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April 20, 2006

Tanner writes about long-term impact of fiscal irresponsibility

'TOUGH CHOICES ARE NECESSARY TO SECURE OUR ECONOMIC FUTURE,' CONGRESSMAN'S REPORT SAYS

MEMPHIS – There will be major consequences for the U.S. economy and Americans’ personal savings if Congress and President Bush fail to reverse the trend of record deficits, Congressman John Tanner said Thursday in an address to the Economic Club of Memphis.

Tanner, a member of the House Ways and Means Committee, released a comprehensive report, titled “The Consequences of America’s Debt on Our Economic Future,” which details the impact of the nation’s rapidly increasing $8.4 trillion debt and proposes solutions to balance the federal budget.

“It is clear that the nation’s current fiscal path is unsustainable and that tough choices will be necessary to address the growing imbalance,” Tanner writes in the introduction to his 20-page report. “Without a bipartisan, honest public debate on both spending and taxes, our government runs the risk of failing to meet the future needs of the American people.”

Tanner represents Tennessee’s 8th Congressional district in west and middle Tennessee. He is a founding member of the Blue Dog Coalition, a group of 37 moderate to conservative House Democrats committed to fiscal discipline.

Following are excerpts of Congressman Tanner's report:

Budget outlook

“The Congressional Budget Office projects that the federal budget will report a deficit of $337 billion in 2006. This amount would be the third most in history and is more than the $318 billion deficit in 2005…. Additional funding will probably be necessary in 2006 to pay for military activities in Iraq and Afghanistan and for flood insurance claims from Hurricane Katrina. If that funding is provided, CBO expects that federal spending will grow by another $20 to $25 billion this year, resulting in a 2006 deficit in the vicinity of $360 billion – the second highest in history.

“Closing the current budget shortfall would require sustained economic growth far beyond what has been experienced in U.S. economic history…. Stated plainly, our federal obligations are growing much more rapidly than our economy.”

Baby Boomers’ retirement

“Social Security, Medicare and Medicaid in their present form represent an unsustainable burden on future generations…. Comprehensive budget reform will be impossible without restructuring these important and increasingly costly federal entitlement programs.”

Over-spending

“Once a federal program is created, it often becomes difficult to limit budget increases, and, more importantly, ensure the money appropriated by Congress is being utilized properly. Nonetheless, it will be critical for Congress and the Administration to control the growth of spending, or we will simply continue to borrow money that our children and grandchildren will be forced to pay back.”

Government accountability

“One of the primary problems with the federal budget process is the lack of accountability and transparency in government…. The Government Accounting Office, which is charged with auditing the government’s books, cannot account for all of the federal government’s assets and liabilities…. Congress needs to restore its constitutional responsibility of oversight and ensure that waste, fraud and abuse are eliminated or the American taxpayer will lose faith in the government’s ability to provide services to its citizens.” 

Interest payments

“Interest has become the fastest-growing spending item in the federal budget and will, over the next five years, grow significantly faster than other spending in the federal budget…. Money spent to pay interest on the national debt is truly wasteful spending. It doesn’t educate a child, build a road or keep the nation secure.” 

Foreign holdings of U.S. debt

“We are in part funding the federal government by selling our debt to the Chinese…. The high level of foreign holdings of U.S. securities could have a debilitating impact on our economy and foreign policy. If China threatened to sell large volumes of U.S. Treasury securities, it could easily fuel higher inflation and put pressure on the Federal Reserve to increase interest rates, putting our economy at risk for a large-scale recession.” 

Debt limit increases

“The last debt limit increase of $781 billion is as large as the entire federal debt in 1978. It took the country more than 200 years to generate as much debt as we borrowed during the past two years alone…. Today, Congress raises the debt limit without a separate vote in the House, amidst limited media attention and virtually no public outrage. This enables policymakers to simply deficit-spend and raise the debt limit instead of making the hard decisions needed to balance the budget.” 

Personal savings

“As federal budget deficits have climbed, personal household savings have reached record lows. Too many Americans today are spending well beyond their means. Last year, for the first time since 1933, our annual personal savings rate was negative, meaning Americans are spending more on average than we earn. Such dismal personal savings has not been seen in the United States since the Great Depression.” 

Recommendations and solutions

“Legislation must be enacted in Congress that would require Congressional Committees to hold hearings and review the findings of [accounting] reports to ensure taxpayer funds are being used appropriately.”

“The President and the Congress together must figure out how to balance the many demands on the federal budget. Unfortunately, all the budget rules in effect in the 1990s, including the pay-as-you-go rule (PAYGO) and spending caps, have expired…. Restoring PAYGO should be a simple and effective way to begin working our way back toward fiscal responsibility.”

“Congress should more honestly estimate the budget cost of bills it considers.”

“[To ensure solvency of Social Security] the first step needs to be a reform commission – not made up of elected officials – to gather information and to educate Members of Congress and the public on the changes facing Social Security, Medicare and Medicaid and discuss ways to preserve these important retirement and health programs.”

“Congress and the President should re-examine the tax code so that taxpayers have the confidence they need in the system and the government maintains the revenue it needs to function properly.”

“The only way to ensure an end to deficit spending seems to be a Constitutional amendment to require a balanced budget every year except in times of war or national emergency.”

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Contact: Randy Ford, 202.225.4714

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