April 27, 2005

Spratt Statement at Meeting of Budget Resolution Conference Committee

WASHINGTON – U.S. Rep. John Spratt (D-SC) made the following statement today at the meeting of the conference committee on the fiscal year 2006 budget resolution.

”Mr. Chairman, the first and probably only meeting of the conference committee on the budget comes amid press reports that you have already reached agreement on a conference report.  If so, this meeting is mostly a formality, just a gesture to lend a semblance of collaboration to the budget process.  But there has been no collaboration, and the budget resolution that seems to be emerging does not reflect the resolution we would pass if we were full partners in this process.

“The federal government faces a deficit this year which OMB estimates at $427 billion. If so, it will be the third record deficit in a row.  With deficits of this size, rising and never ending, the budget should be used to make the bottom line better, not worse. But your budget does just the opposite. The President’s budget, the House budget, and Senate budget all make the deficit bigger, not smaller.

“I know that you have searched the budget for programs to cut, and have come up with some significant cuts:  in Medicaid, student loans, Pension Benefit Guaranty premiums, probably the EITC and Food Stamps, and maybe veterans’ benefits. But these cuts do not go to the bottom-line and reduce the deficit dollar-for-dollar. They are used to offset, partially at least, your tax cuts; because even though the budget is $427 billion in deficit, you keep pushing tax cuts, knowing full well that they can only make the deficit larger.

“It’s fair to ask how do we fund the government if we have a massive deficit, and yet keep cutting taxes.  Obviously, one way is to use the payroll taxes in the Social Security surplus to make up for the income taxes lost to tax cuts. And in fact, that’s just what you do.  You use 100% of the Social Security trust fund surplus for that purpose, not just this year but every year in your five-year budget.  I know that a government bond is placed in the trust fund for each dollar taken out, but I also recall President Bush disparaging these bonds as mere IOU’s.

“Insolvency may loom somewhere in Social Security’s future.  But this budget is not a step toward Social Security solvency.  It is a long step backwards.

“It’s also a step back for services that Americans depend upon: education, veterans health care, environmental protection.  On the discretionary side, the House resolution cuts non-defense discretionary spending below the level needed to keep pace with inflation by $12 billion for 2006 and by $150 billion over five years; the Senate resolution includes cuts of $6.3 billion for 2006 and $128 billion over five years.

“On the mandatory side, the House resolution directs nine House committees to cut mandatory spending under reconciliation procedures by $69 billion over five years, while the Senate resolution includes $17 billion in reconciled cuts over five years distributed among committees.

“Reconciliation instructions do not specify where committees must make the cuts required to meet their targets, but the jurisdiction of each committee suggests where those cuts are likely to fall.  The House resolution includes reconciliation cuts that could fall on Medicaid, food stamps, student loans, veterans’ benefits, and income security.  The House-passed resolution includes reconciled directives to the Ways and Means Committee which would likely fall on income security programs such as Supplemental Security Income — despite the fact that the President’s budget did not propose significant cuts to these low-income programs, and the Senate resolution does not include them. The Senate resolution also eliminated any reconciled cuts in Medicaid, and though majorities in both houses voted their support for that position, it appears that the conference report will not heed their instruction.

“These budget policies mark a continuation of the course taken since President Bush came to office in 2001.  At that time, the budget was in surplus by an estimated $5.6 trillion over ten years.  Democrats warned that these were paper projections, which could disappear in the blink of an economist’s eye.  We also said that we should seize the opportunity. With what appeared to be a substantial surplus, we should pay down long-term liabilities and build up Social Security.

“President Bush’s budgets have taken a different path, driven largely by substantial tax cuts.  As result, the budget has moved from record surpluses to record deficits.

“The President’s 2006 budget, like the House and Senate resolutions, claims to cut these deficits in half over the next five years —I mplying that another five years would bring the budget back to balance.  But your budgets give no deficit figures at all after the first five years, and exclude the impact on the deficit of 90% of the President’s $1.4 trillion tax-cutting agenda.

“The Congressional Budget Office (CBO) has provided us with a ten-year estimate of the policies in the President’s budget, and its estimate contradicts any claim of progress on the deficit front. CBO estimates deficits totaling $2.6 trillion over the next ten years under the policies included in the President’s budget and an annual deficit never falling below $229 billion.

“As bad as these numbers are, the President’s budget omits the cost of Social Security privatization ($754 billion over 2009-2015); omits the revenue impact of fixing the Alternative Minimum Tax  ($642 billion over ten years, if the tax cuts are extended); and omits funding for operations in Iraq and Afghanistan after 2005 (which CBO suggests could run as high as $384 billion over the next ten years).  When these costs are included, the budget outlook is bleaker. Annual deficits never fall below $362 billion and eventually rise to $621 billion in the year 2015.

“We don’t have a ten-year projection of the House and Senate budgets, both of which differ somewhat from the President’s budget in terms of omitted items. They include, for example, $50 billion for operations in Iraq and Afghanistan for 2006, and perhaps a one-year AMT fix.  But given the broad similarity between the President’s budget and the House and Senate budgets, these estimates for the President’s budget give us a ballpark idea of the direction the House and Senate resolutions are heading.  Unfortunately, the result is larger deficits, not smaller ones.

“I would remind you that to accommodate the Bush budgets from 2002-2005, Congress has raised the debt ceiling three times by $2.234 trillion over the last four years.  In January, CBO estimated that the budget was on course to require another debt ceiling increase by February 2006.

“In the House, Democrats offered a better budget, one that had smaller deficits every year than the House or Senate resolutions, and accumulated less debt as a result.  The House Democratic budget reached balance in 2012. The Republican budget never reached balance.

“A real bipartisan conference — with everyone at the table and everything on the table — would afford us the chance to come forth with a conference report that puts the budget on the path to balance.  Unfortunately, such a conference — and such an outcome — will not occur. There will be a budget, but there will be no plan, and no prospect, for reducing the deficit.”

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