Fiscal Challenges
Floor Speech
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Mr. ENZI. Mr. President, I thank the Senator from Ohio for his outstanding comments on faith-biased security and the immigration crisis that we are facing and the solutions he suggested. We have a lot of work to do there.
Now you get to hear from the accountant.
I come to the floor today to call attention to the Federal Government's unsustainable fiscal outlook.
Yesterday in the Senate Budget Committee we had a hearing on fixing our broken budget and spending process, with a focus on securing our country's fiscal future. Our witness was the Comptroller General of the United States, the head of the Government Accountability Office.
In April of this year, GAO issued its third annual update on the nation's fiscal health. The report concluded that the Federal Government is on an unsustainable fiscal path.
A Congressional Budget Office report released this week on the long- term budget outlook painted a similarly bleak picture, noting that our surging Federal debt is putting our Nation at risk of a ``fiscal crisis.'' This is one of the charts we got to see. I know it is pretty hard for people to read. We are figuring out a way to make this bigger.
The impact will be tremendous. It shows that, in 2019, Social Security spending passed the $1 trillion mark annually. In 2021, the highway trust fund will be unable to meet all obligations. In 2022, the discretionary spending caps will expire, allowing unlimited spending. In 2025, the Pension Benefit Guaranty Corporation multiemployer fund will be depleted. It will be insufficient to pay full benefits to insolvent pension plans. In 2025, CBO projects the net interest spending will surpass the spending on national defense. In 2026, the Medicare hospital insurance trust fund will be depleted. With some incoming revenue, it will be sufficient to pay 91 percent of hospital- related Medicare spending, which is already forced to be low.
In 2030, the net interest spending will exceed $1 trillion annually. The interest will exceed $1 trillion annually.
In 2031, mandatory spending and interest will consume all Federal revenue. It means we will not get to make any decisions on anything that isn't mandatory, which we don't get to make decisions on right now.
In 2032, the Social Security trust fund will be depleted. The amount of money coming in that will be paid out right away will only pay 77 percent of the scheduled benefits. I will cover that more later.
Those are a few of the fiscal cliffs we are facing that could be solved now, that have to be solved now. If they are solved now, they have simpler, less impactful problems than if we wait until the cliff gets here.
The Federal Government is swimming in a sea of red ink that threatens to drown America's future generations. If current laws don't change, debt as a percentage of GDP, will soar to unprecedented levels over the next 30 years. Let me repeat that. If current laws don't change, debt as a percentage of GDP--that is production--will soar to unprecedented levels over the next 30 years. By 2037, our debt-to-GDP ratio--that is debt-to-production--will surpass the historical records set in the aftermath of World War II. By 2049, debt will stand at 144 percent of GDP.
That is how bond investors determine the likelihood of getting their money back. Interest rates reflect that fact and go up as risk increases. As that percentage goes up, the risk increases. The amount we have to pay to borrow any money will go up, if people still loan us money, which gets us to what is on the chart.
In 2030, net interest will exceed $1 trillion a year annually. That is not buying anything; that is paying the interest.
In most of the Nation's history, we have only seen periods of high spending and debt during wars and other emergencies, and the increase has been temporary, but today's fiscal situation is different.
We are facing a demographic fiscal storm. For decades, nonpartisan experts, including the Congressional Budget Office and the Government Accountability Office, have warned of the budget pressures that we would face as baby boomers aged and began to retire. We heard yesterday from the GAO that, on average, more than 10,000 people per day turn 65 years of age, and in the next few years, that number will rise to more than 11,000. Here is a little chart of how those thousands per day grow.
Some of us were under the impression, of course, that the baby boomers eventually would die. That is kind of an inevitable sort of thing. What we didn't count on was the extra longevity that everybody will have and the fact that there are other generations coming up. So the chart does not tail off here on the end. The chart continues to grow, even though the birth rate is down.
The combination of aging population, longer lifespans, and rising per-beneficiary healthcare costs put enormous pressure on our spending.
According to the CBO, the projected explosion in debt we will see over the next few decades and beyond occurs because of mandatory spending--particularly Social Security and major healthcare programs, specifically, Medicare and Medicaid--not to mention the interest payments on the national debt that will permanently grow faster than Federal revenues.
This autospent money--spending that is never looked at--has already grown from about 36 percent of the Federal budget 50 years ago to 70 percent today. If left unchecked, CBO projects that more than 80 cents of every dollar the government spends will be on mandatory spending, guaranteed to be spent without further approval, not to mention the interest by 2049.
Because mandatory spending operates on autopilot, not subject to the annual appropriations process, it often escapes congressional scrutiny and proper oversight. It would be one thing if mandatory spending programs bypassed the appropriations process because they were fully funded through their own dedicated source of revenue, but that is not the case.
As this chart shows, many of the largest mandatory programs, such as Medicaid and food stamps, don't have their own source of funding and instead rely entirely on money from the Treasury's general fund. You can see the blue here. That is money that will be coming in. The red is the extra money that has to be spent to meet the obligations. On some of these, you will note that there is no blue at all. That means this is coming out of the general fund, which is where we expect to be able to get defense, education, and all of the other things we do. So there is enough spent right here on excess that doesn't have a source of revenue that forces everything else we do to be borrowed, and I already mentioned the problems of borrowing.
Even though some of these programs do collect some revenue--and a few of them do collect their own revenue--they often spend more than they take in. It didn't used to be the case. We used to have a lot more people working and paying into Social Security than were receiving Social Security, and there used to be a huge surplus, which we spent and then put as bonds in the drawer. We are now drawing down on those bonds, even though there is no real money to back them up, but that is about to be depleted as well.
Over the next 10 years, CBO projects that Social Security spending will total $14.4 trillion, but the program's dedicated tax revenues will only cover $11.8 trillion of that. That is $14.4 trillion going out and $11.8 trillion coming in. You can't do that very long.
CBO projects that under current law, Social Security's combined trust funds would be exhausted through 2032. You may say: That is a long time into the future, 2032. Well, that is 3 years earlier than the Social Security trustees estimated just earlier this year. How many times can we have that accelerated by 3 years before we are at the cliff?
Total Medicare spending will amount to $11.5 trillion over the next 10 years, but the program just collects $6 trillion in dedicated taxes and premiums--again, $11.5 trillion going out and $6 trillion coming in.
CBO and the Medicare trustees both projected Medicare's Hospital Insurance Trust Fund, which covers inpatient hospital services, hospice care, skilled nursing facilities, and home health services, will be depleted in 2026.
Spending on military and civilian retirement programs will total nearly $2 trillion, but Federal employees' contributions toward their pension will only be $70 billion. I don't like that word ``trillion.'' It is kind of hard to wrap your head around it. Billions are tough enough, but $2 trillion is $2,000 billion. That is what is going out, $2,000 billion. What is coming in is $70 billion. There is a little bit of a gap. Just as with most other spending programs, this difference will be made up with general fund revenues, which today are all borrowed funds.
Social Security and much of Medicare is supposed to be different though. Under current law, once their respective trust funds are exhausted, those programs will still pay out money, but they will only be able to pay out as much in benefits as they have coming in. We heard yesterday from the Government Accountability Office that, for Medicare, that means only being able to pay 91 cents on the dollar for hospital- related Medicare spending. How long do you think doctors will put up with that? How many hospitals will that put out of business? For Social Security, revenue is projected to be sufficient to cover only 77 percent of scheduled benefits. Who on Social Security will be able to afford a cut of 23 percent? That is the fiscal cliff.
Of course, this shouldn't be news to lawmakers. For years, the warnings that these programs are on an unsustainable fiscal course have gone largely unheeded, hoping that the next Congress, the next President, or maybe the next generation would be more willing to deal with the problem.
To be clear, I want to make sure Social Security and Medicare are able to continue providing benefits to current beneficiaries, as well as those who may need these programs in the future. That will require us to work together in a bipartisan manner to ensure these programs' solvency. If we don't make changes to the way these programs currently operate, a lot of people in the future will just be out of luck. There are levers that can be pulled on these. If any one is pulled, it would be a tragedy to whomever it affects. If they are all pulled, it is less noticeable but still noticeable based on how long it is before we ever reach a solution on these problems.
Ignoring the problem will not make it go away and, in this case, the opposite is true. The longer we wait to address this imbalance, the more severe the changes will need to be, and we will have fewer options.
We need to change the way we do things around here. Too often we wait to make the difficult decisions that everyone knows has to be made until we have a crisis on our hands. In the Budget Committee, we are focused on trying to put together bipartisan budget process reform proposals that will help us confront these thorny fiscal issues in a more reasoned, timely, and responsible way.
I am hopeful we will get there. I am encouraged with the conversations we have had that we will get there. These issues are too important to ignore, and we are going to need to work together if we are to put our country on a more sustainable fiscal course. We owe it to future generations to try.
We have handled some crises around here. Recently, we handled one of national disasters. The national disasters don't have to be paid for. They aren't a part of the budget caps--they should be a part of the budget caps, but they don't have to be a part of the budget caps--so they just get exempt as long as they are voted on, but everybody wants to help everybody with a problem, so we go ahead and pass those straight to debt. One week, at the beginning of the week, when we proposed it, it was $13 billion. When it actually passed it, it was up to $19.1 billion. That all went to additional debt.
It is a crisis. We need to plan for it. We need to prioritize for it. We need to fit that in, but we can't do everything, continue to escalate everything, and consider that things we haven't look at for years are OK to keep doing the same way we are doing them or to have the duplication. We are doing hearings all the time on ways this problem can be solved, but it is important that we start solving it soon or future generations will be drastically affected.
In fact, the dates I had up here earlier, present generations will be affected. We need to get everyone on board looking for solutions and biting the bullet now to do them.
I have had a penny plan for a long time. Under the penny plan, if we just stopped spending 1 cent out of every dollar we spend, not counting Social Security, no change in Social Security--if we just found ways to do things 1 percent better, and we did that for 7 consecutive years, our budget would balance. If we started with a penny, I am pretty sure we would say: That really didn't hurt too bad. How about if we do 2 cents? Now we cut it back to 4 years, and we can start paying down debt, which we have to do for our future generations, if our kids and grandkids are going to have the kind of life we had.
I am working for and hoping for everybody working together to solve these problems. If we just talk about them, and we don't work on them, it is pretty depressing but not as depressing as it will be hurting.
I ask my colleagues to take a look at this and help come up with solutions. I am impressed with those who are working with me on it.
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