Paul Sarbanes

Mr. SARBANES

Mr. SARBANES. Mr. President, I very strongly believe that adding a balanced budget amendment to the Constitution of the United States would be both economically unwise and constitutionally irresponsible. The amendment would have the substantial risk of promoting instability, retarding economic growth, and shifting the basis of our democracy from majority to minority rule. The amendment raises very difficult and unanswerable questions concerning implementation, inviting fiscal paralysis or court intervention in the conduct of economic policy, or both. There is nothing in the Constitution today that prevents the President from submitting, or the Congress from passing, a balanced budget. Tampering with the Constitution is no way to restore a sense of fiscal responsibility to our system. Instead, it is yet another device to put off hard decisions until some unspecified point in the future. I note that in August of 1993, when we passed the major deficit reduction package, many of those who are now so strongly pushing the balanced budget amendment to the Constitution voted against a good, strong dose of deficit reduction. I want to address some of the analogies that are made with respect to this proposal. Support for the balanced budget amendment is often based on the claim that since State and local governments are required to run balanced budgets, the Federal Government ought to do the same. Not only is this argument wrong factually--most States and local governments run deficits under the accounting principles used to compute the Federal budget--it also fails to comprehend the different responsibilities of the Federal and State governments. The State analogy is superficially attractive. Most States have some form of balanced budget requirement, either statutory or constitutional. But most States maintain capital budgets, which are not subject to the balancing requirement. Others have developed off-budget funding mechanisms to circumvent the balancing requirement, and some use accounting rules which count some form of borrowing as ``revenue'' for purposes of the balanced budget requirement. The first point to make is that if the State and local governments kept their books the way the Federal Government keeps its books, they would not have balanced budgets, because they have capital budgets financed by borrowing. They specifically provide that capital projects are going to be paid for by borrowing money. The rationale for that, of course, is a good one. You are investing in a capital asset which you will use over a period of many years and, therefore, it makes sense to borrow in order to build it now, have its use over time, and pay it off over time. The official data on the debt incurred by State and local governments give a very different picture from the often-used assertion that State and local governments balance their budgets. In fact, the figures on this chart shows that the total debt of State and local governments has been growing. In 1972, State and local debt was a little under $100 million. Twenty years later this debt was almost $1 trillion. have to balance their budgets? How is it that their debt increased? Everyone says, ``You ought to balance your budget at the Federal level. The State and local governments balance their budgets.'' But, in fact, their debt load has been increasing. There was a hearing held only about 10 days ago before the Joint Economic Committee. Two Governors testified that having a balanced budget requirement at the State level assured them a good credit rating. Why do they need a good credit rating if they always balance their budget? They need a good credit rating because they are borrowing, and they plan more borrowing. Under questioning, the Governors also had to acknowledge they are only required to balance their operating budget, and that they make active use of a capital budget for which borrowing is permitted. We do not have a capital budget at the Federal level. Yet, the balanced budget amendment to the Constitution would require that we bring the entire budget--what others divide into operating budget and capital budget--into balance--something that State and local governments do not do. As a matter of fact, businesses and individuals--except for very wealthy individuals--do not do it. How many individuals do you know who can buy their house out of cash, or buy an automobile out of cash, or buy a heavy consumer appliance out of cash? Most people make such purchases by borrowing, and throw their budget out of balance. Second, we should not put the fiscal policy of the National Government into the same constraint as State governments. No national government in the industrialized world has a constitutional requirement to balance its budget. This is because national governments have responsibilities for the overall performance of the nation's economy, which requires them to use fiscal and monetary policy to encourage economic growth and to moderate the destructive effects of business cycle fluctuations. A constitutional amendment requiring a balanced budget each year would not allow for fiscal policy changes over the business cycle. It would eliminate half of the macroeconomic policy apparatus. It would force the Government to try to rely entirely on monetary policy, to promote the dual objective of adequate growth and price stability. A rigid balanced budget requirement would have its most perverse effect during recessions. It would require the deepest spending cuts or tax increases in recessions when revenues automatically fall far short of expenditures. We have learned over the last 50 years how to be more flexible with fiscal and monetary policy in responding to business cycle downturns. As a result, we have experienced significantly less violent downturns than before. This chart, which I consider very important, illustrates the moderation of downturns that have accompanied the more flexible fiscal policy of the last 50 years. This chart shows the movement in real gross national product since 1890 as a percentage of GNP. This chart shows that we used to have violent fluctuations in our gross national product prior to the creation of economic stabilizers. We had a boom-and-bust cycle. The economy would come down so far that we would have negative growth, down in the 10-percent range. The decrease here is the Great Depression. But look at these other large fluctuations from boom to bust--the so-called great panics. In the postwar period, because we have used fiscal policy as an automatic stabilizer in order to offset the downturns, we have managed to avoid these very deep declines in gross national product, and the very high unemployment rates that we experienced as a consequence of the boom-and-bust cycle and these great panics. Mr. President, the proposed amendment to the Constitution does not require a balanced budget over the business cycle--it requires it each and every year. I emphasize the point--this constitutional amendment requires a balanced budget in each fiscal year. The question then is, how do you deal with an economic downturn? Because I think it is clear that if you start into an economic downturn and you try to balance the budget, you only drive the economy further into a recession. That is what used to happen. As the chart demonstrates, we had these wild fluctuations, we had these huge drops in GNP, 10 percent negative drops in GNP through the first part of this century. We had a boom-and- bust cycle. You do not have to read much American history to have an appreciation for that. What did we do that improved the situation so we did not always incur this particular problem? In the post-World War II period, we were able to avoid the steep negative drops in GNP. We still get fluctuations in GNP, but GNP was almost always in the positive range and the boom-bust cycle was substantially diminished. This occurred because we put into place what are called fiscal stabilizers. When the economy would go into a downturn people's personal income would drop, we then had a loss in tax revenues and we started paying people unemployment insurance, nutrition and health supplemental programs, and so forth. So we stabilized their after-tax income while their gross income was dropping. We managed to hold up their after-tax income. This was an offset to the decline in the economy, and as a consequence, we experienced much less violent economic downturns. If we start into a downturn, people lose their jobs, and tax revenue declines. A larger number of people receive unemployment insurance and other income support programs because they are out of work. These programs help them sustain their families. As a consequence of the downturn in the business cycle, we start running a deficit in the budget. If at that moment, in order to comply with the balanced budget amendment, we have to take action to eliminate the deficit, namely, cut spending and raise taxes, we are only going to depress the economy even further. That would turn an economic downturn into a recession and a recession into a depression. The automatic stabilizers worked in order to offset this economic downturn for families so that their after-tax income was not as harshly hit as their gross income. Without those income stabilizers, any downturn, will be intensified and exaggerated, and we will have a far worse economic situation. Third, let me emphasize we are considering changing the Constitution, our fundamental doctrine. The Constitution has been amended only 27 times over the 206-year history of the Republic. Ten of the amendments came right in the beginning in the Bill of Rights. Effectively, it has been amended only 17 times in 206 years. Immediately after the Constitution was written, they adopted the first 10 amendments as the Bill of Rights. It was a condition of the ratification of the Constitution by certain of the States. In other words, they were not prepared to ratify it unless they were assured there was going to be a Bill of Rights. Over the next 205 years, we have amended the Constitution only 17 times. Obviously, that means it is not a matter to be taken lightly. It is not a matter to be done for political expediency. It is obviously a matter whose consequences and implications need to be very carefully thought through. I have tried to address the analogy that is made with respect to this balanced budget proposal with State and local governments, private individuals, and businesses. This argument, ``Well, everyone else balances their budget, why do we not balance ours?'' I pointed out that there is no capital budget at the Federal level, unlike State and local governments, unlike businesses, and unlike what is the practice of most individuals and families. After all, only the very, very wealthy can purchase all of their capital assets out of cash. The overwhelming percentage of Americans do not balance their budget every year. Millions of Americans are buying homes by running a huge unbalanced budget the year they make the purchase. They go out and borrow money in order to do it. No one claims that is not wise, assuming the amount of the mortgage bears a reasonable and proper relationship to the amount of their income. The reason it is prudent to borrow in this case is that they can sustain the payments over time and have the use of the capital asset now. Everyone says we want to encourage homeownership and try to make it easier for people to in the world. It has worked very well. Businesses do the same thing. Businesses make capital investments. They set up a part of their budget for capital investments, and then they borrow the money. They may have more debt now than they had 10 years ago, but as a consequence of those investments, they have expanded the company, they have increased their sales, they have increased their profits. They are in a stronger position today than they were. We have even reached the point where we regard it as wise on occasion for people to borrow in order to get an education, because it enhances their earning power and the enhancement of their earning power will more than cover this debt which they incur in order to obtain an education. I once said to someone, ``Would you rather be someone who had $50,000 in income and 2,000 dollars' worth of debt or $5,000 in income and 1,000 dollars' worth of debt?'' I have yet to find someone who would not rather be the person with $50,000 in income and $2,000 in debt. I say, ``How can that be? You have 2,000 dollars' worth of debt, the other person has 1,000 dollars' worth of debt. You have more debt.'' And they say, ``Yes, but I have much more income. I have 50,000 dollars' worth of income and the other person only has 5,000 dollars' worth of income. My ability to handle 2,000 dollars' worth of debt with $50,000 income is far better than their ability to handle 1,000 dollars' worth of debt with $5,000 income.'' So occasionally we can incur debt for worthwhile purposes. Debt incurred for productive investment that enhances your capabilities, enhances your economic output and your economic productivity can be wise. Second, I talked about fiscal stabilizers and how we have succeeded, to some degree, in offsetting the wild fluctuations in the business cycle so we no longer get these deep depressions with very large percentages of the population thrown out of work. Now, third, I want to talk about the lack of wise choice among spending categories that I believe would be prompted by a balanced budget amendment. I believe it would encourage irrational economic policy by not allowing important distinctions between different types of expenditures. In the version of the amendment that is before the Senate, all outlays are lumped into a single aggregate which cannot exceed the aggregate of total revenues. Economists recognize, however, that different types of spending have different effects on the economy and they ought to be treated differently in the conduct of fiscal policy. Let me give just a couple of examples. Take Social Security and unemployment compensation. Both of these programs are designed to build up surpluses in advance of anticipated needs for spending. In Social Security, we build up a surplus to provide for the retirement of the baby boom generation. So at the moment we are accumulating a surplus in the Social Security trust fund. The unemployment insurance trust fund builds up surpluses during good times to pay for benefits during recessions. Under the balanced budget amendment these programs could continue to build up surpluses in advance in anticipation of needs, but those surpluses could not be used as a balancing item against future expenditures. We have a conscious policy of building up the trust fund balances. The intention is to use them at a later point. That is a responsible budgeting policy. Yet, if you have an amendment that requires a balanced budget every year, you could not draw down those surpluses in later years because that would be an excess of outlays over revenues. So this requirement would fundamentally undermine the economic prudence which is associated with anticipatory budgeting. I am not sure people have really thought this through. You would have under the proposal a requirement each year that the budget has to be in balance. You have built up the trust funds with the intention of using the surpluses in the outyears. The outyear comes. You cannot draw the fund down because you would have an excess of outlays over revenues in that year, which is what the amendment prohibits. The amendment says, ``Total outlays for any fiscal year shall not exceed total receipts for that fiscal year.'' So you would be stymied from using this trust fund which had been built up for the very purpose of being used in the outyears as part of prudent anticipatory budgeting. Amending the Constitution would also encourage irrational economic policy by failing to allow for important distinctions between types of spending. The amendment fails to separate investment spending from spending for current consumption. Running deficits to finance current consumption during expansionary periods is unwise for it shifts onto future generations of taxpayers the task of funding today's spending. In other words, it is not a prudent policy to borrow to fund current consumption because what you are doing is consuming today and placing the burden on tomorrow's generation. But capital investment spending as distinct from current consumption is a different matter. Today's capital investment increases the rate of growth in the economy, yielding a larger stream of future income. Because of the possibility of enhanced future income, it makes economic sense to finance some portion of capital investment with borrowed funds, in effect claiming part of that future income stream to finance the current investment. The balanced budget amendment does not recognize this important economic distinction between consumption and investment spending and would require all investments to be fully funded with tax revenues in each fiscal year. If households were to follow such a budget strategy and never borrow, only a tiny minority of American families would own houses and far fewer Americans than is currently the case would own automobiles or major appliances. If businesses were to follow such a strategy, they would soon be driven from the marketplace by those businesses willing to borrow in order to finance prudent and productive new capital investment. So a balanced budget amendment which makes no distinction between consumption and investment would in effect undercut our ability to accelerate the pace of national investment. In fact, it is my strong view it is almost certain that investment spending by the Federal Government would bear much of the burden of trying to move toward a balanced budget if this amendment were to be put into place. Let me turn to the disruption that I think would be caused by this balanced budget amendment. None of the proposals for a balanced budget amendment contains any detail concerning how such provisions would be implemented or enforced. They have general articles. The Congress shall enforce and implement this article by appropriate legislation which may rely on estimates of outlays and receipts. I understand in the debate in the Judiciary Committee they said that the estimates can be off by 2 or 3 percent. I do not quite understand how you would square that with the requirements of the amendment, and I think it reflects some of the lack of rigor in analyzing this proposal. Fiscal policy is a complex task, and I think it would be disrupted or, indeed, paralyzed by struggles over implementing a vague constitutional balanced budget requirement. This version of the balanced budget amendment that is before us states: ``Total outlays shall not exceed total receipts for that fiscal year.'' If revenues unexpectedly fall short of expectations, would this provision mean that the Government would have to close down toward the end of the fiscal year in order to keep outlays from exceeding receipts? Would we have to stop paying benefits to Social Security recipients, to veterans, or abrogate contracts under agricultural stabilization programs? To what extent would the President's ability to respond to a national security problem be impeded and undercut by this provision? The proposal says that the provisions can be waived ``for any fiscal year in which a declaration of war is in effect,'' or they ``may be waived for any fiscal year in which the United States is engaged in military conflict which causes an imminent and serious military threat to national security and is so declared by joint resolution, adopted by a majority of the whole number of each House, which becomes law.'' is gone. Let us assume we have reached a magical state here and we have a balanced budget. You cannot throw it out of balance. You are prohibited from doing that by the Constitution. There are those who said, we are going to have this flexibility here. The Congress is gone. A national security threat emerges. The President has to respond. The necessity to respond requires the President in effect to make expenditures beyond what had been projected. The consequence of doing that, of course, is to throw the budget out of balance. You have just violated this provision in the Constitution. How do you address that situation? The lack of clarity, of precise meanings, would also certainly in my judgment lead to court involvement in both defining and implementing economic policy. Although the amendment is silent as to which parties have the standing to bring suit against the Government for enforcement of the amendment, arguably any aggrieved taxpayer would have standing to sue if they believed the amendment was being violated. And although no one can state with certainty what role the courts will play in interpreting the amendment, I think it is reasonable to expect ample opportunity for litigation in court interpretation of such terms as outlays, receipts, and debt. So, in addition to shifting the debate on fiscal policy from the President and the Congress to the courts, this amendment raises the real possibility that the courts would eventually be required to interfere with the management of fiscal policy just as they have on occasion taken over the management of school districts or of prison systems. Managing fiscal policy is not an appropriate job for the courts, yet passage of this amendment would accelerate a trend in this direction begun when the Supreme Court declared unconstitutional one of the enforcement provisions of the first Gramm-Rudman budget legislation. Concern over the obvious economic damage which could be done by a rigid implementation of the balanced budget amendment has led its supporters to create the so-called escape clause, to permit a suspension of the balanced budget requirement in time of war or upon a three-fifths vote of the whole number of each House. I might note this requirement of the whole number means that you have to produce 60 votes in order to do it. An abstention or an absence would be a negative vote. The requirement to increase revenues says ``approved by a majority of the whole number of each House.'' In other words, it would need 51 affirmative votes. Suppose you had 8 or 10 Members missing. It is not a majority of those present and voting, it is a majority of the entire membership of the body. The override provision raises two questions. First, I find it hard to understand the logic of waivable principles in the Constitution. In fact, it seems to me a very strong argument why this should not be in the Constitution. The Constitution is designed for statements of fundamental principle, not of matters to be waived away. The three- fifths override provision contained in the proposal before us is essentially a statement that budget balance is not an enduring principle but a matter of current judgment. No other constitutional principle--free speech, individual rights, equal protection--can be waived by a three-fifths vote of both Houses. We do not have other provisions in the Constitution that are waivable. Second, such a waiver provision shifts the balance of power from majorities to minorities in our society, violating the democratic principles upon which our Government is based. A three-fifths supermajority requirement effectively gives control over fiscal policy to a minority in either House. In other words, a minority in only one of the two Houses has the deciding power. I submit this is not what the framers of the Constitution had in mind when they established our democratic form of government. Writing a balanced budget requirement into the Constitution will undercut countercyclical economic policy. It will undermine our ability to make the capital investments in the future strength and productivity of our economy, it will burden the Constitution and the courts with issues which should properly be decided by the President and the Congress, and it will shift the principles of our democracy from majority to minority rule. Gladstone, the great British statesman, regarded the Constitution as the finest document of government devised by man, and I think there are many, many who share that opinion. The Constitution is not something to be dealt with lightly. It has not been dealt with lightly over the course of our Nation's history. As I indicated earlier, after the 10 amendments of the Bill of Rights passed immediately after the establishment of our Republic, the Constitution has been amended only 17 times in the succeeding 205 years. The Constitution is a relatively brief, general statement, defining our framework of government and defining the political and civil liberties of our citizens. It does not establish any specific domestic policy, foreign policy, or economic policy. We do not write the substance of policy into the Constitution. We leave that to be determined in the interplay between the President and the Congress in the enactment of legislation. We do not take substantive policy and place it in the Constitution. Because of its focus on universal principles the Constitution has endured for over 2 centuries, despite dramatic changes in American society. In thinking about amending this document we need to proceed with great caution. The desire to put balanced budget economic policy into the Constitution is frequently justified in the name of political expediency. It is said, ``We have to do this. This is the only way we will be compelled to come to grips with the problem.'' Obviously the question of whether in our fiscal policy we are asking future generations to pay for today's consumption is a very important question. In fact, I have voted in this body for both tax increases and spending cuts designed to achieve deficit reduction. But this proposed constitutional amendment is a promise to do something about the deficit in the future, masquerading as a tough choice today. We do not need more masquerades and promises. We need to attack the deficit problem directly. We did that in August 1993. In fact, the U.S. performance now in bringing down the deficit is the best of any of the major industrial countries. The United States has a lower fiscal deficit as a percent of GNP than Germany, Japan, France, Canada, the United Kingdom, and Italy. Proponents of this amendment have been citing a CBO study which was projecting incredible runup in the deficit in the future. In fact, that very study projected that the deficit ratio to the GDP at this point would be 6.8 percent. In fact, it is at 3 percent. So the program that was put into place in August 1993 was a real measure to reduce the deficit, and it has had a real impact. Let me close with this observation. Much of today's alienation of voters from their government comes, I believe, from the practice of passing hollow laws, laws which purport to change things but which through loopholes and waivers result in nothing really happening. I submit to my colleagues that if hollowing out the law creates political cynicism and alienation, imagine what hollowing out the Constitution would do. Mr. President, I yield the floor. Mr. GORTON addressed the Chair.

Mr. SARBANES. Mr. President, what is the parliamentary situation? Are we on the balanced budget amendment?

Mr. SARBANES. I thank the Chair. Motion to Commit--Amendment No. 231 (Purpose: To require a budget plan before the amendment takes effect)

Mr. SARBANES. Was that part of the request?

Mr. SARBANES. What will happen after the conclusion of this recognition?

Mr. SARBANES. What is the order?

Mr. SARBANES. That is a good question. I do not think the amendment fully answers that question. I think one might well go into court and assert if we had taken measures to incur a deficit, that in effect would end up violating this provision and ought to be restrained by court. Whether a court would pick up on that I do not know. I take it the Senator's argument is we could do it in June and we would have until September 30, somehow, to work this thing out. The trouble with that is the recessions do not turn around in a quarter or two quarters. Once you get on a downward trend it takes a little bit of time to come back up. You are fighting to hold it back. The point I make to my distinguished colleague is the more momentum that builds up in a downward direction the harder it is to check it and bring the economy back. It is always better to respond early because usually that means you can address the situation with a lesser amount than will be required later when the economy is driven deeper into the hole. So I understand the point the Senator is making. I do not know the answer to it. But even if one were to answer it in the direction in which he presupposes, I do not think it helps very much because we are going to come up against that fiscal year before long and then we are going to be faced with an absolute crisis: What to do prior to the end of the fiscal year, in terms of the amendment. This amendment does not require a budget balance over the business cycle.

Mr. SARBANES. I think at the moment we have a certain stabilizing benefit that comes automatically. For instance, the unemployment insurance plan. But it is limited. Then we go into a downturn, and we say we have to extend the unemployment insurance benefits. But by the time you reach that point, you are on the downward slope and you look around and you have a pretty serious situation on your hands. Now, as we start on the downward slope, we often do not recognize it at the time. The automatic stabilizers start working right away. It is my own view we would not admit or recognize a situation that required a response in time. In fact, I doubt even if we can get a majority requirement early in the downturn. I will not argue for the moment whether later, when things are really falling to pieces all around you, whether you can get the 60 votes or not. Some think you would have difficulty doing it even then. I am focusing on to what extent you get on this slope and how much momentum begins to build in a downward direction before you are able to check it. We have done a pretty good job here in the post-World War II period. We get ups and downs, but only in a couple of instances have they actually crossed into negative growth. So we have been able to keep the economy in essentially a positive growth mode with varying degrees of ups and downs and stability. But this is a marked contrast of what we used to go through.

Mr. SARBANES. Sure.

Mr. SARBANES. I thank the Chair. Mr. President, I want to comment on a couple of points that have been made. First of all, on the capital budget issue, most economists estimate that of the current official budget, anywhere from $125 to $200 billion--depending on the standard used of what we spend--would be a capital expenditure if we had a capital budget. It is important to understand that because what the Senator from Illinois and his adherents are pushing for here is to balance the budget, encompassing what State and local governments or businesses would treat as a capital budget. These are the items that any prudent, well-run business or State and local government would say represent investments in the future. These are assets that have a long useful life, and therefore it is reasonable to provide for them by borrowing and then amortizing the expenditure over the life of the asset. That is what individuals do. In fact, most people, when they buy a home do not balance their budget in the year they buy the home. They go very deeply into deficit. Only those who can pay for the home out of cash are able to say that they are not incurring a deficit in that year. If they were bound by an amendment such as the one we are talking about here, they would not be able to do that. Most people, assuming that the size of the mortgage they are getting bears a proper relationship to their income and their employment prospects, regard borrowing as a prudent thing to do. In fact, we say to young people, You ought to go ahead and buy a home. You have enough income to sustain the mortgage payment and you have the use of this asset. You would be building up home equity instead of paying rent. Why not go ahead and do it? Businesses make this type of investment decisions. They go out and borrow in order to enhance the productive capacity of their businesses. We do have the problem whether at the Federal level we are incurring the deficit for consumption or investment. I think if it is being incurred for consumption, there is a very strong argument against doing that because we are enhancing today's living standard by throwing the burden on tomorrow. I heard the Presiding Officer talk about the responsibility he feels toward his offspring that is coming, and that is a reasonable statement to make. However, if it is an investment that is being made for the future, borrowing may be a very smart thing to do. Is it imprudent and irresponsible to incur a reasonable amount of debt in order to educate your children? Suppose you cannot afford at the moment the full cost of your child's education out of your current income flow? But you know that if your children are educated, their earning capacity will be enhanced. I am able to carry this obligation over time if I treat it as a capital asset and amortize it. I think most middle-class people do that in meeting the college or professional school costs of the education of their children. This distinction is made at the State level--the States would not balance their budgets if they kept their books the way the Federal Government does. Most States have an operating budget which they are required to balance. They have a capital budget which they fund by borrowing. They are very explicit about borrowing. We had two Governors who testified only 10 days ago that having a balanced budget requirement at the State level helped them to maintain a good credit rating. Now, why do they need a good credit rating if they are not borrowing? They have a balanced budget requirement and which is helpful to them in maintaining a good credit rating. The reason you are concerned about having a good credit rating is because you are borrowing. They acknowledged under questioning that only the operating budget must be balanced, and they make active use of a capital budget for which borrowing is permitted. So this obligation you are placing upon the Federal budget would be the equivalent of saying to every State you must balance not only the operating budget but you must fund the capital budget out of current revenue. It could be the equivalent of saying the same thing to private business or to individuals. If we had capital budgeting at the Federal level now, the deficit problem would be very significantly diminished, because a fair amount of what we are spending are on capital items which under any reasonable capital budgeting approach would have been placed in the capital budget, and in most places then financed through borrowing. That is why these Governors want to have a good credit standing. I have a State that runs a very responsible fiscal policy, and they are one of five States with a AAA bond rating. That is important to us. But the fact is that we are still borrowing in order to carry out our capital projects. We get a very good interest rate on doing that, better than most States, but we are still not doing the capital budget out of current revenues. Now, let me turn to the problem about economic downturns, and whether they will be precipitated into a recession and in turn a depression. What we have managed to do is build into the workings of our fiscal policy automatic stabilizers. If the economy declines, we lose revenues because people lose their jobs, they are not paying taxes, and we also increase expenditures because they receive income support payments-- unemployment insurance, food and medical supplements--in order to sustain their family. The consequence of the increase in expenditures and the reduction in revenues is that you get a deficit. Now, if you try to eliminate that deficit as the economy is moving downward, you are only going to drive the economy down further. You are going to push it down into the hole. This is what happened all through the last century and through the first half of this century. Mr. President, I invite your attention to this chart about the percentage change in our gross national product beginning back in the 1890's and coming forward until today. This drop is the end of World War II. It was after World War II, learning from the experience of the Great Depression, that we built in these automatic stabilizers which, when the economy went soft, would in effect seek to offset that deterioration by compensating aspects in the Federal budget. What has happened because of that is that we now have been able throughout this postwar period to avoid the very deep boom and bust cycles that we previously had experienced. We still get some fluctuation in the business cycle, but we have been able to diminish them very significantly. There are tremendous economic benefits that flow from a more stable business cycle. The question becomes how are you going to address that situation as it develops? My friend from Illinois says we will get together and 60 votes will certainly waive the requirement and we will then incur the deficits which need to be incurred to offset this. He then, quoted from a study which said that the use of fiscal policy had been too late and too little, generally speaking, in the post-World War II period. And I indicated to him that I agreed with it had been too late and too little. It has been too late and too little without the constraint of a balanced budget amendment and without the requirement of a supermajority to have a more responsive fiscal policy, it defies logic and rationality to anticipate to come earlier and in greater quantity than heretofore experienced.

Mr. SARBANES. Maybe I will reserve and answer the Senator's points, point by point. I thought the Senator might prefer an exchange, but if he wants to do it that way it is fine by me.

Mr. SARBANES. Will the Senator yield on those points?

Mr. SARBANES. Will the Senator yield on that point?

Mr. SARBANES. What is the option on responding to the recession?

Mr. SARBANES. First of all, I agree with that statement. The response has often been too little and too late, which only underscores the problem as set out by the Senator earlier. join here to waive the requirement and make the extended unemployment benefits available.'' The fact is we have done that too late. What the Senator is not recognizing is that the way the stabilizers work now, they kick in as soon as the economy slows down. We then start running a deficit. Under the balanced budget amendment, we would not be able to do that. You would not be able to run the deficit until you convene and got your 60 votes in order to do the waiver. By that time, you are on the downward slope.

Mr. SARBANES. Will the Senator yield, since the Senator mentioned me?

Mr. SARBANES. OK. MR. SIMON. An article in the Public Interest by an economist named Bruce Bartlett makes the same point, but my colleague from Maryland may not believe them. Here is the report of the Joint Economic Committee of the Congress. One of the members of that committee is a fellow named Paul Sarbanes. Here is Lloyd Bentsen speaking, as he says, clearly in a consensus for both parties in the joint economic report. Here is Lloyd Bentsen's language: Examining actions taken to combat these economic slumps over the last 35 years, the committee is convinced that Government responses too often have been too late and too ineffective to influence recessions. Do not take my word for it. Do not take the word of all these economists. This is Lloyd Bentsen, not a Republican--nothing against my Republican colleagues--chairman of the Joint Economic Committee, in behalf of the joint committee, and, as he says, it is the consensus of that body--that includes Bill Proxmire, Abe Ribicoff, Ted Kennedy, George McGovern, Paul Sarbanes, Jack Javits, Bill Roth, Jim McClure and Roger Jepsen on the Senate side, plus a number of people on the House side, including someone both of us respect a great deal, Henry Reuss, who for many years was a Member of the House and was chairman of the Banking Committee and a very distinguished Member.

Mr. SARBANES. Will the Senator yield on that point?

Mr. SARBANES

Mr. SARBANES. Mr. President, I was proud to cast my vote for the National and Community Service Trust Act of 1993 when the conference report came before the Senate for final approval last September. This was important legislation intended to marshal the Nation's best resources--its citizens--to confront the many pressing problems facing communities across the country. The National Service Act, signed into law on September 21, 1993, has helped renew the ethic of civic responsibility and the spirit of community service throughout the United States while also providing critical assistance in meeting vital human, educational, environmental, and public safety needs. In light of this, I am troubled by recent statements by the House Republican leadership expressing opposition to national service, describing it as gimmickry and coerced voluntarism. I would urge those who put forward these views to look carefully at the new national service program's centerpiece, AmeriCorps, a national network of local youth service corps. Unlike previous volunteer-based programs, AmeriCorps is not one large Federal program, but a network of locally developed and locally managed service corps which will give thousands of young people the kind of opportunity earlier generations had to serve their country and improve their own lives as well as those of their neighbors. I am proud that my own State of Maryland has been a leader in the area of national service. The tremendous number of volunteer organizations across the State deserve credit for the enormous difference that volunteers have made and continue to make in Maryland each and every day. Maryland has very deservedly been the recipient of a number of first round AmeriCorps grants. I was privileged to be with the President during the official kickoff of the AmeriCorps Program at Aberdeen Proving Ground last September, the first campus selected under the National Service Act as a cite for the National Civilian Community Corps [NCCC]. Using a converted barracks, the NCCC campus at Aberdeen houses 250 young adults who work in 10-member teams on projects throughout Maryland, the Northeast, and the Mid-Atlantic. The program emphasizes conservation of natural resources, public safety, and the educational and human needs of children and older Americans. I was also privileged to meet earlier with members of Community Year in Montgomery County, Civic Works in Baltimore, and the Maryland Conservation Corps to discuss their critical efforts to rehabilitate housing for low-income families. More recently, my wife was able to visit an AmeriCorps site at Frostburg State University in western Maryland. The local program, named Appalachian Service Through Action and Resources or A STAR, provides many types of assistance in areas involving social service and the environment. Participants perform duties as varied as coordinating environmental projects at Deep Creek Lake, developing Victory Gardens in Garrett County, working with local Head Start programs in recruiting volunteers, providing independent living assistance enlarging area food pantries, and establishing youth literacy programs. Mr. President, it is my view that national service, and those who participate in it represent the best of our Nation. AmeriCorps and other programs under the National Service Act of 1993 carry forward an idea rooted in the best traditions and values of America--the tradition of serving others, the value of taking personal responsibility for ourselves and our communities, and the belief that to whom much is given, much is expected. Through programs like AmeriCorps we are providing our Naiton's young people with both an opportunity and an obligation. It asks them to put something back into the community while also providing them an opportunity to develop skills which will serve them well throughout their lives. As I have indicated through examples in my own State, the national service program is working. Nationwide, there are other examples--the executive director of the National Association of Police Organizations has called AmeriCorps a huge boost in the arm for law enforcement; officials of the Federal Emergency Management Agency say that participants in AmeriCorps have helped thousands of disaster victims pick up the pieces of their lives; Habitat for Humanity says they could not do their job without such individuals. In my view, Mr. President, those who have answered the call to service by participating in AmeriCorps and other national service opportunities are taking part in the oldest and best of America's traditions--a spirit of service. I would ask those who have criticized legislation which has furthered national service to look again at the important efforts underway which serve to produce stronger families and stronger communities, and to join me in commending those who are taking part in this important renewal of service to our Nation.

Mr. SARBANES

Mr. SARBANES. Mr. President, today we find ourselves in the midst of an information services technological revolution. At no time in our history has access to information and information services been more important. In light of this, I am concerned about recent proposals to reduce drastically or to eliminate Federal support for public broadcasting, a primary source of information for millions. As we consider the future of public broadcasting, let us not forget that cable television, which many have suggested can fill the gap, currently reaches only 60 percent of U.S. households. Forty percent of American households do not have cable television primarily because it is cost prohibitive or because cable service is simply unavailable in their communities. While cable television has given millions of Americans remarkable access to information and entertainment, it is not an adequate substitute for public broadcasting. Mr. President, currently on no other network can you find the variety of programming which public broadcasting offers. Children's programming on public broadcasting provides parents with a guaranty of quality without violence. Programs such as ``Ghostwriter,'' ``Reading Rainbow,'' ``Bill Nye the Science Guy,'' ``Sesame Street,'' and ``Where in the World is Carmen Sandiego'' educate and entertain our children without bombarding them with commercials. In addition, from ``Wall Street Week With Louis Rukeyser'' to ``MacNeil/Lehrer NewsHour,'' from ``Austin City Limits'' to ``Live From Lincoln Center,'' millions of adult Americans turn to public broadcasting for exposure to cultural events, news and commentary, documentaries, and instructional programming. Public broadcasting has brought our Nation unparalleled historical and political documentaries such as ``Eyes on the Prize'' and ``The Civil War.'' For a little less than $1 per American annually, we make an investment in our children and in the preservation and dissemination of our culture and our history. I am proud that my own State of Maryland has a State public broadcasting network, Maryland Public Television [MPT], with an unequalled commitment to State historical and educational programming. Maryland Public Television produces more local documentaries than any other local station in the State. Marylanders can study for their GED or earn college credit through MPT. MPT has also been one of the leaders on the information superhighway. Through its electronic classroom, MPT has made it possible for students to see and talk to scientists at the South Pole. MPT is just one example of the many superb public broadcasting networks across the Nation which, on very limited budgets, manage to serve viewer needs while keeping up with the technological advancements currently sweeping the telecommunications industry. We have recently heard claims that public broadcasting is elitist. I would suggest, Mr. President, that it is in fact anything but elitist. Public broadcasting is the one network available to Americans regardless of where they live or how much money they earn. There are communities in my State, both rural and urban, in which a public broadcasting station is one of perhaps two or three stations accessible without cable. In fact I grew up in one of those towns, Salisbury, MD, and my mother still resides there. Corporation for Public Broadcasting [CPB] statistics show that 48 percent of Americans who listen to National Public Radio [NPR] have household incomes of $40,000 or less annually. Public broadcasting is often one of the tools used by rural America to attract businesses and residents. The presence of a public broadcasting radio or television station assures prospective businesses and residents that they will not be cut off from cultural events and access to news and information. Often when we discuss the future of public broadcasting we talk only about television. We forget the importance of public radio. How will cable compensate for the loss of public radio? Nearly 90 percent of all Americans have access to a public radio signal. Public radio provides its listeners with local community-oriented programming while also linking them to the Nation and the world. Public Radio International [PRI] and National Public Radio [NPR] are the two major distribution services for public radio. PRI's mission of operation is to engage listeners with distinctive radio programs that provide information, insights, and cultural experiences essential to understanding a diverse, interdependent world. PRI distributes to public radio stations across the Nation such widely popular shows as Garrison Keillor's--``A Prairie Home Companion'' and the ``Baltimore Symphony Orchestra,'' jointly produced by WJHU of Baltimore and WETA in Washington, DC. NPR is known nationwide for producing outstanding programs such as ``All Things Considered'' and ``Morning Edition.'' Individual public radio stations can be affiliates of both PRI and NPR. This assures public radio stations of access to the broadest possible range of programming regardless of their location. Many public radio stations serve rural communities which would otherwise be entirely without radio service. Over 90 percent of public radio's share of public broadcasting funds goes directly to local stations serving local communities. These radio stations respond directly to the needs and wants of their communities. Many of these communities and ethnically disparate, therefore requiring a commitment to diverse programming. Commercial radio has declared many of these areas commercially inviable. These communities are often too small and too far flung to support stations on their own. In my own State of Maryland, public radio stations such as WESM on the Eastern Shore play an important role in supporting the goals of education, literacy, volunteerism, and in working to combat youth violence. Are we now prepared to tell these communities that at a cost of 29 cents per taxpayer, the Federal Government is also declaring them unworthy of radio access to news, information, and entertainment? Mr. President, throughout its history public broadcasting has set the standard against which we have measured the quality of commercial programming, and with the advent of the information superhighway public broadcasting is needed now more than ever. Millions of Americans will find themselves on byroads instead of the superhighway without public broadcasting. In my view, we should protect the access of all Americans to reliable educational programming and quality entertainment. I look forward to working with all of my colleagues in affirming the contributions of public broadcasting to our society and in ensuring that public broadcasting continues to enhance our lives and enlighten our minds.

Mr. SARBANES

Mr. SARBANES. Mr. President, I ask that the amendment be agreed to.

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

Mr. SARBANES. Mr. President, I rise to offer this amendment on behalf of Senator D'Amato and myself. The amendment makes what we consider to be a technical but important change to S. 1. Section 3 of S. 1 exempts independent regulatory agencies as defined in the United States Code from the regulatory impact analysis and reporting requirements of title II of the bill. The effect of this provision already in the bill is to exempt from title II three of the five Federal agencies which regulate federally insured deposit institutions, in effect the Federal Reserve, the FDIC, and the National Credit Union Administration. However, the provision does not, as currently written, exempt two of the other Federal agencies which regulate Federal deposit insurance institutions, the Comptroller of the Currency, the OCC, and the Office of Thrift Supervision, the OTS. The OCC regulates nationally chartered banks and the OTC regulates savings and loan institutions. The concern is that imposing requirements of title II of section I on Federal financial institution regulatory agencies could delay the prompt issuance of safety and soundness rules that affect federally insured financial institutions. It is my understanding it was not the intent of the sponsors of the legislation to draw a distinction among the Federal agencies which supervise federally insured deposit institutions. In fact, it is not logical since these agencies carry out essentially similar functions and should be treated similarly for the purposes of this legislation. Furthermore, distinguishing amongst the agencies could create problems for their operations. For example, the agencies issue many regulations jointly in order to assure consistent regulatory standards for federally insured institutions. The bill, as now written, would interfere and possibly delay the issuance of these rulemakings for two of the agencies, while the other three are exempt. This amendment will simply provide that all five of the regulatory agencies which have supervisory responsibilities for federally insured depository institutions be treated in the same way by this legislation. It would therefore ensure, this amendment would ensure that the agencies can act jointly and expeditiously in the public interests to ensure the safety and soundness of the federally insured institutions.

Mr. SARBANES. Mr. President, I move to reconsider the vote by which the amendment was agreed to. The motion to lay on the table was agreed to.

Mr. SARBANES. Mr. President, I send an amendment to the desk in behalf of Mr. D'Amato and myself, and I ask for its immediate consideration.