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CEO2Gov Summit Keynote: Senator Tom Coburn

Senator Tom Coburn (R-Oklahoma) kicked off Chief Executive’s CEO2GOV Summit, where CEOs, thought leaders and the nation’s top policymakers gathered in the nation’s capital on June 8. Here are excerpts from his remarks.

Things are a mess in our country. They’re a mess for a lot of reasons, but the biggest reason is that we have created a political culture in where the incentive is to do the short-term, expedient thing rather than do the best, right, long-term thing for our country.

Let me describe what’s going on right now. We’re borrowing $4 billion a day and charging it to our children. We will have a deficit of about $1.8 trillion this year in real accounting terms—not Enron or government accounting, but real accounting terms. We’re on an absolutely unsustainable course where we will double our debt within five years and triple our debt within the next 10 years.

When you see what’s happening in Europe and the lack of confidence and the spreads on things like Greece, Hungary or Ireland, and what’s about to happen to the Euro over the next two years, you can see our future before your eyes. It’s not rocket science.

Look at Japan since 1990 and see what they’ve done since their banking crisis. They’ve essentially had no growth in their economy, and now have 7.5 times their GDP in debt that is all internally funded, and this year for the first time will not be capable of funding their debt. You can see [from them] what’s getting ready to happen to us.

We’re spending $1.1 trillion in Keynesian-type economic stimulus that was not economic stimulus except for about $300 billion of it. So we’ve accumulated this massive debt. We have uncontrolled, mandatory programs in terms of Social Security and Medicare and Medicaid, which are absolutely unsustainable for our kids, and for the first time in our country’s history, we’re a generation that will be leaving the next generation worse off.

The question is how do you go about fixing that? The plan for that is not hard. But the execution is very difficult. Every year, we can document $350 billion that is pure fraud, waste, abuse or duplication within the federal government. Yet we’ve done nothing over the past five years to address that the way you would within your business. Congress’s easy out is to borrow money rather than to make hard choices. The reason Congress doesn’t want to make hard choices is because it’s painful politically for them.

Arlen Specter is a wonderful example of this and so is Charlie Crist. Two different parts of the country, two different individuals. Why are they changing parties, to do the best right thing for the country or to do the best right thing for the politician?

Republics, if you study history, have all failed over the same issue: fiscal policy. So when you see the culture of Washington which says the politician comes first and the country comes second, the only way we get out of our problems is to change the politicians who are in Washington.

You can see what’s getting ready to happen this year. You will see several incumbents beat. You will see a tremendous change in the political landscape in Washington after November, and rightly so, because the one great thing about our country is that when the people get involved, become informed and interested, they change what’s happening here.

There is no problem in front of us that is not solvable. For example, the Senate recently passed a federal financial reform bill that does a ton of things, none of which actually fixes the real problems that cause the financial mess that we got into. The underlying mess was mortgages that were poor quality with no underwriting standards; Fannie and Freddie incentivizing people to borrow money who couldn’t pay it back; a financial system that took advantage of that, totally legally, totally appropriately. The government incentivizes a behavior that can’t be sustained. Then we address the symptoms rather than the disease or the problem.

If you look at Washington, that’s its habit. We did the same thing on healthcare. I know quite a bit about healthcare from being at a medical device company before I was a doctor, before I was a Congressman and a practicing physician. The No. 1 problem in healthcare is the cost of healthcare, and the fact that we have no market forces working in healthcare. We disconnect a discerning consumer from the purchase of healthcare.

We don’t have transparent markets where you can visibly see outcome and price. What we’ve done is create the most expensive healthcare—albeit a very good one—one that is twice as expensive as anywhere in the world except Switzerland. When we passed a healthcare bill, we didn’t address the real underlying problems. All we did was put layers upon layers into the system that will make it more expensive but lower the quality.

I’ll go back to what I said. There’s no one problem we can’t solve, but we have to be honest about what the real problems are and address our solutions to what the real problems are rather than the symptoms of the problems. We need to disconnect the politics from it. If we do it, the paradox is the American people will embrace it.

The American people will embrace changing Medicare. That’s not the political consensus in Washington. The American people will embrace changing Social Security. Why? Because they know their kids’ future depends on it. If any of you are grandparents here, what you recognize is you’ve done a lot for your kids, but there is nothing you won’t do for your grandchildren. So the motivation becomes different as we skip a generation and look down. There is no question that we will be able to change those two programs, and we must change those two programs if we’re to get out of the hole we’re in.

Final point: We had a credit crisis. In three years we’re going to have a liquidity crisis, if, in fact, we don’t make major changes. That liquidity crisis will be because we will have not extended the term of our debt to buy us sufficient time to get out of the problems that we’re in. If you listen to [Kenneth] Rogoff and [Carmen] Reinhart, two of the country’s leading economists today, our gross debt right now is at 92 percent of our GDP. It’s suppressing your business 1.2 percent per year right now.

If we double it within five years, if we triple it within 10, we’re going to be at about 150 percent, 160 percent of our GDP, with net debt. Our gross debt will be about two times our GDP. That will suppress our growth below our historical average growth rate. We’ll see ourselves as Japan if, in fact, we don’t make those changes and make them in a short period of time.

Again, I’m positive on the future because I think we can solve the problems, but I don’t think we can solve it with the typical politics in Washington. It’s time for people to take risks to do what’s in the best long-term interests of the country, not what’s in the best long-term interest of their political careers.

Q&A Session

How do we get more citizen-statesmen, such as yourself, involved in politics?

Tom Coburn: You have to ask for it. In this room are some very successful people. Our biggest problem is the people who have benefited the most from our capitalist society and our freedom won’t turn around and sacrifice in Washington to pursue a course that will allow that to continue.

I just came back from California. I asked people how many of you all are going to run for an office? When are you going to throw the politicians out? Go do it for six or 10 or 12 years if you’ve got a little nest egg made, and secure it for our kids. The only way we do it is to call on those who have benefited from the wonderful genius of our society to come back and invest in it.

If you take everything out of your business and you don’t reinvest in your research, your promotion, your employees, you’ll lose your employees. Your competitors will be ahead of you, and ultimately what you had you won’t have. It’s the same thing with our country. What we’re doing is the people who are benefiting are not coming back and reinvesting in it. That’s what has to happen. There has to be a call to a greater purpose for a longer-term purpose, rather than, “I’m comfortable,” and, “it will be fine.”

Right now, the writing is on the wall. It will not be fine. Unless we make major changes in this country we will see a significant decline in the standard of living for our kids and our grandkids. It is fixable, but only if we have the courage to address it.

There is a feeling that the right sequence would have been immigration reform, healthcare cost reform, and then expanding the coverage to those that really need help. What’s your outlook for immigration reform as part of the whole fiscal responsibility initiative?

Dr. Tom Coburn: We’re not going to solve a lot of our problems until we secure our borders and hold employers accountable. We have two problems. The Southern border is now notorious, mainly because it brings in about $70 billion worth of drugs a year. Eighty percent of the drugs coming in our country are coming across the Mexican border.

Look at the difference between Tucson and Yuma in Arizona. One has a sealed border; the other doesn’t. One has had the resources applied to it and the other hasn’t. So I think, yes, you have to seal the border.

Two, you have to enforce the employment. I talked to the President, and I asked him, please don’t push on the immigration deal. He said, why? I said, because people are going to get hurt in this country. There is a fever pitch in this country like I’ve never seen in my lifetime. There is an anxiety and an intensity that I’ve never seen. I’m not just talking about Oklahoma. I’m talking about everywhere I go.

The thing that really interests me is why do 23 percent of the people still have confidence in us in Washington? I don’t understand that. Either they’re totally in a cave or they’re totally clueless, because nobody with any common sense could sit and say we’re doing a great job here right now. We haven’t, whether it’s Republican controlled or Democrat controlled, because we haven’t had leadership on the principles that will secure our future.

The same thing on healthcare. Healthcare is not hard to fix. One out of three dollars spent in healthcare does not help anybody. That money doesn’t help anybody keep from getting sick, and doesn’t help anybody get well. Markets either work or they don’t work. We have totally disconnected the purchase of healthcare from market forces. Until we reconnect it, we’re not going to control it.

The greatest pleasure in the world is to spend somebody else’s money. That’s what we do on healthcare. The vast majority of the systems we have set up are designed to spend what we think is somebody else’s money when, in fact, it’s really ours.

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