THE FEDERAL DEFICIT -- (House of Representatives - February 16, 2005)
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Mr. KIND. Mr. Speaker, if the gentleman will yield, I thank the gentleman for highlighting the huge budget shortfalls we are facing, but one other item that seems to be masked in the budget numbers on the previous chart, does that include the amount of money that is currently being borrowed from the Social Security and Medicare trust funds? Is that amount also reflected in those figures showing deficits?
Mr. SPRATT. Mr. Speaker, reclaiming my time, the deficit is worse, and the gentleman makes an excellent point. When the surplus, and Social Security is running a surplus next year and this of $150 billion to $160 billion, that amount is actually offset against the gross deficit in the regular budget of the United States. So if you remove that offset, the surplus in Social Security, which is netted out against the deficit, that number becomes $687 billion instead of $427 billion.
Mr. KIND. If the gentleman will yield further, the current raid on both the Social Security and Medicare trust funds makes those budget deficit numbers much worse?
Mr. SPRATT. That is correct. I had another chart up which the gentleman is familiar with which shows you on the back of an envelope in a simple form the net effect of the three Bush budgets sent up in 2002, 2003, and 2004.
When the President sold his tax cuts to the Congress, his Treasury Secretary and his Director of OMB both said, We will not need to come back to you until 2008 to ask for the debt ceiling of the United States to be increased. They were back the next year, 2002. They said, We have incurred so much debt, despite our intentions, that we need to raise the legal ceiling on the debt of the United States by $450 billion.
The next year, 2003, they were back again. The tax cuts were beginning to be fully implemented, taking a toll on the bottom line, with other effects like a recession, like increased military expenses. But all of this added up to a need to increase the debt ceiling by $984 billion.
Let me put that in context. The entire national debt of the United States before Ronald Reagan took office was less than $984 billion accumulated since the beginning of the Republic. Then last November, before we could adjourn, Treasury was back, the administration was back, and they said, Before you can leave here, unless the government is going to shut down, the ceiling on the debt of the United States has to be raised again by $800 billion.
That means that this $984 billion increase made on May 26, 2003, lasted only 16 months. We are in effect adding $1 trillion to our national debt every 18 months. Nobody in his right mind thinks that that course can be continued.
This is the net total by which Congress had to raise, Republicans for the most part voting for it, had to raise the debt ceiling of the United States in order to accommodate Mr. Bush's budgets for the first 4 years, $2.234 trillion. That was the amount we had to raise the debt ceiling over 3 years in order to accommodate his budget.
Let me go back to the things that were left out of the President's budget, because, as I said, it is more notable for what it excludes than what it includes. As I said, there was nothing in the calculation of the taxes that he wanted to make permanent to fix the AMT, though all know this is a looming problem that politically has to be addressed in the next several years. There was not even money to patch it over for another year to study how to fix it.
Secondly, there was not a dime for Social Security privatization. Ten years of budget, not a dime for Social Security privatization, even though the President has made it his number one agenda initiative.
Thirdly, there was nothing for the cost of the war in Afghanistan, the insurgency there, nothing for the cost of our deployment in Afghanistan or Iraq or enhanced security in North America. The Congressional Budget Office, recognizing that that is a number that is there and has to be somehow or another estimated and included in the budget, captured, in order to have the budget be a complete and full account of what we are likely to spend, did a model.
They said, assume we can reduce our forces beginning in 2006, between 2006 and 2010, down to 40,000 troops in the theater, the CENTCOM theater, not necessarily Iraq, but in the CENTCOM theater, with 18,000 troops remaining in Afghanistan. What is the cost over the 10-year period of this budget? The cost to do that is $384 billion. Let us hope we do not have to incur that, but some significant number has to be included in this budget to make it a realistic budget.
Finally, when you add those three items, then we have less surplus. When you have less surplus, you have a bigger deficit, you have more debt service, because you borrowed more principal on which you have to pay interest. You add all of those items together, you get a $2 trillion adjustment to the budget.
This, therefore, is what we see, adjusting for the four items that I have just outlined, the budget path that the Bush budget will take over the next 10 years. $427 billion, third year in a row, it sets a record level, a deficit of $427 billion for the year 2005. It goes up the next year and levels off in the range of $400 billion, and then comes out at the end of 10 years at $566 billion.
We are not reaching to make this point; we are simply putting back in the budget costs we think are realistic and need to be captured in order to have a truthful portrayal of what the budget looks like.
This is the course that the Bush administration is plotting for us in the budget they have just submitted, and most people think that this is not a sustainable course.
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Mr. KIND. Mr. Speaker, if the gentleman will yield for a question, this is a little bit before my time, but correct me if I'm wrong; it was really a Democratic Congress, working with the first Bush administration, the current President's father, that first instituted the pay-as-you-go rules back in the 1992 budget; is that correct?
Mr. SPRATT. That is correct. The Budget Enforcement Act of January 1991, President Bush.
Mr. KIND. It was President Clinton in his first budget that he submitted during his first administration that asked for maintaining and continuing the pay-as-you-go rules that Democrats had to pass without one single Republican vote in the House of Representatives; is that right?
Mr. SPRATT. That is correct; and in the Senate.
Mr. KIND. And, Mr. Speaker, not one Republican back then had supported the pay-as-you-go rules that required tough political decision-making, trade-offs, in essence, with the budget, which is something that the Democrats in Congress today are advocating in the alternative budget resolutions that were submitted, because it worked so well in the 1990s, the pay-as-you-go rules, which are very simple. If you are proposing a pay increase or a tax cut in one area, you have to find an offset in the budget to pay for it in order to maintain balance.
And it led to the 4 years of budget surpluses, as the gentleman pointed out, 2 years of which the Social Security-Medicaid trust fund was not even being raided but, instead, we could use that money for important debt reduction, starting to pay off the national debt.
I was here during that first Bush tax-cut debate we had a few years ago where the big concern, on the Republican side at least, was that we were going to pay off the national debt too fast, if you could believe those days, which never materialized. But now today, we are back into chronic budget deficits, and one of the fastest growing areas in the budget today is interest on the national debt.
I see two major problems with the huge budget deficits today that are unprecedented and we did not face before. One is, who is owning that debt? Who is paying for our deficit financing? Right now, Japan is the number one purchaser of our government debt, soon to be surpassed by China. I do not believe it is in our country's long-term economic interests to be so dependent on foreign entities, let alone China, to be the number one purchaser of our debt in financing these deficits.
The other big difference we have today is ever since those long-ago years when the pound sterling was a viable currency, we have never had a rival currency up against the dollar in the international marketplace. That is changing today with the strength of the euro in the European Union and in the common marketplace.
Now, if these countries that are currently investing in buying our bonds decide to take their investment somewhere else, such as in the euro, which is gaining in strength, and the dollar, which is declining in value, we are going to get caught holding the bag in trying to finance these deficits, and that could be the perfect
financial storm being created.
So again, I think it is a reason why we need to work together in a bipartisan fashion and, at the very least, reach agreement in reinstituting something that worked in the 1990s, the pay-as-you-go rules.
I commend the gentleman from South Carolina (Mr. Spratt), our Ranking Member on the Committee on the Budget, for the leadership and the honesty that he has shown in presenting the figures so that we can, at the very least, agree on the facts and the challenges that we are facing, and then coming up with some commonsense solutions that have a proven history of working in the past. I am going to continue to work with the gentleman and the rest of my colleagues here in trying to put together an honest and reasonable budget in order to get us back on that glidepath of fiscal discipline and fiscal responsibility again.
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