[Congressional Record Volume 158, Number 84 (Wednesday, June 6, 2012)]
[Senate]
[Pages S3800-S3801]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




                               THE BUDGET

  Mr. SESSIONS. Mr. President, every summer the Congressional Budget 
Office produces a long-term budget outlook. This is the report they 
produced yesterday, which is what they do every year. It is a grim 
document indeed, not a document that should give us comfort but should 
be a call to action as to what we would need to do about the financial 
future of our country. It is part of their effort to produce for 
Congress objective, impartial analyses. We all will complain about this 
or that from CBO, but they are pretty objective, and they work hard to 
produce the kind of information we can benefit from as Americans, 
certainly that we in Congress need as we deal with our challenges at 
this period in history. They lay out, over 25 years, what we could 
expect to see if current policy is extended.
  These are some of the things they find in this report that are 
certainly disturbing to us. Actually, they are more than disturbing, 
they are unacceptable. They are absolute proof that we are on an 
unsustainable debt course, and that means we have to get off it or bad 
things will happen. The numbers I will give from this report, as 
Federal Reserve Chairman Mr. Bernanke indicated last year, would not 
happen--events wouldn't occur because we will have a crisis before that 
if we continue on this path.
  This is what they found: 25 years under the current policy, annual 
deficits would reach $5 trillion a year or 17 percent of GDP and would 
rise steadily thereafter. In other words, we would have in 1 year a $5 
trillion deficit. This year we expect to spend $3.7 trillion total, 
including defense and Social Security and Medicare.
  They go on to make this finding: Federal debt would reach 
approximately 200 percent of GDP; that is, the debt would be twice as 
large as the entire American economy. Japan has that high a debt. It is 
the highest in the world. It is financed because of Japan's unusual 
saving policies--financed mainly internally, but we are not financing 
our debt that way now. In fact, 60 to 70 percent of our debt now is 
being financed by the Federal Reserve, by buying Treasuries by the 
Federal Reserve. That is very dangerous because it is, in effect, 
printing money. So this is an unsustainable path.
  They go on to say annual Federal spending would rise to $10 trillion 
a year or 36 percent of GDP. So 36 percent of the entire economy would 
be consumed by Federal Government spending. We are now 18 to 20 
percent, in that range. This is a historic alteration of the 
fundamental concept of our government being a government of limited 
powers. That is a stunning number.
  They go on to say this: Yearly interest, what we would pay yearly, 
would reach $2.7 trillion. That is certainly a large number. As I said, 
this year we spent $3.7 trillion.
  The Federal debt, according to the report, will be double the size of 
the entire U.S. economy in 2037, 25 years from now. CBO agrees that 
higher levels of Federal Government debt will burden American families 
and destroy economic growth. We have had studies on that. Reinhart and 
Rogoff reports--I think most economists agree with this principle--that 
when taxes reach high levels, it pulls down the entire economy's 
ability to grow.
  They go on to say each family's share of the Federal debt will climb 
to $382,000, per family, by 2037 or an additional $287,000 over what 
today's family's share of the total American debt is. That is, of 
course, more than twice as much.
  CBO warns that ``large budget deficits and growing debt would . . . 
lower the growth of incomes in the United States.''
  According to CBO data, over the next 20 years, high debt levels will 
result in $21 trillion less in economic output. This is a significant 
reduction in economic growth, and it is out of growth that we hope to 
be able to close the deficit gap. Without growth, we can't do it. But 
if we run our debt too high, it pulls down growth and makes it even 
more difficult for us to maintain the growth levels we need to get our 
economy and Federal budget under control.
  They go on to say that government debt will also slow economic growth 
nearly 1 percent a year, on average, supporting a landmark study done 
by Reinhart and Rogoff that quantified the effect of debt on advanced 
economies.
  I asked Secretary of Treasury Geithner about the Rogoff-Reinhart 
study. He said it was an excellent study. Then he added: In some ways, 
it understates our problems.
  We were talking about this 1 percent factor. When our debt exceeds 90 
percent of GDP, we lose 1 percent of growth. He acknowledged the 
validity of that, and then went on to say that it understates the 
problem, because when we reach that high debt level, we are vulnerable 
to an economic shock--another recession, a 2007 debt crisis, a Greek-
like problem.
  Government debt, the report indicates, will also slow economic 
growth, and that 1 percent of slowing growth, according to numbers 
released by the Obama administration--and I think they are pretty 
accurate--1 million jobs is 1 percent of GDP. So if we go from 2 
percent to 1 percent GDP growth, 3 percent to 2 percent GDP growth, we 
lose 1 million jobs.
  We don't need to be losing jobs. We need to be creating jobs, and 
debt is a threat to economic growth. The idea some people have that we 
could continue to borrow, borrow, borrow and spend, spend, spend and 
this will create a healthy growing economy that could be sustained is 
absolutely truly false, I believe.
  CBO gave this ominous warning:

       Growing debt also would increase the probability of a 
     sudden financial crisis, during which investors would lose 
     confidence in the government's ability to manage its budget 
     and the government would thereby lose its ability to borrow 
     at affordable rates.

  It seems to me pretty clear, if we look at the numbers, that spending 
is the primary cause of our long-term fiscal imbalance--that and a lack 
of growth.
  Under both the baseline and current policy scenarios set out by CBO, 
spending will remain well above historical averages. So it is not as if 
they are assuming we will cut spending and that we will reduce what the 
government spends each year. They are assuming the spending levels will 
be well above historical averages. If we return those spending levels 
to historical averages, I believe we then have a far better chance to 
get our economy under control, rather than just asking the American 
people to send more money to Washington.
  Under current policy, annual Federal spending will exceed $10 
trillion--or 36 percent of GDP--by 2037. Twenty-five years used to seem 
like a long time to me, but as I have gotten older, 25 is a lot shorter 
period of time.

[[Page S3801]]

  By 2025, the report indicates, mandatory health spending, Social 
Security spending, and interest costs--Medicare and Medicaid, mandatory 
health spending--Social Security, and interest costs will consume 100 
percent of the revenues this government is expected to receive; the 
Defense Department, zero; the Education Department, zero; Federal 
highway bill funds, zero. All of it would just be in those programs. 
That reveals to us that necessity of looking at those programs, to 
think that we can deal with our surging deficits without confronting 
the fact that the largest, most sustained growth areas are Social 
Security, Medicare, Medicaid, and interest on the debt.
  What about raising taxes? Why don't we raise taxes? There are 
problems with raising taxes. It has consequences. It weakens the 
private sector. It takes more money from the private sector where the 
money is earned, where growth is generated, and distributes it to the 
governmental sector--which, I have to tell you, is not as efficient and 
productive and hasn't proven it is and has not gone through what 
private business has gone through, which is to make themselves more 
efficient, more productive, and utilize technology and advanced 
techniques to produce more widgets for less cost. The Federal 
Government has not done that.
  This is what CBO said:

       To the extent that additional tax revenues were generated 
     by boosting marginal tax rates, those higher rates would 
     discourage people from working and saving, further reducing 
     output and income.

  There is no doubt about that. This is not some rightwing scenario. If 
we keep raising taxes on the productive sector, we are going to have 
less of it. It will discourage people from working and saving, further 
reducing output and income. That is an economic fact. It is not a scare 
tactic. So it is not just something we can do. Why don't we just raise 
taxes? That is the reason. It weakens economic growth. It weakens the 
private sector. It empowers the government, violates our heritage of 
limited government, and is not healthy for American families and job 
creation.
  The Congressional Budget Office agrees we cannot wait; that we cannot 
continue to delay action on the deficits. This is what they say in this 
report:

       Waiting to address the long-term budgetary imbalance and 
     allowing debt to mount in the meantime would be detrimental 
     to future generations.

  We don't need to do things that are detrimental to future 
generations. We are already leaving them with more debt than we ever 
should, and we need to get off this path.
  I have told this story, but back in Marion, AL, I was at a house of a 
World War II veteran just less than 2 years ago. Mr. Wheeler has since 
passed away, but he was the last person to speak as I was listening to 
people's views. He said he lived through the Depression and served in 
World War II, he lived through the inflationary period in the 1970s and 
1980s, and the problem we face is not the high cost of living; the 
problem we face is the cost of living too high. Frankly, that is what 
has happened. Individually, we have lived too high. We have to 
deleverage. Individual families are doing it. The government has lived 
too high. It has assumed too much debt, and there is no way out of it--
no easy way. There is no free lunch. Nothing comes from nothing. 
Somebody pays.

  To get this debt under control, we have to manage better than we ever 
have, in my opinion. I truly believe that, and we can do it. We can 
manage better. It is going to take leadership of the Chief Executive 
Officer of the United States, and Congress needs to be involved in the 
process too.
  Federal Reserve Board Chairman Ben Bernanke, before the Senate Budget 
Committee earlier this year, testified this way:

       Having a large and increasing level of government debt 
     relative to national income runs the risk of serious economic 
     consequences. Over the longer term, the current trajectory of 
     federal debt threatens to crowd out private capital formation 
     and thus reduce productivity growth. . . .

  It is growth we need. It is growth we need that will make America 
more competitive, that will produce more widgets for less cost, that 
will allow us to export and be competitive, to defeat importers by 
producing products better and at less cost than the importers can. That 
is within our grasp. But we are getting away from that and debt is a 
threat to us.
  Chairman Bernanke goes on to say:

       To the extent that increasing debt is financed by borrowing 
     from abroad, a growing share of our future income would be 
     devoted to interest payments on foreign-held federal debt. 
     High levels of debt also impair the ability of policy makers 
     to respond effectively to future economic shocks and adverse 
     events.

  Adverse events occur periodically, and high levels of debt impairing 
our ability to react to those make us more vulnerable to serious 
economic dislocations that would occur in the future.
  But Mr. Bernanke also knows that on our current course, we will never 
make it to the years where our debt is three, four, five times the size 
of our economy.
  He also stated about the CBO outlook:

       The CBO projections, by design, ignore the adverse effects 
     that such high debt and deficits would likely have on the 
     economy. But if government debt and deficits were actually to 
     grow at the pace envisioned in this scenario, the economic 
     and financial effects would be severe.

  In other words, what he is saying is we are not going to get there. 
It is not going to happen because we will have a financial crisis 
before then, and we can see that.
  We had the President's fiscal commission, Erskine Bowles and Alan 
Simpson, and they told us, ``We are facing the most predictable 
financial crisis in our Nation's history.'' Both of them signed a 
statement to the Budget Committee just last year to that effect, and 
they said we could have an economic crisis in as little as 2 years.
  We have not had a budget in the Senate. The Republican House has 
produced a budget, but the Senate Democrats have determinatively 
refused to bring up a budget in committee or bring one on the floor. We 
are now 3 years without a budget, while we have had trips to Las Vegas 
and conferences and tax credit loopholes for children of illegal 
aliens. Children who don't even live in the United States are getting a 
$1,000 tax credit from Uncle Sam and we can't get that fixed. That 
seems to be too hard to do, costing $4 billion a year.
  So these are the kinds of things Americans need to be aware of and 
need to be focused on. If we do so, there are a number of options that 
would allow us to get the country on a sound path. We can do some 
things without debt, such as tax simplification that creates more 
growth, such as eliminating every regulation that does not serve the 
national interest and benefit the economy but adds cost to our 
productive capability in America and delays production of energy or 
delays construction of factories and businesses--eliminate those 
regulations that don't make sense. We can work hard to produce more 
American energy, keeping our wealth at home. We can reduce the amount 
of debt we are running up so we are sending fewer dollars, fewer 
billions of dollars, abroad every year after year after year just to 
pay the interest on the debt.
  There are a lot of things we can do that will create jobs and growth 
and productivity gains in America that will not add to our debt, and we 
have to find those things. We have to tighten our belt across the 
board, in Congress and the White House and down to every agency and 
department and government entity that exists in this country and around 
the world. If everybody does that, we will surprise ourselves with how 
much progress we can make. I think it is not too late for us to reverse 
the course.
  I yield the floor.

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