Balanced Budget Amendment

Floor Speech

Mr. THUNE. Mr. President, our Nation has an over $14 trillion debt and unless we can get a handle on it--I have a chart which I think shows what our future will look like if we stay on the current trajectory. You can see that the path leads higher and higher in debt to GDP levels. That level is unprecedented in American history. You have to go back to World War II when we had this kind of debt to GDP. The chart shows we are going to face an ever increasing burden and debt.

Without shoring up our finances, we know what our future will look like. This week, we saw that the country of Greece had to approve an austerity package to be eligible for their next disbursement of a multibillion dollar bailout loan from the IMF and other European countries. This austerity package included 28.4 billion euros in spending cuts and tax increases. That is exactly what will happen if we don't do anything. We will reach a time when we will be facing massive cuts in spending and tax increases, if we don't get our fiscal house in order.

But that isn't necessary, because there is a better way to solve this problem. Instead of more debt and spending, we can pass a balanced budget amendment that would prevent us from spending more than we can take in. We know what the effect of this will be on our future as well.

We have States across this country--49--that have some type of balanced budget requirement, including South Dakota. That is the reason why our State's budget is always balanced. Our legislature cannot go home until that happens. We need that same sort of discipline here in Washington, and a balanced budget amendment would bring that about.

I have with me on the floor a colleague from Nebraska, Senator Johanns, who also served as his State's Governor. My understanding is that the Senator from Nebraska, when he was Governor, had a balanced budget requirement in Nebraska's constitution. I wonder if he can explain the effect that had on his State, and whether it forced them to make some of the tough choices necessary to get a budget balanced.

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Mr. THUNE. Mr. President, I appreciate the comments of my colleague from Nebraska. As a former executive--both as mayor and Governor--he, obviously, has had to make the hard decisions necessary to get the books to balance both in the city of Lincoln and the State of Nebraska. As he has observed, the economic circumstances the State of Nebraska finds itself in today are so much better than other places around the country.

Now, granted, there are lots of factors that contribute to that. Part of it has to do with the business climate in some States around the country. But, clearly, it is also a function of the discipline the State of Nebraska imposes on itself through its balanced budget amendment and the decisions of the leaders in that State, both legislators and Governors, in order to make that possible.

So I think the experience of the Senator from Nebraska is valuable in helping us shape the debate that ought to occur on this balanced budget amendment. I would say one of the features of the balanced budget amendment that we are both cosponsoring is that it caps spending at 18 percent of our entire economy. That is not a number picked out of thin air. It is a number that comes from the historical level of taxation for the past 40 years. In the past five times the budget was balanced in Washington--and bear in mind five times probably in the last 40 years--spending averaged just under 18.7 percent of GDP--not too far off what the cap under the balanced budget amendment would require.

Further, we know in 2007--a year in which we had tax laws that are very similar to current tax laws--revenue was 18.5 percent of GDP. So if we could constrain spending to 18 percent of our entire economic output, we would be able to balance the budget without raising taxes.

Our colleagues on the other side continue to claim the problem could be fixed if we would only raise taxes on a few rich people, tax corporate jets, stop giving tax breaks to American energy production, and those sorts of things. The truth is, the tax proposals from Democrats put only a relatively minor dent in the deficit. To truly balance the budget through tax increases we would have to see astronomical rate increases that would hit not only high-income earners and corporations but the middle class and small business as well.

This is clearly not what the American people want. It is not what I want. Simply raising taxes on job creators isn't going to improve our economy. It is only going to hurt it more. And tax increases aren't the only threat to our economy. We also know these current levels of debt are costing us about 1 million jobs a year as well, and these debt levels are only predicted to increase.

In his experience as a Governor, I guess I would ask my colleague from Nebraska whether when it came time to make these hard decisions about balancing the budget, did the notion of raising revenues, increasing taxes, come into play? I am sure that was a debate that was always raised. It always is. You can either reduce the amount of spending or you can raise taxes on someone.

It strikes me the problem we have in Washington is not that we don't have enough revenue. We have plenty of revenue. We just have too much spending. I am curious to know in the State of Nebraska what his experience was in terms of this debate we have about more taxes or less spending.

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Mr. THUNE. I thank the Senator from Nebraska for his observations. In a minute I want to turn to the ranking member of the Senate Budget Committee to talk about setting priorities, because that is something we are not doing here.

I do want to point out in the course of this discussion, however, that what you have said is exactly right. You cut spending and you grow the economy. One of the things you need to do is you have got to create jobs, you have to get economic expansion going. The way not to do that is to raise taxes, and that is the prescription many of our colleagues on the other side would like: Let's get more revenue and raise taxes.

That is absolutely the opposite thing that you would do when you have got a downed economy and you are trying to create jobs. What we ought to be looking at is how do we reduce the size of government, get us living within our means, and getting the economy growing and expanding again and creating jobs.

I want to point out one thing. This is important, in my view. We are planning right now, to the extent that there is any planning going on here--and, unfortunately, without a budget it is very difficult to prioritize. But there are expectations about what revenues are going to be for the foreseeable future.

There was an interesting op-ed piece earlier this week in the Wall Street Journal written by Larry Lindsey, who is a former economic adviser to President Bush and also former Federal Reserve Governor, who pointed out that the current predictions for the debts and deficits in the coming years are very optimistic for a couple reasons.

One is that the White House and the CBO are using very optimistic numbers for growth in our economy. While I hope they are correct, I am concerned that they could be very much overstating the potential for growth in our economy. If more realistic numbers were used, what Larry Lindsey recognized in that story was that the impact of the financial crisis on our economy, our debt numbers could jump by an additional $4 trillion over the next 10 years by assuming a more historic growth level, given the times that we have been through.

At the same time, the President and the CBO are also predicting that interest rates are going to remain much lower than they have historically. What Mr. Lindsey pointed out in this op-ed was that if interest rates normalize--in other words, reset to what are the historical averages--it would cost us an additional $4.9 trillion more over the next 10 years to finance our debt than what we are currently expecting. So those two factors alone would have an $8.9 trillion negative impact on these forecasts for the next decade. Again, it points to the importance of getting spending under control and doing it now.

He finally pointed out that the new health care law is another significant hidden cost. If you look at what employers are increasingly being faced with, many of them are going to choose to dump their employees into these public exchanges and you are going to see the additional costs of anywhere from about $74 billion to $85 billion a year over the next 10 years.

You start adding that up, you add in the economic growth assumptions--again, I hope they are right. But assuming they are wrong, you have lower levels of economic growth, which I think are probably more realistic levels. If you have more realistic interest rates at least in terms of historical averages, these long-term predictions get awful in a real hurry.

The nice thing about having a balanced budget amendment is you are forced to make those decisions every year. Instead of dealing with these long-term predictions, which are often inaccurate, each and every year the budget has to be balanced. So if interest rates go up, the budget has to be balanced. If employers put their employees on the exchanges, the budget has to be balanced. If there are fictional savings from these independent payment advisory boards that are being created and those aren't realized, the budget has to be balanced. If taxes don't produce as much revenue as predicted, the budget has to be balanced.

This is the very simple solution that, as the Senator from Nebraska pointed out, so many States have come to, so many States have concluded that you have to have some sort of a requirement to balance the budget is the most powerful fiscal reform we could have here in Washington, DC.

We have credit agencies that are questioning our long-term budget outlook. If we did a balanced budget amendment, I think there wouldn't be any question that our country would be able to pay all of our bills.

I was a Member of the House of Representatives back in 1997. I think the Senator from Alabama was here at the time. There was a vote on a balanced budget amendment at that time. We didn't vote on it in the House because the Senate voted on it first. The Senate came within one single vote of passing a balanced budget amendment. Had they done that, we would have been able to pass it in the House. We had the votes for it. We could have sent it on to the States. I can't help but thinking how different our fiscal situation would be today if they had had that one additional vote back in 1997 to get us a balanced budget amendment.

Many of our colleagues here campaigned on a balanced budget amendment. Hopefully when we get a chance to vote on it--and I hope we do here in the next few weeks--we will see whether the rhetoric matches the actions.

But all that is to say we have a major fiscal challenge facing this country. For all the reasons the Senator from Nebraska noted, we are handing our children a burden of debt that is not fair to them, trillions and trillions of dollars. We have to bring some discipline to the process of budgeting around here. What is unfortunate--and this is why I want to turn to our colleague from Alabama, because he is the ranking member on the Senate Budget Committee--we have done nothing in 792 days to prioritize spending.

This Federal Government spends $3.7 trillion annually of the taxpayers' money, and we have not passed a budget for 792 days, let alone one that actually balanced.

My State of South Dakota spends annually about $3 billion. This Federal Government borrows $4 billion every single day. The borrowing of the Federal Government exceeds in 1 day what the State of South Dakota spends in an entire year. That is the dimension of the problem we are dealing with. All that being said, it has been 792 days since we produced a budget here in the Senate.

I say to my colleague from Alabama, clearly this is a problem that needs to be addressed. Wouldn't the Senator say this is reflective of the lack of political courage, the lack of political will, the lack of discipline around here? We have colleagues on the other side who say we don't need a balanced budget amendment. That is a gimmick. All we have to do is balance the budget. Well, where is it? Where is the budget, and where is the budget it is supposed to balance? It is not happening. So I think the balanced budget amendment is a simple, straightforward way in which to deal with a massive challenge facing us in the future, and we need some discipline imposed upon Federal spending on the Congress that so many States have, and as the Senator from Nebraska pointed out, as the Governor of his State he was able to exercise.

I would refer to my colleague from Alabama to ask him his thoughts about where we are with regard to the budget, and is our lack of discipline here--or, I should say, is our lack of willingness to pass a budget not a reflection of a lack of discipline that exists in the Congress today and an unwillingness to make the hard choices that are necessary to get this fiscal train back on track?

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