[Congressional Record Volume 164, Number 160 (Thursday, September 27, 2018)]
[House]
[Pages H9141-H9143]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]
{time} 1645
THE TRAJECTORY OF GOVERNMENT SPENDING
The SPEAKER pro tempore. Under the Speaker's announced policy of
January 3, 2017, the gentleman from South Carolina (Mr. Sanford) is
recognized for 60 minutes as the designee of the majority leader.
Mr. SANFORD. Mr. Speaker, with due respect to my colleague from
Oklahoma who has been kind enough to yield me a bit of time, what I am
going to do is yield to him, ultimately, and he will take the bulk of
this time.
I just was thinking the other night about the larger issue of
government spending, and I would just like to walk through a couple of
numbers here in a few minutes on its importance, because we have a big
tax vote tomorrow. We had one today, and we had a vote before that, I
guess the day before that, tied to spending and what the trajectory
looks like on that front here at the Federal level.
But I want us to step back for one second and look at the bigger
picture on why containing spending is so important and why it is not so
important in our kids' or grandkids' time, but why it is so important
right now.
I think it is interesting, if you were to look at the words of
Erskine Bowles, the words of Sir Alex Fraser Tytler, the words of Paul
Kennedy, and the words of your local fifth grade elementary school
teacher, what you would find is an amazing correlation between all four
of them.
It was Erskine Bowles, who was, I guess, former President Clinton's
former Chief of Staff who said that we are walking toward the most
predictable financial crisis in the history of man.
As we remember, they put together the Bowles-Simpson Commission of
2010. That ultimately led to the sequestration that we are in the
process of getting rid of, but it was a ``nuclear weapon'' that said we
have got to do something, yet we haven't.
If you look at the words of Sir Alex Fraser Tytler, he was a Scottish
historian who lived in the 1800s, and his words, after looking at world
history over the whole of his life, were that a democracy cannot exist
as a permanent form of government. It can only exist until the voters
discover that they can vote for themselves largesse from the public
treasury, with the result that a democracy always fails under loose
fiscal policy and is generally followed by a dictatorship.
The average age of the world's great civilizations has been 200
years. These nations have progressed through this sequence: from
bondage to spiritual faith, spiritual faith to great courage, great
courage to liberty, liberty to abundance, abundance to selfishness,
selfishness to complacency, complacency to apathy, apathy to
dependency, and dependency back again into bondage.
And indeed, if you look at the timeline of civilizations across the
annals of history, what you see is that up and down of the way that
civilizations have come and gone.
And it was Paul Kennedy, in his book ``The Rise and Fall of the Great
Powers,'' who talked about how, traditionally, open political systems
have basically spent their way into oblivion and that the largest thing
that you used to be able to buy was a standing army--nowadays, the
largest thing that you can buy is entitlement spending--but that in
every instance, a civilization came to a tipping point wherein they had
to decide: Do we go back to what made us competitive and, perhaps, a
world power in the first place or not?
And that dovetails, actually, with another book that was written,
entitled, ``This Time It's Different,'' by professors from Harvard and
University of Maryland. They looked at the last 800 years of financial
history and they found, in every instance, civilizations got to this
same point, which brings me back to the local fifth grade math teacher.
One plus one equals two, period. Numbers always work. Can they be
manipulated? Yes. But at the end of the day, in the same way that
gravity works, numbers work.
So I think that we just need to acknowledge that we are living in a
weird
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time. Debt, deficit, and government spending are not things that are
talked about in Washington, D.C., as they should be, and what we are
doing is we are hoping that things will get better. We are hoping that
economic growth will take care of the problem.
Well, it might, but it was Gordon Sullivan, former Chief of Staff of
the United States Army, who wrote a book entitled, ``Hope Is Not a
Method.'' Hope, indeed, is not a method. It may work out that way, but
it may not, and, therefore, we have got to be really prudent with the
way that we budget and spend going forward, given the implications of
what history has said will come our way if we don't get the numbers
right.
So that leads me to a few numbers I would just like to share with
you, and these numbers are interesting in what they point to. They
point to the fact that this is not a problem for our grandchildren or
for our children. This is a problem that is coming down the pike really
fast.
If you look at the Congressional Budget Office numbers over the next
10 years, what they show is that we are running trillion-plus deficits
on a yearly basis and that there is going to be a snowballing effect
with regard to debt to GDP, that we are going to get to spaces that we
have never been to before in peaceful times. That is what this chart
refers to right here.
A lot of people say we don't really need to do something that much
because we got into a real problem--if I pull that chart over this
way--back at the time of World War II. We were over 100 percent debt to
GDP, and we are just not that far right now, 79 percent.
But that doesn't include the social safety net promises that are
built into the budget. If you include those off-balance sheet promises
that are real-world promises and that do have to be paid, we are
actually up around 107 percent, which is not that far from the 106
percent or 119 percent that we saw in the wake of exhausting ourselves
after World War II as we fought against the Japanese and Nazi Germany
for our very survival.
If you do an apples-to-apples comparison and include, again, the
social safety net payments that weren't in place at the time of World
War II, we are eerily close to that all-time high that we saw in the
wake of World War II. That is just sort of a little bit longer
perspective.
Going back to the CBO numbers that I was just referring to, again, we
are going to be hitting the trillion-dollar mark year in and year out,
year in and year out, and that is without a recession, which is really
the point of what I wanted to get to.
Well, before I get to it, actually, let me take one last snapshot.
If you look at sort of blood and turnips, you can only squeeze so
much blood out of a turnip is the saying. If you look at the long run,
we have taken about 17\1/2\, a little shy of 20 percent of the gross
product of everything that we do in this country has gone off to the
Federal Government, and we have been consistently spending a little bit
more than that 20 percent here over the last 50 years. Those numbers
really begin to grow as we have the baby boomers retiring.
So what we have is a math and demographic trap that, unless we get
ahead of it, is going to, again, have profound problems and
implications in terms of the value of the currency, in terms of,
ultimately, the future inflation, in terms of the value of everything
that you or I may have saved to date.
We have been on a spending binge and a debt binge not just as a
country, but around the world. So if you look at the numbers that we
were all troubled by back in 2007, the spike that we saw in 2008, 2009
with the financial crisis, which was the worst crisis that we have seen
since the Great Depression, we thought that there would be a
deleveraging after that, but, in fact, the reverse has occurred.
There is $68 trillion worth of new debt around the globe, and so we
have seen roughly 300 percent increases in China. We have seen that,
more than that in the United States. We have seen that in Spain. We
have seen well more than that in Japan. Debt has gone up, not down. In
other words, we are more susceptible to a financial storm than we were
at the time of the financial crisis back in the mid-2000s.
Add to that, if you look at what is happening in most of the
developed world, they are actually doing a bit of deleveraging. America
is outside of that norm on that front.
But here is the part that I want to get to, and there are a lot of
other charts on a different night that I would like to walk through.
But if you look at, again, the numbers, those CBO numbers basically
anticipate that we are not in for a recession right now. If the
recession comes soon, our numbers balloon in terms of debt and deficits
going forward, so that makes it that much more relevant if you look at
the history of recessions.
The average recession, basically over the last 50 years--excuse me--
the average economic expansion has been about 58 months before a
recession came along. We are now in the second longest economic
recovery in American history.
Now, when it ends, I don't know. But what I do know is that trees
don't grow to the sky, and when you begin to go to the point where you
are, in essence, double the average that we have seen since World War
II, you know that we have to be not too far from the next recession,
which, again, will have incredible implications in terms of debt and
deficit going forward.
Let me give you a few other indicators that say that that recession
and, again, the spiking of deficits and the spiking of debt that will
come with it is not too far.
We are now in the longest bull market in American history. Again,
think about that. Think about the wealth effect that comes with that
and, again, the multiplier effect that that has in a consumer-driven
economy, which is what we have in this country. We have had quite the
run on that front.
And not only has there been duration, there has been levity, if you
want to call it that, not in terms of humor, but we have seen the
numbers really rise. We are now, in terms of PE, our price-to-earnings
multiples, up around where we were at the time in 1928 of Black
Tuesday, at about 32 times in terms of the average market pricing.
This chart, I think, is really interesting. What it shows is that
there have only been two other occasions in the history of our Republic
over the last 70 years when we have had the kind of wealth effect that
we have right now. One occurred--and this is, again, household net
worth as a percentage of disposable income in our country. Once it
occurred just prior to the tech bubble bursting. The other time it
occurred was just prior to the real estate boom bursting in 2008.
Now we are at a level that is, again, more than 600 percent of
household net worth as a percentage of disposable income, again, the
highest level that we have ever seen over the last 70 years and a
number that has only been prefaced twice: once, just prior to the tech
bubble bursting, and the other time, just prior to the real estate
bubble of 2008 bursting.
Now, what does that mean?
I don't know exactly what it means, but if I am looking at any kind
of trend line, you would say: I don't know that it is good. It says the
obvious.
When I drive to Hilton Head Island, South Carolina, and I go into Sea
Pines, the mansions of the 1970s are being torn down to make way for
big houses now. The mansion of the 1970s is no longer a mansion; it is
a little house that is a tear-down. People are wealthier than they have
ever been.
But what comes up oftentimes goes down, and I want to go into some of
the wealth effect that has taken place here, which is what you have
seen with this number right here.
The Fed balance sheet has exploded, from about $800 billion in size
to over $4 trillion in size. As we go on the opposite side of the
curve, deleveraging, it is going to have an impact on interest rates,
which, again, is going to impact this debt and deficit number.
This is yield curve flattening. In every instance over the last 70
years, within 10 months of the yield curve flattening, there has been a
recession. Ours happens to be flattening right now.
Finally, I would make this point in these couple of slides that I
wanted to show, which is that the unemployment rates are bottoming out
right now. In every instance over the last, again, 70 years, when that
has occurred, there has been a recession within 9 months.
There are a lot of other indicators for a different night that I
would like to
[[Page H9143]]
walk through in terms of walking through why, again, the economic
challenges that are before us are, again, not in our grandkids' time,
not in our kids' time, but in our time, which makes spending restraint
that much more important.
I have taken up more than my share of time for my dear colleague from
Oklahoma, and I don't want to burn through the entirety of his time, so
I thank the gentleman from Oklahoma profusely for allowing me to walk
through a couple of slides this evening.
Mr. Speaker, I yield back the balance of my time.
____________________