[Congressional Record (Bound Edition), Volume 151 (2005), Part 6]
[House]
[Pages 8637-8643]
[From the U.S. Government Publishing Office, www.gpo.gov]




                            THE U.S. ECONOMY

  The SPEAKER pro tempore (Mr. Westmoreland). Under the Speaker's 
announced policy of January 4, 2005, the gentleman from New Mexico (Mr. 
Pearce) is recognized for 60 minutes.
  Mr. PEARCE. Mr. Speaker, I appreciate the opportunity to address this 
body this evening. I would like to visit just a little about the 
economy and the ways that I see it, the ways that I think we have to 
evaluate it, and the things we have to be concerned about if we are to 
really consider those options that lie before us over the next 10 to 20 
years. What lies at stake for our children? What kind of a future are 
we going to leave for them?
  Right now, we are in the period where decisions are going to change 
the history of the American economy, and we simply need to be educated 
and need to be aware of that. Usually, I like to draw on an easel and 
discuss with numbers where we can put things into context, and so I 
will do that, Mr. Speaker.
  The first number that I would like to put up on the board is the 2.5. 
That is approximately the size of the government's spending, the size 
of the American budget. All the things we know about are included in 
that number. And it begins to be a focal point, because if we are to 
consider the relative state of our economy, we do the same thing that 
Americans do in their personal finances. We simply talk about how much 
we are spending, and 2.5 is a good approximation for what this economy 
spends, what this government spends to sustain all of its operations.
  But just as anyone else would, if you were considering whether or not 
the

[[Page 8638]]

expenditures that you make are satisfactory, whether they are too low 
or too high, you also have to consider the revenues that compare to 
that. So now we have the revenue figure, and that is about $11 
trillion. Our economy total is about $11 trillion, and we in the 
government spend about $2.5 trillion.
  Now, that is an extremely important relationship, and it is the 
relationship that tells us more than the actual numbers. There are 
people who say that our budget is too large. There are some who say it 
is too small. But the truth is that to really accurately assess, we 
have to understand the relationship between them. And simply by doing 
the division, we are able to then establish that right now our 
government spending is about 23 percent. That would be .23 of our 
overall economy.
  Now, then, this .23 is an awfully important number in the 
relationship. People want to know what does it mean. It means the same 
thing as if you were to consider your personal spending. If your 
spending is too high a percent of your annual income, then you are not 
able to meet all your needs. If we are considering in your personal 
budget that your rent maybe is 25 or 30 percent of your annual income, 
then that would tell you that you are satisfied with the size of the 
rent in that relationship.
  But this particular relationship, the .23, has to be put into a 
global perspective but also into a historical perspective. What we find 
as economists is that as the number, the .23, grows and gets larger, 
then the economy tends to want to stagnate. If that number is smaller, 
then the economy has vitality. It has the capability to grow. And that 
tells us the next piece of what we need to understand, which is that 
relationship between government spending and our overall economy. Is it 
growing, is it getting larger, or is it getting smaller? And that tells 
us what we can forecast for the future.
  So we will simply put arrows up here, and we will write the words. We 
will put an up arrow if it increases, it stagnates. And so if it then 
decreases, we have the capability to grow. Now, as we understand that 
relationship, up as a percent, if our government spending increases as 
a percent of our gross economy, we tend towards stagnation and 
nonproduction of jobs. If it becomes smaller, we tend to have growth 
and vitality.
  Now, there are many good people who asked me in my district a couple 
of years ago why we would pass tax cuts at a point when we are running 
deficits. And that is a very good question. The truth lies exactly in 
that number. At the point we gave the tax cuts, the number was about 
.25. We gave the tax cuts, and it shrunk to about .21; and we saw that 
the economy, in the very first quarter after we gave the tax cuts, 
jumped to about an 8.25 percent rate of growth.
  Now, we knew that was not going to sustain itself. There was pent-up 
demand with the expectation we would pass the tax cuts. But what we did 
expect when we passed it was to get to 3.5 or 4 percent. And we saw 
that rate of growth initially jump up to 8.25, maybe a little higher; 
and then it came back down, and it sustains itself now at about the 3 
to 4 percent range, which we really expected that we would be able to 
achieve.

                              {time}  2000

  Now, it is not magic, it is simply the fact that if you are taking 
more money from taxpayers and giving it to government, they have less 
money to invest in plant and equipment, less money to spend on disposal 
retail items, and so your economy has that dampening effect than if you 
collect more in taxes. It is a simple theme.
  If you think about world examples, we could go to Europe and look at 
Germany. If America is in the 0.23 range right now, which it is, we 
ask, What about Germany? Where is Germany? Germany's relationship is 
0.52. If the theory holds correct, you would say the German economy is 
probably more stagnant at 0.52 than the U.S. economy at 0.23, and the 
truth is Germany has not produced a job in about 10 years. Their growth 
is stagnant. They have an economy where companies are trying to figure 
a way to go somewhere else and find the growth and the vitality that 
they are looking for. And in truth, about 2 weeks ago in this great 
Capitol we met with about 50 or 60 foreign business owners, CEOs of 
corporations that are operating here in America because they choose the 
economic climate here. It does not mean that everything is good and 
rosy with us because we have budget pressures. As we look today, we 
have budget pressures that are trying to force our budget up. And we 
have the long-term effects that would tell us if we do not control our 
spending, we are actually going to slip over into a stagnant economy 
that cannot be remedied easily.
  If we consider the relationship there of again the 0.25 to 11, 
consider that relationship again over in Germany the factor is about 
0.52, if you want to consider another example, you look at the Soviet 
Union and the Soviet Union's economy collapsed. It just fell in on 
itself because the relationship was very high. One would immediately 
ask what about China. China has got a communist state and a controlled 
economy, much like the Soviet Union.
  I visited China in January of this year, and the Chinese themselves 
tell you that they do not want to make the mistake that the Soviet 
Union made, and so they have begun to privatize pieces of their economy 
in order to lower this relationship down to where the economy has the 
vitality in order to produce new jobs and produce the growth and 
sustain a continued economic improving picture.
  They were very cautious about telling us exact figures. The estimates 
range as low as 40 percent, so probably less than the Germans. The 
highest estimates were about 60 percent. In the relationship we are 
considering here for America, it is 0.23.
  So for the United States, just under a quarter of our economy being 
government spending, we have to be aware that the economists differ 
somewhat on where the stagnation begins to occur, but generally in the 
0.25 to the 0.30 range there is consensus that you start to dampen down 
your economy significantly.
  So anything in the future which tries to make our budget go up 
without growing our economy, if the 11 does not increase to a larger 
size, if we increase our budget, we will find that our economy will not 
grow, will not produce new jobs and we simply have to be aware of the 
relationship. It is neither a Democrat nor a Republican idea, it is 
simply an economic relationship that we must be aware of as we consider 
programs that we would want to continue, programs that we might like to 
cut back or to work more properly.
  Now one of the most significant discussions that we have going on 
right now in the country is what to do about Social Security. There are 
those who say it is not really a problem until 2042, so we should not 
do anything. There are others that say we should absolutely do what we 
can right now. But let us take a look at some of the suggestions. There 
are different opinions, and so I will simply use a range because I am 
not really concerned with which opinion to believe, but you have to 
relate it to this economic relationship in our economy. The estimates 
are $1 trillion to $3 trillion, if you want to begin. If we attack the 
problem now, between 1 and 3 trillion. So we put them on the board, and 
then we begin to look at the solutions and how they affect our 
relationship.
  Generally we talk in terms of 10-year payouts here, and so as we talk 
about solving a $1 trillion or $3 trillion problem, again extending 
that over a 10-year period, and we come up with either 0.1 or 0.3. If 
we divide that by 10, that would be $100 billion a year or $300 
billion. It is not so critical what you assume, but you have to take it 
to the next step to adequately discuss the issue. So again, I will put 
the 0.1 and the 0.3 in parentheses, but those need to be related up 
here to the top of the equation.
  If we are going to consider can we do something now, I do not know. 
But if we had a budget and your budget were 2.5, whether it is $25, 
$2,500, $25,000, the mathematical relationship will stay exactly the 
same no matter what.

[[Page 8639]]

  We have a 0.1 or 0.3 problem that needs to be fit into 2.5. I think 
any Members listening would understand that it might not be 
comfortable, but we just might be able to come up with the 0.1 or 0.3 
out of a 2.5 budget. We might be able to find those savings here and 
there to ring the dollars out to cure the Social Security problem up 
front.
  Now what the President is saying when he says it is better medicine 
to take it now than to wait is that the estimates again are pretty wide 
ranging, but the estimates are that in 2042, instead of $1 trillion, it 
is $10 trillion to $30 trillion, something in that range. Again if you 
were to do the math, divide by 10 years, the 10-year payout now, that 
would be 1.0. None would expect that you could take 1.0 of 2.5 and 
squeeze it into your current budget. It is not mathematically possible, 
but that is what we are doing if we wait into the future.
  So again, this body will decide if we are going to do something or 
not do something, but as we do, whatever we do, realize if we had it on 
top of the 2.5, if we do not find the savings, then our relationship 
0.23 is going to increase, and you yourself would see the possibility 
that we are moving toward stagnation, and we might be moving toward 
stagnation at an alarming rate.
  Now there are a couple of other relationships, and I am going to flip 
the chart because I would like to draw approximately the cost curve of 
Social Security, and realize that as we talk about Social Security 
costs, Medicare costs are going to parallel it. As the baby boomers go 
into retirement, we are going to see a tremendous escalation of our 
cost structure for Social Security, but right along with it are going 
to be Medicare costs that escalate because people who live to advancing 
years are more expensive than younger people. We see that daily in the 
escalating cost of Medicare. People are living longer, better lives. 
And during that time, it just takes more to repair them.
  My own parents are an example. My father has had a couple of knee 
replacement surgeries. Mom has had a hip surgery and back surgery. I 
think that any one of you with your parents in their 80s, it is about 
the same.
  We can expect our parents to live into their 80s and even into their 
90s. And in truth, demographers tell us the fastest growing population 
age group is over 100. That is stunning, acceptable, and it is nice; 
but we have to realize the budget pressures are going to increase.
  So when I look at things I am concerned about for our future, my only 
concern does not just lie in Social Security, but it is a piece of the 
equation that I think as we are talking about the economic future of 
our country that we would like to discuss. If you would bear with me, I 
will simply draw an approximation of the cost chart for Social Security 
over the next 50 years or so, and we will also draw a revenue line and 
discuss that, and then we will flip back to this chart and use this 
0.23 relationship on the next chart because almost every issue that is 
in front of us today that involves dollars should eventually come back 
to an analysis of what it does for our economy long term. We can no 
longer just take short-term views of what we are up against.
  So now then with permission, I will draw the approximate chart. One 
thing that we have seen since 1935 is that the number of retirees and 
then the cost, and the retirees and costs are almost equivalent, but 
they have been kind of meandering around and up and down and up and 
down like this. But about 4 years from now, when baby boomers start to 
retire, and this is a chart that the Social Security trustees have 
given me, the number begins to escalate tremendously high, and then it 
plateaus out and continues out.
  Now the people who say that we should be very cautious and not do any 
Social Security reforms now point to times in the past when we have 
made corrections. The mid-1980s we did a significant change in the 
program. About 1983 we increased taxes, pushed out retirement, and 
increased the cap. Those are good suggestions we have to consider the 
effect of, but the truth is they all worked out in a spectrum like 
this.
  So our revenues, they would find problems and they would increase 
them, and the revenues actually have been running surpluses, but they 
have become very stable and they do not increase. This being the 
revenue line here, and this being the cost line.
  So right now we are in a period where these are surpluses, and when 
the President said there is no trust fund, what he says is we in the 
Congress have been spending this money. And we have been loaning it 
from the trust fund to Congress, both Republicans and Democrats have 
done this for the entire period of the Social Security bill. Since the 
1930s, both parties have joined equally in feeding off this excess 
cash.
  Now the period where they intersect, this is 2018. The President 
talks about that frequently, that we begin to use up our cash surpluses 
in 2018. So we see the cost curve escalates through the revenue curve 
at that point. What the President says about 2042 when we are out of 
money is that this period right in here, that is assuming we are 
cashing in all of the IOUs that are in the trust fund. By the way, 
those IOUs are in one filing cabinet in Parkersburg, West Virginia. I 
asked for a picture to be sent, and so I show everyone in my district 
that the entire Social Security trust fund is in one four-drawer filing 
cabinet in Parkersburg, West Virginia. And it is a heavy-duty filing 
cabinet with individual locks, and they look to be sturdy combination 
locks, but the truth is there is not money there, it is simply IOUs.
  It is not dissimilar if we began at an early age to think about our 
child's education when they are born, for instance, and we began to put 
money into the cookie jar. And we put money faithfully every week into 
the cookie jar, except maybe when our son or daughter was about 10 and 
maybe the car broke down. We looked at the cookie jar and said, ``It is 
awhile before they are going to college. I believe I will take the 
money out to buy a new car, and I will put some IOUs in the cookie 
jar.''

                              {time}  2015

  And then the washing machine goes out and then the roof needs 
repairing on the house and pretty soon our son or daughter gets to 
college age, we look at the cookie jar and it is full of IOUs.
  That is exactly what we have done in Congress. We have spent all the 
surplus, but in 2018 we have to start redeeming that surplus for 
everything above this revenue line that extends out, and at 2042, all 
of the trust fund has been expended out of the filing cabinet. There is 
some disagreement and for purposes of discussion, the disagreement is, 
well, maybe it is 2044, maybe 2046, maybe 2040; but the concept is 
irrevocably true that we run out of even IOUs.
  Past 2042, we have got this much revenue, but we will see that we 
have almost as much uncovered cost period here, once we get past the 
hatched area, is costs that are not being paid by cash that is coming 
in. Social Security is a pay-as-you-go plan. There is actually no money 
that was ever designed to be put into a lockbox. I am sorry, but it 
just was never designed, even in 1935, to be put into a lockbox. In 
fact, the framers of the bill understood one fact and that was that the 
retirement age was 62 and the framers understood that they were going 
to let people retire at 62, but the average life expectancy of the male 
was 60.
  The truth is the original writers of the bill probably did not expect 
very many people to ever live to get and collect Social Security if you 
were a man. Women had about a 5-year longer life expectancy, much as 
they do now. The thought was that they will not collect much. So the 
retirement age was 62. I will just put that over here in the corner, 
62; and yet life expectancy for the male was 60. Again, I have already 
mentioned that the fastest growing demographic age group in America is 
over 100. And in case you think that is an anomaly, the second fastest 
growing group is 85 to 100. The average life expectancy then was 60. 
Today it is 77. So we are collecting benefits for 17 years longer than 
what the framers of the bill expected us to do.
  But still we have to wrestle with the fact, do we take care of the 
problem

[[Page 8640]]

now or do we put it off? You can see that the costs are tremendous. 
Realize that as this cost curve slopes up dramatically and it is this 
much of a dramatic look, if you go online and look at the Social 
Security trustees' report, you will see almost this exact graph right 
here. A Social Security trustee, a former trustee came to the office 
and answered the questions that I had about it. I wanted to know, kind 
of away from the political discussion, away from both parties. The 
trustees are pretty well nondenominational. He came to the office and 
he is the one who provided me with the charts and the explanations that 
I place before you now. But if we have the problem with Social 
Security, all these baby boomers going into retirement are going to be 
considerably more expensive, so we can expect that Medicare costs are 
going to escalate.
  Let us flip back to the previous chart. If Medicare costs are going 
up, if we have got to solve Social Security, then we have got pressures 
that want to increase this 2.5. That is not saying that we would 
increase the budget, but the pressure is there to increase the budget.
  The discussion would exist, do we increase it or do we not? We simply 
can do either one we want, but we must realize that as we increase the 
budget, if our economy is not growing, this relationship then becomes 
larger and we begin to move toward a stagnant, nongrowing economy that 
I do not think any of us want to give to our children. If, on the other 
hand, we find solutions now, if we get budget discipline now, then it 
is just possible that we could wiggle out of this mess because I think 
all of us would like to pass along to our children and our 
grandchildren a country that has the same hope and the same promise 
that each one of us has lived with.
  I feel extremely fortunate. I came from a very modest family. My 
father worked hard and my mom worked hard all of their lives. Mom was a 
schoolteacher. My father work in the oil field as a roustabout. They 
earned a good living, but with six children it was tough to make ends 
meet. From that background, I was able to attend college. My parents 
were able to work it out.
  After I attended college, I was able to go into the Air Force, served 
in Vietnam, and when I got back from Vietnam I was able to buy my own 
business, pay that business off, and grow it from about four employees 
to about 50 employees. That is from a family that did not have any 
political capital to spend. It did not have any economic capital to 
spend. My parents did the absolute best they could and God blessed them 
for that.
  But from humble beginnings almost anyone in this country can become 
almost anything that they would like. I did not grow up expecting to be 
in Congress. I grew up just wanting to graduate from high school. And 
then Mom was always pushing us, You're going to go to college. All six 
of us attended college and graduated. Several of us have master's 
degrees. But we were able to do this in a country where we have the 
hope of growth in our economy, the hope that new jobs will replace old 
jobs that phase out and always some jobs are becoming obsolete, some 
jobs pass away from us.
  It is normal and we can worry and fret about it, but if you think 
back 100 years to when the automobile was developed, you can imagine 
the discussion going on among the people who made wagons and wagon 
wheels and maybe the iron rings that fit around the wagon wheels to 
hold those wooden wheels together and they had to be discussing how 
this newfangled thing, the automobile, was wrecking their economy. The 
truth was the economy was simply changing. It did not wreck anything at 
all. It changed and it evolved.
  There is great consternation about the economic well-being of the 
United States today. My take right now, looking at every nation, the 
United States by itself has about .33, about one-third of the world's 
economy, just the U.S. alone. There are approximately 180 countries. 
With 180 countries, the average economic size, if they were all equal, 
would be .06. We are at 33 percent and 6 percent would be the average 
size, so everybody that is smaller than the United States has 
proportionately less of the economic size because we have got a greater 
percent of the world's economy.
  That tells us one thing about this number here. Countries are 
beginning to compete much as companies have competed in the past. All 
of us grew up with the understanding, in my era, that we could go to 
Wackers Department Store, maybe we would go to Montgomery Wards, maybe 
get a catalogue and shop through JCPenney or Sears, but some of those 
people that we used to buy from are simply no longer in existence 
today.
  Wal-Mart did not exist in my early childhood. Yet today Wal-Mart is 
the premier retailer. They have competed well enough to drive other 
companies out of business. And so we understand. All of us know 
products that have simply ceased to exist. A lot of automobiles, they 
no longer make them. The Packard is not made any longer. The Studebaker 
again was a car that existed when I was young, but the company no 
longer makes automobiles. We have seen Oldsmobile with a phaseout. So 
we are very familiar with the fact that companies compete with other 
companies and the weak do not survive; and the ones with better 
marketing, better capability, not only survive but they thrive.
  But what we are seeing now in the world is that countries compete, so 
the United States at $11 trillion, there are nations that want to take 
part of our economy and move it to them. Like I said, in January I went 
to China because I feel like China is one of the large emerging threats 
to our economy and also militarily in the world. I wanted to see them 
firsthand. I wanted to talk to their leaders and find out their 
intentions, to find out exactly what their view of the future was. I 
came back with a firm understanding that they literally intend to take 
as many of our jobs as possible and when they take those jobs, this 11 
becomes 10. As this number becomes smaller, again this number becomes 
bigger. So we have now countries that are competing for economic well-
being.
  Several years ago, Ireland looked at its situation, they evaluated 
that as a developed country, they did not have a lot of economic 
strength, no prosperity, no hope for their kids. And, in fact, they 
were exporting the most precious product, their children. So they began 
to think what to do with it. I am going to flip the chart. We will be 
coming back to the Social Security chart because it all plays into the 
full economic discussion of things that we must be considering if we 
are to really view the future economically for the Nation.
  Ireland was sitting there. These numbers are not exact, they are 
close enough for us to know, but they had a marginal tax rate of about 
36 percent, it might have been 32 percent, 36, something in that range. 
They thought, what can we do to invite new companies to come into 
Ireland? How can we compete with other countries? The most competitive 
part of any country is its tax rate, so they kept this tax rate for 
internal corporations, but they had a split tax rate and they charged 
foreign corporations 10 percent. Some would be surprised, but it was no 
surprise at all. It created the Irish miracle, the economic Irish 
miracle that caused capital and production to flood into that country.
  The European Union became disgruntled. They were trying to establish 
the European Union much as the United States and the European Union 
officials began to really chafe and tell them that those are not right, 
you are taking unfair advantage, you need to adjust your tax rates. 
They became very insistent on it. The Irish, God bless them, said, 
well, we agree with you. So they simply did away with both rates and 
they had a flat 12 percent for all internal and external companies. 
Twelve percent is still extremely good. In the U.S. we are about 36 
percent, more or less. So 12 percent versus 36 is fairly competitive. 
They did not lose any foreign firms, but what they did is began to 
strengthen up their domestic firms.
  And so the Irish miracle continues today, so that today just north of 
my

[[Page 8641]]

district, about 15 or 20 miles, the Irish are here in New Mexico, here 
in the United States building a $200 million plant simply to make 
cheese in the Second District of New Mexico. It is creating prosperity 
and jobs, but the Irish now have strengthened enough to where they can 
begin to go out and incorporate and build in other nations and they 
were able to establish that tremendous strength because this low tax 
rate gave them a low relationship right here that allowed them to have 
the financial and the economic vitality to grow their economy, and now 
they are exporting their economy out and investing in the United 
States. You can run but you cannot hide from the economic facts that 
are going on in the world today.
  This is Ireland, and it would be worthy of note to also consider New 
Zealand. New Zealand also, if I drive about 25 miles north of my 
district in New Mexico, New Zealand has come in and they are building 
another $200 million plant, $220 million plant, they have already got 
it operational, it makes MPCs. Those are milk protein concentrates. New 
Zealand is the only country in the world with the technology to make 
MPCs, and so it is no small accident that they have moved into America. 
Again, they have improved their economic well-being.
  Let us take a look at what caused the New Zealand economy to be able 
to grow to a point that they now can move over and invest in the United 
States, creating jobs here in this climate, this economic climate. 
Several years ago, New Zealand looked at itself and said much the same 
thing that Ireland said, for a developed economy, we are way down the 
list. We are not very prosperous, we do not have a good future for our 
kids, and what can we do?

                              {time}  2030

  They approached it a little bit differently than Ireland, but it 
still begins to put economic pressure on all the governments of the 
world. Again, my facts will not be exactly right, but they are close 
enough. They give a perception of what occurred in New Zealand, and if 
we get the perception, then we have the right concept to understand 
what we must be about in this country. New Zealand took a look at their 
government, and they began to think and assess which functions should 
typically be government and which should not be government, and they 
committed to take nongovernmental functions out of the government. That 
caused a tremendous shrinking of their government spending. Again, just 
to relate it back to our original discussion, they shrunk this figure 
because they weeded out things that did not belong.
  As they shrunk this figure, they shrunk the relationship figure, and 
it fell to a level that their economy began to develop growth, and as 
it grew, then this number began to enlarge, again driving this 
relationship figure, this key measurement here in New Zealand, began to 
fall rapidly, and they today have enough capital built up in their own 
Nation to begin to export and build in our country at this particular 
point.
  Now, what did New Zealand do? How effective was it? What were the 
dimensions of it? Because if we do not understand what New Zealand did 
and other nations will follow suit, if we do not understand those 
things, our country will have a government model that is not 
economically competitive and, again, the future out 10, 15, 20 and 30 
years begins to look bleak if we do not respond to the competitive 
pressures. But what New Zealand did is in assessing those functions 
that typically would be government but maybe should not be, they began 
to shrink the government down, move the functions outside. The outside 
functions processed and then performed at a much better rate. But, for 
instance, they had about 50,000, and it may have been as high as 
70,000, it may have been as low as 30,000, but I figure it was about 
50,000 workers in the Labor Department.
  Now I generally ask at town hall meetings, because I have discussed 
this in town hall meetings frequently in the Second District of New 
Mexico, I asked them if they were to envision a shrinkage of a 
department, how much do they think they could shrink and still perform 
the functions that should be governmental functions from the Department 
of Labor in New Zealand? I get estimates, maybe they shrunk from 50,000 
to 25,000. Some bold ones will say maybe they shrunk to 10,000. But 
they do not really believe they did. They are just throwing out the 
numbers for the debate. The truth is, and we had one of the designers 
of the system actually come into the office because, again I wanted to 
visit, I wanted to get firsthand this information, they decreased down 
to one individual, and the gentleman who came into my office, I think 
he was head of the Department of Labor and he was the last employee.
  Now that creates a tremendous savings on the part of government. They 
are able to lower tax rates. They are able then to go get the economic 
vitality that creates jobs, opportunity, and hope for the future, and 
that is what we all want for our children and our grandchildren. Again, 
these numbers are easily available on the Web site, but maybe there 
were 15,000 people working in their forestry department and they might 
have gone down to 50, but we can see that what they did is they did the 
same thing Wal-Mart does. They create a competitive atmosphere among 
governments that we are going to have to respond to.
  We will not be able to simply act like this does not exist because as 
we act like it does not exist, our cost structure for government 
remains higher, it remains more inefficient, and capital will leave 
this country looking for the best tax rate, the best government, for 
the least cost. It is the same thing that we do. We shop at Wal-Mart 
because our dollars go further. There are those people who curse Wal-
Mart and they say ``not in my hometown,'' but I will tell the Members 
that Americans are voting with their pocketbooks saying ``Wal-Mart is 
extending my buying power.''
  I am not here to advertise for Wal-Mart. There are good competitors 
with them. It is just that they are the ones who are kind of out 
leading the economic change in this country and they have given much 
more buying power to the middle class, and we see that frequently.
  Each one of us, we will stand here in on this floor and we will tell 
the people that they should buy American, but when faced with the 
opportunity ourselves to make the choice, I suspect that we do 
differently than what we say.
  I was in China, and North Face is a jacket here that is well 
respected and is a high-value jacket. Those sell for about $150. We saw 
the same jackets on the street corners in China, and they sold for $13; 
$150 or $13. We could talk to our neighbors and we could implore our 
neighbors to shop local, do their duty, keep Americans working, but the 
truth is when we go to the store and look around and none of our 
neighbors are watching, I suspect that not many of us are going to 
plunk down $150 for the jacket when we could buy the one for $13. Maybe 
I am not right, but I think I am and I think the American economy shows 
it.
  So we have tremendous threats. We have got China. We have got New 
Zealand. We have got the European Union. We have got the old Soviet 
Union trying to rehabilitate itself. All of those nations are trying to 
take a piece of our economy. They want our jobs and our well-being to 
transmit to their country so that they have jobs and well-being. They 
are working hard. They are working smart, and they are working cheaply.
  My generation grew up with Japanese imports, and we used to talk 
about those cheap Japanese imports because they were. We had these 
little bitty radios, these portable radios. We would listen to them. 
They were about this big. That was the best they had. The Japanese were 
beginning to compress and make things, and we all remember those days 
of that little radio that we would hold up to our ear and the sound 
would be very scratchy. Cheap Japanese imports.
  Now today the Japanese are talking about those cheap high-quality 
Chinese imports. The Japanese themselves are being affected. The 
Chinese intend to

[[Page 8642]]

take as much of the world's economy and put jobs from all around the 
world into China. We can complain. We can say it should not be. We can 
try to build barriers around the nation. But the truth is we cannot 
turn back the clock. It is indeed a global economy, and it must be 
reckoned with. To do other than reckon with it, to do other than to 
look at the effects of on our economy as we slowly lose jobs is to be 
faint-hearted and is to be living a lie. We must be accurate in how we 
assess the current threats on our economy, or we will not be able to 
sustain the American way of life.
  I do not know about my colleagues, but I for one am looking for those 
things that will cause our economy to grow. I am looking for ways that 
we could save money and still provide the same services. I am looking 
for ways that we waste money. I often use the example: People want to 
know just how bad is the waste that I see? The most extreme example 
that I see, and there are more extremes available, but it is just one I 
quote a lot, is the VA. We hear constantly from our veterans, ``You are 
not spending enough. You are not spending enough. You should increase 
this figure and give us more money as veterans.'' And would that I 
could. But first we have to look at the ways the Veterans' Department 
spends money foolishly. There is one hospital in New York, actually I 
think it is even a clinic, but that hospital or clinic has 800 
employees and it has got 50 patients. Let me say that again because it 
always draws a gasp. Eight hundred employees and 50 patients. We can 
wonder why it is open, but, frankly, it is open because of political 
pressure, political pressure from New York to keep those 800 jobs 
there.
  If I am in New York, we would just as soon this number not improve 
because I want to have a short-range view of keeping those jobs in my 
district, even if it is bad for the economy, even if it is bad for 
veterans. No matter the long-range effect on our Nation, no matter the 
fact that New Zealand has begun to work smarter and they are going to 
work cheaper, I am going to politically try to maintain that position, 
and I will be frank. It is to the long-term detriment of this Nation 
when we make such decisions because we always come back to the same 
beginning point. We have got to do things that tighten up our budget. 
We have got to do things that create growth. We are going to have to 
manage our government to where it is competitive with other nations; 
otherwise, we do not have hope for the future.
  If we are to consider fully this Social Security concept, again, we 
find the meandering nature of maybe this is 1935 and this is 1950, and 
we go through the 1970s, and over here is about 2008 when we begin to 
retire, we as baby boomers, and at 57, I am the second oldest year of 
baby boomers, and we can see then when baby boomers start. No more soft 
costs. No more question. We have got 40 million people that are baby 
boomers going into retirement in this period of time between now and 
2042. If we are cognizant of that fact, we have to take this chart and 
begin to relate it now to those workers that follow us.
  If I am looking at the replacement for Social Security, the 
replacement dollars, I must be knowledgeable about the population of 
the country and the population, if we start at age zero and we go to 
100, over here, again, very approximately, the younger population is 
small and it increases. The baby boomers are here, and the retired 
population out here. Again, one of the problems is it was assumed our 
retired population would be here, but we are living longer, better 
lives.
  So at about 57, I would be out here, moving toward retirement. But 
see here when baby boomers, if these are all the baby boomers on that 
curve where the curve is going up on the previous page, when these baby 
boomers are retired, we have got all of these jobs right here and we do 
not have enough people to fill the jobs.
  Social Security is a pay-as-you-go plan. I pay for someone who is 
retired. My daughter will pay for me. Hopefully she pays for me and she 
needs to split it between my wife and myself. But when Social Security 
started, there were 42 workers per retiree, and today there are three 
to one, and by the time that my daughter starts retiring, it would be 
two to one. So my daughter and her husband are going to have to work 
for either my wife or me, and one of us is going to be out in the cold, 
I suspect, and knowing my wife, I suspect I know who will be out there. 
We will wrestle that problem over, but it just tells us that we have 
got a significant relationship here.
  Right now we are running at about 5 percent unemployment. We can say 
it is 6 or we can say it is 4. Again, conceptually, we have got to 
choose a point and consider what it means. We have got about 5 percent 
unemployment, but when that 5 percent unemployment comes knocking at 
the door, I as an employer will tell people that we cannot, at 5 
percent unemployment, find someone to fill the jobs because they 
cannot, number one, pass the drug screen, or if they can pass the drug 
screen, they will not show up to work tomorrow or next week.

                              {time}  2045

  These 5 percent are very difficult to hire, frankly. It is not that 
they do not have a desire to work; it is that maybe they lack training, 
maybe they lack discipline, maybe they have developed habits that make 
them pretty unproductive. But the truth is that already, right now with 
the labor population the way it looks in America, with all baby boomers 
still working, we are in desperate need of workers.
  Now, if we are in desperate need of workers, when those 40 million 
begin to retire that we show on the previous graph, the Nation will be 
dying for workers, and dying for workers with a Social Security plan 
that is a pay-as- you-go plan is not going to pay. It is only going to 
go. We must deal with the shortage of workers.
  So I have good conservative friends of mine discussing immigration, 
telling me, you should lock the border down. I say, I am sorry, I look 
at this curve. When I talk about immigration, I look at this curve 
because I have self-interests. I want someone to have a job that pays 
for me.
  Now, if we do not have enough workers, we have two options, and they 
are simply two options. We can say it in any way, and we can be mad or 
we can be contentious about it, but we have two options if we do not 
have enough workers. Number one, we bring in enough workers to fill the 
jobs, that is called immigration; or, number two, if we do not bring 
workers in, we will send jobs to where the workers are, because 
employers must have employees. As we consider now this relationship of 
the population, if we begin to say we do not want immigration, that we 
will send the jobs to where the workers are, this $11 trillion begins 
to get smaller, this relationship begins to get bigger, and we move to 
stagnation, and we move to stagnation for the next, through 2042 and 
beyond.
  We have a relationship that is developing, and this relationship, 
once it is established, once our economic model is set, it is going to 
be very difficult to turn it around. So prudence would suggest that we 
consider deeply if there is a problem: if there is a problem in Social 
Security, if there is a problem in our budget, if foreign countries are 
really beginning to peck away at our job base. And we have to deal with 
those.
  Now, there are many things that create the economic climate of the 
country. These are the economic relationships, but the economic climate 
must be discussed also.
  We hear frequently on the floor of this House about the outsourcing 
of jobs. Why would jobs go to another country? And generally, the 
accusation is made that it is simply because Republicans want it to 
happen. I think that is thin. I think that it is lacking in coherence. 
The real truth is that jobs leave because countries are providing 
better climates. I will tell my colleagues that when companies can pay 
12 percent tax versus 36 percent that they pay here, over time they 
will migrate. We have other costs. We have energy costs. It was said 
that we were simply supporting Big Oil when we passed the energy bill. 
Now, my own

[[Page 8643]]

perception is that right now, natural gas is selling for about $7 in 
the United States. It is selling for 70 cents in Africa, 50 cents in 
Russia, or just vice versa.
  Now, we have been shipping chemical jobs over to Africa and Russia 
because chemicals use a lot of natural gas. Companies cannot continue 
making chemicals here with natural gas that is 10 times the cost in 
other nations. So the chemical council came to me in January of 2003 
and said, at that time the price of natural gas was $4.50, and they 
said, we cannot sustain this. Please, please, we have to have an energy 
policy, get renewables, start opening up plants, whatever we can do, 
because we are beginning to ship good $100,000-a-year jobs overseas.
  Now, many of our friends on the other side of the aisle are concerned 
about the environment, and well they should. But they are concerned to 
the point that they will not consider the things that need to be done 
that both keep the environment clean and affect the cost of energy. If 
we do not begin to come together as both parties and represent our 
common viewpoints at a table to find the solutions, we are going to 
wrestle each other to a standstill, which we have been doing for years, 
while Africa and the Soviet Union are quietly pulling our $100,000-a-
year jobs away from us.
  Now, it is not by design. Neither party, neither Republicans or 
Democrats, would want those jobs to go away; but, sometimes, we are 
unaware of the consequences of our daily actions. The cost of taxes is 
one thing that will drive jobs away. The cost of energy is another 
thing that will drive jobs away. The cost of lawsuits is another factor 
that will drive jobs away.
  Earlier in this presentation I mentioned that we had discussed 
downstairs in this Capitol with about 70 or 80 foreign CEOs, CEOs from 
German companies, English, French, they began to tell us the factors 
that will drive them out of this country. Simply stated, they actually 
had a chart showing just dots on a chart showing the factors as they 
polled their own companies about, those companies that were in the 
room, which things were the highest importance.
  They will tell us that lawsuits, energy, taxes, and, quite frankly, 
another one was education, many of the workers coming through the 
doors; as you recall on the 5 percent unemployment, the workers that 
show up are not prepared. If we do not begin to deal with education so 
that indeed no child is left behind, we can wrestle over the concept 
all we want, but if we do not cure it, these factors, taxes that are 
not competitive, energy that is not competitive, lawsuits that are 100 
times greater, the chance of lawsuits in this Nation, than others 
nations, and a poor education so that the kids going into work are not 
able to do complex tasks. Those are the things that will absolutely 
take away the future of our country.
  So my appeal is constantly that we as Republicans and we as 
Democrats, we can continue to represent the viewpoints that we hold 
dear, but we must begin to work together. I do not care if it is 
quietly in rooms behind closed doors to wrestle with those things; but 
we must begin to deal with those elements that would drive companies 
out of this Nation, because as companies leave this Nation, our $11 
trillion economy becomes smaller, our relationship between government 
spending and the economy becomes larger, and it moves us towards 
stagnation.
  For myself, I will do everything I can to protect the environment, to 
create jobs, to create an environment in this country that will offer 
growth so that my children and my grandchildren will have the same 
opportunities that my wife and I had: to grow up fairly poor, to buy 
our own business, to pay it off, to run for Congress, and from a family 
without much political capital, serve in a Nation like this with a 
democracy like this and a Republic like this. For me, that is the hope 
of America, that is the hope for future generations, and my own 
perspective is that it is the hope for the world.

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