[Congressional Record Volume 149, Number 39 (Tuesday, March 11, 2003)]
[House]
[Pages H1733-H1735]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                         THE FORGOTTEN DEFICIT

  The SPEAKER pro tempore (Mr. Burns). Under the Speaker's announced 
policy of January 7, 2003, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, tonight I am going to talk about 
two very serious issues for this Congress, for this President, 
certainly its effect on future generations and current and future 
retirees.
  First, I am going to talk about defense spending, the overzealousness 
of Washington to continue to increase spending two, three and four 
times the rate of inflation, and what that means is increasing debt 
that we are going to leave to our children.
  So what I have titled the first part is ``The Forgotten Deficit,'' 
and though, right now overshadowed maybe by national security and the 
conflict in Iraq, this year's budget is very important. We must reverse 
the rapid descent into deficit spending that we have seen in the recent 
years.
  Let me give my colleagues an example. From the $236 billion surplus 
that we had in the year 2000, the budget situation has deteriorated to 
a projected $436 billion deficit. From a $236 billion surplus 3 years 
ago now we are looking at $436 billion Federal funds deficit for this 
fiscal year and the same for next year. This is a swing of more than 
$600 billion in a $2.1 trillion budget, and this deficit is going to be 
much larger because this deficit from CBO does not include any money 
for the defense supplemental that is coming. It does not include any 
money for the extra cost of whatever we might do in Iraq, and it 
certainly does not include the effects of any tax cuts.
  It should greatly concern us all that government spending is growing 
explosively as revenues decline. Discretionary spending has been at 
least 6 percent each year. The increase in discretionary spending has 
been at least 6 percent each year since 1995 at about 7.5 percent each 
year since 1998.
  The chart I have on my left shows the projected increases on out 
after 2003, starting in 1993. So fairly flat from 1993 to 1997 and then 
a dramatic growth in spending, and we are looking at a situation where 
the discretionary spending growth will average at least 7.5 percent 
each year since budget balance was reached in 1998, about this level.
  This spending increase, compared to what families are doing, how they 
are dealing with their possible increases in their budgets, is too 
dramatic to sustain, and it is leaving us huge challenges and huge 
problems for the future.
  The President proposed a budget increase for 2004 of 3.5 percent, but 
even so, even though this is a smaller increase than we have seen over 
the past years, is still an increase in Federal Government spending, 
about twice the rate of inflation. This includes some needed spending 
on defense after September 11, I admit that, but we cannot excuse 
unrestrained nondefense spending which should not be increased during 
the challenge in the war situation that we are now in on terrorism.

                              {time}  2145

  Tomorrow, our House Committee on the Budget is going to mark up a 
budget resolution. I just stress, as strongly as I can, that it is 
important to the future of our economy and to the future of this 
country to start having the intestinal fortitude to hold down spending, 
to prioritize some of the spending we do. Some of the spending we do is 
much less necessary. Probably much of it is unnecessary.
  As we ask the American people to do with less, as States all over the 
country are cutting back their budgets and suggesting that people are 
going to have to do more for themselves during these tight times, the 
Federal Government goes merrily along spending, and I will not give any 
comparisons to sailors or anybody else because I think we

[[Page H1734]]

exceed almost anybody else's level of increased spending.
  Government, at the Federal level, does not have the constraints of 
most States that have constitutional language that says that they 
cannot spend more than what is coming in to their government. In 
Washington, we can simply increase the deficit. And that is what we are 
doing. We are going to be increasing the deficit with this budget, 
after we pass this budget. Because of supplementals coming in, we are 
going to increase the Federal limit on the Federal debt. Every time we 
increase the Federal debt, Congress has to pass a law saying we are 
going to increase the Federal debt, and the President has to sign that 
law. And that is what we are doing.
  In fact, we have tried to make it easier for ourselves by saying when 
we pass a budget that spends more money than the existing Federal debt, 
automatically we are going to consider a bill passed that increases the 
Federal debt to the level needed to accommodate that particular budget. 
I think this is a mistake for a couple of reasons, but one is that it 
makes it too easy to not face up to what we are doing with the increase 
in debt for this country and the challenge that that puts on future 
generations. I mean, what we are doing, in effect, is suggesting that 
our problems today are so great that it deserves us taking the money 
from the earnings of our kids and our grandkids to pay for today's 
spending. It is sort of pretending that they are not going to have 
their own problems 20 and 30 years from now.
  The debt problem is soon to come to the fore as Congress is forced to 
increase the debt limit. The debt limit today is about $6.4 trillion, 
and we are going to dramatically increase that because we are 
dramatically increasing spending. If we cannot have an average of zero 
increase in nondefense discretionary spending, we should not have a tax 
cut. The enormity of Federal spending is almost inconceivable. Even as 
States and families cut their budgets, the Federal Government is 
squandering tax dollars faster than ever before.
  The $2.1 trillion proposed budget is more than the Federal Government 
spent in the 178 years between 1789 and 1966. Let me say that again. 
The budget that is being proposed for this next year, that we are 
working on and the budget resolution is going to accommodate in markup 
tomorrow in the Committee on the Budget, is more than government has 
spent in the 178 years between 1789 and 1966. It amounts to over $7,500 
for every man, woman, and child in the United States. It is neither 
fair nor realistic to assume that our problems today are so great that 
we should be putting this burden on our kids and our grandkids and 
future generations. Debt and deficit spending is an obligation to 
increase taxes sometime in the future.
  Let me move to the problem of Social Security, which is a huge 
financial problem for this country. Social Security is one of the best 
retirement programs that we have. And as many of the people in America, 
Mr. Speaker, have heard, Social Security is facing a very dire 
financial situation, and that is because we have a coming Social 
Security crisis. Our pay-as-you-go retirement system will not meet the 
challenge of demographic change.
  This chart represents the number of workers that are working. And 
what happens in this pay-as-you-go system that we started in 1934 with 
Social Security, current workers pay in their FICA tax, their Social 
Security tax, and immediately that money is not saved in some account 
for workers today, but it is immediately spent on paying the benefits 
of current retirees.
  So when I talk about demographic change, I am talking about a 
situation where 26 people in 1940 were working and paying in their tax 
for each retiree. By 2000, it got down to three workers; three workers 
now paying a much-increased percentage of what they earn to accommodate 
the retirement of every one retiree. By 2025, we are looking at people 
living longer, a decline in the birthrate, so there will only be two 
people working and paying in their taxes to cover the benefits of every 
one retiree. A huge burden. A huge challenge.
  As we borrow all this extra Social Security money that is coming in 
now, and that is going to run out very rapidly, currently we are 
looking at $199 billion more coming in every year, if you include the 
interest that is coming into Social Security over and above what is 
required to pay out, by 2016 we are looking at a situation where there 
is no longer going to be enough tax revenues coming in by current 
workers to pay for the benefits of current retirees.

  Look at this next chart with me. Insolvency is certain. We know how 
many people there are, and we know when they are going to retire. We 
know that people will live longer in retirement. We know how much they 
will pay in and how much they are going to take out in benefits, and 
payroll taxes will not cover benefits starting in 2015 or 2016; and the 
shortfalls will add up to $120 trillion between 2015 and 2075. Now, 
compare those huge numbers of trillions with our current budget that we 
are spending in 1 year. So the next-year budget that we are looking at 
is $2.1 trillion. But over this time period, we are looking at some way 
that we are going to have to increase borrowing or increase taxes or 
cut benefits to accommodate that unfunded liability of $120 trillion.
  The biggest risk is doing nothing at all, and that is what we have 
been doing. I first came to Congress in 1993; but actually, I wrote my 
first Social Security bill when I was chairman of the Senate Committee 
on Finance in the State of Michigan, because it was one of those areas 
that looked like the greatest challenge for the Federal Government, how 
we were going to accommodate the situation where the number of workers 
is decreasing in relation to the number of retirees. And in a pay-as-
you-go system, it just does not work out. It just is going to mean that 
Social Security is going bankrupt unless we make some changes.
  The longer we put off the solution, the longer that it is demagogued 
in elections, the longer that Members of Congress and the President and 
the Members of the Senate are unwilling to sit down and talk about 
solutions, the more drastic those solutions are going to have to be. 
And that is because we have a temporary surplus coming into Social 
Security now, after the huge tax increase of 1983. The tax increase was 
so great that we have temporarily ended up with more money coming in.
  Every dollar that has been coming in, government takes and spends and 
writes the Social Security trust fund an IOU. So the question is: Where 
is government going to come up with this extra money in 2016 or 2017 
when funds coming in from the FICA tax, from the payroll tax no longer 
are large enough to pay the promised benefits? And to keep paying 
promised Social Security benefits, the payroll tax will have to be 
increased by nearly 50 percent, or benefits will have to be cut by 30 
percent.
  It is unfair. It is unreasonable. It is unconscionable not to face up 
to this problem and to move ahead with this problem. And of course in 
most of my elections, because I have introduced the Social Security 
reform bill that has been scored to keep Social Security solvent every 
session since I have been in Congress since 1993, my opponents have 
demagogued this. They have said, look, Nick Smith is trying to ruin 
Social Security and, therefore, do not elect him. But I think more and 
more Americans, Mr. Speaker, are now starting to face up and realize 
that Social Security is becoming insolvent; and if we do not deal with 
it, the problem is going to be much worse.
  Let me just give a little bit of history on what has happened since 
we started Social Security in 1934. Every time there was a problem of 
the money coming in on taxes being less than what was needed to pay 
benefits, taxes were increased and/or benefits were reduced. Let us not 
let that happen this time. Let us face up to the problem. Let us deal 
with it. Let us have both sides work together, without demagoguery, 
with not playing politics and trying to criticize either side. And both 
sides have been at fault in some of these situations.
  Social Security has a total unfunded liability of over $9 trillion 
today. If you take that $9 trillion that we need today and spread it 
out over the time period of 2015 to 2075, then it means $120 trillion 
in those future inflated dollars that we are going to have to come up 
with sometime through that time period to pay benefits. The Social 
Security trust fund contains nothing but IOUs. So in 2016, 2017 how are 
we going

[[Page H1735]]

to come up with the money? Do we increase the income tax? Do we 
increase the payroll tax?
  Already 75 percent of American workers in this country pay more in 
the payroll tax than they do in the income tax. So I say, no, we cannot 
increase the payroll tax. Will Members of Congress be brave enough to 
say, look, we are going to have to cut back on some of this other 
spending? I certainly hope they will. Our increase in spending at two 
and three and four times the rate of inflation has maybe been 
politically wise in a reelection sense, because as you come up with 
new programs and make more promises to people and say we are going to 
take care of more of the problems with the Federal Government, that 
means the Federal Government gets bigger. But since it is unpopular to 
increase taxes, what we have done is increase borrowing. And again, 
increased borrowing is nothing more than a promise that taxes are going 
to have to go up sometime in the future.

  Mr. Speaker, let me make one last comment as I conclude tonight's 
colloquy on some of the problems that we are facing, and that is that 
we are dealing with Social Security and spending and it has been 
politically wise for politicians to put off coming up with a solution 
on spending. So the tendency of Congress is we wait until it is almost 
a crisis before we deal with that crisis.
  In terms of coming up with new programs, Members of Congress have 
found that it is easier to get elected because they go on television 
cutting the ribbon and on the front pages of their newspapers when they 
come up with new programs to help people in solving some problem. Look, 
there are lots of problems across the United States. We have a system 
of government in the United States that has served us very well, but 
government cannot solve all those problems, and government should not 
solve problems that States and individuals can solve for themselves.
  We have a system not because we are stronger than people in other 
countries, not because we are smarter, but because our system 
encourages hard work; it encourages productivity. So we have said in 
our constitution those individuals that study and use that knowledge, 
those that work and save and invest end up better off than those that 
do not.

                              {time}  2200

  That is a system that other countries around the world are now trying 
to copy. Let us get back to that system. Let us hold the line on 
spending, and let us stand up and deal with the Social Security 
problem.

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