Table Of Content

< S. Hrg. 104-487 CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997 Y4J 85/2: S. HRG. 104-487 b Concurrent Resolution on the Budget jni:./^INGS Kf^[. BEFORE THE COMMITTEE ON THE BUDGET UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION March 1996—THE CURRENT STATE OF THE ECONOMY, THE ECO- 6, NOMIC OUTLOOK AND THE ROLE THAT PRUDENT FISCAL POLICY CAN PLAY IN ENHANCING LONG-TERM PROSPECTS March 199&—IMMIGRATION AND PUBLIC WELFARE BENEFITS 12. March 1996—BUDGET AND ECONOMIC IMPLICATIONS OF ALTER- 14, NATIVE SPECTRUM USE POLICIES March 20, 1996—THE PRESIDENT'S FISCAL YEAR 1997 BUDGET April 18, 1996—THE ECONOMIC OUTLOOK FOR FISCAL YEARS 1997-2006 ^:?':":'^-^ •"Jr.... K Sep; 8 I9dS ro P*^MK,^ I ITMf^ Printed for the use of the Committee on the Budget S. Hrg. 104-487 CONCURRENT RESOLUTION ON THE BUDGET FOR FISCAL YEAR 1997 HEARINGS BEFORE THE COMMITTEE ON THE BUDGET UNITED STATES SENATE ONE HUNDRED FOURTH CONGRESS SECOND SESSION March 1996—THE CURRENT STATE OF THE ECONOMY, THE ECO- 6, NOMIC OUTLOOK AND THE ROLE THAT PRUDENT FISCAL POUCY CAN PLAY IN ENHANCING LONG-TERM PROSPECTS March 1996—IMMIGRATION AND PUBLIC WELFARE BENEFITS 12, March 1996—BUDGET AND ECONOMIC IMPLICATIONS OF ALTER- 14, NATIVE SPECTRUM USE POLICIES March 20, 1996—THE PRESIDENTS FISCAL YEAR 1997 BUDGET April 18, 1996—THE ECONOMIC OUTLOOK FOR FISCAL YEARS 1997-2006 Printed for the use of the Committee on the Budget U.S. GOVERNMENT PRINTING OFFICE 25-,171a: WASHINGTON 1996 : ForsalebytheU.S.GovernmentPrintingOffice SuperintendentofDocuments,CongressionalSalesOffice,Washington,DC 20402 ISBN 0-16-052867-4 COMMITTEE ON THE BUDGET PETE V DOMENICI, New Mexico. Chairman CHARLES E. GRASSLEY. Iowa J. JAMES EXON. Nebraska DON NICKLES. Oklahoma ERNEST F. HOLLINGS. South Carolina PHIL GRAMM. Texas J. BENNETT JOHNSTON, Louisiana CHRISTOPHER S. BOND. Missouri FRANK R. LAUTENBERG, New Jersey TRENT LOTT, Mississippi PAUL SIMON. Illinois HANK BROWN. Colorado KENT CONRAD. North Dakota SLADE GORTON. Washington CHRISTOPHER J. DODD. Connecticut JUDD GREGG."New Hampshire PAUL S. SARBANES, Maryland OLYMPIA J. SNOWE. Maine BARBARA BOXER. California SPENCER ABRAHAM. Michigan PATTY MURRAY. Washington BILL FRIST. Tennessee ROD WYDEN. Oregon ROD GRAMS. Minnesota G. William Hoaoland. StaffDirector William G. Dauster, Democratic ChiefofStaffand ChiefCounsel (II) CONTENTS HEARINGS — Page March 6, 1996 The Current State of the Economy, The Economic Outlook, and The Role that Prudent Fiscal Policy Can Play in Enhancing Long- Term Prospec—ts 1 March 12, 1996—Immigration and Public Welfare Benefits 69 March 14, 1996 Budget and Economic Implications of Alternative Spectrum Use Policies 149 March 20. 1996—The President's Fiscal Year 1997 Budget 253 April 18, 1996—The Economic Outlook for Fiscal Years 1997-2006 327 STATEMENTS BY COMMITTEE MEMBERS Chairman Domenici 1, 69, 149, 253, 306, 327 Senator Abraham 76 Senator Boxer 144, 251 Senator Conrad 151 Senator Dodd 398 Senator Exon 2, 73, 270, 328 Senator Frist 76,289 Senator Grams 402 Senator Gramm 152 Senator Grassley 269 Senator Lautenberg 39 Senator Simon 77 Senator Snowe 42, 250, 270, 311, 403 WITNESSES Baily, Martin, Member, Council of Economic Advisers 23 Borjas, George J., Professor of Public Policy, John F. Kennedy School of Crovemment, Harvard University 110 NM Burgess, Mike, General Manager, KOB-TV, Albuquerque, 194 Capra, James R., Capra Asset Management 6 Darner, Karen, Virginia House of Delegates, on behalfofNational Conference ofState Legislatures 128 Hausman, Jerry, MacDonald Professor of Economics, Massachusetts Institute ofTechnology 219 Hazlett, Thomas W., Visiting Scholar, American Enterprise Institute, and Director, Program on Telecommunications Policy, University of California, Davis 227 Irving, Larry, Assistant Secretary for Communications and Information, Unit- ed States Department ofCommerce 175 Levy, Mickey D., Senior Vice President, Chief Financial Economist, NationsBanc Capital Markets, Inc 11 Martin, David A., General Counsel, Immigration and Naturalization Service, U.S. Department of Justice, accompanied by Toni Marwitz, Visa Officer, U.S. Department of State and Lavinia Limon, Director, Office of Refugee Resettlement, U.S. Department of Health and Human Services 78 Moore, David H., Senior Analyst, Congressional Budget Office; accompanied by Perry Beider, Natural Resources and Commerce Division, Congressional Budget Office 153 OT^eilf, June E., Director, Congressional Budget Office 332 Rivlin, Alice M., Director, Office ofManagement and Budget 254 (III) Page Shrier. Howard, President-elect, Nebraska Broadcasters Association 197 Tajima, Mark, Analyst, Los Angeles County ChiefAdministrative Office 119 ADDITIONAL MATERIAL — Questions and answers Committee members to witnesses, written: Dr. Rivlin 312 Statement: Becerra, Xavier, Congressman (D-CA) 145 Articles: Free the Airwaves — 234 Spectrum Auctions Only a First Step 238 (IV) THE CURRENT STATE OF THE ECONOMY, THE ECONOMIC OUTLOOK, AND THE ROLE THAT PRUDENT FISCAL POLICY CAN PLAY IN EN- HANCING LONG-TERM PROSPECTS WEDNESDAY, MARCH 1996 6, U.S. Senate, Committee on the Budget, Washington, DC. The committee met, pursuant to notice, at 10:06 a.m., in room SD-608, Dirksen Senate OfRce Building, Hon. Pete V. Domenici (chairman of the committee) presiding. Present: Senators Domenici, Grasslev, Brown, Gorton, Snowe, Abraham, Exon, Lautenberg, Simon, and Conrad. Staff present: G. William Hoagland, staff director; and Amy Smith, cnief economist. For the minority: William G. Dauster, democratic chief of staff and chief counsel; and Jim Klumpner, chief economist. OPENING STATEMENT OF CHAIRMAN DOMENICI Chairman DoMENlCl. Cein we get started? Senator Simon, I have been told by Senator Exon's staff that we ought to go ahead and proceed. Senator Simon. Fine. Chairman Domenici. What I would like to do is get to the witnesses and let everybody get their opening remarks as they in- quire. Rather than have long opening remarks from everyone, I thought maybe Senator Exon and I could give a brief opening and then go to the witnesses. Then with each of you, as we do it in order of arrival, as the distinguished Senator from Nebraska has regularly insisted Senator SiMON. I am even willing to waive your statement and Senator Exon's. [Laughter.] Senator ExON. I object. Chairman DOMENICI. Mine is very, very brief. Senator Exon, now that you have arrived, for the record and for you and so you can dispense this to your members and us to ours, obviously there is some flux with reference to the schedule for the next couple of months, depending upon the outcome of the debt limit extension and the omnibus appropriation bill. We were scheduled to hear Mr. Greenspan tomorrow. However, understand that because he has I not been officially reconfirmed, he has advised the committee that he cannot testify until he is reconfirmed, or that he won't. There- CD fore, the hearing for tomorrow on Dr. Greenspan has been post- poned. Two hearings have been scheduled for next week: on the 12th, which is Tuesday, the budgetary impact of pubUc assistance benefits for non-citizens, and on Thursday, March 14, the budget impact of alternative spectrum option proposals. In both of those cases, as we work our way through negotiations, those two issues remain very, very contentious in terms of the real impact of the spectrum option and the impact of non-citizens getting benefits, to whatever extent it is. So we won't be having hearings on legislation but, rather, on the concept. As you know, on the option you are going to bring some- body from a State like yours, and I am going to bring one from a little more rural State to talk about the impact as we hear from CBO on the options. That is our general plan, and I have cleared that with you. The following Monday, on the 18th, the President will release details of his 1997 budget. I am hopeful that that will be a real budget, a total budget. I have been cautious in my remarks and will await release details. The committee will receive testimony from the 0MB Director the next day, on March 19th. No further hearings have been set, but I expect that we will want to clarify some of the Administration's proposals in their total budget. And we will consult with you, Senator Exon, as we attempt to arrange that. Now, I don't know yet when we would be expected. Senator Grassley, when we might mark up the 1997 budget resolution. We have not consulted yet, nor have I made a decision. It is entirely possible that we may not do anj^hing on that until after the April recess. It is possible that if things break right, we might do it before we go on the recess. But we will be in touch with you regularly. Senator Exon. OPENING STATEMENT OF SENATOR EXON Senator ExoN. Mr. Chairman, thank you very much, and I have not been advised officially by you or anyone else, but I have picked up several reports through the grapevine and other parts of the information services that flow back and forth through the cloak room and otherwise that in all likelihood we, unfortunately, will put off the decision-making process on the budget until after the April recess. I would hope that we would move aggressively ahead on these things. I will be glad to work with you in that regard. As we take up this brand new budget when we haven't finished last year's work, it puts this committee in a most difficult position, it seems to me. And I simply want to offer you, Mr. Chairman, my cooperation and that of the minority members of the committee in the hopes that we will be consulted in some detail on these matters as we proceed. No decision has been reached yet, as I understand it, although there was an interesting story in the Washington Post this morn- ing that is not official but probably was a fair estimate of at least where I think we are coming from at the present time. So, therefore, despite the divisions that we had last year, this is a brand new year, and I hope that we can go into this with some kind of a bipartisan approach, because the budget deficit and the continuing raising of the National debt is not a partisan issue. It has to We be faced by all of us jointly. are all responsible for action or in- action, depending on your point of view. I simply say that I hope we can work in a fashion that is in the interest of the United States of America, and I pledge my efforts in that regard. That might break down through the political process that we have, especially in a Presidential election year. But, nevertheless, I wish to start out with an offer, once again, of being in cooperation wherever and whenever we can. I think that is a step in the right direction. I do have an opening statement that I would like to make, probably hoping to set the tone for this hearing and the ones that will follow. I am disappointed to hear that Mr. Greenspan felt that he could not come tomorrow, because I am certain that Mr. Greenspan has a direct bearing on the decisions of his agency that are essen- tial to what we do or don't do with the continuing markup, and col- lecting the figures that are obviously necessary if we are going to do as honest a job as possible at resolving the various issues that confront us. I do want to join you in welcoming the distinguished panel that we have today, and we are trying to reach into the current state and the future state of the economy, which, as you all know, is what the budget process is all about. I hope we can have a serious discussion about economic growth and not waste our time simply bashing the President. The truth is that the American economy is sound. Under Presi- dent Clinton's stewardship, the economy has performed beyond ex- pectation. Nearly 8 million new jobs have been created, 93 percent in the private sector, I would emphasize. The so-called misery index of inflation and unemployment is at the lowest level in about three decades. The Clinton administration should be complimented for not everything that it has done, but the sound approach that I think has been evidenced by the Clinton administration since they have brought about downturns in the deficit for 3 years in a row, and nothing like that has happened since the days of Presi- dent Harry Truman. We have a broad bipartisan consensus that the Government should balance the budget. I hope we can continue with that on some kind of a reasonable basis. Yet there are some problems with the economy that the President is the first to say that we must ad- dress. He did so, I would point out, in the State of the Union mes- sage. Finally, climbing into the middle class and staying there is getting harder and harder and harder for those people who generally are described as middle-class Americans. Productivity keeps going up, but wages don't. The purchasing power of most workers' wages has fallen for the past two decades. Many breadwinners find that one job will no longer do it. It takes two workers, sometimes with two jobs each, to make ends meet. Now, Mr. Chairman, I simply want to emphasize that there is continuing anxiety among American workers, and it is very obvious and it is very thick. A recent poll found that a staggering 72 percent of those surveyed believed that layoffs and the loss ofjobs will be a very permanent problem. The wholesale firing in America's — blue-chip companies I won't dignify it by calling it simply "downsizing," which is a new word that does not properly describe the real problem that we have in America. That has left hundreds of thousands ofAmericans broken and feeling betrayed. When I ran a business myself, firing a big chunk of the staff was a sure sign in those days of failure and incompetence at the leader- ship levels. But yesterday's bum is lionized as today's savior evi- dently only for the good of Wall Street. Many are appalled with the enormous gap between executive salaries and worker pay. Business Week, no bastion of liberalism, I would point out, states in the February 19 editorial. Despite big gains in productivity and profits, most employees are not sharing in the rewards while shareholders and the option-laden corporate officials most definitely are. The rising economic tide that once lifted everyone in America is now playing favorites, and people don't like the new rules. Indeed, it has become a riptide for countless Americans who are A being dragged out to sea with no life preserver whatsoever. study last year of the earnings of nearly 300 chief executives and their officers found that they made on average 187 times as much as their average worker, up from 41 times as much 20 years ago. In CEO fact, the study predicts that by the year 2010 the average will be earning multiples of the average worker's pay that have not been seen since 1789, the days of the difficulties in France that fol- lowed the Revolution. And we all know what happened then. I don't profess to have the answer to all of these problems, but as a recent editorial in the Lincoln Journal Star said, and I quote, If we want morejob security in this system, there is probably a way for Government to help us get it. But we must realize that comes at a price, too, for the economy is much more than just a bunch ofnumbers. That is something that was all too often missed in last year's budget debate. There are people behind these numbers. And what the majority missed last year, I believe, is that it is not just balancing the budget, but how we do it that is finally important. It is not just balancing the budget but keeping people working through programs like the earned income tax credit and others. It is not just balancing the budget; it is keeping our priorities straight as we do it. So once again, Mr. Chairman, I welcome our witnesses to this very important discussion today that leads off what I think will be some very informative hearings under your direction as the chairman of our committee. I look forward to hearing the views of this panel on the state of the economy and what we can do to ensure that all Americans will still share in the American dream. Mr. Chairman, I thank you. Chairman DOMENICI. Thank you very much, Senator Exon. I think you misunderstood my opening remarks. While I gave you an agenda of what was to come, you assumed that was my opening statement and, therefore, gave yours before me. But that was a great opening statement, and I don't mind at all. I ask that mine be made a part of the record as if read. [The opening statement of Chairman Domenici follows:]