Corker says borrowing is out of control

By GLENDA CAUDLE
Special Features Editor
We spend way more than we can afford.
We borrow to make that possible.
“We” are the United States of America — an “exceptional nation” with a special role to play on the world stage. That role, unhappily, can be negatively impacted by countries hostile not only to our national interests but to the success of our leadership status. The power to break us exists because of the debt we are amassing.
Tennessee Sen. Bob Corker told the budget-busting story with charts and graphs Thursday morning at the Obion County Public Library. The message is one he has delivered 40 times over the past three months in his home state.
“We need a construct to cap spending and incentivize growth. We need a tax policy to grow the economy,” he said to representatives of the Obion County Chamber of Commerce, Industrial Development leaders and other guests from both Tennessee and Kentucky.
The message is one suitable for both states — and the other 48 — so the senator is glad to have an audience that crosses geographical lines. And political lines, as well.
“I don’t think the American people are fully focusing on how bad things are,” warned Corker, who has credentials not only as a senator first elected in 2006, but also as a small businessman in the construction industry, the mayor of Chattanooga and the former Tennessee Commissioner of Finance and Administration. He is a member of the Banking, Housing and Urban Affairs Committee, the Energy and Natural Resources Committee and the Foreign Relations Committee and is ranking member of the Special Committee on Aging in Washington these days.
In a ‘down’ economy
Corker is trying to paint a picture, both accurate and attention-getting, of the downward financial spiral that is spinning the dreams of the average American family into nightmare territory. Pointing to recent campaign rhetoric, he said many of the quick-fix solutions being touted are far too simplistic and far too inadequate to handle the looming disaster.
“All of us have a challenge in this tough economy. I’ll be sitting down with Governor-elect Bill Haslam this weekend as he begins focusing intently on his new job. He’s already made a start and he will be continuing Governor Bredesen’s strong effort. Business folks like to talk to business folks,” he added, calling attention not only to the “real-world” experience both governors have been able to bring to the office but also to the world in which his audience of economic development people find themselves functioning each day.
The nation’s indebtedness, Corker has been explaining across the Volunteer State, is measured as a percentage of its Gross Domestic Product or the nation’s gross output. The senator clarified this image by the comparison he drew to a business reviewing its profit and debt picture to see how it stands. Today, he said, the United States has 62 percent indebtedness in ratio to the GDP. We have borrowed $4.5 trillion from ourselves — with the money coming from the Social Security trust. More has come from other sources, both within and without the nation. It all has to be paid back at some point. And, to make the prospect even gloomier, by 2030 — if we continue on the path we are treading today — we will be at 146 percent of gross domestic product.
Using a current frame of reference, Corker noted that when the bankrupt nation of Greece was bailed out by its European Union neighbors a few months ago, its GDP was at 120 percent. So precarious was its position that it was forced to surrender a portion of its national sovereignty to stave off economic disaster of major proportions. Greek leaders were compelled to abide by the dictates of nations with stronger resources to stay afloat. The experience was more than simply embarrassing. And the countries who rescued them were, relatively speaking, their friends. Imagine a future “rescue” of this nation by its enemies, Corker invited with his scenario.
In the late 1990s, the senator said, for a brief period during the Clinton presidency and Republican control of the Congress, government was actually taking more in than it was paying out. The lines he pointed to on the chart he used to detail the nation’s economic situation showed that state of affairs did not long endure, however. And since that time, the United States has managed to amass so much debt that today there is a $1.47 trillion gap, based on real budgets that currently exist, according to the Congressional Budget Office. On the chart, the pair of lines representing money coming in and money going out continue to veer away from each other as the years roll by and the two will never cross again, Corker warned, unless aggressive action is taken.
Simply put, we spend too much as a nation, he suggested.
In other words
In household terms, a Tennessee family with income of $43,000 in 2008 (the latest data available) who decided to follow Washington’s example of profligate spending, could be enjoying a lifestyle that would actually price out at $70,300. To sustain this giddy state of affairs, the family would have to be using a “credit card” that would allow them to “borrow” an additional 40 cents more every time they spent a dollar they actually possessed. Eventually, of course, the family’s ability to sustain this debt would max out and not only would they be unable to add to their storehouse of goodies, they would be forced to give up what they already had to pay their creditors. And eventually, of course, the United States will find itself in the same situation.
That is the problem Corker is addressing.
To provide additional perspective, the senator noted that in 1970, 62 percent of what Washington spent went to “discretionary” items such as defense, highways, education and whatever else Congress decided to spend it on. The nation paid out 7 percent of its budget in interest on its debt. The 31 percent left over went to entitlements such as Medicare, Medicaid and Social Security.
Today, a vastly trimmed 38 percent goes to the discretionary fund. Six percent goes to interest and — in a nation both aging and increasingly accustomed to having government take care of its problems — 56 percent goes to mandatory entitlements. By 2035, the numbers will have shifted again to 26 percent to discretionary. But only 49 percent will be left over to meet the entitlement demands after the 25 percent due and payable on the interest is honored. In 2009, we spent $187 billion on interest. By 2020, we will be spending $916 billion on interest and it will dwarf all other spending.
Someone will not get what they believe they deserve to have. There simply won’t be enough money to go around.
In the future
Today 46 percent of what we borrow comes from foreign interests. Ten percent of it is owned by China. A few years ago — former Treasury Secretary Hank Paulson told Corker recently — Russia tried to get China to stop picking up our debt in an effort to cripple us economically. Fortunately, China declined to halt the buying of our mortgage-backed securities. But it could “reconsider” at any point. The effect would be catastrophic, experts believe.
And yet, we continue to borrow to sustain the national life-style we enjoy.
“Both parties have put us where we are,” Corker admitted. But, he added, solutions do not emerge from finger-pointing.
For the past 50 years, he noted, the nation has been spending at roughly 20.3 percent of GDP. By 2020, if projections hold true, that will increase to 25.9 percent. Revenue over that 50-year period has been at 18 percent. Some economists believe there is sustainability at the 2.3 percent difference as long as the economy is growing, although as a businessman, Corker said he is uncomfortable with that gap.
“Eighteen percent of GDP is what we should be spending. That’s what we take in,” he pointed out. But the grim reality, he suggested, is that not only have we been unwilling to put what we take in on a par with what we pay out, but the resulting gap is guaranteed to grow to a point that will adversely affect everyone’s comfort level.
“Erskine Bowles, Bill Clinton’s chief of staff and a member of President Obama’s Deficit Reduction Commission, says he thinks we should be spending 21 percent of GDP at the government level. Somewhere between 18 and 21, I think, there is a deal. Shouldn’t hammering out that deal be Page One of the economic plan?” he asked.
Corker suggested that the first debate should be what percentage of GDP citizens want the government to have, noting that until that is done, there is no way to close the gap. To achieve that feat and arrive at the balance between intake and outgo that Corker wants, it will be necessary to cut $.6.7 trillion dollars in spending over the next 10 years. Elementary school math reveals, then, that — somewhere or other — Washington needs to find a way to trim $670 billion a year.
And eliminating earmarks just won’t do it.
Corker, who declines to indulge in such pet project plenitude himself, wishes it were as simple as convincing other lawmakers to follow his frugal example.
Disbanding the military will not do it, since $670 billion is more than defense of the nation is allotted in the budget for a year.
Giving up on Medicare wouldn’t even accomplish the goal. Again, the draconian cuts required exceed the funds available from the entitlement resource pocketbook.
Noting that such cuts are not only insufficient on the one hand and far more drastic than any American would support on the other, Corker said that is no excuse to avoid dealing with the hard decisions that must be made. Washington, he insisted, must rethink how to deal with all its expenditures and start down a new path.
“We must fundamentally change the way Washington does business. If you spent six months with me in Washington, you would be embarrassed at how we spend money. We didn’t even bother to have a budget this year. We are on the verge of leaving our nation worse off than we found it. None of us would think of living our own lives extravagantly and then giving the bill for it to our children. But in Washington, we are running up the credit card and then handing it to the next generation.”
The issue, Corker says, is significantly larger than anything we have been willing to discuss to this point.
But time is rapidly running out.
The conversation must begin.
Mrs. Caudle may be contacted at glendacaudle @ucmessenger.com.

Published in The Messenger 11.5.10

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