The American Deficit

Floor Speech

The SPEAKER pro tempore. Under the Speaker's announced policy of January 5, 2011, the gentleman from California (Mr. Garamendi) is recognized for 60 minutes as the designee of the minority leader.

Mr. GARAMENDI. Mr. Speaker, there is a lot of discussion here on the floor, around Washington, and across this Nation about the American financial situation.

Some people say America is broke. There couldn't be anything further from the truth than that statement. America is a strong, vibrant economy that far and away is the largest economy in the world. We are nowhere near broke. We do have a problem. We are running at a current deficit, and that deficit is expected to grow. But to understand the deficit and to begin the process of addressing it, we need to understand from whence it came. And so I am going to start this discussion out with, hopefully, an opportunity to get a sense of how it is that the American deficit has risen to the point where it is today.

Really, we need to look back to the Ronald Reagan period. During the Ronald Reagan period, he ended his Presidency with a projected $1.4 trillion deficit for the 10 years beyond his Presidency. So we look at these things saying, okay, Ronald Reagan had 8 years. And then what was projected as a result of the policies during his Presidency? Well, what was projected was that the American deficit would grow by $1.4 trillion.

The first George Bush came into office, and at the end of his Presidency, 4 years, the projection for the 10 years after he left office, continuing the policies that were in place at the end of his Presidency, the deficit would grow to $3.3 trillion.

Similarly, the Clinton administration was in office for 8 years, and the policies that were put in place during those 8 years were projected to literally wipe out the American deficit--literally gone. A $5.6 trillion surplus as a result of the policies that were put in during the Clinton period. Those policies were tax policies. Those were the expenditure policies, a policy that we call today the PAYGO policy. That is, if you are going to start a new program, how are you going to pay for it? If you are going to cut taxes, what are you going to reduce in the expenditure pattern?

So, Reagan, a $1.4 trillion deficit projected beyond his Presidency. Bush, add another $3.3 trillion. Clinton comes along, 8 years, deficits turn into a whopping surplus and literally paying off the American debt.

George W. Bush comes in in 2001, and right off the bat, major tax cuts not associated with spending cuts but just major tax cuts. That was in 2001, followed up with a second round of major tax cuts in 2003, and in between a whole new Medicare entitlement adding a new expenditure at the same time that taxes were being reduced.

And for those of you that remember that period in 2001, we did have 9/11, and immediately we started the Afghanistan war. I think most of us would agree that that was the right thing to do, but it was not paid for. It was actually borrowed money that paid for the early Afghanistan war, followed a couple of years later, 18 months later, with the Iraq war, which once again was not paid for but, rather, borrowed money.

The result of all of that and the total pullback of the American Government from regulating the financial industry, the housing markets, was the Great Recession. At the end of the George W. Bush period, it was projected by the CBO, nonpartisan Budget Office, that the deficit would grow by $11.5 trillion if the same policies were left in place.

So where is today's deficit coming from? It is coming from the Reagan period, the first Bush period, the Clinton policies terminated, and the George W. Bush policies put in place, leaving us with a projected $11.5 trillion deficit for the next 10 years.

Now, the rest of the story is that, as a result of the Great Recession, the Obama administration came into office looking at this situation: An economy that was headed into not a recession but a depression and a huge deficit. That was put on Mr. Obama's plate the day he took office.

To deal with the Great Recession that could have become a great depression, a stimulus program was put in place, and it was expensive. And a bailout of Wall Street was actually put in place during the last 2 months of the Bush administration. A combination of those was somewhere about $1.5 trillion to $1.6 trillion, a huge whopping sum of money, but done for a good purpose.

And I don't know many economists, in fact I know of none, who would say it was not necessary. It was necessary that we deal with the Wall Street collapse and successfully stabilized Wall Street, the financial industry. It could have been done differently. Most of that money has now been repaid.

The money that was spent, about $750 billion, on stimulating the economy was similarly successful in stabilizing the economy and causing it to rebound slowly, but nonetheless rebound.

Here we are today debating the best way to deal with the deficit. We have a proposal from the President that over the next 5 years to 6 years would significantly reduce the annual deficit; not creating a situation such as ended the Clinton administration, but bringing the deficit back into a situation that is sustainable. That is the President's proposal, based upon holding steady, no growth in the Federal budget over the next 5 years, having the economy bounce back; ending one of the tax breaks that was put in place by George W. Bush back in 2003, that is, the high income, that is, the millionaire-billionaire tax break which is still in place but would end under the President's proposal.

It is following along closely the recommendations of the Deficit Reduction Commission that was appointed.

Now, that is the President's proposal. What we are debating on the floor beginning early this year with H.R. 1, H.R. 1, a continuing resolution to fund the government for the remainder of the year, was a $60 billion reduction in the discretionary expenditures of this government. No one believed that that would have a significant impact on the long-term deficit problem, but it would have a very significant impact on vital, vital programs that are necessary to continue the operations of this government.

So what are we to do? H.R. 1 passed this House and was rejected by the Senate. For me, that was the right thing to do, because H.R. 1 was estimated by two different economists, not Democratic economists, but independent economists, that it would kill 700,000 jobs across this Nation; immediately increase unemployment in America, reducing tax revenues--unemployed people don't pay taxes--but simultaneously increasing the expenditures for unemployment insurance, welfare and the like.

That is not a very wise thing to do, but that is what our colleagues on the Republican side suggested we should do. And it passed, with unanimous Republican support. I think there were three or four Democrats that voted for it. I think they were wrong. I think the Republicans were wrong.

That doesn't solve the deficit. You cannot take 14 percent of the Federal budget, which happens to be the discretionary expenditures that were targeted by our Republican colleagues in H.R. 1, and expect to do anything meaningful about the deficit. The deficit has to be dealt with over a long period of time, and it has to be dealt with in such a way that we actually put in place the foundations for strong economic growth.

What are those foundations? Well, in my view, there are six of them. If this economy is going to grow soon, mid-term and late, that is, in the years ahead, we have to have the best educated workforce in the world. So in the Republican proposal was an elimination of funding for higher education, funding for the Pell Grants that allow young men and women, and older men and women, to go into the university system. Not a wise thing to do.

The second thing, if we are going to have a foundation of good, solid economic growth into the future, we need to have the best research in the world. Once again, the proposal, H.R. 1, and the two subsequent continuing resolutions that have funded the government cut, cut research, critical research at our national laboratories. Nearly $800 million of funding for the Department of Energy research programs would be eliminated, laying off some 6,000 researchers, Ph.D.'s, scientists at the national laboratories that are working on research for energy production.

No one in this Nation would argue that we do not have an energy crisis. Check out the price of gasoline. We have a serious energy crisis. Yet the proposal would go right at the heart of the research that we need in order to solve the energy problem. Conservation, nuclear, cleanup of nuclear, research into photovoltaic, geothermal, all of the renewable energy research largely reduced and in some cases totally eliminated.

Health care. The fastest growing segment of our economy is health care. Research at the National Institutes of Health is wiped out, largely reduced. What kind of policy is that? If we are going to have a strong economy, we need to have a well-educated workforce. We need the research.

Thirdly, we need to take up the issue of manufacturing. We need to make the things that come out of research. Manufacturing really does matter. If we were to take the American manufacturing sector, as weak as it is today, it would still rank as the ninth biggest economy in the world. Manufacturing in the United States took an enormous hit during the Great Recession. About 25 percent of the jobs that were lost were in manufacturing. We hollowed out our manufacturing sector. If we are to grow this economy, if we are to have a serious reduction in the deficit, then we are going to have to make sure that manufacturing returns as a principal part of the American economy.

I am going to move on with the other three elements and then come back to manufacturing.

We need to have a very strong infrastructure. This is everything from water to sanitation to transportation, rail systems and air systems. One of the things that will be brought up on the floor has to do with the air transportation system in the United States. That infrastructure is critical. Yet in the proposal that we have had from our Republican colleagues, we are actually weakening the infrastructure system of this Nation. That is not a wise thing to do. But, nonetheless, our economy depends upon that infrastructure.

International investments are necessary. We need to export. We cannot find our economy growing if we continue to rely on imports. They may be cheap, but in their cheapness, they destroy the American manufacturing sector. So we need to keep that in mind as a principal investment that we need to make. It doesn't come cheaply. It requires us to spend money on the Department of Commerce that is out there helping to open markets for America. It requires us to finance the Export-Import Bank and other Federal Government agencies that actually support the export of goods and services from America.

And, of course, we have got to pay attention to the defense of this Nation. In the Defense Department, we need to always strive for efficiency. Now, I happen to oppose the war in Afghanistan. It is costing us about $120 billion a year. My view is we ought to end that quickly and spend some money focusing directly on the real threat, and that is the threat from al Qaeda and other terrorist organizations. We will come to that in a different discussion.

But those are the six critical investments: education, research, manufacturing, infrastructure, international trade, and defense. Are we doing well at those? Not if my Republican colleagues get their way with regard to the discretionary budget cuts.

There are some things that we can do that are not expensive. In fact, they actually will create jobs with no additional Federal expenditure. Let me turn to that at this moment.

My Democratic colleagues and I have developed a program that we call Make It in America. Make It in America. If America is going to make it, then we have to make it in America. What are we making? We need to make all of the things that this economy and this world needs for energy security--photovoltaic, geothermal, the new biofuels, the advanced biofuels--all of those things in the energy sector that allow us to prosper and to address the energy crisis, including--and I know the problem of Japan and the nuclear systems there. But 20 percent of our energy presently comes from nuclear. And that's going to be part of the future. So we need to make sure that we make it well, safely, and that those systems are made in America.

Manufacturing matters, and we need to make sure that our manufacturing sector is up to speed and actually making things in America. We cannot count on the Chinese or the Indians or any other nation to provide us with our manufactured goods. And the reason is that's where the well-paying middle class jobs are. It's been hollowed out over the last decade by, I think, unwise policies; but nonetheless we can restore it.

Let me tell you a couple of ways that we're proposing to do this in the Democratic Caucus. I love these charts. They seem to actually make a lot of sense and help display what we're talking about.

If we're going to make it in America, we need to make sure that we are educating and researching; and so these are crucial investments that I've talked about before--research, the health sector, science, a well-educated workforce with teachers that are capable of doing what we call the STEM--the science, technology, engineering, and manufacturing kinds of education. And we need to make sure that our workers are prepared to take on these jobs. So that's the first step. That's the education and the research step of it. And these are investments, and we need to make those investments.

Let me give you a couple of other examples of where public policy really becomes important. Photovoltaic, invented in America. Wind turbines, they have been around a long, long time, windmills and the like; but many of the modern technologies that are in the wind turbine system are American research. And, of course, transportation. It turns out that we don't really do much of this--or at least a year ago we didn't do much of this. We were importing the solar systems, the photovoltaic systems, importing many of the wind turbines that are out there in the wind farms providing us with energy and importing from other countries buses and trains and light rail systems.

What we say in the Democratic Caucus is each of these are programs that are subsidized or paid for with your tax money. There are subsidies for solar, photovoltaic systems. Good. We've need to do these kind of things for energy security, and it's a good place to spend tax money to encourage the development of those kinds of systems. All well and good.

But where are those solar panels made? Are they made in America, or are they made overseas? Our view and my own personal legislation is if you want to use American taxpayer moneys to help you buy a solar system either on your business or on your home, then you buy American-made solar systems. If your transit district wants to buy a bus using our tax dollars--this is the excise tax on gasoline--18 1/2 cents for gasoline and 25-plus cents for diesel fuel--if you want to go buy a bus from your local transit district--good. We need public transportation. But if you're going to use the public's tax money to buy that bus, then you buy a bus that's made in America. Make it in America. If you're using our tax dollars as a transit district or as a business or as a homeowner with a solar panel or a bus, then you use that tax money to buy an American-made bus.

Similarly, with wind turbines. This is a personal thing for me. In 1978, I authored the first State legislation for wind solar tax credits to get that industry started. And it did start. Altamont Hills, California, which I currently represent, has the oldest wind farm in America. Good. We're rebuilding those turbines, putting in new modern turbines, and we're expanding the wind industry in this Nation. Good. We need to do that. And we're using our tax money to subsidize it. That's good, too. But where is that wind turbine built? Is it built in Europe--Spain, Germany, Belgium? Or is it built in America?

Too many of these have been built in other countries using our tax money. And I'm saying with my legislation and the support of others that if you're going to use American taxpayer money to invest in wind turbines, then you buy American-made equipment, period. We don't need to buy Chinese wind turbines when we can make those in America.

These are ways in which we can rebuild our manufacturing base. It turns out that in the San Francisco Bay Area there is the Alameda-Contra Costa Transit District that has within that district one of the last remaining bus manufacturers in America. But until very recently that transit district refused to buy buses from a bus manufacturer in that district that was making buses that were every bit as good as buses made anywhere in the world. They have recently changed that policy.

Similarly, in the San Francisco Bay Area, the Bay Area Rapid Transit District, BART, was buying trains and wanted to continue to buy over $300 million of trains from foreign manufacturers. Many of us said whoa, whoa, whoa. Stop. Time out. Don't do that. Let's buy trains that are made in America.

So Siemens, a German company, has established a manufacturing plant and is upgrading a long-existing manufacturing plant in Sacramento to prepare itself to successfully bid for the manufacture of high-speed trains in California and around the Nation, as well as light rail systems, which they are now and have been for some time producing in the Sacramento manufacturing plant. Good. That's how we can use our tax dollars to rebuild the American manufacturing base.

As we do that, we rebuild a vital part of America's economy, that part of America's economy that was traditionally the heart and soul of middle America, the great American manufacturing sector. This is possible. Does it take new money? It takes a redirection of money that we have been spending for some time.

Let me add one more thing to it. As we look at the renewable industry, let us think about where we can find additional money to enhance the renewable energy industry. For one century, America has subsidized through various tax breaks the oil industry. We did that for the purpose of creating a very strong, viable oil industry that provided us with energy. It was eminently successful. The oil industry is the most profitable industry in America, and probably around the world. Very, very successful.

Do they need a continuation of tax breaks? Well, if you ask them, of course. Everybody wants a tax break. But do they need it? Not when they're running over the last 10 years just short of a trillion dollars of profit. The American oil industry in the last decade has earned $950 billion of profit. Do they need a tax break anymore? I think not.

I think we take that tax break, which, depending upon how much and whose estimate, is somewhere north of $10 billion, maybe as much as $20 billion a year, and use that money to build our renewable energy sector, subsidizing these kinds of things--photovoltaic, advanced biofuels, algae fuels, wind turbines--and to enhance our transportation sector.

These are strategies that we ought to employ. However, as to what is happening today, instead of taking the long-term view and making critical investments that actually will give us the foundation and the start to rebuild the American economy, we are going the other direction. I should say, my Republican colleagues are going the other direction. Many of us think it is the wrong direction. We should not shortchange those investments that actually will create short-term and long-term economic growth. It's critical that we continue to invest in those six things: education, research, transportation, manufacturing--obviously, we have to continue to invest in national defense, but we'd better be very, very wise.

As we do these investments--and, in fact, in everything the government does--we must always strive for two goals: that every program be effective, which is that it actually achieves its stated purpose, and that it be done efficiently. I call these the two E's: efficient and effective. If it's not efficient, then change the program so that it would be efficient. If it's ineffective and inefficient, it should be terminated. It's very simple. But if it is effective and efficient, then maybe we ought to continue it.

Now, in this recent week, we've had our Republican colleagues put forth four bills that literally terminate all of the Federal Government programs, save two, to rebuild the housing industry in America and, more importantly, to help those families that are in desperate trouble with their mortgages. Of those programs, some of them were ineffective, necessary but not yet effective and not up to the kind of efficiency that we would want. That doesn't mean they should be terminated; that means they should be modified because the problem continues to exist.

There is a homeowner mortgage problem in America of enormous, enormous importance. Some 10 million American homes are underwater. It's a problem. We've got to find a way of dealing with that, not just ignore it and not just wipe out programs that we would need. We need to have efficiency, so we look for not a bill that would eliminate it but, rather, a bill that would modify, create more efficiency, and continue to address the problem.

To this date, our Republican colleagues have only moved to terminate, not to replace, not to rebuild. Similarly, with health care, there has only been a bill to terminate, not a bill to improve when we know that we've got an ongoing problem.

I'm going to just wrap this up and let it go where we are, but let me go back and review very, very quickly.

There has been a raging debate here in Congress about the deficit. Where did it come from? How did we get to where we are? How do we solve this problem in the future?

The deficit didn't start with the Obama administration. It started way back, actually, a little bit before the Reagan administration, the Reagan and the George Bush I administrations. It was dramatically altered by Clinton, which actually would have, if those policies had continued, created a surplus, almost wiping out the total debt of America. Then it was run up bigtime during the George W. Bush administration.

These are projections 10 years following, if we'd continued the same policies, as to what would happen. That's where it started. Then there was the great recession and the effort now to deal with that.

The Obama administration has put forth a proposal that follows closely, along with the recommendations of the deficit reduction commission, that says: Don't--don't--do anything that would harm the current recovery, like make an austerity program, like make massive cuts. Yet our Republican colleagues have done and proposed exactly that. Fortunately, the Senate has not gone along with that, but we are nickel and diming our way towards $30 billion of cuts that may, in fact, cause us to see a decline rather than a continued growth in the economy. We must watch that very carefully. So that's the deficit piece of it.

Manufacturing matters. We need to be sure that we rebuild our manufacturing sector. There are many different pieces of legislation, of tax policy. I didn't mention this earlier, but one of the tax policies put forth by the Democrats last December--it actually went into law--was to encourage investment by private companies in capital equipment, allowing those companies in the first year to write off immediately 100 percent of the cost of capital equipment. A good idea. Unfortunately, very few of our Republican colleagues voted for that. In the manufacturing sector, let's make it in America. Let's use our tax dollars to make it in America. With all of the energy programs, transportation programs, let's use our tax dollars to buy American-made equipment.

Finally, research and education. This is not where the cuts should occur. Yet our Republican colleagues are suggesting that that's exactly where it should happen: major cuts in research, energy, education, health care. You cannot make those cuts and expect this economy to be competitive.

One little fact that I just heard about today is that it is expected in the coming year that the Chinese economy will produce more scientific advancements than will the American economy. This will be the first time in, perhaps, three-quarters of a century that the United States Government will give up its lead in scientific advancements. This is not the time for this Nation to make cuts in our science agenda, whether it's in the medical/health care area, the energy area, or in any of the other kinds of research in which we have always been the leader.

Food for thought. Things for us to consider.

I would like the American people to be aware of the real deficit story. You cannot solve it by making massive cuts in just 14 percent of the budget. Yet that's what our Republican colleagues are doing. We need a long-term plan, one that is 5 years, 10 years, to bring our budget back into balance. We can do it. It was done during the Clinton period.

This little chart here gives you some idea of one half of how the Clinton period brought about a budget surplus. This is the spending side, and these are the expenditures of the American Government as a percentage of the economy.

During the Reagan/Bush period, 22-23 percent of the American economy was for government expenditures. It dropped down to 21, but it basically bounced between 21 and 23 percent. During the Clinton period, as a result of policies that were put in place during his period--PAYGO, reinventing government, and other governmental policies--we saw a steady decline in the percentage of the economy that was going to the Federal Government. At the same time, we had very strong economic growth. Those are two of the three things that operate together. There was also a Clinton tax increase that took place that basically added an additional tax burden at the very, very top of the income categories. So the combination of those reductions in the percentage of the economy that was used, good economic growth, and a tax increase that occurred in the very early period, particularly a tax increase on the very wealthy, led to a surplus. George W. Bush came in in 2001-2002, and things reversed.

First of all, there's an increase in the percentage of the economy that went to government, principally the Medicare drug program and the wars, and then this very, very steep rise that occurred right at the end of the Bush administration as a result of two things: one, a plummeting of the American economy as the Great Recession took hold in 2008 and the effort to deal with the Great Recession with the stimulus; and right here at the end of the Bush 2, the financial bailout. And so that's why we saw this extremely high line.

Now, you notice that in the last period, which is the 2010-11 period, we've begun to see a decline once again in the percentage of the government, of the economy that is government spending; and, if we follow carefully the budget that's been put together by the Obama administration, this line will continue to fall back into the 20 percent, 21 percent range, bringing back into balance the Federal expenditure. It cannot and will not happen overnight. It's going to take us 5 years, maybe even longer, to bring this thing back into balance.

Keep in mind the words that were used by the recommendation of the budget deficit commission: Don't do anything immediately to harm the American economy by making rapid, unnecessary, unwise cuts in the Federal expenditure. That will put people out of work. 700,000 people would lose their jobs immediately with the proposal that was put forth by the Republicans but fortunately stopped by the Senate. If that had become law, 700,000 jobs immediately lost and a spike once again in this ratio of government spending.

So we've got work to do. We can do this, but we need to take the long vision, and we need to be very careful that we make the critical investments.

Source