Fiscal Challengesby Senator John Thune
Posted on 2013-02-13
THUNE. Mr. President, I come to the floor today to talk about the
fiscal challenges facing this country, and particularly the spending
problem we have and how it impacts not only the economy but also the
lives of the American people.
Last week, the nonpartisan Congressional Budget Office released the latest Budget and Economic Outlook, which confirmed the threat that long-term fiscal imbalances pose to the Nation's economy. The Congressional Budget Office found that the national debt will climb by $10 trillion, to $26 trillion, over the next 10 years if Federal spending continues on its current trajectory.
Spending on mandatory programs will remain on auto pilot, resulting in high annual deficits. To kind of put things in perspective, if you go back to 2007 and you look at what the Federal Government spent, it was about $2.7 trillion annually. If you look at what the Federal Government spent in fiscal year 2012, which ended September 30 of last year, it was $3.5 trillion, an increase of nearly 30 percent.
Inflation during that same time period was 10.8 percent, meaning that government grew at almost three times [[Page S679]] the rate of inflation. Again, I want to emphasize what I think is an important point here, because in the discussion we are having about spending and debt, there is somehow this assertion that has been made that this is not a spending problem, that actually this is more a revenue issue.
Well, again, if you look at what has happened just in the past 5 years, spending has increased nearly 30 percent, Federal spending, or at a rate of almost three times the rate of inflation. So clearly spending has increased dramatically just in the last 5 years. The trend is projected to continue over the next 10 years and beyond, with spending exceeding its historical average over that time period, and then ballooning in the years beyond that.
Such levels of spending will cause the Federal debt to grow, and according to the Congressional Budget Office, ``Such a large debt would increase the risk of a fiscal crisis during which investors would lose so much confidence in the government's ability to manage its budget that the government would be unable to borrow at affordable rates.'' Again, why is this important? Well, obviously, if the deficits continue to continue year after year, adding more and more to the Federal debt, eventually investors are going to lose confidence in our government. They are going to demand a higher return, higher interest rate when we borrow money. That obviously has an impact all across the economy. Because when interest rates go up, everything else that is pegged to it goes up. If you look at middle-class Americans who are trying to borrow money, for example, to buy a home or to get a college education or for a small business to make investments in order to create and expand jobs, the interest rates go up for everyone. Inflation also goes up if the Nation's fiscal challenges are not addressed, meaning that the hard-earned dollars are not going to go as far. That is going to put further pressure on hard-working middle-class families.
The threat of the budget challenges facing this country and our economy is very real, because of this report that came out last week from the Congressional Budget Office. It confirmed we are headed toward Greece if we do not take the steps that are necessary to change the direction we are on.
A lot of that reality, however, unfortunately, is lost on lots of people here in Washington, DC. As I said earlier, there has been this debate about whether we do, in fact, have a spending problem. Over the weekend, the Democratic leader in the House of Representatives, Nancy Pelosi, repeated what has become doctrine to many in the Democratic Party; that is, the idea that the U.S. Government does not have a spending problem.
She said, ``It is almost a false argument to say we have a spending problem.'' This comes from the top Democrat in the House of Representatives. ``It is almost a false argument to say we have a spending problem.'' Well, obviously the White House scrambled quickly the next day to come out: Yes, yes, we know we have a spending problem.
But there is reporting out there that suggests the President of the United States has also made this assertion, that this is not a spending problem. I do not know how you can examine the Federal budget projections and not come to the conclusion that we have a spending problem. It is driving our national debt, a debt that is very harmful to our economy.
You have to look no farther than the Congressional Budget Office report last week to see that this is a spending problem, not a revenue problem, because that same CBO report said that the revenue--money that is raised by the Federal Government--is returning to its historical average of 17.9 percent of GDP. That is the way we have measured the amount of revenue coming into the Treasury as a percentage of our entire economy. You measure that over time, and getting back to the historical average, the 40-year average would be 17.9 percent.
If you look at the year 2015 as a case in point, the revenues get back to 19.1 percent of GDP, which is a 25-percent increase in 2 years, significantly exceeding the historical average. If you look at the 10- year outlook the CBO came up with, they said revenues would average 18.9 percent over the next decade, which is almost a full percentage point more than the 40-year historical average.
The point is this: Revenues are not only at historic levels, will be there by 2015 and stay there for the next decade, but they will exceed the historic average for revenues over the next 10 years. So clearly, what we are talking about here is not a problem of Washington taxing too little, it is a problem of Washington spending too much.
I know that truth is hard and that math is hard to accept for the people who want to grow government, but we absolutely have to govern in reality. What the math shows is that mandatory spending, which as I said is on auto pilot, continues to squeeze the Federal Government and the Federal budget to a point where we are going to face a Greece-style fiscal crisis if Washington continues to punt on the hard decisions that have to be made.
Mandatory spending comprised roughly 60 percent of Federal spending in fiscal year 2012. If you look at the big drivers of mandatory spending, Medicare, Medicaid, and Social Security represented 40 percent of that total, according to the Congressional Budget Office. Congress and the administration have an opportunity in the coming months to reform these entitlement programs not only to get this country back on a more sustainable fiscal track but also to save and protect these programs not only for current retirees but for future generations of Americans as well.
That is why I was disappointed last night that the President, in his State of the Union Address, failed to lay out a plan to address the fiscal challenges our country faces. I hope the President and my colleagues here in the Congress will come to the table and work with us to solve these problems, particularly as we consider ways to address the sequester, the continuing resolution which follows after that, and the fiscal year 2014 budget resolution.
We cannot simply wait and watch these programs crumble under the weight of looming insolvency. We know Social Security operated at a cash deficit in 2010. The Medicare trustees have told us that Medicare will be insolvent by the year 2024 and the HI trust fund actually as early as the year 2016. If we are going to keep the promises we have made to current retirees and to future generations of Americans, we have to make these programs solvent. That means we have to reform them in a way that saves and protects them and makes sure they are fiscally sustainable not only for today but for the future as well.
I have to say, as I listened to the debate about the issues of spending and debt, there is an argument that is made by those on the other side that this is just because of the two wars, and the two wars drove up spending; you know, they were not paid for and that is the reason we have this $16.4 trillion debt. Well, obviously the wars have contributed to that. But if you look at through 2012, that is about $1.4 trillion. Obviously, I would say, to be fair, Republicans have contributed to this as well as Democrats. When Republicans were in charge of the Congress, we did not do a good enough job of keeping spending under control.
But the fact is even if you count in spending on Iraq and Afghanistan, that is about $1.4 trillion. The total debt now, as I said, is over $16 trillion, scheduled to go to $26 trillion 10 years from now. Over the course of the first 4 years of this President's term, his first term in office, the debt has increased almost $6 trillion. So it is hard to feature any objective analysis of these facts and this data and say it was the wars that somehow caused all of this.
Washington has been overspending for a long time. It is high time for those habits to change. If you look at the war that is winding down, the cost of that, the resources we are putting into these conflicts, those dollars are not going to be showing up again as expenditures in the next few years. We still have the Congressional Budget Office telling us at the end of the next decade we will have added an additional $10 trillion to the debt. So clearly that has certainly been a factor, but it has not been the main factor.
There is again no objective analysis that would suggest spending on the wars has been the driving reason for why we are facing the debt crisis we have today. I would simply say too [[Page S680]] that when you are in a hole, it is advisable to quit digging.
Obviously, we continue to look at ways to add more and more spending and, therefore, more and more debt. The health care bill is not something anybody on my side here in the Senate supported when it passed in 2009 and early 2010. But that too is going to drive up spending and is going to drive up debt as we head into the future.
You heard from the President last night a whole new series of new spending initiatives, ``investments,'' he called them, in a whole range of areas. As he was sort of laying that out, those of us who were listening to that message were thinking to ourselves: Okay, if you put a calculator on this thing, it keeps going and going and going. Yet the President said we did not need to add a single dime to the deficit. Well, I do not know how anybody could accept that with a straight face. It flat does not pass the smell test.
We have a spending problem here in Washington, DC. The facts bear that out. The revenues are going up. They are going to go up 25 percent, according to the Congressional Budget Office, in the next 2 years. In 2015 they will be at 19.1 percent of GDP, an average we have not seen--or a number we have not seen in a long time. Then they will stay roughly at that for the next decade. This is not a revenue problem. This is not a problem where Washington taxes too little. This is a problem where Washington spends too much.
If you look at the other side of the equation, spending continues to go up as a percentage of GDP. We see a little bit of relief here in the next few years, but then when the cost of the Affordable Care Act starts hitting, when you start seeing the demographics of the country, as they continue to change, if we do not do something to save and protect Social Security and Medicare for future generations, it is going to bankrupt us.
We are headed for a train wreck. We have to do something about that and recognize what that problem is. That problem purely and simply is that Washington spends too much. It is a spending problem. That is why, again, when I heard the top Democrat, the minority leader in the House of Representatives, say over the weekend that it is a false argument to say this is a spending problem, I was shocked, because I think most Americans would argue, as they look at this, and they can do the math, Washington has a very serious spending problem which needs to be addressed. It needs to be addressed sooner rather than later.
I thought the report that came out from the Congressional Budget Office last week was instructive for a number of reasons. It pointed out the impact that debt is going to have as we face this debt crisis in terms of interest rates, in terms of inflation, in terms of loss of jobs, and a more sluggish economy. We know from history that when you get a certain amount of debt, it becomes such a drag on your economy that it reduces economic growth. So we have seen this anemic, sluggish economic growth which is going to be continued now for the foreseeable future. We have slower growth, fewer jobs, massive amounts of debt. Eventually what that is going to mean for the middle-class American is higher interest rates when it comes to buying a home, when it comes to buying a car, when it comes to financing a college education. It is going to mean lower take-home pay when the economy slows down and there is not the demand for workers out there. There are so many adverse impacts on our economy from carrying the kind of debt load we are carrying today. I think we have a responsibility to lead.
I hope the President of the United States will lead on this issue; that he in his budget will put forward the types of remedies that are necessary not only to deal with our short-term crisis in the sequestration but also to put us long term on a sustainable fiscal path by proposing reforms, reforms to these programs that are driving Federal spending, that are going to add massive amounts to our debt over the course of the next decade and beyond, and at the same time look at things we can be doing that would generate economic growth, that would create jobs in this country. Because when the economy is growing and expanding, then all of these other problems look much smaller by comparison.
Republicans here in the Senate are ready to work with the President, work with Democrats.
We are anxious to go to work on entitlement reform to save Social Security and Medicare. We are anxious to go to work on reforming our Tax Code in a way that would unleash economic growth to obtain the robust growth we need in the economy to create jobs and make the debt crisis we face look much smaller by comparison.
I hope in the days ahead the President of the United States, the leadership on Capitol Hill, and the Congress will do what we should have done a long time ago. It is long overdue for action. It is high time that we become busy and do the work of the American people, which is about providing a more secure, prosperous, and a safer, debt-free future for future generations. Anything less is negating or undermining the responsibility we have to the American people.