Geithner: “We Have Not Proposed a Plan to Reform Social Security.”

RJ at budget

Note: Click here to watch the video.

Washington, D.C. – Senator Ron Johnson (WI) today questioned United States Treasury Secretary Timothy Geithner at a Senate Budget Committee hearing.

Senator Johnson: “Secretary, welcome. I’d like to talk about reality. And the reality of the situation is this is the President’s fourth budget and this is the fourth year in a row that he is not addressing Social Security. He’s really not - in a meaningful way - addressing Medicare, which we all realize are the real drivers.

I agree with Senator [Bernie] Sanders, I’m highly concerned about why anybody would propose de-funding America’s retirement plan, not only just one year, but two years in a row. And when is that ever going to stop? Because the chart behind me shows that by the year 2035, we will run a cash deficit of $6 trillion, and that’s a real concern. I want to cut through the poll-tested, Washington-speak, that I think is so much of the explanation behind this budget and get to some facts. 

“Now, first of all, let’s talk about actual spending.   Getting to what Senator Sessions was talking about, spending does increase, compared to your last year’s budget. On Table S-1, you projected 10-year outlays of $46 trillion. We’re not cutting spending.  If you take a look at the last 10 years, we spent $28 trillion over 10 years.  Your projection was for $46 trillion in your last year’s budget. You’re projecting this year $47 trillion. These are correct numbers, am I right?

Secretary Geithner: “I don’t, I don’t think those help you at all explain the choices we face. 

Johnson: “Those are correct numbers.

Geithner: “I don’t -

Johnson: “Out of your budget last year, you projected 10-year spending at $46 trillion, this year you’re projecting $47 trillion.  Those are correct, right?

Geithner: “You know this very well; millions of Americans are retiring, becoming eligible for Medicare and Medicaid, so what that means is that spending grows over time –

Johnson: “Are these numbers accurate or not? This is your budget from last year and this year in terms of outlays.  Correct - 46 versus 47?

Geithner: “I know you want to cut deeper than we’re proposing.

Johnson: “No, no.

Geithner: “I understand it.

Johnson: “Let me move on.  I’m not going to get an answer. Let me move on to my next question.  I would think most Americans, when they hear that you’re going to reduce the deficit by $4 trillion, would think you’re going to reduce the debt by $4 trillion as well. Correct?

Geithner: “I think I could save you time by saying, ‘I know you want to cut deeper, faster.’ I got it.

Johnson: “No, no, no.

Geithner: “I can tell what you’re saying –

Johnson: “I just want to cut through the fiction that this budget is.  So, according to your budget last year, you were estimating on table S-14 that the total debt in the year 2021 would be $26.3 trillion, take away the $900 billion, the thing that we should compare it to is $25.4 trillion.  Right now in this budget, you’re estimating $25 trillion for 2021, so the only thing I can come up with is that the total deficit reduction is $400 billion. Congressman Ryan arrived at about the same number a different way, so we are not seeing $4 trillion of deficit reduction, are we?

Geithner: “Those are three days I’ve heard and listened to that argument, and it has no value as a way to expose the choices we face in this context. We –

Johnson: “I’m just trying to cut through the fiction.  Isn’t it true, if you’re really going to cut the deficit by $4 trillion, you should be reducing the projected debt?

Geithner: “I think I can save you some time on this.  Ask CBO [the Congressional Budget Office] what happens to the deficit if you were to enact our policies and they will tell you the deficit falls dramatically as a share of GDP.  That’s the test of fiscal responsibility; what we differ on is whether we should cut more than that faster and how we should get there.

Johnson: “You’re not answering my question.  Let me just ask you another one.  I’ve heard repeatedly over the last year that the President was for the grand bargain. Again, I know that’s poll-tested, I know that sounds grand, it sounds like a real bargain. I bet you it’s even balanced.  What was it?  What was the grand bargain? Was it ever on a piece of paper? Did the American people ever see the entitlement reform the President was actually, supposedly agreeing to?

Geithner: “Senator, I spent - as the President did - months and months with the senior leaders of the Republican Party and Democrats –

Johnson: “Did Americans ever see what the President’s proposal was to reform entitlements?  Because, he keeps talking about that he actually had a plan.  What was the plan?

Geithner: “We proposed in April of last year, in September of last year, and in this budget for reforms to entitlement spending. They’re in the budget.  Now, you can disagree with me –

Johnson: “Is there, is there a plan?  How do you reform them? How do you reform Social Security? How do you save Social Security over the next 35 years?

Geithner: “On Social Security you’re absolutely right.  We have not proposed a plan to reform Social Security, we have not. Nor have you, nor has your side.

Johnson: “But again, the President said that he was for the grand bargain that actually reformed entitlements.  What was the plan?  Can you provide it to my office so I can see a detailed plan of entitlement reform?

Geithner: “You can see a detailed plan in the budget, on Medicare and Medicaid, much more detailed –

Johnson: “For Medicare, $350 billion

Geithner: “Medicare, Medicaid together, $350 billion cut off the expected baseline over 10 years

Johnson: “And Social Security  – you’re doing nothing to address the $6 trillion deficit.

Geithner: “No, on Social Security, we have left - as you have - a broad commitment to work to strengthen it, but we are not willing to come to where you are on how to do that because frankly, your side wants to cut the benefits deeper.

Johnson: “Let, let me move on. When I was questioning Chairman Bernanke, I realize there’s a level of uncertainty because we don’t have a plan. Americans are taking a look at these deficits as far as the eye can see, the fact that this President isn’t leading, isn’t proposing real tax reform, isn’t proposing any kind of - nothing to propose saving Social Security and entitlements.  And I asked, ‘is that a problem?’ and Chairman Bernanke said, ‘yes, that harms economic growth.’ The White House, their answer was, ‘we have no opinion whether this body - the Senate - should pass a budget.’ Do you basically agree with that? Do you have no opinion whether we should actually show a plan for how we save America financially?

Geithner: “Good question, so let me try to respond.  My view is, as you’ve heard me say many times, that if Congress and this country, this city, this Capitol, this building, does not find a way to begin to make progress, more progress than we did in the summer, putting our deficits on a sustainable path, then it will be bad for the country, growth will be weaker, that will be damaging.  However, if you look at any measure we have today of the risks that those concerns about the future are hurting growth, I do not believe you can find evidence to support that.  And let me just say in support of that, the following things –

Johnson: “Now are you going to press Senator Harry Reid to bring a budget to the floor of the Senate to actually vote on it?

Geithner: “That, that’s really a better question addressed by my colleagues, but I just want to finish this one thing.  To borrow at ten years now, we pay less than two percent.  There is no evidence in any measure in financial markets today of concern about fiscal sustainability, about inflation risk, other things in any measure of financial markets you can test every day; it doesn’t exist today.  Now, if we don’t act on this, it’ll happen, it’ll hurt us, but not today.

“Now again, if you look at any measure of the basic health of the American business sector, outside construction today, profits very, very high, expected profits and their stock prices have been way above when we came in, and they are spending on investment and equipment software and on employment at levels that are pretty healthy given where we are and where we’re going.

“So, you were right to say that we cannot sit here and do nothing about these problems, we have to do more, we just started that process, it’s going to take some time.  It’ll hurt us if we don’t get there, but there is not, I don’t think, strong evidence today that suggests that you, the fact that you’re not willing to move on it now, we can’t close our gap right today, it’s having a material impact on growth now.“