[Congressional Record Volume 141, Number 206 (Thursday, December 21, 1995)]
[House]
[Pages H15561-H15567]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




             HAS UNCLE SAM PROMISED AWAY THE AMERICAN DREAM

  The SPEAKER pro tempore. Under the Speaker's announced policy of May 
12, 1995, the gentleman from California [Mr. Horn] is recognized for 60 
minutes as the designee of the majority leader.
  Mr. HORN. Mr. Speaker, the question is, has Uncle Sam promised away 
the American dream? The message today is that by any business standard 
the United States of America is probably bankrupt. We probably have 
promised away the American dream.
  The first step in ending America's possible bankruptcy is to balance 
the budget. Why is not America's bankruptcy frontpage news? It is not 
front-page news because America's bankruptcy can be explained only by 
pouring through a massive amount of numbers.
  I asked a professional staff member on my subcommittee, the 
Subcommittee on Government Management, Information and Technology, Dr. 
Harrison Fox to dig into those numbers and let us see how close we are 
to bankruptcy, if we are not already in it and simply do not realize 
it.
  Usually, when you talk numbers, most people either say, ``I do not 
want to be bothered with those numbers.'' Perhaps they are afraid of 
what story the numbers will tell.
  So how do we get the message out that America is going bankrupt? As 
part of this hour, I will put America's bankruptcy in people terms. How 
much is your share of the debt? What will your children's tax rate be 
if we keep funding Federal programs at current levels? What are the top 
11 Federal promises? By using the David Letterman-style list, tying the 
numbers to your family and your children, your grandchildren, your 
grand nieces, your cousins, and all of us as Americans. By doing that, 
I think we can begin to appreciate the terrible financial shape in 
which the Federal Government finds itself. We must begin a discussion 
of how we are going to work our way our of the bankruptcy mess.
  I am going to show a series of tables. Table 1 will have a number of 
components as we look at various aspects of this problem. The year 2045 
might seem to be a long way away. But it is not. Some high school and 
college graduates will be celebrating their 50th wedding anniversary. 
If current Federal spending we left on automatic pilot, by the year 
2045 then, federal tax rates will have to be raised to an average of 
over 80 percent of annual income. That would be the average for the 
people making $35,000 a year or $3.5 million a year.
  Currently, the highest income tax rate is 36 percent. We will have a 
very confiscatory tax rate in the year 2045 unless we do something to 
redirect this Government over the next few years, the next few decades. 
The result of such a tax rate to pay the obligations of the Federal 
Government would mean that families would end up having quite a bit 
less to spend on life's necessities and life's pleasures.

                              {time}  1945

  Paying this tax rate, the average family, which today makes 
approximately $36,000 a year, would have only $346 per month available 
to spend on housing compared to the $648 currently available. With $648 
monthly, you can pay the mortgage on a house. Now you can get at least 
one bedroom--maybe two, a living room, and a kitchen for that amount of 
money in most places but California, New York, and Washington, DC. 
Compared to the $648 the average American currently spends for housing 
or an apartment. By 2045 that would be barely enough. With the $346 
equivalent left available for housing that would just be enough for a 
one-room efficiency.
  The weekly spending on food would be reduced from $108 to $54. There 
will be no more family meals at McDonald's, at Wendy's, at Mimi's, at 
Nino's, even L'Opera.
  Available yearly personal spending for medical care would fall from 
the almost $5,200 it is now down to perhaps $2,600.
  When it comes to clothing in 2045, available funds for clothing would 
drop from the current $2,075, almost $2,100, to a little over $1,000.
  And then let us think of transportation. If you are a Californian, 
you drive your car to the 7-Eleven a block away. By 2045, the average 
family would only have $130 a month for the car, or mass 
transportation. In 2045, most would not be able to get much more than a 
used car with a minimal engine.
  And then there is recreation. Families would be spending much less 
for vacations, visits to relatives, and even going to the movies. They 
would have available much less discretionary funds than they have now. 
Why? Because the average Federal tax rate would exceed 80 percent in 
order to pay the bills of this Government. The yearly amount available 
in 2045 would decrease from the average of $2,600 today to about $1,038 
in 2045.
  Federal taxes paid by the average family will have to be more than 
doubled from the current $14,527 that is the average family's tax in 
this country to an average family tax of over $30,000 yearly by 2045. 
And we have not even mentioned the State and local taxes.
  If we look at table 2, which is the share one has of the Federal 
debt, liabilities and assets between 1955 and 1995, the year we are 
just ending, you can look back over the last four decades, from 1955 to 
1995, Congress and a succession of Presidents of both parties have 
taken on debt and made promises, which are liabilities financially on 
the Federal Government--you, me, we, the taxpayers--that far exceed the 
ability of you, your children and your grandchildren and other citizens 
and residents to pay.
  Since 1955, dramatic increases in the Federal debt and other 
liabilities have occurred. The rapid escalation in Federal promises has 
not been matched by asset accumulation. That is, the Federal Government 
has not been saving or purchasing land or other assets that have long-
term value.
  In current dollars, the debt has increased more than 12 times over 
the last 40 years. Federal promises, as worthy as some are, as I 
suggested earlier, 

[[Page H15562]]
are financial liabilities. They increased more than 1,000 percent, 
while hard assets, such as land, property, plant and equipment, have 
increased less than 400 percent.
  The average citizen's share of the national debt has increased from 
$1,652 in 1955 to over $19,000 today.
  If the assets of the United States were sold, a citizen's share would 
have been $1,361 in 1955, and $5,283 this year.
  This sounds like a lot of money, until Federal promises are tallied.
  If your grandchild--let us say Jonathan Aaron Yavitz or Jefferson 
Thomas or Michael Gordon or Raul Gomez or Eddie Komomoto--if your 
grandchild was born this year or next year, they come with a share of 
these promise--financial liabilities, if you will--bearing with them a 
bill to pay nearly $193,000 during their lifetime. That is an increase 
of $175,000 over what their share would have been if they had been born 
in 1955 when a number of us were just getting out of college.

  We are not talking here about the liquidation of all the assets of 
the Nation to pay the bills. If we were, each one of us would be left 
with over $185,000 in promises to pay.
  By the way, no one is going to sell Yellowstone or Yosemite or Dwight 
Eisenhower's home in Abilene, KS or Franklin Delano Roosevelt's home in 
Hyde Park, NY. But there is something terribly wrong with the financial 
condition of the United States and it is sure to have consequences for 
each of us, for our children and our grandchildren.
  It will take at least 30 years for the United States to work its way 
out of the overextended promises that have been made by the big 
government welfare state.
  Think of what we are going through now as we simply try to eliminate 
the annual deficit. On a $1.6 trillion annual budget, we are spending 
our time arguing between parties, between this institution--Congress--
the House and the Senate--and the President of the United States, about 
how we deal with eliminating that annual deficit, which is generally 
$250 million, $200 billion, sometimes less, a year, depending upon the 
interest rates. And we have not even started the discussion as to how 
we eliminate the annual public debt that goes up and up and up. We are 
now nudging that authorized ceiling and about to pass the $5 trillion 
mark. That discussion has not even started.
  We are having great difficulty getting the administration to face up 
to what every American knows: You cannot go on forever spending money. 
The $100 billion budget of Lyndon Johnson would only pay for half of 
the interest on the national debt. The interest does not retire that $5 
trillion debt. We have to face up to retiring it. And even if we retire 
the current national debt, we have not faced up to what I am discussing 
tonight, which is the extended liabilities that go beyond the national 
debt well into the next century.
  As we look at table 3, Federal Spending by Category, of course, we 
look at the Federal budget outlays--spending, if you will--and the 
priorities have clearly changed over the last four decades.
  The big gainers have been interest payments. As I mentioned, Lyndon 
Johnson ran the whole domestic government, the war in Vietnam, with 
over a half a million men and women there into the late 1960's and his 
budget at that time is what it takes us just to pay half of the annual 
interest charge on the national debt. That interest payment does not 
enrich our society. It does not help people and meet our domestic 
commitments and our national security commitments.
  The big gainers besides interest payments are, of course, Social 
Security--which we have a basic commitment to keep that was brought 
about by both parties in the 1930's--and Medicare.
  As I have said before on this floor, in my role as the legislative 
assistant to the then Republican whip Senator Thomas H. Kuchel of 
California, I happened to be a member of the drafting team of Medicare, 
working with the late Wilbur Cohen, who became Secretary of Health, 
Education, and Welfare under President Johnson. It was a wise group of 
Republicans and Democrats which framed that legislation in the Senate 
on a bipartisan basis and enacted it into law.
  Every young person, every parent knows that their grandmother, 
grandfather needed that help. Look at the escalating costs that have 
confronted us in this country in hospital care and health care 
generally. So we need to protect Medicare. That is what we are doing in 
the current budget battle. You would not know it by some of the 
scurrilous, stupid comments that we hear on the airwaves, but that is 
what we are doing.

  Then of course we have other mandatory spending since the 1960's:
  For Medicaid, called MediCal in California where there is a State 
match as there is in most States; to assistance to Cuban and Haitian 
immigrants and refugees. The big losers in funding over the last four 
decades are primarily domestic and some national security defense 
programs.
  Our Federal Government is now a benefits distribution machine. That 
is the only category I can think into which fit most of the activities 
I have mentioned.
  By 2002, nearly 75 percent of all spending will be directed toward 
individuals and, of course, interest payments for the $5 trillion 
national debt. And if we do not balance the budget by January 1, 1996, 
and we have a con job that takes us through the November 1996 
elections, we will have a $6 trillion budget. And if we keep going as 
we have been going until this Congress came and this majority came, 
then that budget will add $1 trillion every 3 or 4 years based on the 
level of the current annual deficit.
  Over the last 40 years, Congress and a succession of Presidents have 
redefined the Federal mission. In 1955 the Federal mission in spending 
terms was heavily weighted toward national security, international and 
domestic programs. Today the predominant Federal mission is to provide 
citizens with benefits.
  In 1955 benefit entitlement spending and interest payments were 12 
percent of total Federal expenditures. By 1962--a few years before 
Lyndon Johnson's Great Society programs began in 1965--etitlements rose 
to 30 percent. Today they exceed 64 percent of the annual Federal 
budget.
  By 2002, even with the 7-year balanced budget program of our majority 
in Congress, entitlements and interest are projected to reach 75 
percent of the Federal budget.
  Since 1955, Federal promises--financial liabilities--have increased 
from $2.8 trillion to over $50 trillion. When you look at the 
liabilities as a business would look at liabilities and under laws 
passed just a few years ago and the standards of the various 
accountancy boards that regulate that profession, a business must put 
on its balance sheets the liabilities that it will have to face from 
either retirement plans for its employees or other obligations and 
loans that that business has taken to continue its activity.
  These estimates that I have made of going from $2.8 trillion to over 
$50 trillion are not just something we dreamed up one evening. These 
estimates are based on the Social Security intermediate actuarial 
scenario projects.
  The Social Security Administration has had for decades highly 
respected actuaries, highly respected outside experts. They have a good 
record. Medicare also has responsible actuaries. That is why the 
outside advisers as well as three Clinton Cabinet officers concluded 
that the system was headed for bankruptcy.
  That is why we have provided a Medicare plan that will preserve, 
protect, and save Medicare and provide options for the first time for 
the senior citizen. No longer will it be Big Government telling senior 
citizens what to do. It will be the individual making a choice that is 
in that individual's self-interest.
  So the Social Security Administration has made these projections. 
Some are high. Some are low. This projection is intermediate. Perhaps 
it is splitting the difference. These costly promises resulted mainly 
from rapidly growing new entitlement programs.
  Entitlements, very frankly, become political currency.

                              {time}  2000

  What do we mean by political currency? We mean votes. Frankly, that 
is why three decades ago a lot of us were early drumbeaters for 
Medicare. Every time an election was around the corner, Congress added 
benefits to the Kerr-Mills Program that was an ancestor of Medicaid. 
What we saw was Congress constantly voting benefits but 

[[Page H15563]]
never voting the taxes to bring in the revenue to pay for those 
expanded benefits.
  Medicare is a very conservative program, although Congress has 
muddied that up a lot in the last 40 years. And that is why I was an 
enthusiast of Medicare from the beginning and helped on the drafting 
team. If Congress provided more benefits, then Congress was to raise 
the Medicare tax to pay for those new benefits. That idea seems to have 
been lost somewhere in the last decade or so in this Chamber. But that 
is why it is a conservative approach. You try to measure the outputs 
and make sure the inputs in the trust fund will cover those particular 
outputs.
  Now, that political currency of modern America, the votes, obviously 
affects what we do. And only citizens, by being aroused and angered by 
the continuation of a budget deficit of billions of dollars, a national 
debt rising to $5 trillion and going to go to 6 trillion before the end 
of this century, if we do not do something about it. I am talking about 
eventually seeking to retire the national debt, or at least lower that 
debt into a more manageable shape than it now is. We must begin to deal 
with the unfunded liabilities, which few, if any, are talking about.
  Today's conflicts over Medicare, Medicaid, and 80 means-tested 
welfare programs reflect a reassessment of the Federal mission, and a 
national referendum on the continued use of entitlement benefits as 
political currency. The current Federal mission providing citizens with 
benefits is unsustainable at current levels. Major changes must be made 
in a number of benefit programs, and we are not talking about Social 
Security. Every to-be political demagogue is sitting out there waiting 
for somebody to trip over Social Security. So as the Speaker said, do 
not even consider touching Social Security. The fact that citizens 
might have secured greater benefits if Social Security had been 
properly organized, that is a debate for another time. Citizens should 
have better benefits under Social Security, but to do that, you are 
going to have to do what a few other countries are doing.

  Priorities have to be set. The performance of current programs must 
be evaluated and that is the role of every authorizing committee here, 
every appropriations subcommittee, the Committee on Government Reform 
and Oversight, and our subcommittee and the others in particular that 
are the oversight subcommittees. Congress must decide which programs 
are effective and then how some of them must be administered. That is 
another battle we are having right now.
  Do we continue to administer most programs out of Washington? Is all 
wisdom here? I was not aware of it. Or do we establish block grants to 
the States? That would let the governors--who also meet the test of the 
people every two or four years--administer many programs and adapt them 
to the needs of the people. There are very able civil servants that 
exist at the State, county, and city level. They are just as capable as 
the very able civil servants in Washington, D.C. They can run these 
programs and they can run them closer to the people and they can adjust 
them to the particular needs of their State.
  When we look at table 4, the Federal spending from 1955 compared to 
1995, and recall that the fiscal year 1955 budget was President Dwight 
D. Eisenhower's first budget to be prepared entirely by his 
administration for review by the then-Republican Congress. After that, 
it would be 40 years before a Federal budget would be approved by a 
Congress controlled by the Republicans.
  And look what happened over those 40 years? First remember that not 
one dime can be spent by the executive branch of this government unless 
this House with the Senate passes a law which provides for a permanent 
appropriation. In brief, pass a law that make a program an entitlement. 
It is the Congresses before 1995 that have spent, spent and spent. And 
now we are trying to change that, not by cuts. The attempt is to slow 
the growth and have better programs .
  Can we save a trillion out of revenue increases of several trillion? 
We can and we will.
  During the last 40 years, Social Security spending has increased from 
3 percent of the Federal budget to 22 percent. Medicare was not funded 
until 1967. Today it receives an allocation of 11 percent of the 
Federal budget. Other mandatory spending programs have increased from 
zero to 16 percent of the Federal budget. Other mandatory spending 
programs have increased from zero to 16 percent of the Federal budget. 
Today discretionary spending has a much lower proportion of the annual 
budget than it did in 1955. The national security budget allocation has 
been reduced from 63 percent of the total budget in 1955 to 18 percent 
in 1995.
  Other domestic spending has decreased from 24 percent to 18 percent. 
Interest costs, however, have increased from 9 percent, when Eisenhower 
was President, to 15 percent. That is because our national debt has 
risen from less than a trillion dollars to almost 5 trillion today.

  The bottom line is that the Federal Government's spending priorities 
have changed significantly over the last 40 years. The Federal 
Government's major role has been redirected from program initiator to 
benefits provider.
  Today nearly 50 percent of Americans receive some form of government 
payment. Is this the essence of the American dream? A resounding 
``no,'' I think most of us would say. And increasingly the voters are 
going to shout it so all elected officials can hear.
  Members of Congress, parents, government workers, the media, every 
citizen must have the courage to seek the truth about what is happening 
fiscally in our Federal Government today.
  If we look at table 5, the growth of assets and liabilities, 1955 
compared to 1995, we see that since 1955 Federal assets have increased 
six times while liabilities have skyrocketed by a factor of 18. Why 
does the Federal Government have a significant asset liability 
mismatch? Because little attention has been paid to tie in revenues, 
taxes, fees, duties, to each specific promise and spending decision as 
we do in our family and business. The Federal Government operates using 
a cash budget that is ill-suited for looking out into the future. Thus 
our future spending commitments overwhelm our capacity to raise 
revenues.
  Our option is to cut some programs dramatically. A second option is 
to increase taxes. A third option is to create more debt. The latter 
two options have been rejected by those of us in the Congressional 
majority.
  What does this asset liability mismatch really mean for future 
spending and citizen taxes? Matching assets and liabilities is prudent 
fiscal policy. Spending and taxes are linked to Federal liabilities 
through the debt. Just as a family must not spend more than it earns, 
over the long run governments must make sure that revenues match 
expenditures. Federal debt reduction will be a key factor in 
determining each family's standard of living in the 21st century.
  Many nations--including New Zealand, Singapore, Taiwan--and the 
European Economic Community have recognized the importance of matching 
revenues to equal expenditures. Many nations as well as State and local 
governments in this country have recognized the importance of matching 
specific assets, such as dedicated trust funds--as in the case of 
Social Security and Medicare--with the promises that are made.

  Federal regulatory agencies, such as the Comptroller of the Currency, 
have required banks to match assets with their liabilities--their 
promises--in order to protect the government from losses. We should 
expect at least as much from the Federal Government when it makes long-
term promises, and these promises should be matched to anticipated 
assets or income streams so that all who are entitled to the benefits 
will know that they are there.
  Table 6 looks at the top six Federal assets, again, comparison from 
the Eisenhower administration to today. The bottom line for the Federal 
Government is the need to manage its assets in a prudent manner. By far 
the most important Federal asset is the power of the Government to tax. 
The power to tax results in the cash flow that sustains the yearly 
obligations of government.
  I think it was Mr. Justice Holmes who said taxes are the price we pay 
for civilization, although I am also aware that taxes are rather heavy 
in a few dictatorships. 

[[Page H15564]]

  For the last quarter century, in the United States, tax revenues have 
been less than Government expenditures, thus the deficit. And the 
deficit which consumes our attention does not even consider the long-
term unfunded liabilities which we are now discussing. The power to tax 
is what the Federal Government is expected to collect in fees, duties, 
and individual corporate taxes.
  Expressed in today's dollars, over the next 75 years, the power to 
tax makes up over 95 percent of all Federal assets. This was true for 
both 1955 and 1995.
  The willingness of citizens to pay taxes is what keeps our government 
operating. Between 1955 and 1995, using the value of the dollar for 
each period, the power to tax has increased from 3.5 trillion to 20.6 
trillion, or a little over six times. Federal asset values have 
generally increased proportionally over the last 40 years, according to 
the estimates made by the citizens for budget reform.
  One exception is gold. The U.S. gold stocks have been reduced by half 
since 1955, from 622 million ounces to 262 million ounces. As the price 
of gold increased from the Government mandated price of $36 per ounce, 
to nearly $400 per ounce today, the Federal gold stock was being 
reduced over this period by one half.

  Other significant Federal assets include property, plant and 
equipment, inventories, cash, monetary assets, loans receivable and 
other assets. Property plant and equipment includes Federal buildings, 
military equipment, other equipment, construction in progress and land. 
With nearly 650 million acres of land in its inventory, the Federal 
Government controls almost 29 percent of the land within the United 
States. The vast majority of this land inventory is in Alaska, 248 
million acres. Over 50 percent of Oregon, Idaho, Nevada, Alaska, Utah 
are owned by the Federal Government.
  Federal land is valued at $20.6 billion. Obviously we must strive to 
protect our national parks, our national monuments, historic sites, 
wilderness and other natural wonders. High on this list are the Grand 
Canyon, Yellowstone, wild and scenic rivers, ancient forests and the 
home of our Presidents, among other historic homes and monuments. The 
Federal Government has over $130 billion in loans receivable, not 
counting the over 60 billion that has been written off by the Internal 
Revenue Service.
  I am planning to hold a hearing on that probably around April 15 to 
see why that has happened and to try to get us through a debt 
collection act that will collect the 50 billion they are still owned 
and another 50 billion the rest of the government is still owed.
  There is roughly about $146 billion in inventories. Other Federal 
assets include the national defense stockpile. My colleagues will 
remember that years ago with the strategic metals that were placed in 
it during the cold war. That is valued at $20 billion and 42 billion 
held in presidential funds directly under the control of the President.
  When we look at table 7, we look at the top 11 Federal financial 
liabilities. Some are very good programs. We all need. We want to 
preserve them. We want to straighten them out so they will be here for 
the younger generation who very much doubts that they will ever be 
around by the time they become eligible due to age or means testing.

                              {time}  2030

  The liabilities of the Federal Government include the total of all 
promises, loans, guarantees, claims, contingencies, contracts, and 
undelivered goods. In 1955 Medicare and Medicaid did not exist. In 1955 
welfare, cash aid, food benefits was funded at very low levels. The 
major Federal promises of the Government in 1955 were meeting the 
payments needed to write the benefit checks for Social Security, to pay 
the interest on the national debt, to pay the claims on deposit 
insurance if a bank went broke, and to pay for the weapons systems to 
meet the needs of our Armed Forces at that time.
  By 1995 the Federal Government had taken on substantial promises. For 
example, the retirement-related fiscal liabilities add up to 38 percent 
of the total 1995 Federal Government liabilities. Future welfare 
benefits are now responsible for over 24 percent of the total 1995 
Federal liabilities. Health-related fiscal liabilities account for 20 
percent of our promises and our liabilities.
  These three classes of liabilities, retirement, welfare, and health, 
amount to 82 percent of the Federal Government's long-term promises. 
Additional liabilities are Federal guarantees of deposits in our banks, 
our savings and loans, and our credit unions. The deposit insurance 
fund liabilities equal nearly 6 percent of future promises as of 
September 30, 1995.
  When we look at table 8, the entitlements in the mandatory spending, 
and what are the top five during the fiscal year 1995, which end on 
November 1, midnight October 30, the key to a balanced Federal budget 
depends on how our ability to better manage entitlement benefit 
programs is carried out. Programs providing entitlement benefits; that 
is, mandatory spending, includes the vast majority of all Government 
expenditures.
  Entitlements can be grouped into five major categories. There are 
eight groups of means-tested programs; that is the first category, and 
we have got in there medical benefits such as Medicaid and eight health 
programs related in a similar manner; cash aid, there is about 11 
programs; food benefits, 11 programs. We have heard a lot about school 
lunches. The fact is we are substantially increasing school lunches, 
but you would never know it if you listen to the campaign rhetoric. 
Housing benefits, 15 programs; education, 17 programs, various 
services, another 8; jobs and training, 7; and these are the means-
tested ones, and energy aid, 2 programs.

  Then you have got the Social Security payments in the second 
category. They make up over one-sixth of all Federal liabilities. 
Benefits currently being paid total over $300 billion a year. Social 
Security payments are not assured to all current contributors, and this 
statement is in quotes.
  Young Americans find it easier to believe in UFO's, unidentified 
flying objects, than the likelihood Social Security will be around when 
they retire, unquote. That is based on a survey commissioned by Third 
Millennium, a forward-looking group, and it is a survey of those 
between 18 and 34 years of age, and they found in that survey that 
fully three-quarters of the 18- to 34-year-olds had doubts, grave 
doubts, about their capacity and opportunity to receive Social Security 
payment when they retire somewhere in their mid-sixties while nearly 
half of this same group think there are UFO's. so right now it is UFO's 
one, and Social Security, perhaps half of one.
  Pensions and compensation in terms of the other main category. The 
Federal Government administers over 40 pension and compensation plans. 
The largest two, for civilian and military employees, account for 98 
percent of the Federal Government's pension liability. The unfunded 
liability of these plans include roughly $905 billion, and the civilian 
plan is $630 billion--rather for the civilian plan it is $905 billion; 
for the military plan it is $630 billion. Federal spending for 
retirement income is thus substantial, but it would be even more so if 
the Federal Government were required to fund their retirement plans as 
private companies must fund them, Federal spending would be increased 
by at least $53 billion per year.
  The other fourth category is other retirement plans and health 
actuarial liabilities which include veterans' compensation, the tragic 
black lung disease, Federal employees' retirement compensation, as well 
as other benefits.
  Then the fifth category, the unemployment benefits paid in 1995, 
totaled over $\1/2\ trillion. As you know, we pay into that fund, 
another trust fund.
  Mr. Speaker, we need to develop win-win solutions as we redefine 
Federal retirement, medical health, and unemployment programs. Those 
with the greatest need should be protected. Those in the middle- 
and upper-income economic levels should be willing to give up their 
benefits for reduced taxes and newly designed retirement security 
programs that are actuarially sound.

  When we get to table 9, we are talking about the net worth of the 
United States, again 1955 compared to 1995. In 1955, which was the 
third year of the Eisenhower administration, the net worth of the 
United States was positive. It was slightly under $1 trillion. 

[[Page H15565]]
By 1995 it was a negative of slightly over, minus, $28 trillion.
  Remember now that the national debt is at $5 trillion, and, if 
nothing is done with the suggestions the majority has made in the House 
and the Senate to deal with eliminating the annual deficit, it will be 
$6 trillion, and add another trillion every 3 or 4 years into infinity.
  So right now in 1955 you had a plus $1 trillion positive net worth. 
By 1995 it was a negative of slightly over $28 trillion. Now that is a 
``t,'' not a ``b''; that is a ``t'' for trillion dollars. On the 
average for each year since 1955 over $1 trillion was added to the 
gross liabilities of the United States. Each year the Federal 
Government takes into its Social Security trust funds over $340 
billion, it pays out to current claimants nearly $300 billion, and it 
has generally run surplus of about $1 billion a week for the last few 
years. That is not going to be there forever. As the baby-boomers begin 
to retire, you will see rapid use of that trust fund, and there will 
not be a billion dollars a week surplus. Thus each year approximately 
$40 billion is added to the so-called trust fund. The bad news, as 
reported by the Treasury Department, is that each year since 1989 the 
Federal Government has added nearly $400 billion to its Social Security 
unfunded liability.
  Additional liabilities beyond Social Security, such as the increases 
in entitlements and infrastructure, are estimated to increase each year 
by at least another $400 billion. If the Federal Government had to 
follow business balance-sheet practices, dramatic steps would need to 
be taken since the Federal net worth is less than zero. The Federal 
Government has much more than a little problem with its net worth. It 
is faced with a catastrophic situation.
  The recent experience in Orange County, CA, is instructive. Citizens 
and elected officials were not kept up to date about investment 
policies and related management decisions. Financial disaster struck. 
Undue interest risks were taken that eventually led to the insolvency 
of Orange County, one of the richest counties in America.

  Our Federal Government is exposed to similar risks. Assuming undue 
credit risks have cost the Federal Government billions of farm loans, 
student loans, and small business losses. Mismanagement of Social 
Security interest rate risks are projected to cost the trust fund a 
trillion dollars over the next 30 years. Widespread mismanagement of 
Federal programs, including defense weapons systems, acquisition, job 
programs, welfare initiatives, have increased management risks 
resulting in greatly reduced program performance, and I am calling for 
the Federal Government to use basic financial management accounting and 
budget tools that are used every day in business and by many of us.
  As we get to table 10, the new Federal programs created since 1955, 
we see that hundreds of new programs have been created over the last 40 
years. This Congress has tried to consolidate some of those programs 
and delegate them to the States with Federal funding, but put them into 
groupings where they can be manageable. You now have dozens and dozens, 
hundreds, of competing Federal bureaucracies, dozens in the same area 
that are not talking to each other, and all they are asking for is 
additional budget funds, and we do not measure them properly.
  The States are way ahead of us. Oregon has a benchmarking program. 
They worked with the citizens to talk about what is it you expect from 
government, how can we measure it to know we are satisfying the 
customer, our taxpayer?
  We are not the most reform-oriented government in the world. This 
majority is, but the Government that is being reformed, has been 
reformed and I say to my friends on the other side of the aisle they 
were started by two Socialist prime ministers, and that is New Zealand 
and Australia. They have dealt with problems that we have ignored. We 
will now start dealing with those problems.
  Programs were created from the 1950's up for almost every imaginable 
purpose: health care, education, welfare, national security, 
international assistance, commerce, transportation. The Federal 
Government has been a program-generating machine during the last 40 
years. For instance, the Appalachian Regional Commission, formed in the 
mid-sixties, has created dozens of highway, economic development, 
health, and education programs which duplicate many Federal programs. 
Within the Department of Education new programs were established for 
Alaska Native culture and arts development, cooperative education, 
innovative community service projects, upward-bound talent search, 
student support services, educational opportunity centers, State 
student incentive grants, national science scholars, teacher corps, 
Javits fellows, legal training for the disadvantaged, to name but a 
few, many of them very worthy programs helping a lot of people become 
constructive citizens in our society. The top six new Federal programs 
created since 1955 in terms of current spending, however, include 
Medicare. Benefits reached an estimated $174 billion in 1995. Under the 
7-year Balanced Budget Act of the majority which we passed in its 
proposal to reform Medicare before it went bankrupt, the increase in 
benefits would total over $100 billion by 2002. Medicare benefits are 
paid in addition to Social Security to persons over 65. Medicare 
spending is approaching one-half, 50 percent, of total Social Security 
benefit costs. In 1995 Medicare spending was $174 billion compared to 
Social Security payments of $334 billion.

  Now medical benefits, which covers a number of programs, includes 
Medicaid accounts, MediCal, as we call it in California, and since the 
1960's there are nine major programs besides Medicare that have been 
added, and together they account for roughly 89 percent of the medical 
benefit health category.
  Medicaid serves six groups, and many people do not know about these: 
Current and some former cash recipients, low-income pregnant women, and 
children, the medically needy, persons requiring institutional care, 
which is a growing area, low-income Medicare beneficiaries, because it 
is based on the amount of income one receives, and low-income persons 
losing current employee coverage, which is a serious problem in society 
since some corporations, because they had to meet the unfunded-
liabilities test, cut off their health benefits for their retirees.

                              {time}  2030

  Some are trying to restore that, once they got past the problem of 
having to deal with accounting standards in the business community.
  Other medical groups include veterans without service-connected 
disability, general assistance, Indian health services, started under 
President Eisenhower, maternal and child health, community health, 
family planning, migrant health centers, and medical aid for refugees.
  Then we have another one. Nuclear weapons cleanup costs have been 
escalating almost geometrically over the last few years. The actual 
nuclear weapons costs cannot be estimated with confidence until 
Congress and the regulators determine the level of health and safety 
risks to be assumed. The Department of Energy currently stores 100 
million gallons of highly radioactive waste, 66 million gallons of 
plutonium waste, and even greater quantities of lower-level nuclear 
waste. At the current level of funding, which is under $10 billion per 
year, the nuclear cleanup could take 100 years or more to be completed. 
In 1988 the Department of Energy estimated that the nuclear cleanup 
costs would be between $66 and $110 billion. Knowing government 
estimates, I would suggest we just double it to start with.
  In 1993, Department of Energy officials raised the cost of the 
nuclear waste cleanup. They did more than double it, to between $400 
billion and $1 trillion. Perhaps we ought to triple that.
  Then you have the category of Pension Benefit Guaranty Corporation, 
and that ensures private pension plans. The total potential liability 
of the Pension Benefit Guaranty Corporation is nearly $1 trillion. 
Senator Dirksen, the Republican leader of the Senate when I served on 
the Senate staff used to say, ``A million here, a million there, pretty 
soon you are talking about real money.'' Then it got to be ``$1 billion 
here and $1 billion there, pretty soon we are talking about real 
money.'' Well, we are now talking about trillions. That is real money.

[[Page H15566]]

  Then we come to the transportation insurance that is provided for 
both aircraft and ships that are dedicated to national service during a 
national emergency. Aircraft under this program were first used in the 
Gulf War. And we get to the Government National Mortgage Association 
packages, and the Veterans Administration mortgage loans and Federal 
Housing Administration mortgage loans for sale into the secondary 
mortgage loan market. A Federal loan guaranty is issued. At the end of 
fiscal year 1995, more than $550 billion in loans had been guaranteed.
  With the Federal Home Loan Mortgage Corporation, like its slightly 
older twin, the Federal National Mortgage Corporation, it provides a 
secondary market for mortgage loans, and the risk to the Federal 
Government is less than it seems. The Federal Home Loan Mortgage 
Corporation has nearly $500 billion in gross mortgage loan liability. 
Even in the worst possible economic scenario, its losses would not 
exceed 20 percent of the liability.
  We look at the conclusion here, and what do all these numbers, 
charts, tables, figures, tell us? There are five major conclusions we 
can make out of that. Certainly the first is the Federal Government has 
changes its mission over the last 40 years from program administration 
to bestowing benefits on millions of citizens. The Federal Government 
certainly, in the case of the Veterans Administration and other areas, 
has a lot of analysis to do. We need in the months ahead to be looking 
at some of these areas and to do that analysis.
  We need, once we get the balanced budget, to stimulate a discussion 
on retiring the national debt and to stimulate a discussion of the 
long-term liabilities of this country, so that young people, young 
adults, when they are interviewed, do not have to say, ``It is more 
likely that I will see a UFO than I'll see the guarantees the Federal 
Government now makes to me about Social Security and Medicare.''
  While we have prevented Medicare from going bankrupt, if the 
President signs off on it, we still will have problems with many 
entitlements, and we need to have more efficiency, more effectiveness 
than we have had in the past.
  Mr. SHAYS. Mr. Speaker, will the gentleman yield?
  Mr. HORN. I yield to the gentleman from Connecticut.
  Mr. SHAYS. Mr. Speaker, I would love to get the gentleman's chart 3 
beside him, because to me it just raises a very interesting point as it 
relates to democracy. Mr. Speaker, as I read it, and I would love the 
gentleman to comment, as I look back in 1955, it is fairly clear that 
nearly 90 percent of all expenditures are what we call discretionary 
spending, spending that was voted out by the Committee on 
Appropriations, and that what we call mandatory spending, entitlements, 
interest on the national debt, was close to 20 percent. We vote on what 
we call the discretionary spending, then.
  What my colleagues seems to point out is that sometime, I gather, in 
the 1970's or a little beyond, at that point mandatory spending 
overtook discretionary spending with, I think, tremendous significance, 
because I was elected 8 years ago. I do not vote on 50 percent of the 
budget. It is on automatic pilot. In fact, I do not vote on 60 percent 
of the budget, basically.
  Mr. HORN. You vote on only a third of the budget.
  Mr. SHAYS. I vote on a third of the budget. Gramm-Rudman, which was 
attempting to get our financial House in order, only focused in on 
discretionary spending, so while we tried to control the growth of 
discretionary spending, nondefense and defense spending, we had 
entitlements just continuing to grow, and what to me is most alarming, 
interest on our national debt is about 15.3 percent.
  What it seems from looking at that chart, I am just wondering if the 
gentleman could project this out beyond the year 2002, and tell me if 
we do not deal with this challenge, what is likely to happen.
  Mr. HORN. Mr. Speaker, my second conclusion would be today's spending 
by the Federal Government for mandatory programs is unsustainable. In 
other words, Congress needs to get control, one, through modern 
efficiency and effectiveness. My distinguished colleague [Mr. Shays] is 
chairman of one of the subcommittees, as I am, of oversight on a 
substantial portion of the Federal Government. You have some of the 
major spending programs within your jurisdiction, as does the relevant 
appropriations subcommittee, as do the various authorization 
committees.
  One of our problems with the House and the Senate we that we often 
have 11 authorization committees for one agency. It is hard to get a 
focus on it. We are going to have to do a lot better in management of 
ourselves and the executive branch simply we must think about results, 
not haggle over how many employees they have here or there. Let us find 
out what these employees are going. Are they meeting the taxpayers' 
goals and needs? If we do as they already have done in Oregon, as they 
have done in Minnesota, as they have done in North Carolina, and South 
Carolina, then we will finally get a better fix on these programs.
  As I suggested earlier, and I think you were in the room for that, 
with job training we have had a very good approach this year in 
consolidating many programs, so that the Governors can adjust them to 
meet local community needs.

  Mr. SHAYS. I am struck by the fact that the gentleman points out that 
we cannot continue to allow mandatory spending to continue to grow and 
grow. They cannot be sustained. As they grow, it crowds out 
discretionary spending, though discretionary spending is where you and 
I and other Members on both sides of the aisle actually have to make 
choices.
  Mr. HORN. Mr. Speaker, another point, I think, that the gentleman 
from Connecticut is so correct in, Congress, which has only a third of 
the control over the total budget in terms of discretionary spending, 
unless the authorizing committees recommend and we pass a law that 
tightens up some of the criteria on mandatory spending. And of course, 
one thing we have done is try to bring together some of the related 
programs so they make some sense.
  The average citizen is confused. Where can they get help? That is why 
your district office and mine and those of the other 433 
Representatives in the House, 100 Senators and 5 delegates, have 
congressional staffs in the field to try to help the average citizen 
work their way through this vast bureaucracy. A lot of very good 
programs exist, but they also need to be pulled together so they can be 
serving real needs, and if they are serving out-of-date needs, we need 
to face up to it and deal with it.
  Mr. SHAYS. I serve on the Committee on Government Reform and 
Oversight. We have oversight of HHS, and it was described to me by one 
of the planners, an undersecretary, that when HHS also included Social 
Security, its total budget was larger than the gross domestic product 
of Canada, an astounding thought, that here we had this Government 
agency that spent more money than all the gross domestic product of 
Canada.
  Mr. Speaker, I would just thank the gentleman for his presentation, 
both in terms of liabilities, which ultimately are continuing to grow, 
and something we have not even begun to address. But what we are trying 
to do in this 104th Congress' first session is to slow the growth of 
mandatory spending, to start to make choices about what parts of our 
society should get resources. I thank the gentleman.
  Mr. HORN. And we want to make them work better. One of the things I 
said before, besides efficiency and effectiveness, there has been 
almost no thought given to linking Federal income sources, the assets, 
with long-term promises, the liabilities. The net worth of the Federal 
Government, as I suggested, has gone from positive to very severely 
negative.
  The Federal Government's long-term promises, the problem is 
concentrated among the top 11 financial drains and financial 
opportunities and financially specified programs. We just have to face 
up to how we improve those programs, meet the needs of people, make 
sure that people do not fall through a net that is not a safety net. I 
think we can do it.
  What can be done to straighten out the Federal Government? We are 
going to discuss some of those possibilities over the next few weeks.

[[Page H15567]]


REPORT ON RESOLUTION PROVIDING FOR CONSIDERATION OF H.R. 299, AMENDING 
 RULES OF THE HOUSE OF REPRESENTATIVES REGARDING OUTSIDE EARNED INCOME

  Mr. SOLOMON, from the Committee on Rules, submitted a privileged 
report (Rept. No. 104-441) on the resolution (H. Res. 322) providing 
for consideration of the resolution (H. Res. 322), to amend the Rules 
of the House of Representatives regarding outside earned income, which 
was referred to the House Calendar and ordered to be printed.

                          ____________________