[Congressional Record Volume 157, Number 23 (Monday, February 14, 2011)]
[House]
[Pages H754-H758]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
THE BUDGET
The SPEAKER pro tempore (Mr. Womack). Under the Speaker's announced
policy of January 5, 2011, the gentleman from Missouri (Mr. Akin) is
recognized for 30 minutes.
Mr. AKIN. Mr. Speaker, it is a treat to be able to join my colleagues
here this evening and to consider this great discussion and debate that
is taking place over the past months, but particularly during this week
as we approach the question about what are we going to do with funding
the remainder of this year. There, of course, was no budget decided on
last year, and so they do a thing called a continuing resolution. So
there's a lot of discussion as to how much can we be affording to spend
of the taxpayers' dollar.
And I thought that it might be appropriate this evening to take a
look at that, not so much in a lot of minuscule detail, but at the
magnitude of the overall question that's before us and how the math
just doesn't work. I will also try, as we have a chance to get into a
discussion this evening, to connect it to the problem of unemployment,
because all of these things are connected, and still I think it's
helpful to look from an overall perspective.
So what I have here is one of those--we always have these pie charts.
I particularly like pie. And this particular pie chart here shows some
different areas of the Federal budget. Now, this is the total of
Federal spending here and the pieces of pie are roughly proportional.
What I would like to start with this evening, so we have a big
picture of how serious the excessive spending in the Federal Government
is, is to start by making a distinction between a couple of types of
spending. The first kind of spending--and maybe to some people this
sounds like sort of Washington, D.C., talk but they call it mandatory
spending or entitlements. And mandatory spending may be not necessarily
mandatory, but what that means is that legislators, maybe as much as 50
years ago, passed a series of laws, and those laws then automatically
spit out dollar bills out of the Treasury. So anytime somebody who
happens to be the right person waves their hand in front of the little
machine, out pops a dollar bill.
And so we have these things, and they're called entitlements or
mandatory spending. So these are places where the Federal Government
just is automatically spending money, and there are some of them that
are very familiar with most people: Social Security here, Medicare, and
Medicaid. Those are the three big, as they call it, entitlements or
mandatory spending.
There are other entitlements that are smaller, and that's in this
category over here, the other quote, mandatory spending. So these are
not Medicare or Medicaid, Social Security, but they are the other
mandatory.
And then there's another thing that acts just about like mandatory
spending, and that is the interest on our debt. When the Treasury
decides to sell a Treasury bill, the reason people buy a Treasury bill
is because it is going to pay some interest to them. So we have to pay
the interest on our debt, and in that sense, when we decide to spend
money that we don't have, we are creating what is, in essence, like a
little machine that spits out dollar bills.
{time} 2030
Let's say that you take all of this mandatory spending, or
entitlement spending, and add it to the interest on the debt, how much
does that add up to? It adds up to about $2.3 trillion for this year.
Now what in the world does $2.3 trillion mean? Most of us don't have a
good sense of perspective. Well, $2.3 trillion happens to be the
revenue that the Federal Government collects this year. In other words,
what we're saying is, if you take this purple and this aqua color and
this gold color and light and dark blue here, you add this
[[Page H755]]
all together, this is equal to the revenue that comes in for the
Federal Government.
What, then, does that leave out? Well, it leaves out these two other
pieces of pie. One is defense, and one is non-defense. They're called
discretionary because each year we decide how much money you're going
to spend in those categories. So what we're saying is--and I think this
is really chilling--it sounds maybe a little boring to explain it. But
just think about this a little bit: The entitlements and the debt
service equals our revenue. That means if we want to balance the budget
this year, what we would have to do would be to get rid of all of
defense. Not one soldier, not one plane, not one tank, not one ship,
nothing. There would be nothing in defense. And nothing in the non-
defense discretionary. No Department of Energy, no Department of
Commerce, no Department of Education. There would be no Park Service.
There would be no prisons. There would be no Homeland Security. There
are all kinds of things that the Federal Government does that we fund
every year which would be gone. So there would be no defense and no
non-defense discretionary. Well, the country wouldn't survive very well
under those conditions. So that's the problem. These entitlements have
grown so much that they have eaten up the whole budget.
Now this week, we're going to be debating how we're going to cut this
non-defense discretionary, cutting a little bit from defense but mostly
non-defense discretionary; and we're talking about $100 billion. Is
that a lot of money? Sure, it's a lot of money. Is it a lot of money
compared to the fact that we're about $1.3 trillion or $1.5 trillion
over? Not so much then when you compare $100 billion to about $1.5
trillion.
I am joined tonight by a good friend of mine, a freshman congressman
from Arizona, Paul Gosar. We had a chance to talk about this a little
bit last week, and I invite you to jump in because what I hope that
people are starting to understand here is that we have got a big
financial problem down here. Our entitlements and debt service is equal
to how much revenue we take in, and that's assuming you have zero for
defense and zero for this other, non-defense discretionary. I mean,
there is no money to run the government with. That is a fairly
significant problem. Let's talk about it, my friend.
Mr. GOSAR. Well, you're right. I thank my good friend from Missouri
for yielding.
When we start to look at it in the CR, when we're talking about cuts,
we can't legislate from the CR. What we have to do is we have to just
make the plain cuts. And that is why in the budgetary process, that's
the second step in which we're going to have to address the
entitlements, looking at how we legislate directing, redirecting, and
making cuts. So I think that is an important thing that the American
people need to share.
Mr. AKIN. In other words, I think your point is, Paul, that in our
debate this week, first of all, almost all of the discussion is
centered right over in this--it looks like Campbell's tomato soup on my
chart here--it's in this section, and it's ignoring all of this which
is equal to the entire revenue of the Federal Government. So you can
see that you could cut this to zero, and you still aren't going to fix
the problem. On the other hand, it doesn't mean we shouldn't be looking
for savings and cutting everything we can.
But you are putting in perspective this whole week. I think that's
tremendously helpful, Paul, to do that. And I think, as I recall, there
is about $16 billion being taken out of defense which is not as deep a
cut as what the non-defense discretionary is getting; is that correct?
Mr. GOSAR. That is exactly right. And the savings that we're making
here extrapolates over the next 10 years at a great discount to the
American people in our budget and what we're going to have to come up
with in the future. That's what's so wonderful, at least by the first 5
weeks of this Congress, is zero implications on raising debt.
Mr. AKIN. What you are seeing is a very serious attempt to get into
reducing the size of the government. I mean, we are stepping on all
kinds of political toes just to say, hey, it may be a nice program, but
we're in trouble. I was asked by a reporter--I believe it was earlier
today--whether or not the position that I was taking on these cuts and
everything was like a Tea Party position. I said, You know, I guess we
all reflect, to a degree, our training. I was trained as an engineer;
and to me, this is just plain math. It isn't liberal math. It isn't
conservative math. It's just flat-out, this is how much money these
entitlements are taking, and this is how much money is coming in. The
two are equal, and we don't have any money for these things. I don't
know if this is politically liberal or conservative or anything else.
It's just the reality of the political deficit.
Now the one thing we haven't added here--this is just this year--we
haven't added the perspective of time. I think it's helpful if we take
a look at what time does to this in several regards. The first is, one
of the things that is happening to those little pieces of the pie is,
they're growing. This has got Medicare, Medicaid, Social Security. And
it shows over time what's going on without the other entitlements and
without the debt service. You see that those of us--I hate to admit my
age--but some of us baby boomers, as we get older, we are going to be
leaning on Social Security, Medicare, and Medicaid more. There are more
people there, so that's going to make these numbers go up. What we've
seen is that the revenue the Federal Government collects hovers in here
at 18 percent. There are times, historically, when we've raised the tax
rate tremendously, and yet it seems like it's still 18 percent of GDP.
So if this 18 percent is not that flexible, whether you raise or lower
taxes, then when you get down to this problem, you say, uh-oh. Because
before you could say, our revenue was equal to all of these
entitlements. Well, raise taxes. No problem. Yes, there is a problem.
Because as you raise it, you won't collect any more money. You crash
the economy, and the entitlements are still growing. Over time these
entitlements are still growing. So this picture here, as scary as it
is, is not as scary as it really is because it doesn't take into effect
that the entitlement pieces are growing rapidly.
Here is the other piece from a time point of view. And that is, this
red line is the growth of entitlements. This is 1965. And we're going
over here to 2010. You notice the entitlements are 2.5 percent in 1965.
This is just Medicare, Medicaid, and Social Security. It's up to 9.9
percent. But really, when you add the other entitlements and debt
service, you are getting up closer to 18 percent. So what's happened
is, the entitlements are going out of control. Even if you assume that
the other entitlements are roughly 12 percent or something, you're at
500 percent growth in entitlements. And yet here is defense spending.
It's 7.4 percent here. It goes up as high as over 9 percent here and
drops all the way down to 4.9. So defense spending is going down;
entitlements are going up. And now we get to the point where you could
cut defense to zero and still could not compensate with this incredible
growth in entitlements.
I want to let you jump in, Paul, because I think that people now can
start to see what it is and why it is a whole lot of Americans--not
just Republicans or Democrats--but just plain old Americans are saying,
Hey, we have got to pay attention to what's going on because these
numbers are very scary.
Mr. GOSAR. Well, everybody knows the analogy of a bank. When you put
money in early, and let it build up in a rolling account, compounding
interest, you grow to a bigger fund. That's the opposite of what's
happening here, reverse compounding interest. We are building up more
and more people on the rolls with fewer and fewer people actually
helping out to support it. The last part is, is that we have an economy
that is lagging way behind. We are still over 9 percent for how many
months now? And what we have to do is, in order to create a better
economy, that's what's going to help us service these programs and get
people involved. So it's a variant equation that we have to work by.
Mr. AKIN. So what you're saying is, one of the things that is
affecting this is just the condition of our economy. And I was planning
to get into this a little bit with you. When we started, I wanted to
talk and work in the problem of unemployment and how do we
[[Page H756]]
deal with the level of unemployment in our economy today.
{time} 2040
We've got the government saying it's 9-point-something percent
unemployment. And that's an optimistic number, because if you've been
unemployed more than a year, they drop your name off the list. You may
still be looking for a job. So the real level of unemployment people
are saying is well beyond 10 percent.
So one of the ways you can--I guess this may be a backwards way of
looking at it. What are the things that are creating that unemployment?
And I went to, believe it or not, to a Main Street in my district,
and I got a whole bunch of businesses there and I said, Now, what is it
that's causing this unemployment? And I asked all these different
people, and I was encouraged because they told me the very same things
that my common sense told me and everybody else is saying. Anybody who
has run a business knows what makes the unemployment. The first thing
is when you start taxing the owners of small businesses heavily, they
can't put money back into their business because they're busy paying
taxes.
I believe, gentleman, is it true that you were a doctor?
Mr. GOSAR. Yes.
Mr. AKIN. And did you have a clinic of your own?
Mr. GOSAR. Yes, I did.
Mr. AKIN. And so if you got taxed a whole, whole lot, are you going
to put money into new equipment and expanding your clinic, or is it
going to have to go to pay your taxes?
Mr. GOSAR. Absolutely not, and you're not going to hire somebody when
you don't know the economic rules. And we have besieged the American
people with a set of rules that have a lot of uncertainty to them.
Mr. AKIN. Now you're getting to the second point. You're already
ahead of them.
The first point is, if you want to kill jobs, take the money away
from the owners of small businesses. You could say, Hey, that guy's
making over 250,000, obviously having too much fun. We're going to tax
him into the dirt, make sure he doesn't have a better time than we do.
The only trouble is, if you want jobs, you can't destroy businesses.
And that's the connection it seems like this administration, the
Democrats, keep missing; and that is, if you keep talking about
pounding rich people and those bad corporations, if you pound them into
the dirt, there are not going to be any jobs. And that's where we seem
to have this disconnect going on.
So first thing is you do not want to tax those people a whole lot
because you want them putting the money back into their business. The
second point you're making, though, is all these regulations and
redtape, it may not be a tax, but it has the same effect, doesn't it?
Did you have to fill out a lot of paperwork in your business?
Mr. GOSAR. With the health profession, we have tons of it, from HIPAA
disclosure to anything. When we deal with insurance, the paperwork is
endless.
Mr. AKIN. Do you have to hire people to fill that paperwork out all
the time?
Mr. GOSAR. We have people that just do insurance filings, just do our
mandatory paperwork with the Federal Government.
Mr. AKIN. So, in a way, it's creating a job for people to deal with
government redtape, but it doesn't really create any wealth, does it?
Mr. GOSAR. No, and there's not a service to be provided. It's
actually servicing the public interest within the Federal Government.
Mr. AKIN. So, in effect, what it's doing to the economy is the
government is making you less efficient as a business, and that redtape
then adds to your cost of doing business, which then tends to dry up
jobs.
Mr. GOSAR. That's exactly right.
Mr. AKIN. Particularly in manufacturing, if you do that too much in
manufacturing, it makes it so expensive to make something in this
country, the guy who owns the business says, Hey, I've got an idea.
I'll take this machine that makes good product and I'll send it to a
foreign country where they don't have all that silly redtape and they
don't have all those taxes, and I'll make the product over there. And
so the jobs just disappear from us because of taxes and redtape.
Now, there's another one that the people on Main Street in St.
Charles talked about, too, and that is a little bit less tangible. It's
the sense of unknown. It's the sense of fear because the government's
doing one dumb thing after the next, and they're afraid to make a
decision because of the instability. The economy is down. It's hard to
get loans, and they're not sure what we're going to do. For instance,
the big health care bill was pending, and so what are you going to do?
Well, because you don't know the environment, you tend not to make a
decision, don't take risks because it's a very tumultuous type of time.
There's too much of a storm brewing, and you don't want to be out too
far from shore when there's a big storm brewing up. And so people
hunker down and they don't hire people. And so that's another thing.
And we're doing all those things wrong. Even now we're doing those
things wrong, and we wonder why we have unemployment.
And, of course, the big one is government spending, and boy, are we
doing that. You've got these entitlements that are out of control, and
who's going to pay this tab?
And so, you put all of these things together and you have almost a
perfect storm on business. And people wonder, Gosh, why do we have over
10 percent unemployment? Well, it's because we're doing all the things
to create unemployment.
Please jump in, Paul.
Mr. GOSAR. The Federal Government has also made winners and losers,
and so we don't know in small town USA whether we're one of the winners
or the losers.
Mr. AKIN. Oh, you're going to do the bailout drill. We're going to
bail this one out but that one you don't get bailed out.
Mr. GOSAR. And then our rule is that something went wrong. When it's
bureaucrats asleep at the wheel, what we do is pass more regulations so
that the small banks that we have in our communities can't lend.
They're the ones who get audited five times in less than a year. What
about the same application to the big banks? Where is that equal aspect
to the law?
Mr. AKIN. Paul, I don't believe it. It's just like I'm stepping back
in time to that Main Street in St. Charles, because you're bringing up
that fifth point that they always talked about. It is sort of an ironic
thing, because you've got Bernanke at the Federal level. The Chairman
is creating all this liquidity. He's doing QE2, which sounds like a
science fiction, and I think it may be science fiction economics. But
anyway, he's creating all this money. They used to call it printing
money. But he's created a whole lot of money at the top, and yet
somehow or other the funnel got pinched off and the money's not coming
down to Main Street. And part of the reason it's not is because all of
these regulators are all over the banks second-guessing the loan. So if
the businessman isn't fearful enough as it is, and if he does actually
want to get a loan, he's finding that the banker is being awfully
tough.
And I think they're typically 5- or 7-year loans, is that right,
gentleman?
Mr. GOSAR. It can be, yes.
Mr. AKIN. Is that what you're talking about, basically the banking
regulators, the Federal regulators, are kind of looking over the
shoulder of the small banks all the time?
Mr. GOSAR. Well, what it is--I'll give you an example from right in
our own district--is that we have a small bank that has 39 percent in
liquidity versus loans out.
Mr. AKIN. Thirty-nine percent liquidity; isn't that very, very high?
Mr. GOSAR. Very, very high. It's above the norm of what would be 8 to
10 percent. And yet they gave out two loans in December, but yet have
already had three audits in the fiscal year 2010 and have two more
scheduled in the first quarter.
Tell me where that aspect is and how that actually works, and
especially when we have one bureaucrat disagreeing with another
bureaucrat that this audit wasn't supplanted for another audit. That's
the disruption and that's the fleecing of America.
Mr. AKIN. Well, now the question is, if the banker is a businessman
and he's taking risks and he wants to make a loan and when he makes a
loan he gets some interest, and as long as the loan's
[[Page H757]]
good, then he makes money that way as a banker; now, if he wants to do
that, why do we have a bureaucrat looking over his shoulder all the
time, particularly as long as he's got a sufficient amount of liquidity
to cover potential losses? Why is it that the regulators are deciding
to regulate every aspect of our free enterprise?
Mr. GOSAR. Well, it's actually the crux and the problem with our
economy at this point in time. We actually had a government that
disrupted the understanding of the way the risk was looked at. And we
said, no, we don't need to follow anything, particularly in the housing
industry. We actually saw bureaucrats saying, no, we don't need this
application of risk. We can undermine it a little bit worse. And what
we got is no skin in the game, no application, no money down, and what
we had is a failure along Fannie Mae and Freddie Mac.
Mr. AKIN. You get into this whole thing, and if you looked at what we
have talked about tonight, you kind of start tearing your hair out and
wanting to go buy some real estate on a desert island somewhere to get
away from this huge problem. But there are solutions to this. But you
have to realize where the solutions are.
The first thing is you have to realize that we're not going to deal
with the economic problems of our country until we can reduce the rate
and the number of entitlements we've got. Now, somebody could object
and say, Wait just a minute Congressman Akin, because couldn't you deal
with these entitlements if you just got your taxes up higher? If you
could get these taxes here that are running 18 percent, if we could
double that, why don't we make it a 40 percent tax rate? Oh, that would
take care of this, at least for a while. Let the entitlements grow and
tax everybody at 40 percent. The problem is it doesn't work. And I
think that's something that we ought to warn people about here.
There's something here, this is sometimes now known as the Laffer
curve, and what I have shown here is the top marginal income tax rate.
{time} 2050
Now, that doesn't mean that in 1960 everybody was paying 90 percent
tax. These are the most well-to-do people. But this is what happened to
the top tax bracket over time. We started to reduce the taxes on some
of the very top income people, bringing them down more into this 30
percent range. Take a look at what happens to the Federal tax receipts.
This is an example of the fact that you can actually reduce taxes and
grow the revenue of the Federal Government. The reason that works is
just what you were talking about. Because you are a businessman, you
understand this stuff. And that is, what is happening is when a small
businessman can invest in his own business, he creates jobs. With those
jobs, people are paying taxes. That means more revenue for the
government. So when you get the economy going, we take in much more
revenue.
So the first thing you can do is, actually, by reducing taxes, you
can create more revenue, get the economy going, and that will help
some. But it's not enough to deal with this entitlement problem.
So really, you have a couple tracks you have to take on. One, you
have got to cut the entitlements down. But you also likewise have got
to keep working this advantage of getting your taxes in line to create
a strong economy.
Here is an example. When I was here in Congress, in the third quarter
of 2003, we cut three taxes: Capital gains, dividends, and death tax.
We cut all three. And this picture right here, this black line, is when
the tax was cut, and this is the GDP. These are the GDPs from 2001 to
2003. And you can see, some of them we actually lost GDP. We got up to
2\3/4\ GDP. And then here, we do the tax cut, and take a look at what
happens afterwards. The average GDP is 3.5 versus 1.1. So GDP jumps.
So now we have cut taxes. And you'd think, well, maybe that's good,
because now GDP is going. It gets the companies going, gets the pump
primed. What else goes on at the same time? We've got this next chart.
This is employment. This is before the same tax cut in May of 2003. You
see, all these lines going down means loss of jobs. That means we lost
jobs overall in the economy. The lines that go up were the months where
we gained jobs. Take a look after the tax cut. Look at what happens.
You get a whole lot more jobs being created.
So if you have got better GDP, more jobs being created, you know what
the final chart is going to show, and that is, quite simply, by cutting
taxes we actually grew the Federal revenues. That's a good thing to be
able to grow. It was down here at 1.7 trillion, jumped up to 2.5
trillion just by cutting taxes. What we did was, we cut taxes, and we
ended up with increase in revenue.
So there's two pieces to this equation. One, what we have got to do
is adjust tax policy and create an environment in terms of redtape, in
terms of Federal spending, in terms of tax policy, and in terms of
allowing liquidity to be flowing through the banks. We have got to
create something that's pro-business there.
Why in the world would we be in the mess we're in now and have the
highest corporate tax rates in the world? I just can't understand that.
What is your take on that? Why would we do that?
Mr. GOSAR. Well, I don't understand that madness, but it's something
you have to learn in business. But you have to have the ability to
reinvest in America.
If I have got money sitting there, make it worth my while to invest
back in America. That's what we can do, and that's where the incentives
come in. It also helps us in giving us access to cash, which has been
ladened with the banks and strapped with the new regulations that come
about.
Plus, we also have to look at the certainty of the environment that
we create for business to grow. We're not going to take the load on our
backs if we know that there's an uncertainty in the environment,
whether it be health care, whether it be taxes, whether it be all of
the regulations.
All these things add up. And if you don't get people hired, they are
a drain on the system. And America wants to get back to work.
Mr. AKIN. I think you are right. I think in a way the cuts that we
are going to be talking about this week, while they are not going to
fix the overall problem of the fact that entitlements are out of
control, I think that there are some things that they will do. And I
think that what they will do is to maybe deal with some of that
redtape. Because if you cut some of these agencies that are producing
all that load of bureaucracy and redtape and all kinds of extra
overhead, as you start to reduce that, it is like taking weight off of
a runner; they are going to run faster. The economy will run better.
And some of those cuts are probably Draconian in many people's eyes,
and probably some of them are counterproductive. But, overall, you know
you have got to trim up.
So that is what we're going to be talking about doing. We are going
to be kind of working it from both ways. We are going to have to cut
the Federal spending, but we're also going to have to create an overall
policy in terms of policies, that is redtape, and limit the amount of
redtape, and the tax cuts to basically create a pro-business
environment. When you do that, the revenue is going to grow, the size
of the government is going to shrink, and you will start to see the
shift come back to normal and America will start moving forward again.
Mr. GOSAR. Well, it's like a parent. What we have to do is also work
with our children, which you can make the analogy of Federal Government
versus State government, empowering and giving them the environment for
them to succeed.
As a business owner, what we always want to try to do is make sure
that we put an employee in the best environment with the right tools
and the right education, and then they can succeed. When they succeed,
they make me a better business owner and much better at what I do. And
that's the same thing that we have done here.
We have had unfunded mandates from education to health care, all the
way across. What we have to do is start working with the States in
their individual expertise and what makes them special, and allow them
the flexibility to succeed as well. But we have got to put them in that
right environment. And that goes all the way down from the States to
the communities. This is a group effort, and this is a family affair.
[[Page H758]]
Mr. AKIN. Well, that's a great way to end things up tonight. Thanks
so much for joining us. I know the people of Arizona are tickled to see
that their new Congressman is already earning his keep down here. And
goodnight to you, and goodnight to my many colleagues and the people
across America.
We're looking forward to a brighter day, but we have some tough
decisions to make, and we're getting ready to make those even this
week. God bless you all.
____________________