Introduction Of The Safe Commission (Securing America'S Future Economy)
Mr. Speaker, few are willing to admit--much less discuss-- the looming financial crisis facing our country. However, the longer we put off fixing the problem, the worse the medicine will be and the greater the number of Americans who will…
Mr. Speaker, few are willing to admit--much less discuss-- the looming financial crisis facing our country.
However, the longer we put off fixing the problem, the worse the medicine will be and the greater the number of Americans who will be hurt. We need to begin this conversation with the American people today.
That is why I am introducing legislation to establish a national commission that will put everything--entitlement benefits and all other federal programs as well as our tax policies--on the table and require Congress to vote up or down on its recommendations in their entirety, similar to the Base Realignment and Closure Commission (BRAC) first created by former Rep. Dick Armey in 1988.
This commission would be called the SAFE Commission, to secure America's future economy.
Many will say the problem is too big to be fixed. Some will view the proposal as too risky, particularly in an election year. Others will say it is an abdication of congressional responsibility.
My response to such comments is that the problem is so great we can no longer look for excuses not to act. Nothing, I believe, is too big to undertake.
Abraham Lincoln, one of our Nation's greatest presidents, once said, ``You cannot escape the responsibility of tomorrow by evading it today.''
Yet that is precisely what we have been doing--avoiding our responsibility to future generations of Americans by passing on a broken system in the form of unfunded Social Security, Medicare and Medicaid obligations. And it's been both sides of the aisle and in both Republican and Democrat administrations.
The growing gap between money that has been promised to future generations in various entitlement programs and that which is available to pay these promised benefits is staggering.
To meet the government's current unfunded promises for future spending, every American--including multimillionaires like Bill Gates and Warren Buffett--would have to hand over 90 percent of their personal net worth in today's dollars. This is unacceptable.
I deeply believe there is a moral component that goes to the heart of who we are as Americans. By that I mean, I wonder if we have lost the national will to make tough decisions that may require sacrifice? Moreover, have we lost the political courage to reject the partisan and special interest demands and do what is best for our country?
If we remember the legacy we have inherited, the debt we owe to previous generations--our grandparents and our parents and the sacrifices they made to make our country what it is today--we all will be moved to do our duty.
The SAFE commission should be embraced by both sides of the aisle. I am open to suggestions about the legislation from members of both parties. This is a national issue; not a Republican issue or a Democrat issue.
A month ago I took a trip to Antietam National Battlefield. As I walked along ``Bloody Lane,'' the site of one of the most vicious battles of the Civil War, I was struck by how many individuals made the ultimate sacrifice.
September 18, 1862 was the bloodiest single day in American history. There were more than 23,000 casualties, nine times as many Americans killed or wounded than in World War II's D-Day on June 6, 1944. More soldiers were killed and wounded at the Battle of Antietam than the deaths of all Americans in the Revolutionary War, the War of 1812, the Mexican War and Spanish-American War combined.
I also recently visited the site of George Washington's crossing of the Delaware River in anticipation of the Battle of Trenton. Washington was down to only 3,000 soldiers and the war was almost lost. Yet, with great courage--and sacrifice--Washington and his forces were successful in changing the direction of the American Revolution.
And with Memorial Day's recent passing, I think of the tremendous sacrifice being made by the thousands of men and women serving today not only in Iraq and Afghanistan, but around the globe. Their families here at home are also making great sacrifices.
These examples of sacrifice for country are what led me to ask just what are we passing on to those who are coming after us?
In two short years, the baby boom generation will begin trickling into retirement. Five years later, that trickle will become a flood that within five more years will become a tsunami that will begin to wreak havoc on our Social Security and Medicare systems.
As we tragically learned the lesson of Katrina in New Orleans, the best time to deal with a damaged flood wall is before the rains begin. Make no mistake; the levies that are our country's entitlement systems can only be plugged for so long. Without major repair and a long-term fix, we are facing a financial disaster like never before.
There is near unanimous agreement by all who have looked at this issue: Social Security and Medicare are amassing huge deficits and are ill-prepared for the coming flood of new baby boom retirees.
When our retirement security programs like Social Security and Medicare were established, the ratio of workers supporting each retiree was more than 10 times the number supporting retirees today. In 1945, there were 42 workers for each retiree. Last year, the ratio dropped to 3 workers for each retiree and is expected to drop to just 2 workers for each retiree by 2030.
The 2006 Social Security Trustees Report paints a grim picture with projections that the Social Security Trust Funds will begin running cash flow deficits in 2017 and be exhausted in 2040--one year sooner than last year's projection. That means that by the year 2040, the projected federal income will only be sufficient to pay 74 percent of scheduled benefits.
Perhaps even more troubling than the Social Security projections are those for Medicare.
By 2010, the trust fund expenditures are projected to exceed annual income from all sources and the reserves will be depleted by 2018, 12 short years from now. According to the trustees, ``Medicare's financial outlook has deteriorated dramatically over the past five years and is now much worse than Social Security's.''
As a father of five and grandfather of 11--soon to be 12--the challenge posed by the pending retirement of baby boomers strikes me as much more than a routine policy discussion.
Without action, just what kind of future are we leaving to our children and grandchildren?
My youngest grandchild is just two months old. By the time she is 15 years old, 29 cents out of every dollar paid in income taxes will be required to cover the needs of Social Security and Medicare to pay for my retirement. That's not including payroll taxes of almost 15 percent.
By the time she completes her undergraduate degree, more than 45 cents out of every dollar of income taxes then will be needed to cover the shortfall of Social Security and Medicare, rising to 62 cents out of every dollar if she decides to get her doctorate 10 years later. Again, this is on top of payroll taxes.
Sadly, before she retires--and looks into the eyes of her own grandchildren--retired baby boomers will be consuming 88 percent of every income tax dollar. With the baby boomers consuming so much, there will be little money left to meet the needs and challenges of her generation. Not only is this unacceptable, it raises serious moral questions. Is it right for one generation to live very well knowing that its debts will be left to be paid for by their children and grandchildren?
Before he left the Federal Reserve, Alan Greenspan gave a speech in Jackson Hole, Wyoming, where he echoed the significance of the coming baby boom retirement on our budget and economy. In stark language, he noted that because of lower fertility rates and longer life expectancies, we are faced with dramatic elderly dependency ratios that will pose ``substantial challenges to Social Security,'' which he noted is already in ``chronic deficit.''
This coming crisis demands our immediate attention. While there is never a convenient time to make hard decisions, the longer we wait, the more dramatic the required remedy will be.
According to the Government Accountability Office (GAO), balancing the budget in 2040 necessitates one of two alternatives: cutting total federal spending by 60 percent or raising federal taxes by two and half times today's level.
Either of these options would devastate our economy. But if we can summon the resolve to begin these difficult conversations now--and make some hard choices on the front end--we can change our current course.
Basic economics underscore the dangers inherent in our current national trends. America is living on borrowed dollars and borrowed time. U.S. spending is outpacing income growth and personal savings rates have dropped to negative 1.3 percent in the first quarter, meaning that U.S. consumers are spending more than 100 percent of their monthly after-tax income. In spite of this, our economy has remained strong, in large part because other countries have been willing to buy our debt. In fact, we have benefitted greatly from low long-term interest rates that have been kept low largely because of continued foreign purchases of our national debt. As our fiscal deficit grows, we can finance it in one of three ways: through foreign-held debt, through reduced domestic spending, or by selling U.S. goods abroad. In 2004, foreigners bought $900 billion of U.S. long-term bonds. I am told that we now need more than $2.6 billion a day of capital inflows to fund our savings shortfall.
As our fiscal deficit balloons, our current account deficit is projected to hit historically unprecedented highs, and our country's net investment position abroad is eroding rapidly.
While the Asian Central Banks and petrodollar countries like those in the Middle East have no doubt contributed to our country's growth (the housing boom and the ability of U.S. consumers to spend), the purchase of U.S. securities by foreigners has, at the same time, enabled us to live way beyond our means.
This makes our country--and our children and grandchildren--much more vulnerable in the future. Will a geopolitical dispute with a major oil exporter cause it to stop funding our deficit, resulting in a sharp drop in the dollar, a spike in interest rates and a market meltdown?
If foreigners lose faith in the U.S. and our ability to put our own fiscal house in order, their investment decisions could send shock waves through our financial markets and even result in a collapse of U.S. real estate prices.
Our children and grandchildren deserve a future that will allow them to respond to the challenges of their generation.
Who could have predicted, even 10 years ago, that today our Nation would be engaged in a global war on terror.
Each generation faces its own international threats, and we have an obligation to ensure that future generations have the flexibility to respond to the challenges of their time.
In addition to international considerations there are domestic factors. Getting our financial house in order will allow us to prioritize spending in areas such as cutting edge medical research for cancer, Alzheimer's and autism, and for education, particularly in mathematics and science, which are critically important to America's remaining the world's leader in innovation and technology.
It is with the hope of building consensus on this very difficult issue that I am introducing legislation to establish a bipartisan commission charged with evaluating the scope of our fiscal problem and recommending tangible solutions. One of the most critical responsibilities of this panel will be explaining the crisis we face and listening to the American people about how to get the country back on sound financial footing. It will also develop a strategic plan for the future. It will look beyond the Beltway for solutions, holding at least 12 town meetings--one in each of the Nation's Federal Reserve districts--over the span of six months in order to hear directly from the American people.
The SAFE commission will be comprised of 15 voting members, three of which will be appointed by the president, three by the Senate Majority Leader, three by the Senate Minority Leader, three by the Speaker of the House, and three by the House Minority Leader. The director of the Congressional Budget Office and the Comptroller General of the United States will be appointed as non-voting ex-officio members of the commission to lend their expertise. The president will have the ability to appoint the chair from among the 15 voting members.
To be successful, I believe the commission must include men and women who are more committed to their country than they are to their political party and committed to working in a bipartisan manner. Names such as former U.S. Treasury secretaries James Baker and Robert Rubin, former Federal Reserve Chairmen Alan Greenspan and Paul Volker, former Senators Phil Gramm and Bob Kerrey and former Congressmen John Kasich and Charlie Stenholm come to mind. Leading economists from both the public and private sectors must also be included on the panel. Bipartisanship is critical to the commission's success.
I have heard criticism that such weighty decisions on the Nation's financial future are the responsibility of Congress. Because of the ever-increasing politically charged atmosphere that has come to characterize dealings in our capital city, I fear that partisan rather than national interest has become the order of the day. Congress is paralyzed. Our political system is polarized. Many now only think about ``red'' or ``blue'' ideology, which has led to paralysis and disregard of the common good. The American people deserve an honest assessment about the federal government's future saving's account and checkbook--a discussion driven not by politics, but by statesmanship and one which elevates the Nation's sights.
Working together to find common ground, this group will comprehensively review entitlement benefits, patterns in savings and insurance for retirement, tax policies and the long-term implications of increasing foreign ownership of the U.S. Treasury.
Everything must be on the table. As a fiscal conservative, I believe that the economy grows when people keep more of their hard-earned money, and my voting record reflects this belief. But given the enormity of the challenge, the commission needs to be able to look at every component of our fiscal policy to fairly assess where we stand and how we can best move toward a sound fiscal future. In looking at revenues, I believe any changes in the tax code must help simplify the system and stimulate increased economic growth and thereby tax revenue. The late William Simon, who served as Treasury secretary under presidents Nixon and Ford, believed ``the United States should have a tax system, which looks like someone designed it on purpose.''
The IRS estimates Americans spend 6.6 billion hours per year filling out tax forms--including 1.6 billion hours on the 1040 form alone and nearly $200 billion on tax compliance. That amounts to 20 cents of compliance cost for every dollar collected by the tax system.
Shouldn't we have a system that people understand? One that encourages faster growth in business formation, jobs, family income and tax revenue? A simplified tax code also could help increase the personal savings rate, which went negative for the first time since the Great Depression earlier this year.
After spending six months conducting town meetings around the country to determine the scope of the problem and consider solutions, the commission will present to Congress a report describing the long-term fiscal problems, public suggestions and views expressed during the town meetings and policy options available to ensure federal programs and entitlements are available for future generations.
With a bipartisan two-thirds majority vote, the commission will send to Congress a legislative package to implement the commission recommendations no later than 60 days after the interim report. The administration and Congress will have 60 additional days to develop actuarially equivalent proposals to achieve the same cost savings. Essentially, no later than 10 months from the organization of the commission, Congress would be required to vote--up or down--on each proposal.
For example, if the interim report is delivered on January 1, then the commission's legislative package would be due by March 1 and any alternative developed by Congress or the Administration would have to be presented by May 1.
All proposals must include a 50-year CBO score in addition to disclosing any impact on future federal liabilities. If more than one proposal receives a majority, the one garnering the greatest number of votes would prevail.
I have put in the legislation procedures for expedited consideration of the commission's legislation to ensure that the Congress acts. I do not want this to simply be another blue-ribbon commission whose findings end up on a bookshelf somewhere only to collect dust and never be acted upon.
I look forward to working with my colleagues to enact this legislation.
I also welcome a forthright national dialogue. Only by working together in a truly bipartisan manner will we be able to secure America's future economy.
I believe most Americans will welcome it as well, especially considering we all want what is best for our children and grandchildren.
I will close with the cautionary words of George Washington's 1796 farewell address:
``We should avoid ungenerously throwing upon posterity the burden of which we ourselves ought to bear.''