The
GOP Tax Reconciliation Bill is about to come to a vote, and Sen. Kent Conrad D-ND, speaking from the floor of the Senate told us all how the bill, rather than decreasing the deficit, is poised to dramatically increase it in coming years. Covered by C-Span (transcript not yet available), the presentation, complete with highly illustrative charts, effectively synthezised the relationship between Social Security and debt. The main take-away point:
The deficit is irrelevant; we should be focusing on the DEBT. The debt is poised to
explode.
Mr. President, I think the chairman of the Budget Committee just summed up the position of his party when he said we have to borrow the money because we have the debt. That is exactly right. Their party has put us on a fiscal course to explode the debt.
Why? See below.
Kent Conrad has the "cred." For one thing, he is Senate Budget Committee Ranking Member. On his website are
the charts he used for today's presentation and the
accompanying statement. I had intended to associate each chart with its section of the statement, but I have discovered I cannot point back to each chart in the original pdf. Check out the links for yourself. Sen. Conrad did a great job explaining the looming DEBT, not deficit, crisis.
The President assured us when we embarked on this course that there would not be deficits. Then, the next year, he told us the deficits would be small and short term. Then, the next year, he told us they would be small by historical standards. Now he says he is going to cut them in half over the next 5 years.
Let's compare rhetoric to reality. Here is what has happened. In 2001, the first year he was in office, inheriting surpluses from the Clinton administration, we had a $128 billion surplus.
Remember, even those there was a surplus, the US was still in debt. But then what happened?
The next year, we were back in deficit. The next year, 2003, we had the biggest deficit ever, only to be exceeded, in 2004, by an even larger deficit. And this year, again, we have the third largest deficit in our history but somewhat of an improvement.
Let me say to my colleagues, this modest improvement is largely illusory because it focuses just on the deficit. I say to my colleagues, what we ought to be thinking about, what is really far more important to the fiscal future of the country, is not the growth of deficits, but the growth of the debt.
While media attention has been focused for year on the deficit, the elephant in the room is the debt. Why?
Well, the biggest reason is because under the President's plan, $173 billion of Social Security money was taken to pay for other things. That all gets added to the debt. It all has to be paid back. But it is not included in the deficit calculation. Very frankly, these deficit calculations are increasingly irrelevant to understanding the true fiscal condition of the country.
Media framing of the issue has been all wrong.
I see the news media, very frequently, say: Well, as a share of GDP the deficit is not as big as the deficits were in the 1980s. That is true. But it is totally misleading. Why? Because back in the 1980s, there was virtually no Social Security surplus to be used to pay for other things. In fact, until 1984, there was no Social Security surplus -- none. Then, in the 1980s, the Social Security surpluses were very modest. But look what has happened over time. The Social Security surpluses have exploded, masking the true size of what is being added to the debt of the country -- masking the true size of the deficits is probably a better way to say it.
Robbing Paul to pay Peter would be a crime if private companies did it.
I say to my colleagues, if any private sector entity tried to do what we are doing here, they would be headed for a Federal facility. But it would not be the Congress of the United States, it would not be the White House, they would be headed to Federal prison because any private sector entity that tried to take the retirement funds of its employees and use them to pay for current expenses, they would be guilty of Federal violations of law. They would be guilty of fraud. You cannot take the retirement funds of your employees and use it to pay current expenses. That is exactly what we are doing
here, every year.
The real problem is the gap between expenses and revenue.
We are headed for a train wreck. The President says: Don't worry. We are going to cut the deficit in half over the next 5 years. Our problem is not a 5-year problem. In fact, that is the sweet spot of the budget cycle. That is the sweet spot because that is before the baby boomers have retired. In addition, the only way the President gets to his claim of reducing the deficit, over 5 years, in half, is he just leaves out things.
.
What happens in five years?
When you add back the things he left out, here is the picture we see emerging, and this is just the deficit calculation. The debt calculation, as I have described previously, is far worse. We are going into a circumstance in which the next 5 years -- these are the good times; it is before baby boomers retire -- we are headed for an extraordinarily serious set of circumstances if the budget plan of the President is maintained. Why? Because many of the proposals he has explode in cost right beyond the 5-year budget window. For example, the cost of his tax cuts absolutely explode right beyond the 5-year budget window. So does the cost of dealing with the alternative
minimum tax. It explodes beyond the 5-year budget window.
This explosion is poised to happen in the second term of the next president who will likely be a Democrat. Of course, people will have forgotten the Bush administration by then, and it will all be the Democrat's fault.
The debt is exploding before the baby boomers retire. What are the implications? Well, here is one of them. Foreign holdings of our debt have doubled in the last 5 years. It took 42 Presidents, pictured here, 224 years to run up $1 trillion of external debt. This President has exceeded them all. He was able to double foreign holdings of our debt in just 5 years. It took 42 Presidents 224 years to run up $1 trillion of external debt. This President has added more than $1 trillion of external debt in 5 years.
To whom do we owe the debt? Well, here is the latest scorecard. We owe Japan $687 billion. We owe China $252 billion. We owe the United Kingdom $182 billion. And my favorite, the Caribbean banking centers, we owe over $100 billion. We owe South Korea over $60 billion. I submit to my colleagues, that does not make America stronger. That makes America weaker.
Sen. Conrad presented the PAYGO amendment to the bill, and described how this amendment would accomplish the same goals as the original bill, but without cutting things like student loans. The results would be paid for by closing loopholes such as Conrad's personal favorite, whereby companies buy the subway systems of foreign cities, depreciate the subway system in their books to avoid taxes, and lease the system back to the original city. Conrad called this scheme a scam, and said closing down such scams would alleviate US budget woes without raising taxes.
Please watch the c-span broadcast yourself by watching for it under "Recent Programs.