[Congressional Record Volume 157, Number 69 (Wednesday, May 18, 2011)]
[Senate]
[Pages S3065-S3067]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                           ENTITLEMENT REFORM

  Mr. THUNE. Last Friday, the Social Security trustees' report and the 
Medicare trustees' report were both released. They showed that as large 
as our debt and deficits are now, without tackling these two 
entitlements, our future debts and deficits will dwarf current levels. 
In fact, this year alone, Medicare is running a cashflow deficit of 
more than $32 billion. This is the largest deficit ever for this 
program. Likewise, Social Security will run a cashflow deficit of $46 
billion this year. This requires the Treasury to finance

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these programs through additional borrowing, adding even more to our 
deficit.
  In total, Social Security faces a $6.5 trillion unfunded liability. 
The reason for this, according to the report, is the aging of our 
society. As we live longer and as the size of families has decreased, 
the number of workers financing benefits has steadily decreased. For 
example, in 1950 there were 16\1/2\ workers for every Social Security 
recipient and life expectancy was 69 years old. By 1960, the number of 
workers supporting each recipient was just half of what it was 10 years 
before. Now there are fewer than three workers for each beneficiary. By 
2040, it will be just over two.

  Around the same time, in 2036, Social Security's trust fund will run 
out of all of the IOUs the government has issued to it. After this 
point, Social Security will be able to pay just over 75 percent of the 
current benefits. That is an important point because some say Social 
Security does not need to be reformed because these benefits are still 
going to be able to be paid. I think we have to remind ourselves of how 
this will work.
  But you can see the demographic trend here, what is happening. Going 
back to the 1950s when you had a life expectancy that was shorter, you 
had more people paying in--16.5 for every 1 who was drawing out. Now we 
are looking at three people paying in for every one drawing out. And, 
of course, the life expectancy now is up to about 78 years average. In 
2040, as I said earlier, there will be two people paying in for every 
one drawing out. So the crunch is coming. We all know that. We can 
predict it. We see it coming.
  Of course, the expectation is that because the Social Security trust 
fund will be able to pay benefits until sometime in the 2037 timeframe, 
everything is OK; we do not need to take steps to rectify this 
situation today. The problem with that is the so-called IOUs in the 
Social Security trust fund are just more borrowing. When we get to that 
year, when we get to the 2036-2037 timeframe, there will only be about 
75 cents coming in for every dollar that will have to be paid out. So 
you will have people who literally will take a huge cut in benefits or 
we would have to undergo a massive payroll tax increase in order to 
make that up or dramatically increase the borrowing of the Federal 
Government because, in fact, those IOUs in the trust funds are not an 
economic asset that can be used to pay a cash benefit. It is simply 
borrowing. We all know that. And I think the important date--in my 
mind, at least--is the date at which the amount we receive coming in to 
the Social Security trust fund in the form of payroll taxes no longer 
exceeds the amount we are paying out in the form of benefits. That 
happened this year to the tune of $45 billion.
  Many of us have committed to preserving these programs for existing 
retirees and for those who are about to retire soon. If we do not 
reform Social Security, these cuts of nearly 25 percent would be 
instant and automatic, giving retirees no time to make other 
arrangements.
  Working back from the 2036 date to ensure that the program remains 
solvent and can pay out benefits to future generations requires us to 
take action today. We do not have the luxury of time. We cannot afford 
to wait. The sooner we take action, the more time the current 
generation has to prepare for a realistic level of benefits and not be 
blindsided when their benefits are dramatically cut. Without reform, 
Americans aged 42 and younger will not see full Social Security 
benefits when they retire.
  In addition to the aging population, the rapidly rising cost of 
health care is placing enormous pressure on the Medicare system. 
Despite the recently enacted health care reform legislation, health 
care costs rose by over 7 percent in 2010 compared to about a 1-percent 
increase in all other goods and services in the economy. The Medicare 
trustees reported that the program has an unfunded liability of nearly 
$36.8 trillion and that the Medicare hospital insurance trust fund will 
be completely insolvent by the year 2024. Medicare spending is expected 
to rise from 3.6 percent of our entire economy--of our gross domestic 
product--in 2010, which is where it is today, to 10.7 percent in 2085. 
That means the amount of money the government spends on health care is 
going to triple over the next 75 years.
  Now that, unbelievably, is the rosy picture of what will happen. Due 
to the double counting that occurred in unrealistic savings and targets 
that were included in the health care reform bill that was passed last 
year, these numbers are going to be invariably worse if further action 
is not taken.
  Finally, the Medicaid system also faces nearly all the same increases 
in costs and funding challenges as the Medicare system, while also 
failing to provide States with the flexibility they need to provide 
quality care for beneficiaries.
  Unfortunately, this administration and the last Congress made these 
problems even worse. Instead of reforming these entitlement programs, 
they created yet another new entitlement program called the CLASS Act, 
which even the Democratic chairman of the Senate Budget Committee has 
called a Ponzi scheme.
  Included in the same health care bill passed last year was a massive 
expansion of Medicaid and the creation of new credits for individuals 
to buy insurance, all of which adds to the budget burdens we are 
already experiencing.
  If these programs are not reformed, we know what we will face. Under 
the Congressional Budget Office's ``alternative fiscal scenario'' which 
makes realistic assumptions about the growth of these programs, 
spending in 2020 would comprise 25.9 percent of GDP, more than 25 
percent above the historical average. It would continue to grow, and in 
2035 spending would comprise 35.2 percent of GDP or nearly 60 percent 
more than the historical average.
  In that same year, deficits would comprise nearly 16 percent of the 
GDP of our entire economy, and debt would be 185 percent of GDP.
  I want to illustrate that in the form of a chart and show you what 
this would look like. The historical average for deficits--3 percent, 
as I said. Look at what we faced in the last 40 to 50 years, roughly, 
and where that is headed in these outyears. As you look at 2010, how 
this thing spiked up in the last couple of years, we have added 
massively to the debt, the stimulus spending, the massive health care, 
the entitlement programs, all of which will make this worse. But we are 
on a trend to follow the trajectory where we will get to where the 
deficit is literally going to represent 61 percent of our entire 
economy.
  That is a stunning path to be on--why it cries out for us to take the 
necessary steps to get back on the right fiscal track. Interest on the 
debt would comprise nearly 9 percent of our economy, half of which is 
paid to foreign debtors. We all talk about the impact of carrying this 
amount of debt. Today, we have so much debt that, in a few years, the 
amount we pay for interest will exceed the amount we spend on national 
security. In other words, we will spend more financing our debt and 
simply making the interest payments than we do defending the country.
  Think about that. Think about where we have gotten to. Think about 
the fact too that if we saw even a 1-percent increase in interest 
rates, if interest rates went up 1 percent and we had to pay more to 
borrow money from those creditors, some of which are foreign countries, 
it would increase the interest we pay annually by $140 billion. That is 
how sensitive we are to a slight increase in interest rates because of 
this massive debt. We passed, yesterday or the day before, the $14.3 
trillion level, the debt limit. We are going to have to raise the debt 
limit here. We don't know exactly when--sometime in July or August. But 
that is coming. We have maxed out our credit card, our borrowing 
authority, we have hit the limit, and in order to keep our economy 
functioning we have to increase the amount our country borrows.
  If we follow the President's budget, we would double that in the next 
decade. We will go from $14.3 trillion to literally over $26 trillion 
in the next decade under the President's budget. Why? Because the 
President didn't make any attempt in his budget to reduce spending or 
reform entitlements--Social Security, Medicare, and Medicaid--which are 
the big drivers of Federal spending. If we don't take steps to reform 
those entitlement programs, this picture gets worse and worse over 
time.

[[Page S3067]]

  I want to illustrate this with a chart. This is where we are today. 
This is debt as a share of the economy. As I said before, if you look 
at historical averages, what we have carried in the form of debt, in 
World War II, obviously, there was a big ramp-up because we had to 
finance the war and coming out of the war. As the economy started to 
expand and we got spending under control, the debt, as a percentage of 
our economy, started to come down to historical averages, which is 
where it stayed for about 40 to 50 years. It started to spike in the 
last couple of years, as we have seen spending increases. The reason is 
because the amount we spend as a percentage of our total economy has 
continued to tick up.
  I mentioned earlier that we are looking at--what was the number--25.9 
percent of GDP is what we will spend on the Federal Government in 2020, 
according to the CBO's alternative fiscal scenario. If you think about 
that, the amount we have spent historically as a percent of our economy 
on the Federal Government is 20.6 percent. That has been the 40-year 
average. We are going from 20.6 spending as a percent of our economy--
the amount the Federal Government spends for our entire economic 
output--to 25.9 percent a decade from now. It continues to spike up. 
Because we are having to finance so much spending with borrowing, the 
borrowing level will increase dramatically, to the point where we are 
looking at debt to GDP--if we don't take steps to change, this is what 
we are looking at on this chart. It is a straight up spike in the 
amount of borrowing to GDP. This is pointed out too by where we are 
currently; right now, we are running somewhere in the $1.4 trillion to 
$1.6 trillion in annual deficits on $3.8 trillion in total spending, 
which means that out of every dollar the Federal Government is 
spending, we are borrowing over 40 cents.
  Can you imagine any family or business in this country that could 
continue to get by borrowing literally over 40 cents out of every 
dollar they spend? You cannot do it. That would be like the average 
family in this country having an annual income of about $60,000 and 
spending $110,000. You cannot do that. The Federal Government has been 
doing that for way too long. That is why we have to take on this issue 
of spending and debt.
  Some people argue that we don't have enough revenue, we need to raise 
taxes, and that is the way to deal with this fiscal crisis to get more 
revenue coming into the Federal Government. I argue that, based upon 
these facts, this is not a revenue problem, this is a spending problem. 
The reason we are where we are is not because we don't have enough 
revenue, it is because we are spending dramatically more as a 
percentage of our economy than we have in the last 40 to 50 years. The 
historical average is 20.6 percent over the last 40 years--what we have 
spent on the Federal Government as a percentage of our entire economy--
and today that is 24 percent, and by 2020 we are looking at over 25 
percent--an increase of 25 percent in the amount we are spending on the 
Federal Government as a percentage of our entire economy. That is a 
spending problem, not a revenue problem.
  We need to address this and recognize it, and we need to understand 
that the only way we can fix it is to deal with what is driving that 
spending. It is Social Security, Medicare, and Medicaid. Those programs 
comprise 55 to 60 percent of all of government spending. Absent reforms 
to those programs, this is what we will end up with; this is where we 
will be as a nation. That is certainly someplace I don't think most 
Americans want to go.
  The other reason is critically important. I have said this before, 
and I will say it again. It has implications not only for future 
generations but in the here and now. One is that when you are carrying 
this kind of debt to GDP, sustaining this kind of debt level, it 
impacts your economy's ability to create jobs, because you are crowding 
out private investment that otherwise would be allocated to more 
productive uses, and you are spending it on the government. You are 
also impacting interest rates and inflation in ways that could be 
counter to the economic expansion, growth, and job creation in this 
country. There has been a great amount of research and study that has 
gone into at what level does that start to take away from economic 
growth, economic expansion, and job creation?
  Two people who have recently put out a book; Carmen Reinhart and 
Kenneth Rogoff have suggested, from their study of developed countries 
over the last half century, that when your debt to GDP reaches 90 
percent, it is costing you about 1 percentage point of economic growth 
every year. In this country, losing 1 percentage point of economic 
growth costs us about a million jobs. If we say we are serious about 
job creation, one of the problems we ought to focus on is getting 
spending and debt under control. If we sustain and carry this kind of 
debt level for the foreseeable future, we are going to cost the economy 
1 percent of economic growth and, therefore, a significant amount of 
jobs that might have been created by that economy. That is one reason 
we need to rein it in.
  The statement has been made repeatedly by ADM Mike Mullen that the 
greatest threat to our national security is our national debt. I would 
say that the national security implications are very real as well. When 
you have the highest ranking military official saying the greatest 
threat to America's national security is our national debt, that is a 
stunning statement. I think it speaks volumes about why it is important 
to get this issue under control.
  One of the reasons he says that, obviously, is that so much of the 
debt is held by foreign countries, all of which have additional 
leverage on us because we owe them so much money. We need to get 
spending under control and get the debt dealt with. That starts with 
entitlement reform. I hope the discussions currently occurring between 
the White House and some of the leaders here in the Congress will come 
to a result where we can work together and use this as an opportunity 
to, once and for all, put this country back on a fiscal track that will 
ensure that future generations are not burdened and saddled with an 
enormous amount of debt and an economy that is saddled with that weight 
and not able to create the jobs to get people back to work and to grow 
and prosper and create a higher quality of living and standard of 
living for the next generation.
  I ask unanimous consent that the time of the quorum call be divided 
equally on both sides, and I suggest the absence of a quorum.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  The clerk will call the roll.
  The legislative clerk proceeded to call the roll.
  Mr. DURBIN. Madam President, I ask unanimous consent that the order 
for the quorum call be rescinded.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.
  Mr. DURBIN. Madam President, I ask unanimous consent to speak as in 
morning business.
  The ACTING PRESIDENT pro tempore. Without objection, it is so 
ordered.

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