Corker said America’s current debt makes up 62 percent of our Gross Domestic Product (GDP) in interest payments. At the rate the federal government is spending money, that number will rise, based on projections, to 146 percent of the GDP.
“We’re quickly moving into what I would consider a very dangerous place,” Corker said in reference to rising debt.
The debt is due in large part to the increasing gap between revenue and expenditures, Corker said. In 2010, the federal government will spend $1.29 trillion more than it earns. “We’re still spending each year about a trillion dollars more than we have,” Corker said.
Corker related this fiscal practice to the Rotary Club members in attendance by citing numbers that said the average Tennessee household earned $43,000 per year in 2008. He said if a Tennessee household applied Washington’s spending practices that family would spend $74,000, while borrowing 40 cents of every dollar they spend.
In 1970, Corker’s presentation showed that mandatory spending, or entitlements, which include Social Security, Medicare, Medicaid, constituted 31 percent of the federal government’s spending. Corker said that money is spent despite the actions of Congress, saying the money “goes out the door.”
“Fifty-six percent of the money that goes out the door in Washington is entitlements,” Corker said, referring to the current numbers.
Also in 1970, interest payments on the country’s debt made up six percent of Washington’s expenditures. Today, that figure has grown to 25 percent, totaling $2.27 trillion, as opposed to only $209 billion in 1970.
“Twenty-five percent of our federal budget is going to be spent on interest in 2035 if we continue on the path we’re on, and that does nothing to make our country stronger,” Corker said.
A part of Corker’s concerns is also who we are borrowing money from. Again, he cited numbers in 1960 that said foreign holders, being other national governments, held $13 billion of America’s debt, only five percent. Today, that number has increased to $4 trillion, approximately 47 percent of the debt and of that 47 percent, Corker said China holds $844 billion.
“It matters who you’re borrowing money from,” Corker said. “I think it affects our national security,” he continued. He said the level of America’s debt that China holds has definitely affected the way the government deals with China’s purposeful devaluation of its currency.
“For fifty years we’ve been running a 2.3 percent deficit,” Corker explained, saying that economists have said during that time, as long as the economy is growing, a nation can handle that deficit.
Corker said the President’s Deficit Reduction Committee Co-Chairman Erskine Bowles said the proper level of federal spending, relative to its revenue should be 21 percent. Corker felt that percentage should be reduced to 18 percent, which would create a balanced budget since the country has on average, produced 18 percent of its GDP in revenue.
In order to achieve that 18 percent spending, Corker said you would have to cut $6.7 trillion in federal spending over the next ten years. To get to Bowles’ 21 percent, you would have to cut $3.4 trillion during the next ten years.
“We’ve got to fundamentally change the way Washington works,” Corker said. “If you spent six months with me in Washington, you would be embarrassed about how we spend your money.”
He said there is plenty of blame to go around, saying Democrats and Republicans alike are equally responsible in getting the nation in the shape its in. Corker said he believes that bi-partisan solutions to the problem can be reached and that he is hoping to change the conversation by traveling through Tennessee and making people aware of the crisis at hand.
“It seems to me that between 18 and 21 percent there is a deal to be made,” he said.
In line with that statement, he said after the elections, he is going to offer a bill that will lower federal spending over time to his desired 18 percent of GDP. But when answering questions from those in attendance, he admitted it will be hard to pass the bill anytime soon, but he’s hoping to get the conversation moving.
Corker likened Washington’s spending habits with a person, who lives beyond their means, takes extravagant vacations, runs up charges on credit cards and then leaves their children with the bill after they pass away.
“There’s no one in this room who thinks that way,” Corker said to the audience, indicating Washington shouldn’t think that way either.
Corker fielded several questions after his speech, one regarding earmarks and the extra, unnecessary expenditures that are often latched onto legislation.
“I don’t do earmarks,” Corker replied, “I didn’t run to play small-ball and to me, pork barrel politics is small-ball.”
Another audience member mentioned the Fair-Tax system, which would eliminate a federal income tax and increase sales taxes. Corker and the audience member agreed that system “doesn’t have a snow ball’s chance” but Corker likened it to Tennessee.
“It’s much like what we do in Tennessee. People in Tennessee don’t like an income tax,” Corker said.