Commencement | Erskine Bowles Address to SPA Graduates
American University School of Public Affairs
May 13, 2012
Former White House Chief of Staff
What about Nate Bronstein? Wow! Nate, I will tell you one thing, you just heard us go through all of this stuff I've been able to do. It reminded me of when my Uncle Sam back in Greensboro, North Carolina passed away. And when he did, the obituary editor of the Greensboro Daily News called up to ask about him. After a few minutes, my aunt went on and on all of the stuff he'd done. Finally, the editor said, “Miss Bowles, you do know we now charge $5 a word for every word we put in.”
She said, “No, no, I didn't know that.” She said, “In that case, just put in there ‘Sam died.’"
True story. I will tell you the rest of it. He said “Miss Bowles, we can't do that. We have a five word minimum.”
She said, “My goodness.”
She said, In that case put in there "Sam died. Cadillac for sale."
I'm afraid my wife is going to do the same.
I am very, very honored to be a member of the class of 2012, the most politically astute class in America!
Congratulations to you all.
For all of you mamas out there, happy mamas’ day.
You're going to see me leave early, because my wife has nine of our grandchildren all under 6 years of age at home, and she gets really mad at me for being here. I'll be cutting out early.
Congratulations, mamas. And congratulations to all of you.
I truly am honored. Thank you, President Kerwin. Thank you, Provost Bass. Thank you, Dean. I am thrilled to be here.
Look, I have this nice little uplifting, inspiring little graduation speech. But I left it at home.
And I did it because I'm really, truly worried. I'm really, truly concerned for you. And about your future. And I decided what I wanted to do was to use this commencement exercise as a chance to see if I could get you to think again about one of the most pressing problems facing the country today.
And then get you mad! Mad at me. Mad at my generation. Mad at us for kicking the can down the road, for ducking the really tough choices, for what I believe we've done shirking our responsibility. I want to get you mad enough to use that social network of yours to stir up your friends to see if you can get some real action out of my generation, and more importantly out of these politicians in both parties here in Washington, D.C.
And to do it, Nate, you're going to have to put Superman's cape on again. All of you are. For you see, I believe that this generation faces the most predictable economic crisis in history.
Fortunately for us, it's also the most avoidable! For you see, the fiscal path that our nation is on today is simply not sustainable. And if I had to give you an analogy, unfortunately I'd use something Nate said. I'd tell you that these deficits that we have today of over a trillion dollars a year they are like a cancer, and over time they are going to destroy our country from within.
Let me just give you all one arithmetic example. It's easy to understand the problem. If you take last year, no 20 years ago or 20 years hence, and you took 100% of a revenue that came into the country, every nickel, every single nickel was spent last year on our mandatory spending and interest on the debt. Mandatory spending is principally the spending we do for the entitlement programs, Medicare, Medicaid and Social Security. What does that mean? That means that every single dollar we spent last year on these two wars, on national defense, on Homeland Security, on education, infrastructure, high value added research, every single dollar was borrowed and half was borrowed from foreign countries.
That is crazy! And we have to stop.
You know, when I get a chance to talk to people my age and they tell me, you know, why we have these trillion dollar deficits, I have to laugh. You all, thank goodness, know better, because you've been here at American. But you know what people tell me? They always come up with the same three or four reasons. I used to say four, but I was afraid I'd get in one of these Rick Perry deals.
But they say, first, waste, fraud and abuse. Then they say foreign aid. Sometimes they say Nancy Pelosi's airplane. And oil subsidies.
You can take all of those things together and it wouldn't amount to a hill of beans! There are four primary reasons we have these enormous challenges today. And if we aren't willing to face up to them, we are facing a world of hurt, you're facing a world of hurt. They're easy to remember. If any politician in any party tries to tell you anything else, they're just jerking your chain.
First is healthcare. We spend twice as much as any other country in the world on healthcare. That's whether you talk about it as percentage of GDP or per capita basis. That would be OK if our outcomes were twice as good as any other country. But they're not. We rank somewhere between 25th and 50th in such important measures as life expectancy, preventible death, infant mortality, and any of you sitting here today who don't think those 50 million people who don't have healthcare insurance don't get healthcare, you're crazy. They get healthcare. They just get it at the emergency room at five to seven times the cost it would be in the doctor's office, and that cost doesn't disappear. It gets cost shifted. You know who it gets cost shifted to? You. In the form of higher taxes and higher insurance costs. So healthcare, by far our biggest problem. Was about 10% of the budget in 1981, about 25% today, and before 2020 it will be 1/3.
Number two, defense. We spend more on national defense than the next 15 largest countries combined. And that includes both Russia and China put together. You know, I think we are bearing a disproportionate responsibility for global world peace. I believe this is causing us to hollow out our country and I don't believe America can afford to be the world's policeman. Let me tell you how crazy it is. Today we have a treaty, America does, with Taiwan that we'll protect them if they're invaded by the Chinese. There's only one problem with that! We'll have to borrow the money from China to do it! It's crazy! Defense.
Third, we have the most inefficient, ineffective globally anti competitive tax code that man could dream of. It is crazy! Crazy! You wait. It's really nuts. People ask me all time how can we have the highest nominal tax rate we do and net such very little bit of money. Which only net $1.3 trillion a year in income tax, corporate and individual, which spend $3.6 trillion. Crazy. The reason is we have $1.1 trillion of back door spending in the tax code that principally benefit people like me. It is nuts! What we recommended is we said hey, let's broaden the base, simplify the code, let's wipe out this spending in the tax code, that issues 92% of the money to reduce rate, 8% of the money, about $100 billion a year to reduce the deficit. That's where we got our trillion dollars of revenue to reduce the deficit. What would it do to your tax codes? It would take tax codes to 8%, up to $70,000. 14% up to $210,000. And you would pay a maximum marginal tax rate of 23%. And we could take the corporate rate to 26%, and we could pay for a territorial system so that $1.5 trillion that today is captured overseas could be brought back too this country to create jobs for you. I think that would create dynamic growth and would be great for America. And it makes a little bit more common sense.
The fourth area is our old friend compound interest. Today we spend about $250 billion on interest costs alone. That's at rates where we are today. If rates were where they normally are, the average rates of the 1990's or the first decade of this century, we'd be spending about $650 about. But even at $250 billion, we're spending more on interest than the cost of operating the Department of Commerce, education, the environment, energy, Homeland Security, interior, justice, and state combined. Crazy. We do nothing, we just waddle along like we are, we'll be spending over a trillion dollars a year on interest costs alone by the year 2020.
Think about that, for you. That's a trillion dollars that we can't spend in this country to educate the next generation of kids. It's a trillion dollars we can't spend on infrastructure, and our infrastructure truly is crumbling in this country. It's a trillion dollars we can't spend on research to create the next new thing over here, and unfortunately it's a trillion dollars we will spend principally in Asia to educate their kids, to build their infrastructure, to do high value added research there, to create the next new thing over there so the jobs of the future are there, not here.
It's nuts. We've got to put on Superman's cape. We've got to get serious about this. This is not a problem that we can solely grow our way out of, don't let the politicians tell you that. You could have double digit growth for decades and not solve this problem. It's not a problem that we can solely tax our way out of, raising taxes doesn't do a darn thing to change the fact that the demographics of this country are changing or that healthcare is growing at a faster rate than the GDP.
Unfortunately, we also can't simply cut our way out of it without truly hurting the disadvantaged. Which is unacceptable to me.
Or without disrupting what is a very, very fragile economic recovery. That's why our commission put forward a plan that we felt was reasonable, responsible, bipartisan, that reduced the deficit by $4 trillion over the next decade. We didn't make the $4 trillion number up because the number 4 bus passed us on the street. $4 trillion is the minimum amount you have to reduce the deficit to stabilize the debt and get it on the downward path as percent of GDP. We got a majority of Republicans, a majority of Democrats and a super majority of the commission to vote for it. We had six sitting U.S. senators on our commission, five of the six voted yes. All three Republicans, two out of three Democrats. The diversity of viewpoints of people who voted for it were amazing, all the way from Tom Coburn, senator from Oklahoma, you can't get any more fervent right, to Dick Durbin, senator from Illinois, as far to the left as you can get. But they voted for it because they thought it was the responsible thing to do, because they thought it was the right thing to do! They did it for our country.
So what I want to ask you today, you graduates, this most politically astute class in America, is to think about this problem. Think about it like Ernst Rutherford did. He was the great Nobel Prize-winning scientist, and this is what he said when his Nobel prize winning project was running out of money. He turned to his team and said "Hey! We're running out of money! Now we got to start thinking!"
That's what America is. We're running out of money. Now we've got to start thinking! We got to make these choices, these tough choices, these hard choices, these politically difficult choices. I'm confident that if we do, if you all can get these politicians to put partisanship aside and pull together, rather than pull apart, that the future of this country is very, very bright, and I know that you can compete with the world's best and brightest.
But I'm equally sure that if we continue to kick the can down the road, duck the tough choices, shirk our responsibilities, then America is well on its way to becoming a second rate power.
Please, don't let this happen. You can't wait like we've done for that next generation of young folks who will sit in the seats you sit in today. We need you to think! Get mad! And force these politicians in both parties to deal with these problems and deal with them now.
Please. Do it for yourselves. Do it for those classmates sitting next to you today. Do it for those kids you'll have in a few short years. Do it for our country.