As prepared for delivery
The title of this hearing is the “Growing Risks to the Budget and the Economy.” Regardless of ones’ political posture – there are clearly some warning signs before us. In many ways the current budget and the current economy are in fact risks unto each other.
The Congressional Budget Office (CBO) provides all of us with some sobering information – demonstrating that policymakers have ample evidence and information revealing just how severe the risks are now and will become in the not too distant future.
Today, the nation’s total debt tops $19 trillion. At the end of the ten year budget window, over the next decade, CBO projects we will borrow another $8.6 trillion – accumulating a total level of publicly-held debt equivalent to more than 85 percent of our economy. That is twice the average level of the past half century. It is the highest our nation has had since the end of World War II.
Of course, unlike the 1940s, today’s debt is not being driven by a massive, temporary mobilization of military might. In 2016, our debt trajectory is being driven by a chronic imbalance in our nation’s budget, for which there’s no end in sight under current policy and current law.
In fact, today’s growing debt is not so much the result of defeating a threat to America’s national security – as it is the threat itself. The fiscal imbalance we face; the uncertainty that is sown into our economy by a looming fiscal crisis – this all weakens our nation.
And yet, despite all of this, there are many who are saying that because interest rates are so low that we ought to borrow even more money – run up the credit card while credit is relatively cheap.
This is horribly short-sighted thinking. Publicly held debt is over $14 trillion – more than three-fourths the size of our economy. We are already past what economists say is a sustainable debt burden – let alone advisable or fair to leave our kids and grandkids.
The fastest growing component in our budget is not national security spending; it’s not health care; not research and development; not infrastructure to repair roads and bridges; not aid for the nation’s poor. It is interest payments on our nation’s debt. Unless something is done to change course, in 2026 America will pay $712 billion in interest payments alone – just shy of what we are projected to spend on our entire national defense. And interest payments are dollars that can’t be used to pay the rent, send a kid to school, buy a house, buy a car, start or expand a business – all of the things Americans want to do with their money will be harmed by the ever increasing interest payments.
Annual deficits are projected to exceed $1 trillion in that same period of time. These deficits will come at a time when Washington will be taking in higher than average tax revenue. This means that we’ll be taking in more tax money – and going further in the hole – further into debt. Clearly, government is not being starved of revenue.
That being said, a stronger economy that creates higher revenues is the key to addressing our fiscal crisis. If our economy was growing today at just the historical average – roughly three percent instead of the two percent projected over the next decade – we would be in a better fiscal position than we are right now. According to CBO, if economic growth were just 0.1 percentage points higher per year than currently projected, annual deficits over the next 10 years would be reduced by $327 billion. Just through better economic output, we could reduce future deficits by as much as $3.3 trillion over the next decade if we were growing at our own historical average.
In short, economic growth is a vital ingredient to any coherent strategy to get the nation’s fiscal house in order. Poor economic policies contribute to the poor fiscal health of the nation, and today we are experiencing the worst economic recovery in the modern era.
The macro effects of slow economic growth, however, are only one side of the story. The uncertainty that the country as a whole is experiencing due – in part – to lackluster economic growth is also experienced by millions of individual Americans, families, and entrepreneurs in their own lives and in their own ways. Many Americans are struggling to make ends meet at a time when opportunities are fewer and the cost of basic necessities like health care and education are rising.
While the headline unemployment rate has dropped to under five percent, the “under-employment rate” – that which takes into account those who are working part-time because they cannot find full-time work and those who have given up looking for work – is currently 9.7 percent. That’s higher than where it was prior to the recession. Meanwhile, the rate of participation in America’s labor market – the percent of the population who are able to work – who are working – is at levels not seen since the late 1970s, and the rate of worker productivity has declined for three straight quarters.
At a time when over sixty percent of the country believes the nation is on the wrong track, it is time we adopted a pro-growth policy agenda – and when that is coupled with a sound budgetary strategy, it will jumpstart America’s economic engine and put us on a sustainable fiscal trajectory. House Republicans – led in part by this committee’s efforts on fiscal and economic matters – have been championing bold solutions to achieve those goals.
To further this discussion we are joined today by Dr. John Cochrane, Senior Fellow at the Hoover Institution; Dr. Jared Bernstein, Senior Fellow at the Center on Budget and Policy Priorities; and Dr. Douglas Holtz-Eakin, President of the American Action Forum.
Thank you for taking part in what I hope will be a healthy and enlightening conversation.
And with that, I yield to the Ranking Member, Mr. Ryan.