John Spratt

Mr. SPRATT

Mr. SPRATT. As large as the deficits are in this budget, I just read them to my colleague, they accumulate $3.2 trillion over the next 10 years. There is nothing in here to pay for the war in Iraq, and there is nothing in here either to pay for our global war against terrorism, the war in Afghanistan and elsewhere. It is expressly understood that that is a hole that has to be filled later in the year, and probably sooner than later with war just around the corner. Nevertheless, we are moving ahead with the budget, not knowing this enormous item, the size of it, the cost of it, or how it will be paid for and accommodated in this particular budget.

Mr. SPRATT. I yield to the gentleman from Wisconsin.

Mr. SPRATT. Mr. Speaker, I yield to the gentleman from Wisconsin (Mr. Kind).

Mr. SPRATT

Mr. SPRATT. Mr. Speaker, I offer my wholehearted support today for H.J. Res 27, which recognizes and commends the continuing dedication, selfless service, and commitment of members of the Armed Forces and their families in the war on global terrorism and in defense of the United States in the Persian Gulf and elsewhere. This measure is a simple gesture, but I hope it will convey the profound gratitude we feel for the service provided by our men and women in uniform. Since I was elected to Congress 20 years ago, I have represented Shaw Air Force Base in Sumter, South Carolina, which provides nearly 40 percent of the Air Force capability to ``Suppress Enemy Air Defenses.'' Like most Members, I also represent hundreds of men and women in the National Guard and Reserves, who are contributing to this nation's defense now more than ever before. So I know firsthand of the dedication we recognize today. To all of you I offer this message. Your dedication to the defense of America, your willingness to go in harm's way, our unparalleled capabilities, and your unequaled bravery warrant our highest praise and deepest appreciation. Wherever you are serving, I extend a hearfelt ``thank you.'' Indeed, we should all thank God that there are such Americans willing to go anywhere and pay the price of defending freedom and the security of this country.

Mr. SPRATT

Mr. SPRATT. Mr. Speaker, I thank my friend and colleague, the gentleman from North Carolina (Mr. Price), for taking charge of this Special Order and making this information available. It is awfully difficult to get all of this detail and all of its complexity out so that everybody can understand why we are so concerned. This is not just political rhetoric we are going through tonight. I have one chart here which runs the risk of being a little complex, but it tells a great deal about where we are. First of all, it shows the surplus that we thought we had that OMB estimated in January of 2001 as $5.637 trillion. A few weeks ago, OMB came back to us, the Office of Management and Budget, and says, whoops, we were wrong. We have to make economic adjustments to that surplus of $3.174 trillion. What that means is that the adjusted surplus, the real surplus in economic reality now is $2.463, not $5.63 trillion. Then if we look at these enacted policies, and these are things done today, legislated, which have committed the available surplus, we will find they add up to mostly the tax cuts, $2.6 trillion. As a consequence, we have already committed all of the available surplus still remaining after economic adjustments from the $5.6 trillion surplus last January. In fact, we are $19 billion over and above that surplus if we do not do another thing, just sit still and do not increase any policies. However, the administration, knowing that, is proposing nearly $2 trillion in additional action, the lion's share of which goes to additional tax cuts, two tax cuts that come to about $1.4 trillion. As a consequence, they are adding $2.1 trillion to the national debt, which, with cumulative deficits between 2002 and 2011, will come to $2.1 trillion. Here in one chart, very graphic, is why we are concerned. Now we are living in this sweet spot. Those are the peak years of the baby boomers when they are doing better and paying into the Social Security and building up a surplus, for now. As this chart shows graphically with these red bars here below the line, in 2017 that gravy train comes to a halt. Social Security goes cash negative, and it is that that we should be getting ready for right now. We are doing just the contrary of what we should be doing to prepare for those years when the baby boomers will be retiring.

Mr. SPRATT

Mr. SPRATT. Mr. Chairman, I rise today to voice grave concerns about this bill. This bill reflects a steady erosion of the federal government's commitment to provide a safety net for low-income working families. States now face a severe fiscal crisis due to the slack economy. This bill imposes expensive new requirements on states, without providing sufficient funding to help states meet these requirements. The Congressional Budget Office estimated that the additional costs to states of meeting the increased work requirements in this bill are between eight billion and eleven billion dollars over five years. This bill largely mirrors the welfare plan that President Bush first put forth last year and proposed again this year. The President's 2004 budget makes clear that the President's welfare plan is just one part of a larger drive to abandon the Federal government's traditional role of providing a safety net for society's most vulnerable members. The budget also includes plans to recast several other major federal programs for low-income individuals and families as block grants to states. The President offers states increased program flexibility and administrative streamlining, but requires in exchange that states give up the traditional assurance that future federal funding will keep pace with the estimated need for these programs. The programs affected by these policies provide health care and housing to low-income children, elderly, persons with disabilities, and low-wage workers. If the President's proposal for welfare reform is any indication, these other block grant proposals point the way toward a shrinking federal financial commitment to the poor. States will be left to figure out how to fill the fiscal hole. This raises very serious concerns that I encourage my colleagues to consider long and hard before heading down this path. The President's block grant proposals are likely to lead to enormous inequities across states as to who gets assistance and who does not. A major role of federal income security policy is to provide a level playing field by offering a safety net to all citizens. Under the president's plan, low-income individuals and families will be the mercy of geography. Income security programs are sensitive to economic conditions. Need increases disproportionately when the economy is slack and state budgets are tight. Only the federal government has the ability to borrow when times are bad. Block grant funding will give states the incentive to respond to hard times by cutting low-income benefits more than they would choose to do otherwise. I voted for welfare reform, and I along with Members of both parties have cheered the progress of former AFDC beneficiaries into work during the prosperous 1990s. But that progress requires support in the form of child care and other vital services. Penny-wise but pound-foolish policies now threaten that vital underpinning and they risk all our recent progress against dependence. Finally, I believe the President's overall priorities deserve serious questioning. At the same time he proposes to shrink the federal commitment to the poor, he proposes $1.5 trillion in new tax cuts that largely benefit our nation's most prosperous, create record deficits, and burden working families with a growing debt tax. The Administration now argues that its tax-cut plan is really an anti-poverty plan because it will stimulate growth and create jobs. This is the old theory of trickle-down economics that has been discredited time and time again. Tax policy does not exist in a vacuum. The point of safety-net programs is to support people when the economy falters, or when circumstances in their own lives make it difficult or impossible for them to participate fully in the economy.

Mr. SPRATT

Mr. SPRATT. Mr. Speaker, there is no question about it. A lot of the economic effect was already in place before 9/11. That is a key point to understand.

Mr. SPRATT. Mr. Speaker, the point I was making at the outset is, 2 years ago OMB projected a surplus of $5.6 trillion. The Bush administration then enacted a massive tax cut taking advantage of that big surplus. They now acknowledge that they overstated, miscalculated by some $3.2 trillion. It really was not $5.6 trillion in surplus. It was more like $2.4 trillion in surplus. The problem is that tax cuts have largely already committed that amount of money. As we begin this fiscal year, instead of having a cushion fund, a huge surplus of $5.6 trillion, we are in the red. We have fully dissipated that surplus and we are in the red $129 billion. But they, knowing that, proposed additional tax cuts and additional measures that would drive us deeper in the red over the next 5 years to the tune of $2.1 trillion which is intentional. You could at least excuse what happened before as negligent miscalculation. I do not. I think they should have seen the storm clouds gathering over the economy and understand that the surplus was overstated; but chalk it up to negligence. This is willful, wanton, and intentional.

Mr. SPRATT. If the gentleman will yield, the gentleman was in the investment banking business for a period. He knows the name Goldman Sachs. And I understand one of their economists today said they predict that the unified deficit for this year will be in the $400 billion range. That means that is after netting out, backing out the Social Security surplus. The unified deficit, by their projection, will be in the $400 billion range this year. That is depressing enough, but the problem is those deficits continue on and on and on without any abatement.

Mr. SPRATT. We warned that this would happen, but we did not see, even in our admonitions, the severity of the problem we have before us now.

Mr. SPRATT. Absolutely not.

Mr. SPRATT. I thank the gentleman from Virginia (Mr. Scott). Now I yield to the gentleman from Tennessee (Mr. Cooper) who was here from 1983 until 1994 when he ran for Senate from Tennessee. But before leaving the House of Representatives he cast one of the hard votes that a number of us mustered the courage to pass and that was a vote for the Clinton budget in 1993, which laid the foundation for a decade of fiscal progress during the 1990s, a period when the bottom line of the budget got better and better and better every year until finally, in 1998-1999 we were in surplus for the first time in 30 years.

Mr. SPRATT. Mr. Speaker, if the gentleman will yield, let me just clarify the chart the gentleman has, which is very graphic. The blue bar charts, the blue bars above the horizontal axis show the surplus that is accumulating in Social Security, for now. But it is for a limited period of time, intended to be used for parents, for the retirement of the baby boomers. The red bars that get deeper and deeper as you approach 2037 show the net cash outflow in the Social Security trust fund beginning in about 2017, which is not that far away, 13, 14 years from now.

Mr. SPRATT. Mr. Speaker, to further explain and clarify other things that are buried in this budget is the gentleman from Virginia (Mr. Scott), to whom I now yield.

Mr. SPRATT. Mr. Speaker, the gentleman's point, and the point of the gentleman before him, was that even in this budget with big deficits, $400 billion and more every year for the next 5 years, $2.1 trillion in the general fund, additional deficits, additional debt; even with those bottom lines, we have these significant cuts already made in this budget, and we are still running almost a half a trillion dollars in the red every year.

Mr. SPRATT. Before-school programs.

Mr. SPRATT. After-school programs, primarily?

Mr. SPRATT. The authorization act calls for $9 billion more in the fiscal year 2004 than his budget in this year's request.

Mr. SPRATT. Mr. Speaker, what the gentleman is talking about is the authorization act Mr. Bush signed and signed into law and took credit for.

Mr. SPRATT. Let me now yield to the gentleman from North Carolina (Mr. Etheridge), who used to be the Superintendent of Education in North Carolina, to further the effects of some of cuts in education in this budget.

Mr. SPRATT. That does not include the war against Iraq. That does not include the war against terror. The Secretary of Defense told us the other day, if and when those costs come, we will send up a supplemental. If you add that to the bottom line, it gets worse.

Mr. SPRATT. Mr. Speaker, let me enlarge upon the point the gentleman is making, and that is, as bad as the Bush administration says, when pressed, where is your solution, what plan do you have? Cut spending, cut spending. In truth, as the gentleman is pointing out with a very specific example, there are plenty of spending cuts built into this budget already. One of them is impact aid, which amounts to the Federal Government saying to military installations, we are not going to pick up the full impact of the children of military dependents in the public schools in that particular locality. We are going to let the local folks pay that and not do what other employers do and continue contributing some of the costs of it. That is one example. The gentleman from North Carolina is going to get up and give another example about the larger education bill that already is cut in this bill. If you took the whole budget for discretionary spending, the 13 appropriation bills that the gentleman's committee reports and we pass, which constitutes the discretionary budget, if you take all of nondefense discretionary spending and cut it all out, it would not replace the $400 billion deficit in the general fund we expect next year.

Mr. SPRATT. Mr. Speaker, on the chart I have just displayed it is clear from the Office of Management and Budget that the real surplus adjusted for the real economy over the last couple of years is not $5.6 trillion, but $2.4 trillion. Out of that $2.4 trillion in real surplus, the Bush administration has already cut $1.349 trillion and $42 billion; add those two together and you get easily $1.4 trillion. Nearly two-thirds of the remaining surplus has been cut, has been diminished, due to tax cuts already passed now in the face of the fact that there is no remaining surplus. After you factor in these tax cuts and factor in the spending increases, mainly for defense and homeland security, which we all supported, but nevertheless, his budget left no room for contingencies like that, when you factor in those additional spending items, the surplus not only disappears, it goes deep in deficit for as far as the eye can see.

Mr. SPRATT. Mr. Speaker, I wanted to address a very grave matter that affects our country, and that is the status of our budget. It is hard to believe that just 2 years ago when we began the budget process as we do now this country looked forward to a surplus of $5.6 trillion. That was the projection of the Office of Management and Budget of the Bush administration in January of 2001. We have come a long, long way since January of 2002, since that fiscal year was concluded. In the last fiscal year of the first Bush administration, there was a deficit of $290 billion. That was the deficit that President Clinton found on the doorstep waiting for him when he came to the White House on January 20, 1993. On February 17 he sent us a budget that would deal with that deficit, and over the next 8 years every year, every year, the bottom line of the budget got better, better to the point that in 1999 for the first time in 30 years, we balanced the budget. In the year 2000, we had a surplus of $236 billion. So from 1992 until the year 2000, we took the budget from $290 billion in the red, in deficit, to $236 billion in surplus, a phenomenal record. President Bush the Second came to office, and we gave him an advantage that no President in recent times has ever enjoyed, a balanced budget, a budget that had a surplus the first year he was in office of 126, $127 billion. Today, 2 years later, this is what has happened. That surplus cumulative over 10 years, the years 2002 through 2011, has declined from $5.644 trillion as projected by the Bush Office of Management and Budget to $2.122 trillion in the red, in deficit. From $5.6 trillion dollars in the black to $2.1 trillion in the red, that is a swing in the wrong direction of $7.2 trillion over a period of 2 years. We have never seen that at least since the Great Depression, such a dramatic fiscal reversal in our account. That is what we want to address to you tonight because as this next chart will show, we face some decisions in the next couple of months that will determine the fiscal fate of this country for years to come. This is where the Bush administration began 2 years ago. This was a 10- year surplus, $5.6 trillion. They now say, and these are the numbers presented to us just last week by the Office of Management and Budget, that there was an overcalculation, a miscalculation due to the economy of $3.174 trillion so that the real surplus was really $2.463 trillion, $2.4 trillion instead of $5.6 trillion. That is only part of the bad news. The rest of it is that the Bush administration bet the budget on this blue-sky forecast and over the last 2 years has committed $2.6 trillion in enacting policies, two thirds of which went to tax cuts. We have more than spent the cumulative surplus during that period of time so that this year we start with a cumulative deficit of $129 billion. But the point to note here is that we are going to decide this year, in the next few months, whether we take that deficit, $129 billion in the red, a bad enough reversal since 2002, and add to it almost $2 trillion so that we add to the national debt $2.1 trillion. If we do that, it will be because we have chosen to do that. We could possibly out of abundance of charity say to those who passed the budget 2 years ago they thought they had a $5.6 trillion surplus, we told them we thought they were overstating it, but we will acknowledge that maybe this was negligence, this was a mistake, this was a miscalculation. Now we have to say if they go forward knowing what they know using their own projection, they will be deliberately, willfully, wantonly, and intentionally adding $2.1 trillion to the national debt. Notice that this period of time is a critical period of time in our country's fiscal history because this is when the baby boomers, 77 million of them now marching to their retirement, first begin to retire in 2008. In 2010, 2011 they begin to draw not only their Social Security but their Medicare. So this is a period of time when we should be husbanding our resources so we can meet our obligation to the baby boomers who will be retiring in huge numbers and will double in time the number on Social Security and Medicare. Instead, during that very period of time we are incurring, if we follow the budget proposals before us, mostly the tax cuts proposals that have been made, $2.122 trillion in additional debt. A large part of that additional policy will go to tax cuts. This chart shows the Bush tax cut in 2001, $1.349 trillion in revenues committed to that tax cut. This shows what we did a couple of years ago when we had a first stimulus package to try to get us out of the recession that we felt ourselves slumping into. Now the Bush administration has come up with an additional tax cut. They want to exclude dividends from taxation. I can understand why that would be appealing to a lot of people, but the revenue cost to us of the latest Bush tax proposal is another $615 billion. Those tax cuts made in June of 2001 were not permanent. In order to shoehorn them into the budget, they artificially terminated or truncated the taxes at the end of 2010. If we make them permanent, which the Bush administration is proposing, that adds another $692 billion. Then there is another problem we will not even get into tonight, but it is on the tax agenda. Democrats and Republicans, the Congress and the White House will soon have to face the problem of the alternative minimum tax. Pretty soon millions of Americans will be paying more in the alternative minimum tax than they pay under the regular taxation. If we add all of those together and add the debt service that we have to pay additionally because we have used these tax cuts to dispense with our revenues, we have got a tax agenda here of $4.4 trillion. And this is coming at a time when I said we have some critical obligations to meet, we are draining the revenues dry. Let me just stop on this point and recognize my friend, the gentleman from Texas (Mr. Edwards). Before doing so, look at the next 5 years. These are numbers taken straight from the Bush budget, the Office of Management and Budget. Over the next 5 years, this year, 2004, 2005, 2006, 2007, 2008, they are proposing to spend a deficit of more than $400 billion in every one of those years. What is distressing is not necessarily the size of these deficits to start with. If we are, after all, in a slumping economy, you would expect to see a deficit then. But there is no abatement, no reduction. There is no diminution of this deficit in any of these years. These are the numbers you get if you back out Social Security. The total amount of deficits we will incur in the general fund of the budget if we follow this plan over the next 5 years, 2004 through 2008, is $2.14 trillion. As I said earlier, that is not the result of what we did previously; that is the result of decisions we are about to make now. This is where it will take us. Notice that they stop at the end of 5 years. Last year and in 2001 we had a budget that went out 10 years, because we had found from experience that fiscal discipline was served by projecting the consequences of your fiscal actions out as far as you could, and 10 years was deemed to be a good projection period. But if you run this out 10 years, the situation only gets worse. Mr. Speaker, I now would like to yield to my friend, the gentleman from Texas (Mr. Edwards) to pick up here and talk about some of the consequences in this budget for programs that all Americans support.

Mr. SPRATT

Mr. SPRATT. Mr. Speaker, I yield myself such time as I may consume. I congratulate the chairman of the Committee on Small Business; the gentlewoman from New York (Ms. Velazquez), the ranking member; and my colleague, the gentleman from Iowa (Mr. Nussle), for facilitating the legislation before us. This is not only good, but necessary, legislation. I am glad to see us move it. S. 141, this bill before us, would allow the Office of Management and Budget, OMB, to change its 2003 technical assumptions regarding the SBA general business program. Without this change, everybody should understand this, SBA will have to reduce the 2003 loan volume supported by this program by about 50 percent, 50 percent below the 2002 level of $9.3 billion. This legislation was referred to our committee, the Committee on the Budget, because it required an exception to the usual strictures of the Balanced Budget and Emergency Deficit Control Act that bind OMB to one set of assumptions throughout a budget year. That is why it is necessary for us to bring it to the floor. I guess we could call this directed scorekeeping, but in this case it is justifiable scorekeeping. OMB has had chronic problems with overestimating the credit subsidy rate for general business loans, the so-called 7(a) program and related programs. As a result, SBA has historically underestimated the volume of loans that can be supported by a given level of appropriations. Starting with the 2004 budget, this problem should be corrected because OMB has developed a much more sophisticated and accurate model for estimating the subsidy rates. For this fiscal year, 2003, however, the President declined to request sufficient appropriations to maintain the program level for general business loans, given this existing estimate of the subsidy rate. Consequently, SBA is now on the horns of a dilemma. It can either reduce the maximum size of loans made to individuals or it can suspend the program once it runs out of authority before the end of this fiscal year. Neither of those is an attractive option, especially not now, in the midst of a very, very slack economy. We are struggling to get back on our feet and get people back to work. This legislation is proemployment legislation because, with the adjustment we make by this legislation, SBA will be able to support a 2003 loan volume of about $8.2 billion, which is close to its historic standard of $9 to $10 billion. I enthusiastically support this legislation and I urge everyone to give it their support. It could create and should create additional jobs. It will certainly iron out a problem for small business borrowers and the SBA for the balance of this fiscal year, something we need to do and should do, and it is good legislation to boot. I urge everyone to support it. Mr. Speaker, I yield the balance of my time to the gentlewoman from New York (Ms. Velazquez), the distinguished ranking member of the Committee on Small Business, and I ask unanimous consent that she be given the ability to allocate that time.