TRANSCRIPT OF INTERVIEW

HELD

OCTOBER 21, 1975

ON THE

AGRONSKY EVENING EDITION

FEATURING

REP. BROCK ADAMS (D-WASH . ) CHAIRMAN OF THE HOUSE BUDGET COMMITTEE

AND

SEN. EDMUND S. MUSKIE. (D-MAINE) CHAIRMAN OF THE SENATE BUDGET COMMITTEE INTRODUCTION: From this is Evening Edition. Now here is Martin Agronsky. AGRONSKY: Good evening. The Congress has set up two new budget committees to try to bring some order out of chaos in its handling of Federal money. Its still too early really to tell whether Congress has set itself a politically impossible task let alone a fiscally impossible task. The head of the new Senate Budget Committe says 'hobody promised us a rose garden when we undertook budget reform. We knew the task of addressing our national fiscal priorities and beginning the long road back to a balanced budget would be a thankless one. And now President Ford has cast a few more thorns on ttie budget committee's path with his combination tax-cut spending ceiling proposal." Well, tonight on Evening Edition a discussion of how the new congressional budget procedure is working, what is the outlook for Mr. Ford's plan in Congress and at the state of the economy with democratic Senator Edmund Muskie of Maine, Chairman of the new Senate Budget Committee and democratic Congressman Brock Adams of Washington, Chairman of the new House Budget Committee. Gentlemen, there 1 s been a lot written about the Budget Committee and how it functions; but I wonder if you could just simply say what was the idea behind bringing it into being tn both houses. Would you like to start Congressman Adams? ADAMS: Yes, what basically happened was that we had a conservative president, Nixon, elected after we balanced the budget in '69 and yet for four years spending went up every year without any particular control. At the same time the President was either deferring money or impounding money which meant that the priorities that the liberals wanted were not being achieved so both the liberals and the conservatives arrived at the conclusion that first they wanted. control over·overall spending and second they wanted control of where the money was spent within an overall target and that's the budget act. AGRONSKY: Yes.· Well, you put it in a context of Republican president; Democratic Congress in effect. You don't meant that do you? ADAMS: No. Not with Repulican/Democratic, but fiscal conservatism versus liberal spending habits by that I mean a person that comes in and you expect to have the budget balanced or very close to it and instead you run a large number of deficits that were really unplanned. In other words they didn't have fiscal stimulus and so you weren't balancing the budget and yet the people who wanted particular programs, and new initiative~weren't getting those. In fact programs were being cut back; so it showed that the whole budget process between the Administration -2-

and t he Congress,whether you were a fiscal liberal or a fiscal conservative or some place in between,wasn't working and so they wanted an act that brought some order out of chaos. MUSKIE: There's another point, Martin, and that was the process of handling appropriations, or the budget within the Congress, was fragmented. It was such a big thing that it was handled through thirteen or fourteen different appropriations bills. ADAMS: So, it was done piecemeal. MUSKIE: It was done piecemeal and those pieces were stretched out over a time frame that usually began about the first of June, I think, and then continued until well into the budget year. Sometimes December and I think I remember one year that the last appropriations bill was enacted in January following the July which represented the beginning of the year. So that as members of the Congress voted on appropriations bills, they did not have the benefit of the overall picture in order to set their own priorities. AGRONSKY: (A) How much they are going to spend, how much revenues were, how much deficit would result; you began with that still way down the road,and what you are trying to do this time around is to know all of those factors before you begin. MUSKIE: That is right and there is one other thing we try to crank into it without making it too complicated. We try to crank into it a rational economic policy. Of course the President has one in :niind, with the advice of his economic advisors when he presents the budget, but the Congress also does so now so that the two ate tted ,together--the budget and economic considerations. AGRONSKY: Yes. Well, the question is--how was it working? MUSKIE: Well, I think that for the first year,and this is a trial year, its been called that,--Its trial only in the sense that it's the first time and it's not complete but it's the real thing in terms of being binding. I think for this first year its worked very well. Both Houses I think faced up to the need for discipline. Both Houses' members have shown a willingness to vote to restrain spending and even to cut back spending. Perhaps the most visible one in terms of its politics is the Federal Government's Employees pay increase. Both Houses voted to hold that at 5 percent which was below the 8 percent cost of living increase which the Comparibility Board recommended and so this and other votes I think indicate that the Congress is willing to accept this discipline. Now how long that will 1ast • . . -3-

AGRONSKY: The President by the way proposed that too. ADAMS: That is right. MUSKIE: That is correct. AGRONSKY : And you ha ve to give him credit for that parti cular ... ADAMS: Absol utely. MUSKIE: Precisely. ADAMS: And you get to a point when the process shows,when you begin in the spring ,what the deficit is going to be and people begin to look at that bottom line as their voting in new bills, and then one other part of it,and it is a complex puzzle, Martin, but another part was that we , found that bills were avoiding the Appropriations Committee. Other committees would make automatic spending bills which meant that the Appropriations Committee didn't ever see them and very often the Members didn't know what the total effect of that spending bill would be. It might only be ten or twenty million dollars in the first year; but it might end up over a period of 30 or 40 years, each year building into the base of the budget. That ' s why the budget total spending has gone up over the years. We don't vo te so much for each individual appropriation bill; but when we build in a bottom and then build on top of it each year, pretty soon you're at a very hig h figure. AGRONSKY: Well, let me raise what.seems to me a rather conspicuous success that you had persona lly, apparently. That was when the Committee on Post Offi ce and Civil Serv ice · approved q bill that would have increased Federal pension benefi ts $3.4 billioD, Now as I understand it, when you told the Chairman of that committee that the Budget Committee wo u·td fight it, he withdrew it. Did it work that way? ADAMS: Yes and you see there is a difference in the way that technically the House and the Senate work as institutions. In the House most of the work is very detailed a_nd specialized within committees _on spe!lding bills, and so we've been tracking. We have an early warning system in the Budget committee that indicates when they' re going to come to the floor, what amount those bills will involve over not just one year but over four to five years. The Chairman of that committee is a very fine man and when we begin to track for hi m the bills he was bringing out, especially this bill ne said, "I am not going to do that. I don't want to add that amount of spending." And the week before that we defeated an additional subsidy for the Post Office of $1.7 billion so we knew -4- that if we got into a floor fight that there was a very good chance that he would loose it. So, the system is working at that level. I don't mean it's perfect, Martin. We miss some. Spending in a lot of areas are still going up, but there's a defintte new qtti tude in the committee chairmen on saying, "Wait a minute. We'll check out what's going to happen." AGRONSKY: Well, in that sense a kind of a miracle has occur~ed~ It -always used to be,as you both know from long e~perience in the Congress of the United States,that the technique was always a logrolling technique. You know, 'you do it for me and I 1 11 do H for you~· and then by the time that you would get done with that everybody would have some special thing · that they were doing~ One Congressman would support another one because he wanted support on his own special thing. Now are you stopping that too? Is the logrolling affected by this? MUSKIE: Well, I think what is happening is a ~ort of logtolli~g in reverse; and everybody now is alert to the fa ct that the Budget Committees are following this spending. They get the benefit of score­ keeping reports both in the House and the Senate and so they themselves now check with us and there are many invisible restraints imposed because Senators or Chairmen have checked with us and have determined that a certain number was wrong and they themselves voluntarily bring it down. Let me give you a rather conspicuous example of this. On the Senate side we sent the Defense Procurement Conference Report back to conference because we thought it went over the target; but as a result of that vote, Senator McGovern who was handling the school lunch conference report which was scheduled for action on the Senate floor at the same time voluntarily pulled that back into the conference. AGRONSKY: The increases -- he cut them bac k? MUSKIE: He cut them back and he Seid on the floor what I though was an excellent statement that he did so because he was convinced after the vote on the defense bill that the budget process was working, that he thought that made sense, that we had to be responsible, and he was willing to take part of the responsibility in the school lunch program, which is very close to his heart. AGRONSKY: Well, Senator what happens when you run foul of a real power house in the Senate like Senator Stennis the Chairman of the Armed Services Corrmittee? In the past there always was this sort of combination between Anned Services,where so much of the power in the Senate lies and the Pentagon working together and nobody was every able to deal with that. Now you apparently short-circuited the process even before it ever began. How did Senator Stennis take it? MUSKIE: Very well because he believes in fiscal restraint, of course. He's a fiscal conservative as well as very strong on national defense, -5- he found himself in something of a dilemma because he believed in the restraints of the budget process but also believed in the numbers he proposed for the defense function. He accepted the result in excellent grace and he supported us on other decisions and I think that's going to happen over and over again. Senators are going to get a perspective now that they never got before. They are going to see the rest of the picture just as Brock Adams has said and when they do you know I' ve had many Senators come to me after a vote and say, 11 you know, I'm so delighted that this process is working and that you're there to inform us on what is happening. It's of enormous help . 11 AGRONSKY: Well, without doubt you're going to come in for an enormous amount of heat. Now let's move over to the House side. The Secretary of Defense,testifying on the House Appropriations budget cuts said this, "that the committee has made deep, savage, arbitrary cuts in the budget and if they're not overturned by the Senate, the nation's defense posture wi 11 be severely affected •11 Now that's pressure and that's real heat. ADAMS: No question about it. AGRONSKY: How do you deal with it? ADAMS: Well, you just resist it because I had already discussed at length this bill with the Chairman of the Appropriations Committee, Chairman George Mahon,who also chairs the subcommittee on defense. We had a target in the budget. He. came very close to meeting that target. Actually the defense function went up 8 percent over last year, but the . . . Secretary of Defense wanted it to go up 16 percent.

AGRONSKY: Well, you took out 7 billion 600 million. ADAMS: That's right. MUSKIE: In budget authority. ADAMS: In budget authority, and this is a substantial cut in the increase that he wanted. Now I'll say this, a number of liberals in the House said that we had only created paper cuts. So if the Secretary of Defense is saying what he has just stated and liberals are saying we have made paper cuts, it looks to me like we probably cut it just about right. And I am very confident that when it goes over to the Senate they will work on it even more to be sure that it fits into the total picture. We simply are saying to -6-

each department that if we I r"e' goina to cut these:'programs then we are going to try to be fair across the board. And I am going to have to go in this week with a resolution, Martin, which indicates that our deficit target is probably going to rise from around $68 billion to somewhere up around $70 - I1 bi 11 ion because unemployment compensation is going up; veterans benefits are going up; food stamps are going up. All of these required programs. AGRONSKY: Because of the recession. ADAMS: Because of the recession. Now, MUSKIE: And because of the inflation. ADAMS: Exactly. Now if we are going to add on to the defense budget more than was allocated in the House at the present time. The deficit is going to go up; and people are trying to say, 11 Wait a minute. Let's kind of control the whole thing in each part of it.1' AGRONSKY: And so what happens on the Senate side? Schlesinger says he is going to come over to you. If he is going to say give us back $2 bil 1 ion 600 mi 11 ion that the House cut. In other words give us back a third back of what the House cut. Now what do you say? MUSKIE: I doubt very much that we wi11 take a different position than Congressman Ada~s~has taken. Now, we ... AGRONSKY: That again, is something interesting. It so often happens that the agencies, that is the executive deoartments and cabinet members.were able to play the House against the San'ate. and this time they can't do that so you're telling me. MUSKIE: Well, first of all we try to make sure that we are using the same numbers and that's important. AGRONSKY: Wel1, you begin with the same numbers. MUSKIE: We begin with the same numbers and we use the Congressional Budget Office to keep us on track so that we are using the same numbers and don't get hung up on that. But the second point that I'd make, Martin, is very important. It isn 1 t the budget corrnnittees of the two houses that make these "savage cuts." The way this budget process is structured in each house from mid-April to mid-May there 1 s an extended debate on the whole budget and all these priorities are debated. There are seventeen budget functions. Defense is one of them. You go through the whole range of them and Senators can make the argument for this function, or that function, or whatever and the Senate as a -7- whole and the House as a whole that finally make the decision So that these targets we're talking about are not targets that John Stennis said or that Ed Muskie said or that Brock Adams said. These are targets that the Congress of the United States debating all of these programs against each other in a given month said. So these aren ' t arbitrary numbers. These were numbers that were arrived at after long and deliberate debate in the Budget Committees and then on the floors of the two houses and then ever since. AGRONSKY: Hell, would you mind my saying that a remarkable thing seems to be happening. That the Congress of the United State-sis taking back and asserting the power of the purse that's given to it by the Constitution which they haven ' t done for an awfullj long time.

ADAMS: This is the very basic function that is occuring, and it's very painful because as you now have it set up, if you're going to increase defense and you're not going to increase the deficit then you have got to decrease another spending in another area so you get what you mentioned earlier and Senator Muskie mentioned, which is kind of a negative l o.;~olling. We're trying to say to each Congressman before the whole year starts, as Senator Muskie put it so well, debate out generally how much money you want to spend and where you want to spend it in these areas and we'll tell you during the course of the year by constant reminder whether you're going above the targets or not. So if someone slips in a little bill out of a particular committee and it raises the deficit, somebody else's bill may get cut so they begin to be a little careful about voting for ear.h new bill.

AG RONSKY: Let me raise a political question that must have occurred to all of you when you went into this process. Now here is the Congress of the United States with very, very substantial majorities on the Democratic side in both houses and with a Republican president, Now, th erefore, it is not unnatural that a Democratically controlled Congress is going to resist a lot of the fiscal policies and proposals of a Republican president. Now, how well would your process work if assuming there was a Democratic president who then asked you to go down his road. Now, at that point would you be so objective; would you be so nonpartisan? Wouldn't it be different? ADAMS: It would be different, sure. MUSKIE: There's been every effort, Martin, in establishing this process to make it independent. For example, the Congressional Budget Office is an independent agency although it serves us; and we hope its always I that way. We hope. Now I understand if the president's of the same .' I -8-

party the pressures to conform to the ... that's one of the reasons ... AGRONSKY: I think they're going to be irresistible. MUSKIE: One of the reasons,we lost some of our congressional powers in recent years, the war powers notably and the power of the purse,is for the very reason you said,that Democratic congresses have tended to give way to Democratic presidents the prerogatives that are legislative. AGRONSKY: Indeed they have. MUSKIE: And I think that's so wrong. Now, I hope that out of this experience of the last 30 years--let 1 s make it 30 years to include the presence of both parties--that out of this experience the Congress has learned that that was wrong for the country.and that that won't happen again. But you know power naturally grows in the executive and naturally shrinks in the legislative body. Whether or not we can turn that around historically only the future can tell, but I'll tell you this that Brock Adams and Ed Muskie are determined to try to make the Congressional Budget Office an independent agency that will survive. ADAMS: That's what we're doing--trying to get a process that will survive in the Congress and will be here regardless of president. And yes, it would be more difficult but there are advantages too because one of the problems we have right now is that if you have one party going for fiscal stimulus and one saying no we don't want any stimulus and you pass bi 11 s and they are vetoed, thus it ~s very hard to do that other key function that Senator Muskie mentioned, which is to develop a coherent fiscal policy and monetary policy that says to the country all right we have decided that we want to stimulate the economy, but we have decided that it's time to dampen down the economy. It's more difficult right now to arrive at an accommodation. That string . of vetoes the early part of the year just simply knocked out our economic stimulus program with the exception of the tax cut. Now, the people are going to judge which one of us was riqht; but at least now the issue is out and Congress has a fiscal face on. AGRONSKY: Now let's go back to a political reality. There is a Republican president and there is a Democratic Congress now. The Republican president, Mr. Ford, has now proposed a $28 billion tax cut proposal if at the same time there is an equivalent cut of 28 billion in Federal expenditures. Now, how realistic is that? MUSKIE: Well, I have two questions about it. (1) Whether or not the $28 billion tax cut,which represents considerably more stimulus to the economy then Brock Adams has spoken about, is the right medicine for the economy in this fiscal year and remember that the two are -9-

MUSKIE: separated by a year. The President would cut taxes by $28 billion as of this year and the spend i ng cuts would take effect as of next year. That gives you . . • AGRQNSKY: On the eve of the election. MUSKIE: On the eve of the election, but that gives you a difficult thing to measure in terms of its impact on the economy . But on the tax cut, I think the size is one quest.ion we have to examine and secondly the makeup of the cut. Now what the Congress has been considering is a simple extension of the 1 75 tax cuts ihto the next fiscal ·year. AGRONSKY: As they now exist. MUSKIE: As t hey now exist~ To do otherwise than that would mean withholdi ng rates would go up on the first of January and that would be perceived as a tax increase would be bad for the economy. So, I think there is a lot of support in the Congress for that. Now whether we ought to change from that to what the President has proposed is a question, I think, of some consequence. On the tax cut side what I take issue with hete is this: The budget process is designed to establish ceilings on spending, but that process begins now and the ceiling i s finally arrived at next May. The President wants to shortcut that process and force us to take his notion of what a ceiling is now. And he asks us to do this before he · has submitted his own budg et that won't happen unti l January and before he himself has identified the $28 billion in cuts. Budget Director Lynn was before t he Senate Budget Committee today. He couldn't tell us what those cu ts were going to b~ and he told us we wouldn't get the President's budget until January and nevertheless he wants us to do this now. AGRONSKY: I think that the President politically has a very advantageous position for many obvious reasons, and he's got a very tough co1TUTient that he makes and I would be curious to know how you answer it. He says 11 if this new Congress, this refonnedCongress, can't use enough imagination to put together a tax reducti on and a spending limitation, I think the American people ought to know about it because other Congresses have done it. 11 MUSKIE: I'll answer him in tenns of his own record. A year ago the President promised us a balanced· budget for this fiscal year. A balanced budget. Five months later when he presented his budget to the Congress it was $52 billion in deficit. Now what is wrong with that President? Couldn't he use his imagination, you know, to make possible in February what he promised in October? The reason he couldn't, of course, is because e_conomic conditions were changed and were not foreseeable. -10-

AGRONSKY: Revenues were going down; costs were going up. MUSKIE: Exactly. So now he wants us to try to anticipate a year before the fiscal year begins -- because the year he's talking about begins next October 1 -- a year ahead of time what he couldn't do five months ahead of time. AGRONSKY: I would venture to you gentlemen that if he is renominated on the Republican side and I think he will be, he's going to run on that partiuclar platform. ADAMS: All right and we're going to offer him up something like this. You're going to have a tax cut extension this year which is fiscally responsible and falls in with the spirit of holding intact the recoyery that is beginning to start. And in the spring we will go in and consider an additional tax package while we're considering the spending limitation for next year. And we'll wrap that into one package under the budget system and we'll offer it to the American people as what we have to keep this economy moving. And we'll say now which has been responsible, a wild shot early in October or a fiscally responsible system. I think for the Democrats to come on as fiscally responsible in this country is (1) healthy and (2) is good politics because its right.

MUSKIE: I couldn't have stated it better myself. That's an excellent statement. AGRONSKY: Very quickly. You do think both of you then that the tax cut as it now exists will be continued? MUSKIE: Yes. ADAMS: Yes. AGRONSKY: Secondly, everybody is terribly interested in federal aid to New York City. Do you think New York City is going to get it or not? What do you think? ADAMS: Well, as of right now I don't think so. I think that they are going to have to through some kind of a reorganization system like the Penn Central or others did before they can get theirs. AGRONSKY: Senator Muskie? MUSKIE: I think we cannot be indifferent to its impact on the rest of the country! but I think that if we are to deal with it and I would underline the 11 if11 we must want to insure (1) that the Federal government does not get into managing the affairs of our cities, and (2) that the · cash flow in New York City, after whatever action is taken, is sufficient to sustain rock-bottom services. •