The Republican "Contract with America" (1994)

As Republican Members of the House of Representatives and as citizens seeking to join that body we propose not just to change its policies, but even more important, to restore the bonds of trust between the people and their elected representatives.

That is why, in this era of official evasion and posturing, we offer instead a detailed agenda for national renewal, a written commitment with no fine print.

This year's election offers the chance, after four decades of one-party control, to bring to the House a new majority that will transform the way Congress works. That historic change would be the end of government that is too big, too intrusive, and too easy with the public's money. It can be the beginning of a Congress that respects the values and shares the faith of the American family.

Like Lincoln, our first Republican president, we intend to act "with firmness in the right, as God gives us to see the right." To restore accountability to Congress. To end its cycle of scandal and disgrace. To make us all proud again of the way free people govern themselves.

On the first day of the 104th Congress, the new Republican majority will immediately pass the following major reforms, aimed at restoring the faith and trust of the American people in their government:

Thereafter, within the first 100 days of the 104th Congress, we shall bring to the House Floor the following bills, each to be given full and open debate, each to be given a clear and fair vote and each to be immediately available this day for public inspection and scrutiny.

Further, we will instruct the House Budget Committee to report to the floor and we will work to enact additional budget savings, beyond the budget cuts specifically included in the legislation described above, to ensure that the Federal budget deficit will be less than it would have been without the enactment of these bills.

Respecting the judgment of our fellow citizens as we seek their mandate for reform, we hereby pledge our names to this Contract with America.


DATE January 12, 1995

Mr. CONRAD. Mr. President, ever since the November 8 election, the Republican majority and the media have been talking about the Contract With America. The contract sets out the Republican agenda for the first session of the Congress, and it has many good elements in it. For example, I strongly support the Congressional Accountability Act, which will ensure that Congress lives by the same rules it imposes on everyone else. That is something that we almost passed in the last Congress and that is something we will pass in this Congress.

I support the unfunded mandates bill, which will make it more difficult for Congress to mandate State and local governments to establish programs unless Congress appropriates funding to pay for them. That also makes common sense. And it is also something we were working on in the last Congress. But when it comes to the budget and tax elements of the contract, there are two big problems.

First, the numbers just do not add up. There has been a lot of talk about what will not be cut, but the specific proposals on what Republicans believe should be cut fall far short of what is needed to balance the budget. And if the math does not work, the contract will balloon our deficits, explode the national debt, slow our economy, and leave future generations to clean up the mess.

Second, the tax cuts proposed by the Republicans are unfair because they are clearly designed to benefit the wealthiest among us far more than average Americans. And the program cuts necessary to finance these tax cuts, or the higher interest rates that will result when the Republicans fail to balance the budget as promised, will hurt the middle class. Let me explain why the contract does not add up and why it is unfair to average Americans.

We first have to look at the current budget outlook. The contract calls for a balanced budget amendment to the Constitution, which would require a balanced budget by the year 2002. I strongly support this goal. Deficit reduction has been at the top of my agenda since I came to the Senate in 1986, and I have spent an enormous amount of time working on the Federal budget, learning about it, and devising plans to put our fiscal house in order. Every year I have been in the Senate, I have offered comprehensive plans in the Budget Committee, or far-reaching amendments in the Budget Committee or on the floor of the Senate, to achieve more ambitious deficit reduction goals.

Unfortunately, the rest of the Republican contract that is before us makes it far more difficult to meet the balanced budget goal. According to the Congressional Budget Office, it will take more than $1 trillion in cuts over the next 7 years to reach a balance by the year 2002. That is what this chart shows. This is what is necessary to achieve balance by the year 2002 - over $1 trillion in budget cuts.

This is not millions of dollars; this is not billions of dollars - this is a trillion dollars, one thousand billion dollars. And that is only if we do not do anything to make the problem worse before we start to solve it.

But the contract makes things far more difficult because it promises hundreds of billions of dollars in tax cuts, most of which would benefit the wealthy far more than average Americans.

The Republicans call it the Contract With America. I call it a Contract on the Middle Class. In order to pay for the tax cuts, the Republicans will have to cut an additional $364 billion in the next 7 years, much of it from programs that benefit middle income families. So let me be clear. If we do not do anything to make the problem worse before we begin to solve it, we need $1 trillion in cuts over the next 7 years to S 822 achieve a balanced budget. But the Republicans suggest the first thing we do is not to cut the spending, but to cut taxes by $364 billion over 7 years. So they have dug the hole deeper. Instead of a $1 trillion problem to solve, they present us with a $1.4 trillion hole to fill.

This chart shows that. The blue indicates the $1 trillion necessary to bring the budget into balance. And if you add the $364 billion of tax cuts Republicans have called for, you then see we have a $1.4 trillion problem to solve.

In fact, the effects of these tax cuts will be worse than it appears from these charts. By design, the tax cuts are structured so that the adverse effects are not readily apparent until after the end of the 5-year budget window that Congress uses to measure the effect of proposed changes in taxes and entitlements. In the first 5-year period the tax cuts would cost $197 billion. But between fiscal years 2001 and 2005, their cost more than doubles to $514 billion. Over the 10-year period, those tax cuts cost $712 billion.

This is at a time when we already have a $1 trillion problem to solve over the next 7 years. Without going further on that point, let me just say this means we will have to make additional cuts after 2002 to keep pace with the growing cost of these giveaways to the wealthy and corporate America.

In addition, the contract calls for more spending on defense. Everyone wants a strong national defense, but the world has changed. We now spend more on defense than the next top 10 countries combined, even though there is far less danger to defend against than just a few years ago. In fact, we are the only remaining superpower in the world. Certainly we see this to be true when we look at the Russian Army that cannot even effectively deal with one element of its country that is in revolt.

The extra $82 billion the Republican defense buildup will add to our budget will raise the total cost necessary to reach balance by 2002 to a staggering $1.48 trillion - $1.48 trillion. So we start with a $1 trillion problem and the Republicans immediately proceed to add $364 billion of tax cuts and $82 billion of additional defense spending, making the hole deeper, making the problem bigger, and making the prospects of success more remote.

Just to put that in context, the entire Federal budget this year for everything but interest on the Federal debt is $1.36 trillion. That is, to reach balance by 2002, to pay for all of the proposals in the Republican contract, will require the equivalent of eliminating every Government program - except interest payments - for more than 1 year.

That would be a tough enough problem to address and to solve even if the Republicans in their contract did not do other things to make it even more difficult. But after all the Republican goodies are added on top of our current fiscal problems, we need to cut nearly $l.5 trillion in order to reach a balanced budget by 2002. Clearly that will not be easy.

You have heard our friends on the other side of the aisle suggest over and over that they are going to close this budget gap by cutting agriculture, maybe eliminating farm programs completely and by cutting welfare. Mr. President, that is less than 5 percent of the Federal budget. They have a long, long way to go. The only thing they have come up with so far is welfare, foreign aid, and agriculture, a small fraction of overall spending.

This chart shows where the money is going in the 7 years leading up to 2002. We are going to be spending - if we do not make changes - and clearly we must - some $13.2 trillion over the next 7 years. Where is the money going? Interest is just over $2 trillion, and defense is just over $2 trillion. In fact, we are going to be spending more on interest than we are going to be spending on defense over that 7-year period. Medicaid will be about $1 trillion. Social Security will be almost $3 trillion. Foreign aid will be $162 billion, a little sliver of the spending pie. Domestic discretionary spending will be $2 trillion. Medicare will be nearly $2 trillion. And agriculture, that I hear the other side talking about so loudly, is far less than 1 percent of the budget over this period, only $87 billion. This little tiny sliver here on the chart is agriculture. All other Federal spending over that period will be about $1 trillion.

Mr. President, it`s clear we cannot balance the budget just by cutting agriculture programs, cutting foreign aid, and cutting welfare. That is less than 5 percent of what we spend. That is not going to do the job. Once again, we have public statements that sound good but just do not stand up to budget reality. They just do not add up. What we have is a Republican credibility gap.

Unfortunately, instead of giving us a detailed plan that tells us what they are going to cut in order to reach their goal, the Republicans have been telling us what they will not cut. First, they say we cannot cut interest payments on the Federal debt. Of course, that is true. If we did try to cut interest payments, the Federal Government would default and the economy would be thrown into turmoil. This takes over $2 trillion off the table of the $13 trillion we are going to be spending over the next 7 years.

Second, the contract authors say they are not going to cut Social Security. That takes an additional $2.9 trillion off the table.

Third, the contract authors have promised to increase rather than decrease defense spending. So cuts in defense spending are also off the table. That removes another $2.1 trillion from consideration. In fact, after the contract authors have finished making their promises, more than half of the budget is off the table. More than half of the budget cannot be considered in order to solve the budget problem that we face.

On the other side of the ledger, the Republicans have detailed only $277 billion in spending cuts over the next 7 years. Mr. President, I earlier outlined the extent of the problem. If we are going to balance the budget over the next 7 years we have to make cuts of $1.48 trillion, almost $l.5 trillion. The Republicans have so far identified $277 billion of cuts. That leaves the Republicans with a credibility gap of $1.2 trillion - not million, not billion, but trillion. The size of the problem is $1.5 trillion but they have identified less than $300 billion of budget cuts. That means somewhere out there is $1.2 trillion of budget cuts our Republican friends have failed to identify.

We have heard the good news from our Republican friends. But as Paul Harvey would ask, `What is the rest of the story?` They have only two choices. Either the Republicans detail Draconian cuts in programs to close this gap or they fail to balance the budget by 2002.

This failure to talk about specific spending cuts sounds like deja vu all over again. We have heard it all before, Mr. President. History reminds us of the failed trickle down economics of the 1980`s. They can say it is a new Contract With America. They can put new clothing on it, but it is the same old trickle down theories, the same old voodoo economics.

History also tells us that faced with a choice between making tough specific spending cuts to pay for their proposals and letting the budget run out of control, the Republican Party will balloon the deficit and run up more and more red ink.

In the 1980`s President Reagan came to town promising huge tax cuts, increased defense spending, and a balanced budget. Does it sound familiar? Well, it is. It did not work then. It is not going to work now.

Instead, during that period the average annual deficits under Presidents Reagan and Bush were five times that under President Carter. The national debt tripled under President Reagan, from $900 billion to $2.6 trillion, and grew by half again under President Bush to $4 trillion.

Mr. President, all we have to do is go back and look at what happened when we previously relied on this economic theory. Here is the budget deficit line. From 1940 to 1980, the national debt of the United States was relatively stable. But the Republicans came to town in 1980 with this theory that they could cut taxes, increase defense spending, and somehow the budget would be balanced - even though it was not balanced when they began. It proved to be a complete fraud and hoax. Mr. President, this is what happened. We very nearly destroyed the economy of this country by creating a fourfold increase in the national debt. S 823

Mr. President, these debts did not finance investment in our future. Instead, they reduced our national savings. The result was record high real interest rates.

This chart shows exactly what happened to interest rates as a result of those failed economic policies. From 1968 to 1973, real long-term interest rates, the difference between the interest people paid and the rate of inflation, was less than 1 percent. From 1974 to 1979, real interest rates, the difference between inflation and the interest rates people paid was a negative point 6 percent. But look at what happened from 1980 to 1989 to real interest rates. The difference between the level of inflation and the interest rates people paid was 5.5 percent - record high real interest rates. What did that do? It stopped economic growth in its tracks, it killed job creation in this economy, and it weakened us for the future.

Record high real interest rates means that we invested less in the 1980`s than in previous decades resulting in less economic growth for the future, stagnating wages, and a bigger struggle for the average guy to get ahead. It is true. The rich got richer but the middle class got nothing in the 1980`s.

These policies squeezed the middle class while better off Americans, the top 20 percent of earners, saw their incomes increase. In fact, this chart shows the changes in family after-tax incomes by income group from 1977 to 1992.

Here is what happened. The bottom 20 percent in our country, the lowest one-fifth in terms of income, saw their after-tax incomes decline 12 percent. The next 20 percent in our country saw their incomes decline 10 percent. The next 20 percent of the income ladder in this country saw their incomes decline 8 percent.

This is the harsh reality of what occurred under a flawed economic policy and plan. Those 60 percent of Americans in the lowest income categories saw their incomes decline during this period. The next 20 percent of the people in this country saw their incomes rise a modest 1 percent. But look what happened to the top 1 percent. The top 1 percent saw their incomes increase 136 percent.

The facts are startling. Working men without college degrees - about three-fourths of all working men - saw a 12-percent decline in real wages since 1979. It is no wonder they are angry; it is no wonder they are upset; it is no wonder they are anxious about the future.

Average weekly compensation has actually fallen to its lowest level since 1960. The only reason that real median family income stayed level overall is because families have added additional earners. My family is an example. I was raised by my grandparents and grew up in a middle class, extended family, with three uncles and aunts and their families in my hometown. In our family - like most middle-class families at that time - the mothers were able to stay home until the kids went to school. Now, in my generation, with 13 grandchildren - all with advanced degrees - every single family has both spouses working to maintain the same middle-class existence. This is not just the reality of the Conrad family. It is the reality of every family in America, and it is, in part, because of a flawed economic policy and plan that was put in place in the 1980`s - a plan that proved to be an economic disaster for this country.

Meanwhile when middle-class incomes were falling, the cost of health care, a college education, and homes were rising faster than inflation, squeezing the middle class. Middle-class incomes are buying less and middle-class families are saving less. At the same time, the pay of the average chief executive officer of a corporation, has risen from 29 times as much as the average worker in 1979 to 93 times as much as the average worker today. It is no wonder, I suppose, that a major corporation gave $2.5 million to the Republican Party in the last campaign. They like this policy. This policy is good for them. I understand that. They are looking out for their economic self-interest.

Mr. President, our obligation here in this Chamber is to look out for all Americans, not just the wealthiest 1 percent, not just those at the top of the income ladder, but everyone.

If we look at the tax provisions of the contract, we see more of the same trickle down economic theory. I would like to focus for a few minutes on some of the tax provisions proposed in the contract, because they point so clearly to why the contract is not fair, why it is more of the same old trickle down economics that hurt the middle class in the 1980`s.

Middle-income Americans are being led to believe that the tax changes proposed by the Contract With America are directed primarily at them. Nothing could be further from the truth. In fact, only 46 percent of the contract`s proposals benefit families with incomes under $100,000.

Mr. President, this chart shows that reality. A majority of the benefits - 54 percent - go to families with incomes greater than $100,000, only about 3.5 percent of all Americans. Put another way, only 46 percent of the proposed Republican tax cuts go to benefit the 96.5 percent of Americans who earn less than $100,000, while 54 percent of the benefits go to 3.5 percent of the people who earn more than $100,000 per year. That is the old trickle down economics. That is the way it worked then and that is how it would work now. It is no wonder the middle class got left behind in the 1980`s. And if such a policy is enacted now, they would be the first ones hurt in the 1990`s.

All in all, almost one-third of the benefits under the Republican plan go to households with incomes of more than $200,000. That is how the Republicans targeted this plan - with one-third of the benefits going to the top 1 percent.

Mr. President, I think it is useful to look more closely at a few of the tax proposals - the major ones - that our friends in the Republican Party have proposed. Let`s examine them and see who benefits.

The most costly of the tax cuts in the contract are aimed at the very wealthy. For example, 95 percent of the benefits from the expanded IRA provision would accrue to the top 20 percent of income earners, at a net cost of $45 billion over 10 years. This chart shows how that works. Ninety-five percent of the benefits of the IRA tax incentive they have proposed go to the top 20 percent of income earners who are more likely to already benefit from other tax-favored pension and retirement plans, while only 5 percent of the benefits go to 80 percent of the population.

Capital gains tax relief, which has also been proposed, strikes a chord with many Americans, including some of my constituents who are small business owners or farmers. The proposal in the contract is not a reasonable relief measure, however. Again, it benefits primarily the wealthy. In fact, almost half of the benefits from the capital gains provision would accrue to the wealthiest 1 percent of the population.

It should be pointed out that, through indexing and direct exclusion, taxes would be eliminated on most capital gains profits. The overwhelming winners would be higher income individuals who hold stocks and bonds, while no change would be made in the treatment of interest income from the savings accounts that ordinary middle-class Americans hold. For interest earnings, no adjustment for inflation or exclusion from taxation would be provided. This is the reality of the Republican Contract With America.

Mr. President, I do not know what can be more clear. This shows that the top 1 percent of income earners receive 50 percent of the benefits of the proposed capital gains tax cut. The other 50 percent goes to the other 99 percent. This is the Republican idea of equity. It is not my idea of equity, not my idea of fairness, not my idea of an economic plan that is right for America.

Tax cuts that benefit primarily the wealthy are particularly ironic in view of the fact that I mentioned earlier - income for the top 20 percent of the population has dramatically increased over the past 20 years. I am glad to see that. But what happened to the rest of the folks in this country?

As I noted earlier, the next 20 percent saw a 1 percent gain, and the income of the bottom 60 percent in this country actually declined. This is the reality. In fact, the wealthy are taking home the largest share of national income ever. Yet, the contract proposes tax cuts to ensure that the wealthiest become even wealthier. S 824

The problem is further compounded by the certainty that while upper income families are receiving the benefit of the lion`s share of these tax cuts, they secure a much smaller percentage of their income from Government benefits than average families at lower- and middle-income levels. Upper income families would be affected the least by budget cuts necessary to balance the budget and pay for further tax cuts, primarily for their benefit.

We are giving these benefits to the wealthy at a very high price to the country. At a time when we should be focusing on fiscal restraint, further deficit reduction and spending cuts, the Republicans instead are focusing on tax cuts.

The proposals in the contract are simply a recycling of the hollow promises from 1981: large tax cuts, defense spending increases, and a balanced budget. That is what they said then; that is what they are saying now. They did not keep their promises then and they can`t do it now.

The Reagan administration predicted the economy would improve from a $55 billion budget deficit in 1981 to a surplus of $5.8 billion in 1985. In reality, the Federal deficit actually rose during that period to $212 billion - another gap between rhetoric and reality. They inherited a deficit of $55 billion and they ran it up to $212 billion, all the while saying they would achieve a surplus.

Mr. President, the contract is just as irresponsible. The contract`s tax cuts will cost $364 billion, and the Republican defense increases will add another $82 billion. That means the Republicans need $1.4 trillion of spending cuts to balance the budget by the year 2002. Let me repeat: The Republicans need $1.4 trillion in spending cuts over the next 7 years to balance the budget after their tax cuts and after their defense increases.

But where are their spending cuts? Where are they? `Where is the beef?` The only specific cuts the contract identified add up to $277 billion over the next 7 years, not even enough to pay for their tax cut proposal, let alone start to balance the budget.

The bottom line is that there is a $1.2 trillion - not million, not billion, $1.2 trillion - Republican credibility gap, the gap between Republican rhetoric and Republican reality. It gives new meaning to the phrase `Don`t ask, don`t tell.` That is the economic policy the Republicans are asking the American people to buy - a pig in a poke. `We will balance the budget.` The problem is $1.4 trillion. They have shown $277 billion of spending cuts. Where is the rest? Where is the other $1.2 trillion?

You really have to wonder what the Republicans are hiding from the American people.

We have seen these sorts of promises before, so we know what is going to happen. These tax breaks for the wealthy will end up busting the budget and the middle class will get stuck with the bill in one of two ways. Either they will be paying through huge cuts in middle class programs, from Medicare to student loans to keeping our highways in good repair, or they will pay with higher interest rates on home loans, car loans, and educational loans, and economic stagnation caused by falling investment in our future.

The Republicans have been enormously successful at selling their contract as a benefit to the middle class.

Mr. President, the reality is that, hidden in the fine print of the contract, are enormously expensive tax breaks for the wealthy that will bust our budget.

Instead of talking about more defense spending and tax breaks for the wealthy, the Republicans need to tell us their specific proposals for balancing the budget. Where are they going to cut the other $1.2 trillion necessary to balance this budget? That is $1,200 billion.

We are waiting to hear from the Republicans. Where are they going to make the cuts specifically? Not these nostrums, `Oh, we will maybe eliminate agriculture funding.`

In closing, let me again say we have heard this all before. There was a credibility gap in the 1980`s between what the Republicans promised and budget reality. Earlier, I said the Contract With America was a contract on the middle class.

I would warn those middle class Americans who listened to the promises of the Republicans in the 1980`s. What happened to you? What happened was the rich got richer, the poor got poorer, and the middle class paid the bill.

Mr. President, political rhetoric in a campaign is one thing. Performing when one has the responsibility of governing is another thing. I call on the Republicans and I challenge the Republicans to come forward with their plan to balance the budget.

What are they going to do to close the gap between the $1.48 trillion necessary to balance the budget over the next 7 years and the paltry $277 billion of budget cuts they have identified? Where is the other $1.2 trillion the Republicans need in spending cuts in order to balance this budget?

We are waiting. The American people are waiting. We wait with great interest to see how our friends on the other side of the aisle will begin to close the gap between rhetoric and reality.

I thank the Chair and I yield the floor.


April 6, 1995

Last September, more than 300 Republican House members and candidates stood on the steps of the Capitol and signed the Contract With America. The contract proposed specific legislation to limit government and hold it accountable to the people; to promote economic opportunity and individual responsibility for families and businesses; and to maintain security both at home and abroad. The contract put in writing what our candidates stood for and what a House Republican majority would accomplish when entrusted with power from the people to act on their behalf. It its first 100 days, the Republican Congress has kept its promises and begun building a better America.

Reforming Washington

Opening Day Reforms:

Ending 'business as usual' in Congress

On its first day in office, the new Republican majority began keeping its promise to change the way Congress does business and cut government down to size. With bipartisan support, the House enacted "A Bill of Accountability." The GOP reforms:

* Make Congress more open and accountable. The House voted to live under the same laws it imposes on the private sector, limit committee and subcommittee chairmen to three terms and the speaker of the House to four terms, ban ghost voting in committee and authorize the first full public accounting of the House in history.

* Eliminate waste and inefficiency. The House voted to eliminate three committees, 25 subcommittees, one-third of committee staff slots and all special-interest service organizations.

* Ensure Congress cuts spending. The House voted to require a three-fifths majority to raise income taxes and implement an "honest-numbers" budget so spending increases will no longer be labeled "cuts."

Unfunded Mandates Reform Act:

Ending the fed's shakedown of state & local government

House Republicans ensured that state and local governments (and ultimately taxpayers) will no longer be saddled with costly unfunded federal mandates. The bill establishes procedural roadblocks to keep bills imposing unfunded mandates greater than $50 million from being considered on the House floor, requires federal regulators to consider the cost-benefit impact of new regulation and allows judicial review to ensure compliance.

Line-Item Veto:

Eliminating pork from the budget

Congressional Republicans gave the president the authority to eliminate wasteful spending and special-interest tax breaks buried in appropriations bills.

Balanced Budget Amendment:

Reining in the cost of government

The Republican House approved -- for the first time ever -- a balanced budget amendment. By holding federal spending growth to just 3 percent instead of the projected 5.4 percent increase, Congress can balance the budget by the year 2002 without touching Social Security or raising taxes. The Clinton budget projects deficits of $200 billion or more for the next five years, rising to more than $300 billion after that. Although six Senate Democrats -- who voted for the amendment last year -- switched their votes and killed the amendment, congressional Republicans will continue to fight for a balanced budget by 2002.

Term Limits:

Creating a citizen legislature

The Republican House held its first-ever vote on term limits. The constitutional amendment needed 290 votes to pass and was defeated by Clinton and the Democrats. More than 80 percent of Republican members voted in favor of term limits; more than 80 percent of Democrat members voted against term limits.

Ensuring a Safer, More Secure America Taking Back Our Streets Act:

Taking aim at violent criminals

The House approved six crime bills aimed at correcting serious flaws in the Clinton crime bill.

* The victim restitution bill requires criminals to pay full restitution to their victims for damages resulting from their crimes.

* The exclusionary rule bill allows the use of evidence seized without a valid warrant if authorities acted "in good faith".

* The prison construction bill authorizes $10.5 billion for states to build more prisons.

* The criminal alien deportation bill streamlines the deportation of criminal aliens after they serve their sentences.

* The Habeas Corpus appeals bill limits endless appeals of death-row prisoners.

* The police-or-prevention block grants bill gives local officials maximum flexibility to administer $10 billion for law enforcement programs.

National Security Revitalization Act:

Strengthening national defense

Clinton's FY 1996 budget cuts defense spending $10.6 billion below the 1995 level. Yet, Clinton has deployed U.S. forces on more peacetime and humanitarian missions than ever before, jeopardizing the combat-readiness of the military. The GOP bill:

* Establishes an advisory commission to assess the nation's military needs;

* Prohibits the placement of U.S. troops under U.N. command;

* Cuts the United States' share of U.N. peacekeeping costs from 32 percent to 20 percent;

* Urges that Eastern European countries be assisted in the transition to full NATO membership.

Renewing America's Families

Welfare Reform:

Giving hope to the nation's poor

The comprehensive Republican welfare reform package approved by the House is pro-work, pro-responsibility and pro-family. It ends entitlement status of numerous federal welfare programs, folding the money into block grants to states where services are delivered more effectively, at less cost and with more local concern. The reforms include:

* Ending the Entitlement: Four cash welfare programs, including AFDC, are merged into one block grant to states, eliminating hundreds of pounds of federal regulations and red tape.

* Work Requirements: States must require able-bodied recipients to work or participate in work programs after two years of receiving cash welfare benefits or sooner at each state's option as a condition for receiving benefits.

* Curbing Illegitimacy: The Republican bill seeks to reduce the number of children having children by denying cash welfare benefits received through the block grant to mothers under 18 who have children out-of-wedlock, and denying extra payments to families that have additional children while on welfare. They would remain eligible for food programs, Medicaid and other non-cash assistance.

* School Lunches: Increases funding for school lunches and family nutrition programs by 4.5 percent per year $1 billion more over the next five years than we spend today. States are required to use not less than 80 percent of funds for low-income children.

* Child Care: Consolidates nine different federal child care programs into a single block grant to states so that child care assistance can be provided for the same or greater families, but at savings of nearly 15 percent over five years.

Tax Relief for Families:

Restoring the American dream

Under the House Republican tax-relief bill passed this week, families will be able to keep more of their own money instead of giving it to Washington bureaucrats. The measures include:

* a $500 per-child tax credit for families with incomes below $200,000; 4.7 million working families at the lowest income levels will no longer pay any income taxes.

* relief for married couples from the punitive marriage penalty.

* a $5,000 tax credit for couples adopting children.

* allowing non-working spouses to make $2,000 tax-deductible contributions to their IRAs.

* encouraging families to invest in American Dream Savings Accounts that will allow families to contribute up to $4,000 a year in 'back-ended' IRA-type accounts (contributions are taxable but interest earnings accrue tax free), allowing tax-free withdrawals for first time home purchases, post-secondary education expenses and medical expenses.

Senior Citizens Equity Act:

Addressing the concerns of older Americans

House Republicans passed a bill to ensure older Americans will be able to keep more of their earned Social Security benefits and not be penalized for working. The reforms include:

* repealing the Clinton tax hikes on Social Security benefits with incomes above $34,000 (singles) or $44,000 (couples).

* raising the $11,280 Social Security earnings limit to $30,000, allowing seniors over 65 to work without losing Social Security benefits.

* providing tax incentives to encourage individuals to purchase long-term care insurance coverage.

Creating Jobs Through a Strong Economy

Regulatory Reform:

Rolling back the regulatory tide

Because excessive government regulation threatens competitiveness of American businesses, stifles entrepreneurial activity and suppresses economic growth and job creation, House Republicans passed regulatory reforms to cut government red tape. The bill:

* Suspends most regulations issued since Nov. 20 and bars agencies from issuing new rules through the rest of the year.

* Requires federal regulators to prepare a formal "impact" review before any regulation is issued and to assure special relief to small businesses. Federal agencies also would have to conduct cost-benefit reviews of regulations if a rule is estimated to cost the economy at least $50 million.

* Requires the federal government to compensate landowners when regulations cause the value of private property to drop more than 20 percent.

Common Sense Legal Reform Act:

Restoring fairness to the legal system

The Republican legal reforms provide concrete steps to restore efficiency and fairness in the civil justice system. Even though the Clinton administration opposed every one of the reforms, all three bills passed on overwhelming bipartisan votes.

* Securities Litigation Report Act: imposes "loser pays" rules in certain cases, requires stricter standards of proof to prevent "fishing expedition" lawsuits, creates a "safe harbor" from litigation for companies that publish market predictions, limits awards and curbs "professional plaintiffs."

* Attorney Accountability Act: institutes a loser-pays rule to encourage settlements, and requires attorneys who file frivolous lawsuits or engage in abusive litigation practices to compensate their victims.

* Common Sense Product Liability and Legal Reform Act: limits the liability of manufacturers for injuries due to drug or alcohol abuse, imposes sanctions for bringing frivolous product liability suits, caps punitive damage awards in all civil suits at $250,000 or three times actual harm (whichever is greater) and caps pain-and- suffering awards in medical suits at $250,000.

Business Tax Reforms:

Creating economic opportunity

The Republican tax provisions passed in the House provide businesses with incentives to create job opportunities for working Americans. The measures include:

* lowering the corporate capital gains tax.

* allowing small businesses to deduct the first $35,000 they invest in equipment and inventory.

* expanding the deduction for home office use.

* increasing the value of investment depreciation to equal the full value of the original investment.

Text of Address to the Nation by House Speaker Newt Gingrich

April 7, 1995

Embargoed until 8:00 p.m. EDT

Good evening. I want to thank you for joining me tonight and for this chance to give you, the American people, a report on the new Congress, what we've been doing, what we hope to do, and how we're working to keep faith with what you sent us here to do.

But first, let me thank the hundreds of thousands of Americans who've written me over the past few months. Your letters, nearly 400,000, are full of good ideas and often moving words of encouragement. This letter, addressed to "Dear Mr. Newt," included a portrait of George Washington. It was sent to me by first grader Steven Franzkowiak from Georgia, and I thank Steven and everyone else who wrote me, even if you didn't include a picture of George Washington.

Last September the House Republicans signed a contract with America. We signed this Contract and made some promises to you and to ourselves. You elected us, and for the last 93 days we have been keeping our word. With your help, we're bringing about real change. We made Congress subject to the same laws as everyone else. We cut congressional committee staffs and budgets by 30 percent. And we voted on every item in the Contract. And I can tell you tonight we're going to sell one congressional building and privatize at least one congressional parking lot.

While we've done a lot, this Contract has never been about curing all the ills of the nation. One hundred days can't overturn the neglect of decades. The Contract's purpose has been to show that change is possible, that even in Washington you can do what you say you're going to do. In short, we wanted to prove to you, and I think to us, that democracy still has the vitality and the will to do something about the problems facing our nation. And it seems to me that whether you're a conservative or a liberal, that is a very positive thing.

And so I want to talk about the Contract tonight, our successes and our failures, but I also want to talk about something much larger, because although I've spent the last six months of my life living and breathing and fighting for what's written in this Contract, I know the American people want more than these 10 items.

So what I want to talk with you about tonight is not just what a new political majority on Capitol Hill has accomplished in 100 days, but how all of us together, Republicans and Democrats alike, must totally remake the federal government, to change the very way it thinks, the way it does business, the way it treats its citizens. After all, the purpose of changing government is to improve the lives of our citizens, to strengthen the future of our children, to make our neighborhoods safe and to build a better country. Government is not the end. It is the means.

We Americans wake up every morning, go to work, take our kids to school, fix dinner, do all the things we expect of ourselves, and yet something isn't quite right. There's no confidence that government understands the values and realities of our lives. The government is out of touch and out of control. It is in need of deep and deliberate change. Americans will be able to sleep a little better at night and wake up feeling less anxious about their futures.

I represent the people who work at the Ford plant in Hapeville, Georgia. The Ford Motor Company, like all the domestic auto industry, faced the need to change in order to keep up with tougher competition. Today they produce twice as many cars per employee at three times the quality. And General Motors and Chrysler are doing the very same thing. So are America's small businesses. They're all rethinking the way they operate. Should government be any different?...Of course not.

We sincerely believe we can reduce spending and at the same time make government better. You know, virtually every institution in America except government has re-engineered itself to become more efficient over the last decade. They cut spending, provided better products, better education and better service for less.

But I believe we must remake government for reasons much larger than saving money or improving services. The fact is, no civilization can survive with 12-year-olds having babies, with 15-year-olds killing each other, with 17-year-olds dying of AIDS, with 18-year- olds getting diplomas they can't even read. Every night on every local news we see the human tragedies that have grown out of the current welfare state.

As a father of two daughters, I can't ignore the terror and worry parents in our inner cities must feel for their children. Within a half-mile of this Capitol, your Capitol, drugs, violence and despair threaten the lives of our citizens. We cannot ignore our fellow Americans in such desperate straits by thinking that huge amounts of tax dollars release us from our moral responsibility to help these parents and their children. There is no reason the federal government must keep an allegiance to failure. You know, with good will, with common sense, with the courage to change, we can do better for all Americans.

Another fact we cannot turn our head away from is this: No truly moral civilization would burden its children with the economic excesses of the parents and grandparents. Now, this talk of burdening future generations is not just rhetoric. We're talking about hard economic consequences that will limit our children and grandchildren's standard of living. Yet that is what we are doing for the children trapped in poverty, for the children whose futures are trapped by a government debt they're going to have to pay. We have an obligation tonight to talk about the legacy we are leaving our children and our grandchildren, an obligation to talk about the deliberate remaking of our government.

This change will not be accomplished in the next 100 days, but we must start by recognizing the moral and economic failure of the current methods of government.

In these last 100 days, we have begun to change those failed methods. We outlined 10 major proposals in the Contract that begin to break the logjam of the past. The House passed nine out of 10. First, we passed the Shays Act, which makes the Congress obey all the laws that other Americans have to obey. The House passed it, the Senate passed it and the president signed it. So that's one law signed, sealed and delivered.

We passed the balanced budget amendment in the House with bipartisan support. It has been temporarily defeated in the Senate by one vote. Although constitutional amendments are harder to get through Congress because they require a two-thirds vote rather than a simple majority, don't be discouraged. Senator Dole has said he will call it up for another vote. The momentum is with us. And with your help and your voice, I believe it is possible this amendment will pass later in this Congress.

As promised, we introduced a constitutional amendment on term limits, but we failed, even though 85 percent of House Republicans voted for it; again, that two-thirds vote. There have been 180 bills introduced to limit congressional terms over America's history, but not one of them ever made it to the House floor until last week, when we brought term limits to a vote. I pledge to you that term limits will be the first vote of the next Congress. So keep the pressure on. Keep your hopes up.

In both the House and the Senate, we passed the line-item veto, just as you asked. It's remarkable that a Republican House and a Republican Senate are giving such a strong tool to the president of the other party. I believe it shows our good-faith determination to cut spending.

Other Contract proposals have passed the House and are being worked on in the Senate. We passed regulatory reform, legal reform and welfare reform. We passed a $500 tax credit per child. We passed an increase in the earning limit for senior citizens so they won't have their Social Security checks cut if they earn extra money. We passed a capital gains tax cut and indexed those gains to spur the savings and investment that creates jobs.

Even with all these successes and others, the Contract with America is only a beginning. It is the preliminary skirmish to the big battles yet to come.

The big battles will deal with how we remake the government of the United States. The measure of everything we do will be whether we are creating a better future with more opportunities for our children.

New ideas, new ways and old- fashioned common sense can improve government while reducing its costs. Let me give you an example. The United States government is the largest purchaser of vacuum tubes in the western world. This is a Federal Aviation Administration tube, based on good solid 1895 technology. This is actually the updated mid-1950s version. When you fly in America, vacuum tubes in the air traffic control system keep you safe. Our purchasing rules are so complicated and so wasteful that our government has not been able in seven years to figure out how to replace vacuum tubes with this. This is a microchip. It has the computing power of 3 million vacuum tubes. So today's government operates this way.

After we remake it, the government of the future will operate this way.

My point is this. The same reliance on the obsolete pervades most of the federal government, not just in regard to computers but in regard to its thinking, its attitudes, its approaches to problems. It's one thing if we're talking about vacuum tubes, but this backward thinking is entirely something else if we're talking about human lives. The purpose of all this change is not simply a better government. It is a better America.

A truly compassionate government would replace the welfare state with opportunity, because the welfare system's greatest cost is the human cost to the poor. In the name of compassion, we have funded a system that is cruel and destroys families. Its failure is reflected by the violence, brutality, child abuse and drug addiction in every local TV news broadcast.

Poor Americans are trapped in unsafe government housing, saddled with rules that are anti-work, anti-family and anti-property. Let me give you some statistics on this failure. Welfare spending now exceeds $300 billion a year. Yet despite all the trillions that have been spent since 1970, the number of children in poverty has increased 40 percent.

On this chart, you'll notice that welfare spending goes up and so does children born outside marriage. Year by year they track each other. The more tax money we spend on welfare, the more children who are born without benefit of family and without strong bonds of love and nurturing. If money alone were the answer, this would be a paradise.

Since money is not the answer, it should be clear we have a moral imperative to remake the welfare system so every American can lead a full life. After all, we believe that all men and all women are endowed by our creator with certain unalienable rights, among which are life, liberty and the pursuit of happiness. We are determined to remake this government until every child of every racial background in every neighborhood in America knows that he or she has all the opportunities of an American.

I believe we have to do a number of things to become an opportunity society. We must restore freedom by ending bureaucratic micromanagement here in Washington. As any good business leader will tell you, decisions should be made as closely as possible to the source of the problem. This country is too big and too diverse for Washington to have the knowledge to make the right decisions on local matters. We've got to return power back to you, to your families, your neighborhoods, your local and state governments. We need to promote economic growth by reducing regulation, reducing taxation and reducing frivolous lawsuits. And everywhere I go, Americans complain about an overly complicated tax code and an arrogant, unpredictable and unfair Internal Revenue Service.

This summer we will begin hearings on bold, decisive reform of the income tax system. We're looking at a simplified flat tax and other ways to bring some sense to the disorder and inequity of our tax system.

You know, another reason for optimism is the tremendous opportunities being created by the new information technologies. Tremendous is a big word, so let me show you an example. This is a traditional telephone cable. This -- I hope you can see it; it's pretty small -- is a fiber-optic cable. You can barely see it. This almost invisible fiber-optic cable -- with some pride I can tell you it's made in Norcross, Georgia -- is equal to not one of these -- to 64 of these big, bulky, traditional cables. Now, that is a tremendous opportunity. With these breakthroughs, the most rural parts of America can be connected electronically to the best learning, the best health care and the best work opportunities in the world.

Distance learning can offer new hope to the present inner-city neighborhood, the poorest Indian reservation and the smallest rural community. Distance medicine can bring the best specialist in the world to your health clinic and your hospital.

Furthermore, the breakthroughs in molecular medicine may cure Alzheimer's, eliminate many genetic defects and offer new cures for diabetes, for cancer and for heart disease. These breakthroughs, combined with preventive care and medical innovations, can create better health care for all Americans. And we will pass a reform so that when you change jobs, you can't be denied insurance even if you or your family have health problems.

We will improve Medicare by offering a series of new Medicare options that will increase senior citizens' control over their own health care and guarantee them access to the best and most modern systems of health research and health innovation. My father, my mother and my mother-in-law all rely on Medicare. I know how crucial the Medicare system is to senior Americans. And we will ensure that it continues to provide the care our seniors need with more choices at less cost to the elderly.

All around us, opportunities for a better life are being developed, but our government all too often ignores or even blocks them. We need those breakthroughs which create new jobs, new health and new learning. They give us the opportunity and the economic growth to deal with our budgetary problems. We must get our national finances in order. The time has come to balance the federal budget and to free our children from the burdens upon their prosperity and their lives.

This is a Congressional voting card. This card goes into a box on the House floor and the computer records the members vote. The Congressional voting card is the most expensive credit card in the world. For two generations it has been used to pile up trillions in debt that our children and grandchildren will eventually have to repay.

Now a big debt has a big impact. To make such numbers real, let us give you an example. If you have a child or grandchild born this year, that child is going to pay $187,000 in taxes in their lifetime to pay their share of the interest on the debt. Yes, you heard me right, $187,000 in taxes, in their lifetimes--that's over $3,500 in taxes every year of their working lives just to pay interest on the debt we are leaving them. That's before they are taxed to pay for Social Security or Medicare, education or highways or police or the national defense. You know and I know, that's just not fair.

It was once an American tradition to pay off the mortgage and leave the children the farm. Now we seem to be selling the farm and leaving our children the mortgage.

By 1997, we will pay more for interest on the debt than for the national defense. That's right, more of our tax money will be spent to pay interest on government bonds than we'll pay for the Army, the Navy, the Air Force, the Marine Corps, the intelligence agencies and the defense bureaucracy combined.

Okay, Social Security. I want to reassure all of you who are on Social Security, or will soon retire, that your Social Security is fine. No one will touch your Social Security, period. But we must make sure that the baby boomers' retirements, which are coming up in the next century, are as secure as their parents'. Because the money the government supposedly has been putting aside from the baby boomers Social Security taxes is not there. The government has been borrowing that money to pay for the budget deficit. The Social Security trust fund is simply I.O.U.s from the U.S. Treasury. So when the baby boomers get set to retire, where's the money to pay them going to come from? Well, can't the government just borrow more money? The honest answer is no.

No system, no country is wealthy enough to have unlimited borrowing.

But the answer is clear. The key to protecting the baby boomers Social Security is to balance the budget. That way by the time the baby boomers retire the government will be financially sound enough to pay them. The problem is not Social Security. After all, Social Security would be fine if the federal government would stop borrowing the money. The government can stop borrowing the money when we balance the budget. It is just that simple.

Our goals are simple. We don't want our children to drown in debt. We want baby boomers to be able to retire with the same security as their parents. We want our senior Americans to be able to rely on Medicare without fear.

These are the reasons why, as Franklin Delano Roosevelt said, "Our generation has a rendezvous with destiny." This is the year we rendezvous with our destiny to establish a clear plan to balance the budget. It can no longer be put off. That is why I am speaking to you so frankly. Next month we will propose a budget that is balanced over seven years. The budget can be balanced even with the problems of the federal government. It can be balanced without touching a penny of Social Security and without raising taxes. In fact, spending overall can go up every year. We simply must limit annual spending increases to about 3% between now and 2002.

The key is the willingness to change, to set priorities, to redesign the government, to recognize that this is not the 1960s or '70s but the 1990s and we need a government to match the times. As I've said, Social Security is off the table. But that leaves a lot on the table--corporate welfare, subsidies of every special interest. Defense is on the table. I'm a hawk, but a cheap hawk.

As the budget battle rages over the coming months, you will hear screams from the special interest groups. I'm sure you've already heard the dire cries that we were going to take food out of the mouths of school children. That we were going to feed them ketchup. The fact of the matter is that all we did was vote to increase school lunch money four and a half percent every year for five years and give the money to the states to spend, because we thought they would do a better job than the federal government of ensuring that the children's meals were nutritional.

We believe that if local parents, local school boards and local state legislators visit their children's local schools, they will know firsthand about their children's lunches. Our critics believe that if the school hires a clerk, who doesn't cook anything, to fill out a report to go to the state clerk, who doesn't cook anything but fills out a report so that the national clerk in Washington, who doesn't cook anything, can write you a letter about the school they didn't visit in the country they've never been able to reassure you about the lunch they've never seen. That is the difference in our two approaches.

All I ask is that as we work to balance the budget that you verify the facts on both sides. And then you decide which approach is best.

Whatever the arguments this remains a country of unparalleled possibilities. I was talking the other day to a fellow who does business in Europe. he said what impresses people overseas is that the U.S. can change faster than anybody. That's why we're competitive once again in the world. We as a people have the natural ability to respond to change. That is what we do best when the government is not in the way. Our potential is as great and prosperous as it's ever been in our history. From now on all roads lead forward.

This job can't be done in Washington. We need your participation in a new dialogue. I hope every high school and college student will spend some class time in April or early May looking at the impact of the deficit on their young lives. We are making this speech and our briefing on the budget available though the Library of Congress at Thomas on the Internet. Both are also available from your congressman or congresswoman's office. We want every American to have the facts and participate in the new dialogue.

If I had one message for this country on this day when we celebrate the act of keeping our word, it would be a simple message: Idealism is American. To be romantic is American. It's okay to be a skeptic, but don't be a cynic. It's okay to raise good questions, but don't assume the worst. It's okay to report difficulties, but it's equally good to report victories.

Yes , we have problems, and of course it's going to be difficult to enact these things. That's the American way. And of course, we're going to have to work hard, and off course we're going to have to negotiate with the President, and of course the American people are going to have to let their will be known. But why should we be afraid of that? That is freedom.

I am here tonight to say that we're going to open a dialogue, because we want to create a new partnership with the American people, a plan to remake the government and balance the budget that is the American peoples' plan--not the House Republican plan, not the Gingrich plan, but the plan of the American people. And it is in that spirit of committing ourselves idealistically, committing ourselves romantically, believing in American, that we celebrate having kept our word. And we promise to begin a new partnership, so that together we and the American people can give our children and our country a new bit of freedom.

Thank you, and good night.

Source: Congressional Record, 1995.