in the Congress being very deliberate and very wise to all of a sudden live within our means, but we will be forced to live within our means because those who want to loan the money to us and the value of the money will change, that there will just not be enough wealth. What promotes all this? Well, what is the grand illusion that allows us to get ourselves into such a situation? Well, the grand illusion of the 20th century, especially in the latter half of the 20th century, has been that prosperity can come from the creation of credit. Now if you think about it, it does not make any sense if you take a Monopoly game and you create more Monopoly money and pass it out, everybody knows it has no value. But we have literally endorsed the concept that if we just print money and pass it out, everybody is going to be wealthy, and because it is government and because it was related to a gold standard and because foreigners will take money, this system continues to work because there is still trust in the money. But eventually this trust will be lost. The wealth cannot be created by creating new money. Yes, if the Federal Reserve prints more money today and hands it to me, I can go spend it and I can feel wealthier. But in the grand scheme of things, you do not create wealth that way, and that is also the reason why productivity growth is down. We do not create it. We have to have incentives, we have to encourage work and effort. That is the only place you can get wealth. So our taxes are too high, the regulations are too high, we borrow too much money, interest rates are too high, and we discourage savings all because of this monetary system. So eventually we are going to be required to do something about that to restore trust in the money so we do save money so we work harder. But we have to lower taxes, we have to get rid of regulations, we have to get rid of taxes on capital gains and get rid of taxes on savings and interest and get rid of taxes on inheritance. Then people will have more of an incentive to work rather than just to borrow. So the illusion of wealth today is that which comes from a fiat or paper monetary system. We need today a very serious debate on what the monetary system ought to be all about. It cannot be a debate which is isolated from the role of government. If we have a role of government which is to run the welfare state, to give anything to anybody who needs something or wants something or claims it is an entitlement or claims it is a right, if that is a system of government that we want to perpetuate, it is going to be very difficult to have any reform. If we continue to believe that this country is the policeman of the world, that we must police the world and build bases overseas at the same time we neglect our own national defense, our own borders, our own bases here at home, but we continue to spend money on places, on Bosnia and Africa, and pay for the defense of Japan and Europe; as long as we accept those ideas, there is no way we can restore any sanity to our budget. So I am suggesting to my colleagues here in the Congress that what we must do is address the subject of what the role of government ought to be. There should be a precise role for government. That is what the whole idea and issue was of the Constitutional Convention as well as our Revolution. We did not like the role of government that the English and the British had given us, and we here in the United States decided that the role of government ought to be there for the preservation of liberty. The role of government ought not to be to redistribute wealth, it ought not to be the counterfeiter of the world, to create money out of thin air. It is illegal for you or I to counterfeit money. Why do we allow the Government to counterfeit the money and make it worthless all the time? As long as we accept that, we are going to have big problems. But there will be a time coming, and I suggest to all of my colleagues that we be ready for it, because it is so serious. Not only is it a serious threat to our physical and economic well-being, the greater threat is the threat to our individual liberty. As conditions worsen, and when we have to face up to our problems, so often the response is, all we need is another government program. And that is still an attitude that I see all the time around here: if we just have a little more tax money. Already in this very early Congress, we have had tax increases in spite of the rhetoric against taxes. We have been raising taxes. We have increased the amount of regulations. We have done nothing to really address the subject. That comes from the fact that we never really ask the right questions. What should the role of government be? The Founders, as they concluded after the Revolution, as they wrote the Constitution, it very clearly was stated that the role of government, especially at the Federal level, ought to be there to protect the individual liberties of all individuals, no matter what. But today, we have lost that as a goal and as a target. We concentrate, whether it is a businessman or the person that is receiving welfare benefits, the concentration is on the material benefits that usually come from a free society in a voluntary way. But today, if anybody wants something or they need something or they think they have a right to it, what do they do; they order a political action committee and come to Washington. I was gone for a few years. I was here in the Congress in 1976, and, after returning, there is one dramatic difference. There are more lobbyists than ever, more commands, more people coming and more people wanting things. I have more demand from the business community than I do from those who are from the poor end of the spectrum. There is a vicious maldistribution of wealth in a society that destroys its money. Inevitably, if a country destroys its money, it destroys its middle class. This is what is happening in this country already. The poor, middle class individual who is still proud enough not to go on the dole and not to take welfare, that is the individual who suffers the very most; and he is the one that is most threatened by the loss of a job in the next downturn. Currently right now, Wall Street, are they suffering from this financial bubble that I see? No. If you are in the stock market or the bond market or borrowing overseas, they are doing quite well. People say: You worry too much. There is no inflation. No matter what you say about the money supply and all of these things you talk about, there is no inflation, do not worry about it. Inflation deals with money, not prices. So as I said earlier, I believe prices are going up much faster than people will admit; but at the same time, the supply of money and credit continues to expand. So we will have to eventually address these problems. I think it will be up to us as Members of Congress to at least make some plans. Because if we do not, if we do not make the plans, I see this as a serious, serious threat to our personal liberties. Mr. Speaker, it will not be a simple reform that we need. We have to do something more than that. We have to start thinking about what do we need to do to really change the course. Is there anything wrong with addressing the subject of individual liberty? Is there anything wrong with talking about the value and the importance of sound money? I claim there is nothing wrong with that, but there is very little debate. There is very little debate among our committee members and in our committees to address this. It is usually, how do we tide ourselves over? How do we modify this so slight a degree? But the time will come, the time will come, because we will go bankrupt, because no country has ever done this before. No country can live beyond its means endlessly. No country can spend and inflate and destroy its money. There will be this transfer of wealth. It happened in many, many countries in this century. Of course, one example of the 20th century was the German inflation, and then there has to always be a scapegoat. The middle class suffers the most. Somebody has to be blamed. Currently today, I see a trend toward those of us who advocate limited government, those who detest big government as becoming the scapegoat saying, oh, you individuals who are against big government, you are the people who cause trouble, you cause unhappiness. That is not the case. People are unhappy. I meet them all the time because they are having a difficult time making it in this day and age. Who knows who the next scapegoat will be, but there will be one. Mr. Speaker, the middle class in America will have to eventually join in the reforms that we need. The reforms can be all positive. There is nothing wrong with advocating limited government. There is nothing wrong in the American spirit to advocate the Constitution. There is nothing wrong with the American tradition that says work is good. And there is something wrong with a system that endorses and encourages and pushes the idea that we have the right to somebody else's life and somebody else's earnings. I do not believe that is the case. I think that is morally wrong. I do not believe it has been permitted under the Constitution, and it also leads to trouble. If it led to prosperity, it would be a harder argument for me. But if it leads to trouble and it leads to people being undermined in their financial security and in their economic security, then we have to do something else. I would like to invite those who expressed deep concern about the poor and those who advocate more programs, more welfare programs, I would like to suggest they need to look at monetary policy. They need to look at deficits, and they need to realize that wealth has to be created. And if we truly do care about the poor people in this country, and if we do care about the people trying to build homes, public housing obviously has not worked. We have been doing public houses now and spent nearly $600 billion, and there is no sign that we have done much for the people that we have given public housing to. We have spent $5 trillion on welfare. There are more homeless than ever. The educational system is worse than ever. Yet we do not really say, well, what should we do differently? Sometimes we will say, well, let us take the management and change the management. Let us take the bureaucrats from Washington and put them in the States. Let us do block grants. Let us make a few minor adjustments and everything is going to be OK, and it will not be. We will not make it OK until we address the subject of what kind of a society we want to live in. I want to live in a free society. Fortunately for me, as a Member of Congress, and as one who has sworn to uphold the Constitution, this is an easy argument. It should be an easy argument for all of my colleagues who would say, yes, I have sworn to uphold the Constitution, I believe in America, I believe in hard work. But why do you vote for all of these other programs? Why do you vote for all of the deficits? Why are we getting ready to vote for more taxes soon? Why are we voting a supplemental appropriation? Why are we doing these things if we really are serious? I have not yet seen any serious attempt to cut back on spending and cut back on taxes. Mr. Speaker, someday we will have to do it. The sooner, the better. If we do it in a graceful manner, there is no pain and suffering. The American people will not suffer if we cut their taxes. The American people will not suffer if we lower the amount of regulations. The American people will not suffer if we get out of their lives and not give them 100,000 regulations to follow day in and day out. The American people will not suffer if the Federal Government gets out of the management of education and medicine. That is the day I am waiting for and the day I am working for. Hopefully, I will get other Members of Congress here to join me in this effort to support the concepts and the principles of individual freedom.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I move that the House do now adjourn.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I am very disappointed that so far in this Congress we have not yet seen any sincere effort to cut any spending. The latest ploy has been the Treasury report that claims the deficit is shrinking up to nothing. In the first 6 months of this year we are in deficit of $101 billion and this is claimed to be a victory, thus taking off the pressure to work harder to cut spending. How did they do this? The first thing we did was we sent the IRS agents out and hounded the American people and collected $28 billion more than they did in the first 6 months of the last fiscal year. But they did something else. They keep borrowing from the trust funds. They borrow from the Social Security fund, further jeopardizing that whole program. Looking at the statistics more carefully, they claim the deficit is $111, but during the past 12 months our national debt went up $241 billion. There is no way to predict what the next 6 months will bring. Interest rates may rise, revenues may dwindle if the markets and the economy slumps. I think that we ought to have some truth in lending and truth in legislating here by honestly telling the American people that there is something wrong here that could and should be adjusted with decreased spending, not raising taxes and not further robbing the Social Security trust fund.

Mr. PAUL

Mr. PAUL. Mr. Speaker, I hesitate to speak out on this legislation, but having been the only dissenter in the committee I feel compelled to explain my vote. I am confident this bill will neither destroy Western civilization nor save it. However, it does nothing to help it. What we have here is another problem, another law and another form to fill out, and all along I thought our new mandate was to reduce government rules and regulations. Every time Congress passes a new law to solve some problem, several new unsuspected consequences emerge, requiring even more problem solving regulations. This new piece of regulatory law, I am sure, will do the same. This bill will limit consumer choice, raise costs on consumers and limit availability of consumers to purchase a home. Just this past weekend, Alan Greenspan explained why consumers are often better served by private market regulations rather than government intervention. He said that, quote: Government regulation can undermine the effectiveness of private market regulation and can itself be ineffective in protecting the public interest. With this I concur. If Congress were really serious about making it easier for first-time home buyers and others to secure financing, it would do what it could do to lower the cost of capital. Interest rates are high because of the lack of sound monetary and fiscal policies pursued by our government. What should we do? We should cut taxes. We should cut spending. We should cut regulations, not add a new regulation. And follow sound monetary policy. This approach would lower the interest rates on mortgages for all homeowners and potential homeowners. This lower interest rate climate could benefit home buyers in the way that greater reliance on the nanny state cannot. The Constitution limits the power of Congress and clearly states that powers not delegated to Congress are reserved to the States or to the people. We should not interfere in the private, voluntary, noncoercive contracts of individuals in a free society. This legislation tramples on States rights. Some States, notably California and New York, already have laws on the books dealing with this issue. Congress should not be involved in this issue. Perhaps this bill is just a veiled attempt to put all mortgages, public and private, under the control of HUD. Private mortgage insurance has benefited 20 million consumers over the past 40 years. Now Congress wants to do for them what they have done for our public housing tenants. Any new regulatory mandates by Congress would only add to the cost of private mortgage insurance and hurt the very people the proponents of the legislation are trying to help. I suggest that a no vote is the proper vote on this bill. H.R. 607 will limit consumer choice, it will raise the cost to the consumer, it will push home ownership further from the grasp of poor Americans. If my colleagues want to vote for the consumer and if they want to help all potential home buyers, vote no on H.R. 607. I hesitate to speak out for this legislation, but having been the lone dissenter in committee, I feel compelled to explain my vote. I'm confident this bill will neither destroy Western civilization nor save it. However, it does nothing to help it. What we have here is another problem, another law, and another form to fill out. And all along I thought our new mandate was to reduce government rules and regulations. Every time Congress passes a new law to solve some problem, several new unsuspected consequences emerge requiring even more problem-solving regulations. This new piece of regulatory law, I'm sure, will do the same. This bill will limit consumer choice, raise costs on consumers, and limit the ability of consumers to purchase a home. Just this past weekend, Alan Greenspan explained why consumers are often better served by private market regulation rather than government intervention. He said that ``government regulation can undermine the effectiveness of private market regulation and can itself be ineffective in protecting the public interest.'' With this I concur. He continued, The real question is not whether a market should be regulated. Rather, it is whether government intervention strengthens or weakens private regulation, and at what cost. At worst, the introduction of government rules may actually weaken the effectiveness of regulation if government regulation is itself ineffective or, more importantly, undermines incentives for private market regulation. Regulation by government unavoidably involves some element of perverse incentives. The perversity of this bill is its effect on consumers. It will increase premiums on consumers, limit choices, and make home ownership less affordable. If Congress were really serious about making it easier for first-time home buyers and others to secure financing, it would do what it could to lower the cost of capital. Interest rates are high because of the lack of sound monetary and fiscal policies pursued by our Government. What should we do? We should cut taxes, cut spending, cut regulations--not add a new one--and follow sound monetary policies. This approach would lower the interest rates on mortgages for all homeowners and potential homeowners. This lower interest rate climate would benefit the home buyer in a way that greater reliance on the nanny State cannot. The Constitution limits the power of Congress and clearly states that powers not delegated to Congress are reserved to the States or to the people. We should not interfere in the private, voluntary, noncoercive contracts of individuals in our society. This legislation tramples on States rights. Some States, notably California and New York, already have laws on the books dealing with this issue. Congress should not be involved in this issue. It was that wonderful competition of experiments at the State level that brought consumers such benefits as private mortgage insurance, adjustable rate mortgages, and automatic teller machines [ATM's]. Private markets make home ownership more affordable while Washington interference perversely hurts the consumer. H.R. 607 is harmful and unnecessary. The overwhelming majority of homeowners have no problem canceling their private mortgage insurance, if it is not canceled automatically. In fact, Fannie Mae has studied this concern and is currently setting clear guidelines regarding PMI. These guidelines would quickly become industry standard given the influence they have in the market. If Congress were so concerned about consumers' alleged overpayment regarding PMI, then we should do something about the mortgages in which we have a vested interest; namely, FHA loans. But this bill exempts FHA homeowners even though it is the FHA mortgages where the Government has some influence. Perhaps this bill is just a veiled attempt to put all mortgages, public and private, under the control of HUD. Private mortgage insurance has benefited 20 million consumers over the past 40 years. Now Congress wants to do for them what they have done to our public housing tenants. A dynamic, free market is the best vehicle for prosperity. By overregulating the marketplace, the flexibility to deal with the law of unforseen consequences is lost. Loan to current value is a better indication of the current situation than loan to original value. Forcing mortgage companies to only look at the loan to original value ignores potential changes in that value. In short, it ignores reality. We cannot ignore the realities of the marketplace. Real values of real estate declined as much as 50 to 60 percent over a 6-month period in the late 1980's. Mortgage decisions should include a combination of factors and individual choices. Any new regulatory mandates by Congress would only add to the cost of private mortgage insurance and hurt the very people the proponents of the legislation are trying to help. There is a cost to any regulatory burden imposed on the economy. This misguided legislation would increase the cost, and thus limit the availability, of mortgage insurance for everyone. Since very few people would gain from this legislation, it punishes the vast majority for the benefit of the few. We should reject this special interest favoritism and get our own fiscal house in order so all of us can benefit. We should not impose unfunded mandates on those that are helping consumers realize their goal of home ownership. H.R. 607 will limit consumer choice. H.R. 607 will raise costs to the consumer, and push home ownership further from the grasp of poor Americans. If you want to vote for the consumer and all potential home buyers, vote ``no'' on H.R. 607.