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Debt and the Deficit

Location: Washington, DC

DEBT AND THE DEFICIT -- (House of Representatives - April 25, 2006)


Mr. COOPER. Mr. Speaker, I thank my good friend from Arkansas for yielding and my friend from Georgia for his remarks.

If the gentleman from Arkansas would not mind, I might take that podium because of the easel next to it, because I brought a chart with me tonight.

Mr. ROSS. Please do.

Mr. COOPER. I appreciated the gentleman's remarks because he was exactly on track. There are two basic methods of accounting. One is simple, it is based on the cash basis. That means when you pay for something, you have to acknowledge it on the books.

We all know that we live in a credit card economy, and it is easy to buy things with plastic, and you know that when you sign that little piece of paper after you put down your credit card, you have effectively bought it even

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though you have not paid the bill yet. You might not pay the bill until the end of the month or the end of the year, but it is important to acknowledge the fact that you have bought it when you put down the plastic.

That is essentially what the accounting method that my colleague from Arkansas was describing does. It is called accrual accounting, A-C-C-R-U-A-L. Now, it has nothing to do with the word ``cruel.'' It is not a mean form of accounting. In fact, it is probably the kindest form of accounting because it remembers our elderly, it remembers our sick, and our disabled not just when their bills are due, but when their needs arise. And that is when we should pay attention to our seniors, our sick, and our disabled.

I brought with me a chart tonight that asks a very simple question. Here we are in the Congress of the United States. This is the greatest country in the history of the world. You would think that in a recent year we would be able to tell you, Mr. Speaker, and tell the American taxpayer how big our deficit was. Well, there are different ways of measuring it, and let me list the ways for you tonight.

One is the way that my colleague mentioned, the U.S. budget that the President talks about so much. I am going to have breakfast at the White House in the morning with the new OMB Director, Rob Portman, a former colleague of ours, and I am going to be discussing this with him in the morning. It will be interesting to see what his reaction is. Under the OMB approach of cash accounting, the deficit last year was $319 billion. That was the third highest figure in U.S. history. It is about 2.6 percent of GDP. So it is huge and worrisome. They claim it is shrinking, but let me show you these other deficit measures again for the same year, 2005. If you do not allow us to borrow money from Social Security, the gross borrowing for the U.S. that year was $494 billion. So in a sense our true deficit in 2005 was not $319 billion. It was $494 billion, because I do not know anybody back home who supports our borrowing from Social Security in order to reduce the appearance of the size of the deficit.

But here is the number that my colleague from Arkansas mentioned as well: This is using real accounting, accrual accounting, like all businesses of any size in America have to use by law. If you apply that to the U.S. Government, you get a shocking result. The budget deficit jumps $441 billion to $760 billion using modern accounting. And guess what. This deficit is not shrinking, as OMB claims. This one seems to be growing rapidly. And that number equals almost all domestic discretionary spending in America, defense and nondefense. That is a huge number. That is a deficit as large as basically all the money that Congress has any say over during the year because the rest of it is in entitlement programs and the interest on the national debt.

As bad as that is, look at these other numbers. These are truly scary numbers because if you believe, as I do, that Social Security is the most solemn obligation in the United States, you cannot ignore Social Security. And as good as this document is using modern accounting, it basically ignores Social Security because it has got a little paragraph in here on page 12 that says in the section ``Other Responsibilities,'' oh, by the way, the Social Security unfunded liability situation is trillions of dollars. Well, that needs to be accounted for in the annual budget deficit, and if you account for it in the annual budget deficit, it means that the budget deficit in the year 2005 was basically $1.7 trillion, many times larger than the figure the administration releases.

But guess what. Not only is Social Security a sacred obligation of our Nation, so are other programs like Medicare. Medicare takes care of our elderly and our disabled, and it, too, is a solemn obligation of our Nation. But it, too, is ignored in this document, ignored in the annual deficit figure. If you factor that in, the true deficit for the year 2005 was not $319 billion, was not $494 billion, was not $760 billion, was not $1.7 trillion. It was $2.747 trillion, or $2,747 billion. That is a number so large, it is almost impossible to imagine. It is literally as large as the entire Federal budget itself.

So if you want to measure the budget deficit accurately, I think you have to acknowledge there is not just one measure. There is the old-fashioned cash measure, which can be used, but is unrepresentative of our true obligations under credit card accounting and under the needs that we have with Social Security and Medicare. If you used a more modern accounting, suddenly the deficit looks a lot larger. In fact, if you include Social Security and Medicare, the deficit is, in fact, larger than most citizens can imagine.

Very few people know this. It will be interesting tomorrow morning at breakfast to see whether the new Director of OMB knows this because these numbers are so large, they literally represent a crisis for our Nation. It is a crisis not only for this generation, but for future generations, because what a deficit means is it is borrowing money, oftentimes, as my colleague from Arkansas said, from foreign nations, and these folks expect to be repaid with interest. And that puts a terrific debt burden, D-E-B-T, on the backs of our kids and grandkids as they struggle to pay the interest costs. Pretty soon interest alone will take up almost $400 billion or $500 billion a year of American productive capacity. That is a shame because that money could be invested in roads and schools and future productive opportunities for our young people. Instead it will be paid in interest to foreign central bankers. It is the only tax that can never be repealed.

[Time: 22:15]

It is a tax that will not go away until we once again return to the days of budget surpluses, when we can pay down that debt. But we are a long way from home right now, because the Nation is on the wrong track. We are headed in the wrong direction, and we need to acknowledge these truthful deficit measures so we can better understand our current plight.

It is important that the American people be informed of all the facts, not only the President's budget, but also the financial report of the United States Government which was issued by his own Department of Treasury, but which they printed so few copies of that they literally don't want you to see it.

So I would like to yield back my time to my colleagues from Georgia and from Arkansas. I appreciate your holding these issues up for the American people so the entire Nation can be involved in the debate. It is very important, Mr. Speaker, that all the American people see what is really going on in our great country, because our responsibility in this generation is to keep our country great.


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