20 Trillion Reasons to Reform Taxes and Mandatory Payment Programs

U.S. Senator Mike Rounds. (Official Senate Photo)

September 15, 2017
By U.S. Senator Mike Rounds

The federal government’s national debt recently surpassed $20 trillion. While there is plenty of blame to go around, the majority of this debt can be attributed to the past decade, as our debt was $10.6 trillion at the start of 2009. In other words, in the past eight years, the federal government has accrued as much debt as it accrued throughout the first 230 years of our country’s existence. It’s no wonder military leaders acknowledge it as being a top threat to our national security.  Even more frightening, there is no sign of it slowing down.

High debt threatens economic growth by driving up interest rates and discouraging businesses and individuals from investing back into the economy. And it breeds even more debt as the interest on our debt must be paid to those who hold it – leaving fewer resources for other priorities such as roads, research and education.

Our broken tax system also plays a role by limiting our ability to collect revenues. Our current tax rates create a disincentive for companies to do business here in the United States, which then leads to fewer high-paying jobs for American workers, and encourage businesses to keep their profits overseas. Lowering tax rates would incentivize companies to repatriate that money and invest it back into our economy. Earlier this year, I introduced a proposal in the Senate to lower the tax rate in each bracket. It is but one step we can take to overhaul the tax code that will provide direct, immediate relief to hardworking families, jolt our economy and increase federal revenues.

While I do believe tax cuts are an important step to controlling our debt, the biggest driver of our debt is the rapid, unchecked growth of mandatory payments on safety net programs including Medicare, Medicaid and Social Security. If we continue down our current path, in less than ten years 99 percent of all federal revenue will have to be spent on mandatory payments and interest on our sky-high debt. No amount of cuts to defense and other programs such as crop insurance, education, highways and bridges will have a meaningful effect on debt reduction without also controlling the cost of these mandatory payment programs.

Mandatory payments already account for nearly three-fourths of our total federal spending today. This is because Medicare, Medicaid and Social Security have never been properly managed and Congress does not currently appropriately oversee them. They run on auto-pilot. Given that they are our largest federal expenditures every year, it is time for Congress to take an active role in managing their funding levels on a regular basis. This does not necessarily mean making cuts – it simply means giving Congress the authority to review them to make them as efficient as possible and to make sure they are available for individuals who need them, both now and in the future.

Surpassing $20 trillion in debt should be a wake-up call to Washington, which for decades has failed to own up to their responsibility to balance its checkbook. I continue to work with my colleagues in the Senate to shake up the budget process in Congress, and open up the entire budget to congressional review – including mandatory payments. It is the only way to slow down the fiscal train wreck. Simply delaying action and looking the other way is not an option.

Getting our Country Back on Track By Senator Mike Rounds November 22, 2016

Getting our Country Back on Track
By Senator Mike Rounds
November 22, 2016

As we look forward to the start of a new year, Congress and the new president will have a number of agenda items to start working on to get our country back on track. Along with executive overreach and regulatory reform, finding a solution to our nation’s fiscal crisis is one of the more important issues to address. With our debt spiraling out of control at more than $19 trillion, it’s clear that federal spending at current levels is unsustainable. According to a report from the nonpartisan Congressional Budget Office (CBO), in ten years, 99 percent of all revenue will go toward mandatory payments and interest on our debt. We need to begin managing our entire budget before it is too late.  

The long-term driver of our debt and deficit remains the rapid growth of mandatory payments. These include Medicare, Medicaid and Social Security. Already, spending on these mandatory payments, as well as interest on our debt, account for nearly three-quarters of all federal spending. Since the passage of the Congressional Budget Act of 1974, Congress has not exercised oversight over mandatory programs. There is no specific committee with oversight over the efficiency of these necessary expenditures. Instead, Congress has focused on defense and non-defense discretionary spending. This makes up only about 28 percent our entire budget today. I believe now we have the opportunity to change this outdated, failing budget process.

Compare our lack of management of Social Security to South Dakota’s retirement system, in which both chambers of the legislature and the South Dakota Retirement System Board of Trustees actively manage one of the best retirement systems in the nation, every single year. Proactive management of all mandatory programs would be easier if they were voted on as part of the budget process every single year. Better management of these programs does not necessarily mean cutting them. It means making them as efficient as possible.

When our Founders wrote the Constitution, they explicitly gave Congress the task of setting spending and tax policies for our country. James Madison called this power of the purse “the most complete and effectual weapon with which any constitution can arm the immediate representatives of the people.”   

Currently, I am working with a number of other senators to find ways to revive the budget process here in Congress, so we can address our budget crisis once and for all. What we have been working on would open up the entire budget to congressional management, including mandatory payments. Our plan would also require the federal budget to be approved and signed into law. Additionally, there would be consequences for Congress should we fail to pass a budget in a timely manner. 

As we move forward into a new year, I will continue to encourage my colleagues to work with us to make these important changes to the budget process in Washington. The fiscal crisis isn’t coming ten years from now. The crisis is here, and we need to face it head on.