20110322 Sen. Lee : Balanced Budget

This was a gathering at UVU where Senator Lee presented his thoughts on the Balanced Budget Amendment that he is working on. He also took some questions at the end.
3/22/2011 10:09:41 AM Introductions I met Senator Mike Lee at J Reuben Clark law school. We attended a class together. He said after one class that my analysis “was bold.” I knew there was something special about him. Today it is the Senator who will be talking about a Balanced Budget Amendment. We have only had 17 amendments since the Bill of Rights in 1791. He has the discipline and focus to accomplish his goals.
In 2010 he ran for Congress and was elected as Senator. He is on numerous committees. He has 3 children and they reside in Alpine, Utah.
3/22/2011 10:13:05 AM Report Mike Lee I am sure your analysis today is still bold. I love this t-shirt. The message of a gun toting party brings back great memories. I gave a speech here at UVU and I swear every other student in the room was open carrying. I thought, God bless Utah Valley University.
I love this school. I love that there is a place like this where people can some from all over the country. You can get a great education here. I grew up in Utah county and still reside here. Even though I have a job in DC, my home and heart are still here.
I wanted to talk today about the interaction between representative government spending and personal liberty. Government is to protect only what government can protect, life liberty and property. We rely on government to protect that. In order to protect those interests, government requires money and personnel and equipment. The government has to have money. Money is property. People spend a portion of their lives for money. So our liberty, life and property are joined.
Ironically government has to erode some of the interests to take some property to help do what they need to do. We don’t want anarchy, so we have government.
Whenever you have a representative government in place you need things to keep it in check. Let me explain the cycle. As government expands its role it needs more money and then it will ask for more power. We have seen this happen over the last 100 years.
100 years ago the federal government had 2% of GDP but it is now 25%.
Elections can change this cycle of growing power. Occasionally people look for other people to send in to government to help shrink it. To help remind what the role is. This should save us. Sometimes there is a counter acting force that influences this. The idea of deficit spending. If the money is spent and you don’t have to pay for it in that election cycle, then people don’t realize the pain and don’t remove the government.
If a program is popular enough that people don’t mind their tax increase then things go on. If the government says we will create a problem and just pay interest so the electorate doesn’t know that they will have a significant fiscal impact. That is how we have gone from where we were 100 years ago to where we are today. The government is spending over one quarter of every dollar. Our deficit has grown to 14 trillion. The debt is then loaded over time on all of you.
We are adding to this debt at 1.5 trillion / year. Everyone will have to pay this back. This simply is not sustainable. The interest that we owe on this debt now is very large. Economies around the world have gone in to tailspins when this happens. They see that when the country goes over 90% a lot of the laws of “gravity” just change. Economic growth shrinks by one half every year.
That means for us we can decrease in our own jobs. This is very dangerous because it leads to more expansion. Over time you erode what the government was created for. In the past you’ve had a division. Many Republicans have said, “no matter what you cut you can’t cut military.” Also Democrats and others have said, “you can’t cut entitlements”. Now you are seeing members of both parties in both houses saying everything needs to be on the table.
You are also seeing a gradual establishment of bipartisan support for a Balanced Budget Amendment. It is necessary because we need to restrict our ability to get debt. The political pressure is at times so overwhelming that even when Congress puts up limits they then get weak knees and make new laws and removes the limits.
An example is in the mid 1980s the Graham / Rudman / Halling Act set targeted deadlines by which the government had to make cuts on a percentage basis. By January 1988 we have to cut by 10% and if they didn’t then the Treasury would have to do it for them. There were a lot of people who thought it was a good idea. When the pressure grew, they decided to repeal the measure by a simple majority vote. That is why, I believe, we need even more today that you have an Amendment. It has only been amended 27 times.
We need an Amendment SJR5 that I have introduced with Senator John Kyl. “Congress may not spend more than it takes in in a year. Spend more than 18% or raise ceiling with out a 2/3 vote.” We want to make it rare but possible to lift the restriction. In the case of a war we would be able to do that.
In every conflict there has been only one instance where we have garnered less than 2/3. That was in Bosnia. We could have easily done this based on our history. We could still protect our national interests and yet move toward a process of paying off the debt.
Once we plug the holes we will need to expand the economy. Without the holes it becomes easier and we can move to shrinking the debt and when we get below the 90% we will show better improvement.
The whole reason we worry about this is because the money we pay for taxes and the time we spend to pay it are property. You are a generation that unfortunately is faced with a daunting task. You have laws and debt that are massive and you weren’t old enough to vote when the debt was acquired. Many of your parents hadn’t even met. This is a form of intergenerational wealth transfer and taxation without representation. We fought a war about that and we won.
Although we can paint a smiley face on it, it is not a benign debt. Hopefully the economy will improve so that you can get a good job after being here. I don’t want you to have to work for 25% of your time to pay the debt. And then still be told it is not enough. This isn’t fair and isn’t right. It is eroding those interests that government is supposed to protect.
This is why I am pushing the Balanced Budget Amendment. A move to stop the inexorable movement of the debt. We need as many young people as possible to jump on board with this. I need your help.
I inserted a sense of the Senate amendment with another bill that is sort of a poll to see where the Senators are. We got 58 votes with 11 Democrats to vote on that. We need 2/3 to ratify that so we are looking for nine additional Democrats and I believe we need to do this for your benefit and the benefit of all Americans.
This is not just conservative, liberal or Republican and Democrat. At the rate we are spending at the end of this decade we will be spending 1 trillion per year just on interest on debt. If these interest estimates prove to be off then it could be higher.
1 trillion is a lot of money. It is more than we spend in an entire year on any category in our government and yet it will be interest if the current rate of spending doesn’t stop. We will be spending over 3.8 trillion on entitlements and interest. That is our entire spending today that is putting us deeper in debt. In 10 years there won’t be anything left for government. We will be paying debt and entitlements and that is all we could pay for. We won’t be able to run government.
Right now we are spending at about 3.85 trillion. What we bring in as tax revenue is 2.2 trillion. We are currently spending all of that 2.2 trillion right now for paying our required amount and everything else is paying for “working government.”
I want to finish this with whether you as a citizen are concerned about Social Security and Medicaid OR you are concerned about military, all of those things stand in jeopardy if we don’t change our spending.”
3/22/2011 10:39:43 AM Question Since Congress has the power to coin money or print money. Why do we borrow and not print?
3/22/2011 10:40:15 AM Answer Mike Lee If we just printed money of 1.65 trillion every year, we would have rampant inflation. We have seen that in Argentina 10 years ago. We also saw this in pre WWII where the inflation dramatically escalated. Inflation does happen and will happen as we get more debt but those sort of things are part of growth. The inflation from just printing would be on a very different scale and that would be dangerous.
3/22/2011 10:41:39 AM Question Andrew This is systemic of other issues in America. We need to cure all of it at the same time. What are you willing to give as yourself to set an example?
3/22/2011 10:42:12 AM Answer Mike Lee We voted to cut the budget to Congress for ourselves in the Senate. I don’t know where the House is on this.
If you go back just a few years you can see that our outlays matched revenue. In 2004 we were spending about 2.2 trillion dollars. In 2004 you can remember what it was like. We survived and had good times.
If we went to 2004 and baselined then we could just add Social Security and don’t cut current benefits. We would need to take something else away. In deciding what to cut I think we should go through the budget and see what the States could do and we should move that back to them.
For instance the Department of Education could be devolved to the states, between 50 and 75 billion per year is spent there. We have HUD, Energy, Labor that could be shaved. That is a drop in the bucket and we will need to look at entitlements.
300 Billion is spent on medicaid and is administered by the states and paid for there. We have lots of regulations that we tie them up with. If we look at what the States role is in that then perhaps we can reduce by 30-40% our expenditures and just do a block grant to the States. Then the States would save money, time and effort on a state by state basis.
If we move in that direction we can get to a balanced budget over time. We can’t do this in one year.
3/22/2011 10:47:24 AM Question Nathan Amendment process question. If you are unsuccessful there, would you encourage a convention of the states?
3/22/2011 10:47:49 AM Answer Mike Lee Article 5 says how to do this. I would say no. In the first method, Congress approves by 2/3 and the states ratify by 3/4. The other option is to convene a convention of the States.
I favor the first one and there is no real risk of a run away convention. In 1787 we had a Convention and we came out with a completely new document. But we don’t have James Madison and George Washington. I don’t really like the idea of a new document.
3/22/2011 10:49:25 AM Question My question is more about what are we going to do with CA and NY so that they don’t take UT tax payers money?
3/22/2011 10:49:50 AM Answer Mike Lee This is about State bailouts. I will certainly fight against efforts to do that. I know why a President who is up for election in 18 months might want to do that for a large state to the west of us. I hope that he won’t vote for that. We have no business bailing out their governments when we are this far in the hole. I would fight that as hard as I could.
3/22/2011 10:50:52 AM Question Would you be taking away the power of Congress to borrow money?
3/22/2011 10:51:12 AM Answer Mike Lee Article 1 Section ii provides the ability to get money. It was necessary to fighting a war and for other purposes. We used it to deal with Revolutionary War debt and during other conflicts. This amendment would not be removing that power but would restrain it. It would take 2/3 of both houses to do that. It is pretty easy to get there with a majority so we are making it more difficult and therefore more rare.
3/22/2011 10:52:52 AM Close Before you leave please enjoy the refreshments. The Senator will also be here for a few minutes before he leaves. Thank you for coming.