[Congressional Record (Bound Edition), Volume 150 (2004), Part 6]
[House]
[Pages 7155-7162]
[From the U.S. Government Publishing Office, www.gpo.gov]




                          APPROPRIATING MONEY

  The SPEAKER pro tempore (Mr. Burns). Under the Speaker's announced 
policy of January 7, 2003, the gentleman from Michigan (Mr. Smith) is 
recognized for 60 minutes.
  Mr. SMITH of Michigan. Mr. Speaker, today I am going to discuss what 
Congress is doing in the last several weeks and the next several 
months, and that is appropriating money.
  A week or so ago, most of the people in the United States were 
completing their tax bills. This is sort of a tutorial on what happens 
to the tax dollars of American taxpayers and what happens to the FICA 
tax, the payroll deduction tax, taken out of American workers.
  I start with a pie chart, if you will, Mr. Speaker, and this pie 
chart represents how we are spending the $2.4 trillion that we are 
budgeting for this coming year. We see the biggest piece of pie is 
Social Security at 21 percent. The previous speakers were talking about 
defense. Defense and national security, they are probably the prime 
objectives of the Federal Government compared to what State governments 
do, and yet we have diminished the share of total Federal spending of 
defense since World War II down to 20 percent of the total expenditures 
of Federal Government.
  I want to especially pay attention to the 14 percent that says 
interest. The interest of the Federal Government now is $240 billion a 
year. That is the interest that we are paying on the national debt. It 
is an interest rate that is almost at record lows. Alan Greenspan, the 
Chairman of the Fed, said

[[Page 7156]]

today in testimony that interest rates probably are going to increase. 
We know what interest rates are today, a little over 4 percent for the 
prime. Compare that to the early 1980s where interest rates were 
approaching 12 and 13 percent.
  Now, if we have a 14 percent of the budget, a cost of $240 billion on 
the interest we pay out for this increased debt of overspending, that 
that side of the aisle and this side of the aisle and the Senate and 
the White House have been overspending, spending more money than has 
been coming in, if interest rates were to double, and we continue 
increasing the size of the debt, it is easy to see that servicing that 
debt is going to be a huge challenge, even for a Nation as rich and as 
prosperous as the United States of America.
  What happens to empires that do not pay attention to serious problems 
are empires that diminish and cannot survive. So I suggest, Mr. 
Speaker, it is so important that we start looking at our overspending 
and our overpromising.
  Briefly, to go around the piece of pie, discretionary spending uses 
up 16 percent of the budget. Discretionary spending is what we spend 
most of the year doing with our appropriation bills.
  Other entitlement spending, the food stamp program, the WIC program, 
the welfare program, the other entitlement programs, if you reach a 
certain age or a certain level of poverty, you are automatically 
entitled to some of those payments. That is what entitlement programs 
are.
  Then we have Medicaid, now at 6 percent of the budget, Medicare at 12 
percent of the budget. The projections are that Medicare will overtake 
Social Security as far as cost within the next 20 years, and that leads 
me to the overpromising.
  Two bad things that Congress does and the administrations for the 
last 25 years have done, and that is make a promise when they do not 
know where the money is coming from, and I call that unfunded 
liabilities.
  The unfunded liability report that came out 3 weeks ago, when the 
actuaries of Social Security and Medicare met, were enormous, and their 
estimate is that the unfunded liabilities, to pay for programs that we 
promised but do not have the money to pay for, and so we need extra 
money on top of the payroll tax and the FICA tax and the other revenues 
coming in for those programs, amounts now to $73.5 trillion. And 
remember, what is our budget? Our budget is now $2.3 trillion this 
year, about $2.4 trillion we are anticipating for next year.
  In breaking it down, there are two parts to Medicare. Medicare Part A 
is mostly the hospitals. Medicare Part A is projected by Tom Savings, 
one of the actuaries of Social Security, and he is also an actuary of 
Medicare, he is estimating $20.8 trillion; Medicare Part B, mostly 
doctors, $23.2 trillion. Medicare Part D, drugs, the drug program that 
we passed last November, is now estimated to be $16.6 trillion. Last 
November when we passed that bill, Tom Savings, the same person, 
estimated the unfunded liability to be about $7.5 trillion, and now 
with the new report that has just come out for Medicare and Social 
Security, the estimate has dramatically gone up, and that is based on 
the increased cost and the increased number of people that are expected 
to use the program.
  Then we come to Social Security, Social Security, a program that was 
started in 1934 by Franklin Delano Roosevelt. We have made promises in 
excess of the money coming in from the Social Security tax that amounts 
to about $12 trillion. The estimate is between $11.9 trillion and $12.3 
trillion that we would have to put into a savings account today that is 
going to have a return to cover inflation and the time value of money 
to accommodate the money that is going to have to be paid out in future 
years. So if you want to be really dramatic, you can say what we are 
going to need in the next 75 years is $120 trillion more than is coming 
in to Social Security to pay promised benefits.
  So what are we going to do? Are we going to reduce benefits? Are we 
going to increase taxes? Is it going to be a combination? What we have 
done historically in this country is the combination. We have increased 
taxes and reduced benefits, and I think the danger might be 
demonstrated by the predicament that some other countries of the world 
now find themselves in.
  France, for example, the percentage of the payroll that is used to 
finance the senior citizen population in France is now over 50 percent. 
So you can imagine a company or a business trying to compete in world 
trade that has one of two choices with that kind of cost coming out of 
the payroll tax. They either have to increase the price of their 
product to pay for it, or they reduce what they are paying to workers. 
Either way, let us not allow that to happen in the United States.
  The country of Germany just went over 40 percent in terms of the 
amount of payroll tax that is required for their senior population. I 
just think it is very important that when we talk about this unfunded 
liability, you compare it. That is about seven times the total 
production of the United States, the GDP. So it is about seven times 
GDP. At a little over $2 trillion a year, that means that we would have 
to come up with the equivalent of about 35 years of government spending 
to accommodate what would need to be put in a savings account now.
  So why do not we pay attention to some of these huge challenges that 
are facing this country? Let me give you my best guess.
  Politicians have discovered that they are more apt to get reelected 
or elected if they promise more and more benefits, and, look, there are 
a lot of problems out there. There are a lot of things that need to be 
doing. So the question is, how much should government do? But we now 
have evolved into, if you will, dividing the wealth with our tax system 
where we have 50 percent of the adult population that now pay less than 
1 percent of the income taxes in this country. So 50 percent pay less 
than 1 percent of the income taxes.
  What is the natural reaction of some of those 50 percent? The natural 
reaction is to elect Members to Congress that bring home more pork, 
that bring home more benefits, that start more social programs, and 
that is what we are evolving into.
  I am a Republican, a farmer from Michigan, and we are now doing our 
Lincoln Day banquets, the Republican fund-raising dinners, celebration 
dinners of Lincoln's birthday. It is the 165th birthday of Abraham 
Lincoln. In his famous Gettysburg Address, he sort of expressed a 
wonder whether a Nation of the people, by the people and for the people 
can long endure.

                              {time}  1630

  And I think that challenge is now before us.
  We hear other Members talking about the conflict of this war. 
Certainly we have had huge challenges, such as the Civil War. But I 
would respectfully suggest that the challenges of overspending and 
overpromising are probably greater in terms of the survival of this 
great Nation than any of those wars. So somehow, how do we get the 
discipline to try to make changes?
  I chaired the bipartisan Congressional Task Force on Social Security 
and served on the Committee on the Budget for 8 years and have sort of 
been on my soapbox, pulling my hair and complaining about the fact that 
we are not dealing with the increased cost of Social Security and 
Medicare and our reduced ability to pay for that dramatic increase in 
cost.
  This is another demonstration of the unfunded liabilities. It just 
says that if we do not make some changes by 2020, 16 years from now, we 
are going to have to take out 28 percent of that pie chart that we 
started out with. We are going to have to use 28 percent of the general 
fund budget to accommodate the shortage of money that is needed to 
cover those three programs: Medicaid, Medicare and Social Security. By 
2030 it is going to be over 50 percent that is required of that budget.
  This body and the Senate quite often do not deal with problems until 
the disaster is almost on us. But the problem with solving Medicare and 
Social Security is the longer you wait, the more drastic the solution 
is going to have to be.

[[Page 7157]]

  The Social Security bills that I introduced when I first came to 
Congress in 1993, 1994, and 1995 were much simpler then because we had 
surplus money coming in from Social Security. Right now, this year, 
coming in from the Social Security FICA tax will be $645 billion. What 
we are using to pay benefits out of that money coming in is $490 
billion. So there is a little surplus there that we could do something 
with. But what we do is we spend it for other government programs.
  My caution is that this money is going to be running out in the next 
8 or 10 or 12 years, and at that time we will have less money coming in 
from the Social Security FICA tax. That is 6.2 percent on workers now 
and 6.2 percent on the employer. But, really, if you are going to be 
fair, it all comes out of the employee's pocket when an employer has to 
pay part of it, even though it is not a deduction on the check of the 
employee.
  So here is a time that we have more money coming in that offers us 
the opportunity to make changes to the program and use that surplus 
money coming in. In my Social Security bill that I introduced 10 years 
ago, I did not require any extra funds. The Social Security bill that I 
have introduced this session requires that we borrow almost $1 trillion 
from outside borrowing to accommodate a transition to keep Social 
Security solvent for the long run.
  I thought it would be good just to give sort of a thumbnail 
impression on a chart of the predicament we face in Social Security in 
the future. What happened with the Greenspan Commission in 1983, they 
decided the way to solve the Social Security problem and the increased 
number of seniors in relation to the people and workers paying in that 
money was to raise taxes and reduce benefits. So they said, starting in 
2001, we would start increasing the retirement age for maximum benefits 
from 65 to 67, and they said we are going to dramatically increase the 
taxes that are charged to American workers by a 20-plus increased 
percentage on the increase in taxes.
  Here is how Social Security works. Benefits are highly progressive. 
Everybody pays the 12.4 percent tax. If you are self-employed, you pay 
it all yourself. If you have an employer, then, theoretically, the 
employer does not pay you quite so much and the employer pays 6.2 
percent and 6.2 percent is deducted from the employee's wages. At 
retirement, all of a worker's wages, up to the tax ceiling, which is 
now $89,000, are indexed to the present value using wage inflation.
  In other words, it is not complicated, but if wages for a particular 
job double every 12 years, and you were making $20,000 12 years ago, 
then that would be indexed in the computation of your Social Security 
benefits up to $20,000. So it is what that particular job would pay 
today is how they calculate the kind of benefits you are going to get.
  And here is how it is calculated. The progressivity of the program 
says if you are a low-wage earner, earning less than $7,344, you get 90 
percent back in Social Security checks of what you were making while 
you were working. Then the difference between the $7,300 and the 
$44,000 is 32 percent. So 32 percent of the earnings between the $7,300 
and the $44,200 you get 32 percent of that back, and you only get 15 
percent back over the $44,000.
  Now, what I do in my Social Security bill to come up with some of 
this extra money, I add what are called ben points, but I add another 
ben point of 5 percent. What that means is that if you are a high-wage 
earner retiree, the increase in your benefits are slowed down. So we 
make it a little more progressive and we save some of the money to make 
the transition to really investing some of this money that is coming in 
and getting a better return than the 1.7 percent that the average 
retiree gets in Social Security.
  Let me just mention that early retirees receive adjusted benefits. So 
the actuaries make the best guess of how long the average person is 
going to live. So on average, the person that retires at 62, with a 
slightly lower benefit, is going to receive the same total benefits by 
the time they die as the individual that waits to 65 or 66 to start 
drawing benefits.
  And, by the way, if you wait until you are age 66 or 67, there will 
be a 4 percent increase for each one of those years to increase your 
Social Security benefits. So if you are jogging, if you are really 
healthy, it might be in your best interest not only to wait from 62 to 
65, but to maybe wait and retire at 66 or 67.
  SSI, by the way, does not come out of Social Security. There is a lot 
of concern amongst my constituents in lower central Michigan who 
complain about those who are receiving Supplemental Security Income 
payments who do not deserve it. But SSI comes out of the general fund. 
Even though the Social Security Administration administers and handles 
that program, it does not come out of the Social Security trust fund.
  Well, insolvency is certain. We know how many people there are, we 
know when they are going to retire, we know that people will live 
longer in retirement, we know how much they will pay in, and we know 
how much they will take out. Also, the payroll taxes will not cover 
benefits starting in 2017. The shortfalls will add up to $120 trillion 
between 2017 and 2075. The $120 trillion is what we are going to need 
in future years. What we need right now is to put $12 trillion in a 
savings account with compounded interest that will grow at least at the 
rate of inflation.
  The demographics are what is bringing this pay-as-you-go program to a 
crisis situation. There are 78 million baby boomers beginning to retire 
in 2008. The baby boomers are what we call those babies that were born 
right after World War II, roughly from 1946 to 1966, that age group, 
that are now in their maximum earning. So they are paying in maximum 
social security taxes, but also, when they retire, number one they stop 
paying those taxes in and they start taking out maximum benefits.
  The baby boomers that are retiring probably will be the most well-off 
generation that we probably have ever had in this country, possibly the 
best well-off generation that we will ever have in this country, 
considering the fact that we are putting a huge burden on future 
workers and future retirees by making more promises than we can afford 
and going deeper into debt.
  Social Security spending exceeds tax revenues in 2017, and so Social 
Security trust funds go broke. Technically, if we pay back the $1.4 
trillion that we now owe the Social Security trust fund, then that will 
allow Social Security to continue. But the problem is that the trust 
fund contains nothing but IOUs.
  And here is a worse situation, or a more dangerous situation. The 
Supreme Court, on two occasions now, has said that no one is entitled 
to Social Security benefits, and it does not make any difference 
whether you paid in social security taxes. Social security taxes are 
simply another tax, is what the Supreme Court said; and benefits from 
Social Security are simply a new benefit passed by Congress and signed 
into law by the President.
  This chart sort of pictorially represents the demographics of living 
longer, of seniors living longer and the birthrate going down. So back 
in 1940, there were about 36 workers paying in their Social Security 
tax for every one retiree. By the year 2000, it came down to three 
workers. So we dramatically increased taxes. The estimate by 2025 is 
that there is going to be two workers paying in their Social Security 
tax for that growing number of seniors. There is going to be two 
workers paying in their tax to accommodate the Social Security benefits 
of every one retiree.
  This is a huge challenge in terms of putting this kind of pressure on 
our workers, and we talked about what has happened to the tax rate in 
countries like France and Germany and the predicament that now Japan is 
facing with their senior population.
  I did this picture of FDR just to start a discussion of should we 
have privately owned accounts. When Franklin Delano Roosevelt in 1933 
started advocating a Social Security System of mandated savings while 
you are working, to help assure that you will have a little Social 
Security instead of going over the hill to the poor house when you 
retire, he started out saying that individuals should own their own 
savings account, but it should be a law

[[Page 7158]]

that they had to put so much money in it, and that it should be a law 
that they could not take it out until they reached the retirement age 
of 65.
  By the way, when we started Social Security, the retirement age was 
65; but the average age of death was 62. That meant most people paid in 
their Social Security tax but did not live long enough to take out 
Social Security benefits. And, of course, the program stayed funded 
very well. But today, the deduction is made on your payroll check; and 
immediately, within 3 or 4 days, that money is sent out to 
beneficiaries. So we are going deeper in the hole even as we increase 
taxes and reduce benefits.
  Social Security benefits are indexed to wage growth. And I say that 
because I hear so often many of my colleagues saying that when the 
economy gets better, then everything will be okay. But because benefits 
are indexed to the wages you make, and even if there are more people 
that have a job and more money coming in to Social Security in the form 
of taxes, and maybe some are making higher wages so they pay in a 
higher amount, that 12.4 percent times the higher amount of earnings, 
because eventually when they retire they are going to take out more 
from Social Security, in the long run economic growth does not solve 
the problem that we are facing with Social Security running out of 
money.

                              {time}  1645

  Growth makes the numbers look better now, but leaves a larger hole to 
fill in the future. I think what has happened with a lot of Members of 
Congress is that it is easy to put off the solution. When I give 
speeches in Michigan and around the country, a lot of people say if 
Congress would just keep their hands off the Social Security trust fund 
and that surplus money, everything would be okay.
  Well, I did this bar chart to represent what the Federal Government 
now owes the Social Security trust fund. We borrowed $600 to $700 
billion; but because we will write another IOU for interest, the total 
debt that government owes the Social Security trust fund is now $1.4 
trillion; but the total problem needs $12.2 trillion. So we owe $1.4 
trillion that is in the trust fund, but to solve the problem we need 
between $11.9 trillion and $12.3 trillion to solve the problem. 
Government should stop taking that money and spending it for other 
government purposes. We also need to start investing some of the short-
term surplus we have had.
  Like I mentioned, coming in from the Social Security trust fund 
today, there is about $645 billion, and what we are paying out in 
benefits is $490 billion.
  I will jump to the second blip. The Social Security trust fund 
contains nothing but IOUs; and to keep paying promised benefits, 
payroll tax will have to increase by nearly 50 percent, or we will have 
to cut benefits by a third. I have a chart that I will be coming to on 
how Washington has increased benefits over the years. But I wanted to 
show this chart to try to demonstrate that Social Security is not a 
good investment. It is nice to have that guarantee. Nobody is 
suggesting any Social Security reform. Certainly not in the five or six 
bills that I have introduced, nobody touches the disability portion, so 
getting hurt on the job continues to be a Federal Government insurance 
policy and nobody is touching that. All we are dealing with is the old 
age and survivor benefit portion of Social Security. By the way, in 
only 5 years, the disability insurance is going to have less money 
coming in from that particular trust fund than is needed to accommodate 
disability payments.
  This chart shows that the average return for the average retiree is 
1.7 percent of what they and their employer sent in to Social Security. 
I put down what has happened in the last 10 years in the Wilshire 5,000 
stock market. The Wilshire 5,000 earned, even with the 3 bad years we 
have been experiencing on stock markets and equities, the average over 
the last 10 years has been 11.86 percent. If we take the last 100 years 
in this country where we have kept track to what has happened to stock 
and equities, the average is 7.4 percent. So in some way, we can 
guarantee that you can have a better return on your private accounts. 
And so what I do in my proposal in my bill, I allow 3.5 percent of your 
wages to be put into your own personal retirement account and then we 
limit where you can invest it. Simply to try to get Democrats on board, 
and my bill is a bipartisan bill, we have added provisions where any 
investment is going to be limited to index stocks and index bonds.
  But I think one of the challenges that needs a lot of explaining is 
the fact that we hear Members of Congress brag sometimes that we are 
paying down the debt, and that is not true. One of the strong advocates 
of explaining the fact that the debt is never really reduced is the 
gentleman from Maryland (Mr. Bartlett).
  Mr. Speaker, I yield to the gentleman for his comments and maybe a 
couple of his solutions on Social Security, Medicare, going deeper into 
debt, and unfunded liabilities.
  Mr. BARTLETT of Maryland. Mr. Speaker, I would like to spend a moment 
talking about the debt and some terminology that we use. I suspect 
there is not one person in 100 outside the beltway, and maybe not many 
more than that inside the beltway, that knows that the public debt and 
the national debt are not the same thing. For about 4 years we were 
telling the American people that we were paying down the public debt. 
That was true. The implication was that we were paying down the debt 
which the government owes and that was not true. Let me explain why 
that was not true.
  The total debt that we owe is called the national debt, and that is 
made up of two subparts. One of those subparts is the public debt, and 
the other subpart is the trust fund debt. The public debt is the Wall 
Street debt. And the lockboxes we had on Social Security and Medicare, 
and these lockboxes did nothing to preserve and protect Social Security 
and Medicare, they are totally unrelated to the future of these two 
funds, what the lockbox said was if we had a surplus, and we did and do 
for the moment in those two, that we cannot use that surplus for 
ordinary spending. We have to use it to pay down the debt. The debt 
that we pay down with that is the public debt. But for every dollar 
that we pay down the public debt, the trust fund debt goes up a dollar, 
and the total of those two debts, which is the national debt, does not 
change at all; but there are 50-some trust funds and only two of them 
had a lockbox or have a lockbox now.
  So we took the surpluses, and there are surpluses in others, like the 
civil service retirement and railroad retirement and transportation 
trust fund and there are surpluses in some of those, and so we happily 
took those surpluses and spent them.
  Mr. SMITH of Michigan. Mr. Speaker, our forefathers thought they were 
putting a little safeguard on it when they said if you ever increase 
the debt limit of this country, you have to vote in the House and the 
Senate, and it has to be signed by the President. They thought that 
might protect us a little bit in not dramatically increasing the debt 
the way we have. I think what the gentleman is saying is the fact that 
the total debt has never gone down.
  Mr. BARTLETT of Maryland. That is true. I checked with GAO, and they 
told me that although there were 14 months during those four periods 
when revenues exceeded expenditures, if we kept our books on an accrual 
basis, like we force every business that handles more than a million 
dollars a year to do, there never was a moment in time when the debt 
went down. What that meant, of course, was that we were getting ever 
closer and closer to the debt limit ceiling. I kept teasing Members by 
quoting the Bible, ``Surely your sin will find you out.'' What are you 
going to tell the American people when we are going to have to raise 
the debt ceiling limit when we have been telling them all this time 
that we are paying down the debt?
  As a matter of fact, we had to do that in a very interesting evening. 
We debated until about midnight. We debated for hours. We were being 
harangued, how could you be so irresponsible? How could you run up the 
deficit and the debt? At midnight we recessed

[[Page 7159]]

and we convened the Committee on Rules. They came out with a rule about 
1 a.m. that said we were going to debate the rule for 1 hour and then 
go immediately to a vote on the bill. So we did that, and we raised the 
debt limit ceiling.
  As Members know, because we were embarrassed by that, we decided we 
would not want to do that again in the future. So what we did, without 
my vote and against my wishes, we voted the Gephardt amendment.
  Mr. SMITH of Michigan. Mr. Speaker, I hope Members are watching this 
just as a reminder of what we have done to try to not embarrass 
ourselves as we sort of secretly increase the debt.
  Mr. BARTLETT of Maryland. What we did was to incorporate the Gephardt 
amendment, which said whenever we pass a budget resolution that the 
debt limit ceiling would be raised whatever it needs to be raised to 
accommodate the spending anticipated by the budget resolution. But 
budget resolutions do not include emergency supplementals, and we keep 
voting emergency supplementals because we do not want the budget 
resolution to be such a high number.
  In the future, there will be another debate on raising the American 
debt limit ceiling, and I hope America is listening when we do that. 
What we are doing is amassing the largest intergenerational debt 
transfer in the history of the world. We cannot run our government on 
current revenue, and so what we are doing is systematically borrowing 
from our kids' and grandkids' future. When I ran for Congress 12 years 
ago, I promised those who I hoped to be my constituents, and they are 
my constituents now, that I would try to conduct myself here so my kids 
and grandkids would not spit on my grave because of what I have done to 
their country. I am still trying to do that.
  I think it is unconscionable for us to amass this larger and larger 
debt that we are going to pass on to our kids and grandkids.
  Mr. SMITH of Michigan. Members are pretending that our problems today 
are so important that it justifies taking the money that our kids and 
grandkids have not even earned yet. It is sort of like breaking into 
their piggy bank and saying I will try and pay you back some time, but 
for now let us go out and buy some candy bars and ice cream. There 
might be a better word, but ``unconscionable'' comes to my mind to 
consider the burden of debt, to consider the burden of promises that 
exceed our ability to pay for them in terms of unfunded liabilities 
that we are placing on future generations.
  Mr. BARTLETT of Maryland. What we are doing is systematically 
borrowing from our kids' and grandkids' future. We cannot run our 
government on current revenue, so what we are doing is borrowing from 
their future. When it comes their turn to run the government, not only 
will they have to run it on current revenues, but they will also have 
to pay back all of the moneys we borrowed from their generation.
  We have a systemic problem here, and that is by law the only place we 
can invest these surpluses is in nonnegotiable U.S. securities. These 
surpluses are the order of magnitude of about $200 billion a year, more 
or less. The only place we can invest them is in nonnegotiable U.S. 
securities. There is no money laying around Washington we have not 
spent. As a general rule, government spends all of the money you give 
it plus as much more as it can get away with. This government is no 
different.
  I think it is important for our people, our kids and grandkids, to 
understand what we are doing. The reason I am so concerned about this 
fact that we are hiding some of the deficit is that it is obscuring the 
magnitude of the problem. I think the American people want us to 
balance the budget, and I think they want us to do it honestly.
  Last year we were told that the deficit was about $500 billion, but 
the debt went up $700 billion. That is because the $200 billion in 
Social Security surplus and Medicare surplus that we took and spent is 
not called deficit, but it does represent debt.
  Mr. SMITH of Michigan. Mr. Speaker, this pie chart shows that 
currently the interest that we are paying on the debt, servicing the 
debt, the interest is $240 billion a year. This represents 14 percent 
of the budget. Yet interest rates are almost at record low levels, and 
so what happens as we increase the debt by $500 billion to $700 billion 
a year, and interest rates go up, and Alan Greenspan said today that is 
going to eventually happen, it is going to eat up a bigger piece of 
that pie. One of these days it has got to come to our obvious attention 
that something needs to be done to control spending.
  Mr. BARTLETT of Maryland. I would hope, because we cannot continue to 
amass this ever-increasing debt. As the gentleman stated, interest 
rates are now very low, and still interest on the debt is a meaningful 
percentage of the largest item in our budget, which is defense. When 
interest rates go back to normal levels, the interest on the debt will 
be just about as much as we are spending on defense.
  Mr. SMITH of Michigan. Right now interest is 14 percent of the 
budget. Defense is 20 percent of the budget. It is easy to at least 
assume there is a good possibility that the very low interest rates 
today could double. That would mean $440 billion a year, or 28 percent 
of the budget. It would mean our borrowing and servicing that debt is 
more important than what government should be paying attention to, and 
that is security and defense.
  Mr. BARTLETT of Maryland. By the way, the interest on the debt is 
part of what we call mandatory spending. Our total expenditures this 
year will be about $2.4 trillion. We will vote on about one-third of 
that, about $800 billion, and about half of that will be defense. 
Defense is running roughly half of our total discretionary spending. 
This mandatory spending is kind of hidden, but it represents two-thirds 
of all of the money that we spend.

                              {time}  1700

  Mr. SMITH of Michigan. And, Mr. Speaker, of course the lobbyists that 
come in, they would prefer that it be mandatory spending; so some of 
these programs, if they can write it in law that if they meet certain 
qualifications, they automatically get it and it does not go through 
the appropriation process, it is not subject to prioritizing. So we 
have ended up with more and more of our budget being spent in this 
mandatory spending, and really even though technically defense is 
discretionary, most of the defense budget becomes the kind of 
obligation, because that is what we are here for, defense and security, 
becomes almost untouchable.
  Mr. BARTLETT of Maryland. Mr. Speaker, a bit more than half of all 
the expense budget is salaries, and we now do not have enough military 
personnel, who are having to extend their tours. They have been on the 
ground over there, reservists on the ground for a year, and now they 
are being extended for 3 or 4 months. So obviously unless we are going 
to have fewer people in the military, we are not going to be able to 
cut defense spending.
  So the gentleman is right. In a sense a lot of that is mandatory 
because we cannot imagine a smaller military because our present 
military is really not large enough to do what we are now attempting to 
do because we are having to extend reservists who have already been 
there a year.
  Mr. SMITH of Michigan. Mr. Speaker, how do we change? How do we 
develop the kind of discipline, intestinal fortitude to start slowing 
down this huge growth of government to the extent that we have decided 
we will simply borrow more and more money to take home to our districts 
or to start new social programs? Does the gentleman have any thoughts 
on how we can discipline ourselves better than we have been?
  Mr. BARTLETT of Maryland. Mr. Speaker, we need to get back to 
constitutional government. Thomas Jefferson said, The government which 
governs best is the government which governs least. Now we are a 
million miles from his dream of what his country would be at this time 
in history. And we need to look at our Constitution at what our 
Founding Fathers believed the Federal Government ought to be doing.

[[Page 7160]]

  And there are several things that we spend a lot of money on, and I 
will challenge my colleagues to go to Article I, Section 8, and that is 
the part of the Constitution that delineates the appropriate functions, 
the allowable functions of the Federal Government, and find any 
justification for philanthropy. I really believe in philanthropy, but 
they did not believe it was the proper function of the Federal 
Government. We will see no hint there that we should be involved in 
health care other than the health care of our military people. We are 
responsible for them. We will find absolutely no hint that we should be 
involved in education. As a matter of fact, for the 24 straight years 
when the SAT scores were falling lower and lower and lower in our 
schools, the Federal Department of Education was getting better, bigger 
and bigger and bigger, and exerting more control over education. We 
contribute about 6 percent, 5.9 I think is the actual number, percent 
of the funds for education. We would like to have 100 percent of 
control. We just need to get back to constitutional government.
  Our Founding Fathers believed that States do some things better, many 
things better, than the Federal Government. They believed that the 
private sector did most things better than government. And what we are 
now trying to do is to have government do more and more of what our 
Founding Fathers thought that the private sector ought to be doing.
  Mr. SMITH of Michigan. Mr. Speaker, I think it is good to remind 
ourselves that our Founding Fathers in the original Constitution did 
not want to penalize individuals that were going to school and working 
and saving. So the original Constitution says we cannot have a tax 
based on how much we earn, and that is what we were founded on. That is 
part of the incentive. But this body and Congress and the White House 
over the last 50 years have decided trying to equalize that wealth, 
dividing the wealth, taxing the people that have made it a little more 
and giving that back in some forms of government service to the 
individuals than have not. And there is a balance there. There is a 
golden mean.
  We want to help people that really need help, but we need to try to 
develop programs that help lift them up because we have got now a tax 
system that the young couple that decides to go get a second job ends 
up not only being taxed more for working harder to try to earn enough 
money to do well for their family, but they get taxed at a higher rate. 
So we have sort of evolved into taking away from the people that work 
hard and try and are successful, and dividing that wealth in a system 
of government where now 50 percent of the adult population of the 
United States now pay less than 1 percent of the total income tax.
  Mr. BARTLETT of Maryland. Mr. Speaker, our Founding Fathers not only 
did not permit personal income tax in the Constitution, they prohibited 
it with the original Constitution. So to get a personal income tax, we 
had to amend the Constitution.
  The numbers that the gentleman mentioned are very interesting. The 
lower 50 percent of taxpayers pay 4 percent of our taxes. The upper 50 
percent of taxpayers pay, I think, 96 percent of our taxes. And the top 
1 percent of taxpayers, I think, pay 34 percent of our taxes. So if we 
are going to give a tax cut to people who pay taxes, people who pay 
taxes are going to get a tax cut. And since 34 percent of the taxes are 
paid by the top 1 percent of wage earners, and the top 50 percent of 
wage earners pay 96 percent of the taxes, clearly those who earn money 
are going to get a tax cut because they are the ones who pay taxes.
  Mr. SMITH of Michigan. Mr. Speaker, so there we come to the popular 
criticism that it is a tax cut for the rich, but because of the fact 
that that 50 percent of the population pay essentially very little of 
the income tax, when we have any kind of a tax cut, it tends to go to 
the 50 percent that do pay taxes. So here again it is a balance.
  But as we talk about jobs and economic expansion, when we have a 
system that taxes our companies and our businesses 18 percent more than 
what their competitors in other countries are taxing their businesses, 
we are putting our business at a competitive disadvantage, and our 
overzealousness to pass on new regulations and more taxes so that this 
body and the Chamber across the Capitol can have more money to spend I 
think is one of the negatives and something we have to correct if we 
are going to expand business and jobs and the economy in this country.
  Mr. BARTLETT of Maryland. Mr. Speaker, in a former life I was a small 
businessman, and I would like to make the argument for a moment that it 
is impossible to tax business. A tax on a business simply becomes a 
part of the cost of doing business. If they are going to stay in 
business, they have to pass that cost on to the consumers, to their 
customers, which makes a tax on business the most regressive tax we 
have because the poorest of the poor pay more for everything they get, 
more for their food, more for their clothing, more for everything they 
get, all goods and services, because these companies are taxed. So the 
poor are hurt, first of all, because everything they buy costs more 
because we are taxing businesses. And, secondly, they are hurt because 
the tax on business, as the gentleman pointed out, makes them less 
competitive in a global marketplace. So finally they become 
noncompetitive, and the job disappears here and appears somewhere on 
the Pacific Rim. So the poor person who had to pay, to begin with, more 
for the things he bought now does not even have a job to earn the money 
to buy the goods. So it is a doubly regressive tax.
  My liberal friends, when we talk about this, seem to understand it 
for about 5 minutes, but 10 minutes later they are saying, those rich 
businesses, we really need to tax them. But in the final analysis we 
cannot tax a business. It simply becomes a part of the cost of doing 
business, and they pass that tax on to their consumers.
  Mr. SMITH of Michigan. Mr. Speaker, I happen to be the prime sponsor 
of the flat tax. But whether it is a flat tax or a value-added tax or a 
type of sales tax, we need to change our Tax Code if we are not going 
to continue to put a lot of people at a disadvantage and a lot of 
businesses at a disadvantage. Most of our businesses pay the same 1040 
personal income tax that the gentleman and I do. As we increase the tax 
on those businesses, it hurts the chances of the survival of that 
business.
  How do we get the discipline? How do we get the discipline to police 
ourselves? We are talking about a PAYGO bill. Maybe that will help. It 
sort of helped during the 1980s and some of the 1990s, but convincing 
the American people, I think, might be the best way in terms of getting 
that voice heard in this Chamber and in the Senate Chamber and at the 
White House.
  Mr. BARTLETT of Maryland. Mr. Speaker, I think there are two ways 
that we can discipline ourselves. The first is that we need to 
understand that it is unconscionable to amass an ever larger and larger 
debt that we are going to pass on to our kids and our grandkids.
  By the way, the gentleman was talking about Social Security earlier. 
A recent poll of young people believe more that they would see a UFO 
than believe they would ever see a Social Security check. So this is 
not a big vote of confidence in our system.
  I think there are a couple of things that we need to do to curb 
spending. One is to recognize how unconscionable it is to continue to 
amass a larger and larger debt we are going to pass on to our kids and 
our grandkids. And the second thing is we need to go back to the 
Constitution. We would not have any problem in spending if we would 
just stop the spending on things that are unconstitutional.
  There was a very interesting speech that Davy Crockett gave in the 
Congress. There was a fire, when he was here in Congress, over in 
Georgetown, and they could see the buildings burning over there, and 
there were a number of people who were burned out of their homes, and 
one of them was a widow woman for whom everybody felt sorry. So a 
couple of days later, the Congress voted $20,000, which is not

[[Page 7161]]

much today, it was a whole lot more money then, $20,000 to help the 
victims of this fire.
  Davy Crockett was campaigning a bit after that, and there was a 
farmer in a field who came to the end with his horses and stopped them, 
and he told Davy Crockett, I have always voted for you in the past, but 
I cannot vote for you anymore. And Davy Crockett asked, Why can you not 
vote for me? So he reminded him of this fire. He reminded him of what 
they had voted. And he said, Sir, that was not your money. That was my 
money. Philanthropy is not a proper function of the Federal Government. 
I cannot vote for you anymore.
  Davy Crockett came back and gave a speech, and I am sure people can 
find it if they go on the Web and click on Davy Crockett. They can find 
his speech there. This was a great speech. It points out that no matter 
how philanthropic that is, that that is not a proper function of the 
Federal Government.
  As a matter of fact, the Bible says, ``It is more blessed to give 
than to receive.'' Does the gentleman from Michigan know a single 
person who has a good warm feeling on April 15 because so much of their 
money is going to philanthropy? Has not the government usurped the role 
of philanthropist and denied our citizens the reward that the Bible 
promises, that it is more blessed to give than to receive? A whole 
bunch of the money that the government forcibly takes from us on April 
15 goes to philanthropy, a totally inappropriate function of the 
Federal Government, a constitutionally denied function of the Federal 
Government. And because they thought that we might not understand, 4 
years after the Constitution was ratified, they ratified the first 10 
amendments, the tenth of which, the most violated amendment in the 
Constitution, the tenth of which says it in everyday English, and we 
cannot find it in Article I, Section 8. The three things I mentioned I 
cannot find there. And I defy anybody to take out their Constitution 
and find it.
  Mr. SMITH of Michigan. Mr. Speaker, the gentleman from Maryland (Mr. 
Bartlett) carries the Constitution in his pocket.
  Mr. BARTLETT of Maryland. I always have a Constitution next to my 
heart.
  Mr. SMITH of Michigan. Mr. Speaker, I want to show this chart of what 
government has done historically every time Social Security has less 
money than what is needed to pay benefits, and it is a pay-as-you-go 
program. It is deducted from the paycheck at the end of the 1 week or 
the 2 weeks or the month, and within days it is sent out to 
beneficiaries. So there is no savings account with one's name on it. So 
we have run into problems of not having enough money in Social Security 
to pay benefits on several occasions, but what we have done 
historically, and I use this because I think it is a danger of what can 
happen in the future, is simply that we have increased taxes and 
reduced benefits. This is a chart that shows the increase in taxes.
  In 1940, we had 2 percent of the first 3,000. By 1960, it went up to 
6 percent of the first 4,800. By 1980, 10 percent-plus of the first 
26,000. In 2000, 12.4 percent of the first 76,200. And currently it is 
not a rate increase, but it is a base increase; so it is the same 12.4 
percent on the new base of $89,000 a year. So continually we have 
continued to increase taxes on working Americans to the extent that 
most working Americans now pay more in the Social Security tax than 
they do in the income tax.
  Mr. BARTLETT of Maryland. Mr. Speaker, I object to calling this 
Social Security because it is clearly not Social Security. If that is 
all one has at their retirement, they are in a world of pain and hurt. 
If we look at those dollars over there, we see that on many pay stubs 
the FICA tax is the biggest tax that we pay. That worker has every 
right to believe that since it is called Social Security, because it is 
the biggest tax item on his pay stub, that it is Social Security. So he 
is not doing what he ought to be doing, saving providently for his 
retirement.
  We need to change the name of that. It is not Social Security. It 
never was Social Security. It never was intended to be Social Security. 
But the tax has gotten so large, and it has gotten large because 
originally there were 42 people working for every 1 on Social Security. 
Today it is three people working for every one on Social Security. 
Shortly it will be two people. That is a pretty heavy burden to carry, 
two people supporting one. That is why the trust fund will be depleted.

                              {time}  1715

  We will be able to meet only 70 percent of the demands on Social 
Security.
  Mr. SMITH of Michigan. So the challenge is Social Security has an 
unfunded liability of about $12 trillion now. But now we have made even 
more promises in Medicare and Medicaid. So not only deficit spending is 
how much we overspend in one year; the debt is adding up every year's 
overspending. It is now over $7 trillion of debt in this country, in 
addition to the promises that do not know how we are going to pay for.
  But within the next 3 months, Congress probably again, as the 
gentleman from Maryland (Mr. Bartlett) and I talked earlier, is going 
to have to face up to increasing the debt limited. My guess is we will 
do it again like we have done in the past, so that we do not have to 
talk about it, so we are not embarrassed in this Chamber. It will be 
some legislation that is hidden in the rule, so if you vote for the 
rule you vote for an increase in the debt limit, which I think should 
disturb us, because it does not make us stand up and deal with the huge 
challenges we are facing in this country in terms of overpromising and 
overspending.
  Mr. BARTLETT of Maryland. $7 trillion is a very big debt, but I would 
like to talk for a moment about the debt.
  If we kept our books like we force companies to keep their books, and 
some people say that we keep Enron-type of books, if we had to count as 
debt the contingent liabilities, our debt would not be the $7 trillion. 
It would be, I am told, between $25 trillion and $30 trillion, and some 
people think as much as $60 trillion.
  I think that we need to keep the kind of books that we require 
businesses to keep. I think the American people have a right to know 
what the debt is that totally they owe. If you divide this by the 
number of working families, I think it is, what, about $10,000 for 
every man, woman and child in the country.
  Mr. SMITH of Michigan. The debt is $7 trillion divided by about 290 
million. It comes out to almost $25,000 for every man, woman and child 
in terms of their share of the debt.
  Mr. BARTLETT of Maryland. That is about $10,000 per family. Just 
paying interest, by the way, the first thing that comes out of your 
paycheck is interest on the debt. Before you can do anything, before 
you can build roads or fund your schools or do anything, you have got 
to pay interest on the debt. So it comes right off the top. Every year 
we do not balance the budget makes it that much harder to balance the 
budget next year, because we have a larger interest debt to pay.
  By the way, in our fondest dreams today, in 4 or 5 years we are going 
to cut the deficits in half? That will not get us there, will it?
  Mr. SMITH of Michigan. No plans. I do not see it in terms of 
responsibility much different than what any family should do, what any 
business should do, and that is you cannot just keep going deeper and 
deeper into debt without any plan to ever pay that debt back.
  I am a farmer from Michigan, the gentleman is a farmer from Maryland, 
and philosophically we felt that if we can pay down the mortgage on the 
farm so that we can leave our kids a little better chance of having a 
better life than we have, we should.
  But in this body, in Congress, we are not doing that. We are not only 
not paying down the debt; we are increasing the debt load that they are 
going to have to be responsible for, and the tremendous amount that is 
going to have to come out of their pockets to pay the increased 
promises and even the interest on the debt, not even mentioning 
starting to pay that debt down.
  Mr. BARTLETT of Maryland. The gentleman mentioned the family as an

[[Page 7162]]

analogy of our country. In a 4-year period, we went from being the 
world's largest creditor Nation to being the world's largest debtor 
Nation. I saw a fascinating editorial that said, gee, is that not 
great? Look how credit-worthy we are.
  I related that to my family. I said, gee, if last year I had $10,000 
and this year I owe $10,000, I am having some trouble figuring out that 
I am better this year than I was last year.
  That is what this editorial was saying: Is it not nice that we are so 
credit-worthy that we now are the world's largest debtor Nation? We in 
4 years, we went from the world's largest creditor Nation to the 
world's largest debtor Nation.
  Mr. SMITH of Michigan. It is a whole different 1-hour debate and 
discussion; but just, for example, one country, we have $100 billion 
deficit trade with China, and what does China do with that extra $100 
billion? They probably invest it in our companies, or buy some of the 
property in the United States. So it makes this country more 
vulnerable.
  But in terms of the total debt, both our Treasury bills, the debt of 
companies, we are becoming more and more dependent on other countries.
  It is time we took ahold of ourselves, pulled ourselves up from our 
bootstraps, and started to be responsible, and not leave the kind of 
debts and responsibility to our kids and our grandkids simply because 
we think our problems today are great.
  I thank the gentleman from Maryland for joining me.

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