Tom Price Speaks! (On austerity)

A day after he became everyone’s favorite future Majority Leader, Rep. Tom Price gave a speech at the Heritage Foundation. Price compared reactions to the 2008 crisis among Western nations and found “America’s impending fiscal crisis can be attributed to two primary problems: anemic economic growth and compounding entitlement costs.” He went on to advocate the tax and entitlement reform packages you’d expect. It’s unlikely this was written specifically to position himself after last night’s news, but it does showcase the orthodoxy and wonkishness that makes him popular with most factions of the Republican coalition.

Wednesday, June 11, 2014

Price Speech at the Heritage Foundation

WASHINGTON, D.C. –  Congressman Tom Price, M.D. (GA-06), vice chairman of the House Committee on the Budget, delivered a major fiscal policy address today at noon at the Heritage Foundation in Washington, D.C.

Remarks, as prepared:

Austerity: Past or Future?

Thank you, and thanks to the Heritage Foundation for inviting me to speak today. I’m honored to join such a distinguished panel.

During the rollout of his budget proposal earlier this year, President Obama defiantly proclaimed that the “age of austerity” is over. Austerity? It is a frightening thought that the President considers federal government spending of nearly $3.5 trillion last year to be austere. Note that in 2008 – a few short years ago – total spending was $2.9 trillion.

The truth is – America is not and has not been in an “age of austerity.” Despite growing concerns about our weakened economy and our fiscal insolvency, Washington continues to spend like today’s bills don’t matter and tomorrow’s will never come.

In 2008 and 2009, America experienced one of the most significant economic upheavals in our history. Across the Atlantic Ocean, our friends in Europe were dealing with fiscal issues of their own.

Congress’s own research arm has identified four major economic problems that led to trouble in the Eurozone: high debt levels and public deficits; weaknesses in the European banking system; economic recession and high unemployment; and persistent trade imbalances within the Eurozone. With stagnant economies hampered in part by redistributive policies that destroy jobs and disincentivize growth, these nations were also experiencing an ever-growing entitlement crisis.

The result? Widespread economic turmoil that turned into political and civil unrest. Leaders throughout Europe debated how to repair the economies of countries like Greece, Italy, Spain, Ireland and Portugal without taking down the entire Eurozone.

Each country chose a different approach based on its own history, social structure, economy and so on. So, what caused some countries — like Portugal, Ireland, Greece and Spain – to endure more painful measures and still face economic and fiscal disarray, while other nations – like the United Kingdom and Germany – imposed minor measures and are currently enjoying elevated levels of growth?

In his study of the recent European fiscal crises, Dr. Furth concludes that, “spending cuts [were] less harmful than tax increases when reducing deficits.” He also notes that “countries that practiced fiscal discipline before the recession had greater flexibility and firmer recoveries.”

We need to be paying attention. As our nation approaches a similar fiscal crisis, perhaps we should take lessons from our friends in Europe. First, we need an accurate depiction of the situation at-hand.

Today, our national debt has exceeded $17.5 trillion – a level above our total GDP. But a more complete view of our country’s fiscal situation offers an even bleaker outlook: 1,000 economists, including 15 Nobel Laureates, estimate our long-term fiscal gap – or unfunded liability, those obligations current law has already proscribed – to be $222 trillion – that’s right, $222 trillion!

Just as in Europe, America’s impending fiscal crisis can be attributed to two primary problems: anemic economic growth and compounding entitlement costs. While our financial situation is not at present as dire as those facing Europe, a failure to act now will result in a crisis similar to theirs – only with far more catastrophic results. As the world’s largest economy, there are real international consequences to an economic and fiscal collapse in this country – and in our own backyard, such a disaster would most adversely affect the poor among us – those least able, economically, to withstand more headwinds. We have a moral obligation to prevent this from happening.

In order to determine how to best solve the challenges that lay ahead and to prevent the need for actual austerity, we must first understand how we got where we are today. Our current economic stagnation has only exacerbated our already existing fiscal problems.

At the end of May, the Commerce Department announced that our nation’s Gross Domestic Product contracted by 1 percent – annualized – last quarter. Couple that news with what we already know about our economy – a labor participation rate at it’s lowest level in nearly 4 decades, stagnant wages – and it’s all the proof we need to know that what we’ve done so far just isn’t working.

Current policies are clearly harming our economy – preventing a more robust recovery. Most obvious of these is our unfair, confusing and cumbersome tax code. It discourages growth, investment and job creation. It punishes the people who make our economy work. And in doing so, it blocks the stream of revenue that funds the very government programs that are already going bankrupt.

If we are serious about economic growth, we need to also be serious about real tax reform. Republicans believe our tax system should be fairer, flatter and a lot less complicated. We need to lower the rates, broaden the base and end the cronyism of special loopholes. And unlike our Democrat friends, we certainly don’t want to take more from hardworking families just so we can spend more in Washington, D.C.

That’s because we believe economic growth happens when the American people keep more of their own money to save, spend and invest as they see fit. History has also shown that cutting taxes increases revenue. The tax cuts of both President Kennedy, a Democrat, and President Reagan, a Republican, generated more revenue for the federal government.

In addition to fixing the revenue side with tax reform, we must also address the spending side – especially those automatic and entitlement programs whose compounding costs greatly contribute to our national debt and continued deficits. The budget passed by House Republicans in 2013 and 2014, the Path to Prosperity, does just that.

When it comes to our nation’s safety net programs – particularly Medicare, Medicaid and Social Security – there is no shortage of literature, actuarial reports and government studies that make it absolutely clear that these programs are in deep financial trouble. Some, like the Social Security Disability Insurance program – which goes broke in 2016 – are a more immediate concern than others.

But they are all predicated on a set of fiscal assumptions that frankly no longer ensure long-term viability – current worker paying for current retirees – promised benefits that far exceed a funding stream. These are the hallmarks of a failing system in a society with changing demographics – where 10,000 Americans reach retirement age every single day – and will continue to do so through the next decade.

It’s also fairly obvious that if we surrender to demagoguery and fail to accept the facts before us, the damage to our nation’s financial well-being will be significant. But more importantly, if we don’t act on a reform plan, there will be tremendous pain and suffering endured by those who depend on these programs for their own security and well-being.

No one is interested in watching Medicare and Social Security collapse into turmoil, removing health and financial security for seniors. The logical next step is to ask: how do we make these programs work now and in the future? In fact, how do we make these programs work better so we are providing folks more choices and more security?

The solutions that we have supported on Medicare reform and Medicaid are about giving retirees and those in need of assistance more choices while making realistic the benefits we as a society have promised. When it comes to Medicare, we believe those who are in or near retirement should be able to keep the current plan, if they choose. In the future, the program should offer financial assistance – through what we call premium support – a benefit check – to purchase the health care coverage they want for themselves. All the while making sure traditional Medicare remains an option.

This is not exactly a novel concept. We already have examples – like Medicare Part D – where providing seniors the freedom to choose has led to higher rates of satisfaction and lower than predicted costs.

When it comes to Medicaid, we say give states flexibility with funds – real control over the resources provided – so that they can deliver the right style of services to their diverse communities.

What we propose would ensure these programs have not just a future but a brighter one. Reform is the avenue to improvement of services as much as a way to stave off fiscal collapse.

In addition to these vital policy reforms, we also need to fundamentally change how we spend money in Congress. As vice chairman of the House Committee on the Budget, I am acutely aware of the problems caused by our outdated budget process – specifically the Congressional Budget and Impoundment Act of 1974. All of the inertia in Washington is to spend more money – regardless of whether or not Congress acts.

The inverse should be true. As just one correction, if Congress doesn’t do its job – if it doesn’t complete its appropriations bills – spending should automatically decrease, not increase, as is currently the case. In our fiscal crisis, the trajectory of federal spending should bend downward, not upward.

We also need to know the real consequences – fiscally and otherwise – of the laws we pass. Right now, that’s impossible under current law. The Rules under which CBO works – static scoring or non-realistic scoring – skews their findings and recommendations. This oftentimes results in huge inaccuracies in projections compared to the real world. Obamacare is a classic example – where the Congressional Budget Office grossly underestimated the cost of President Obama’s signature piece of legislation – literally off by over a trillion dollars as time has shown. This doesn’t even account for the law’s apparent harmful economic impact seen in lost wages, widespread joblessness and stagnant economic growth. Just as you wouldn’t buy a car without knowing its total price, Congress shouldn’t pass a law without knowing what it really costs, either.

There are a number of positive reforms that should be considered, debated and voted upon. That’s why I introduced the Pro-Growth Budgeting Act. This bill would require the Congressional Budget Office to perform a realistic, dynamic scoring analysis in addition to the static analysis they currently provide.

A dynamic scoring analysis would better depict how passing legislation in Washington affects our nation’s economy – growth, jobs, revenue and so on. It would also serve as a reminder of the true cost of government to the American taxpayers who are stuck paying the bill. If Members of Congress had a more realistic – and likely, sobering – understanding of the true cost of government, perhaps they would think twice about expanding it to the detriment of the people.

Further, the federal government should not spend more than it takes in. American families can’t live this way, and neither should Washington. That’s why it’s absolutely imperative that we pass and adhere to a balanced budget. The budget passed by House Republicans these past two years – the Path to Prosperity – not only comes to balance within ten years, but it also puts us on track to pay off our national debt. By comparison, the budgets offered by the White House and Senate Democrats – when they choose to propose one – never, ever come into balance. It’s disconcerting that they do not seem to treat our nation’s fiscal emergency with the seriousness it requires.

The House Republican Budget is proof that it is, indeed, possible to honor America’s most important priorities – providing for a strong national defense, repairing the social safety net, securing Medicare, growing our economy – without raising taxes and without spending money we don’t have! Responsible, accountable governance that respects future generations.

All of these are necessary goals that we must achieve in order to right the course of our nation. But we can’t do it overnight. We must begin by making small, but important, gains in the direction of limited government.

As conservatives, we must appreciate that practicing smart politics doesn’t mean abandoning sound principles – limited government, individual liberty and fiscal restraint. It just means getting better at implementing them than the other side is at destroying them.

Some have suggested that incremental changes fail to recognize the apparent severity of the challenges we face. On the contrary, conservative incrementalism seeks to address current crises and to prevent future ones by governing in a principled, logical and strategic way. It is a way to secure real gains.

We do this not only by opposing the failed liberal policies that got us into this mess, but also by articulating how we’d do a better job getting us on the right path. That American principles are conservative principles and that our policies – conservative policies – embrace the vision that in a fair and accountable way, we support the greatest opportunity and greatest success for the greatest number of people so that the greatest number of American Dreams may be realized.

With a formidable political opponent and oftentimes an adversarial media, it’s obviously a tough battle. And make no mistake in the public battle of ideas, our liberal friends will come armed with any scholarly work that claims to justify their confiscatory tax schemes and redistribution mantras. Just take a look at the Left’s current love affair with Thomas Piketty’s “Capital in the Twenty-First Century.”

But, I’m up for the fight. I am certain my fellow House Republicans are, too. And I know groups like the Heritage Foundation, AEI, Cato Institute, and others are ready to stock our intellectual arsenals with the information to make a truly compelling case to the American people – from Sacramento to Cedar Rapids, from Philadelphia to Fargo and from Detroit to Decatur, Georgia.

With all of this talk of the economic and fiscal crises facing our nation, and the cautionary tale of the struggles of our European friends, there seems little reason to be hopeful. But I am. My optimism is affirmed when I turn to the states.

According to the U.S. Department of Labor, the states with the highest drop in unemployment last year – South Carolina, North Carolina, Indiana, Nevada, Tennessee, Louisiana, Pennsylvania, Ohio and New Jersey – are all led by Republican governors. Most of the states with the fastest growing economies are led by Republican administrations and legislatures, too. These governors and legislators are creatively addressing the challenges we face – from education to health care – and their constituents approve overwhelmingly.

Yes, there are many reasons to be optimistic. But we must also be proactive. With all due respect to our international friends in the room, I am unapologetic in my insistence that the United States is truly the most exceptional nation in human history. In our relative infancy, the American way of life has fostered real and lasting prosperity for hundreds of millions of people within our borders and has served as an inspiration for billions more worldwide.

En route to America to fight in our revolution, Marquis de Lafayette wrote to his wife that “the happiness of America is intimately connected with the happiness of all mankind; she is destined to be the safe and venerable asylum of virtue, of honesty, of tolerance and of peaceful liberty.”

Indeed, we Americans are the beneficiaries of humanity’s greatest experiment, as well as a living example to the rest of the world that freedom and prosperity are actually most attainable when government is limited, responsible, accountable and deferential to the people.

That’s why we have a real moral obligation to act now to secure the future of America. Conservatives must stand ready to fortify our ideas, demonstrate political courage and do the hard work necessary to rally and persuade our fellow Americans that ours is the best way to correct the course of this country and to foster the prosperity they seek.

Thank you, again, to the Heritage Foundation and to the scholars here today. I look forward to continuing this discussion as we work together to save the American Dream for generations to come. God bless.


  1. Max Power says:

    Tax cuts, blah blah blah, dynamic scoring, blah blah blah, market based solutions, blah blah blah, liberal bad conservative good, blah blah blah.

    You want to know why people have trouble taking the GOP seriously, it’s because they’re still running the 1980 campaign. They have to recognize that things that might have worked in the past might not work now.

  2. notsplost says:

    I like Tom Price. He voted against the TARP back in 2008, showing that he is not captured by Wall Street unlike most of his colleagues.

    This is a good speech – taxes and entitlements may be boring subjects, but they absolutely have real world consequences. I like the idea of automatic budget cuts unless Congress does its job and passes real appropriations bills for each cabinet agency under regular order. And he correctly identified the Social Security DI fund going broke in 2016 (maybe 2017 at the latest according to what I’ve read.)

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