The Federal Deficit

THE FEDERAL DEFICIT -- (House of Representatives - February 16, 2005)

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Mr. SCOTT of Virginia. Mr. Speaker, I thank the gentleman for yielding.

Mr. Speaker, on this chart the gentleman shows the blue line as to the President's promise to cut the deficit in half within 5 years. Cutting the deficit in half within 5 years is certainly a modest goal.

Is it not true that the projected surpluses that we started off this administration with would have created $5 trillion in surplus? Yet according to the first chart you had, we are very much in debt, and we come up with a promise to cut the deficit in half in 5 years. What kind of goal is that? Why are we not talking about returning to surplus, where we were, and not having all of these deficits? Is cutting the deficit in half not somewhat of a bizarre goal?

Mr. SPRATT. Mr. Speaker, reclaiming my time, first of all, the gentleman is absolutely correct. When the President came to office, he had an advantage that no President in recent times had enjoyed, a surplus projected to be $5.6 trillion between 2002 and 2011, over a 10-year period of time; $5.6 trillion. That surplus is now gone, vanished. In its place there is a deficit over the same time period of $3 trillion to $4 trillion. This shows you how the $3 trillion to $4 trillion accumulates over that period of time.

We have had a swing of $8.5 trillion to $9 trillion in the budget over a 4- to 5-year period of time, a swing in the wrong direction of $8 trillion to $9 trillion.

Mr. SCOTT of Virginia. Mr. Speaker, I would say to the gentleman that one of the things when you run up all this deficit, you have to pay interest on the national debt every year. The interest on the national debt, you have a chart that shows what we spent in 2004, what we are going to have to spend.

Mr. SPRATT. The big red bar is the amount of interest, or debt service, that we pay, first in 2004, and then to its right, 2010.

Mr. SCOTT of Virginia. Mr. Speaker, if the gentleman will yield further, interestingly enough, I remember when President Clinton left office that we expected to pay off the national debt held by the public by 2008, in which case we would be paying zero interest on the national debt. Here you show in 2010 a $300 billion interest expense.

Is it not true that with $300 billion at $30,000 each, you could hire 10 million Americans? That is even more than the number of people unemployed today.

Mr. SPRATT. The gentleman is correct. When the President came to office, we had before us in Congress a novel idea, which would have been truly a conservative fiscal proposal, namely, that we would take the surplus in Social Security alone and instead of buying up new debt and funding new spending, we would use that surplus to buy old debt, retire that debt. We would add that money, $3 trillion-plus, to net national savings, bringing down the cost of capital, boosting the growth of our economy; and then in 2020, when the Social Security beneficiaries, the baby boomers, begin to press their claims for benefits, Treasury would be more solvent than ever to meet those obligations.

That would have been the first long step we could have taken toward Social Security solvency. There was support for it on both sides of the aisle. The President rejected that in preference for his own budget, which has led us to the deficit which appears there now.

Mr. SCOTT of Virginia. Mr. Speaker, if the gentleman will yield further, when we have all that interest on the national debt, that means that NASA will not have any money. NASA-Langley in my district is suffering cutbacks, laying off people. Shipbuilding, we would not be able to build the number of Navy ships, we are particularly trying to cut back on aircraft carriers. Pell grants are not going up with inflation. We are cutting back veterans health care. We are not keeping up with inflation to maintain present services and veterans health care in the middle of the war.

Is that not the kind of thing that happens?

Mr. SPRATT. Mr. Speaker, reclaiming my time, the gentleman is right on the mark. When you have an enormous increase in debt service like this, what it does is crowd off, trade off, other things that would normally be purchased, defense and non-defense goods and services.

Instead, the one thing that is truly obligatory in the budget is interest on the national debt. We cannot fail to pay it, or the credit of the United States collapses. So it takes precedence over everything else. You can see it has become the big boy on the block. It eclipses other non-defense spending priorities. From education to health care to veterans health care, you name it, interest on the national debts will be crowding out these other priorities, and the American people will pay substantial taxes to service this debt and wonder why they get nothing in return.

Mr. SCOTT of Virginia. Mr. Speaker, I had just one other question. On the first chart that the gentleman had up there, on the other side, the first chart the gentleman had, I remember we had something called pay-go during the Clinton years.

Can the gentleman explain how that helped us keep the trend up, and then what happened?

Mr. SPRATT. Mr. Speaker, we had two rules in the 1990s that applied from 1990 through the year 2000, really until 2002, and those rules effectively said, number one, the pay-go rule, if you want to increase an entitlement, liberalize the benefits of an entitlement program, you have to pay for them with an identified new source of revenues, or you have to cut some other entitlement somewhere else of the same amount.

Secondly, if you want to cut taxes, you have to have another tax to offset the revenue loss, or you have to cut entitlements enough so the bottom-line effect is neutral. Those two rules, with a discretionary spending cap, those rules that helped us put the budget in surplus for the first time in 30 years to a $236 billion surplus, what the Bush administration did was let those rules lapse, expire.

Mr. SCOTT of Virginia. So during those years, we had fiscal responsibility. We could not spend money unless we paid for it; we could not cut taxes unless we cut spending; and maintaining that fiscal responsibility kept that line going up. And, at the top of that line, we stopped pay-go and we passed tax cuts without spending cuts, and we passed spending increases without paying for them; is that right?

Mr. SPRATT. That is correct.

Mr. SCOTT of Virginia. And that graph shows what happens.

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