Date: 1981-09-10
Speaker: ST GERMAIN (democrat)
Chamber: H

Mr. Speaker. President Reagan. Budget Director Stockman and the Republican leadership have had perhaps the most successful first 200 days of any administration in recent history. This administration has been given every legislative tool it has asked for to date to fulfill Its hopedfor economic recovery. There has been much debate about the damage this plan will do to the economy. and great concern that inflation and budget deficits will swell in the next few years. There Is a danger of that. but a more likely outcome isj that the administrations package will have virtually no effect on the economy. that we will continue to slide sideways for the next few years. President Reagan and Director Stockman asked us to gamble that. by dismantling this Nationis social support system. we would make everyone better off. This Housethe Congressvoted to take that bet. and give the Reagan administration a chance to succeed. Unless the economy begins to surge forward. and all sectors share in that surge. the program will have failed. In Its failure it will have imposed deplorable costs on the most vulnerable. sector of our economy and most of the people of this country: Those people struggling the hardest against the highest odds to make their way toward economic selfsufficiency. and the good life they see a few individuals and a few corporations so conspicuously enjoying. Continued unemployment at 7 percent or above. Interest rates In the midtcens to low twenties. and under utilization of our factories and shops will not compensate these people. Far more than hoping the economy deteriorates no further. the American people now expect. and deserve. an economy that Improves dramatically. I want to document. for this House and for the American people. the Reagan adiministrations success in fulfilling ita legislative agenda for the economic recovery program. I thcn want to concentrate on the many problems which stand in the way of successfully Implementing these program. Shortly after last Novembers election. thenCongressman David Stockman and the gentleman from Now York. (Mr. Krau.) prepared a memorandum for Presidentelect Reagan outlining the steps necessary for economic recovery. TIhere were seven specific actions set forth in the memo. and all of them have been put into place by legislative action or Executive order. First. they urged Presidentelect Reagan to set the stage for a quick turnaround In inflationary expectation by announcing a firm policy of balanced budgets. decreased regulation of business. slow money growth. and so forth. It was said th~at by promising business a new ERA of less Government and lower taxes that rational expectations of better times would lower Interest rates. spur Investment. and get the economy moving quickly. There can be no doubt that the President and his administration have tried this course of action. They have overlooked no forum in spreading the word that big business and the upper income groups will find favor with the Reagan administration. Second. the memo urged support of at least 2 years of the KempRoth personal Income tax cut. some form of the 1053 accelerated depreciation plan for corporations. and a 50percent cap an the taxation of unearned Income. Barely a month ago. the administration pushed through a tax bill that included all of these provisions. Third. they urged that it was time for substantial regulatory ventilation. True to the memorandums recommendations. President Reagan appointed a task force headed by Vice President BUSH. and sent it on a regulatory searchanddestroy mission. He ordered a temporary freeze on new regulations. and has sharply curtailed or eliminated the administration of many longstanding regulations. To further this policy. the administration has taken. or Is planning to take. a series of steps geared strictly to aid big business. For instance. the administration has let It be known that recalls of cars need not be announced publicly. But these announcements are a crucial element In protecting consumers by making It clear that some cars are unreliable or hazardous. These are facts the average citizen may have no other way of knowing. True. a massive recall may hurt the image of particular cars. as in the Pintc recall. but if an auto manufacturer makes cars with severe safety defects. should It be protected from paying to correct those mistakes? The American people deserve to have full and complete Information about products in which they invest money. and on which they depend for reliable and safe transportation. The Bush task force recently began contributing to lessened regulation by announcing 30 regulations for review. including those which lowered the maximum amount of lead In gasoline. and regulations protecting the job rights of women and minorities on Federal contracts. In addition. it has targeted. for reconsideration. existing rules and regulations requiring drug manufacturers to provide information on side effects to consumers. and those setting construction and safety standards for mobile homes. That this administration would challenge laws designed to protect the safety of American consumers. or those which seek to Insure nondiscrimination In employment and promotion. goes beyond any reasonable concern for the economic efficiency of enterprises. It is a slap In the face of most Americans. and a warm handshake for big business. The fourth suggestion made In the StockmanKemp memo called for monetary policy reform. They argued that the Federal Reserve Board must be protected from criticism and political Interferenceexcept. of course. from the Reagan administration as the evidence showswhile it went about a singleminded task of reducing the rate of money growth. To date. the Fed has pursued a brutally tight money policy. leading to real Interest rates currently the highest in our history. The administration Indicated complete support of the Federal Reserve in hearings held before the House Banking Committee in July. Once again. the administration has received what It wished for in the fall 1980 memorandum. The fifth suggestion was for outyear and entitlement program reductions. Trhis resulted In the GrammLatta II budget cuts which used the reconcilation process. In ways never Intended. to en~orce cuts for 3 years Into the future. based on economic presumptions about Interest rates and inflation that are unduly optimistic. In July. the Congress delivered a package of cuts totaling more than $130 billion through 1984. Cuts were made. over Democratic objections. in social security. medicare. community development. disability assistance. heating assistance. school lunches. and a vast number of other crucial social support provTams. These programs were Bpecifically targeted for reduction In the StockmanKemp memo. The sixth suggestion made was to remove the price and allocation controls on petroleum products by February 1. 1931. They wrote that. unless this was done. gasoline lines and market disorder would reappear in early spring. and that this would disrupt the legislative momentum of the administrations economic programs. They wrote "In short. if gas lines are permitted to erupt due to equivocation on revocation of controls. debilitating legislative and political distractions will be created." Thus. the President. who had the sole authority to do so. lifted all price controls In the closing days of January. in the middle of the coldest months of the year. and with great added cost to consumers. Finally. Stockman and Kemp suggested that all social and labor policy legislation. such as repealing DavisBacon and the minimum wage. be put off until after the economic package was completed by Congress. Working with key Republican Senators. the administration was successful in delaying these issues. and thus. avoiding the infighting such proposals would inevitably cause. In view of the November 1980 memo. and the ambitious sevenpoint program outlined therein. the Reagan administration. and the Republican leadership in Congress have effected a minor miracle In pushing through all aspects of this plan. While the attention has focused on tax cuts and budget cuts. the other five Reagan tenets were In many respects just as crucial. In short. the Reagan economic recovery program Is now in place. The American people have demanded that we give the President a chance to succeed with his plan. and that has been done. The question Is: Will the Reagan program work? Predicting what the American economy will do Is a hazardous enterprise at best. Time after time the economy has surprised experts with its resiliency. I will not predict* that the Reagan program will send the economy into a tailspin. Our economy is too complex for It to be destroyed by any one administration. But the pain and loss visted on the low- and moderateincome families. and the elderly. by administration budget cuts demand more than simply avoiding economic disaster. Will the Reagan program bring forth the sustained economic growth that will make this country a rewarding place to live for all of its citizens. and. not Just the 4 percent of families wh o earn more than $50.000 a year? All indications are that It will not. Tha goals are good. but they are contradictory. and the heightened expectations estab-. lished by administration pronouncements may quicken the failure of its policies. as one yardstick after another fails to measure up to original pronouncements. Let us take a few of the basic economic goals of the administration. and look at the problems which stand In the way of a solution. The administration has made a balanced budget Into the new Holy Grail. and has set the country In pursuit of it by 1984. although we have the lowest budget deficit. as a percent of GNP. of any major industrialized economy. A balanced budget has gained independent Importance. and will be used as a measure of administration success. Can the Reagan program lead to a balanced budget by 1984. as he has promised? All recently elected Presidents have entered office with brave predictions of balanced budgets toward the end of their first terms. and they have been wrong. President Reagan has shown unusual resolve In pushing -through cuts In social programs that total more than $130 billion in the next 3 years. but he has combined that with massive increases in defense spending. and a tax bill. which he fought hard for. that reduces revenues by $750 billion over the next 5 years. saving money for big business and wealthy families. Somewhere $620 billion more will have to be cut If we are to blance the budget. That Is nearly the amount spent by the Federal Government this fiscal year. The administration has asserted that $70 billion In new cuts for 1983 and 1984 are being formulated. but that still leaves almost 90 percent of the work yet to be done. Does the administration have the political support for cuts of that size? President Reagan has recently Indicated that small cuts in the defense budget will have to be made. But those alone will not be enough. and the only programs that can provide the necessary money to cut are social security and health care. I wil certainly oppose any plan to go back on our word by cutting the little money available to this Nations elderly. and it Is criminal to propose robbing our deserving citizens of basic health provisions. This massive projected deficit may pale In comparison to that which develops when the administrations rosecolored glasses are taken from them. Already. many previous estimates have been erased. In November. then Presidentelect Reagan promised to hold fiscal year- 1981 outlays to $620 billion. Then In March. he said outlays would amount to $655.2 billion. and In July that became $661.2 billion. In just 8 months $40 billion was added to the estimates: $7 billion of which Is attributable solely to higher than predicted interest rates brought about by the Reagan dictated Federal Reserve tight money policies. At this pace there would be a cumulative error of $240 billion In the Federal deficit by the end of President Reagans first term. A few weeks ago word leaked out that the administration was concerned the fiscal year 1982 deficit may rise to September 10. 1zs81 CO $60 billion. from its $42 billion level predicted* In July. The Congressional Budget Office also predicted such an outcome. President Reaigan has since denied that and sent his aides back to recalculate the deficit. Accoiding to administration spokesmen. they would make this recalculation by deciding to adopt more optimistic assumptions about the economy this year and next. Assumptions alonewill not close that gap in 1982 or any other year. In fact. with the weak economic performance every month since Mr. Reagans inauguration. the deficit is likely to grow for 1982 rather than to drop. Recessions inevitably increase the deficits of Government by reducing revenues and spurring outlays from programs like food stamps and unemployment Insurance. If unemployment and Interest rates turn out to be only 1 percentage point higher than Administration predictions. while real GNP grows at a 1percentagepoint lower rate. It would cost the Treasury nearly $30 billion a year. according to CBO guidelines. On top of unpredicted recession expenditures. and large revenue cuts. efforts to balance the budget are complicated by cost overruns. and supplemental appropriations. Much attention has been focused on the Increased spending dictated for defense by the Reagan administration. and Its Inflationary pressures havb been well documented. Part of these pressures come from the susceptibility of defense spending to cost overruns. particularly when faced with solesource suppliers. In fact. for the last 3 months of 1980. there were defense budget overruns totaling $47.6 billion. The most wellintentioned planners cannot fully anticipate such pressures. Unexpected defenserelated expenditures aie only one aspect of the cost pressure problem. It Is now becoming clear that cuts made by the Reagan administration budget for 1982 and beyond will have unintended side effects. such as creating higher expenditures In some entitlement programs. The Agriculture Department has recently calculated that cuts In other welfare programs may cost it $500 million more in food stamp allocations than was originally anticipated. and this assumes that the Reagan economic recovery program works. I suspect that as the various agencies and departments review the hastily scrawled Republican Budget Act they will find numerous cases of such conflict. A further difficulty standing between President Reagan and his balanced budget are supplemental appropriations. According to a Congressional Budget Office report just released. "In every year of the 1970s. supplemental appropriations were the final phase of the budget process." The report goes on to say that Congress approved 95 percent of the supplemental appropriations brought to It. and that they averaged more than $23 billion a year. The greatest need for sup-