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June 30, 2011

TRANSCRIPT: Johanns Participates in a Budget Colloquy

MR. THUNE: Our nation faces permanent deficits unless we can get a handle on our finances. I've got a chart here which shows what I think our future is going to look like if we stay on the current trajectory. The path leads us to higher debt and GDP we're in unprecedented territory already. You have to go back to World War II to find a time when we had this kind of debt to GDP as the chart shows, we're going to face an ever-increasing burden of debt, without shoring up our finances, we know what our future is and what it's going to look like in this country.

Just this week we saw the country of Greece had to approve an austerity package to be eligible for their next disbursement of a multibillion-dollar bailout loan from the IMF and other European countries. The austerity package included 28.4 billion Euros and spending cuts and tax increases. That's exactly what happens if we don't do anything. We're going to be faced at a time when we will be faced with massive cuts in spending, massive tax increases if we don't get our fiscal house in order. That isn't necessary, Mr. President, because there is a better way to solve this problem.

Instead of more debt and more spending, we could pass a balanced budget amendment that would prevent us from spending more than we take in. We know what the effect of this is on our future as well. We have states all across this country, 49 states that have some type of balanced budget requirement, including my home state of South Dakota. It's the reason why our state's budget is always balanced. Our legislature can't go home until that happens. We need that discipline here in Washington, D.C., and a balanced budget amendment would bring that.

I have with me on the floor a colleague from the state of Nebraska, Senator Johanns, who also served as his state's governor. I think, my understanding is at least that the Senator from Nebraska, when he was Governor, had a balanced budget requirement in their constitution. And I wonder if you could explain what effect that had on your state and whether it forced you to make some of the tough choices that are necessary to get the budget balanced.

Mr. JOHANNS: Thank you. I appreciate the opportunity to speak about a topic that I think has made all the difference in the world for my state, the state of Nebraska. I did have the privilege a few years back of serving as the Governor of the state of Nebraska until I came out to join the cabinet as Secretary of Agriculture. And I served about six years. Before that, I was the Mayor of our state capital, the community of Lincoln, a great community. We followed the same pattern really at the Governor's office that I did at the Mayor's office. We governed with a simple principle: we did not spend money that we did not have.

Before I talk about the balanced budget amendment, let me just let you how that worked as Mayor of Lincoln. My budget staff would go to work. They worked on the budget pretty much year round, really it was a year-round endeavor, and at some point in the process, I would get a stack of paperwork that was about an inch thick with line after line after line after line of items that they were proposing that we needed to spend money on to keep the city running. And there would be everything from place cars to whatever to salaries. Imagine what it takes to run a city and it would be on that list. I would go through it item by item, page by page, studying each entry, and ultimately reaching the conclusion for each entry, yes, I believe this is necessary to keep our city going. Well, somewhere in that thick stack of paperwork I would turn over the page and I would come to a page where there was a red line drawn through the items, and the significance of that red line was that everything above that red line we had money for. Everything below that red line, there was no money for. And so if the next entry below the red line was something that I really wanted to see happen, then what I had to do as the chief executive of that community was to cut spending to eliminate something else. Because, you see, when I went to the city council, I couldn't go to them and say for operations we're going to borrow a whole bunch of money.

Well, it didn't really change at all when I became the Governor of the state of Nebraska. Our constitution requires a balanced budget. And it's very, very straightforward. It just basically says you can't spend more than what's coming in. You can't buy things that you don't have money for. But let me add another piece to this that makes our state quite a bit different I think than virtually any other state in the United States.

You see, way back when our constitution was written, those who sat down to write the constitution with amazing foresight said you know, at some point politicians in their passion to get re-elected are going to say to the people you can have all of this and then finance it by borrowing money. Well, they didn't want that. So literally, there is a provision in the constitution that in essence says you can't borrow any money. I think the limit is like $50,000 or $100,000, and that's it. You know, if you drive across the roads in Nebraska, I want to point out to you that they're paid for. Why? Because we don't spend money we don't have. Our constitution will not allow us to do it. And so year after year when we get together, we look at the priorities of the state. It might be education. It might be something relative to human services, it might be roads, whatever it is, and the executive branch, me as Governor working with the legislature would decide what we are going to fund and at what level. And I could guarantee people of Nebraska that three things would happen by the end of the legislative session. Number one, a budget would be passed. Number two, it would be balanced. And number three, we would not borrow money for those first two things to happen. A budget would be passed and it would be balanced and we weren't going to borrow money to make that happen. And that's been going on for decades and decades and decades.

Now, some are out there probably ready to rush down here to the floor and say oh, Mike that sounds so backward. And here's what I have to say. During this very difficult economic time, all of us agree it's been one of the toughest times since the depression. Unemployment in Nebraska has not gone over 5%. Unemployment today in Nebraska is 4.1%. Let me say that a bit differently. 96% of people able to work in Nebraska have a job. 96%. Our legislature this year actually recessed early -- and I believe I remember this correctly. They unanimously passed the state budget. There's Democrats in the legislature, there's Republicans in the legislature, there's Independents. How did they do that? They did that because they felt it a responsibility to the state and to their constitution to get a budget done to make sure it's balanced and not to borrow money to get there.

Now, let me contrast that with what's happening out here. What's happening out here is for decades and decades and decades, we as the federal governments have said to the people don't you worry. We can be all things to all people. We can give you this. We can give you that. Because we have got a big credit card. Well, that credit card today is now at $14.5 trillion and growing. Growing and growing and growing. And when I go back home and do town hall meetings and I look across the room and I see young people there or children, it pains me to tell them that I know who is going to be responsible to pay the credit card off. Not Mike Johanns who turns 61 this year, although it should be my responsibility, it's going to be our children and our grandchildren who have their own priorities, their own desires, their own wishes. And yet, they are going to be saddled with trillions and trillions and trillions of dollars of debt before they can even address their priorities.

I'll end with this thought. What's the merit of a balanced budget amendment? Well, when I was 20 years old, our nation owed $380 billion. $380 billion. It is projected that when I reach 65, just four short years from now, our nation will owe $20 trillion. It is time to be honest with the American people. You won't solve this problem unless you put discipline in place like our states have done, like the great state of Nebraska has done that essentially says year after year, president after president, senator after senator, house member after house member, you're going to have to live within your means. And that's what the balanced budget is about. Because, you see, without that, there will be always a way to get around it to do something and not accept the responsibility of running this country with fiscal responsibility.

MR. THUNE: Well, I appreciate the comments from my colleague from Nebraska as an executive, both as a Mayor and a Governor, he obviously has had to make the hard decisions that are necessary to get the books to balance in his -- in -- both in the city of Lincoln and of Nebraska. It strikes me that as you have observed, the economic circumstances in which the state of Nebraska finds itself today are so much better than other places around the country. Granted, there are lots of factors that contribute to that, part of it i think has to do with the -- the business climate and -- in some states around the country, but clearly also a function of the discipline that the state of Nebraska imposes on itself through this balanced budget amendment and the decisions that the leaders in that state both legislators and governor make in order to make that possible…

We have just got too much spending. And I'm curious to know in the state of Nebraska if of that what his experience was in terms of this debate that we have here about more taxes or less spending.

MR. JOHANNS: We adopted the philosophy in the state of Nebraska that we wanted to be job creators. We wanted to have that low unemployment, and so we recognize that it's not government that's going to create the jobs. After all, people don't want a bigger, grander, greater state government or federal government, for that matter. But our responsibility was to create the right climate so a small business had an opportunity to grow and expand, that a large employer, looking across the United States for a great place to locate would know that they had an opportunity to grow and expand a business in the state of Nebraska. And so we fought like tooth and nail.

And I will give you a current example. If you dial the clock back to about November of last year, you would see that our current Governor, David Heinemann, was faced with a great challenge. He had about a billion dollars that he had to somehow make up to balance the budget over a two-year cycle. Now, for a state like Nebraska, that is a powerful amount of money. You know, in Washington where we talk about trillion dollar programs like stimulus, et cetera, that may not sound like much, but it's a huge amount of money in our state. Now, I suppose our Governor could have said well, if we just hit the taxpayer here more and hit the taxpayer there more, then all of this will balance out. But he adopted very much the opposite view, which is exactly what I expect of Governor Heinemann, and he said we're going to balance the budget and we're going to do it without raising taxes.

And, you know, when you think about it, that philosophy is absolutely right. You know, families are tightening their belt, they're balancing their budget, they're doing everything they can, they're suffering through economic times that are tough. Why would you hit them harder? Why would you go to your family so our -- to your families who are already struggling and saying I have got to take more money out of your bill fold and send it to the state capital? And so he led and he stepped forward to deliver a balanced budget. And you know what? He didn't send somebody else to go into that room. He went himself and said, this is the plan that I believe in for the future of our state. And he led through every minute, every hour, every second of the legislative session. And at the end of it, with no tax increases, they balanced the budget, and like I said, I'll have to check this, but if memory serves me correctly, I think that plan passed unanimously. And in our state legislature, we have members who are more liberal than others, more conservative, we have some more Democrats, some who are Republicans. But you know what? Our chief executive led. And, again, I draw a sharp contrast here. There is one nationally elected official in our nation, and we call him "Mr. President." the president pays the filing fee and convinces the nation that he or she is the right person to occupy that office, and there is no substitute for their leadership. We need to have our chief executive, the man we call "Mr. President," deliver a plan that he believes is the right direction for our country. And that is the key to this issue.

Now, I will be very clear. I like the plan of Governor Heineman. In tough times you pull back. When the revenues are a little bit better, you can do some things and establish some new priorities. But what happens out here is there is no prioritization. It's just spend on everything, spend on everything that walks by, and someday our kids and grandkids are going to have to pay off the credit card. And I just don't think that's right. …

MR. JOHANNS: Senator Sessions raises an excellent point. Having really served in the executive branch pretty much exclusively until I came to the Senate two years ago, there is only one leader, and I not only believe that the executive -- in this case, the President of the United States -- has that responsibility but I feel very, very strongly that that responsibility has not been discharged.

I fully appreciate the need to go out there and drive a message and get votes and get yourself elected or reelected. That, of course, is what democracy is all about. But there is a point at which the election is over, and that needs to be set aside. And there needs to be someone who can lead on behalf of the entire United States. We are all United States Senators, but it is the people of Nebraska who vote for me. We only have one nationally elected official, and that is the gentleman that I referred to previously who's called "Mr. President." there is no substitute for that, not in our system of government. It is absolutely incumbent upon the president to lay out, in terms that United States citizens can understand, what we are facing.

I'll just be very candid. I could not be more disappointed with the President's comments yesterday. And it's his podium. He's free to talk about whatever he chooses to talk about. And he doesn't need the advice of Mike Johanns. But I tell him to talk to you about the dire situation of our budget and to lay out in stark detail what brings us to this situation. And invite the American people to understand the difficulty we are facing, and most importantly to put a plan out that the president stands behind. Now, let me tell you what happened this year. The President put out a plan. The plan came to the floor of the Senate, and it was so disregarded, it did not get a single vote. It wasn't a serious plan. No one took it as a serious plan. Now, think about that. No Republican, no Democrat, no Independent, no liberal, no conservative, no moderate said this is the right plan for the future of this great nation, not a single one in this United States Senate. That's a very, very serious situation for our nation.

It is time to be serious about this and to present a serious proposal that makes the hard choices. don't tell me that you can solve this problem by, well, everybody's going to pay higher taxes that makes over a certain level. I did the math on that. When I first heard that, I said okay, let me understand that better. If you earn over $250,000 a year, what would the tax rate have to be for those earners just to balance the budget for that year? I'm not talking about the massive amount of debt that lies in front of our children and grandchildren just to balance the budget that year. The tax rate, 90%. And it has gotten worse because our deficit has grown to $1.6 trillion. 90%, and actually I think if I redid that math, it would be closer to 100%. Well, that may be a great political talking point. It may be tested, it may be polled, it may be a 70% talking point, it may be an 80% talking point, but I tell you what, it isn't going to solve the problem that this nation faces. It just simply isn't. It just isn't the pathway that deals with the massive problem that we have, and there is no one else who can speak to the nation like the president of the United States. Senator Sessions can't, Senator Johanns can't, Senator McConnell and senator Reid, with all of their stature cannot either. That bully pulpit is unique to the President of the United States, and we have yet to see that responsibility met.

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