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Chairman Yarmuth Opening Statement at Budget Hearing Reexamining the Economic Costs of Debt

Nov 20, 2019

Washington, D.C.— Kentucky Congressman John Yarmuth, Chairman of the House Budget Committee, gave the following opening statement at today’s hearing on the costs and consequences of debt in today’s economy. Remarks as prepared are below:

I’d like to welcome our witnesses – we appreciate you coming here to help us discuss the changing economics of debt and its implications for fiscal policymaking. There is a wide array of views on this subject – at the witness table, across the aisle, and even within our Caucus and the Republican Conference. So, it is my hope that we can use this hearing as an opportunity to learn more about the different perspectives driving this important debate and hear from the experts on what Congress must evaluate when considering the real costs of debt in this new economic era.

I say new economic era because today’s economy defies many of the core principles of traditional economic theory. We have been operating under the long-held assumption that persistent budget deficits and rising government debt would increase interest rates and inflation, harming our economy over the long run. However, contrary to these predictions, we’ve seen interest rates and inflation fall to record lows while debt has soared to its highest level since just after World War II. We are truly in a new era that has economists reassessing entire economic theories in light of these unexpected outcomes. If the Budget Committee is to promote effective and responsible fiscal policy, it’s important that we learn more and participate in this growing debate.

In our hearing last week, Federal Reserve Chair Powell made it clear that the fiscal challenge we face is a long-term one, not an immediate crisis. Our aging population and growing health care costs have put our debt on an unsustainable path. We will need to take steps to address this issue over the next several decades. But in the meantime, persistently low interest rates have made reducing deficits in the near-term less urgent – even counterproductive given the risk to economic growth. It has also increased Congress’s fiscal space, empowering lawmakers to make responsible investments now that will improve our future economic outlook.

But that doesn’t mean we should be spending like a drunken sailor, without thought or discretion (I apologize to any current or former sailors in the room). Deficits – and what they’re used for – matter. Failing to tackle severe and persistent infrastructure, education, and health gaps is arguably more damaging to our economic and fiscal outlooks than the risks posed today by higher debt. Policies that support working Americans in an economic downturn, provide much-needed investments in our families, communities, and environment, and have a positive impact on our long-term fiscal health are responsible uses of deficits. Every dollar invested in infrastructure increases near-term economic output by $1.50 and boosts our economy’s productivity over time. A dollar for pre-disaster mitigation efforts saves $6 in future disaster costs. Investments in children’s health care, and preschool and college attainment pay for themselves over the long run. Housing programs that move children out of poverty can increase life time earnings by $300,000. Moreover, low interest rates will supercharge these investments; they’ll be cheaper to make today and likely provide a bigger boost to the economy later.

On the other hand, deficit-financed tax cuts for the wealthy and big corporations are clearly an irresponsible use of deficits. The Republicans’ 2017 tax law is the poster child for wasteful deficit-financed policy: It has failed to provide any meaningful boost to the economy but increased our debt by $1.9 trillion and counting, worsening our already serious revenue problem. Skyrocketing the deficit for this purpose while uninsured rates increase, air pollution worsens, and our children’s reading scores decline is appalling.

At the end of the day, carrying debt still carries risks. But by investing strategically in responsible policies that reflect our nation’s values -- and by having a more sober and evidenced-based understanding of the costs of debt -- we can lay the groundwork for a productive and dynamic 21st century economy.

I know we will hear different points of view as we examine this – which is the point of this hearing. But despite critical differences, both mainstream and alternative schools of thought increasingly agree that government debt appears to be less risky, less costly, and less urgent than traditional economic thought suggests. Today’s hearing will provide a platform for experts and policymakers to share their ideas, whether practical or aspirational, conventional or controversial.

I look forward to hearing from our witnesses about what they believe Congress can and should be doing in this new economic era, how we can invest responsibly in our future, and what fiscal policies best support American families.

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