One of Senator Kerry’s first legislative initiatives as a United States Senator was his cosponsorship of the Gramm-Rudman-Hollings Deficit Reduction Act. At the time of its enactment in December of 1985, the federal deficit was over $200 billion. The bill sought to gradually eliminate the deficit by requiring adherence to a series of fixed deficit targets. Sequestration, a process involving automatic spending cuts, was established as a means to enforce the deficit targets. The Gramm-Rudman-Hollings legislation is widely recognized as a turning point in federal budgeting–representing a critical step in curtailing runaway government spending.

Nevertheless, by 1992, the unemployment rate was over 7 percent, the fiscal deficit was $290 billion and projected by the Congressional Budget Office to grow to over $500 billion in 2001, and the federal debt had quadrupled over the preceding 12 years and was projected to double again by 2001.

Against this unfriendly backdrop, Senator Kerry was a key supporter of the Deficit Reduction Act of 1993–a bill which passed Congress without a single Republican vote. With its commitment to fiscal discipline, the bill’s deficit reduction program set in motion a virtuous cycle of rising incomes, job creation, the lowest poverty rate since 1979, low inflation, unemployment as low as 4.2 percent–a level not seen in 30 years, and large current and projected surpluses. Between the beginning of 1993 and the beginning of 2000, payroll employment increased by more than 20 million jobs.

Through a policy strategy of maintaining fiscal discipline, investing in people and technologies, and opening international markets, the nation has been able to exploit new opportunities and reap the benefits of major scientific and technological advances.

Balanced budgets have contributed to lower interest rates, restoration of consumer and business confidence, increased demand, increased investment–especially in new technologies, and increased productivity levels.

Recent events, however, threaten to dismantle the framework of budget discipline which enabled our economy to grow for a record 10 years, the longest expansion in history. In June of 2001, a Republican-controlled Congress passed a $1.35 trillion tax cut which relied almost exclusively on uncertain budget projections. Within eight months, the new tax legislation and a decline in economic activity had resulted in the loss of nearly $4 trillion in projected surpluses. Deducting Social Security revenue from surplus calculations revealed that the federal budget had returned to an era of deficit spending. At the same time, Republicans were calling for additional corporate tax cuts while opposing Senator Kerry’s proposals to assist working families struggling during the recessionary period.

Senator Kerry’s agenda for economic growth and prosperity involves continued investment in key priorities to lift and improve worker productivity–education and training, investments in new health care technology, and support for both federal and private sector-based research and development. Senator Kerry supports capital gains relief for investments in small businesses and critical technologies. He also supports targeted tax relief to encourage savings, investment, and entrepreneurship. Senator Kerry believes in harnessing the power of the market economy, not overwhelming it with excessive government regulation. For the economy to grow, government and business must work in tandem, not in opposition. The 1990s demonstrated that a national commitment in favor of fiscal discipline; productive investments in education, business, and technology; and modest and targeted tax cuts can serve as an effective engine of economic growth. Senator Kerry will continue to work in the months and years ahead to ensure that the American economy remains a beacon of leadership in a competitive global marketplace.