Tanner sees dangers in U.S. deficit

Level of securities held overseas is cited

By Rob Robertson

April 21, 2006

The future of the United States' economy faces "major consequences" if lawmakers fail to reverse the current trend of record deficits, U.S. Rep. John Tanner told the Economic Club of Memphis Thursday.

Tanner, who represents Tennessee's Eighth Congressional District and is a member of the House Ways and Means Committee, detailed the impact of the nation's rapidly increasing

In 2000 the federal government recorded a budget surplus of $236 billion, the largest in U.S. history.

This year, the Congressional Budget Office is projecting a deficit of $337 billion, the third-largest -- and that figure does not take into account any extra spending for the war in Iraq or for Hurricane Katrina.

"Closing the current budget shortfall would require sustained economic growth far beyond what has been experienced in U.S. economic history," Tanner said. "Stated plainly, our federal obligations are growing much more rapidly than our economy."

In a meeting with members of The Commercial Appeal editorial board before the event, Tanner railed against the growing level of U.S. securities being held by foreign nations -- particularly China.

"We are in part funding the federal government by selling our debt to the Chinese," he said. "I consider this a national security threat; we're losing the ability to jawbone anybody we owe money to."

In one worst-case scenario, Tanner said if China started dumping U.S. securities, it could have worldwide repercussions on the value of the dollar.

"If you've got $100,000 in the bank it wouldn't be worth $100,000 anymore," he said. "The financial vulnerability we create by continuing to borrow from foreign interests is very dangerous."

Tanner said that laws should be enacted that would require Congress to review federal spending reports to ensure taxpayers' money is being used properly, and he said that Congress should be more honest about the costs of the bills it considers.

He added that more bipartisan public debate about the tough choices that lie ahead will help Americans understand the urgency of situation -- and boost public confidence in lawmakers' solutions.

"It's not fun to talk about," he said, "but it requires public awareness and folks in Congress who will level with the American people (about) the depth and severity of the problem."

Economic Club executive director David Kemme welcomed Tanner's call for a higher-profile dialog about the issue.

"We were very pleased to have him speak to the club on a topic that, in my view, needs far more pubic discussion," said Kemme, who holds the Morris Chair of Excellence at the Fogelman College of Business and Economics at the University of Memphis.

"I'm amazed that we went from large surpluses to record-setting deficits and neither congress nor the public seem to be concerned," Kemme said. "I'm happy that Congressman Tanner is taking up the issue, because this is a serious long-term problem."

-- Rob Robertson: 529-5888

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