U.S. Senator Mitt Romney (R-UT) today joined Committee for a Responsible Federal Budget president Maya MacGuineas to discuss the current status of the major federal trust funds and potential policy reforms to improve their solvency. Romney highlighted how his bill, the bipartisan TRUST Act, would create a process to rescue these endangered federal trust funds and rein in the national debt.
Excerpts of their conversation can be found below and video can be found here.
Maya MacGuineas: So let me just start with where we are in the economy—we have come out of a terrible crisis, we borrowed trillions of dollars. That was absolutely the right thing to do, certainly in the beginning, but now we are also faced with the aftermath of that, which is strong growth—which is really reassuring—but very high debt levels, and now this hugely problematic inflation. So about the inflation concerns, there are a number of people in Congress and the Administration who are proposing to temporarily suspend the federal gas tax, and you recently came out against that proposal, as did we. I’m wondering if you could talk a little bit about what you’re thinking about that.
Senator Romney: Well it’s too little, too late, and it takes attention away from the real causes of our inflation. One of those of course being the Federal Reserve which was continuing to keep interest rates exceptionally low, even as the economy was doing well back in the final years of the Trump Administration. It was buying American debt, almost half of the debt the government was issuing the Federal Reserve was buying. Its balance sheet was too large, so it was carrying out quantitative easing and holding interest rates down to zero way longer than it should have. At the same time, our Democrat friends after just having passed—I think—an important and essential COVID relief package of $900 billion dollars in December of ‘20, they decided to put out another $1.9 trillion just two months later, and not a single Republican in the House or the Senate voted to do that—it made no sense. We talked to the states, I met with the President more than once and said look, I’m looking at the numbers coming in from states, and almost every state is awash in money. They did not have a drop-off in tax revenues. They got plenty of money, and yet you’re sending them hundreds of billions of dollars more. This makes no sense, but it’s very clear the Administration was intent on “taking credit” for things getting better, and they had to put out a ton of money to do that and to pursue, of course, their broader agenda. So, when you have the Federal Reserve with easy money way too long, and the Administration spending massively more than it should have, you’re going to create unusual levels of demand and that’s going to be met with some hiccups in supply, as well just the shortage of contractors and so forth. The result is you’re having very high levels of inflation, and I don’t know when that ends.
Maya MacGuineas: Since you joined the Senate, you’ve been talking about the need to restore solvency to our trust funds, I think from the very beginning. Can you talk a little bit about why that is so important?
Senator Romney: We face a real challenge there, and that is that this growing national deficit that we have and the additional debt that the total nation has is already an issue, but it’s becoming a more frightening issue. We spent over $400 billion dollars on interest last year. Compare that to $700 billion in the military, at some point we’re going to be spending more on interest than we’re spending on our military. I don’t know how you can be the leader of the free world if you’re having to pay hundreds of billions of dollars in interest, and can’t even keep up with your military. Or, by the way, with your education support, your health care systems and so forth. So we’ve got to find a way to finally get us closer to balance.That’s one piece. The second piece, of course, is that the programs that people rely on: Social Security, Medicare, Medicaid, our Highway Trust Fund—these trust funds are about to run out of money over the next decade or so, some more quickly than that. Medicare Part-A probably in the next four years. So we need to take action before these trust funds run out of money, at which point legislation says—the law says—we have to cut benefits dramatically, and we all know that’s probably not going to happen. So it being a dramatic increase in taxes, and if we have a dramatic increase in taxes it would slow down our growth and make it harder for us to pay down the debt that we have. I know I’m making it all sound like it’s pretty cataclysmic, but if you look at the history of great civilizations that have failed, a characteristic of their failure is that they start spending massively more than they take in. Because as the lead civilization of the world other nations loan them funding, but at some point they can’t keep up with the interest and paying back the loans and their currency weakens, and they get replaced by someone else. In our case right now we have got China nipping at our heels. They will be bigger than us economically, militarily, and geopolitically. And for us to keep on adding debt at a time like this is obviously threatening our future, or the future for our kids and our grandkids. So we’ve got both the need to protect our seniors with Medicare and Social Security—as well as Medicaid—and the need to keep America strong. So for all those reasons it’s time for us to address the imbalance that exists…
The topic of debt and excess spending and trust funds is just not something that the voters talk about. As a result, politicians don’t talk about it. There are a few people who recognize it, people of capacity like Angus King, who you just met with. Republicans and Democrats recognize that this is a real issue, and that it needs to be addressed. I’m reminded of that old line from Hemingway. One character in his book was asked, “How did you go bankrupt?” and he said, “Slowly, and then suddenly.” And the challenge is that we’re facing some of the consequence of our excesses right now with inflation. But we haven’t had the kind of collapse that has occurred to Great Britain before us, and the Dutch before them, and the Romans before them. The kinds of things that happen when people do not maintain their strength by maintaining, if you will, their fiscal sanity, and not having debt overwhelming the capacity of a nation to provide for itself and its strength globally.
Maya MacGuineas: If you could talk a little about what I think is the most impressive legislative development that we’ve seen in years, your developing the TRUST Act.
Senator Romney: For those that are not familiar with it, the idea is simply to take the vision of Simpson-Bowles and say okay, is there a way to make Simpson-Bowles work? Is there a way to make it more likely that it would be successful? And so we said instead of, as Simpson-Bowles did, looking at all of the trust funds together, and saying ‘Can we solve the whole thing?’ We instead divide the different trust funds and establish a rescue committee, if you will, for each one of the trust funds. A separate rescue committee, bicameral, bipartisan. And if any one of these committees—the one responsible for Medicare, or for disability and Social Security, or Social Security and old age, or the highway trust fund—if any one of them, any one of those groups can come up with a solution to find balance and solvency long-term, if they come up with a solution which has bipartisan support within that that group, then goes to the House and the Senate on a privileged basis, an up or down vote without amendment, and that’s the basic idea. And I can’t tell you that we’re going to solve all four trust fund deficits, but I think we could solve one or two, and if we get that done it’s going to create the impetus, I think, to take on the effort even further and perhaps solve all of them.
We’ve got about twelve or so, maybe more, individuals who have signed up as sponsors. When COVID hit, everything sort of stopped because we all focused on COVID rescue packages, and so forth. And then the new President came in with Build Back Better, and we were pulling our hair out, saying, “that makes no sense at all.” And yet, the Democrats felt they needed to give their leader a win. And so the TRUST Act became a back-burner topic, but it’s back to a front-burner again. And there are senators who are very intrigued—Bill Cassidy, for instance. Not only is he a supporter of the TRUST Act, he’s actually got some ideas to fix Social Security. So he’s working on the solution. And there are others that are working on specific solutions. Great, bring those to the various rescue committees if and when we can get this passed. I hope we can get enough bipartisan support. Right now, there are a couple of people like Bernie Sanders who just say, “Oh, you’re just going to cut benefits.” It’s like, “Bernie, the benefits are going to get cut when the trust funds go bankrupt.” So you ought to realize that’s in the law. We’re trying to avoid that happening, but there’s always a capacity. Any time you’re talking about Medicare, Medicaid, or Social Security, a demagogue can always grab a microphone and say, “Oh, they’re going to cut your benefits.” No one is going to cut benefits for current retirees or people near retirement. That’s simply not going to happen politically. But we’ve got to solve these imbalances, and we’ve got to do it before it becomes a burden too heavy, and potentially throws us into the kind of decline that would be terribly destructive.
Maya MacGuineas: So are there any policy objections to this or are they merely political, which is that sometimes people like to keep issues alive so they can continue to try to beat up the other guy with them? Is there any policy argument for waiting?
Senator Romney: That’s an argument I agree with. So then the question is: What is the intent of Bernie Sanders, for instance—who really is the most vocal, outspoken critic of this approach? And on the one hand, it may just be very much in his heart that anything that could potentially adjust a program in the future, he has totally opposed and he only wants to raise taxes in order to pay for whatever programs might exist in the future. So that that may be where he is…But that’s not where America is, and I think the distinct majority of his party that is represented in the Senate—and my party—believes that we’ve got to find a solution to these issues before they become back-breaking. And they’re getting there, if they’re not already there. We’ve got to find solutions that keep us from continuing to have to borrow hundreds of billions of dollars to make the obligations that we have. I don’t think most Americans recognize that when we talk about balancing the budget and when the senators every year work on our budget we’re only talking about one-third of spending. Two-thirds we don’t even talk about, we never even vote on it. Two-thirds of federal spending is automatic, Medicare, Medicaid, Social Security, and the interest. These things are automatic, and we are never going to get ourselves to a posture where we have a sound financial base until we’re willing to look at those programs and say, “What can we do for future generations to make sure they’re solvent for them?” And by the way, if everybody thinks we’re going to need more revenue, meaning we need higher taxes, why, that’s what we’ll have. But I think there’s going to be instead a balance where we’re going to find ways to improve programs to make sure they’re only going to people who need them, and find ways of economizing certain programs.