Nick Smith, November 21, 2004

Twelve years ago, I came to Congress with the goal of improving the financial standing of the United States. I have fought hard - as a member of the Budget Committee, as Chairman of the Debt Limit Task Force, and as Chairman of the bipartisan Social Security Task Force - to reduce unnecessary spending, hold down the debt we leave to our kids and grandkids, and restore the solvency of Social Security. As a freshman, I offered a budget resolution to balance the budget and the first Social Security reform legislation since the 1983 Greenspan commission report. Unfortunately, there were never enough like-minded members to make a difference.

When I entered Congress, the public debt stood at $4 trillion, accumulated over 217 years of American history. Today it is more than $7.4 trillion. The budget deficit narrowed some in the late 1990s - the budget never was balanced if you include what was borrowed from government trust fund surpluses. The recently released figures for fiscal year 2004 (which ended September 30) show that our debt increased by $568 billion. We expect to borrow another $521 billion in fiscal year 2005. That’s why the debt limit was recently raised - over my objection - by $800 billion to accommodate continued spending and borrowing.

About 40% of the money to finance U.S. Treasury debt comes from overseas, leaving us dependent on China, Japan and other foreign countries. The need for this foreign money has contributed to the recent weakening of the dollar, rising interest rates, and chronic high trade deficits. If the foreign countries financing our over-promising and overspending lose faith in the economy, they could precipitate an economic shock by refusing to buy our government bonds.

In addition to the high debt, we face an additional $73.5 trillion of unfunded liabilities in Social Security and Medicare, which are the result of extreme over-promising by many Presidents and Congress over the last four decades. To be precise, unfunded liabilities are a calculation of the amount (in today’s dollars) that the cost of promised government benefits will exceed expected government revenues to pay for those benefits. Not only have the President and Congress shown no urgency in tackling this problem, they actually added $16.6 trillion to our unfunded liabilities just last year when we passed the changes to Medicare. I opposed that legislation because it makes a bunch of promises we simply won’t be able to keep.

Despite our present economic health, accumulating financial obligations will inevitably cripple our economy. We will face a choice between much higher taxes and less generous government benefits and services. Special interest lobbyists for social and welfare programs will continue to press for more services. I pray that Americans and their elected officials will make the right decision, reclaim their traditional independence from government, and avoid the creeping socialism where more people expect government to take care of them.

Our decisions on these issues will determine our country’s future. With rapid growth in China and India, our global dominance will be contested. If we continue on our present path of financial irresponsibility and dependence on government, we will be eclipsed economically, politically, and militarily. Still, we can prevent such a decline if we face up to our problems. Our best hope is that with informed voters, these challenges can be overcome, as we have overcome those of the past.

Congressman Nick Smith, a Republican, represents Michigan's 7th Congressional District, which includes Battle Creek and the counties of Branch, Eaton, Hillsdale, Jackson, Lenawee, Calhoun, and Washtenaw in south-central Michigan.