STATEMENT OF HON. CHARLES A. VANIK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF OHIO

Mr. VANIK. Mr. Chairman and members of the committee.

I just want to ask the committee to consider, making in order, an amendment which would provide for a limitation on the borrowing of the various Federal Government agencies outside of the public debt ceiling.

Our main thrust in this budget and expenditure control legislation, and in the President's impoundments is to control inflation. You can control inflation in two ways, by budget, bringing the accounts into balance, and the second way you do it is to try to control the rate of borrowing.

Treasury Under Secretary Volcker came before our Ways and Means Committee some weeks ago and told us that this year, in fiscal 1973, we would be borrowing, outside of the public debt, outside of any clear control of the Congress or its appropriation committees, $27 billion

You see, when we go into the money markets and borrow money to pay for our budget deficits, you have to compound that by what you have to do to help pay for some of the borrowing that is going on by the various Government agencies outside of the debt.

I have a list of the agencies that have this "special" authority. I am not going to burden you with this list. For example, a few months ago the Washington Metropolitan Transit Authority went in on the very day when money conditions were very critical and announced the sale of $250 million worth of bonds for the subway.

Today, the Export-Import Bank has $10 billion in authority. They have currently obligated $4 billion of that. They could tomorrow announce that they are going to borrow another $6 billion to make new loans and credits available.

They have absolutely unlimited control on what they can do. We gave them power, saying they had borrowing authority to carry out their mission, and they exercise their own discretion on when to do it. It seems to me that if we fail to put a control on borrowing, that we are only doing part of the job, because the Government's interest rates now are at 7 percent. They could very easily be pushed to 8 or 9 percent if these agencies all went to the market on their own initiative, these faceless bureaucrats who are not elected people just decide that they have to have more money to carry out their stated functions. They can negate, practically nullify, all of the work that we are doing in order to bring our accounts into balance. So what I am suggesting to your committee is that you make in order an amendment which would enable us to put a restraint on the allowable borrowing in any fiscal year. Such a person would have to provide for allocation, too, according to priorities, because there are a great many things that are involved.

There ought to be a way of apportioning it under a ceiling similar to the one developed in the other chamber. I think if we are going to really meet the problems of inflation, that in addition to putting an overall ceiling on spending, you have to say it is time to put an overall ceiling on borrowing and then establish some formula which will

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give each one of the agencies a proportional part of that borrowing power or allocate it in some other way to meet the priorities established by the Congress.

This is a power that we have lost. We have no control over when the agencies go to the money markets within the overall grant of authority we gave them years ago. I say to you we ought to have this kind of power and there ought to be this kind of limitation if we are really going to be effective in holding down the inflationary spiral.

That is the gist of my statement. I have cut it very short in consideration of your time. I frankly feel that any effort to control inflation through the budget-direct expenditures-alone is inadequate and is not going to control the problem.

The other area is the control of Federal guarantees. We have Federal guarantees and contingent liabilities that are now running at almost $1 trillion. A lot of agencies have the right to guarantee loans made by others. That is inflationary. That is raising the price of interest.

Someone is going out to borrow the money that is guaranteed. So we have to put some restraints on these already enacted powers of the Government so that we put some restraints on the demands that are made on resources for money. That is the thrust of my statement. The CHAIRMAN. Thank you, Congressman.

Are you familiar with the various bills that have been talked about here?

Mr. VANIK. Yes, Mr. Chairman. I didn't want to get into an analysis or discussion of any of those bills. I will respect the judgment of the committee on what form you give us on that basic legislation.

My own feeling is that I hope you make it possible for the House to consider an amendment which would put a limitation on the borrowing that is outside of the debt limit, that is outside of the control of Congress.

The CHAIRMAN. Mr. Sisk.

Mr. SISK. Charley, what kind of an amendment? Do you have language? I am sympathetic to what you are saying. I recognize, as you mentioned, on the guaranteed loans for the Federal Government it is a fantastic figure. We have all kinds of agencies all over the lot that are borrowing money under so-called Federal guarantees and insured. loans, and so forth, and so forth.

What kind of language do you have? Do you have language that you think would be effective in this area? In the first place, I think anything we pass out is probably going to be an open rule. I don't know whether it will be germane or not, but what kind of an amendment do you have in mind?

Mr. VANIK. I would say, for example, that Mr. Volcker says we have $27 billion outside of the debt ceiling this year and we ought to probably put an overall limitation of

Mr. SISK. You are talking only of borrowing directly by the Government, itself?

Mr. VANIK. I am talking about borrowing by Government agencies. In other words, I would like to see us enact an overall limitation on the borrowing outside of the debt limit this year.

Mr. SISK. The point is there are so many of these agencies. Let's take TVA or REA, you name it. There are literally dozens upon dozens of these agencies with borrowing authority. How many are there? Mr. VANIK. I think there are about 25 principal ones.

Mr. SISK. I thought there would been a lot more than that.

Do you propose to limit on a percentage basis? The point is that here, again, you get down to priorities. I understand in essence the point you are making. Technically, I don't see how to do it.

Mr. VANIK. We could establish an overall ceiling.

Mr. SISK. I see what you mean. In other words, first come, first served. In other words, when those agencies that had borrowed reached a certain amount.

Mr. VANIK. We could say that they should anticipate their borrowing a year ahead, just like anything else we do. They should submit their borrowing needs to us and let Congress fix the priorities for any given year.

Mr. SISK. In other words, return the power to Congress.

Mr. VANIK. Return the power to Congress that we have granted and which now operate without any control by us at all. For example, the Export-Import Bank has $10 billion authority. You probably wouldn't want to take that away, but we could have an amendment that would state that the total borrowing for next year shall be $23 billion. Of the $6 billion that they have remaining, they-the bank-cannot, in the next year, borrow more than $2 billion.

Just to fix it at some amount, the same way you establish your priorities here. I think the legislation is possible.

Mr. SISK. I agree with your point, Charley. I think this is an area. where, so far as inflation is concerned, it is terribly inflationary.

Mr. VANIK. It is just as much a cause of inflation as your deficit between receipts and expenditures. I want to tell you as one member of the Ways and Means Committee, I don't see any new tax changes as any form of relief, nor do I candidly expect that we are going to pick up any more revenue in tax reform.

We did have a report the other day that the receipts of the Government are going to be considerably higher. I think you should have that before you in your considerations.

Secretary Shultz told us the other day that because of increased profitability there has been a pickup in tax receipts that are well beyond the budget. I think they go $5 billion or $6 billion beyond the initial budget estimates.

Mr. LONG. The inflation, itself, has caused that, too.

Mr. VANIK. Inflation is a great part of it. Probably over half of it. The CHAIRMAN. Mr. Quillen?

Mr. QUILLEN. No questions.

The CHAIRMAN. Mr. Young.

Mr. YOUNG. Thank you, Mr. Chairman.

What you have said I think is tremendously interesting and there is a lot to it. But that only pertains to the Federal Government's borrowing, its agencies and so forth. Is it or is it not a fact that other agencies of Government, State, local, so forth, plus the private sector in their fiscal operations really far exceed the U.S. Government?

Mr. VANIK. That is correct. I am talking about what we can do. There is no real way that we can cut back on their expenditures or their borrowing. I think that is a matter that they have to decide.

Mr. YOUNG. You are not saying, then, that the U.S. Government is solely responsible for inflation, the expenditures of the U.S. Govern

ment.

Mr. VANIK. I think our Federal borrowing is a substantial contributor to the inflation. It is the substantial contributor.

Mr. YOUNG. But not entirely?

Mr. VANIK. Not entirely, you see, this is controllable. As a matter of fact, the administration, itself, has felt the need of some kind of control over its own agencies. They act as though they don't even talk to each other. You might wake up in the morning and one of the agencies might decide to float a loan for $2 billion and it throws the whole money picture completely out of line and feeds inflation.

It is a time that Congress ought to step in and say, "You have to tighten your belt. Though you will still have your authority, we will only allow you to use a certain percentage of it.

Mr. YOUNG. I can recall 18 or 20 years ago when a country government cleared before it issued or sold bonds.

Mr. VANIK. Yes.

Mr. YOUNG. That is all.

The CHAIRMAN. Mr. Latta.

Mr. LATTA. Did I understand you to say in your amendment it would include the guaranteed loan program?

Mr. VANIK. I Wouldn't include the guaranteed loan program in this kind of amendment, but I just wanted to point out that the loan guarantee program is used sometimes as a substitute for direct borrowing, and this is something that we have to watch. We have to watch the guarantee or contingent liability program because it is getting out of control. It is up near the trillion-dollar mark right now.

The liabilities which might come due from all these guarantees and insurances could probably be one-twentieth of that. But it is a tremendous sum and it also fuels inflation. For example, the ExportImport Bank had a new gimmick in the LNG gas deal. The ExportImport Bank guaranteed a loan made by a foreign government to the Government of Algeria.

The CHAIRMAN. To which government?

Mr. VANIK. To Algeria. The loan was made by Europeans to a foreign government and our Export-Import Bank, using the backing of the American taxpayer, guaranteed that loan at subsidized rates.

There are all sorts of things like this going on. The Export-Import Bank is really something to watch.

Mr. LATTA. Your proposed amendment would not go to that.
Mr. VANIK. No.

Mr. LATTA. Nor would it go to the guaranteeing of mortgages on homes, for example, the Farmers Home Administration, the VÀ. You wouldn't go to that?

Mr. VANIK. No. We don't disturb that. We would try to control other agencies. The Export-Import Bank, for example, can issue bonds at any time. They could go out tomorrow and issue $6 billion worth and throw us into a real spin.

The Government's interest rate could go up 12 points on that. I think we have to have some control over the way they can freely march into the money market and increase the cost of our own Government borrowing and our own deficit because of what they do and when they do it. I think we can't possibly fight off the inflationary effect, unless we put a curb or some limitation on the annual borrowing.

Mr. SISK. Could I clarify this with you again: Do you think this would require a special provision of the rule to cover the kind of amendment you are talking about for either one of these bills?

Mr. VANIK. I think so. I think either one of the bills would require a rule simply saying that it would be in order to offer an amendment which would endeavor to limit the borrowing in the next fiscal year, borrowing in and out of the debt ceiling.

I think we have to have that special language in the resolution. Mr. CLAWSON. Do you think that has to be spelled out in order to take care of the germane requirement?

Mr. VANIK. I am absolutely certain it would have to be spelled out to meet the germane test. There would be no harm in letting this go to the House and let the House work its will on this issue. The debate would be astounding in that it would reveal the tremendous extent of the borrowing and the arbitrary nature in which it is made.

People that we have no control over can just go ahead and decide they are going to go to the money market and borrow $14 billion or $1 billion and they don't talk to anybody. They don't even clear with the White House. It is a dangerous thing.

Mr. YOUNG. If this is made an order, you will be heard on the floor, wouldn't you?

Mr. VANIK. Yes.

Mr. YOUNG. In that connection, if it is not too much of a burden, I, for one, would be very much interested in seeing the ratio between private and other Government activities along these lines.

Mr. VANIK. I will be glad to try to provide that. I will provide every member of the Rules Committee with a list of the outstanding direct loans and the power that remains.

Mr. CLAWSON. Mr. Chairman, may I ask for unanimous consent that these be inserted into the record?

The CHAIRMAN. Without objection it is so ordered.

Mr. VANIK. There are two tables. One is a table relating to the Executive control over major and federally assisted borrowings in the private market, which our colleague from Texas talked about, and the other is outstanding direct loans, guaranteed insured loans. Those two tables should be in the record. Again, my amendment would not affect all these programs. I just want to give you an idea of the size of these backdoor activities.

[The tables referred to follow :]