Nick Smith

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Is that not amazing? And I am going to give an example for some folks down in Hillsdale County, where the homes are a little less. If you had a $50,000 home and you ended up having--you had a mortgage that lasted over 30 years, it would reduce the amount of money that those homeowners paid by $30,000. Think of what would happen if it was a business deciding to invest a half a million dollars in some new equipment or build new machinery. It would reduce the cost of that equipment and machinery, we would end up putting better tools in the hands of the greatest work force in the world; that is, the American work force; and we would see our productivity take off. I mean, that is why Alan Greenspan followed it up saying, look, if you can do this and interest rates drop, you will see this economy growing like it has never grown before.

Mr. SMITH of Michigan. Mr. Speaker, a challenge is facing this country, and I think there is excellent news for our future, for families, for wages that give families a decent living, if we make some simple changes down here in Washington. Washington cannot do everything, and eventually, you know, in this country we are going to have to produce a good product that people around the world in this country want to buy, and we can sell it at a reasonable price. Government can do some things to make sure that happens. Think for a moment as you look at tax policies around the world and in the industrialized nations, and I see our chairman of the Committee on Ways and Means here. We in the United States penalize savings and investment more than any of those countries. If you look at what has happened the last decade, we see the United States trailing in savings. Out of every take-home dollar in the United States, we are saving about 4 cents. That compares with about 18 cents in Japan, up to 34 cents out of every take-home dollar saved in South Korea. So we are shy on savings. Part of it is because we have tax policies that discourage savings, almost penalize savings. If you look at the investment, the new investment in machinery and equipment over the last 10 years, again we see the United States investing less per worker than those other industrialized countries. So it is not surprising that the result is a lower, slower rate of increase in productivity. Make no mistake, the United States is the most productive nation in the world, but our rate of increase in productivity is slipping over the last decade. We cannot afford that. What is happening in this post-cold-war economy is that Eastern Europe, the Asian tigers, are doing everything they can to attract capital. I was talking to some of the Wall Street financiers 3 weeks ago. They are saying with some of their portfolio funds they are now investing in other countries because they think they might be able to get a higher rate of return. Look, in this next campaign we are going to be talking about new taxes, we are going to be talking should it be a flat tax, should it be some kind of a national income tax, should it be some kind of a value- added tax? All of those taxes are essentially the same in achieving the goals of encouraging savings and encouraging investment. The country that attracts that investment and expands the capital in their country is going to be the country that ends up with a higher standard of living. We have got to do that. Here are some of the things that we can do to increase the savings rate in this country: We have got to reduce the negative savings that is caused by Government overspending. Government now borrows about 18 cents out of every dollar we spend. That means that if you look at all of the money that was lent out in the United States last year, the Federal Government borrowed almost 42 percent of all of the money lent out in the United States last year. We remember our lessons in economics. The greater the demand, the higher the price. That is why Alan Greenspan came to our Committee on the Budget and said, ``If you guys can balance this budget, you are going to see interest rates drop between 1.5 and 2 percent.'' That means a tremendous difference in what happens to the economy, it makes a tremendous difference in reducing the price of everything we borrow money for, from cars to homes to college educations. I would yield to the gentleman from Georgia [Mr. Kingston].

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, this morning the headlines on the Congress Daily, the little newspaper that goes out on the Hill every day, says Senator Domenici recommends that the increase in the debt ceiling be used as leverage to make sure we get on a glidepath to a balanced budget. There were 160 of us, Mr. Speaker, as you know very well, that sent a letter to the President of the United States saying that we are not going to vote for an increase in the debt ceiling unless we do get on that glidepath to a balanced budget. I brought this chart this morning to explain why it is so important that we insist to the full extent of our ability that we make changes in some of those entitlement programs, make some changes in those welfare programs that are leading us to pass higher and higher debt ceiling and more and more borrowing. As my colleagues see on this pie chart, the bottom blue part of that pie chart that now represents 50 percent of the $1.6 trillion annual spending is the welfare programs and the entitlement programs, the so- called mandatory spending, now using up half of the Federal budget. As a point of reference, I would just suggest that, if we look back to the year, for example, 1955, mandatory spending only represented 3 percent of the total Federal budget spending. The Constitution of the United States says that Congress is responsible for controlling the purse strings. It is responsible for spending. But what has happened in the last 40 years is Congress has given away that authority to legislation that says, if you meet these certain qualifications, of age or poverty or whatever, you are automatically entitled to these payments. It is no longer annual appropriation bills that are controlled by Congress. A majority in Congress can no longer control or reduce that spending that is using up 50 percent of this Nation's budget without the consent of the President. So the question has been, how do you get a reluctant President that does not want to cut spending to make some of the changes in these welfare and entitlement programs? We have suggested that we are going to be as vigorous as we can in suggesting that, look, what causes most of the increased debt is the entitlement programs. Therefore, it is not only reasonable but they are inextricably tied to each other, the debt ceiling increase and changes in some of these welfare entitlement spending programs. If my colleagues were to take a look at the other provisions of this pie chart, the green represents defense spending. Everybody agrees now that there has got to be a defense spending. In fact, the administration is suggesting that even now we might need a supplemental to cover the expenses of Bosnia. But the hawks and the doves, the Republicans and Democrats, conservatives and liberals, all of us agree on defense, there is little difference, a plus or minus 10-percent deviation on what the expenditures should be on defense. So like the entitlement programs, most of defense is now on, if you will, automatic pilot. It is automatically a spending obligation of this country. What is also on automatic pilot is interest rates. So the interest on the national debt last year at $270 billion represented the total budget of the United States just back in 1977. This country, this Government, and the expenditures of this Government and this huge bureaucracy continue to grow out of control because politicians in Washington have found sort of an undercover way to expand the size of government without the safeguards and protections of individual citizens that do not want their taxes raised too high. That is by more and more borrowing. Somehow we do not feel that that borrowing affects our lives. I stand here today to suggest to my colleagues very aggressively that not only is it immoral to pass on what we consider important expenditures today and make our kids and our grandkids pay for it, out of money they have not even earned yet, but it is also tremendously a negative factor in economic expansion. Government borrows almost 42 percent of all of the money lent out in this country. We are driving interest rates as high as 2 percent more than they otherwise would be. Chairman Greenspan, the Chairman of the Federal Reserve, suggested that if we can balance the budget, interest rates would drop 2 percent. If interest rates dropped 2 percent, he and other economists are saying this economy would take off like it has never taken off before in the history of this country and we would have more and better jobs and a stronger economy.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I just sort of handed out this sheet to both sides as a reminder to us that we have not given clean debt ceiling increases. So it seems like tonight, with this clean increase in borrowing authority for the Federal Government to make sure that we get by the rest of this month and into toward mid-March, that we should pass it and say,``Look, it is a good first step, let us move on.'' Mr. Speaker, to the gentleman from Michigan, I would still like to point out that the last couple debt limit bills that we had represented a huge tax increase of $137 billion over the 5-year period in 1990 when there was pressure on President Bush. Again, there was a large $252 billion tax increase in 1993. Some of these put pressure on an administration. So the debt ceiling is not very wholesome, not being used as leverage. As we researched the records, Treasury does not have the right to withhold Social Security payments. The trouble is they have not managed cash flow, so they are out of money right now. They have no legal authority to withhold payments for Social Security or any other trust fund when there are surpluses coming into those trust funds. This action tonight is to give money back to Treasury because they have not had the kind of cash flow management that allows them to pay Social Security benefits and the other retirement benefits.

Mr. SMITH of Michigan. Regular order.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, the Secretary of Treasury has repeatedly warned of the impending collapse of our financial system if Republicans did not give up on their quest for a balanced budget and simply increase the debt limit. His lack of credibility is now established. His recent statements about not having enough cash to make retirement payments on March 1 is again designed to put political pressure on the Congress in hopes that Congress will abandon the balanced budget and allow the addition of more debt to the trillions that our children will be responsible for. This bill will ensure that Social Security payments must be made on March 1. It does not add to the debt, but it does allow Treasury to overcome a timing problem that they have created by their claim that they cannot manage the cash of this country. Under normal circumstances Treasury would sell bonds a few days before benefit payments are due with a settlement date the same as the benefit payment date. Then the trust fund is disinvested and the debt limit has returned to what it was. Because we are at the debt limit Treasury cannot use this normal procedure. Because the Social Security Trust is void of any cash, Treasury must sell securities to make benefit payments that come due. This bill will allow these securities to be sold outside the debt limit, then as the benefit payments are met the trust fund securities will be redeemed. The securities which were sold will then come under the debt limit, so by March 15, when all benefit checks have been paid, the debt will be the same as it was before. Congress makes the decision about what the pattern of debt will be in the future. The current Congress, however, no longer directly controls the amount of spending that will occur in the near future. This is because of the growth of entitlement programs. In 1955, nearly nine- tenths of the Federal budget was discretionary programs. Today only about one-third of the budget is discretionary. Congress can only alter the spending pattern to match its wishes with regard to the time path of debt by amending statutes which authorize the entitlement programs. Although it is true through budget reconciliation Congress does authorize mandatory spending, and can thus make changes, Congress recently offered such legislation under the guise of the Balanced Budget Act of 1995. This legislation was vetoed by the President. Unlike an appropriations bill, which if vetoed results in no spending and no additional debt, a veto of a reconciliation bill, or changes in mandatory spending through new authorizing legislation, results in continued spending under the old programs. The results is that, in the case of mandatory spending, Congress cannot affect a change and alter the time path of debt without the consent of the President, unless it has a two-thirds majority to override the President's veto. Due to the inextricable link between the entitlement programs and the future debt of the Federal Government, there is an inextricable link between the budget bills and the debt limit. To argue that the debt limit is not to be tied into the budget process is to miss this vital point. Congress's last hold on its authority to borrow money under article 1, section 8 is the debt limit. Because the amount of debt that will be needed in the future is directly related to the amount of spending that will occur, the authority to borrow under section 8 is tied directly to Congress' authority to spend under article 1, section 9. It is quite appropriate to link budget bills to debt limit increases. Historically, this has been the case. Indeed, with the decrease in the share of the budget that is accounted for by discretionary spending, the linkage has become ever closer. In 1993, H.R. 2264 raised the debt limit in the Omnibus Budget Reconciliation Act, which included a tax increase of $250 billion. In 1990, the debt limit increase incorporated the Omnibus Reconciliation Act of 1990, which also included large tax increases. In 1987 and 1985 the debt limit increases were included in the debate over Gramm-Rudman I and II. In recent years, a clean permanent increase in the debt limit simply doesn't occur. Thomas Jefferson: I place economy among the first and most important of Republican virtues, and public debt as the greatest of dangers to be feared.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. I yield to the gentleman from Ohio.

Mr. SMITH of Michigan. Mr. Speaker, I think it is very dangerous to keep threatening a default of this country. I think the Democrat Members would be well served to look at the real financial situations. No. 1, if Secretary Rubin or the President of the United States default on our debt, and that is, not pay principal, not pay interest, they both should be impeached. What we are talking about is 1\1/2\ percent of existing revenues coming into this Government to totally satisfy the interest and principal; so to play these political games, to scare the American people, to try to convince Wall Street that something disastrous is going to happen I think is a very dangerous, a very dangerous commentary, because it does have, what you say does have an effect on people in trying to understand and believe what is actually going to happen. We talked about a director of a company or a manager or a CEO of a company being fired. If there was a manager of a company that took the actions of Secretary Rubin last June and July, developing the plans on how he is going to come up with additional cash flow to meet those needs, and at the same time proclaim to the Nation that there was going to be a disastrous danger of default, interest rates would be going up across the country. Let us look at what Mr. Rubin just did the day before yesterday. He sent out a memo to the Veterans Administration, to Social Security, and what he said was if people call in and ask if they are going to get their payments, telling them that there is a problem, we might not have enough money to pay Social Security payments, to pay veterans' payments, to pay civil service retiree payments. What a tremendous disaster, to threaten people, to scare people, when it is absolutely untrue, uncalled for. What this administration has done so far is they have reached into the trust funds, they have reached into the Federal financing bank, they have reached into the exchange stabilization funds, to the tune of $20 billion for the Mexican bailout. Now they are reaching in again for another $3.5 billion, to say that they are going to have additional money to pay this out. They are saying they do not want to go any further, because they think they can blame everything on Republicans now. Mr. Speaker, I ask the ladies and gentlemen of America to take some time to study this budget, to study the reality of the consequences. Fifty percent of the spending of the United States is now in the hands of the President. Article 1, section 8 of the Constitution says that Congress has the control over spending, Congress has control over borrowing. Now the President has taken control over welfare spending. He has said, ``No, we are not going to cut that spending.'' Somehow, if we give a hang for our kids and our grandkids, and for the future economy of this country, we are going to have to somehow have a real, honest balanced budget.

Mr. SMITH of Michigan. I yield to the gentleman from California.

Mr. SMITH of Michigan. Mr. Speaker, I think we should mention that the President has now vetoed two debt limit increases. There is not a Member on this floor that has ever voted for a clean debt limit increase. I pause, because is it not sad that they are doing so much political rhetoric, yet all of the debt ceiling increases that have been used over the years have been used over the years to put in the Kemp-Roth, the Gramm-Rudman, the tax increases?

Mr. SMITH of Michigan. Mr. Speaker, I yielded to the gentleman from California.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, will the gentleman yield?

Mr. SMITH of Michigan. Let me just say that I asked the Congressional Research Service whether Secretary Rubin could legally withhold trust funds. They said their first review of the law said, no, it would be illegal to withhold trust fund payments for any trust fund where there is a surplus coming into those trust funds. I have written Secretary Rubin the day before yesterday asking him to give us the reasons why he thinks he can do this.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I think it would be good for all of us to review exactly where we have been in debt extensions: Since 1980, H.R. 7428, a debt extension with increases in the import fee. In 1985, H.R. 3721, a debt ceiling increase with an increase in the cigarette tax and expanded benefits for unemployed. In House Resolution 372, debt extension with a Gramm-Rudman attached. In 1986, debt extension with budget reconciliation, with a large increase in social spending. In 1987, a long-term debt limit extension with liberal modifications to Gramm-Rudman. It goes on and on. We have tied everything in the past to debt ceilings that we wanted to get a President that did not pay attention. This is going to continue.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, will the gentleman yield?

Mr. SMITH of Michigan. Mr. Speaker, I thank the gentleman for yielding to me. I wanted you to know, it is not totally perfected yet. It is a continuing resolution. My understanding is it will go to March 15. It takes those appropriation bills the President has vetoed. It reinstates some of that funding to give the President another chance to keep Government open. It takes targeted legislation at appropriations that are going to extend all the way through the rest of this fiscal year.

Mr. SMITH of Michigan. Mr. Speaker, I think the argument is still going on, including Democrats in that argument, but the fact is, no, I do not know the final resolution of that bill.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I also say, let us stay here, let us resolve the issue. It seems to me that again we need a review of what is happening with this budget process. The Democrats criticize the Republicans for probably biting off more than they can chew in terms of spending cuts. As it turned out, those Democrats were probably right. We had a lot of ideas that we wanted to accomplish to bring spending under control. But, Mr. Speaker, I say to the American citizens, wake up, America. Anybody under 50 years old better start putting in some studying time on what is happening to this Federal budget, what is happening to overspending, overtaxing and over- borrowing, because it is going to affect your lives. It is going to affect your kids' lives. We have now mounted a huge Federal debt of $4.9 trillion, plus the extra $100 billion that Secretary Rubin has creatively come up with that is no less an obligation of this country to pay back. We are looking at a situation now where we have made such huge promises in social programs that we cannot afford to pay for them. Civil service retirement has an unfunded liability or a so-called actuary debt of a half a trillion dollars; Medicare, $5 trillion actuary debt; Social Security, $3.2 trillion actuary debt.

Mr. SMITH of Michigan. I yield to the gentleman from North Carolina.

Mr. SMITH of Michigan. Reclaiming my time, Mr. Speaker, it is a moral obligation to pay the bills we owe. Why it is reasonable to attach the debt limit to the consideration of an overhaul of spending is because Congress has lost its control over spending for 50 percent of what this Government spends. those are now on automatic pilot in the so-called welfare and entitlement programs. Those programs are the biggest reason that we need additional debt limit in the future. So it is reasonable to tie these two together. I mentioned earlier today, Mr. Speaker, in a 1-minute, all of the previous debt limit extensions forcing Presidents to do things that they did not otherwise want to do by increasing taxes. The most recent, of course, was the 1993 bill, where we had the largest tax increase in history, but also George Bush in 1990, where the large tax increase was tied to that debt limit extension. Mr. Speaker, I yield to the gentleman from Michigan [Mr. Chrysler].

Mr. SMITH of Michigan. There are two numbers that I think the American people and all of us should remember about the President's budget. One number is $300 billion, one number is $200 billion. He spends $300 billion more than Republicans. He increases or has higher taxes, $200 billion more, than the Republican proposal.

Mr. SMITH of Michigan. Reclaiming my time, Mr. Speaker, I think it is absolutely correct. The eastern media do not say it, but it takes two to tango. We need to bring both sides to this table. If we are serious about a balanced budget, we can do it. The fact is that it is much easier to say you want a balanced budget than to come up with the spending cuts to do it. It is too easy for the other side to demagog every spending cut, to go to that interest group and say, Look at these mean-spirited Republicans and what they are doing to you. Mr. Speaker, we have overcommitted ourselves. We are no longer the rich Nation we were. If people under 50 years old want anything left in Social Security, Medicare, Medicaid, the kinds of programs that we should be running, it is important that we start being reasonable. We not only reduce spending and stop deficit overspending, but we start paying back some of that huge, huge debt that we already owe.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, first let me thank the gentleman from Michigan [Mr. Chrysler] for the tremendous work he has done looking at wasteful government spending, and, make no mistake, there is a lot of waste. You are exactly correct that Republicans probably made a mistake when they simply said we want the President as a starting point to give us his balanced budget that balances in 7 years as scored by CBO. So what does he do? He gives us a budget that increases taxes, does not cut spending and said, well, this is it. But do the people of this country really want to continue down that path of more taxes and more spending and more borrowing. On the Department of Commerce, I think when we have a department that is not necessary and we start appointing political cronies to head up those departments, there is a danger of misuse of their positions. So I am not only concerned about Secretary Brown's international travels, I am also concerned about his domestic travels. This is an individual who was chairman of the National Democratic Party, who was the major fundraiser for Democrats, who does a political evaluation test for the people that he brings in to make sure that they are partisan Democrats. I think what happens is not only a waste of taxpayers' money but a misuse of the Department, when instead of appointing the highest qualified individuals, you go to those political patronage jobs who have done the most for your political Democratic Party or for your reelection as President and you say this is the person I am going to bring in to head this Department. So it is no wonder that there is an abuse of travel. When we investigate this, and I would hope everybody would just take the time to read the Monday, January 22 Los Angeles Times article where it cites the travel costs of the Commerce Secretary that are 145 percent higher than his predecessor, that has evidence of misuse of credit card by the staff of that department. Here is not only the head of the Department but essentially a whole department that should be wiped out, eliminated from the Federal Government. The useful functions of that department can well be accomplished by other agencies and other departments at much lesser cost. We have got a problem in this country, and it is about time we face it. It is about time that every individual, say, at least under the age of 50 years old, better start looking at this Federal budget, they better start looking at the ramifications that this overspending and overtaxing and overborrowing is going to have on their future lives. Because if you look at how long Social Security is going to last, the estimates are now that Social Security is going to be broke by the year 2020, that Medicare is actually this year spending out more money than it is taking in. We have made overcommitments, we are overspenders. Politicians in the past have decided that by promising more and more good things to people, it increases their chances of being reelected. The U.S. American citizens, when they go to the poll every election, better be saying, Is this person going to be doing what is right for my future, my kids' future and our grandkids' future? We are in a big battle now. I will yield back to the gentleman from Michigan [Mr. Chrysler]. He can yield maybe on this point.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. Mr. Speaker, I am introducing a bill this morning that I would invite all Members to cosign with me. It is a bill that says there shall be no increase in net marketable debt after December 31, 2001. Mr. Speaker, both sides of this issue on how we reach a balanced budget have agreed to have a balanced budget and not have an increase in debt. I think when you analyze the President's budget though, we need to remember two figures: $300 billion and $200 billion. The President's budget proposal for balance has $300 billion more spending than the Republican proposal. It has $200 billion more taxes than the Republican proposal. Mr. Speaker, if one wants to continue to tax and spend, then it is OK to go with the President's proposal. The Republicans cannot accept that if we give a hang about what happens to our kids and grandkids. Let us at least agree on the final line, the final resolution, to not increase net marketable debt after the year 2001.

Mr. SMITH of Michigan

Mr. SMITH of Michigan. My understanding is that the gentleman from Ohio [Mr. Kasich] and the gentleman from Georgia [Mr. Gingrich] say everything is on the negotiating table except a true, real balanced budget in 7 years.