Selling the Budget: Senator Kent Conrad
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RAY SUAREZ: The Democrats also have a new man playing a key role on budget matters; he’s Kent Conrad of North Dakota, ranking Democrat on the Senate Budget Committee. Well, Senator, you heard the new OMB Director, Daniels say that not only is there room for a 1.6 trillion dollar tax cut; there is vastly more than enough room, what do you think?
SEN. KENT CONRAD: Well, there is if you raid the Social Security Trust Fund of 600 billion as they do. There is if you raid every penny of the Medicare Trust Fund of $500 billion as they do. But that is the only way. And that is the wrong way. That would be a very serious mistake.
RAY SUAREZ: When you say raid and you use that specific figure, let’s say $2.6 trillion in the case of Social Security, what are you saying they are doing — by not earmarking it all, that that constitutes a raid in your view?
SEN. KENT CONRAD: No, what they are doing is classic double counting. They are crediting the money to the Social Security Trust Fund then they are taking 600 billion of the 2.6 trillion of Social Security surplus and diverting it for our purposes. The Medicare Trust Fund it’s even more egregious, they are taking every penny of the Medicare Trust Fund surplus to create this so-called reserve. They are saying those monies are uncommitted. They are fully committed. You can’t double count here. You can’t credit the money to a trust fund then take a chunk of it and go use it for some other purpose. I mean, you know, the words say one thing, the numbers say quite another. And this is a very serious mistake because if we get it wrong now, there is no time to recover. You know, back in the 80s we could make fiscal mistakes and there was time to recover. It took us 18 years to do so but now if we make a mistake, the baby boomers start to retire in 11 years and the big surpluses turn into massive deficits. That is why we have to be cautious and conservative and not go overboard and spending, or tax cutting and put this economy back into the ditch.
RAY SUAREZ: By dedicating two trillion of the 2.6 trillion dollar Social Security surplus to debt reduction, thereby not paying off the entire outstanding national debt, they say they are being prudent with the money. You heard Director Daniels say that paying too much of the debt off right away incurs costs that are just not productive.
SEN. KENT CONRAD: Well, there is some of this debt that can’t be retired within the ten years prudently but they have badly underestimated that number. We could pay down far more of the $3.4 trillion national debt that exists today than the 2 trillion they are proposing. We have done a detailed analysis that shows we could use all of the monies available from the trust funds to pay down debt and not run into any cash accumulation problem until the year 2010. So I think they’ve badly overestimated here or underestimated in an attempt to try to make this tax cut look affordable.
RAY SUAREZ: So you reject the challenge to you just made a few minutes ago that the only two possible uses for the money are a bonus, in effect, to the government of Japan for early retirement or buying private securities.
SEN. KENT CONRAD: These are utterly false choices. The fact is the choice before us is what do we do with projected surplus, a projection that is over ten years that might not come true, that is highly uncertain. I think that alerts us; we ought to be cautious here; we ought to be careful, and we ought to pay down as much of this debt as we prudently can. That is much more than the $2 trillion of the $3.4 trillion national debt that we currently have.
RAY SUAREZ: Those projections over the next ten years for the size of the surplus were just called cautious assumptions, conservative assumptions; are they in your view?
SEN. KENT CONRAD: Look, it’s a very professional forecast done by the Congressional Budget Office. But even the forecasting agency themselves have warned us of its uncertainty. They’ve made good projections here based on kind of the best case scenario. But they have warned us, look, based on their previous forecasts there is huge uncertainty. In fact they’ve told us in the fifth year alone it could be anywhere from a $50 billion deficit to more than a trillion dollar surplus. That’s based on their previous forecasting error. I think when the forecasting agency themselves warns you of the uncertainty of their own projection, we probably ought to pay attention.
RAY SUAREZ: So what would you want to put in place as a possible other option? What would you want to suggest in place of the President’s plan?
SEN. KENT CONRAD: Here is what I would suggest: Number one, that we protect every penny of the Social Security and Medicare Trust Funds. That ought to be principle number one. Number two, with what is left that we take roughly a third for a tax cut, roughly a third for the priorities that we all agree on in terms of prescription drug benefit, improving education, strengthening national defense and then with the last third that we strengthen Social Security for the long-term, because the truth is we enjoy surpluses today, but those surpluses are going to turn into very big deficits just past this ten-year window. And we shouldn’t just live for today; we should prepare for tomorrow.
RAY SUAREZ: In the President’s plan he cuts down on the rate of growth in government spending. Is that something you endorse?
SEN. KENT CONRAD: Well, I do. You know, the size of the federal government has been shrunk substantially over the last nine years. We’ve gone from 22 percent of the Gross Domestic Product to 18 percent of the Gross Domestic Product. Under the plan that I just lined we to further reduce the size of the federal government to 16.4 percent of the Gross Domestic Product, the lowest level since 1951 – in other words, the smallest size of federal government in 50 years and domestic discretionary spending would be reduced to its lowest level ever. That’s how conservative the spending plan is that I just outlined.
RAY SUAREZ: So do you look forward to a chance to debate this, or do you think that trying to fast track this is something that is coming down the pike whether you like it or not?
SEN. KENT CONRAD: I’m very worried about fast tracking. Look, we could fast track tax relief right now to stimulate the economy. That would have my support. I think that would be a wise thing to do. I think we should recognize that 1/80 of this proposed tax cut would be under the President’s proposal effective this year. That is only 1/5 of 1 percent of our national income. So there’s not much stimulation there but I think it would be useful to do that and we could fast track that. The vast majority of the President’s proposed tax cut doesn’t happen until years five through ten and it just strikes me as imprudent and unwise to commit that kind of money before we know if we really have it.
RAY SUAREZ: Senator Kent Conrad of North Dakota, thanks a lot.