Posted: August 12th 2011
From Argus Leader
Current course has nation headed for bankruptcy, he tells Chamber
As a purveyor of scary stories, Sen. John Thune gave a camp-counselor-around-the-bonfire performance to the Sioux Falls Area Chamber of Commerce at its Inside Washington luncheon Thursday.
An explosion of federal spending that will see it rise from 25 percent of the value of all the goods and services produced in the country now to 39 percent of gross domestic product by 2040 has the U.S. headed for bankruptcy if the government does not dramatically restrain spending, Thune told the packed luncheon audience.
"We need to change how we spend," Thune said. "I think the real solution is to grow the private economy and make the federal economy smaller."
Acknowledging that changing entitlement programs such as Social Security, Medicare and Medicaid with such tactics as increasing retirement age and reducing health care benefits to the wealthy would require a political will that Congress has yet to show, Thune said the alternative is to see massive cuts in defense spending or national bankruptcy.
A House-Senate select committee has until Thanksgiving to propose $1.5 trillion in federal budget cuts over 10 years. If it fails to do so, across-the-board cuts of $1.2 trillion will be triggered automatically, including $600 billion to defense spending.
A key issue widely predicted to be hotly debated among committee members is whether spending cuts should be accompanied by new taxes to increase federal revenue. Proponents of hefty spending cuts say that unless those are enacted first, adding new revenue to the federal budget would be like throwing gasoline on a fire. Thune said until Congress reins in spending to something approaching historic levels, "You can't look at revenue."
However, Ben Nesselhuf, chairman of the South Dakota Democratic Party, said Thune overstated the case.
"He's playing the game people who have been in Washington for a while start playing - 'If we don't do things exactly the way I want to, the country is going to end,' " Nesselhuf said.
"What we need now, and what I hope the super-committee comes to, is the realization that now is the time for moderation and compromise, and that means you have to look at both sides of the ledger," Nesselhuf said.
In his Chamber speech, though, Thune offered a prescription for reinvigorating the economy that relied heavily on adopting a federal balanced-budget amendment, lowering tax rates and broadening the tax base by eliminating loopholes, scaling back federal regulation of business, passing trade agreements that have been stalled in Congress as long as four years, ramping up domestic energy production to reduce dependence on foreign oil and slowing the growth of health care spending.
Sioux Falls Council Member Greg Jamison said Thune's analysis of federal economic issues should be a cautionary tale for the city.
"Sitting here listening to him talk about spending deficits and borrowing money, I saw all kinds of similarities. I see Sioux Falls at that point. We can change our future. But if we continue on the same path, we will wind up at the same place," Jamison said. Specifically, "the events center is right in the crosshairs of what we should not be doing, given the timing of our economy," Jamison said.
But his colleague on the council, Jim Entenman, said, "If we're going to make something happen in Sioux Falls, we've got to take care of ourselves. That's even more evident after listening to (Thune's) presentation."
Chamber of Commerce Executive Director Evan Nolte characterized the attitude toward the economy in the local business community as a cautious but growing optimism. Beginning in late 2010, "You could kind of feel a view that there are some things starting to come back," he said.
But he said Thune's warning about potential bankruptcy if the federal government does not reform spending policies to reduce its budget deficit and the nation's debt resonated with the biggest concern local business officials have.
"They are very frustrated with Congress," he said. Fears about the nation's economic future are the heaviest anchor slowing new business investment, according to Nolte.
"Uncertainty is really the biggest issue," he said.
