Fiscal Discipline
Floor Speech
Mr. CORNYN. Mr. President, earlier this week the Congressional Budget Office released its latest long-term outlook. Of course, the CBO, as it is known around here, is the authoritative guide to all things involving the finances and the fiscal picture for the Federal Government. That long-term outlook offered us a sobering reminder the Federal Government cannot defy the laws of fiscal gravity forever. In other words, as every American knows--every working family knows--your output can't exceed your input forever. In other words, you can't spend more money than you have coming in. Unless you are the Federal Government, of course. But sooner or later we will have to reverse the trend of debt accumulation before it destroys our economy, because our current path is simply unsustainable.
The crazy thing about it is that everybody in Washington, particularly the Congress, knows that. Yet it seems as though they are in a state of denial about what could very well happen to our country and to our future if we don't act. As I said, it is a very sobering message, and it is also very different from the message President Obama has been delivering lately. He likes to talk about America's short-term budget deficit falling. To remind everybody, there is the debt and there is the deficit. The deficit we measure on an annual basis. Debt is the cumulative shortfall between what comes in the front door and what goes out the back door. That debt is now about $17 trillion.
For these young people down here, that means they each owe about $52,000 because my generation and other adults have not been responsible, and we have shoved off onto the next generation the responsibilities we ought to be meeting ourselves. So here is the reality. Any short-term deficit reduction will be meaningless unless we adopt longer term reforms. That means where the Federal Government spends most of its money, which is in mandatory spending--the spending that keeps Social Security and Medicare, among other programs, going. We need to also bend the spending curve down so that we are spending less money as well.
The Congressional Budget Office estimates, when we factor in the likely impact of rising debt levels, the publicly held debt is on course to reach 108 percent of our gross domestic product in 2038. The gross domestic product is basically another way of saying the size of our entire economy. So 108 percent of the size of our entire economy is their projection, and that is before we include money the Federal Government effectively owes itself.
I realize 2038 sounds like a long time from now. I remember as a kid I thought the year 2000 was going to be a long way away, but we now see that only in our rearview mirror. But by 2038, under current law, our net interest payments, as a share of our economy, will be 2 1/2 times greater than the 40-year average.
Let me boil that down a little bit. When we borrow money--because we are spending money we don't actually have--that adds to our annual deficit. But it also, over time, adds to our national debt. We have to get somebody to buy that debt so we can continue to spend money we don't have, so that we can continue to spend borrowed money. We have to pay interest to our creditors. In other words, they are going to expect a rate of return, as anybody would, when they loan somebody money. When China loans us money, it is not cost free. When they buy a huge portion of our national debt, it is not cost free.
Over time we will see interest rates--which are really at historic lows now because of the aggressive action of the Federal Reserve keeping those interest rates low--go back up to historic norms, and then we are going to see that a larger and larger share of what the Federal Government spends is merely to pay China and our other creditors who buy our debt, unless we take aggressive measures to begin to bring our debt load down.
The President and the Democrats frequently demand more spending on things such as research and development--that is a good thing--or infrastructure--that is a good thing--yet they refuse to embrace the serious reforms necessary that enable us to do so. Here again, when the interest payments on the debt invariably go up, they will crowd out spending on other priorities, such as research and development, such as infrastructure, such as education, and others that should be among our national priorities.
The Congressional Budget Office projects that by 2038 total spending on everything other than major health care programs, Social Security, and net interest payments would decline to 7 percent of gross domestic product, and that is down from 11 percent, which is the average over the last 40 years. That is the crowding-out effect I was mentioning a moment ago. When we spend more and more money on these other programs, it crowds out spending on other things necessary to keep our economy growing and to keep people employed.
If we don't start reforming our biggest mandatory spending programs--again, that is Social Security and Medicare--in a responsible way, it will become much harder for the Federal Government to perform its most basic obligations and it will leave these young people and others--such as my daughters, who are in their early thirties--holding the bag, not only with the debt I mentioned a moment ago, but also with broken programs that are unsustainable, that will not be there for them when they turn 65 or when they get older.
It is a law of nature that you cannot keep spending money you don't have, and you can't keep racking up debt forever without any consequences. The only question is whether the reforms I am talking about will be gradual--will be phased in over time--or whether they will be sudden and abrupt and disruptive. If we start now in a responsible way, these reforms can be gradual.
Thank goodness, when Social Security was passed people didn't live to be 80 years old, on average, and they weren't as productive as they are today. That is a good thing. Modern medicine and nutrition have made it possible for us to live longer, on average, and to be much more productive. But we need to make sure we take into account, through Medicare and Social Security, the fact that people are living longer and are more productive. We need to make certain our programs are modernized to keep up with those facts and make sure they are available in the future, particularly among our most vulnerable citizens. If we wait until America is on the verge of a debt crisis, the reforms will have to be abrupt. In other words, when the bottom drops out, a lot of people are going to be hurt, and it will be far more difficult to protect the most vulnerable among us from the harshest sort of cuts.
What I am suggesting makes sense. Wouldn't we prefer to be in control of a gradual reform of our mandatory spending programs that are phased in over years, in ways most Americans will not actually feel because it can be done gradually? To me, it makes sense to do that as opposed to watching the bottom drop out or just simply kicking the can down the road. You know, they say: If you kick the can down the road long enough, pretty soon you are going to run out of road.
Let me again quote from the Congressional Budget Office. They said:
At some point, investors will begin to doubt the government's willingness or ability to pay U.S. debt obligations, making it more difficult or more expensive for the government to borrow money. Moreover, even before that point is reached, the high and rising amount of debt that CBO projects under the extended baseline would have significant negative consequences for both the economy and the Federal budget.
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Mr. CORNYN. Those negative consequences would include less private investment; more Federal spending on interest, which I have talked about briefly; less flexibility to address unexpected events, which you know always seems to occur--such as 9/11 or a natural disaster--and more risk of a full-blown debt crisis.
To the extent President Obama and our friends across the aisle acknowledge our long-term debt problem, their main solution seems to be always the same: Let's raise taxes some more. In fact, they are now trying to use tax reform, which we thought should be revenue neutral, as a vehicle for another $1 trillion tax increase. We are told that is a condition of even talking about reforming our Tax Code, to make it flatter, simpler, and more growth oriented. That is after the President and his allies have already raised taxes by $1.7 trillion. So there is never enough to feed the beast of the Federal Government here in Washington. It is insatiable.
Meanwhile, to the extent the President acknowledges the need for Medicare reform, his proposals always involve more price controls, primarily on the providers. Yet price controls have not solved Medicare's fundamental cost problems, and they won't solve it in the future. They say: We can save money on Medicare. We will just whack the payments we make to doctors and hospitals. I can tell you from talking to the hospitals and doctors in Texas--who would like to see Medicare patients but they can no longer afford to do so--that it is limiting access to health care by just dealing with Medicare on this basis of price controls and whacking payments to providers.
Amid the weakest economic recovery and the longest periods of high unemployment since the Great Depression, the last thing we need is another massive tax increase that would discourage work, savings, and investment. We all know we cannot simply tax our way back into fiscal stability, and we cannot spend our way back into economic prosperity. If the President would merely accept those two realities, we might finally get the kind of long-term reforms and the real long-term spending cuts that might finally produce the economic recovery America is desperately waiting for and desperately needs.
Mr. President, I yield the floor.
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