[Congressional Record Volume 157, Number 31 (Thursday, March 3, 2011)]
[House]
[Pages H1568-H1571]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                          OUR FISCAL SITUATION

  The SPEAKER pro tempore. Under the Speaker's announced policy of 
January 5, 2011, the gentleman from New Mexico (Mr. Pearce) is 
recognized for 30 minutes.
  Mr. PEARCE. Mr. Speaker, I appreciate the opportunity to address the 
House this afternoon.
  Mr. Speaker, there are many people who are wondering in the Nation 
exactly what it was we were doing up here a couple of weeks ago as we 
were talking about amendments to cut the budget, amendments to increase 
the budget. And for myself, I like to keep it in very narrow terms and 
like to get it as simple as possible.
  So we went across the district last week, had town hall meetings 
trying to explain to people exactly the situation that we're facing 
here in the country. And I've got a chart here which is very 
instrumental in helping me to visualize what's going on. And basically, 
this chart is one which shows that we're spending $3.5 trillion at the 
current moment and we're taking in $2.2 trillion, and that begins to 
give the basic understanding of where we are.
  Now, if a local family were in this position, they would be maybe 
spending $3,500 a month and bringing in $2,200 a month, and their 
banker would not be pleased with that. Their banker would say, well, we 
probably need to do better, especially if they were borrowing money 
every month. And we are borrowing money every month to work here. And 
so our government is just as stressed with the debt and with this 
imbalance in spending and imbalance in revenues as a family would be.
  Now, our banker in this country is used to Americans saved and they 
bought Treasury bills. That's how we would finance our government. But 
Americans across the country basically don't save anymore, and so we 
have to find other people who will buy our Treasury bills. And that's 
the Chinese Government. So China is our borrower of record, our lender 
of record.
  And so we would watch what the Chinese have said in the past couple 
of months, in the past couple of years, and a couple of times China has 
said, We're not going to buy any more of the Treasury bills from the 
United States Government. At one point they said, We'll buy South 
Korean treasury bills, meaning the South Korean Government was a better 
bet than the U.S. Government. And so our banker has been giving us 
signs that, We're concerned. We're concerned about the economic health 
of your country, because they see that we cannot long continue.
  Now, for myself, I've gone ahead and done the mathematics that, if 
you are spending 3.5, you are bringing in 2.2, well, you are running a 
deficit of $1.3 trillion every year. Now, that's a deficit as long as 
it's unaccounted for, as long as it hasn't been spent. But the moment 
that the money spends, then it goes into the debt barrel, and that's 
the top small barrel. And then we have a debt of approximately $15 
trillion. Might be a little bit less.
  To put that in perspective, that debt barrel began to build in the 
early days of our history, and we accumulated up to $5 trillion worth 
of debt to the second President Bush, George W. Bush. And during his 
term, we increased that debt from 5 to basically 10. So, a very rapid 
escalation of debt accumulation during the second Bush years.

                              {time}  1640

  But then, under President Obama, then we have seen an acceleration 
even faster so that we have already added almost another $5 trillion in 
debt in 2\1/2\ years under President Obama, and we are on track to 
maybe add another 6 or 7, maybe 8 in the next 2 years. This 1.3 deficit 
for this coming year, that was last year. This coming year, that number 
becomes 1.6 trillion. So you can see that the gap between what we are 
bringing in and what we are spending is absolutely increasing rather 
than decreasing.
  Now, to put this in a bigger perspective the last year of President 
Bush, the deficit was about $200 billion so. Instead of 1.3, it was 
about 0.2, if we round it off to 0.3. You could see that almost 
immediately under President Obama that we increased our deficit. That 
is, we increased these outlays by almost a trillion dollars so that our 
economic condition is worsening very rapidly.
  Now, the unsettling pieces, I mean, if you look at the 15 trillion in 
the top debt barrel and then you look at the revenues that we are 
bringing in from the government, you say, well, we could pay off 7 or 8 
years. If we weren't spending a thing, we could pay off for 7 or 8 
years and still not have quite all of our debt paid off.
  But then the alarming piece is this fiscal gap at the bottom, that is 
Social Security, Medicare and Medicaid. And when we consider those 
elements, then we are looking at a $202 trillion deficit, a debt, a 
debt that we owe. Those are mandated spending programs that we are not 
going to turn off.
  So we can already understand that we would pay almost 100 years if we 
were only getting $2.2 trillion into paying off this fiscal gap that we 
experience here.
  Now, over in the far right corner of the chart, we see now a graph. 
The thing about graphs is they go on in time, this bottom line, the 
horizontal line is actually years and then the vertical line then is 
representative of the average income, per capita income that we as 
Americans have had through our history.
  So I ask our listeners always, are you doing better than your parents 
did? And almost always the answer is yes, I make more money than my 
parents did and I, I myself, made more money than my parents did. 
That's shown on this chart that every year the chart has been 
increasing as we go through time, the numbers increase and so it shows 
that.

[[Page H1569]]

  But then we see that the chart levels off and starts down. So when I 
ask people right now, are your children going to live better than you, 
are your children going to have more income than you did, very few 
people in a room will raise their hand. That's because they see that 
the economic condition of the world is getting worse, not better. That 
worsening condition is based simply on these factors right here.
  There is nothing in the world economies that would not improve if we 
didn't solve these problems. It does not have to be--we could continue 
that growth curve forever. So we are right now at the point where the 
curve flattens off and moves down into a lower category.
  But at the very tip of that curve is a red dot. Then the curve stops 
and discerning people would say, well, I thought graphs just continue. 
You draw them on out through infinity.
  Well, you do except this chart stops. This chart stops because our 
economy literally shows both Office of Management and Budget, the White 
House, and the CBO, that's the congressional arm. So both the White 
House and the Congress both show the same chart that our economy simply 
ceases to function about 2037.
  Now for people who are younger than myself, that's in your lifetimes. 
I may not see that, but my children and grandchildren will see this 
point where our economy quits. That's what happened in the Soviet 
Union.
  President Reagan believed that if he simply increased our spending 
enough on arms that he could cause them to continue to invest more 
spending on arms. They would not be able to increase the revenues. They 
would have this gap right here. Their deficits would increase, their 
debt would increase and eventually the system would implode. It would 
collapse on itself. That's what's happening in our economy in 2037.
  So at this particular point in our time, we have to stop and say we 
can't continue this. We must begin to do differently, and that is what 
the House was doing last week.
  Now many in the country have said, oh, they are draconian cuts. We 
should not have done that. You shouldn't have cut that deeply and 
others are saying you should have cut more.
  So let's evaluate that briefly. We cut, basically, about $60 billion 
out of the budget. We cut it out of the continuing resolution a couple 
of weeks ago when we passed that bill.
  So what does 60 billion mean in this chart? Sixty billion would mean 
that you would change this number from 3.5 to 3.44. We are still faced 
with only the 2.2 here in revenues to the country.
  I would ask every listener in the audience, is that significant, is 
it draconian? If you think it's draconian, would your banker think it's 
draconian? Almost everyone laughs if I ask them, if you were spending 
$3,500 a month, bringing in $2,200 a month and went to your banker, 
would your banker think that you made significant cuts if you cut from 
$3,500 to $3,440? Most people would laugh and say my banker wouldn't 
talk to me if I only cut that much. So I put it into that context that 
we did not do significant cuts.
  Yet many of the people here in Washington are wailing and weeping and 
gnashing of teeth, those sorts of things, that catastrophe just awaits 
us because we cut spending by .06.
  Myself, I don't think so. I think that the looming economic crisis in 
2037 is the more compelling point that our economy simply will cease to 
function out in that range. Again, you can go online and look at CBO or 
OMB to find that chart. That's where we pulled it out. So take a look 
at it.
  But the important thing is to understand that no company--my wife and 
I ran a small company--and no company ever found itself in fiscal 
straits like this and cured it simply by cutting spending. I don't 
think that it's possible for us to cut spending from 3.5 to 2.2. As a 
business person, it does not ring true. It doesn't seem like that we 
can cut that much.

  So if we can't cut that much spending you have to say, well, then how 
do we get the 2.2 to move toward the 3.5? If we can't cut spending 
enough then how do we grow the revenues? Now some people will say well, 
we should raise taxes. They would say we should raise taxes. And then 
you shouldn't have to ask, well, what's the outcome of raising taxes?
  The first thing is to understand that there is a basic economic truth 
that tax increases will kill jobs. And so if we want to make this 
number smaller, just increase taxes and we actually increased the 
difference. We increased our deficit because this number actually gets 
smaller at that point.
  If we want to solve the problem that we are facing now, there is only 
one way to go, and that is economic growth. We need to create jobs. If 
we have to create jobs, then we must evaluate the ways that we are not 
creating jobs today.
  We resume our discussion talking about how we would create these two 
numbers to come together. That would be a balanced budget. And, again, 
I would repeat that it is very difficult for us to cut enough spending 
to reach bottom, that my idea is that we must increase the number of 
jobs.
  As we bring people into the workforce, we are simultaneously 
encompassing two things. We are causing this number to go up as people 
pay taxes that were previously unemployed, but then we are also 
bringing people off of unemployment, welfare and government assistance. 
So we are lowering their number toward this one as we increase that 
one.
  The actuarial tables show us at about 3.5 percent rate of growth that 
we can actually begin to move towards balance. These long-term numbers 
begin to clear up significantly just by creating jobs in the growth 
rate of about 3.5 percent.
  Well, then the next question would be, can we create jobs in 3.5 
percent? Well, that's exactly what we have averaged for over 70 years. 
It's well established that we can do it.
  Right now, our economic growth is in the 1 to 2 percent range, so 
that means that we almost have to double our rate of growth, and that 
would be possible if we did two basic things.

                              {time}  1650

  Number one, we can lower taxes. Tax breaks create jobs. Tax decreases 
create jobs. Tax increases kill jobs. And so then the second aspect of 
creating jobs would be to lower the regulations.
  Now, I have many people that react in horror when I say we should 
lower regulations. They immediately claim you would go to zero 
regulation. I don't mean that at all. I simply mean that we are 
regulating our jobs out of existence. Companies are finding it easier 
to go to another country and operate rather than operate here because 
the regulations are so extreme.
  One way that we're regulating companies out of existence is through 
our lending right now. We passed the Dodd-Frank bill which puts new 
requirements on banks. And so the bankers in my district in southern 
New Mexico have been calling recently saying that under the previous 
accounting methods and the previous reporting methods, we used to 
simply get written up if we made a mistake on a loan package. Today 
we're told that we could get a $50,000 fine. So they then are skeptical 
and reticent to lend money to small businesses and to people buying 
homes because they stand to lose more on the loan by one typographical 
error, one exception, than they can make.
  And that, then, has a formal process so that a young family, a young 
couple in Socorro, New Mexico, recently graduated from New Mexico Tech, 
they both are employed, both have degrees, both have good-paying jobs, 
and yet the bank says, well, we just don't want to lend money because 
it might turn out to be a bad loan and we could lose our bank over one 
bad loan or we could get a $50,000 penalty over a mistake on the loan 
application. It's just too tough.
  That means the regulations have been so high that businesses are 
saying, well, we would rather stay on the sidelines, which is what's 
happening nationwide. So we're being told that if the banks would 
simply loan money that everything would be fixed, and it's a lot true. 
Construction would start back. Houses would start back. Real estate 
agents would start back, and everyone would start, except it is 
regulated down into a low, just stagnant position because of these 
regulations that are, in many people's eyes, too high.
  Another way that we regulate jobs out of existence is through 
environmental concerns. We are saying to ourselves that we should 
protect species at

[[Page H1570]]

all costs, that is, even the human cost. And I'm saying that that's too 
extreme. I would not let a species go extinct, but I would say that we 
should create jobs and protect the species at the same time. So in 
order to cure this problem, to raise this 2.2 toward the 3.5 and 
simultaneously lowering the 3.5 toward 2.2, I have actually put three 
bills in so that we could have test cases of this discussion for 
America.
  The first one would be that, yes, we should keep the spotted owl 
alive, but we should not kill every timber job in America, which is 
basically what happened in New Mexico. We used to have 20,000 jobs in 
timber and today we have, more or less, none. Sometimes, one guy says, 
I've got eight people, and sometimes he says, well, I laid them off 
this week. And so we're up and down. The meaning of all that is that 
we've lowered, because of the spotted owl, from about 20,000 jobs 
basically to zero in New Mexico. And nationwide, that has caused this 
number to get smaller as people go on welfare, and it has caused this 
number to get bigger.
  And as people get less-paying jobs, then that means this number gets 
smaller because they don't pay as much in taxes. They don't have as 
much to spend, so retail merchants don't make as much, and then they 
pay less in taxes. Meanwhile, more families are struggling. They get 
some sort of aid even when they're working, and the 3.5 number gets 
larger as we get jobs that pay less.
  So, again, my bill simply says, let's have a discussion as Americans. 
Let's discuss whether or not we have to make the species the last 
determinant of everything in the forest or if we can't keep the spotted 
owl alive in sanctuaries, 1,000 acres here, 1,000 acres there, and go 
back to cutting in the forest.
  Well, the first thing that some alarmist will do is say, well, you're 
going to clear-cut the forest; we shouldn't clear-cut the forest. We 
don't need to do that. We don't need to do that. And I'm saying, no, we 
don't have to clear-cut the forest. Land management companies commonly 
have a balanced thinning program. They go through and cut some trees of 
all sizes. And they're constantly working their way through their 
acreage so that good small companies exist on very small acreages.
  We've got 225 million acres of forestland in this country, and yet it 
is being logged at almost zero rates. We've got forests in New Mexico: 
3 million acres in one, 2 million acres in another. We've got very 
large forests, and yet they haven't had significant thousand-acre 
timber sales in forever, and it's been maybe 20 years since they've had 
significant timber sales. And even then they are restricted from 
harvesting the large-diameter trees that are economically profitable.
  And so we've driven out most of the timber mills. We've driven out 
most of the people that would make a living doing that, all in the name 
of the environment. And all of us would want the environment clean. We 
would like the species to not be extinct. But I do not think that we 
have to completely ignore the job situation at hand.
  The second bill we put in was the 27,000 farmers in the San Joaquin 
Valley. They were put out of work about 2 years ago by a silvery 
minnow. A judge said that all the water in the river has to stay there 
and cannot be used for agriculture. So those 27,000 people who used to 
be paying income tax here moved, as a cost to the government, to the 
3.5. They are on welfare and unemployment, and so our revenues go down 
and our expenses go up. And that's a toxic case for a government, for a 
business, or for a family. And yet we're encouraging it through our 
policies.
  So my bill, again, is very simple. Keep the 2-inch minnow alive in 
holding ponds. Put them in the river in the millions when we need them, 
but in the meantime, let's use that water for the irrigation in the San 
Joaquin Valley. The worst thing about shutting that farmland down in 
the San Joaquin Valley is that that area used to produce most of the 
vegetables for this country. Now, then, with them idle, we are 
importing vegetables from Central and South America, and they spray 
pesticides that we're not allowed to. So we hurt our revenues, we 
accelerated the cost of government, and we get an unsafe food supply 
all at the same time. It does not have to be that way. We can 
accomplish both jobs and the species.

  The last bill that we introduced was offshore. Every one of us saw 
the BP situation. Again, I believe that BP should be accountable. I 
understand the process that they went through. They made bad some 
decisions. They are being held accountable. They are actually paying 
100 percent of the cost. And that is not the question.
  The question is whether the President should have ordered for the 
100,000-plus jobs to be killed. You see right now the Governor of 
Louisiana and you see the people in Louisiana are really suffering 
because those rigs that used to be offshore working, thousands of 
people out there working every day at very high-paying salaries now are 
drawing unemployment. So we, again, lowered our 2.2 figure down lower. 
We increased the 3.5. So we made our budget situation much worse by 
policies that threaten or stop job growth.
  Back on taxes. Again, we have mentioned that that's one reason that 
companies choose to live and operate elsewhere. Now, the people say, 
well, why do taxes create jobs more slowly? Mr. Swett, who is in the 
Second District of New Mexico in Artesia, said it best. He said, For me 
to create one job takes $340,000. He said, That's what a bulldozer 
costs, and I run bulldozers. He said, So when the government taxes my 
money away from me, it takes me longer to get my $340,000. He said, By 
the way, I've got to buy a $60,000 pickup because they won't let me 
drive the bulldozer to work down through the main streets of Artesia. 
And so we have to have a pickup and the truck. So he said, Actually it 
takes a little bit more than $340,000 to create a job. But every time 
the government taxes me more, it takes longer to get the $340,000 in 
the bank.
  That's the reason that under higher and higher tax rates our economy 
stagnates and jobs are not produced as quickly, because we're taking 
that money away from businesses who would create it and putting it into 
the government that simply then spends it here in this 3.5 without 
really making more jobs.
  So we are faced with a question in this country: Are we caring about 
the long-time survival of our economy or are we going to continue down 
the same path?
  Now, that's the greatest discussion that we should be having. That's 
the discussion they're having right now in Wisconsin. In Wisconsin, 
basically the union employees are saying, We want more. We want more 
pay and we want more benefits, that is, more retirement.
  Right now, basically across the country, our union employees--and I 
think they should get every penny that they are wanting, that they are 
deserving, but we have to understand that our union employees working 
for the government are making basically twice what our people in the 
private sector are making. So we down here are paying taxes in order 
for people that are costing the government to make twice what we are. 
And they are asking for more, meaning that we should charge the public, 
the private sector workers more taxes in order to pay higher salaries.
  But then the real rub comes in on the retirements. Many of our 
government employees have an option to retire at 20 years, and many of 
those can retire at 75 percent of their pay. If you are making $40,000 
a year, then you can retire at $30,000 a year. I have a document in my 
office that has New Mexico retirees' salaries, and this is from 10 
years ago when I was in the State legislature, and the highest paid 
worker in our retirement system in New Mexico is making about $5,600 a 
month.

                              {time}  1700

  Now, that contrasts with about $3,000 a month. So he is making almost 
double in retirement what the average New Mexican is making working 40 
hours a week. What it has caused is this imbalance here, this cost that 
is doubling above what we can take in in revenues.
  So the discussion that is going on in Wisconsin is the same 
discussion we should be having here on the floor of the House, and it 
is the same discussion we should be having in every State capitol 
because almost every State, I think 48 of the 50, is now running in 
deficit conditions because the cost of government, the cost of their 
employees, the cost of education has risen so

[[Page H1571]]

dramatically. And in the private sector, we are sitting out here 
basically with flat wages, maybe declining wages. And so our discussion 
nationwide has to be: How do we cure the problem?
  Now, if we begin to get our tax policy and our regulatory policy 
under control, I think that the manufacturing jobs would come back. So 
it is not just that we want jobs. McDonald's and such would create 
service-level jobs, but we are interested in careers, not just jobs. We 
are interested in being able to plan for your future and being able to 
pay for college for your kids or plan for your retirement. Those are 
the careers that we want to draw back, and those come from the good 
manufacturing jobs that left in droves during the last 30-40 years as 
we increased regulations and as we increased taxation.
  Those jobs would come flooding back to us if we simply lowered the 
taxes. And you heard President Obama say in his State of the Union 
message that we now have one of the two highest corporate tax rates in 
the world. A couple of days after his speech, Japan actually lowered 
their tax rate, leaving us at the top level.
  So the President recognizes that we make ourselves uncompetitive with 
our tax rate and we should do something about it. He is exactly right. 
We should cut taxes; and yet when you bring that up on the floor of the 
House, you get one-half of the body that grabs their chest and falls 
backward, pulling the flag across their face and saying we can't do 
that because Old Glory might just wither away. And the other side says 
it is the only way to economic growth.
  If we are going to fix this imbalance of spending and revenue, we 
absolutely have to have growth, and job creation should be the primary 
focus of this Congress. But unless we focus on taxes and regulations, 
we cannot cure the job problem in the country.
  A few years ago, Ireland was looking at itself and said, Ireland is a 
pretty smart country. We are smart people; we are hardworking people. 
We are struggling under a bad economy. What can we do to make it 
better?
  So they thought a lot about it, they had studies, and they decided 
they should lower their corporate tax rate. So they lowered their 
corporate tax rate. It was equal to ours at that point, about 36 
percent, and they lowered it down to 12 percent. Companies began to 
flock into Ireland because the tax rate was changed from 36 down to 12 
percent. That is what lowering the tax rate does; it draws the great 
jobs to you, the manufacturing jobs.
  Well, in the intervening years, Ireland began to do what we did. They 
began to say with all this money, we are awash with money, the revenues 
were exceeding the outflows, they began to say, we are going to spend 
more. And so they began to develop programs to give away, and they 
began to raise taxes.
  Now, my brother-in-law works for Hughes Tools, and he just got back 
from Ireland. They just dismantled their last plant in Ireland that 
they had taken over when they were given the lower taxes. Because of 
the higher tax rate now, they are now evacuating out of Ireland. So 
Ireland is faced with this exact same problem, and Ireland is at the 
point of economic collapse, along with Greece, along with Spain, along 
with other countries in Europe because all of us have been living 
beyond our means.
  Each country in the world right now is faced with its own set of 
problems that basically originate from the fact that we are spending 
more than we are bringing in. We are spending more for government than 
what the private sector can make, and we all face the same catastrophe 
that the Soviet Union faced, that their economy is simply going to 
implode.
  Now I, for one, do not want to be on the watch and not be saying 
something as we're going down the track, and so I give this 
presentation everywhere I go. And to the people who are saying we 
absolutely have to have more government spending, I simply say: show me 
how it is going to work. The way we have been making this work is we 
have been printing money. As we print money, we take money away from 
you because printing money makes the dollars in your pocket worth less. 
And so as your money in your pocket is worth less, then the prices go 
up. So we see gasoline prices now escalate to $4, and some people are 
saying it is the evil oil companies. The truth is your dollar is worth 
less.

  If it was only going up, then you could say: yes, the oil companies 
are taking more profit. But your vegetables are going up. Your gold is 
going up. Silver is going up. Big metals are going up. In the oil 
fields in southeast New Mexico, we use a lot of drill pipe. I got word 
last week when I was traveling around that the people who own drill 
pipes to sell it right now don't want to sell it.
  They would rather have their pipe than dollars because they see that 
we have printed this $2.6 trillion. They see their dollar is worth 
less. They see the prices escalating, so they simply have shut off 
selling their drill pipe. It is worth more than the cash that they 
could get for it. That is going to be another sign that our economy has 
really begun to struggle under the inflation as we see shortages--
shortages of vegetables, shortages of anything.
  Now, the price of silver and gold have been escalating. The price of 
silver a week ago Friday went up 10 percent in one day. Then 2 or 3 
days later it went up another 8 or 9 percent. It is not that we are 
using that much more silver 2 or 3 days later; it is that people are 
saying I would rather hold silver than dollars, and they have been 
flooding across from dollars to silver. You are seeing that people are 
choosing this object of silver that maybe is very difficult to store, 
very difficult to handle, is actually more valuable to them than 
holding the cash in the bank. This is because we are living like that.
  So either we begin to discipline ourselves both nationally and as 
individuals because we individually have been running up debt that is 
sort of the equivalent of this, either we begin to discipline or the 
ultimate consequences is within 25 years we are going to see 
catastrophic economic situations arise for families.
  I do not think that any of us want that. I think that the economic 
explanations of exactly why we are having the difficulties in our 
economy that we are having are very simple. They are very transparent. 
We are spending $3.5 trillion every year, and we are bringing in $2.2 
trillion. That number is actually going to escalate next year so that 
this deficit, instead of being $1.3 trillion in the next year, 
according to the President's budget, is going to be $1.6 trillion. That 
$1.6 trillion at the end of the year will be added to the $15 trillion 
of debt so at the end of the year we will owe $16.5 trillion. The $202 
trillion stays out here as obligations that are currently due because 
retirees are flooding into the market. The baby boomers are moving into 
retirement in record numbers now, and that is going to continue for 
another 15 or 20 years.
  We have serious problems facing us, but the problems are fairly 
easily solved if we simply lower the tax rates, especially if we lower 
them on the job producers. And, secondly, if we get our regulations 
under control, not to no regulations, but to simply find a balance 
point that will allow us to protect the workers, protect the 
environment, and protect the species while at the same time creating 
jobs.

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