Unsustainable, Crippling Federal Deficit and Debt

Floor Speech

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Mr. CASE. Mr. Speaker, tonight I join colleagues from both parties in focusing attention on what is truly one of the quietest and most avoided crises in America today. I speak very directly of our Federal budget and, in particular, its unsustainable, crippling Federal deficit and debt.

This silent but accelerating crisis threatens all of us, not only these generations, but generations into the future. This crisis is all of a fiscal crisis, an economic crisis, a social crisis, and a security crisis.

Mr. Speaker, it is a crisis that we are, frankly, busy denying. We are certainly avoiding it and explaining it away, but I think we all know instinctively in this country, and some of us know very consciously in this country, that it is an imminent crisis.

Tonight, colleagues of both parties and I, all of us members of our Bipartisan Fiscal Forum, which has 87 bipartisan Members of the House who are committed to facing and solving this threat, want to discuss this issue in a very brief discussion to assure we do not keep sweeping this crisis under the rug.

We will highlight how our Federal finances work, what is going wrong and why, what are the severe consequences if we don't correct the cause, and what can we do about it.

I will go into details later, but I first want to invite my colleagues to share some of their concerns and perspectives.

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Mr. CASE. Mr. Speaker, I thank the gentleman for highlighting not only the overall crisis, but certainly many of the process concerns that we all have in terms of full transparency and full accountability from the perspective of getting our budget under control.

Mr. Speaker, I now yield to the gentlewoman from Pennsylvania (Ms. Houlahan), an entrepreneur and a small business person herself, a member of the Committee on Armed Services and Permanent Select Committee on Intelligence, and somebody that also knows her way around a budget.

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Mr. CASE. Mr. Speaker, I thank my colleague so much for her very realistic and eyes-wide-open assessment of our Federal budget, and especially the focus on its impact on our national security from her own perspective in that space because I think we sometimes forget that this is a security risk, as well as a risk elsewhere.

I thank the gentleman for joining us.

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Mr. CASE. Mr. Speaker, I appreciate my colleague's leadership very much. Not only do we agree on the destination, but we agree on the problem. When you can agree on what the problem is, you can usually get to a solution. What we need to do is all agree on that problem on a bipartisan basis.

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Mr. CASE. Mr. Speaker, I thank so much my colleague for his leadership, as well. I really appreciate his highlighting the intergenerational consequences of not solving this issue today.

Mr. Speaker, may I inquire as to the time remaining.

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Mr. CASE. Mr. Speaker, I really appreciate my colleagues spending the time here tonight.

Now, I will go back and add a little bit of detail, so that we can fully illustrate what the issue is, how we got here, what the consequences are, why we need to do something about it, and how we do so.

The first thing I will start with is something very basic, and that is: How do our Federal finances actually work? First and foremost, our Federal finances are no different in concept than our family or business budgets, fundamentally.

In our Federal finance situation, our taxes and fees create revenues for our government. Our programs create the expenses for our government. If the revenues exceed expenses, we call that a surplus. If expenses exceed revenues, that is a deficit. We calculate both revenues and expenses and surpluses and deficits on an annual fiscal year. When we are talking about a deficit or surplus, we are talking about what happened in a particular fiscal year.

How do we address a deficit if we have it? It is easy to understand how we deal with a surplus. We spend the money that we got and, hopefully, save up a little bit for the next year, just like any family, any business.

What do we do about deficits? We will borrow that money, and we mostly borrow it by issuing government bonds to people around the country and world who want to invest in our government bonds, believing that the United States is the most secure investment in the entire world, but we also borrow intergovernment or, more accurately, intragovernment.

We are busy borrowing, for example, from the Social Security trust fund, which is building up a surplus toward a time when it needs it far more to pay Social Security benefits, and that money is due and owing to the Social Security trust fund.

It creates extra pressure on the Social Security trust fund that money is not being used for Social Security. It is being used for everything but Social Security.

Those borrowings in a family or business setting start to overwhelm you. We, of course, like anybody else, pay interest on what we have borrowed. Our total borrowings at any one time, which are essentially the accumulation of our deficits over time, are our total government debt.

Just like any family or business, it would be nice to have no deficit or debt, but that is not most of us. It is fine to run some debt if that debt is not chronic, if that debt is not just an excuse to be irresponsible and avoid fiscally responsible behavior, and that debt is not too high in relationship to our overall budget or economy.

We measure this many times by reference to our gross domestic product, how much our economy is producing. We calculate a debt-to-GDP ratio, which, if it is too high, starts to overwhelm the economy just like any family or business budget, or if the interest on the debt is not too high in relation to our total budget.

Bottom line, we can afford some debt but not if it starts to get away from us. This is, again, no different in concept than a family or business budget with one exception, and that is we can go on borrowing as long as we want, even irresponsible borrowing, whereas in a family and a business budget, that is going to catch up with you sooner or later.

Now, what exactly is going wrong, and why is it going wrong?

Well, the last year that we had a surplus in our Federal budget was 2001, 23 years ago. We have run deficits every year since then.

This illustrates our deficit track since 2001 down on this side, and you can see that it increased in the middle part of 2008, 2009, 2010, and 2011, during the Great Recession when we had higher expenditures for recovery and lower revenues because we were in a recession.

Then, of course, this big bump right here is COVID when we had to borrow a lot of money, when we had to run deficits in order to bail our country out of a tremendous problem. These 2 years were deficits.

Then we recovered in the post-COVID environment, but now we see it going up again for no real good reason other than that we are running deficits.

We are now at $1.9 trillion per year, and if we carry that out over time, we will see deficits grow to about $2.9 trillion by 2034, not too many years away.

How about our debt?

This is our total debt, and it starts over on the left side back in 1990. We had a pretty level debt increase until the early part of the 2000s.

The last time we had a surplus, we were managing debt. Then it started to take off with that recession. It started to take off more with irresponsible budgetary decisions on revenues and expenses.

The scariest part is the acceleration of this curve right here, which takes us only to about 2022. Our debt was $7 trillion in 2004, $18 trillion in 2014, $23 trillion in 2019, and now, as was already noted, it is up to $35 trillion--23 trillion to 35 trillion in 5 years.

How about the measure of debt to GDP?

As was discussed earlier, that is a really good indication of what is actually happening in our economy. This is our debt to GDP.

Now, you can see this big bulge right here was the highest debt to GDP we have had to date. That was World War II when we had to borrow to win a war. We had to do that.

Of course, the war, aside from being tragic, was not very good for the world economy. We had a real issue, as we always do in a war. This happens from a budget perspective.

Here we see a rapid escalation in debt to GDP in the last 5 to 7 years. This number right here is about 125 percent or 124 percent, which is our highest level of debt to GDP since World War II. Unless corrected, this is what is going to happen. It will shoot up over the next 10 years.

Reference was made by my colleagues earlier to interest that we pay every year on our current national debt. Our annual interest on debt now is up to $892 billion, and as was mentioned by reference, that is more today than we spend on defense or Medicare.

This line is interest, this red line right here. This line is defense extrapolated at the current levels out to 2034 from today, which is right over here. By the way, we all know that we need a very robust defense expenditure to handle the geopolitical challenges that we face. The green line is Medicare.

The point here is unless we get interest under control, it will essentially surpass defense and continue at an increasing gap. Medicare is going up because it is costing more. It is staying up with Medicare, and it is essentially overwhelming our ability to pay for defense and Medicare, crowding out our national budget.

Now, what are the consequences of carrying a very high deficit and a very high debt load? Why does debt matter, in so many words?

Well, I am going to go through this pretty fast. Number one, I already said it. It crowds out other needed spending, defense and nondefense. It reduces fiscal flexibility, especially in crises.

What if we did have another COVID today or tomorrow? What if we had a major expense that we didn't anticipate?

Our debt and deficits would jack up, just as happened during COVID, just as we saw during the Second World War.

The interest rates would jack up essentially exactly when we need to have a fiscally solvent and responsible base to build on. In other words, you have to prepare for crises. When you are not in a crisis, that is the time to get your thoughts in order, and when you go there, that is when you want the flexibility.

It slows economic growth. It creates inflation pressure. It creates interest rate pressure. We have already talked about national security risks, especially with adversaries such as the People's Republic of China, who invest in our bonds.

China owns a tremendous amount of our bonds. That gives China leverage over us. I don't want to be a borrower from China. It disincentivizes responsible budgeting internationally.

Many countries around the world are facing budgetary pressures. If we can't run our own show, how can we ask them to run their own show responsibly?

Finally, it feeds directly into arguments by the PRC and others that are seeking to replace our dollar as the world's reserve currency.

Essentially, what they are saying is the dollar is not a stable, not a responsible, not a secure currency, so let's try our own. We are begging all of these questions right now.

What do we do about all of this?

There are a couple of things we can do. First of all, we can acknowledge the issue, and we can acknowledge the crisis, and we can acknowledge that we have something that we must work on.

Number one, stop looking for marginal, illusory, magic solutions. For those that say we can grow our way out of this, no, we can't.

We would have to have an annual growth rate of somewhere around the range of 10 percent a year, which is absolutely unrealistic for the foreseeable future, for us to solve this simply by growing this economy. Any economist would say that we are doing incredibly well to come even close to 10 percent a year.

We can also stop the bleeding and reduce annual deficits through mechanisms such as paygo, which is a responsible process that we have followed sometimes, and lately not followed, under which whenever we reduce revenues through tax reductions, we have to offset them with expenses or revenue somewhere else or vice versa. Whenever we increase a program cost, we have to pay for it or else reduce another program cost so that it is budget neutral.

We obviously need to rebalance revenue and expense over time in our tax and spending policies with major decisions coming up.

Finally, as was mentioned, we probably need some major help with a fiscal commission. A fiscal commission can help us to sort through this in a nonpartisan, apolitical way to provide the expertise necessary to make recommendations that we must take a look at.

To those that criticize fiscal commissions, I would pose the question, well, what is your solution, then? Is there a solution that you have that you think would help us to solve this incredible crisis?

In conclusion, for the Bipartisan Fiscal Forum, my 87 colleagues and others who believe that this is, indeed, a crisis, we have a couple of steps that we have to go through.

The first step is to stop the denial, which is where we are right now, for this to be an issue in our campaigns, in our elections, for this to be front and center in our public discourse scores.

Then we have to ask, what can we do?

There is plenty we can do.

First of all, we can get through denial and get firmly into step number two, which is to do something about it. Then next, of course, acknowledge that the solutions are hard, but the alternative of doing nothing is and will be far, far harder.

We urge acknowledgment and action both within our colleagues in Congress and especially with the American people as we consider this crisis.

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