I thank the Speaker and welcome all of you to the discussion tonight. As everyone is talking about right now, we are preparing to have a discussion this week on the budget and where we go from here. The continuing resolution is last year's…
I thank the Speaker and welcome all of you to the discussion tonight.
As everyone is talking about right now, we are preparing to have a discussion this week on the budget and where we go from here. The continuing resolution is last year's spending. It was not passed for the full year, so we are now in the process of considering how to fund the government and at what levels through the rest of the year. So I appreciate the opportunity to consider why we are doing what we are doing.
You would have to ask yourself exactly what the basis is of all of the discussions that we are having on the floor of the House. I'd like to make things as simple as possible to understand, so I will begin the discussion by simply writing the big picture onto the white board to my left.
The big picture is simply 3.5 and 2.2. Now, 3.5 T is the amount that we spend every year. 2.2 T is the revenue that the government brings in.
If you were to go ahead and then do the math on that, you would see that we have an outflow of 1.3 greater than the inflow. Actually, those numbers have been revised. I'm not sure if it's because the inflow has dropped down or if we are spending more, but the revised figures show us that we have a deficit of 1.5 T, $1.5 trillion, in this current year. So we will put that number up on the board in order to continue to just get the big picture on where we are.
This 1.5 T, $1.5 trillion, deficit that we have I consider to be in a pipeline. It's a deficit this year, but at the point at which we spend the money and we've not taken in money to offset it, then it becomes debt. I look at it like it's a pipeline running into a barrel. We'll just make a graphic here. We've got the deficit pipeline full of $1.5 trillion each year because we are spending more than we bring in.
The barrel at the end of the pipeline I just call the debt barrel. It's, again, fairly transparent. As the deficit rolls into that barrel, it becomes debt, which is accumulated and passed on to the next generation. In rounding the figures off, we see a debt right now of about $15 trillion. We will put that label on our barrel.
Basically, you have the picture of the budget right here in front of you. We are spending $3.5 trillion. We are bringing in approximately $2.2 trillion. One of those numbers is a little bit incorrect, so you'd say, well, it's a $1.3 trillion deficit. Instead, that has been revised, and that deficit then is flowing into the debt barrel of $15 trillion. So, at the end of next year, if we continue to spend and the proposals in front of us now are still running a deficit of at least 1.5, you can calculate that we will have a debt accumulated of $16.5 trillion.
Now, everyone likes to make this complex and it's not that complex. It's very similar to the problems that maybe you or I had when we were growing up, but we began to use more, to spend more than what we brought in. Now, if that's the case, then we go about it by doing one of two things: We either shrink the size of outflows, we cut the spending; or we get a second job or we get training in order that we would get a promotion and we then drive up our revenues.
So the discussion this week that we're having, the continuing resolution is focused mainly on what do we do about the outflows. The revenues to the government, that requires more people go to work, and so this problem of the 2.2 is being accentuated by the 9\1/2\ percent unemployment. So when our citizens are antsy, they're concerned, they're alarmed that the jobs are just not happening, it is not only in their lives that it's a significant problem; it's in the lives of our government. Each one of our States is also, with one or two exceptions, going through this exact same problem. They're spending more than what they're bringing in in tax revenues.
Now, a government has one of three different choices that they can make. They can cut spending, they can increase taxes, or they can grow the economy. And growing the economy is when you add more jobs. Each person and their job will pay taxes, and that incrementally increases the number on the bottom so that we eventually get them to balance.
But then a government can also do one more thing, and that is to print money, and that's the quantitative easing that Mr. Bernanke has triggered off. So the printing of money then has its own downside. We won't talk much about that tonight. Although, it is probably the most significant thing in our business climate that we face, an unstable dollar; that is, one where we are printing more dollars and the value begins to erode.
So people in their homes tonight would be watching the price of vegetables go up. The price of gold has gone up, the price of silver. Those don't have any more intrinsic value. In other words, a vegetable a year ago in our life would be consumed and would have about the same value. The price of gold hasn't got any new manufacturing techniques that would be pulling great supplies off the market, driving a price up through supply and demand. The same thing with silver.
And, in fact, those prices are escalating dramatically right now because we have so many dollars because we're printing money. And, by the way, we printed last year about $2.6 trillion, more or less. So we have quantitatively eased. We have printed enough money that we're now seeing the prices go up in our society.
Now, the inflation is in contrast to what the government reports say, because the Federal Reserve would tell you, quite frankly, that they see no signs of inflation; it's just that they don't consider the food and the energy that we would have facing us.
So, again, returning to our main board here, then we have a significant chart that is available from both CBO--that's congressional--and from the OMB--that's White House. And so we've got a significant chart, and the chart basically looks like this, and the chart simply comes up and then stops. Now, this axis would be the years, so that these would be prior years, and now then future years extending out ahead of us. On this level, we have the dollars, and this represents our gross income, our per capita income.
As you can see, throughout our history the income has been rising, rising, so that you have made more in your lives than your parents made, and your parents made more than their parents, all the way back to our founding. But you also see right in this point, which is occurring right about this period of time, is that the curve begins to flatten out and start down.
So when I ask in our town halls--and we frequently ask the question, ``Are you living better than your parents did?'' and almost unanimously the answer is ``Yes.'' But when I ask the second question, ``Are your children going to have better lives, better incomes than you have had?'' and almost 100 percent of the people say, ``No.'' Well, that's actually playing out in the chart right at this peak point here, and we're experiencing that as we speak.
Now, then the unsettling piece of this chart is that it's discontinuous; it stops. The thing about charts is they continue on through history. So we start at the Founding Fathers here and we come up, we come up, we're topping out, but then the chart stops. That is 2032 maybe, 2034, something out in that range, and the economy simply stops. The economy stops because of this and because of that.
You could see with our $15 trillion worth of debt that we could take every dollar that's coming into the U.S. Government right now, and it would take us 6, 7 years to pay it off. That's if we did not spend any money and did not have any more deficits. As you can see from this year and next year, we're going to have significant deficits, and so we could not, in fact, pay that off in 7 to 10 years. In fact, it is ongoing.
The last thing that we need to get to have the big picture in front of us is that I view that barrel of debt and then I view that it is sitting on top of an aquifer of debt underneath it. So I will
simply draw that on the board at this point.
Now we have the aquifer of debt, and many people are saying that it's about $202 trillion. We could pay for almost 100 years and not pay the accumulated obligations for Medicare, Medicaid, and Social Security, and it's that piece which begins to make our economy falter and fail within the coming generation.
We saw this happen in the Soviet Union. And so as we consider could it happen here, well, yes, it could anywhere, and the U.S. is no exception to anything. The rules of economics say that everything that you spend, you have to pay for, and if you don't pay for it, there is loss at some point, and we have been living in the government an economic lie. We have been fooling ourselves, saying that we can continue this process, and now we have reached a point where it would be catastrophic within the lives of many of the people who are here in the U.S. today.
So what do we do? Do we cut the 3.5? Or do we grow the 2.2? Now, this week we're going to have many, many amendments, and looking at it from this lens, I heard my friends discussing public broadcasting, and I agree with them. There are many things about public broadcasting that I like and the programming, but the question is: Should it be a government function and should we be spending money for it when it's going to put your children and grandchildren into deeper debt? Should we be risking the failure of our economy? And again, this is not Steve Pearce. This is CBO and OMB. You can go to either Web site and take a look and find the chart of per capita incomes and just look at it. It's there.
So, if we are risking that, looked at through that lens, then we can ask ourselves should the Corporation for Public Broadcasting be funded, and that answer will be given sometime this week on the floor because there will be an amendment. There will be something in the bill that says that we will do just that. These are the hard choices that we need to make now.
Let's consider one other thing. The President today submitted his budget to us and he recommended that we have $1 trillion over 10 years, maybe $1.1 trillion. How does $1 trillion--it sounds like a big budget cut. Oh, we're really going to cut the budget a lot, $1 trillion. Keep in mind, that's for a 10-year period, and so simply divide $1 trillion by 10 and you get about $100 billion. If we cut $100 billion out of this budget, we change this number from 3.5 to 3.4. That's what $100 billion means.
And when the Republicans are accused that we're going to slash budgets and we're going to really create turmoil in the budgetary process, Republicans are saying basically that we're going to cut $100 billion, also, from 3.5 to 3.4.
Now, you can do the math fairly easily. If you cut $100 billion, the deficit is going to lower from 1.5 to 1.4. Now, that's not going to significantly affect our debt barrel, nor the debt aquifer that we face. Both are looming problems that simply OMB and CBO tell us break the system.
Now I do not believe that our system is going to break because I think the American people are going to insist that we begin to do forensic audits of our government to find the efficiencies, to find the better ways of doing things. A forensic audit would, for instance, ask, Are the duplications in the budget? Do we have multiple offices doing the same thing? And the answer is, absolutely we have offices doing the same thing; that, in fact, sometimes we have 70 and 80 offices. We are paying an overhead in every single office. I think that what we're going to have to do is to find those duplications, and we simply roll them into one office to where we're not multiplying the number of government salaries. Because every government salary creates, in its lifetime, about $4 million toward this. You simply multiple the number of government workers by about $4 million in its life. It's actually a little bit more. But that is their benefits, their pay, and everything associated with them.
But I tell my friends, as Republicans, Yes, I'm wholeheartedly in favor of cutting the 3.5. That we must do. And I believe that we should have the forensic audit of our government in order to wring out the inefficiencies. The fraud alone in Medicare is almost 0.1 percent in this equation. The fraud in Medicaid is 0.06 percent. So you can see that they are significant numbers.
But none of the cost-cutting that we're doing is actually going to balance the equation. If we intend for our Republic to survive, we must begin to grow our economy. We must increase the number of jobs. That creates a population that is more content with their welfare, with their prosperity, with their ability to pay their bills every month, but it also begins to cure our budget problems.
Now if we're going to talk about creating jobs, we have to understand the greatest threat to job creation. The greatest threat to job creation is uncertainty. If you, as an individual without owning a company, are uncertain about what you're going to make in the stock market. If you see different stocks, and you're afraid that the stocks are not going to make you money, then you pull your money out of the stock market because of the uncertainty. Right now we have a lot of the money that came out in the last 2 years flowing back into the stock market, driving the prices back up. We're seeing that companies are actually posting profits higher than what they intended and higher in the past years. So there's a mood of certainty among those people who are investing stocks, and money is coming back to the stock market. The uncertainty drove it out.
Well, the same thing happens in businesses. If a business owner is certain that he's going to make new investments--right now if you have cash in the bank, it's less than 1 percent. You probably get one- quarter of 1 percent each year for cash. The best thing to do with cash is to invest it in creating jobs. And President Obama, about 3 or 4 months ago, really hit the business community, and he reminded them here a week or so ago when he spoke to the U.S. Chamber, You have a moral obligation to invest and create jobs. Well, the government has the moral obligation to give certainty through taxes and regulation.
And that's the great rub here. We have regulated and taxed many of our corporations offshore. I know we have discussions every day about those companies that are taking tax breaks, and they're evil, and taking the jobs somewhere else. The truth is, President Obama mentioned it in his State of the Union, that we have the highest corporate tax rate in the world--one of the two, and I think that Japan just recently lowered theirs, leaving us there. So we are taxing our companies into uncompetitiveness. They're not competitive because of that piece of their cost structure. Ireland addressed this 15 or 20 years ago. They lowered their corporate tax rate from 36 percent, which ours is, to 12 percent, and companies began to flock into Ireland. In the succeeding years, Ireland began to raise its corporate tax rates so now companies are flocking out of Ireland. It's that simple. Higher taxes kill jobs. Lower taxes create jobs. I'm not saying we should not have taxes, but I do say that tax policy, increasing taxes, that kind of tax policy, will create stagnation and no job growth.
But the second thing that causes that is regulation. Companies do not want to put money into investments where they don't think they're going to get a return. They cannot get a return sometimes because they're simply regulated out of business. For instance, consider the farmers in the San Joaquin Valley. Those were businesses. Those businesses were making money. They were paying the banks. They were buying land, and they're employing people. They're buying fertilizer.
But the silvery minnow, a 2-inch minnow that we would all want to keep alive, got all of the water in the San Joaquin River. A judge declared that we are going to regulate the water away from people and to the minnow. So 27,000 farmers in the San Joaquin Valley lost their jobs. Now, then, those people are not making the payments on their land. They're not able to feed their families. So instead of being productive members of society, they have now scooted to the top end of the equation, which is the second poisonous thing we deal with in this, is that when we kill jobs through taxation and regulation policies, we actually transfer more cost to the top of the equation. And that's the reason we're in such imbalance. A 9.5 percent rate of unemployment means that we are going to
have more people on welfare, food stamps, more people on assistance.
I think we have a moral obligation to begin to fix the job situation in the country, and we do that by finding the balance point in regulations. I do not want to see the minnow go extinct, but neither do I want to see our jobs go extinct. We have killed industries in this country in the name of regulation. The spotted owl was simply a regulation that was put into effect in our national forest. And in New Mexico alone, we lost 20,000 jobs because of the spotted owl regulation. I don't think we should stand by and watch the spotted owl become extinct, but neither do I think that we should have given up those jobs, and those jobs have gone to Canada. Now I love the Canadians, but I would rather have the jobs here and be using U.S. timber.
In the meantime, when we stopped cutting timber, then we started seeing massive forest fires because of the buildup of fuel in our forests. An additional problem has been found in the West where the trees use up all the water. They transpire it. Formerly what was happening was that New Mexico, with its arid climate, had fewer trees per acre--maybe 50, maybe 100. Now we have got 2,500. The trees were crowding the grass out. The grass is on the slopes. The water can't run through grass as easily as it can across the bare ground. So now with no grass, the water is rushing into the streams down at the bottom of the mountain. It used to be that the grass slowed it down, and it had a chance to percolate in and recharge the aquifers. So we are finding many of our mountain communities now starved for water. So not only have we lost the jobs, not only have we put people on welfare and driven up the cost of government, we are also creating resource shortages throughout the West, and we absolutely must begin to deal with all of this.
If we are to look again at another industry that we have simply dismantled or are in the process of dismantling, I would look offshore in Louisiana. My wife and I made a career in repairing oil wells, and so we understand the processes that happened offshore. We understand the decisions that were made. I think BP should be accountable, and they're being held accountable. They are actually paying the bills on the cleanup, and that's set in law and is actually happening right now. But I do not think that we should have taken 100,000 jobs. Those are jobs offshore that were making well into the six figures. High taxes were being paid to the government because people were making good money. It's dangerous work. It's hard work, many hours. And yet we took probably 100,000 jobs from the Louisiana/Texas economy, and we have moved it now to a cost for the government. If we would begin to create the jobs again, if we would go back and rebuild the industries, the greatest solution for our budget crisis is that. Grow the number on the bottom, and as we create jobs, we pool costs from the top end of the equation.
My friends, I don't believe that it is among our choices to not get our fiscal house in order. If we raise taxes in order to increase this, which many people suggest, we are going to kill jobs, and we get a wash--maybe no increase, maybe even a decrease. If we will set about curing the imbalance in our tax rate for our U.S. corporations, I think then that job growth would become explosive if we would also find the pendulum, bring the pendulum to the middle of the equation where we can protect species, protect the environment, protect the workers, and at the same time, create jobs.
I think Americans are hungry for us to begin to solve the problems in that fashion, rather than the partisan divide that says, no, we can't create jobs, and those jobs shouldn't be here. I think that Americans are going to insist that we do what it takes to bring back the manufacturing jobs, those good career jobs, not just a job, but a career. That's what people are hungry for. They would like to be able to plan their life, to plan for retirement, to plan for college for their kids, to pay off a house, to build a nest egg. That's what Americans are hungry for, and it is not possible in the environment that we have right now.
When we kill job growth, we kill opportunity. When we kill job growth, we kill prosperity. And I think Americans are hungry for the prosperity. They're hungry for a forensic audit of our government that begins to say, why does it take $3.5 trillion to run the government?
Every person sees things every day that our government does that don't make sense, that cost too much and, in the end, kill our jobs and drive them overseas.
Now, people would ask, well, that's not possible and it's going to take too long. First of all, is it possible? Yes, if we establish 3.5 percent rate of growth, then these numbers begin to balance up, and we begin to cure the budget shortfalls, both for every State and for the entire Nation. A 3.5 percent rate of growth, then you would ask, is that possible? As a country, we have averaged a 3.5 percent rate of growth over the last 75 years. It is extremely possible. So let us take on the hard tasks of finding the savings in the budget, increasing our job growth, and we're going to find the solutions to the economic woes that threaten our entire society, that threaten our entire economy.
We have many people who question, can we cut the government? Can we cut the size of government right now with unemployment? It's going to drive unemployment too high; that we should not be laying off a single Federal worker.
New Zealand came upon that question a decade or two ago. New Zealand began to ask themselves the same question. Why is our economy sluggish? New Zealand was in the bottom third of the world's economies. They said, we're a developed country. We have smart people. We have hardworking people. Why aren't we in the top third?
New Zealand's conclusion is that they had too many non-government functions inside the government. And so they took one agency and set about to cut the nonessential government jobs, just to cut them, without regard to what it's going to do to unemployment or any other question.
In the Department of Labor, that's the one that took it on, and I have visited with the guy who actually did this. They cut from approximately 63,000 employees down to one employee. He actually said, I could have cut myself, but I had to go home that night and face my wife.
And, by the way, I should wish my wife Happy Valentines Day. She is in New Mexico and I'm here. And also my mom, two special, special women in my life.
But he said he could not go home and face his wife if he had cut his own job. So, from 63,000 down to one.
Now, to people who worry can we cut jobs from the government without it affecting the unemployment, what happened in New Zealand would happen here. They jumped from the bottom third of the world's economies to the top third. That's because the people that they laid off from government went outside, those functions transitioned outside the government and they began to be done at higher pay, with more efficiency and with more purpose. And so actually, the tremendous increase in their relative position worldwide jumped from the bottom third to the top third, was the offshoot. And I think that we would see the same thing happen in our economy.
Now, again, to whether we should have taxes, increase taxes or decrease taxes, does it work, does it not work. Back in 2003, we gave the tax cuts under President Bush, and I was here at that point and voted for those tax cuts. When we cut the taxes, the growth rate was not 3\1/2\ percent. It was actually about 1\1/4\ percent rate of growth. Within 30 days, the economy began to boom up so that it finally got to 8\3/4\ rate of growth--from 1\1/4\ to 8\3/4\. Now, there was pent up demand and so people were buying new equipment and buying things in kind of a surge, so that 8\3/4\ finally moderated down to 5\3/4\, then down to 4, and 4\1/4\ and finally down to 3\3/4\, which again is all we need to fix the situation. It is not that complex. The picture is not that complex. People try to make it so here in Washington because they love to spend your money. But the truth is the consequences are now on us. The truth is that we are facing catastrophic economic failures and inflation if we do not begin to pay attention to the fundamentals that are in play in front of us.
So as we approach this week, the idea that we can only cut $100 billion is one that we should all question. We know there are greater inefficiencies. I'm going to propose a series of amendments that would cut even more; cut functions that I think could be delayed. We're going to suggest that the government maybe shouldn't be building a lot of projects, a lot of buildings right now. Surely we can take a moratorium on that for a year or maybe two. In the interest of future generations, don't we think that that's a sacrifice that we should make? So these are the issues that face us this week.
Mr. Speaker, I would conclude by saying that I think that it's achievable. The solutions are right at hand. We just have to have the will to create jobs and cut the size of the budget.