First, I want to welcome Dr. Elmendorf to the committee – I can’t think of a CBO Director who’s had a more challenging first year. Considering the state of the economy and the budget outlook, the role CBO plays is critical to Congress.
When President Obama took office, America was in the midst of a crisis that shook our financial system to its core and eclipsed access to credit markets. The Administration exploited this crisis to pursue a relentless increase in federal spending and the size and reach of the government.
Heading in this direction has made matters much worse for our fiscal future.
Last year, Congress enacted a trillion-dollar “stimulus” bill sold with the promise that it would hold unemployment at 8 percent – and yet the unemployment rate continued to rise and now stands at a 25-year high of 10 percent. We learned that much of this “stimulus” was neither targeted, timely nor temporary – in fact, it was just a down-payment on permanent government programs.
TARP – advertised as an emergency plan to heal financial markets with eventual returns to the taxpayer – has become Washington’s latest slush fund.
CBO’s “Budget and Economic Outlook” paints a startling picture of both the year we have left behind and what we face during the next decade. In 2009, Congress delivered a $1.4-trillion deficit – the largest in our nation’s history. Estimates for the current year are also staggering: the deficit will hit $1.3 trillion and debt will reach over 60 percent of GDP this year. Under current policies, by 2020, CBO projects that debt will soar to nearly 100 percent of GDP.
Adding to that, yearly interest paid to finance this surge in spending will more-than-triple in nominal terms from $207 billion in 2010 to $723 billion in 2020.
More troubling than another over-one-trillion-dollar deficit is that there is more to come. CBO’s figures don’t include what is likely to come down the pipeline this year – from requests for needed war funding to the effort to jam through a new $1 trillion health care entitlement.
I am encouraged by the news yesterday that the Administration is considering a 3-year freeze of certain discretionary spending programs. We need to see the details and this freeze need to be enforced with a statutory cap.
It’s time to get serious about ending Washington’s insatiable appetite for increased spending and expanded government.
The promise of a discretionary freeze – although a step in the right direction – is not enough to secure America’s financial future.
As astounding as our current budget shortfalls are, long-term debt projections are profoundly worse.
The bi-partisan Peterson-Pew Commission on Budget Reform warned in its recent report that government spending – driven by the growth in health care costs and an aging population – will almost certainly bring debt to crisis levels during next few decades.
What was once thought of as a scenario that would unfold in the distant future has compounded and become a pressing issue that we must face today. We must reform our largest entitlement programs – and not create new ones – in order to save the benefits they provide and put America on a sustainable fiscal path.
Until we do, we continue to be held hostage by crushing deficits and vulnerable to the increasing demands of our creditors.
The time to act is now. I have put forward a plan I call, “A Roadmap for America’s Future.” I am hopeful that as a Congress, we can buckle down and solve the budget and economic problems that threaten to erode our character and prosperity. I look forward to hearing what I’m sure will be very insightful testimony from Dr. Elmendorf today.