In Austin to address the Austin Economic Club, U.S. Sen. John Cornyn met with Community Impact Newspaper to discuss the federal budget, the national debt and how the nation's finances affect Texans.

1. The U.S. gross domestic product reached $15.17 trillion at the end of the third quarter of 2011, according to the U.S. Bureau of Economic Analysis. The national debt is $15.23 trillion and would increase with another debt ceiling increase. What does this mean for the average Texan? How will this affect our daily lives?

In two ways, really. One is, obviously, the debt has to be paid, and if we don't deal with that now, it means our children and grandchildren are going to have to pay it back, which seems fundamentally unfair. We're spending the money now and leaving the bill for our next generation.

The second way, and I'm actually speaking at the Austin Economic Club about this part, is that it actually throws a wet blanket on economic growth. The only way we're going to create more jobs is to get the economy growing because it takes roughly 90,000 new jobs per month just to keep pace with population growth. So we need economic growth in the 3 percent -plus range to see any reduction in the unemployment rate.

The latest quarter we have, [the U.S.] economy grew in the third quarter last year by 1.8 percent. So that debt has a dampening impact on economic growth.

2. What is the share of the national debt held by each Texas household?

Roughly about $46,000. And that's for the baby that was born at Brackenridge Hospital this morning. Welcome to the world, here's the bill.

3. How have federal taxes increased for Texans in recent years?

The last time we did tax reform nationally, I think it was 1986 during the Reagan administration. It's complicated, because you have to look at the marginal tax rate, which is what percentage of your income you pay depending on what you make.

But then there are all sorts of ways that the federal government has put in the tax code various subsidies and credits. For example, I think a huge number of people actually receive, in essence, a check through the Earned Income Tax Credit from the federal government through the tax code. People in different industries have received benefits, like Solyndra that received over $500 million in grants.

Fortunately, President Obama agreed with Republicans in 2010 after the election to extend the so-called Bush tax provisions for another two years. Those will be expiring at the end of 2012. If they do expire, it will result in the single largest tax increase in American history.

But we've also seen other taxes, for example, like the tax on medical device manufacturers, on insurance companies and others as part of the health care bill. Invariably, those get passed down to consumers in higher prices. There's a lot of different ways that the federal government gets to people in terms of hiding the tax increase, sometimes in the context of higher prices for goods and services.

4. What effect does all of this have on job creation in our state?

My predecessor, Phil Gramm, was a Ph.D. economist and I'm not, but what I understand is that if you want more of something, increasing burdens on people producing it does not get you there; it gives you less, not more.

I think one reason why Texas has been a beacon for a strong economy and job growth is because we are a low-tax state, relatively speaking. We don't have an income tax. We believe in reasonable regulation, we're a free-trade state, we're a right-to-work state, and we've passed tort reform laws that have leveled the playing field in terms of civil justice. All those things have a positive message to the people we're depending upon to make investments and create jobs.

It's really not rocket science. The harder you make it, the more obstacles you throw in the way of the job creator, the fewer jobs you're going to get.

5. Most of us can't comprehend $15 trillion. What is a good analogy for an average Texan to help understand the debt the country is facing?

You know, it is mind-boggling. I think it was Everett Dirksen who said, 'A million here, a million there, pretty soon you're talking about real money.' He was talking about millions, and now we've gone to billions and now trillions. Someone asked, 'Well what comes after a trillion?' To which the reply was, 'Well, please don't tell Congress.' I think it's a gazillion. And really, the numbers are, in some way, so mind-numbing and so incomprehensible, I think that's why you have to boil it down to the per capita, individual share of the debt.

But the truth is, all we have to do is look at Europe and see what living beyond your means, where it will get you. The crisis that we've seen in Greece and the downgrade of the sovereign debt in France and the questions about the survivability of the euro should be a warning to us. Now our national debt is roughly the size of the whole U.S. economy. The president's own bipartisan fiscal commission, the Simpson Bowles commission, in their report, The Moment of Truth, basically they say that could be us. There's nobody to bail out the United States if we have a sovereign debt crisis.

For example, when we sell our debt to China and other people, they factor in the likelihood that we will default. Because the United States is the single strongest economic entity in the world, we are able to keep the cost of that debt very low. What we've seen happen in Europe, for example, we've seen in places like Greece and Ireland, and more recently in Italy, the cost of their debt or their bonds, what it costs them to get people to buy that debt so they can keep living on borrowed money, has spiked.

Just a 1 percent increase in the cost of us getting somebody to buy our debt, it would add to our debt tremendously because it's so big and just makes it much harder to pay back.

6. This level of debt wasn't reached overnight. What key actions in the past decade or so have led to this?

What usually happens in Washington is, when there's a problem like this, everyone starts pointing fingers. And the truth is, everybody has some blame. We've seen an explosion of the debt by more than 40 percent just in the last three years. With things like the stimulus, which was supposed to keep unemployment down no higher than 8 percent. Well, obviously that didn't work. I was looking at this yesterday—the projections in the first quarter of 2012, unemployment was supposed to be down at 6 percent as a result of the stimulus. Obviously, that goal was not achieved.

7. What steps need to be taken to reduce this debt, and how long will it take for those effects to be felt?

I think we're going to have to rein in federal spending. We need to reform our entitlement programs like Social Security and Medicare, to keep the promises we've made to seniors, but at the same time to put them on a sustainable path. My daughters are 29 and 30 and they say, 'We don't believe it [that the programs will be around for them].' But they're having to pay for it. That's not right. So I think we need to cut spending, we need to reform entitlements, but we also need to take our boot off the neck of the people we're depending upon for job creation.

I was just meeting with Commissioner Covey at Williamson County [Williamson County Precinct 3 Commissioner Valeri Covey] about the potential listing of three Central Texas salamanders on the endangered species list. What she's telling me is that, if that were to happen without the proper investigation and science, that it could have a very devastating impact on growth of the economy in Williamson County, which is one of the stars in the crown of Texas in terms of economic growth.

Those are the two things that we need to do to start paying down that debt—certainly not making it worse—and then growing the economy. I guess it was 2007 when our deficit was 1.2 percent of the GDP. That's not because the federal government wasn't spending a lot of money; it was. It was because the economy was booming and the money coming in to the Treasury was at historic highs. So we need to do both—bend the spending curve [down] and bend the growth curve up so they get closer together and we can get back on a sounder path.

I was an original co-sponsor of the balanced budget amendment to the Constitution. It's pretty clear to me that you can't bind future Congresses. What happens is, in an emergency, everybody says, 'I believe, I believe,' and tries to do what they see as the right thing. Then, after the pressure is off, then Congress gets back to the same old ways. What a Constitutional amendment would do would be to force the federal government to do what the state government has to do, and that's to is live within its means. There would be some exceptions for declaration of war and national emergencies, but what we need is, I think, a balanced budget amendment.

I think 10 years is probably what it's going to take is for us to actually get there because right now, 40 cents out of every dollar we're spending is borrowed money. If we were essentially to go cold turkey, it would have huge negative impact on the economy, so we're going to have to wean ourselves from this over a reasonable period of time.

8. What programs do you think should be cut from the budget and why? What about the idea of consolidating redundant programs—what affect do you think that could have?

I think Washington ought to take a page from the Texas playbook. I've introduced a Sunset Commission piece of legislation, which would create a process whereby all of the federal government agencies would undergo a review to eliminate duplication. It seems so common-sense, but common sense isn't that common, it seems like, today in Washington, especially.

And then also to go in and do zero-based budgeting. What I mean by that is, not start with the current budget, but to say, 'OK, we're going to zero and now you have to justify your budget.' Because what happens is even when new programs are created, it creates almost this irresistible impulse to grow and it creates a constituency where people come in and say, 'Well, we only got X amount last year. This year we need X plus a cost-of-living increase.' Well, over time, that ends up being some real money. And we really haven't done what we need to do—go back and look at, is there a need for this program, is there a duplication and does the budget reflect our priorities?

One of the things that federal government actually needs is a federal budget. The Senate hadn't passed one in coming up on 1,000 days, which is the most basic responsibility of government. What that does is, it forces you to ask the hard questions—What's the most important thing? What do we have to do? What are things that we'd like to do, but we can't afford now? And what are the things that maybe we want but are really not necessary? Stuff we all have to do in our personal lives.