John Thune

Posted: January 20th 2011

From Yankton Press & Dakotan

Congress must focus on the economy and take control of its spending and debt, which begins with repealing federal health care reform, Sen. John Thune (R-S.D.) said Tuesday at a joint Rotary and Chamber of Commerce luncheon at Yankton’s Hillcrest Country Club.

“We need to get the economy going and create jobs. And we need to get spending and debt under control,” he said. “Jobs, spending and debt — those need to be our focus over the next three to four months.”

The first major debate of the new session should come today (Wednesday), when the House is expected to vote on repealing health care reform, Thune said.

The House, which saw a Republican majority elected in the November election, is expected to repeal health reform, Thune predicted. The Senate, still controlled by the Democrats, will then defeat the measure, he predicted.

“Where do we go from there? I would expect that we will take a ‘rifle shot’ approach,” he said, describing the piecemeal approach. “I expect the main target to be the individual mandate (for carrying insurance).”

The GOP will offer an alternative plan, Thune said. “If we succeed with repeal, what do we replace it with? The Republicans have a series of proposals for reform,” he said.

The current health reform package would double the number of people on Medicaid, the federal health program for the poor, Thune said.

About 16 million people are currently on Medicaid, but the number will swell to 32 million under health reform, Thune said. The states are currently funding one-third of the costs, while the federal government is funding two-thirds, he said.

“In the long term, the states will shoulder increasing responsibility,” he said.

Recent polls indicate the American people are evenly split over repeal of health reform. However, Thune told the Press & Dakotan that he believes there is a much stronger support for repeal.

“I think the voters spoke very clearly in the last election,” he said, citing the electorate’s desire for health reform repeal as a major factor in the GOP takeover of the House.

The U.S. must get its spending and budget under control or face financial catastrophe, Thune said. The country currently owes $14.3 trillion, and Congress faces a vote in late March or early April on whether to increase the debt limit, he said. Of every $1 in federal spending, 43 cents is borrowed, he said.

“We have to get the situation turned around in 3 to 5 years, or we are headed over a cliff. We will be in the same situation as Greece and Spain,” the senator said. “If we’re not willing to make the tough political decisions, we are going to bankrupt the country.”

Of the nation’s $3.5 trillion budget, about one-sixth goes toward domestic, non-military spending; one-sixth for defense; and two-thirds for mandatory entitlement spending, Thune said.

The domestic, non-military spending has grown 21 percent in the past two years, while the inflation rate was 2 percent, Thune said.

“The federal government was growing at 10 times the rate of inflation,” he said. “We want to take it back to the 2008 levels.”

Thune called for reform in the federal budget process.

“We have a $3.5 trillion enterprise, and Congress didn’t pass a budget last year. For the last 34 years, there are only four times where we passed a budget on time,” he said. “The process is dysfunctional and broken. I am embarrassed at a process this dysfunctional.”

Thune suggested switching to a biennial budget rather than an annual budget. Congress would pass the budget under the first year and conduct oversight the second year, looking for savings rather than spending during an election year, he said.

He also called for making the budget resolution binding, for introducing a line-item veto and for reviving the joint committee on deficit reduction. The latter was introduced in the 1940s and operated for about 30 years, he said.

“We have 26 committees for spending dollars but not one for saving money,” he said. “The inertia is not for (a smaller) federal budget.”

The nation is seeing signs that the economy is improving, but much remains to be done, Thune said. The United States’ $14 trillion economy represents one-fourth of the global Gross Domestic Product (GDP), he said.

Without getting its economy going and its spending and debt under control, the United States faces “incredibly perilous situations” such as those found in many nations, he said.

States are facing their own financial crises, but South Dakota faces a better situation because its constitution requires a balanced budget for state government, Thune said.

“We will require a lot less draconian steps (in solving our state budget problems),” he said.

Thune noted the dire situation faced in other states.

“Our state’s unemployment rate stands at half the national rate. We have a difficult situation, and it’s serious, but we’re not along the dimensions of states like California and Illinois that are on the verge of going bankrupt,” he said.

“My feeling is that (states with budget crises) will come to the federal government and ask for help. My (response) would be that we have got to say no. We can’t set that precedent.”

Thune took questions from the audience on a number of topics:

• Thune opposes raising taxes as a solution for the current budget crisis.

“Most economists believe the worse thing in the middle of an economic downturn is to raise taxes,” he said. “We don’t have a revenue problem in Washington, D.C. We have a spending problem.”

Government spending should be reduced from its current 24 to 25 percent of Gross Domestic Product (GDP) to the historic level of 20.6 percent, Thune said.

“I don’t subscribe to raising taxes. We need to get the economy growing and expanding,” he said. “Higher taxes would stifle investment and slow down the economy. It makes it more difficult to get out of the hole.”

Thune believes the federal government should shoulder more financial responsibility in areas it mandates, such as special education. However, he believes local school boards are better equipped to determine and handle local needs than the federal bureaucracy in Washington, D.C.

• Freddie Mac and Fannie Mae, agencies set up to work with mortgage lenders, should be part of an overhaul, Thune said. The two agencies need to be phased out or made part of a transition, returning more of the nation’s home financing to the private economy, he said. Freddie Mac and Fannie Mae currently cost taxpayers $160 million, which is expected to grow to $300-400 million, he said.

• After failing to win legislative approval, federal agencies are increasingly trying to take over more functions through regulations and resolutions, Thune said.

The Environmental Protection Agency (EPA) is trying to pass its own cap-and-trade and greenhouse gas regulations, he said. The Federal Communications Commission (FCC) is taking more control of the Internet, while the National Labor Relations Board (NLRB) is pushing “card check” regulations that do not require secret ballots for union elections, he added.

• American companies and jobs should benefit in decisions made about the procurement of U.S. defense weapons, he said.