As prepared for delivery
For over a year, the House Budget Committee has been engaged in an initiative called Restoring the Trust for All Generations. Today’s hearing is the fourth in a series of hearings this committee has held to advance this initiative.
Restoring the Trust is an effort to raise awareness among both our colleagues in Congress and, more importantly, the American people we represent – about the serious fiscal and policy challenges facing our nation’s health, retirement, and economic security programs. These are programs that are funded automatically without any annual appropriation or, necessarily, any Congressional oversight. They’re what is known in this town as “mandatory spending”. It means that the money continues to be spent, and is increasing, and will continue to increase, until Congress and the president agree to reform these programs.
The unchecked growth in spending in this area – whether on Medicare, Medicaid, and Social Security or numerous federal housing, education, and safety-net programs – is eating up a larger and larger portion of the federal budget. It is crowding out other government functions, other national priorities, and contributing substantially to the budgetary imbalance that has our national debt over $19 trillion – and climbing.
As we have discussed in this committee previously, in addition to the fiscal challenges, we know that these programs are not necessarily serving their beneficiaries all that well. At the same time – and perhaps less appreciated – is the fact that many of these programs create substantial distortions and foster perverse incentives in the private market in areas like education, health care, and housing. Those distortions drive up the cost of goods and services for all Americans. For many working-age Americans and families, they may have no direct interaction with these automatic spending programs. But these programs and government policies generally are increasing demand for services while simultaneously limiting supply, and results in prices that are outgrowing wages. That hits the middle class particularly hard.
In today’s housing market, affordability is the missing element. The fundamental problem is a supply-demand imbalance that works against families struggling to afford the mortgage or rent as home values appreciate faster than wages and inflation. The average family’s housing costs rose 63.3 percent between 1997 and 2015. According to the U.S. Census Bureau, homeownership rates are at the lowest level in over 50 years ago, and currently equal the same level of 62.9 percent that was achieved in 1965.
In higher education, evidence points to federal student aid distorting demand, and it has been linked to recent rapid increases in tuition. A 2015 study conducted by the Federal Reserve Bank of New York reports a pass-through effect on college tuition from increased Federal student aid. For every additional dollar in subsidized loans, tuition increases by an estimated 65 cents – and for every additional dollar in Pell Grants, tuition increases by 55 cents. More generally, our current education system contributes to higher costs by stifling innovation – innovation that could offer flexible, customized, and more affordable education experiences catered to the lives of working students with families who are seeking to realize their full academic potential.
Washington’s current approach to health care has – under the presumption of knowing what’s best for patients across America – restricted them to health programs that are on unsustainable paths while driving up costs. According to the Kaiser Family Foundation, the average premium in America has increased by 61 percent in the past decade. Similarly, deductibles have increased more than 250 percent, meaning increased out-of-pocket expenses for individuals and families. Thanks to heavy-handed government intervention into the nation’s health care, costs for families continue to rise, without gains in quality and value. Furthermore, competition and innovation are stifled, and providers spend nearly twice as much time completing paperwork as they do caring for patients – lending itself to a paper-centered, rather than a patient-centered health care delivery system.
In short, the status quo is not working. However, positive solutions can be discovered in the private sector and successful government programs. We should work to advance free market policies that will foster competition. In order to have a well-functioning marketplace, it is necessary to allow entrepreneurs to meet the demand of consumers – creating better products for lower prices through innovation – in short, allowing America to work!
To provide their views on these issues of critical importance to so many Americans, we have as our witnesses Edward Pinto, Resident Fellow and Codirector of the International Center on Housing Risk at the American Enterprise Institute; Dr. Keith Smith, Managing Partner and Co-Founder of the Surgery Center of Oklahoma; Dr. Thomas Lindsay, Director of the Center for Higher Education at the Texas Public Policy Foundation; and Dr. William Spriggs, Chief Economist at the AFL-CIO.
Thank you all for being here and for being willing to share your insights and first-hand knowledge about how our nation’s automatic spending programs are impacting the lives and livelihoods of families and working-age Americans.
And with that, I yield to the Ranking Member, Mr. Yarmuth.