Welcome, everyone, to today’s hearing. Thanks to Dr. Elmendorf for coming to testify. And thanks to your staff for putting together the latest Budget and Economic Outlook.
I’m sorry to say: Things don’t look good. The CBO says our economy will grow by only 1.4 percent this year. Unemployment will hover around 8 percent. And we will add another trillion dollars to our debt.
Farther down the road, things get worse. The CBO says we will add $10 trillion to our total debt by the end of the budget window. That debt will weigh down our economy like an anchor. Starting in 2019, the economy will grow by a mere 2.2 percent—much lower than the historical average. And when people can’t find jobs, many will stop looking altogether.
In other words, this report is a warning of what’s to come—if we don’t get spending under control.
Publicly held debt will hit 76 percent of GDP at the end of this year—the largest share since 1951. In the 1950s, we paid down our debt—and our economy kicked into high gear. But these days, we still haven’t gotten a handle on spending. Total debt already exceeds 100 percent of GDP.
We’re in a danger zone. Investors might begin to doubt our ability to pay our obligations. They might demand higher interest rates. If they did, interest rates across the country would skyrocket—on mortgages, on credit cards, on car loans. One estimate says an interest-rate increase of a single percentage point would cost the average family $400 more each year.
In short, we would have a debt crisis. And the results would be catastrophic—because unlike during the financial crisis, government would be unable to borrow more money. Instead, the only way out would be austerity: big tax hikes and big spending cuts.
We don’t have to look far for examples of a debt crisis in action. In Central Falls, Rhode Island, retirees’ pensions have been slashed by up to 55 percent. In Stockton, California, a quarter of the police force has been laid off. If a debt crisis hit the country, the social-safety net would unravel. And the most vulnerable would suffer. We can’t let that happen.
And if this report shows us anything, it’s that spending is the problem.
Spending on Medicare and Social Security is set to double. Spending on interest is set to quadruple. The CBO expects revenue to double in the next ten years. But even with the President’s tax hikes, the budget never balances. In fact, it doesn’t come close. By 2023, the deficit will be nearly $1 trillion.
The President says we need a “balanced” approach to closing the deficit—by which he seems to mean one tax hike after another. But the fact is, we can’t tax our way out of this problem. We need to get serious about spending.
Unfortunately, the President has yet to produce a budget—in violation of the law. And Senate Democrats haven’t passed a budget in nearly four years.
House Republicans will offer their budget—on time—next month. We will put our plan up against the President’s. And we will have a healthy debate in the House over the way forward.
With that, I yield to the ranking member, Mr. Van Hollen.