[Congressional Record (Bound Edition), Volume 157 (2011), Part 2]
[House]
[Pages 1702-1706]
[From the U.S. Government Publishing Office, www.gpo.gov]




                               THE BUDGET

  The SPEAKER pro tempore (Mr. Womack). Under the Speaker's announced 
policy of January 5, 2011, the gentleman from Missouri (Mr. Akin) is 
recognized for 30 minutes.
  Mr. AKIN. Mr. Speaker, it is a treat to be able to join my colleagues 
here this evening and to consider this great discussion and debate that 
is taking place over the past months, but particularly during this week 
as we approach the question about what are we going to do with funding 
the remainder of this year. There, of course, was no budget decided on 
last year, and so they do a thing called a continuing resolution. So 
there's a lot of discussion as to how much can we be affording to spend 
of the taxpayers' dollar.
  And I thought that it might be appropriate this evening to take a 
look at that, not so much in a lot of minuscule detail, but at the 
magnitude of the overall question that's before us and how the math 
just doesn't work. I will also try, as we have a chance to get into a 
discussion this evening, to connect it to the problem of unemployment, 
because all of these things are connected, and still I think it's 
helpful to look from an overall perspective.
  So what I have here is one of those--we always have these pie charts. 
I particularly like pie. And this particular pie chart here shows some 
different areas of the Federal budget. Now, this is the total of 
Federal spending here and the pieces of pie are roughly proportional.
  What I would like to start with this evening, so we have a big 
picture of how serious the excessive spending in the Federal Government 
is, is to start by making a distinction between a couple of types of 
spending. The first kind of spending--and maybe to some people this 
sounds like sort of Washington, D.C., talk but they call it mandatory 
spending or entitlements. And mandatory spending may be not necessarily 
mandatory, but what that means is that legislators, maybe as much as 50 
years ago, passed a series of laws, and those laws then automatically 
spit out dollar bills out of the Treasury. So anytime somebody who 
happens to be the right person waves their hand in front of the little 
machine, out pops a dollar bill.

[[Page 1703]]

  And so we have these things, and they're called entitlements or 
mandatory spending. So these are places where the Federal Government 
just is automatically spending money, and there are some of them that 
are very familiar with most people: Social Security here, Medicare, and 
Medicaid. Those are the three big, as they call it, entitlements or 
mandatory spending.
  There are other entitlements that are smaller, and that's in this 
category over here, the other quote, mandatory spending. So these are 
not Medicare or Medicaid, Social Security, but they are the other 
mandatory.
  And then there's another thing that acts just about like mandatory 
spending, and that is the interest on our debt. When the Treasury 
decides to sell a Treasury bill, the reason people buy a Treasury bill 
is because it is going to pay some interest to them. So we have to pay 
the interest on our debt, and in that sense, when we decide to spend 
money that we don't have, we are creating what is, in essence, like a 
little machine that spits out dollar bills.

                              {time}  2030

  Let's say that you take all of this mandatory spending, or 
entitlement spending, and add it to the interest on the debt, how much 
does that add up to? It adds up to about $2.3 trillion for this year. 
Now what in the world does $2.3 trillion mean? Most of us don't have a 
good sense of perspective. Well, $2.3 trillion happens to be the 
revenue that the Federal Government collects this year. In other words, 
what we're saying is, if you take this purple and this aqua color and 
this gold color and light and dark blue here, you add this all 
together, this is equal to the revenue that comes in for the Federal 
Government.
  What, then, does that leave out? Well, it leaves out these two other 
pieces of pie. One is defense, and one is non-defense. They're called 
discretionary because each year we decide how much money you're going 
to spend in those categories. So what we're saying is--and I think this 
is really chilling--it sounds maybe a little boring to explain it. But 
just think about this a little bit: The entitlements and the debt 
service equals our revenue. That means if we want to balance the budget 
this year, what we would have to do would be to get rid of all of 
defense. Not one soldier, not one plane, not one tank, not one ship, 
nothing. There would be nothing in defense. And nothing in the non-
defense discretionary. No Department of Energy, no Department of 
Commerce, no Department of Education. There would be no Park Service. 
There would be no prisons. There would be no Homeland Security. There 
are all kinds of things that the Federal Government does that we fund 
every year which would be gone. So there would be no defense and no 
non-defense discretionary. Well, the country wouldn't survive very well 
under those conditions. So that's the problem. These entitlements have 
grown so much that they have eaten up the whole budget.
  Now this week, we're going to be debating how we're going to cut this 
non-defense discretionary, cutting a little bit from defense but mostly 
non-defense discretionary; and we're talking about $100 billion. Is 
that a lot of money? Sure, it's a lot of money. Is it a lot of money 
compared to the fact that we're about $1.3 trillion or $1.5 trillion 
over? Not so much then when you compare $100 billion to about $1.5 
trillion.
  I am joined tonight by a good friend of mine, a freshman congressman 
from Arizona, Paul Gosar. We had a chance to talk about this a little 
bit last week, and I invite you to jump in because what I hope that 
people are starting to understand here is that we have got a big 
financial problem down here. Our entitlements and debt service is equal 
to how much revenue we take in, and that's assuming you have zero for 
defense and zero for this other, non-defense discretionary. I mean, 
there is no money to run the government with. That is a fairly 
significant problem. Let's talk about it, my friend.
  Mr. GOSAR. Well, you're right. I thank my good friend from Missouri 
for yielding.
  When we start to look at it in the CR, when we're talking about cuts, 
we can't legislate from the CR. What we have to do is we have to just 
make the plain cuts. And that is why in the budgetary process, that's 
the second step in which we're going to have to address the 
entitlements, looking at how we legislate directing, redirecting, and 
making cuts. So I think that is an important thing that the American 
people need to share.
  Mr. AKIN. In other words, I think your point is, Paul, that in our 
debate this week, first of all, almost all of the discussion is 
centered right over in this--it looks like Campbell's tomato soup on my 
chart here--it's in this section, and it's ignoring all of this which 
is equal to the entire revenue of the Federal Government. So you can 
see that you could cut this to zero, and you still aren't going to fix 
the problem. On the other hand, it doesn't mean we shouldn't be looking 
for savings and cutting everything we can.
  But you are putting in perspective this whole week. I think that's 
tremendously helpful, Paul, to do that. And I think, as I recall, there 
is about $16 billion being taken out of defense which is not as deep a 
cut as what the non-defense discretionary is getting; is that correct?
  Mr. GOSAR. That is exactly right. And the savings that we're making 
here extrapolates over the next 10 years at a great discount to the 
American people in our budget and what we're going to have to come up 
with in the future. That's what's so wonderful, at least by the first 5 
weeks of this Congress, is zero implications on raising debt.
  Mr. AKIN. What you are seeing is a very serious attempt to get into 
reducing the size of the government. I mean, we are stepping on all 
kinds of political toes just to say, hey, it may be a nice program, but 
we're in trouble. I was asked by a reporter--I believe it was earlier 
today--whether or not the position that I was taking on these cuts and 
everything was like a Tea Party position. I said, You know, I guess we 
all reflect, to a degree, our training. I was trained as an engineer; 
and to me, this is just plain math. It isn't liberal math. It isn't 
conservative math. It's just flat-out, this is how much money these 
entitlements are taking, and this is how much money is coming in. The 
two are equal, and we don't have any money for these things. I don't 
know if this is politically liberal or conservative or anything else. 
It's just the reality of the political deficit.
  Now the one thing we haven't added here--this is just this year--we 
haven't added the perspective of time. I think it's helpful if we take 
a look at what time does to this in several regards. The first is, one 
of the things that is happening to those little pieces of the pie is, 
they're growing. This has got Medicare, Medicaid, Social Security. And 
it shows over time what's going on without the other entitlements and 
without the debt service. You see that those of us--I hate to admit my 
age--but some of us baby boomers, as we get older, we are going to be 
leaning on Social Security, Medicare, and Medicaid more. There are more 
people there, so that's going to make these numbers go up. What we've 
seen is that the revenue the Federal Government collects hovers in here 
at 18 percent. There are times, historically, when we've raised the tax 
rate tremendously, and yet it seems like it's still 18 percent of GDP. 
So if this 18 percent is not that flexible, whether you raise or lower 
taxes, then when you get down to this problem, you say, uh-oh. Because 
before you could say, our revenue was equal to all of these 
entitlements. Well, raise taxes. No problem. Yes, there is a problem. 
Because as you raise it, you won't collect any more money. You crash 
the economy, and the entitlements are still growing. Over time these 
entitlements are still growing. So this picture here, as scary as it 
is, is not as scary as it really is because it doesn't take into effect 
that the entitlement pieces are growing rapidly.
  Here is the other piece from a time point of view. And that is, this 
red line is the growth of entitlements. This is 1965. And we're going 
over here to 2010. You notice the entitlements are 2.5 percent in 1965. 
This is just Medicare,

[[Page 1704]]

Medicaid, and Social Security. It's up to 9.9 percent. But really, when 
you add the other entitlements and debt service, you are getting up 
closer to 18 percent. So what's happened is, the entitlements are going 
out of control. Even if you assume that the other entitlements are 
roughly 12 percent or something, you're at 500 percent growth in 
entitlements. And yet here is defense spending. It's 7.4 percent here. 
It goes up as high as over 9 percent here and drops all the way down to 
4.9. So defense spending is going down; entitlements are going up. And 
now we get to the point where you could cut defense to zero and still 
could not compensate with this incredible growth in entitlements.
  I want to let you jump in, Paul, because I think that people now can 
start to see what it is and why it is a whole lot of Americans--not 
just Republicans or Democrats--but just plain old Americans are saying, 
Hey, we have got to pay attention to what's going on because these 
numbers are very scary.
  Mr. GOSAR. Well, everybody knows the analogy of a bank. When you put 
money in early, and let it build up in a rolling account, compounding 
interest, you grow to a bigger fund. That's the opposite of what's 
happening here, reverse compounding interest. We are building up more 
and more people on the rolls with fewer and fewer people actually 
helping out to support it. The last part is, is that we have an economy 
that is lagging way behind. We are still over 9 percent for how many 
months now? And what we have to do is, in order to create a better 
economy, that's what's going to help us service these programs and get 
people involved. So it's a variant equation that we have to work by.
  Mr. AKIN. So what you're saying is, one of the things that is 
affecting this is just the condition of our economy. And I was planning 
to get into this a little bit with you. When we started, I wanted to 
talk and work in the problem of unemployment and how do we deal with 
the level of unemployment in our economy today.

                              {time}  2040

  We've got the government saying it's 9-point-something percent 
unemployment. And that's an optimistic number, because if you've been 
unemployed more than a year, they drop your name off the list. You may 
still be looking for a job. So the real level of unemployment people 
are saying is well beyond 10 percent.
  So one of the ways you can--I guess this may be a backwards way of 
looking at it. What are the things that are creating that unemployment?
  And I went to, believe it or not, to a Main Street in my district, 
and I got a whole bunch of businesses there and I said, Now, what is it 
that's causing this unemployment? And I asked all these different 
people, and I was encouraged because they told me the very same things 
that my common sense told me and everybody else is saying. Anybody who 
has run a business knows what makes the unemployment. The first thing 
is when you start taxing the owners of small businesses heavily, they 
can't put money back into their business because they're busy paying 
taxes.
  I believe, gentleman, is it true that you were a doctor?
  Mr. GOSAR. Yes.
  Mr. AKIN. And did you have a clinic of your own?
  Mr. GOSAR. Yes, I did.
  Mr. AKIN. And so if you got taxed a whole, whole lot, are you going 
to put money into new equipment and expanding your clinic, or is it 
going to have to go to pay your taxes?
  Mr. GOSAR. Absolutely not, and you're not going to hire somebody when 
you don't know the economic rules. And we have besieged the American 
people with a set of rules that have a lot of uncertainty to them.
  Mr. AKIN. Now you're getting to the second point. You're already 
ahead of them.
  The first point is, if you want to kill jobs, take the money away 
from the owners of small businesses. You could say, Hey, that guy's 
making over 250,000, obviously having too much fun. We're going to tax 
him into the dirt, make sure he doesn't have a better time than we do.
  The only trouble is, if you want jobs, you can't destroy businesses. 
And that's the connection it seems like this administration, the 
Democrats, keep missing; and that is, if you keep talking about 
pounding rich people and those bad corporations, if you pound them into 
the dirt, there are not going to be any jobs. And that's where we seem 
to have this disconnect going on.
  So first thing is you do not want to tax those people a whole lot 
because you want them putting the money back into their business. The 
second point you're making, though, is all these regulations and 
redtape, it may not be a tax, but it has the same effect, doesn't it?
  Did you have to fill out a lot of paperwork in your business?
  Mr. GOSAR. With the health profession, we have tons of it, from HIPAA 
disclosure to anything. When we deal with insurance, the paperwork is 
endless.
  Mr. AKIN. Do you have to hire people to fill that paperwork out all 
the time?
  Mr. GOSAR. We have people that just do insurance filings, just do our 
mandatory paperwork with the Federal Government.
  Mr. AKIN. So, in a way, it's creating a job for people to deal with 
government redtape, but it doesn't really create any wealth, does it?
  Mr. GOSAR. No, and there's not a service to be provided. It's 
actually servicing the public interest within the Federal Government.
  Mr. AKIN. So, in effect, what it's doing to the economy is the 
government is making you less efficient as a business, and that redtape 
then adds to your cost of doing business, which then tends to dry up 
jobs.
  Mr. GOSAR. That's exactly right.
  Mr. AKIN. Particularly in manufacturing, if you do that too much in 
manufacturing, it makes it so expensive to make something in this 
country, the guy who owns the business says, Hey, I've got an idea. 
I'll take this machine that makes good product and I'll send it to a 
foreign country where they don't have all that silly redtape and they 
don't have all those taxes, and I'll make the product over there. And 
so the jobs just disappear from us because of taxes and redtape.
  Now, there's another one that the people on Main Street in St. 
Charles talked about, too, and that is a little bit less tangible. It's 
the sense of unknown. It's the sense of fear because the government's 
doing one dumb thing after the next, and they're afraid to make a 
decision because of the instability. The economy is down. It's hard to 
get loans, and they're not sure what we're going to do. For instance, 
the big health care bill was pending, and so what are you going to do?
  Well, because you don't know the environment, you tend not to make a 
decision, don't take risks because it's a very tumultuous type of time. 
There's too much of a storm brewing, and you don't want to be out too 
far from shore when there's a big storm brewing up. And so people 
hunker down and they don't hire people. And so that's another thing. 
And we're doing all those things wrong. Even now we're doing those 
things wrong, and we wonder why we have unemployment.
  And, of course, the big one is government spending, and boy, are we 
doing that. You've got these entitlements that are out of control, and 
who's going to pay this tab?
  And so, you put all of these things together and you have almost a 
perfect storm on business. And people wonder, Gosh, why do we have over 
10 percent unemployment? Well, it's because we're doing all the things 
to create unemployment.
  Please jump in, Paul.
  Mr. GOSAR. The Federal Government has also made winners and losers, 
and so we don't know in small town USA whether we're one of the winners 
or the losers.
  Mr. AKIN. Oh, you're going to do the bailout drill. We're going to 
bail this one out but that one you don't get bailed out.
  Mr. GOSAR. And then our rule is that something went wrong. When it's 
bureaucrats asleep at the wheel, what we do is pass more regulations so 
that the small banks that we have in our

[[Page 1705]]

communities can't lend. They're the ones who get audited five times in 
less than a year. What about the same application to the big banks? 
Where is that equal aspect to the law?
  Mr. AKIN. Paul, I don't believe it. It's just like I'm stepping back 
in time to that Main Street in St. Charles, because you're bringing up 
that fifth point that they always talked about. It is sort of an ironic 
thing, because you've got Bernanke at the Federal level. The Chairman 
is creating all this liquidity. He's doing QE2, which sounds like a 
science fiction, and I think it may be science fiction economics. But 
anyway, he's creating all this money. They used to call it printing 
money. But he's created a whole lot of money at the top, and yet 
somehow or other the funnel got pinched off and the money's not coming 
down to Main Street. And part of the reason it's not is because all of 
these regulators are all over the banks second-guessing the loan. So if 
the businessman isn't fearful enough as it is, and if he does actually 
want to get a loan, he's finding that the banker is being awfully 
tough.
  And I think they're typically 5- or 7-year loans, is that right, 
gentleman?
  Mr. GOSAR. It can be, yes.
  Mr. AKIN. Is that what you're talking about, basically the banking 
regulators, the Federal regulators, are kind of looking over the 
shoulder of the small banks all the time?
  Mr. GOSAR. Well, what it is--I'll give you an example from right in 
our own district--is that we have a small bank that has 39 percent in 
liquidity versus loans out.
  Mr. AKIN. Thirty-nine percent liquidity; isn't that very, very high?
  Mr. GOSAR. Very, very high. It's above the norm of what would be 8 to 
10 percent. And yet they gave out two loans in December, but yet have 
already had three audits in the fiscal year 2010 and have two more 
scheduled in the first quarter.
  Tell me where that aspect is and how that actually works, and 
especially when we have one bureaucrat disagreeing with another 
bureaucrat that this audit wasn't supplanted for another audit. That's 
the disruption and that's the fleecing of America.
  Mr. AKIN. Well, now the question is, if the banker is a businessman 
and he's taking risks and he wants to make a loan and when he makes a 
loan he gets some interest, and as long as the loan's good, then he 
makes money that way as a banker; now, if he wants to do that, why do 
we have a bureaucrat looking over his shoulder all the time, 
particularly as long as he's got a sufficient amount of liquidity to 
cover potential losses? Why is it that the regulators are deciding to 
regulate every aspect of our free enterprise?
  Mr. GOSAR. Well, it's actually the crux and the problem with our 
economy at this point in time. We actually had a government that 
disrupted the understanding of the way the risk was looked at. And we 
said, no, we don't need to follow anything, particularly in the housing 
industry. We actually saw bureaucrats saying, no, we don't need this 
application of risk. We can undermine it a little bit worse. And what 
we got is no skin in the game, no application, no money down, and what 
we had is a failure along Fannie Mae and Freddie Mac.
  Mr. AKIN. You get into this whole thing, and if you looked at what we 
have talked about tonight, you kind of start tearing your hair out and 
wanting to go buy some real estate on a desert island somewhere to get 
away from this huge problem. But there are solutions to this. But you 
have to realize where the solutions are.
  The first thing is you have to realize that we're not going to deal 
with the economic problems of our country until we can reduce the rate 
and the number of entitlements we've got. Now, somebody could object 
and say, Wait just a minute Congressman Akin, because couldn't you deal 
with these entitlements if you just got your taxes up higher? If you 
could get these taxes here that are running 18 percent, if we could 
double that, why don't we make it a 40 percent tax rate? Oh, that would 
take care of this, at least for a while. Let the entitlements grow and 
tax everybody at 40 percent. The problem is it doesn't work. And I 
think that's something that we ought to warn people about here.
  There's something here, this is sometimes now known as the Laffer 
curve, and what I have shown here is the top marginal income tax rate.

                              {time}  2050

  Now, that doesn't mean that in 1960 everybody was paying 90 percent 
tax. These are the most well-to-do people. But this is what happened to 
the top tax bracket over time. We started to reduce the taxes on some 
of the very top income people, bringing them down more into this 30 
percent range. Take a look at what happens to the Federal tax receipts.
  This is an example of the fact that you can actually reduce taxes and 
grow the revenue of the Federal Government. The reason that works is 
just what you were talking about. Because you are a businessman, you 
understand this stuff. And that is, what is happening is when a small 
businessman can invest in his own business, he creates jobs. With those 
jobs, people are paying taxes. That means more revenue for the 
government. So when you get the economy going, we take in much more 
revenue.
  So the first thing you can do is, actually, by reducing taxes, you 
can create more revenue, get the economy going, and that will help 
some. But it's not enough to deal with this entitlement problem.
  So really, you have a couple tracks you have to take on. One, you 
have got to cut the entitlements down. But you also likewise have got 
to keep working this advantage of getting your taxes in line to create 
a strong economy.
  Here is an example. When I was here in Congress, in the third quarter 
of 2003, we cut three taxes: Capital gains, dividends, and death tax. 
We cut all three. And this picture right here, this black line, is when 
the tax was cut, and this is the GDP. These are the GDPs from 2001 to 
2003. And you can see, some of them we actually lost GDP. We got up to 
2\3/4\ GDP. And then here, we do the tax cut, and take a look at what 
happens afterwards. The average GDP is 3.5 versus 1.1. So GDP jumps.
  So now we have cut taxes. And you'd think, well, maybe that's good, 
because now GDP is going. It gets the companies going, gets the pump 
primed. What else goes on at the same time? We've got this next chart. 
This is employment. This is before the same tax cut in May of 2003. You 
see, all these lines going down means loss of jobs. That means we lost 
jobs overall in the economy. The lines that go up were the months where 
we gained jobs. Take a look after the tax cut. Look at what happens. 
You get a whole lot more jobs being created.
  So if you have got better GDP, more jobs being created, you know what 
the final chart is going to show, and that is, quite simply, by cutting 
taxes we actually grew the Federal revenues. That's a good thing to be 
able to grow. It was down here at 1.7 trillion, jumped up to 2.5 
trillion just by cutting taxes. What we did was, we cut taxes, and we 
ended up with increase in revenue.
  So there's two pieces to this equation. One, what we have got to do 
is adjust tax policy and create an environment in terms of redtape, in 
terms of Federal spending, in terms of tax policy, and in terms of 
allowing liquidity to be flowing through the banks. We have got to 
create something that's pro-business there.
  Why in the world would we be in the mess we're in now and have the 
highest corporate tax rates in the world? I just can't understand that. 
What is your take on that? Why would we do that?
  Mr. GOSAR. Well, I don't understand that madness, but it's something 
you have to learn in business. But you have to have the ability to 
reinvest in America.
  If I have got money sitting there, make it worth my while to invest 
back in America. That's what we can do, and that's where the incentives 
come in. It also helps us in giving us access to cash, which has been 
ladened with the banks and strapped with the new regulations that come 
about.
  Plus, we also have to look at the certainty of the environment that 
we create for business to grow. We're not going to take the load on our 
backs if

[[Page 1706]]

we know that there's an uncertainty in the environment, whether it be 
health care, whether it be taxes, whether it be all of the regulations.
  All these things add up. And if you don't get people hired, they are 
a drain on the system. And America wants to get back to work.
  Mr. AKIN. I think you are right. I think in a way the cuts that we 
are going to be talking about this week, while they are not going to 
fix the overall problem of the fact that entitlements are out of 
control, I think that there are some things that they will do. And I 
think that what they will do is to maybe deal with some of that 
redtape. Because if you cut some of these agencies that are producing 
all that load of bureaucracy and redtape and all kinds of extra 
overhead, as you start to reduce that, it is like taking weight off of 
a runner; they are going to run faster. The economy will run better. 
And some of those cuts are probably Draconian in many people's eyes, 
and probably some of them are counterproductive. But, overall, you know 
you have got to trim up.
  So that is what we're going to be talking about doing. We are going 
to be kind of working it from both ways. We are going to have to cut 
the Federal spending, but we're also going to have to create an overall 
policy in terms of policies, that is redtape, and limit the amount of 
redtape, and the tax cuts to basically create a pro-business 
environment. When you do that, the revenue is going to grow, the size 
of the government is going to shrink, and you will start to see the 
shift come back to normal and America will start moving forward again.
  Mr. GOSAR. Well, it's like a parent. What we have to do is also work 
with our children, which you can make the analogy of Federal Government 
versus State government, empowering and giving them the environment for 
them to succeed.
  As a business owner, what we always want to try to do is make sure 
that we put an employee in the best environment with the right tools 
and the right education, and then they can succeed. When they succeed, 
they make me a better business owner and much better at what I do. And 
that's the same thing that we have done here.
  We have had unfunded mandates from education to health care, all the 
way across. What we have to do is start working with the States in 
their individual expertise and what makes them special, and allow them 
the flexibility to succeed as well. But we have got to put them in that 
right environment. And that goes all the way down from the States to 
the communities. This is a group effort, and this is a family affair.
  Mr. AKIN. Well, that's a great way to end things up tonight. Thanks 
so much for joining us. I know the people of Arizona are tickled to see 
that their new Congressman is already earning his keep down here. And 
goodnight to you, and goodnight to my many colleagues and the people 
across America.
  We're looking forward to a brighter day, but we have some tough 
decisions to make, and we're getting ready to make those even this 
week. God bless you all.

                          ____________________