UNION — U.S. Rep. Mick Mulvaney says that 28 years from now on the eve of his 65th birthday the Social Security system will go broke, 22 years after Medicare goes broke.
During a town hall meeting Monday at the USC Union auditorium, Mulvaney, both in an opening statement and in answering questions from the audience, addressed a variety of issues including the fiscal condition of the federal government, the impact of federal regulation on business growth and job creation, immigration, and the divisions between the Republican Party leadership and the grassroots Tea Party movement.
In looking at the financial condition of the federal government, Mulvaney said that while Congress has the power of the purse, meaning it can increase spending (as it practically always does) or reduce spending (as it practically never does) by the federal government, that power only affects 40 percent of the budget.
Pointing to a pie chart that broke down the $3.45 trillion the federal government spend in 2013, Mulvaney said that Congress has effective power only over defense spending ($625 billion) and non-defense discretionary spending (576 billion.
The other 60 percent of the budget, which Mulvaney called “automatic spending” includes Social Security ($808 billion), Medicare ($62 billion), Medicaid ($265 billion), interest on the federal debt ($221 billion), and other mandatory spending ($467 billion). These obligations that the federal government is required by law to meet and therefore Congress is unable to reduce federal spending and balance the budget by reducing those commitments.
Instead, Mulvaney any and all cuts that Congress could make were it inclined to do so would have to come out of defense and non-defense discretionary spending which make up only 40 percent of the budget.
Mulvaney also showed a slide that compared federal revenues with expenditures including Social Security. The slide showed Social Security taxes generated $673 billion in revenue in fiscal 2013 but paid $808 billion in benefits. The $135 billion difference was made up in the reserves the Social Security system currently has in place, reserves that Mulvaney, 47, said will be exhausted just shortly before his 65th birthday 28 years from now.
When that happens, Mulvaney said Social Security will be effectively broke and will only be able to pay out benefits equal to the revenues it takes in. Mulvaney said that when this happens the Social Security system, which cannot legally go into deficit, will have to reduce benefits to match revenues. Using the slide as a source for comparison, Mulvaney said this means that a person who is expecting a Social Security check for $808 will only be able to receive a check for $673.
Mulvaney said the situation is even worse for Medicare which he said will be broke in six years. The slide comparing federal revenues with expenditures in 2013 showed Medicare revenues of only $209 billion but expenditures of $492 billion.
Nor is this imbalance confined to Social Security and Medicare. The revenues in the slide comparing revenues and expenditures in fiscal 2013 total only $2.77 trillion compared to $3.45 trillion in expenditures.
Currently, the federal government covers the deficit between revenues and expenditures by borrowing, a process made easy by low interest rates.
The only other means the federal government has to balance the budget is taxes and Mulvaney said the government’s largest source of tax revenue is the income tax which in 2013 generated $1.316 billion in revenue. He said that the only way to truly increase federal tax revenue is to raise income taxes on everyone.
While some argue for increasing the tax on the wealthiest Americans, Mulvaney pointed out that the wealthiest one percent of Americans already generate 20 percent of the tax revenues collected by the federal government. He reiterated that the only way to truly increase federal tax revenue would be to increase taxes not on some taxpayers, but on all taxpayers, something he feels would be counterproductive economically and would not solve the fiscal problems of the federal government.
Those problems, he said, are the result of too much spending, not too little tax revenue.
Some have also argued for increasing the corporate tax, but Mulvaney also rejected this, pointing out that while the United States already has one of the world’s highest corporate tax rates it generated only $274 billion in revenue in 2013 or slightly less than one-fifth the revenue generated by the income tax.
Mulvaney pointed out that back in the 1980s when the United States cut its corporate tax the economy boomed and other nations of the world took note of this and have cut their corporate tax rates. He said that the other nations of the world learned the lesson taught by the United States but that since then the United States has forgotten that lesson and has suffered for it economically.
Instead of raising the corporate tax, Mulvaney said he believes the United States should not only reduce its corporate tax, but eliminate it. He said the corporate tax is not just a tax on corporations, but a tax on the individual taxpayer as well corporations view the tax as a business cost and pass it along to the consumer in the form of higher prices. Mulvaney said this means that the individual taxpayer is not only paying the income tax but the corporate tax as well.
Nor is the corporate tax the only drain on the economy imposed by the federal government.
Mulvaney said increasing federal regulation is driving up the cost of things like automobiles, effectively pricing many people out of the market. He pointed to slide that showed the impact in terms of increased cost of future federal regulations on cars:
• Rearward visibility — Cost per vehicle: $159-$203
• Roof crush standards — Cost per vehicle: $69-$114
• Greenhouse gas emissions and corporate fuel economy standards, 2017 models and later: Cost per vehicle: $770-$3,500
• Greenhouse gas emissions for heavy duty vehicles — Cost per vehicle: $225-$6,510
The slide concludes with the statement that the cost of these federal regulations will be up to $10,327 per vehicle.
Mulvaney said that, far from helping, the excessive regulations being imposed by the federal government including Obamacare are actually hurting the people they were designed to help by hindering economic growth and job creation while increasing the costs to taxpayers/consumers.
In addition to driving up costs to consumers, Mulvaney said the excessive federal regulation is slowing economic growth and job creation with some small business owners even opting not to grow their businesses to avoid dealing with those regulations and the costs that accompany them.
He said he’d met a man who along with his wife own a business that currently employs 48 people, but could within the space of a couple of years grow their business to the point where they would be employing 400 people. Mulvaney said the man told him he and his wife chose not to do this because the moment their workforce exceeds 50 the regulations and costs of Obamacare kick in and they did not want to have to deal with that.
The businessman told Mulvaney that in hiring the additional people he would have to get new equipment, but that federal regulations make it difficult and expensive to borrow money to do so. The businessman said this was another reason he and his wife decided against expanding their business, buying more equipment and hiring more people.
Mulvaney said this was a prime example of how excessive regulation and taxation are depressing economic growth and job creation, especially where small businesses, the main drivers of job growth, are concerned.
“These are 352 people who won’t have jobs because of federal health and banking regulations and new taxes,” Mulvaney said. “We need to get these off the backs of small businesses so they can create real jobs.”