John Spratt

Mr. SPRATT

Mr. SPRATT. Because they are so devilishly difficult to understand all the fine details that go into the pricing of student loans and the renewability and consolidation. A lot of the details about the changes being proposed are not yet widely disseminated and widely understood. Nevertheless, the students are going to feel it and see it once they realize what the long-term cost of it is and the envelope they have to repay.

Mr. SPRATT. Mr. Speaker, let me return to student loans and yield back to the gentleman because he is far more conversant in student loans than I am. It is curious that you would turn to student loans, to kids who are accumulating more debt than any generation in America to get a college education, and raise the cost of student loans in order to pay for the cost of Katrina. It just does not strike me as the kind of equitable loading that would support.

Mr. SPRATT. I looked the numbers up, and that is why I have got them available, but let me show you how the reconciliation process works so that the gentleman from Virginia (Mr. Scott) can pick up from there. Originally, when the Republicans decided in their budget resolution that they would cut $35 billion to facilitate $70 billion in tax cuts, it had nothing to do with Katrina. It was just one way of diminishing the impact of the tax cuts on the bottom line. Originally, when that $35 billion number was set as the reconciliation target, the amount that was reconciled to the Committee on Education and the Workforce was $12.6 billion. That committee labored diligently. I do not think the gentleman voted for the final product, but it was still $10.6 billion, $2 billion less than what was reconciled. Now, all of the sudden comes a claim for an additional $5.5 billion. Where in the world will the $5.5 billion come from within the jurisdiction of your committee?

Mr. SPRATT. Already in the bill you have reported, which is $2 billion short of your targeted amount, and now it is going to be $5.5 billion more than either targeted amount, already you have reversed the decision to lower origination rates. Your committee has raised the rate effectively on student loans. You have reversed the decision to increase the amount that students can borrow. You have changed the rates at which they could expect to consolidate their loans. How do you get the additional $5.5 billion after having done this much already to student loans?

Mr. SPRATT. It is a reaction to this curve right here, a recognition that the chickens are coming home to roost. All of the bad budget decisions and fiscal policy risks that have been taken are not breaking favorably, are beginning to accumulate, and we have increasing deficits that require dramatic action. The problem is, and there is recognition of the problem finally, and that is good. There is reaction to it, and that is good, but the resolution that is before us, the reaction that is being taken, the substance of it, does not really address the problem. And, if anything, it worsens the problem because it adds to the deficit rather than diminishing the deficit. That is why we are out here trying to explain this somewhat complicated fact in the face of what is posing to be, taken as a pretext to be, a fiscal responsibility initiative.

Mr. SPRATT. In the wrong direction.

Mr. SPRATT. Here is a good account. Defense, for reasons we all understand, has gone up substantially from the year 2000 to the year 2011. This is a projection. It will increase from about $300 billion to $600 billion over that period of time. When the President talks about the increase in spending as if he is laying the blame on the Congress, and in truth most of it is coming in defense accounts, and all of it has been requested by the President of the United States. We have appropriated. I voted for it. I do not think you send troops in the field and give them a tough mission to do and not back them up. But let us be honest where the spending increases he decries are really coming from. They are coming from defense. This layer right here was what was planned for defense in January 2001. This red layer is what the Bush administration added to it in the way of policy. It is mainly new equipment, personnel and things of that nature. This is the cost of Iraq, Afghanistan and future war costs here; also, the cost of waging the war on terror, but it does not include homeland security. This is cost risk because the Pentagon typically has overruns in its programs. CBO said it is reasonable to assume they will miss their targets by at least this amount. When you put all these layers together, you see a budget increase from $300 billion to $600 billion over a 10-year period of time. At the same time all of this is being done, more or less deliberately, stacked on top of each other, we are having substantial tax cuts. When you put together these two factors, the defense spending increases and the tax cut decreases, you begin to see the emergence of the deficits that we are struggling to deal with today.

Mr. SPRATT. Madam Speaker, this was not just serendipity or good luck. We had a good economy, but we also had a good set of budget policies and a good budget converging with a good economy. One of the things that we did in 1991 under the first President Bush, we adopted a set of budget rules in the Budget Enforcement Act. One of these required every budget to be a 5-year budget. Secondly, another rule required that we put a cap on discretionary spending. We cap and limit on a 5-year basis the money that we appropriate every year for discretionary programs. These are discretionary programs. Thirdly, we adopted something called a pay-as-you-go rule. It was a very effective rule which simply provided if Members want to increase the benefits under an entitlement program, Medicare, Social Security, whatever it may be, you have to either pay for it or cut some other entitlement by an equal amount. By the same token, we said if you want to cut taxes when we have a huge deficit, you have to pay for those tax cuts, offset those tax cuts, either with a spending cut of equal amount or with a tax increase elsewhere in the Code of an equal amount so it is deficit-neutral, it does not impact and worsen the deficit. Those rules proved to be extremely helpful as we moved the budget from a $290 billion deficit in 1992 to a $236 billion surplus in the year 2000.

Mr. SPRATT. Madam Speaker, in 2001, 2002, PAYGO, the multiyear spending caps and the sequestration provision, all of the budget enforcement rules that we put in specially in 1991 that served us so well in the 1990s, were allowed to expire. Why? Because the PAYGO rule would have impeded further tax cuts when we had still big deficits.

Mr. SPRATT. Madam Speaker, a lot of people say it is necessary for fiscal reasons. We have to balance the budget. They say to us as Democrats, What would you do? And that is fair enough. Whenever anyone raises this issue, I think it is pertinent for us to point out this is what we did. Beginning in 1992, after President Clinton came to office, January 20, 1993, on February 17, 1993, the first piece of legislation he sent to the Congress was a 5-year budget to cut a deficit of $290 billion, he inherited that deficit, to cut it in half over the next 5 years. This is what happened. Every year thereafter, 1993, 1994, 1995, 1996, every year thereafter, the bottom line of the budget got better and better and better, to the point where in 1996 we had a deficit of about $120 billion. We convened again under his auspices, the President's auspices, and we passed the Balanced Budget Act of 1997. As a consequence of that, in 2 years the budget was not just in surplus, it was in a surplus of $236 billion. So all of this is history. This is where we took the budget, and this is where we handed it off, at that point, with a surplus just below $200 billion. We handed the budget over to President Bush, and every year thereafter, except this year, the bottom line is that the budget got worse. It got marginally better this year, but as this chart shows, it is still $320 billion. As I said, under the basics of the Bush administration's budget, the highlights of his budget, the things that he is pushing us to do, if we follow that course, CBO tells us we will incur a deficit in 10 years of $640 billion, twice today's deficit, and the debt service of the United States will go up threefold from $182 billion to $458 billion.

Mr. SPRATT. Madam Speaker, he vetoed those tax cuts.

Mr. SPRATT. But it has to be paid. It is obligatory. There is no way around it. You have got to pay it, otherwise the bonds default and the country is in bankruptcy. We cannot let that happen. Let me touch on the package that we expect to come to the floor to show what our concern is and why we are here at this hour of the day talking about the package that the Republicans are putting together to bring to the floor ostensibly to pay for some of the costs for Hurricane Katrina but truly, truly to offset additional tax cuts of $106 billion. Originally, as the gentleman from Virginia (Mr. Scott) knows, because this is his committee and he can comment further upon it, the Higher Education Act had to be amended this year and was to be amended so that student loans would enjoy fixed rates, not variable rates which would go up as interest rates go up as they are likely to do in the near future. That decision has been discarded. It is gone. Next, origination fees. The front-end fees that students have to pay to take out a student loan were to be lowered. Not anymore, not with the latest cut. What we are looking at are the barest component parts of this bill called the reconciliation bill that is coming to the floor. It went directly from the Committee on the Budget to the committees of jurisdiction, like the Committee on Education and the Workforce, and they said cut so much money from programs in your jurisdiction. So where did the Committee on Education and the Workforce cut? They turned to student loans, the most significant part of their budget, and the Pension Benefit Guaranty Corporation.

Mr. SPRATT. Madam Speaker, I thank the gentleman for his comments.

Mr. SPRATT. These two tax provisions, called PEP and Pease, phase-out of the personal exemption and the phase-in limitation on itemized deductions, these two provisions were signed into law by the first President Bush. When the second President Bush sent up his request for tax cuts, these provisions were not included in his package of proposed tax cuts. They were added by Members and pushed to the very end of the implementation period. They do not actually get cut out or cut back, phased out until the year 2007. Nevertheless, as you are pointing out, these provisions, if they were simply left in place, would yield enough revenues over time to pay the cost of Katrina and leave a substantial amount of change on the table.

Mr. SPRATT. That is true.

Mr. SPRATT. Mr. Speaker, last week I came to the well of this House to express my concern along with the concern of others in the Committee on the Budget who joined us that night about the direction that a process we call reconciliation was taking. This week my concerns have not been allayed. They have been aggravated because I see the course that reconciliation has taken, and it is coming home closer and closer to programs that matter to those that can least afford to take the hits that they are about to receive. As we speak, our colleagues, our Republican colleagues from across the aisle, are debating and considering and moving toward big cuts in Medicaid, student loans, child support enforcement, child foster care, and supplemental security income, farm conservation, the list goes on. About $50 billion in spending cuts spread over about a 5-year period of time. They have offered up these spending cuts as a way to offset, partially at least, the spending increases that the responses to hurricanes Katrina and Rita will require; but in actuality, these spending cuts will not go to offset the costs of Hurricane Katrina because the Republican budget calls for $106 billion in additional tax cuts. And when these additional tax cuts are passed, the spending cuts that are also being proposed will simply go to make up for the revenue losses to some extent caused by the tax cuts they are proposing. Since the spending cuts are $50 billion, as this chart here shows, and the tax cuts are $106 billion, none of the spending cuts will ever make it to the bottom line where they might otherwise be available and applied to the offset of the cost of Katrina and Rita. So the first problem that we as Democrats have, with what our Republican colleagues are pushing and pushing hard this week, is that it is not what approximate purports to be. It is not what it claims to be. It is not a plan to pay for Hurricane Katrina. It is a plan to facilitate $106 billion in additional tax cuts, notwithstanding the fact that we have last year, just a few weeks ago, we closed the books, and the deficit for the preceding fiscal year was the third largest in history, $320 billion; $106 billion in additional tax cuts at a time when we have a $320 billion deficit that is only likely to get worse this year because of the cost of the hurricane. The second problem that we as Democrats have with the plan that our colleagues are pushing is that we believe the cost to help one State sustain the catastrophic costs of a natural disaster, a disaster like Hurricane Katrina, should be borne by all the States and spread over the entire population, the whole country, but spread equitably, spread equitably. We do not believe that those least able to bear the costs should be burdened with the lion's share of the load, and yet that is exactly what is taking shape. That is exactly what they are doing, pushing a plan to pay for the cost of Hurricane Katrina, at least under that pretext that will come down on the backs of college students borrowing to pay for their education; on the backs of the sick whose only access to care is Medicaid; and on the backs of the very poor who depend on food stamps and foster care and child support enforcement, all of these things. These are the programs and the bore sights of the plan that are about to be brought to the floor. These are just some, a sampling of those on whom these cuts are going to fall. So what we have coming before the House this week, if it does indeed come forth, is a plan for spending cuts that does not serve its stated purpose because it does not go to pay for the cost of Hurricane Katrina, not a dime of it. And the spending cuts it selects, whether to offset more tax cuts or to pay for Katrina, come down on those, as I have said, who are least able to bear them. On our side we think it is fair to ask, Why this sudden interest in offsets? Why insist on offsets to pay for building or rebuilding Biloxi, but not insist on offsets for building or rebuilding or building back Baghdad for which we have appropriated so far more than $20 billion? One reason that our colleagues have suddenly seized on this issue is that the evidence of bad budgeting, of fiscal failure, of endless deficits is mounting and spreading and becoming undeniable is too much to sweep under the rug. On their watch, the Federal budget has descended from a surplus of $236 billion in the year 2000, the last full fiscal year of the Clinton administration, to a deficit of $320 billion last year and $412 billion the year before. The deficit will only be worse this year, as I have said, this fiscal year, 2006, because this year is when most of the spending to fix up and respond to Katrina is going to be paid out. Here is one simple, back-of-the-envelope way of looking at the budgets that we have had and the impact of these budgets that bottom-line over the last 5 fiscal years. Our Republican colleagues have had to come to the floor four times and raise the debt ceiling, the legal limit to which the United States can borrow, incur debt, in order to make room for the budgets of the Bush administration. As a consequence, in June 2002 they had to vote to raise the debt ceiling by $450 billion. In May, just a year later, they had to raise it again by a record amount, $984 billion. You would think that $984 billion would give you plenty of room for additional deficits to be accommodated, but no. In November 2004, 15, 16 months later, $800 billion had to be added to the debt ceiling. In the budget resolution that will come to the floor this week, there is a contingent provision that when the Senate passes the provision, the debt ceiling will be raised one more time by $781 billion. Add up these four increases in the debt ceiling over the last 5 fiscal years, you get 3 trillion, 15 billion; $3 trillion, the amount by which they have had to raise the debt ceiling to accommodate their budget. That says it, as I said, on the back of the envelope, better than any way I could possibly put it. When the Bush administration closed the books on fiscal year 2005, just 3 weeks ago, they announced a bit better deficit, no doubt about it, a deficit of $320 billion. But that is still the third largest deficit in our Nation's history. And it shows you how sad the State of our fiscal affairs have become when the White House boasts about and brags about a $320 billion deficit as being good. Mr. Speaker, I yield to the gentleman from Virginia (Mr. Scott).

Mr. SPRATT. The year before it was 412, and the year before that it was 375. Those are the three worst over the last 3 years, three record deficits in a row. Here is the hard part. It would be bad enough if that were behind us and we are now having to live with this $3 trillion increase in the debt ceiling of the United States, but the future looks even bleaker. This September, the Congressional Budget Office, which is neutral and nonpartisan, prepared for us, as they always do, it is their custom and I think it is required by law, an update of the economy and the budget and a projection of where the economy was going and a projection of where the budget was going with the economy. Here is what they came up with. They predicted a deficit of $319 billion. That is about where we came out. Look at the red line here and you will see their continued projection shows that over the next 10 years the deficit will double. It will increase from 320 to $640 billion in the year 2015. That is CBO's projection per certain requests we made to them to adjust their baseline survey. We said to CBO, take your baseline survey and assume four things in the President's budget: number one, that the tax cuts passed in 2001, 2002, and 2003 will all be renewed and extended when they expire at the end of 2010; Number two, that the alternative tax will be fixed as we all know it must be so it does not affect middle-income taxpayers to whom it was never intended; Number three, that we will eventually have a drawdown of our troops in Afghanistan and Iraq, principally Iraq, so that we have 20,000 in each theater. CBO has a model for estimating what the likely cost of that force is going to be; Finally, the President gave us the numbers for implementing his Social Security privatization program for the last 2 years of his 5- year forecast. Pick up where he left off and carry it out 10 years. Make those changes, we said to CBO, and tell us what then. If you hit the highlights, carry out the basics of the Bush budget, what then happens to the budget? Here is what happens with the deficit: it goes from 320 to 640 in 10 years. The debt of the United States held by the public, and in many cases held by foreigners, goes from $4.6 trillion in 2005 to $9.2 trillion in 2015. Debt service, this is obligatory, this is one thing in the budget that has to be paid or the credit of the United States will collapse, the debt service that we now pay, the interest we now pay on the national debt, net interest, will increase from $182 billion in 2005 to $458 billion in 2015. It will become one of biggest items in the budget. This is the sort of thing that breeds cynicism of our government, because people pay heavy taxes, yet they see nothing in return due to the fact that money is going to service the national debt. One thing else, a lot of this is due to tax cuts that they keep making despite the bottom line, despite the fact that the original forecast showing $5.6 trillion in surpluses over a 10-year period of time no longer apply. However, those tax cuts eventually become a debt tax because that is what you see here. We have a debt tax, a tax that has to be laid on the people in order to pay the debt service, the interest on the national debt, which is truly obligatory. Mr. Speaker, I yield to the gentleman from Virginia (Mr. Scott).

Mr. SPRATT. Let us look at the Committee on Ways and Means. In the original budget resolution, the Committee on Ways and Means was largely spared, mainly because the cuts in Ways and Means would mostly fall on Medicare. It is the biggest entitlement within their jurisdiction except for Social Security, and that is not in the cards right now. Only $1 billion was reconciled in the way of spending cuts to the Committee on Ways and Means, but now, in recent weeks, in the zeal to get the amount from $35 billion to $50 billion, which is reconciled, they have added to the directive for Ways and Means, or they will if this resolution gets passed this week, another $7 billion, $8 billion. Very little of this actually comes out of Medicare because they do not want to touch Medicare for fear that they will have a fight in their own ranks, but this is where it comes from. This is astounding. It comes from child support enforcement. This is the money that we appropriate to match State money to enforce fathers who are not supporting their families to come up with the financial support for their own families. We let them know this program will be robustly funded. We have a national program so they cannot skip from one State to another. We have a State-by-State program so they cannot elude enforcement. They are going to take a reduction in child support enforcement of $3.8- to $4 billion in child support enforcement. Foster care for children and families, foster care families, children not with their own biological families, a cut of $577 million. And then Supplemental Security Income, the welfare program of last resort for people who are disabled and the elderly and have nothing else to fall back on. SSI is truly a safety net program. It will be cut by $732 million. Do you know how? They will say to people who have back claims for SSI, who qualify for SSI, go through a long process to prove it, and who have a claim settlement at the end of that process, we cannot pay you 100 percent of this. Despite the fact you have been living on next to nothing, we will pay you in installments, so $732 million out of SSI. And then in the same bill we are told all of these things that are truly safety net programs, they turn to something called antidumping duties. We impose duties, antidumping duties, on foreign companies in foreign countries that ship goods to us, like steel, below its true market value in the country from which it comes. When we find that people are doing that in order to undercut our domestic industry, we impose antidumping duties on those industries. The law provides that the duties thus collected go to the American companies that are hurt by these illegal trade practices. What they propose to do is repeal the Byrd amendment which provides for the money to go to these firms. That repeal will not save a dollar. To the contrary, it will cost Federal spending of $3.2 billion over a 5-year period of time. After squeezing money out of child support enforcement, foster care and SSI, they turn around and give up a $3.2 billion resource that goes to firms that have been hard hit by unfair foreign trade.

Mr. SPRATT. It is indeed. That is true. It has increased substantially.

John Spratt

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