Wednesday, July 22, 1998
What should Congress do with the first budget surplus since 1969? As the top Democrat on the House Budget Committee, Rep. John Spratt of South Carolina has a leading roll in negotiating the fate of the projected $63 billion surplus. A rare Democrat in his state's House delegation, Spratt is also in a crucial race for control of Congress.
Spratt joined us live from his office in the Longworth House Building today. The transcript follows.
Rep. John Spratt (D-S.C.): The "budget" begins with a "budget resolution," which is a basic outline. It prescribes spending levels for 20 different budget functions, and can include special provisions known as "reconciliation directives." These direct committees like Ways and Means to raise or reduce taxes by a certain amount or committees like Commerce to change Medicare or Medicaid so as to save certain sums of money. After the budget resolution is passed by both houses, the Appropriations Committees take the spending levels in the resolution and use them to set spending levels for 13 different appropriation bills, which the House considers one by one. So, the whole budget never comes before us at one time, but in many parts at different times. Nevertheless, no one can claim to read every line in all of this legislation. As members, we rely upon the committee reports, the party staff analyses, and outside analysis. Some comes from groups that oversee the legislative process and report it like CQ [Congressional Quarterly]. Some comes from groups that have a stake in the legislation. All of it helps us keep "heads up" as to significant changes or key parts.
Wytheville, Va.: What if anything do you plan to do to get rid of the marriage tax penalty?
Spratt: Broadly speaking, there are three ways to mitigate the "so-called" marriage penalty in the tax code. You should understand that 57 percent of married couples get a "bonus" from the tax code because they are married, due to the tax rates allowed joint filers. Forty-three percent pay more because they are married, and many of these pay more because the EITC [Earned Income Tax Credit] is keyed to household income. The EITC rules would not be changed. For the rest, there are three possible solutions: (1) increase the standard deduction for couples, (2) allow the lower-earning couple to deduct a certain percent, say 5-15 percent, of his or her income in calculating adjusted gross income, and (3) allow couple to file separately but set up a new schedule for separate-filing married couples. Upper bracket taxpayers prefer (2) over (1) because many of them itemize deductions, and an increase in the standard deduction is of little or no value to them. The cost of correcting the problem will determine the percent of income that can be deducted. The proposal under (2) that does the most means a tax loss of about $30 billion a year. The separate filer proposal costs even more, $50 billion a year.
Bridgewater, N.J.: Are you for or against the flat tax proposal advocated by the House majority leader? Why or why not?
Spratt: I am for scubbing down the tax code again, as we did in 1986, removing the excess of special deductions, credits, exclusions, and preferences cutting rates by broadening the tax base. The majority leader's bill cuts rates and tax revenues and leaves lower income taxpayers paying more, not less. The minority leader, Dick Gephardt, has a better "flatter" tax proposal, which reduces the rate for the vast majority of taxpayers below 15 percent, but retains a higher tier of around 30 percent for the top 10-15 percent. His proposal also retains the most popular deductions: local property taxes, charitable contributions, mortgage interest. I prefer it to Armey's bill.
Rock Hill, S.C.: You voted to give yourself a $30,000 pay raise in the early 1990s and a cost of living increase just last year. Do you intend to give yourself another big pay raise in the coming years?
Spratt: I did not vote to give myself a $30,000 raise at any time. In fact, I have never voted for more than a cost-of-living increase in congressional pay, and I have voted against anything more. In the late 1980s, when Senator [Ted] Stevens (R-Alaska) engineered a way to get an increase in pay approved without a vote, I disagreed with the method so much that I gave my pay increase back to the Treasury every month giving back over $10,000 during that two-year period. This year, I voted against a cost-of-living increase in pay.
I am a native South Carolinian recently relocated to the Washington area.
Spratt: We expect a managed care reform bill to be on the floor by the end of this week. Democrats have forced the issue, first by devising a responsible bill that almost all of our caucus and some Republicans (like Dr. Greg Ganske) support, and then by signing the discharge petition with the House Clerk to have the bill reported to the floor without committee action. Republicans have a watered down bill, which not only we but the AMA [American Medical Association] will oppose, on the grounds that no bill is better than a bad bill or fig-leaf reform that puts real reform on back burner. I hope to be chairman of the Budget Committee next year, but if not, I will serve for three terms on Budget, the allotted time, and return to Government Operations and a seat of Armed Services that is about two seats from the chair.
Bethesda, Md.: With a heavy national debt, do you think that the majority of the surplus should go to relieving that debt?
Spratt: The budget is in surplus for the first time in 30 years, which is something to savor. But we should not forget that the budget appears to be $63 billion in surplus because the Social Security trust fund is $103 billion in surplus. Over the next five years, CBO predicts that the budget will show cumulative surpluses of $520 billion, but when Social Security surpluses are backed out, the operating budget is in deficit by $137 billion. Over 10 years, the unified budget is predicted to be in surplus by $1,548 billion, but when Social Security is backed out, the surplus is $31 billion. Until we have taken these Social Security surpluses and made Social Security assuredly solvent for the next 50-75 years, we should not have massive tax cuts. The first priority should be to save Social Security and then to save Medicare, and one way to do both is simply to pay off debt.
Madison, Wis.: How do the often-changing estimates of the budget surplus affect the way the Budget Committee works? Are you skeptical of the revisions, and is there a particular office or agency whose estimates you think are the soundest and least touched by politics?
Spratt: The congressional Budget Office (CBO) has been cautious and conservative in recent years because it has been wrong in the past and it did not want to let Congress assume that the budget deficit could be forecasted away. OMB has been more optimistic and in recent years more on the mark because it too was burned by supply side forecasts in the 1980s that never materialized. Forecasting is a precarious art. I think that CBO and OMB are both trying to do an earnest, honest job of it. Over the last two years, the major question overhanging the forecast has related to revenues. Revenues have been growing 8-10 percent, faster than the economy has grown, and CBO has been cautious and even skeptical about the continuation of revenue growth. In each year, toward the end of the year, they have revised upward their estimate because the revenues have kept flowing in. In April of this year, for example, revenues were $31 billion higher than in April of last year, and this caused CBO to revise its estimate for the future. But the precarious nature of these forecast should make all of us cautious about massive tax cuts until we have a much better handle on the revenue forecast.
Manassas, Va.: With a supposed upcoming surplus in the federal budget, why can't we get a tax break?
Spratt: I think we should deal with first things first. The surplus of $63 billion that we expect to see on Sept. 30 is a reflection of a surplus of $103 billion in the Social Security trust fund. Since the money that makes the surplus derives from Social Security, we should now step up to the country's longer-term fiscal problem: the solvency of Social Security in the next century. When we have settled that problem, and Medicare too, we should turn to tax cuts, but we should also use some of the surplus to pay off the $4.5 trillion in debt that we have added to the nation's credit card since 1981.
Williamsburg, Va.: You played a lead role in promoting President Clinton's health care bill in 1993. Several Democrat House leaders have recently said that if they regained control of Congress in this election, they would revive the Clinton health care plan. Would you support such efforts?
Spratt: I did not lead the charge for the Clinton health proposal. I did not even co-sponsor the bill, and would not have voted for it if it had been brought to the floor. There is no plan to revise this bill. However, we did pass CHIPS Children's Health Insurance as part of the Balanced Budget Agreement of 1997, and extended health insurance to 5-10 million children. And we have proposed making Medicare coverage available to those 55-65 who lose their coverage and cannot find coverage. The price would equal the cost of coverage. So, efforts are afoot to broaden access to affordable health care for age groups at both ends of the spectrum.
Washington, D.C.: In recent years, funding from Congress for the arts has decreased sharply. Do you feel that the future budget surplus will reverse this trend, or do you think that a Republican majority will prevent this from happening?
Spratt: The budget agreements that we passed in 1990, 1993, and 1997, which have brought us into surplus, have all imposed a cap on discretionary spending. There is a statutory cap in place now which limits the growth of discretionary spending between now and 2002 to about 1 percent a year. This tight a cap will make it hard to increase funding for the arts. We will have a hard time holding the level of funding where it is. The same logic that calls for us to save Social Security before dissipating the surplus with large tax cuts also calls for same discipline with respect to spending.
washingtonpost.com: You have said you oppose Most Favored Nation trade status for China, in part because of the importance of textiles to your home district. What do you see as the long-term effects of President Clinton's recent visit?
Spratt: I oppose MFN because I think trade with China has been too unilateral. Our deficit with China has grown from almost zero in the mid-1980s to nearly $50 billion this year. The Chinese should be looking in earnest for more ways to buy goods and services from the U.S. to spend these dollars. In addition, the Chinese have enjoyed liberal access to our textile/apparel markets, but once their firms have filled their import quotas, they have trans-shipped through other countries. Most-favored nations should be better trading partners. Nevertheless, this is the largest nation on earth, a burgeoning economy, and a military power to be reckoned with. We should engage the Chinese, work with them, try to export more, and have educational and cultural exchanges. The President's trip promoted all of these things, and on the whole, was a success. I believe in dealing sternly with China, but in trying to improve our relations at the same time.
Silver Spring, Md.: Being a young member of today’s work force I am concerned with the fate of my FICA contributions and whether or not they will be there when I retire. I believe there is a lot to be said for the privatization of social security. What is your opinion on this subject?
Spratt: There are several problems with privatizing Social Security. The main problem is transitioning from today's pay-as-you-go system to a privatized system in which what you pay is vested in your name. If we convert to this kind of system, who will pay the payroll taxes to fund benefits for those people who are retired now and the near future? Most of the privatization plans call for the government to borrow and bridge the transition, but the sum that has to be borrowed is staggering: $2 trillion in some proposals. I think your money will be there when your benefits come due, especially if we seize the opportunity we have now with sizeable surpluses to shore up Social Security. I would gladly support a supplemental savings account which would give you the opportunity to save for retirement and supplement your Social Security.
In all your years as a congressman what has been the piece of legislation that you sponsored that you are most proud of and what has been its impact ?
The Balanced Budget Agreement of 1997. This budget act is not solely responsible for the balanced budgets that we now have, but it puts us on the path to budgets in surplus for as long as the eye can see. As ranking Democrat on the House Budget Committee, I helped negotiate and sell my colleagues in the House on the passage of this act.
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