The Budget
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Mr. CONRAD. Mr. President, I thank the Senator from Colorado for his remarks and for his leadership. He has been right on point with respect to what has to be done in this country to get the debt threat under control.
Make no mistake, we do face a debt threat of ominous proportions.
Yesterday, the Congressional Budget Office again warned us: ``Debt crisis looms absent major policy changes.''
You go to the end of this article that was from the Associated Press, by Mr. Andrew Taylor, a respected writer, and it says:
CBO says the debt increases the probability of a fiscal crisis in which investors lose faith in U.S. bonds and force policymakers to make drastic spending cuts or tax hikes.
That is where we are headed if we do not respond. And it is going to require a bipartisan response with Republicans and Democrats, because Republicans control the House of Representatives, Democrats control the Senate, and there is a Democratic White House.
So when Republicans--as I just heard on this floor--blame it all on the President, that is not going to work. That is not going to work, because Republicans can block anything in this Chamber, and Republicans control the House of Representatives. So guess what. They are going to have to join Democrats and be responsible. And being responsible means doing some things that are tough.
Republicans and Democrats are going to have to do some things that are tough. Why? Because we are borrowing 40 cents of every dollar we spend. That cannot be continued much longer.
If you look at the historic relationship between spending and revenue, here it is, as shown on this chart, going back to 1950. The red line is the spending line. The green line is the revenue line. What you see is spending as a share of national income is the highest it has been in 60 years. Revenue is the lowest it has been in 60 years.
When I hear my Republican friends say this is just a spending problem, they have it half right. It is in part a spending problem. Spending is the highest it has been in 60 years--or very close to it. But revenue is the lowest it has been in 60 years. So let's get real. Let's get honest. This is a spending problem and a revenue problem. It is the difference between the two that leads to record deficits and a debt that is spiraling out of control.
Here is what the head of our Armed Forces--Admiral Mike Mullen, the Chairman of the Joint Chiefs of Staff--said last year at about this time:
Our national debt is our biggest national security threat.
Colleagues, are you listening? Are you listening? We are moving at warp speed toward a fiscal crisis. Nobody can tell us when it will happen. What everyone is telling us is that it will happen.
Here is where we are, as shown on this chart. This is the gross debt of the United States. We are now, at the end of this year, going to be over 100 percent of our gross domestic product. That is going to be the gross debt of the United States--all the bills we owe. The black line shown on the chart is the 90-percent threshold line. Why does that matter? Because we have just had the definitive economic study done on deficits and debt and economic growth. It was done by Professor Carmen Reinhart at the University of Maryland--she is no longer there; she was at the University of Maryland--and Professor Ken Rogoff at Harvard. Here is what they concluded:
We examine the experience of 44 countries spanning up to two centuries of data on central government debt, inflation and growth. Our main finding is that across both advanced countries and emerging markets, high debt/GDP levels (90 percent and above) are associated with notably lower growth outcomes [for the future].
This is not just about numbers on a page. This is about the future economic prospects of our Nation. A failure to act will consign us to a more limited future. Fewer jobs, less economic growth, less economic activity, a
weaker position for the United States in the world--that is where we are headed.
We have been warned repeatedly. Quoting from the Wall Street Journal: ``S&P''--the major rating agency--``Signals Top Credit Rating Is in Danger, Stoking Political Battle on Deficit.'' ``U.S. Warned on Debt Load.'' So nobody in this Chamber, nobody across the Capitol in the House of Representatives, can claim they did not know what was coming. We have been warned, and we have been warned repeatedly.
What happens if we do not act and there is a reaction in the interest rate environment for the U.S. debt? I would remind my colleagues, a 1-percentage point increase in interest rates will add $1.3 trillion to the debt over the next 10 years. A 1-percentage point change in interest rates will add $1.3 trillion to the debt over the next 10 years.
People say: Well, we are not going to extend the debt, we are not going to extend the debt limit of the United States. Do you know what happens? The creditors say: Oh, really? Well, we are not going to lend you more money then. Do you know what happens then? Interest rates go up in order to attract other lenders. And what happens? Every 1-percentage point increase in the interest rates adds $1.3 trillion to the debt in just 10 years.
Here are the remarks of 10 of the previous chairs of the President's Council of Economic Advisers. Headline: ``Unsustainable Budget Threatens Nation.'' This is their conclusion, the top economic advisers to former Presidents, Democrats and Republicans. The previous 10 unanimously said this:
There are many issues on which we don't agree. Yet we find ourselves in remarkable unanimity about the long-run federal budget deficit: It is a severe threat that calls for serious and prompt attention. ..... We all strongly support prompt consideration of the Fiscal Commission's proposals. The unsustainable long-run budget outlook is a growing threat to our well-being. Further stalemate and inaction would be irresponsible.
I served on that commission. There were 18 of us. Eleven of us agreed to the recommendations--five Democrats, five Republicans, and one Independent. That proposal would reduce the debt from what it would otherwise be by $4 trillion. Mr. President, 5 Democrats, 5 Republicans, and 1 Independent--11 of the 18 agreed to support the recommendations. We cut spending. We cut domestic nondefense spending. We cut defense spending. We took on the entitlements. And, yes, we raised revenue by $1 trillion over the next 10 years--not by raising tax rates. In fact, we cut tax rates. But we still got more revenue because we expanded the tax base by reducing tax expenditures that are now running $1.1 trillion a year.
Over the next 10 years, the tax expenditures of this country are going to be $15 trillion. Let me repeat that. The tax expenditures in this country over the next 10 years--special loopholes, deductions, exclusions, all the gimmicks that are in the Code--$15 trillion.
Not only did the Fiscal Commission come up with a recommendation of about $4 trillion, almost every other group that has made a recommendation has called for debt reduction of about $4 trillion over the next 10 years from what it would otherwise be: the Fiscal Commission, the Bipartisan Policy Center, the American Enterprise Institute, the Center for American Progress, the Heritage Foundation, the Roosevelt Institute--all of them saying we need to get this debt down.
Here is where we are headed, according to the Congressional Budget Office. This is not the gross debt. This is the publicly held debt. It is headed for 233 percent of the gross domestic product of the country if we fail to act. If, instead, we would adopt the commission proposal, you can see, as shown on this chart, we would actually work the debt down, the publicly held debt, to 30 percent of GDP.
Every part of the budget has to be scrutinized and has to generate savings. Here is what has happened to defense spending since 1997. It has gone straight up, from $254 billion a year to $688 billion a year.
Secretary of Defense Gates said this:
[T]he budget of the Pentagon almost doubled during the last decade. But our capabilities didn't particularly expand. A lot of that money went into infrastructure and overhead and, frankly, I think a culture that had an open checkbook.
I think he got it right. When we look at this growing debt, where did it come from? The Washington Post had this report on May 1:
The biggest culprit, by far, has been an erosion of tax revenue triggered largely by two recessions and multiple rounds of tax cuts. Together, the economy and the tax bills enacted under former president George W. Bush, and to a lesser extent by President Obama, wiped out $6.3 trillion in anticipated revenue. That's nearly half of the $12.7 trillion swing from projected surpluses to real debt.
If we look back on the five times we have balanced the budget in the last 40 years, revenue has been close to 20 percent of GDP: 19.7 in 1969; 19.9 in 1998; 19.8 in 1999; 20.6 in 2000; 19.5 in 2001. Where is revenue today? It is 14.8 percent of GDP. And our friends across the aisle say it is only a spending problem. Let's get real. It is a spending problem and it is a revenue problem. Let's be honest with the American people.
Martin Feldstein, the distinguished conservative economist, said this:
Cutting tax expenditures is really the best way to reduce government spending ..... [E]liminating tax expenditures does not increase marginal tax rates or reduce the reward for saving, investment or risk-taking. It would also increase overall economic efficiency by removing incentives that distort private spending decisions. And eliminating or consolidating the large number of overlapping tax-based subsidies would also greatly simplify tax filing. In short, cutting tax expenditures is not at all like other ways of raising revenue.
Mr. Bernanke, the Chairman of the Federal Reserve, has said this, and I will conclude on this point:
Acting now to develop a credible program to reduce future deficits would not only enhance economic growth and stability in the long run, but could also yield substantial near-term benefits in terms of lower long-term interest rates and increased consumer and business confidence.
This is a defining moment for our country. We can either continue to run head-long toward a debt crisis, or we can join together, Republicans and Democrats, in a comprehensive plan to get our debt under control. That will require a comprehensive plan, one that addresses spending--spending must be reduced. But it needs to be reduced when this economy is stronger. That is what every one of the bipartisan commissions has concluded. Yes, spending has to be cut, but not right this minute. It has to be part of a plan that assures it will be cut, and it has to be every part of spending: domestic discretionary spending, defense spending--yes, the entitlements have to be right-sized and we have to have the additional revenue given the fact, the simple fact, that revenue is the lowest it has been in 60 years as a share of our GDP, far lower than it has been in every one of the 5 years we have balanced the budget out of the last 40.
I urge my colleagues on both sides, now is the time for principled compromise. Now is the time to come together to put in place a plan that deals with this debt threat, fundamentally and assuredly. We have that opportunity. We should not let this opportunity slip by.
I yield the floor.
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