Budget Watch

A newsletter covering budget reform and the latest news and views on the federal budget, published by The National Center for Public Policy Research, 501 Capitol Court, N.E., Washington, D.C. 20002 (202) 543-4110, Fax (202) 543-5975, and the Small Business Survival Foundation, 1320 18th St. NW, Washington, D.C. 20036 (202) 785-0238, Fax (202) 822-8118, E-mail [email protected], Web http://www.nationalcenter.org/.

Issue # 27 - April 8, 1996 * David A. Ridenour and Karen Kerrigan, Editors

Hill Watch: Update on Budgetary Issues on Capitol Hill

Are Deficit Hawks Being Fooled into Supporting Bill to Take Transportation Spending Off-Budget?

Apparently under the impression that the U.S. government has been hoarding money raised for transportation projects by transportation taxes, and then using the surplus to mask the true size of the deficit, dozens of deficit hawks have joined more than half of Congress in sponsoring H.R. 842, the "Truth in Budgeting Act." H.R. 842 would move the Highway, Harbor Maintenance, Airport and Airway and Inland Waterway Trust funds off-budget. But contrary to what some sponsors seem to think, it would not stop transportation trust fund surpluses from being used to mask the deficit -- as there is no surplus. Since 1980, for example, the federal government has spent $14 billion more on Highway Trust Fund programs than the fund has collected. What's more, since 1956 the federal government has spent $38 billion on highways without debiting the $38 billion from the Highway Trust Fund's account. Rumors that the Highway Trust Fund has been stockpiling transportation taxes intended for road construction are simply false. Even the paper surplus listed for the Highway Trust Fund account is attributed to accumulated interest, not unspent tax revenues. The true motivation of most H.R. 842 sponsors seems to be a desire to take transportation funding off-budget so transportation expenditures won't be subjected to the same budgetary disciplines as other federal programs. This view is supported by the fact that a special interest coalition consisting of 61 national organizations with an interest in seeing transportation spending increased, the "Alliance for Truth in Transportation Budgeting," has urged its local members to lobby Members of Congress hard in support of H.R. 842 during the Easter recess. Opponents of H.R. 842, led by Budget Committee Chairman John Kasich, Appropriations Chairman Bob Livingston and Ways and Means Chairman Bill Archer, are citing several reasons why H.R. 842 would increase the deficit, and on March 21 circulated a "Dear Colleague" letter setting out four facts about H.R. 842 to correct what they call a "misinformation campaign" in support of it. The three Chairmen say that passage of H.R. 842 would give transportation spending a "de facto entitlement status." In an unusual move, Federal Reserve Chairman Alan Greenspan has joined opponents of the bill, saying in a letter to Representative Frank Wolf (R-VA), Chairman of Appropriations' Transportation Subcommittee, that passage of H.R. 842 "could engender cynicism in financial markets and the public at large about the commitment and ability of the federal government to control federal spending." H.R. 842 is scheduled for a vote in the full House during the week of April 15-19.

GOP Announces Effort to Turn "Tax Day" Into "Anti-Tax Day"

House Republicans have announced plans to take up a bill on April 15 -- "Tax Day" -- that would require future tax increases to be approved by a supermajority of two-thirds of Congress. The measure, House Joint Resolution 159, is sponsored by Representative Joe Barton (R-TX) and will be debated after 6 P.M. on the 15th -- peak television viewing hours. Senate Majority Leader Robert Dole (R-KS) has promised a vote on the measure in late April, if approved by the House with the needed 290 votes. Perhaps "Tax Day" can become "Anti-Tax Day" on Capitol Hill.

Campaign '96: The Budget Debate on the Campaign Trail

Proposed Minimum Wage Hike Would Be Budget Buster

With the congressional and presidential campaigns in full swing, Democrats have wasted no time in making their case for a hike in the minimum wage -- a move, they argue, that will not only help working Americans, but aid in reducing the welfare rolls by encouraging welfare recipients to enter the job market. Recent studies, however, suggest that just the opposite would occur with such a wage increase: Rather than serving as a budget boon, it would be a budget buster. According to a recent Congressional Budget Office study, raising the minimum wage from $4.25 to $5.15 per hour as Democrats propose would cost the economy $12 billion over the next five years, costing perhaps hundreds of thousands of jobs. A University of New Hampshire poll of the nation's economists showed that nearly 80% of those surveyed believed that minimum wage hikes cause job losses. And what do you suppose happens when jobs are lost? Welfare rolls increase and government expenditures on these programs rise. A University of Wisconsin study found that welfare recipients in states with recent minimum wage increases, on average, stayed on welfare 40% longer than recipients living in states with no wage increases. "The pernicious effects of a minimum wage hike are most acutely felt among black youths," explains Peter Kirsanow, a member of the African-American leadership group Project 21. "The reason is not complex. An increase in the minimum wage displaces unskilled or low-skilled workers whose labor is not worth the new arbitrary wages mandated by government... A disproportionate share of the unskilled work force consists of black teens." But just as companies began to eliminate some of these positions, Kirsanow argues, the demand for them among black youth would skyrocket. "[An increase] would... produce a dramatic rise in the number of black youths leaving school to embark upon an unsuccessful job search." For more information, contact Project 21 at (202) 543-4110 or the Small Business Survival Committee at (202)785-0238.


Small Business Survival Foundation
1320 18th Street, N.W.
Washington, D.C. 20036
(202)785-0238
Fax: (202)822-8118

The National Center for Public Policy Research
501 Capitol Ct NE
Washington, D.C. 20002
(202) 543-4110
Fax: (202)543-5975
E-mail [email protected]

Nothing written here should be construed as an attempt to help or hinder legislation before the U.S. Congress.

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