tv Washington Journal William Hoagland CSPAN July 9, 2019 9:31pm-10:03pm EDT
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this is bill hoagland of the by paulson part of the center to talk to you about the effect of debt on the federal budget in the next many years. thank you for giving us your time. >> glad to be here. >> looking out 30 years, what is the potential when it comes to the debt in the united states? >> the total amount of debt will continue to grow. a lot of factors involved in that. these are all projections that could be off, but generally because of the demographics of the changes in the way we are an aging population and the fact that we pay a lot in terms of medicare and social security benefits will continue to grow. as a consequence, along with just paying the interest on accumulating debt itself means we will be looking at the possibility of the debt to what we call the debt to the level of government growing to what it is today which is at a historic high, around 78% of gdp, well over to 150% over the next 30 or 40 years.
there was a report a couple weeks ago that made these projections. 144% of gdp by 2049 or so. >> right. that is a starkly very high, of course. we like to think that will not happen. but if it should happen, it is certainly something unprecedented in terms of the country in history. >> if you have to make a list of the drivers of this debt, what would you put on top of the list? >> in the near term, it is the entitlements, the spending we have created for particularly dealing with aging population. social security benefits, medicare benefits. those are the major drivers of our spending going out into the future. the other factor that's involved is always the flipside, the revenues. that is being that if you are trying to control the debt and deficits, you have to also balance it out with the amount of resources you are taking in. revenues are important, too. if they are not growing as fast
as spinning, you are going to have accumulation of debt going over. it's a combination of both spinning in terms of the major entitlement grams and also the rate of growth in revenues and the growth of the economy. >> is there a way to factor in the tax cuts passed by republicans into these final numbers are projected numbers? >> these are projected numbers. quite frankly, the projections that the congressional budget office and others make some current law for the taxes. in fact, through 2025, i believe it is, the tax bill that republicans passed back in 2017 drops back down, so it is a situation in which those are carried into the future. >> our guest here to have a conversation taking a look at that in the united states, if you want to ask him questions about some of the things he says, you can call him.
make your thoughts available on social media at twitter and our facebook page. mick mulvaney at wall street annual cfo meeting last month talked about that there was a constituency in washington that still cares about that and deficit. i will play a little bit to get your thoughts on it. >> the difficulty we face is dedicate hawks. i feel like the guy sitting in the corner with the sign saying the end is nigh. sooner or later i am going to be right. i'm not sure if it is now. we have been saying the deficit has been a problem since the 1980s. i never forget, the first year i was in the house, one of the old bulls that had been there as long as i have been alive walked into work one day and laughed and said you always try to see the cycle repeated itself. the budget hawks back. welcome back. you will hear a little bit of the 80s, the 90s, now. i have seen them come and go. you will be gone in a little
bit. i will still be here. i want to spend that money. you will get that. i am not sure how fashionable fiscal conservatism is right now. i do know the president believes it, and wishes that we have more control of our spending. but again, it takes two to tango. there's not any dance partners on the hill. >> what you think about those comments? >> first of all, i think he is absolutely correct. it is not a top priority of the public. it is something that i would say a pox on both houses. the difficulty is, as he has pointed out, you don't know when that last drop into the test tube will turn blue and you will have a physical crisis. we used to refer to it as debt and deficit being something like the lights under the front porch. they are there. -- the termites.
someday you will walk out of able fall through. the difficulty from my perspective is the simple fact that it is a tax on future generations. it is reducing the level of what i would say the living standards are for our children, our grandchildren as we can relate more and more debt and deficits going forward. it may not have an immediate effect, but at some point in the future, it is not popular to talk about that and deficits, but it is something i think in the long term future that we have to deal with. >> a quick reminder for the folks at home, the difference between debt and deficit. >> good question. deficits are the annual differences between our spending and our revenues. that the deficit. the accumulation of those debt deficits over the history of the country from the beginning of the republic is the debt, the accumulating debt. today we have an accumulated from the beginning of the public to today, a debt deficit
, or debt, of nearly $22 trillion. our annual deficit is closer to about i would say about $1 trillion this year. >> our democrat line starts us off. this is michael from grand rapids. go ahead. >> the debt, you mentioned any social programs on the social security, cutting social programs possibly to accommodate the debt. we spend several times more than any other country in the world on our military buildup. beware of the military- industrial complex thing. what effect would it have if we would think about what we are doing with our military? not enough soldiers really serve in the military et cetera. >> yes. first of all, in terms of our federal spending for national security, which is part of the constitution, and protection of
our country, that is probably about 50% -- 12% up to 50% of the total spending. whereas the total number entitlements i talked about in terms of social security, medicare, medicaid and paying the interest on the public debt which is a real entitlement that has to be paid, we are talking about 70%. there is a difference. you can read those -- reduce defense spending. that is not something that is popular right now. the president has asked for an increase in defense spending. as well as there seems to be some consensus in congress that there should be an increase in defense spending relative to where we are today given all the uncertainties in the world. i'm not disagreeing with you are suggesting we shouldn't look for finding ways where there is waste or abuse or unnecessary spending both in defense and non-defense programs. but still, after having said that, the major drivers will be on the entitlement side.
>> from tampa florida. independent line. >> how are you doing today? i just wanted to say, i keep hearing medicare and medicaid. -- i mean medicare and social security. but those are things people paid into, sir. i never hear anything about these pension plans that were put in in the 80s when people were getting a certain percentage, but now their salaries have gone up so high that these people, free medical, free dental, previous, free that, for them and their family while they are serving. nobody ever talks about what that is doing to the debt. it is basically ruined the bond industry, the municipal bond industry. the city pensions, state pensions have just destroyed these states, the bond market. you know, you never hear anything either about the total wealth -- welfare bureau which is about $800 billion plus
every year that these politicians just giveaway. that doesn't include the empowerment zones they are putting in the cities that they try to do over and over again. it has always turned out to be a fad. >> we will stop you there. >> in terms of the pensions you are talking about, those are private pensions, or they are state and local pages. they are not part of the federal government bookkeeping if you would like. in that sense. when i talk about public pensions, i am referring to the federal budget. yes, civil service and military retirement. but i think the type of pensions you are talking about are at the state and local level specifically. i'm not going to get into the weeds too far. but in terms of $800 billion in spending for well welfare programs, i think that is an overstatement unless we are adding in what is at the state and local level. much less of that is been here
at the federal level for welfare programs. i think the federal food stamp program as an example is probably less than $80 billion annually.'s make of you on twitter says can you name me any insurance policy that hasn't raised its premium in 30 years? social security has never caused >> i can't identify any insurance premium that has not raise premiums. this is always very dicey. i understand the sensitivities. the social security trust fund is a trust fund where we are paying in, and those who are working are paying in in payroll taxes, and there are benefits going on. as of today, that balance between what is in the trust fund and what is being paid out will exhaust in the year 2035 i believe. so from that perspective, in 2035, we will only be able to
pay that which is coming in. there will be any trust fund to pay those benefits of what people thought they were going to get. it would probably mean as an average, about a 20% reduction in on what people thought they were going to get in social security. yes, social security has never not paid its benefits. but in order to make actionable to the future is part of our debt and deficit, we are going to have to make changes. >> what's the most efficient change you can make to lincoln they have a time we have those surpluses? >> i would .22. one of them is probably increasing the payroll tax. at the same time, i would said the other aspect is the fact that we probably want to focus on the demographics in terms of the aging and maybe modify the point in time we receive full benefits. we have moved that out slightly to full retirement age is 67.
we can move that forward. the good news is, we are living longer. we are healthier. generally. as a consequence, we need to make sure we are adjusting our pension programs to reflect the fact that we are a much longer-living population. >> is there a magic number when it comes to the age to make social security most beneficial? >> i can't think of one off the top of my head. but i would say probably we want to start moving close to 70 or 71%. somewhere in that neighborhood. full retirement benefits. >> washington state, this is jordan on a republican line. you are nextep at >> good morning. i want to discuss foreign aid as an example. what about investing in different countries like chad or the condo? it's been proven many times that if you involve other countries into the world economy, it helps, it might --
i'm sorry. it would balance the deficit. >> first of all, the amount of federal spending that goes to foreign aid is always overstated significantly. it let the maybe 2% of the total federal spending goes into what we would define as foreign aid. but i agree with you. as an example, the issues we are facing on the border today as it relates to the difficulties, the people having to leave central america to get out of the difficult situations they live in. i think investments in those countries from the federal government would improve the living standards, maybe control some of the property that's in that country. that would avoid some of the problems we see with the immigration that is going on today. i am one who is always believed that this is a global economy. let's be clear about it, first
and foremost, the aspect is that we don't spend that much in foreign aid. increasing foreign aid would increase the debt and deficits further. >> from north carolina, democrat line, this is carol. >> good morning. i have a question. for years and years, all of these different presidents, and money has been taken out of social security and medicare like it's a piggy bank. if anything, we need some kind of law that money cannot be taken out of those funds to fund wars, to find other government expenditures. we don't know what being taken out of those funds and how much. every now and then we hear about it on the news, like someone is taking out for obamacare, what was it, $700 billion? and medicare? these funds are robbed all the time. and then you hear about all these big expenditures that the government wants to spend money
on. where is all this money coming on if we are so short of money on social security and medicare? where is all this money coming from that the government spends? i'm just curious. thank you. >> thank you. where does the money come from? it comes from you, the taxpayers of the united states, you pay your taxes. it also comes from a very important aspect. something we are dealing with right now. we borrow the money. right now, as i explained to pedro, we have a dead in this country of nearly $22 trillion. we have borrowed $22 billion. we have to pay interest on that. that's where, when we are running deficits, we have to, besides revenues that come in, the revenues are not covering the expenditures, so we have to borrow. carol, i disagree with you. we are not stealing from social security or medicare. that was programs have their funds. the other trust funds.
they are spending the money that comes into them. i think when you talk about obamacare having reduced spending in medicare, it was more of the fact that the expansions of particular benefits reduced the amount that was needed to expand on medicare, whether that is expansion of the medicaid program. first and foremost, to answer your question, where is this money coming from? taxpayers and borrowers. by the way, about 50% today at the money that we borrow, thank you very much, is from investors overseas. i have a friend, a former cbo, who says we are the best looking horse in the glue factory. thank you very much that we are still looked at as a good investment and people are willing to buy our bills and invest in this country. >> if you are on twitter. when will interest on the debt exceeds medicaid or defense
spending? >> i think it is about 10 years. this is all projections, of course. it depends on interest rates. we know today that interest rates are at a very low level. 2% i believe. if those interest rates start to grow back to what we call normalized, backup into the 3%, 3.5%, the fastest growing component of the federal but government will not be social security or medicare. it will simply be paying the interest on that accumulated $22 trillion in debt. in fact, figures in just yesterday look at the first nine months of 2019 show that interest payments grew 16% last year. >> a headline to show you. this saying that the treasury
department could reach instead filling by early september. what does this mean? >> very good. a bipartisan policy center, we yesterday we tracked this. we call it the "x" date. at what time does the federal government actually run out of borrowing authority? we reached that date back on march the 1st of this year. since march we had -- the secretary of the treasury has been initiate whing what we cal extraordinary measures that he can legally use to make sure we can borrow the money to fund our bank. by our own estimates at the bipartisan policy center, we believe that there's a risk, there's a risk, that we could run out of our borrowing authority by some time in early september. it's a risk. it depends on -- on what happens from now until end of september, particularly as it relates to income coming in on taxes.
we've seen not the growth in corporate taxes that people thought we -- in fact, they've been flat this year. personal income taxes relative to the same nine months last year have also been filed. so we are thinking that the federal government is facing a very significant cliff, which is that we could default. the federal government in 230-some-year history has never defaulted. think of it as bankruptcy. i don't think this congress, i don't think this president, wants to be on the watch that says the federal government went into bankruptcy. that's what a default mi faulfa. like i said, it never happened before. to deal with this, congress has to raise its authority to borrow or suspend its -- suspend it so that they can pay its bills. this -- >> political discussions we've seen in past congresses over this, even shutdowns because of that. >> well, we also -- this is a confluence of two events, unfortunately. we have a fiscal year that
begins on october the 1st where we have to fund government. we also have to have the money to fund government and, yes, it can create a shutdown. but the difference i want to make very clear here is, a default is something that's never happened, which is the federal government is bankrupt and cannot borrow and doesn't have the money to pay those bills. >> this is keighley from massachusetts, independent line with our guest bill hoagland of the bipartisan policy center. >> caller: hi, good morning. >> good morning. >> caller: my question is, instead of spending so much money on defense, why isn't the united states using federal budget to fund foreign aid, specifically, to prevent global conflicts through peace building? there's a bill in the senate right now, the global fragility act, that would use the international affairs budget to eliminate root causes of global conflict around the world, and this would boost the united states economy and national security, yet, it's taking a lot for senators to sign on, even
though it's bipartisan bill and would reduce defense spending. >> keighley, yes, i think a previous caller also raised the issue of increasing spending on foreign affairs, foreign investments. i think, again, it is a -- it is something that's a serious proposal. i would say, i was a staffer up here for 33-some years. foreign aid is something that, yes, people look at from a humanitarian perspective, and, yes, it does have a peacekeeping focus to it, but at the same time, when it gets right down to it, there's still -- we are still needing to maintain the benefits and security to our own public. that's the formula we talk about, whether it's social security benefits or pension benefits or health care benefits, so this is a balancing act, how much do you invest in foreign investors, foreign countries, versus investing right here in the united states. >> another thing to talk to about budget caps for the 2020 -- >> oh, boy.
>> -- fiscal year. politico tells us that without action by congress or the white house, budget caps on the pentagon cut by $71 billion, domestic programs cut by $55 billion. fill in the blanks for those, bill hoagland. >> oh, boy, here we go, pedro. this is -- in 2011, we passed an act called the budget control act of 2011, which set caps on spending for ten years. those caps set a level for defense and nondefense. we reach -- we are -- we are at this point about to reach the year 2020 in terms of the fiscal year that begins and the caps that were adjusted back almost a year and a half ago now will be dropped down because of the -- because this act goes through 2021. those caps, in order to adjust those caps, congress has to pass a law or -- or they leave them
where they are. if they leave them where they are, pedro, just as you outlined, that would be a 10% cut in defense and in fairness, some people i guess would like to see that kind of cut in defense. i don't think this congress nor this president would support anywhere near that kind of a reduction in defense spending, but at the same time, it also would result in a 10% cut in nondefense spending at the same time. such things as education, science, technology, infrastructure, things that people say we need to invest more money in. so the negotiations that are ongoing right now, separate and apart from the debt limit that we talked about earlier, is what to do, how to adjust those caps for 2020 so we don't have those kind of cuts or more importantly as you just had raised, government shuts down, we can't pay anything at that point. >> helen from michigan, republican line. helen, good morning. >> caller: hello. >> good morning, helen. >> caller: i am just wondering what on earth you can -- all
these people, these illegals, they get everything for nothing, and we've lived here and worked. i worked for 50 years and now social security is getting cut off. you say. but everybody else gets everything for nothing. food stamps. and a lot of people that work can't hardly afford the food. and what about the democrats that are trying to arrest everybody for just to find out something that don't even mean anything? >> okay, helen. we'll leave it there. thanks. >> not sure how to respond, helen. first of all, your social security benefits are not going to be cut off. what we're talking about is a reduction in 2035, a potential reduction if we do not adjust
the -- changes in the program going forward relative what people expected they would get. >> hiere is pat from pennsylvania. democrats line. good morning. >> caller: good morning. i have three things. >> yes, pat. >> caller: first thing is if you lift the cap on how much people pay into social security, that would help. >> yes. >> caller: and a lot of things are that people said that that would increase their benefits, but rich people die young, too. second thing is, how come everybody that works s in a ch all their lives wants to increase the age limit on social security for the workers that actually do work out here? the third thing is how much is co corporate welfare costing us every year? thank you. >> thank you. first of all, i do agree that one of the adjustments i didn't mention that pedro asked about what we would do is to adjust that cap on payments going into the social security fund. raise that up, $118,000 i think it is today, something, that neighborhood. on the issue that you also raise
as -- the second issue that you raised, i'm not -- i'm blanking on what it was specifically that you had raised, but i do think that social security trust fund has to be addressed and corporate -- corporate waste is out there, yes. i've always found in my career here that what one person's waste is another person's income or something of that nature. so you have to be very careful about all that going forward. >> if you look at the cbo and look at your analysis about changes that could be done to even just start to tackle the debt, what would you advise? >> well, i thirs would advise you have to approach this in a -- no surprise coming from the bipartisan policy center in bipartisan manner. it's true, you have to focus both on spending and focus on revenues. i think that we're not talking -- and, again, i want to be clear, we're not talking about cutting, we're talking about slowing the rate of growth
in some of these benefit programs. so i do think that we have to focus upon the pension programs, the retirement programs. i am a beneficiary. i'm a civil servant retirement. i do believe we can make adjustments in those programs going forward to lower the rate of growth there. also think we're going to have to, unfortunately, if we're going to want money to spend on foreign aid, if we want money to spend on defense, if we want money on rebuilding our infrastructure out there, way have to belly up to the bar and simply say we have to have additional revenues. in that sense, the carbon tax is another approach we might want to think about going forward that would generate -- would have the benefits of both generati generating revenues and improving our environment. >> let's hear from one last caller. jerry in kentucky. go ahead. >> caller: there's a bump up/bump down rule of government spending that none of these politicians want to talk about. when the government lets a contract -- company start hiring workers, buying material, that's a bump to the economy. >> yep. >> caller: if after that job is
finished and product starts going in use, if it gets back to the economy, that's a two bump. if it's neutral, it's a one bump. if it costs measure, it's a bump up/bump down. none of these politicians want to ever talk about this. i'd like to have your comments on that. thank you, sir. >> thank you. if i understood the question or the issue, a bump-up, there is a bump-up. we did have a bump-up associated with the tax cuts in 2017. i think part of the growth in the economy the president talks about that we're experiencing right now, the low unemployment rate, is associated with a bump-up, as yuou call it, in terms of the tax cuts that went into the economy. long term, though, bump-ups go away and you have to stabilize going forward. long term, i keep coming back to this, long term, not in the near term here, but in the long term, we're going to have to find some way to reduce that level of debt that's going to be a tax and a bump-down, if you like, on future generations. >> bill hoagland with the
bipartisan policy center. if you go to their website, you'll see analysis from the new cbo numbers particularly when it comes to issues of debt and deficit. thanks for your time. >> thank you, pedro. in 1979, a small network with an unusual name rolled out a big idea. let viewers make up their own minds. c-span opened the doors to washington policymaking for all to see, bringing you unfiltered content from congress and beyond. a lot has changed in 40 years, but today that big idea is more relevant than ever. on television and online, c-span is your unfiltered view of government. so you can make up your own mind. brought to you as a public service by your cable or satellite provider. there has been discussion about an appearance before congress. any testimony from this office would not go beyond our report. it contains our findings and analysis and the reasons for the decisions we made. we chose those words carefully and the work speaks for itself.
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