21 So more will be spent for the BA allowed. There are four or five other items, the largest of which is increased costs for agriculture programs. Senator BOSCHWITZ. What is the total, Mr. Chairman? Chairman DOMENICI. I have the combination of all of them, not just the outlays and our estimate is the same, $220.5 billion. We will make these estimates available and I will make them a part of the record. [The following was subsequently supplied for the record:] Senate Budget Committee staff estimate Explanation of deficit increase Deficit in budget resolution.... Policy changes....... Resolution revenue assumptions not achieved Spending reconciliation not achieved (except farm bill).. Farm bill excess over resolution assumptions....... Excess of appropriations over resolution assumptions Debt service on policy changes.. Economic changes........... Revenue loss.... Outlay reductions..... Debt service on economic changes. Technical changes Revenue reduction Defense outlay increase Agricultural programs increase Debt service on technical changes. Total increase in deficit........ Deficit in Gramm-Rudman base.. Chairman DOMENICI. Senator Exon, you are next. Billions $171.9 24.0 2.3 7.7 7.4 1.0 4.4 1.2 6.9 13.0 -6.4 0.3 17.7 3.3 8.0 5.5 0.9 48.6 220.5 Senator EXON. Thank you very much Dr. Miller, welcome. I appreciated your opening statement and I appreciate, very much, the fact that you and the other agencies have come together. If Gramm-Rudman accomplishes nothing else, it will receive part of the credit for getting these two agencies together that have been miles apart for a long, long time. So, maybe Gramm-Rudman is not as bad as I think it is. But I am going to violate what the chairman requested by getting into specifics with regard to agriculture, because it is so critical. You know the depression that we have in the farm belt today. And farmers right now are planting in the south, and they are planting plantings further north. There are some things about Gramm-Rudman that are simply not understood and I am not sure that the agencies of Government understand what is happening in this area. Maybe you can clarify one or two of these. It would be a big help to people that are trying to plant out there, and are under extreme adverse situations. If you are familiar that when the President signed the farm bill, he said, at least the people who are producing food have the right 22 to know what the Government program is and we want to implement it. The Secretary of Agriculture promptly came forth with his rather devastating lowering of the loan rates, which I thought was too low, but he had that authority and he has done it. GRAMM-RUDMAN HAVING DEVASTATING EFFECT Now, Gramm-Rudman is taking over and it is having a further devastating effect, not only on prices, but also on planting. Here is my question or two. I can understand why the Agriculture Department is required to take out 4.3 percent. We are not going to argue about that. I think I understand that. And with regard to deficiency payments, you know, the difference between the loan and the target price, I can understand that when the farmer comes in and signs up, he is going to say, this is a deficiency payment that you would have received, but it will be reduced by 4.3 percent, because the deficiency payments are an outlay under the budgetary process I do not understand, and I wonder if the Department of Agriculture does, and if you can help clarify this—the Department of Agriculture is saying that also applies, not just to deficiency payments, but also the commodity loan programs, the nonrecourse loans. So we can get specific and so that you will know what I am talking about, the Secretary reduced to a $1.92 the nonrecourse loan on corn, for example. The Ag Department, today, I suggest, backed up by your Department is saying, but when that farmer comes in and signs up for this program for commodity loans, then $1.92 per bushel for corn will be reduced by 4.3 percent, which mathematically, as I understand, calculates out to $1.84 per bushel for corn. Here is my question that I want to ask, how in the world did you come up with that? I can understand the 4.3-percent reduction on the advance on deficiencies. But I do not understand how a loan is the same as a deficiency payment? I do not understand why you are proposing to reduce the loans given for a bushel of corn, and if you are reducing the loans, evidently you have taken the 4.3 percent against the $1.92 figure, which assumes that the corn put up as guaranteeing the loan is essentially worthless. Can you explain that to me? Dr. MILLER. I am told that this is quite clear in the language of Gramm-Rudman. Senator ExON. Well, I do not think that is a very satisfactory answer By whose interpretation, I would ask? Dr. MILLER. You are not asking me to violate the law, are you? Senator EXON. Oh, I would never do that, sir. Dr. MILLER. Let me read you section 251 here. It says sequestrations and reductions under the remaining nondefense program shall be applied on a uniform percentage basis so as to reduce new budget authority, new loan guarantee commitments, new direct loan obligations, obligation limitations and spending authorities, defined in section 401(c)(2) of the Congressional Budget Act of 1974 to the extent necessary to achieve any further required outlay reductions. 23 Senator EXON. Well, assuming that your interpretation of that is right, which I am not assuming at this time, my point is that you are reducing from a $1.92 to a $1.84 which is 4.3 percent of the $1.92. Should you not only be reducing that by 4.3 percent of the difference between those two figures, rather than against the full $1.92? You are assuming with that kind of a calculation, I hope that you will understand, that the corn put up as collateral is totally worthless. Dr. MILLER. Let me just give you a legal reading of that, if I could? Senator EXON. Let me ask another question on deficiency, well, my time is up. I will wait for the second round if I have one. Thank you, Dr. Miller. Dr. MILLER. Thank you, sir. Senator ARMSTRONG [presiding]. Senator Kasten is next. CLEAR POLICY TO REDUCE SPENDING Senator KASTEN. Mr. Chairman, thank you. Director Miller, I think that we are at a real turning point in the history of our budget and I am pleased to have you before us, here today. The Congress has acted, and I personally support that action. I voted for it and I was an original cosponsor of GrammRudman. And I think that despite some of the discussions that we have had here and in the press, I predict today that the outcome of legal challenges about the procedure and that we have identified in spite of any legal challenges, a clear policy to reduce spending. I do not know how the court challenges are going to work themselves out. I think that Gramm-Rudman will survive in the courts. But nevertheless, if a court challenge were to be successful, I think that Congress with a quick legislative action would fix that deficiency. And I think that even if we did not fix that deficiency, that we are locked in because we voted essentially for the numbers of $171.9 billion deficit; for $144 billion deficit, going on down to a zero deficit, a balanced budget, in 1991. So, whether we do it through Gramm-Rudman, through sequestration, through what we do here in the Budget Committee, or working back and forth with the administration, I think that we have got these targets and I believe that we owe it to the American people to make the budget reductions which we have agreed on. I do agree with you-we do, in effect, have a contract, and that contract goes beyond the legal challenges. I think also that what we are doing here today, has the widespread support of the people all across America, across Wisconsin, in terms of making these reductions. MARKET RESPONDS POSITIVELY TO GRAMM-RUDMAN Now, we have heard an awful lot of discussion about the negative impacts of Gramm-Rudman. Lots of stories about programs that are going to be cut, benefits that are going to be reduced. I wonder if you could try to help us in just the couple of minutes that I have got-what will be the actual benefit of Gramm-Rudman to an average family? Let us take an average family in Wisconsin, 24 as we see these benefits and these different support programs under question? But at the same time, as we see a Federal budget racheted down? Dr. MILLER. Well, I think if you look at what is coming up in terms of reducing the deficit by say, $50 billion, you are looking at something like $500 for every family in America. The reduction of the deficit, I think, is very important because otherwise, it poses a threat to our continued economic expansion. You have had a very fine recovery and expansion and that may well be threatened by continuation of such high deficits. You need to get them down, not that we are really in the business of trying to maximize the stock market in some way, but I think the fact that the market, the stock market responded very positively when Congress agreed to Gramm-Rudman is evidence that they believe that, the way that I would translate it, is that the real rate of interest would come down some. Senator KASTEN. Could you express that in terms of not, the stock market so much, but jobs, the cost of a cart of groceries, home mortgages, other kinds of things that the average family would be affected-what would be left in the banking account at the end of the month? Dr. MILLER. Well, if the real rate of interest were to fall, we would find that mortgage rates would fall; payments for families for a home would fall; quantity demanded of investment would go up and that will create jobs, that will create additional economic activity. It will create additional sales. I do not have at my fingertips a quantification of those particular effects, but they are quite substantial. I do not think that there is any question, but that the viability and the vitality and the continued expansion of our economy hinges upon our doing something responsible about the deficit. As I testified for my confirmation, I think it would be wrong to attempt some precipitous overnight cure of the deficit problem, as in trying to eliminate the deficit tomorrow, through increasing taxes or something like that. But to get the deficit down over a period of several years-4 or 5 years, seems to me the most prudent course to follow, and it is one that I think is going to have the maximum effect, positive effect on our economy, and the opportunities for all Americans. Senator KASTEN. Let me in just the couple of seconds that I have remaining, switch subjects for a second. GRAMM-RUDMAN DOES NOT APPLY TO FEDERAL RESERVE BANKS It is my understanding that the Federal financial institution regulatory agencies, instead of the Federal Deposit Insurance Funds, we are talking about the Federal Deposit Insurance Corporation, Federal Insurance Savings and Loan Corporation, the National Credit Union share insurance funds, except for those, are subject to budget reduction provisions under Gramm-Rudman. Is that, in fact, the case? My question is, How is this justified because no tax dollars are used to support the funding of these agencies? Dr. MILLER. Senator, I raised this earlier. All three agencies agree that the language did not appear to apply to the Federal Re 25 serve Board or the banks, even though, if that had been the intent, we thought that there might be legislative language to that effect. Senator KASTEN. Let me at a later time, follow up on this question, because I do not understand how there is no effect on tax dollars without tax dollar support. And it would seem to me that that would be difficult to justify. But we will follow that up at a later time. Dr. MILLER. I understand that the administrative expenses were sequestered. Senator KASTEN. Thank you, Mr. Chairman. Senator ARMSTRONG. Senator Lautenberg is next. Dr. Miller, I was interested in your presentation. I would have to tell you that I do not envy you and your earliest assignments as the new Director. We have had a chance today to explore some of Gramm-Rudman at work. I thought it was an ill-conceived plan, I voted against it, and I am "Gramm" glad I did vote against it. But, like others of my colleagues here, I think it is essential that we reduce the deficit, that we get our hands on our fiscal policy and our fiscal condition. I got my book on the sequestering orders, with a bunch of pages upside down and backwards, and I thought that was a pretty clear reflection of what Gramm-Rudman was about. Gramm-Rudman cuts will impose hardships on many Americans. At the same time, Gramm-Rudman cuts $140 million in funding for the Internal Revenue Service, which will further hamper our ability to collect revenue due and owing the Government. Treasury estimates that $90 billion in taxes is going uncollected each year. NO REPROGRAMMING REQUESTS APPROVED We can argue about that figure, but I assume that Treasury cannot be off by more than a small percentage. Collecting a part of that would help relieve the burden considerably for each member of our society. As we look at what is ahead, Dr. Miller, I wondered whether you had any views on what, if any, reprogramming of funds we might expect? Will there be an effort to move funding from one project or program to another in order to cope with the across-the-board cuts? I understand that is under discussion now. Do you have any feel for reprogramming requests that we might be facing? Dr. MILLER. I do not have a precise number at this point. I have approved no reprogramming requests. I doubt that we have very many. I really doubt that we will have very many reprogramming requests, in excess of those that we ordinarily experience during the year. I mean, as the fiscal year winds on, agencies find that certain kinds of accounts are bereft of funds and others are fat, depending on how they carry out their policies, and there are reprogramming requests. But for the specific purpose of meeting Gramm-Rudman, shortfalls, I do not anticipate-I surely, personally am not going to look upon reprogramming requests approval very approvingly. We are going to make the belt tightening cuts. We are going to meet the |