[Congressional Record (Bound Edition), Volume 156 (2010), Part 1]
[Senate]
[Pages 904-907]
[From the U.S. Government Publishing Office, www.gpo.gov]




                           DEFICIT REDUCTION

  Mr. SESSIONS. Mr. President, a number of things of importance have

[[Page 905]]

 happened with regard to our financial condition over a period of 
years. Actually, this week the President, in his State of the Union 
Address, made some reference to the seriousness of our financial 
condition. I think his comments were far too weak, and he 
insufficiently advised the American people of how serious our condition 
is.
  Yesterday, in the Budget Committee, Mr. Elmendorf, who is the CBO 
Director selected by our Democratic majority in the Congress and whom I 
think tries his best to do the right thing day after day and give us 
the right numbers to make our plans upon, told us a lot of things that 
were very troubling. He was just repeating that the dire predictions 
and dire assessments they have made previously, which are, if anything, 
on track and getting worse. They haven't misjudged the numbers and how 
bad our debt is increasing, but, in fact, if anything, they may have 
underestimated them.
  I will just quote one thing in his statement to us yesterday. He 
talked about analyzing the American debt or how much money we owe as a 
percentage of the size of our economy--as a percentage of GDP, gross 
domestic product. That is one way economists like to look at it. He 
pointed out that the numbers might look a little better, but there are 
a number of things that are on the table that are likely to occur. I 
think he is exactly correct about that; if those things occur then the 
situation realistically is even worse. He analyzed if the tax cuts were 
made permanent and if the alternative minimum tax is indexed for 
inflation. The President proposed to make some of the tax cuts 
permanent, and Members of Congress are reluctant to see taxes increase 
substantially, which will occur if the tax cuts aren't extended but are 
allowed to expire. Each year we address the alternative minimum tax 
because it is falling ferociously on middle-income Americans, and 
disproportionately on families with children. Every year, we indexed it 
and fixed it so it doesn't impact so many people, but for 1 year only. 
But when the CBO tries to predict the budget deficit, they have been 
assuming that the AMT would go back to its high rate, and we would have 
more income coming in because we are taking these increased taxes from 
American families.
  However, instead of fixing it permanently, which would score a loss 
of revenue over 10 years, we only fix it 1 year, and the CBO has to 
assume based on what the law is that it would not be fixed again and 
that these taxes will be imposed on Middle America and we will have 
more revenue and make the budget numbers look better. But I don't think 
we are going to not fix AMT. Frankly, we may not be able to 100 percent 
fix it, in my view, but that is what the votes have been each year, to 
fix it 100 percent.
  He notes that if annual appropriations keep up with the increasing 
gross domestic product, as they have over the last 20 years, which is 
about where increases in spending has fallen, the deficit in 2020 would 
be historically large as a percentage of GDP, and the annual deficit 
would be large as a percentage of GDP. Then he said:

       The debt held by the public would equal nearly 100 percent 
     of GDP. This is a level of debt that most economists say has 
     the ability to create instability and a lack of confidence in 
     the United States Government and it would have adverse 
     economic ramifications throughout our economy. In other 
     words, once the Nation reaches this high of a level of debt, 
     we have a very serious problem, and it is very difficult to 
     extract yourself from the cliff with those kinds of huge 
     deficits.

  I think the President should have talked about that in real detail. 
He did say on the discretionary accounts, which amount to about 18 
percent of our budget, he would like to have a freeze, and he made some 
exceptions and said that freeze wouldn't be this year, though. Instead, 
it would be next year because that is the way things work, and I wish 
to talk about that for a minute. I think our Congress needs to be more 
serious about it, and the President needs to be more serious about it.
  Senator McCaskill, my Democratic colleague, and I offered an 
amendment yesterday that was voted on, and I think 17 Democrats joined 
with all but one Republican to vote for it, and it would have helped. 
It would have said the budget we passed--which I will explain to my 
colleagues how we violate it--the budget we passed that allows the 1 
percent to 2 percent increase in discretionary spending accounts would 
be enforced. In other words, there would be a cap on our spending. So 
we put in this amendment that we offered the actual dollar amounts in 
the budget we passed last year--or basically the Democrats passed last 
year--and we wouldn't go above that. It would take a two-thirds vote to 
go above those top line numbers. That would work. This was done in 1990 
and in 1997. They had statutory caps, not just budget caps, and those 
statutory caps led to a consistent reduction in annual deficits to the 
point that by the late 1990s we were in surplus for 4 years from 1998 
through 2001. We had surpluses for the first time in decades. Then we 
allowed the statutory caps to expire and we got back on this spending 
track that has put us in this deficit situation that exceeds anything 
we have ever done before in the history of the American Republic; 
nothing close to it, except World War II.
  But when the war ended, we promptly got back on the right track and 
brought the economy back into sound shape. I don't see us heading in 
that direction. It is going to take bold leadership.
  We received 56 votes to put these statutory caps in, but it took 60, 
so it is not the law. I am disappointed about that. If you want to know 
the truth, I think the leadership in the Senate didn't mind how many 
voted for it, as long as it wasn't 60, because it crimps their style.
  The President, during his State of the Union Address, made some 
confusing statements about his commitment and the depth of it to 
dealing with the problem. He gave some lipservice to the freeze, which 
I think I am going to support, and I will back him on that all I can. I 
hope he can do that. However, there were other things that were 
contrary to a freeze. For example, he said we were going to take money 
from the Wall Street bailout, the TARP money as we call it, and he 
said:

       I am proposing that we take $30 billion of the money Wall 
     Street banks have repaid and use it to help community banks 
     give small businesses the credit they need.

  Well, that sounds OK, except that is $30 billion more. Well, we took 
it from the TARP money that they paid back, so that doesn't count. That 
doesn't count? It does count.
  At the budget hearing yesterday, Senator Gregg, the ranking 
Republican and former chairman of the Budget Committee, who is an 
expert on this and very respected, asked this question of Mr. 
Elmendorf.
  The budget Chairman:

       There has been a lot of talk about the fact that the TARP 
     money is available to spend somewhere else. First, the law 
     doesn't allow that.

  Parenthetically, I would note that Senator Gregg put in the language. 
He foresaw that when the banks paid back the money they were given as 
part of this financial bailout, it shouldn't be used as a slush fund to 
spend. He wrote it in there. So he said:

       First, the law doesn't allow that. It is supposed to reduce 
     the debt. But I want to clarify the fact that there is no 
     TARP money. All of this money has to be borrowed, right? 
     Every cent of the TARP money is borrowed from China or 
     somebody else, right?

  Mr. Elmendorf answered:

       There is just one pool of government money and everything 
     else is sort of accounting treatments to keep track of 
     various purposes. But, yes, if more is spent through the 
     TARP, that is just more that's spent and more that's 
     borrowed, and more that goes to the Federal debt.

  So there is no free money in the TARP repayments. We borrowed the 
money, every penny of it, to give to those banks. When they pay it 
back, we have a debt to pay down.
  That is what we were supposed to do. That is what Senator Gregg put 
in the bill. Now they claim they have some free money paid back by the 
banks, and we can just spend it. That is what the President said, and 
it is not accurate. That is wrong, and it doesn't prove to me that he 
understands he has to fight every day over every billion dollars to 
contain the natural tendency of this body to spend.

[[Page 906]]

  Mr. President, I point out that even though the President talked 
about a freeze, he talked about $30 billion for banks, not big banks, 
but this free money he apparently suggests has now appeared as a result 
of the repayment of the loans they got in the financial bailout. Some 
of the banks didn't even want the loans. They forced them to take it, 
basically. Some have been told they should not pay it back. They don't 
want them to pay it back, when the banks are ready to pay it back. At 
any rate, some of that is paid back. We borrowed the money to give it 
to them. When it is paid back, it is not extra, free money. We always 
assumed that most of this money would eventually be paid back.
  I point out as to how big a need it is to spend $30 billion out of 
this money for community banks instead of big banks, to give small 
businesses credit. Well, what did the community banks say? They don't 
want the TARP.
  According to the Christian Science Monitor yesterday, the headline 
is: ``Community Bankers to Obama on TARP: Thanks, But No Thanks.'' 
Community bankers say they have plenty of money now. That isn't the 
problem with loaning money. It says:

       ``The whole TARP program is perceived as a misadventure by 
     the public,'' says Dennis Jacobe, chief economist for Gallup, 
     Inc. in Washington. ``I think it is greatly disliked.''

  Now we are getting the money back from the big banks, and now the 
other bankers said they don't need it. Also, as we talk about money, 
the President is proposing a second stimulus package. The first one 
passed was scored at $787 billion, the largest expenditure in the 
history of the American Republic--a breathtaking amount of money, so 
large that most people have not been able, in any realistic way, to 
apprehend how large it is. I just point out that the State of Alabama, 
one-fiftieth of the Nation, an average-size State with over 4 million 
people--our budget, the general fund, is about $2 billion.
  Senator Warner was Governor of Virginia and did a fabulous job and 
was well respected for his work. I am sure they didn't have a $100 
billion budget. I don't know what it was, but it is a lot less than 
that.
  We spent over $700 billion on one vote on one day, out the door, and 
every penny of it was borrowed because we were already in debt. So if 
you spend more money, you have to borrow it. However, now it is not 
$787 billion. Based on some of the entitlement language we put into the 
bill, it is now at $862 billion. Some people said they would not vote 
for a bill over $800 billion, so they got it under. In truth, 
surreptitiously, they put in guaranteed benefits for certain programs, 
and those have now claimed the money, and it is over $800 billion. I 
think it is $862 billion. That is a pretty big overrun--$75 billion. 
Just like that. We didn't vote on it really.
  Now we have stimulus II. This is what the President said:

       Now the House has passed a jobs bill that includes some of 
     these steps [referring to clean energy and high-speed rail]. 
     As the first order of business this year, I urge the Senate 
     to do the same. . . .

  I thought we had a freeze on spending. Let me tell you what the 
House's so-called jobs bill does. It costs $150 billion. Spending. 
Another $150 billion in spending, with $28 billion for highways, and 
about $2.5 billion for railroads, and $2 billion for clean energy.
  Well, if I recall, we were told that the $787 billion stimulus bill 
was designed for what primary purpose? Jobs and to rebuild our 
crumbling infrastructure. They talked about roads and bridges that have 
fallen in and interstates getting old and needing all this work. Do you 
remember that? That is how the bill was sold by this administration. I 
don't want to be just partisan carping, but that is what they told us.
  Amazingly, less than 4 percent of the stimulus bill that we passed--
the $787 billion package--went to highways and infrastructure, less 
than 4 percent. I complained about that. I remember making speeches on 
it because jobs are created when you build a highway. At least you have 
something permanent that benefits the Nation--perhaps replacing a 
bridge that you are going to have to replace anyway, and you get a 
benefit for everybody from improving our infrastructure, although that 
is not a philosophy that will always stand us in good stead. We were 
trying to create jobs, and at least we should have focused on 
infrastructure.
  Now they are coming back with $150 billion more--$28 billion for 
highways and $2.5 billion for railroads. That is not good management of 
money. That is not good spending.
  The President went on to say this:

       According to the Congressional Budget Office, the 
     independent organization that both parties have cited as the 
     official scorekeeper for Congress, our approach would bring 
     down the deficit by as much as $1 trillion over the next two 
     decades.

  He is talking about the health care bill that did not pass. He said 
it would bring down the deficit by as much as $1 trillion. That is not 
accurate. The CBO on December 19 of last year, trying to get out these 
scores as fast as they could, said it would cut the deficit by roughly 
$1 trillion. Then they revised it 1 day later. The official score was 
that it would reduce the deficit about half that amount.
  As I explained on the floor, that is a product of miscalculation--
deliberate miscalculation. Let me explain.
  The way they get this score in the first 10 years, for example, is 
they said it would create a surplus of $132 billion if we would pass 
this health care bill. Isn't that great? You add 20 million people to 
the rolls, give many of them subsidized health care, and you are going 
to reduce the costs and you are going to save money. That is a pretty 
good deal if you can get it. But, of course, you cannot get something 
for nothing. Nothing comes from nothing.
  What happened was, Medicare scored that if you cut Medicare benefits, 
as the administration proposed, and you increase Medicare taxes, as 
they proposed, you create extra money in Medicare and you extend the 
life of Medicare. Medicare is going into bankruptcy, but this would 
extend the life of it. That is an honest and correct score.
  The Congressional Budget Office utilizes what it calls the unified 
budget. They score the whole budget as to how it comes out. The amount 
of money is increased to the government through Medicare, and they 
score that as a gain. Since the health care bill would not take effect 
or pay benefits until 4 or 5 years later--although the taxes increase 
now--then over 10 years, it would create a surplus of $132 billion. 
Sound good? But I read the small print of the CBO letter and the small 
print of the Medicare letter.
  The Medicare Chief Actuary told us that if you raise taxes and you 
cut spending in Medicare, it will extend the life of Medicare. But he 
had a parenthetical line in there. He said: Of course, you cannot 
simultaneously use the Medicare savings to fund a new program and claim 
it does both. You would be spending the money twice. How logical is 
that? But that is what they did. He used this phrase: ``Although the 
conventions of accounting might suggest.'' What he is saying is, 
Medicare scores the money. They scored it accurately. Mr. Elmendorf and 
CBO score it as a unified budget. They said you have more money for 
Medicare and spending in the first 10 years of the health care plan--it 
is less than that--so you have a net surplus, right? Looks good. Sounds 
good. But that is not so because there is a bond, a debt instrument 
from the U.S. Treasury back to the Medicare Trust Fund. As soon as 
Medicare starts going into deficit again, they are going to cash in 
those bonds and the government is going to have to then borrow the 
money on the open market.
  According to the CBO, it would not increase the deficit but it would 
increase the debt of America. When we raised the debt limit yesterday--
and my colleagues voted to do so--the internal debt between the 
Treasury and Medicare, counts as part of the Nation's debt. It is an 
internal debt. It is not scored the same way. But sooner or later, when 
Social Security and Medicare start cashing in and claiming their money, 
the U.S. Treasury has to do something. What they are going to do and 
what they have been doing is convert those debt instruments and go out 
and sell bonds in the marketplace. Whatever the interest rate, they 
have

[[Page 907]]

to pay to China, individuals in the United States, and others who buy 
those Treasury bills. We are selling so many of them it is no doubt 
going to drive up the interest rate.
  These numbers are not real. My concern and my criticism of the 
President's address is not that he said we ought to have a freeze. I 
salute that, and I will support that. But he did not indicate the 
severity of the crisis we are in.
  Two years ago, President Bush's last year, he had a $460 billion 
deficit which I think at that time was the highest deficit since World 
War II. It spiked up as a result of increased spending and the 
recession we are in. Last year, the debt was $1.4 trillion, 1,400 
billion dollars, three times what it was. And this year the projected 
deficit is going to be almost the same, according to Mr. Elmendorf's 
report.
  It continues this way, unfortunately, throughout the decade and will 
average, based on the planned expenditures and revenues as set forth by 
the Obama administration's budget, almost $1 trillion a year in 
deficits. This is why experts are repeatedly telling us it is 
unsustainable. We will be maintaining deficits twice as large as 
anything we have ever seen for the next decade.
  Let me show what it means in one area that I think all of us can 
understand. When you borrow money, you pay interest on it. Each year, 
the interest we pay on the debt is one of the biggest line items in the 
whole budget. If the debt goes up from $5.7 trillion in 2008 to $17 
trillion in 2019, which is what they project will happen, the interest 
rate is going to go up. It will go up even more than that. It will go 
up more. Interest rates are extraordinarily low as a result of the 
economic slowdown. They are going to go up, and they are going to hit 
us in the book.
  Here is what CBO says will happen. In 2009, we paid $200 billion in 
interest on the debt. In 2019, they project we will pay $799 billion. 
They project an increase in rates and an increase in debt--a tripling 
of debt and an increase in interest rates--which leads to four times as 
much interest being paid over that period of time. Frankly, it does not 
include some other factors in there also.
  I have to say to my colleagues, I am sorry we did not pass the 
statutory cap we offered this week. But I was encouraged by so many of 
our Democratic colleagues who saw fit to support it. I think it is 
indicating there is a recognition in this body that we are going to 
have to do some tough things. We cannot keep spending like this. There 
is always some excuse for it. We cannot continue it.
  Think about this. The Federal Highway Program a few years ago, before 
we had the stimulus package, was about $40 billion a year. Federal aid 
to education is about $40 billion a year. Other programs are in that 
range. It gives you a picture of what kind of dollars we are talking 
about. But if you add $600 billion in increased interest payments over 
this next decade, in 1 year $600 billion more, this is going to crowd 
out spending for all kinds of programs that we wish to fund.
  We are going to be in a dilemma. How much more can we borrow--100 
percent of GDP? More?--without destabilizing our currency or cutting 
spending? And it is going to crowd out spending on items we need to be 
spending money on. It is going to be crowded out by the interest 
payment which will exceed all expenditures in the budget, well above 
the defense budget even, the largest expenditure.
  This is a stunning path we are on. Mr. Elmendorf reconfirmed it 
yesterday in his testimony before the Budget Committee. I am worried 
about it. The American people are worried about it. I don't think they 
know it is as bad as it is, but they know it is not good. They know 
there is no free lunch. They know nothing comes from nothing, and that 
we have to pay for what we do around here. We cannot continue to 
borrow, borrow, borrow, stimulate today and maybe 1 day in the future 
we will get around to paying it.
  I offer to you, in 2019, there is no plan to pay down a dime of the 
debt. It is just to pay the interest on the debt. In 2019, we will add 
$1 trillion more to the debt of America. It is going up almost $1 
trillion a year, and these are outyears, according to CBO analysis. 
Nothing is perfect that far out. It could be better; it could be worse. 
They are not projecting a recession in the outyears; they are 
projecting steady economic growth. It could be worse.
  We have to do better. This is not a matter that is going away. The 
American people instinctively have it right. They are telling us in 
rallies and tea parties: You guys have to do better. You are being 
irresponsible. I think they are fundamentally correct. They have every 
right to be upset with us. We can do better. We must do better. And I 
hope we will.
  Mr. President, I thank you for the opportunity to make these remarks. 
It is something we are going to have to continue to work on. We cannot 
continue this path. If we put our mind to it, we can fix this 
situation. It is not a challenge beyond our capacity. But make no 
mistake, financially I doubt we have ever been in a situation that 
requires as much clarity and as much determination as is going to be 
required over the next decade, and some painful decisions are going to 
have to be made. They are going to have to be made.
  That means containing spending and resisting the temptation to create 
more and more new programs that inevitably cost more than they were 
projected to when they started.
  I thank the Chair, and I yield the floor.

                          ____________________