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 | BUDGETING FOR THE FUTURE Senate Budget Committee October 30, 1996 Congressional Leadership Forum |
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Read Senators Nickles' and Lautenberg's responses.
NewsHour Coverage of the Federal Budget Battle
Sept. 29, 1996:
The leaders of Congress discuss which party can better deal with the economy and the budget during Debate Night: The Future Congress.
May 9, 1996:
Susan Dentzer, of U.S. News and World Report discuss the latest House and Senate debate over the 1997 budget.
April 25, 1996:
White House Chief of Staff Leon Panetta and House Budget Chair John Kasich discuss the deal finally reached on the 1996 budget, six months late.
March 19, 1996:
Director of OMB Alice Rivlin and Senate Budget Chair Pete Domenici debate the President's proposed FY 1997 budget.
June 28, 1996:
Ellen Miller participates in an Online Forum on the campaign finance reform efforts.
Jan. 9, 1996:
Two economists debate the importance of the size and scope of the federal government and its deficit.
Browse NewsHour coverage of the budget battle.
Outside Links
Senate Committee on the Budget
Senator Nickles
Senator Lautenberg
In the seminal event of the 104th Congress, Congressional Republicans and President Clinton were unable to pass a complete budget causing the federal government to shut down not once or twice, but three times. This debate encapsulated the differing views of the role of government.
The Republicans were fighting for a substantial reduction in the size and scope of government and the Democrats, while supporting several of the proposals put forward, fought to stop reductions in many of the areas they considered essential.
Much of the debate raged over what is known as the Budget Resolution. The Resolution is the framework by which the Congress will structure later spending bills. Congressional Republicans were pushing for enactment of a balanced budget in addition to substantial tax cuts they had promised in their Contract With America. Democrats argued that the cuts required to balance the budget and give tax cuts would be too draconian. They argued for working towards a balanced budget with few, if any, tax cuts.
The question is have Democrats and Republicans learned anything from their encounter? In this year's State of the Union, the President called on the Congress to "never shut the government down again." It appears that Congress and the President, whether out of election year necessity or in the spirit of compromise, have learned to work out their differences. In April, after thirteen temporary spending bills and two government shutdowns, Congress and the President finally struck a budget deal. The bill -- which was seven months late -- provided money for nine cabinet-level departments, dozens of agencies. And as the final days of Fiscal Year (FY) 1996 passed, Congress moved to pass continuing resolutions to continue funding the government through the election.
But the debate is not over, just delayed. In the 105th, Congress will address the same fundamental issues that went unresolved in the 104th. What is the government going to do about entitlement programs? Can the government afford a tax cut, if so how big? The Senate Budget Committee, along with its partner in the House, will be instrumental in shaping the federal government in the years to come.
Our Forum asked: What should the direction of federal spending be? Should the government work to pass funds on to the states to utilize as they see fit or should it cautiously target money in areas that can best utilize new funds? Who was to blame for the government shutdown of 1995-1996?
Senator Don Nickles of Oklahoma serves as a member of the Senate Budget Committee and was elected to the post of Assistant Majority Leader. He has worked closely with the GOP majority leader Trent Lott to pass welfare reform and other major legislative items.
Senator Frank Lautenberg (D-NJ) will also answer your questions. The Senator will serve as the second-ranking Democrat on the Senate Budget Committee.
Questions asked in this forum:Additional Comments
- What will history remember about the 1995-96 budget battle?
- Has the budget process become too political?
- How important is deficit reduction?
- Should we be concerned about foreign investment in the U.S. government?
- What should be done with Medicare?
- What about the national debt?
- Senator Nickles in the Oklahoma State Senate?
A question from Michael McMonigle of Fairfax, VA:
What do you think the historians will write about the budget battle over the 1996 budget? Who will be remembered as the winners and losers?
Sen. Nickles responds:
I believe history will show there was a lost opportunity to achieve a balanced budget with the enactment of the Congressional Balanced Budget Act. The President's veto of this act put off these tough decisions to a future Congress and Administration. When looking at the 1996 budget debate it is important to look at where both sides started, and where they ended up.
The number one goal of the new Republican majority in the 104th Congress was to reduce spending, cut taxes, and balance the federal budget. We passed legislation to do just that, which the President vetoed.
The budget President Clinton sent us at the beginning of 1995 projected $200 billion deficits forever into the future. We said that was unacceptable.
In the final analysis, we succeeded in making him submit three more budget proposals, and ultimately endorse our goal of balancing the budget by the year 2002. Our efforts also yielded $62 billion in discretionary spending cuts and a major welfare reform bill which will save $54 billion over the next six years.
Sen. Lautenberg responds:
I believe that historians will write that the 1995-96 budget battle was not about numbers but about how government serves the needs of its citizens. The Republicans probably will be viewed as legislative accountants who were preoccupied with budget numbers that ultimately balanced in seven years. Democrats will be seen as wanting to move towards a balanced budget, while also focusing on how to preserve and protect important programs like Medicare, Medicaid, education and the environment.
In my view, ordinary Americans were the winners when the Democrats stopped the deep cuts contained in the Republican budget. Once President Clinton vetoed this budget, I think that most Americans were relieved to know that safety net programs like Medicare and Medicaid, and investment programs like education and the environment were going to be protected. Conversely, the losers were the very wealthy and the special interests who were counting on a large tax break, paid for by huge Medicare cuts, from the Republican Congress.
A question from Lisa Johnston of Charlottesville, VA:
My question is simply: Do you think the budget process has become TOO political? It seemed that Democrats and Republicans spent a lot of the last two years wrangling over the rhetoric of the budget (i.e. what constitutes a "cut" in Medicare) Do you think the process is overly political? Is this really a bad thing? If it is what do we do about it?
Sen. Nickles responds:
Budgeting is by its very nature political because it involves allocating limited resources among many competing interests. However the budget process, which was first established in 1974, could be improved to reduce political infighting.
Perhaps the biggest improvement would be to make the federal budget a binding, enforceable document. Under the current process, neither the President's budget nor Congress' budget resolution becomes law. I have proposed that both the President and Congress agree on a binding, enforceable budget law early in the year to prevent gridlock and government shutdowns at the end of the year. Another improvement would be to adopt a two-year budget at the beginning of each new Congress so that budget battles would not consume so much time each year.
Sen. Lautenberg responds:
I believe that last year's budget process was too political. In part, it ended up this way because the Republican majority did not include the Democrats in the development of their budget. The Republicans did not try to negotiate with the Democrats. Instead they took a hardball approach to passing their budget. They tried to blackmail President Clinton into signing their budget by shutting down the government. Thankfully, President Clinton refused to go along with these tactics and he vetoed their budget that would have made huge cuts in Medicare to pay for tax breaks for the wealthy.
I would much prefer a bipartisan working environment in approving budget legislation and I am hopeful that this will be the case in 1997, no matter who controls the Congress. We finished up the final spending bills this September in such a fashion, proving it can be done. However, the Federal budget contains critical programs that affect the lives of all Americans, like Social Security, Medicare, Medicaid, student loans, community police, environmental protection, highways, nutrition programs and small business loans. If the Republicans again embark on a go-it-alone budget that makes deep cuts in these vital programs, we will be forced to fight this effort vigorously.
A question from Sue Petrillo of East Greenbush, NJ:
The current political philosophy is that the federal budget deficit must be eliminated. Therefore both parties have proposed major cuts in programs. Yet economists are divided over how serious the deficit is to the economic stability of the country. Is deficit reduction a real issue or just a political scare tactic? If it is just a some screen, what are the real issues not being addressed?
Sen. Nickles responds:
The federal budget deficit and our $5.2 trillion national debt are certainly a real issue. They threaten our nation's fiscal health and our children's future.
Every dollar the government borrows is a dollar that cannot be invested in a business or paid to an employee. Every dollar spent to pay the $240 billion interest bill on the national debt is a dollar that cannot be spent on Medicare, education, or the environment.
Further, historical data suggests a strong link between budget deficits and interest rates. Some studies have determined that balancing the budget would reduce interest rates by as much as 2%, saving Americans billions of dollars on home mortgages, student loans, and car loans.
Sen. Lautenberg responds:
Since you are from New Jersey, it is no surprise that you have asked an outstanding question.
In my view, deficit reduction is a real issue (though it is not the only budget issue. Like President Clinton and Congressional Democrats, I believe that we should move towards a balanced budget by a date certain by cutting wasteful programs and closing tax loopholes. Under President Clinton's leadership, the deficit has been cut 63 percent in four years. The deficit for Fiscal Year 1996 will be the lowest since 1974. It is 1.4 percent of our economy which is lower than any other western industrialized country. This has helped improve the economic climate in the country.
While it is important to continue to reduce the deficit, I believe that we must be mindful of undermining our nation's health care and investment programs. For example, the 1995 Republican budget made huge cuts in Medicare, Medicaid, education and the environment. I strongly opposed this type of deficit reduction because it would have hurt senior citizens, disabled persons, students and communities trying to make their water and air safe and clean. Some in Congress have opposed Medicare and a Federal role in education and they use the deficit as a reason to cut these programs. I believe that it is more important to preserve Medicare and extend educational opportunities for our young people than it is to adhere to a unnecessarily rigid deficit reduction schedule.
A question from Solvei Fosse of Oslo, Norway:
How concerned are you about foreign investors holding significant amounts of U.S. Treasury bills? Is this something Congress should address?
Sen. Nickles responds:
To date, foreign investment in U.S. securities has not been a problem, but there are some recent, troubling signs that may be changing.
Since President Clinton took office, foreign holdings of U.S. debt increased from $549.7 billion to $958.6 billion. In 1995, foreign interests owned $814 billion more of our securities than we owned of theirs, a rise of 40 percent over 1994. Since this debt must be serviced, U.S. taxpayers sent more money overseas.
These trends are troubling, but not damaging as long as the rest of the world continues to view the U.S. as a good investment. However, if our deficits and debt continue to grow and foreigners decide to scale back their investment, the U.S. could suffer. Congress should act to pass an amendment to the U.S. Constitution requiring a balanced budget, an action that would reassure both domestic and foreign investors of our commitment to a balanced budget and a healthy economy.
Sen. Lautenberg responds: Yes, I am concerned about foreign investors holding significant amounts of U.S. debt. U.S. debt held by foreigners reflects the huge Federal debt built up during the Reagan and Bush years. The enormous budget deficits of those administrations had to be financed by issuing debt, and foreigners purchased much of it. At the time, this eased some of the pain associated with the large Federal deficits because it meant that interest rates were lower than they would have been if the deficits had been financed exclusively by Americans. This short-term benefit is offset, however, by the long-term burden of paying scarce dollars to service that debt. The Government must now therefore pay billions of dollars to foreign bond holders before it can devote any resources to current domestic needs. This debt illustrates the dependency we as a Nation have developed because of the Reagan-Bush deficit spending.
The legislative response should be to continue President Clinton's efforts to reduce the deficit. A big problem with the debts built up during the Reagan-Bush years is that so little of it was used to finance investments that would improve our future. It is one thing to borrow in order to make investments that will yield long-term payoffs. It is another to borrow simply to operate the government in the short-term. Unfortunately, throughout the 1980's and early 1990's, we did too much of the latter, and we will be paying the price for that for many years to come.
A question from John Kolman of San Diego, CA:
No politician has dared admit that services to some of the elderly will have to be reduced to save the Medicare system, but is it not inevitable given the enormous current and projected growth rate?
Sen. Nickles responds:
Without changes, the Medicare trust fund will go bankrupt five years from now. If this happens, there will be no funding available to pay Medicare hospital benefits. There are only two ways to fix this problem, raise taxes or reduce expenditures.
The Balanced Budget Act passed by the 104th Congress and vetoed by President Clinton made real, prudent reforms to the Medicare system. We slowed the growth in hospital costs, restructured the program to give seniors more health care choices, and required wealthy seniors to pay more if they elect to participate in Medicare's doctor program.
Sen. Lautenberg responds:
In fact, Medicare and health care inflation in general has decreased in recent years. But there is no question that Congress will have to address problems in the Medicare system in the short run to make the system solvent for 10 years and, in the long run, to prepare it for the retirement of the baby boomers in 2010. Medicare is the crown jewel of the Federal safety net. It serves the health needs of 37 million senior citizens who have paid Medicare payroll taxes since the inception of Medicare in 1965. Now, almost all seniors have high quality health insurance and we have dramatically reduced€poverty among seniors. And the United States leads the world in life expectancy after the age of 65.
Given Medicare's importance to all Americans, we should resist large structural changes that put its very existence at risk. We can find savings in provider reimbursement, offering voluntary managed care plans to seniors and cracking down on waste, fraud and abuse. This should be enough to make the system solvent for 10 years. In the meantime, I believe that we should create a bi-partisan commission to recommend options to preserve Medicare for the retirement of the baby boomers.
A question from Kelly Shannon of Lancaster, PA:
Both Bob Dole and Bill Clinton have promised some type of "tax relief" in addition to balancing the budget. I think everyone would like some tax relief, but isn't balancing the budget only part of the battle? Should we not run a surplus for a few years to take a bite out of the national debt as well?
Sen. Nickles responds:
This question raises a good point which often gets lost in the rhetoric of "balancing the budget." Any plan to balance the budget and cut taxes should contain long term spending reform which insures not only that the budget stays in balance but that it runs a surplus to reduce our outstanding debt.
Both the Balanced Budget Act passed by the 104th Congress and Bob Dole's economic plan provide significant tax relief and spending reductions which would result in a budget surplus by the year 2002. These plans make real, structural reforms in entitlement spending programs which would continue to yield savings well after the budget is balanced.
Sen. Lautenberg responds:
I agree with you that after we move towards a balanced budget, we should then look at trying to reduce the national debt. However, I believe that President Clinton's tax cut proposal is superior to Senator Dole's. President Clinton's tax cuts are smaller and targeted for child care, education and for buying a home. They are paid for, line by line, in his balanced budget plan. Senator Dole's tax scheme will blow a huge hole in the deficit and require even greater cuts in Medicare, Medicaid, education and the environment. I believe that tax cuts that help more and more students go to college will help our economy tremendously. I went to college on the GI bill, so I know firsthand that investment in our children's education will pay off in the future in the form of higher economic growth and lower deficits and debt. That is what happened after World War II and that is what would happen in the 21st Century if we made a similar investment in higher education today.
A question from Jeff Halverson of Moorhead, MN:
Senator Nickles,
From your experience in the Oklahoma State Senate, can you please address the importance of giving the states the control to spend federally allotted money versus the federal government directing every dime. Isn't it true that the state governments in America have some very competent officials and have a better understanding of what is in their state's best interest? And would you agree that with this better understanding of their respective state's needs comes a more fiscally responsible use of the federal money? Thank you for your time.
Sen. Nickles responds:
One of the primary goals of the next Congress, if it remains in Republican control, will be to continue the process of returning powers and authorities to state and local governments. A significant step was taken this Congress in the form of Welfare Reform by returning public assistance programs back to the states. The experience of the states in this regard will prove to be a positive one. They are closest to the need and are directly accountable for meeting that need.
President Reagan began a program of "New Federalism" which took seriously the Tenth Amendment to the Constitution which says, "The powers not delegated to the United States by the Constitution, nor prohibited by it to the States, are reserved to the States respectively, or to the people." Unfortunately, the creation of our big federal government of today has in effect repealed the Tenth Amendment by usurping much of the state's powers. The next Congress will work to return those powers to the states for which they have primary responsibility.
Bruce Ripley of Gainesville, FL
As a government employee that was labeled as being "non-essential" in FY96, I took great umbrage in the lack of foresight of the Republicans of the impact of having a budget impasse. It underscores the inability of freshman representatives in understanding the ramifications of their actions.
Being a subscriber to the American work ethic, I have extreme difficulty in supporting a tax cut before resolving larger issues such as entitlements. To shovel the responsibility to the state level is irresponsible and lacks (again) foresight into the long-term implications.
Please, for the sake of the entire United States, find a way to compromise so that faith the democratic process is restored.
Thank You.
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Susie Betke of Santa Ana, CA
I believe the government shut down was not the fault of any one person or group. I think the shut down was a cooperative fault of everyone involved. The President for not okaying the bills and the parties for not agreeing on a budget. This is the first time our government has cooperatively done something together, Shutting down. If the only thing our government can agree on is shutting down, I think we are in desperate need of some unity toward something positive. I think the whole fiasco was ridiculous and uncalled for.It also seems to me that the government acted like small children. If each party couldn't have it's own way, it wouldn'y play at all.
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Paul J. Harte of Hoboken, NJ
I feel that our federal government spends far to much of the taxpayers money with little concern for what they are getting for those dollars. It is almost as if nobody is accountable, but when it comes to collection of those funds, you people in Washington are watching every penny.
All federal programs should be subjected to a thorough budget review, and everything should be on the table for cuts. Budgets should be set for all federal programs, including Medicare, Social Security, farm subsidies and social welfare programs. Nothing should be excluded, and politicians better understand that the federal budget should not be used to make payoffs to loyal voters.
Everyone has their hand out in America, and taxpayers are forced to pay for it.
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Gary Richie of Atlanta, GA
A neighbor had a bumper sticker that read, "Demand Less Government." With wear and tear, the right side of it weathered away and now it reads simply, "Demand Less..." Isn't that what your constituents need to accept? If the Government is to be reduced and trimmed, the Public better demand less. The services just won't be there whether in natural emergencies such as hurricanes and floods, or in artificial emergencies resulting from the excesses of those with adequate wealth or power to direct world events along the road to ruin.
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Maryanne Wartko of Erie, PA
How do you propose that the federal government continue to maintain a social safety net under which no child will fall, while continuing to reduce the deficit.
I have no objections for my tax dollars going to this cause, but in the past this money has been used for short term programs that do not improve the lives of working poor.
I think programs that encourage work are very helpful, but who is going to make sure the jobs are available, that the people are not exploited, and that one group of poor is not pitted against another.
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