Budget Committee Hearing Echoes Need for Fiscal Plan
Today the Senate Budget Committee, led by chairman Kent Conrad (D-ND) and ranking member Jeff Sessions (R-AL), held a hearing on The Budget and Economic Outlook: Fiscal Years 2011-2021. The panel testifying before the committee was made up of three economists -- Dr. Richard Berner, chief U.S. economist at Morgan Stanley; Dr. Simon Johnson, senior fellow at the Peterson Institute and a professor at MIT; and Mr. David Malpass, of Encima Global.
The U.S. fiscal outlook received a substantial amount of attention during this hearing. Sen. Conrad began the session with opening remarks that reiterated his past calls to get serious about developing a comprehensive fiscal plan. His statements mirror the kind of attitude we believe is necessary to address the daunting challenge facing us. Sen. Conrad said today:
I believe that the deficit and debt reduction plan assembled by the President’s Fiscal Commission on which I served got it about right...
There were 18 members on the commission, 11 supported the report – 5 Democrats, 5 Republicans, one independent – that’s 60 percent of the commissioners supported the conclusions of the report that would reduce the debt by $4 trillion over the next 10 years. I believe that proved that Democrats and Republicans can join forces when we face an imminent threat to this country. And I believe this debt threat is an imminent threat to the nation.
We can put together a credible, responsible, realistic bipartisan budget plan. This year, we need to finish the job. It will require Presidential leadership and it will require a Congress that is willing on both sides to come together, to do things both of us would prefer not to have to do. I hope very much we face up to this, because a failure to do so would mean very serious consequences for the country in the future...
Sen. Conrad renewed his previous call for a summit between the White House and Congress to work out a fiscal plan and said it should happen before the debt ceiling vote. He also made a statement about the need to get serious about addressing all aspects of the budget. He criticized those who claim that cutting non-defense discretionary spending alone will be enough to get us back on a sustainable path. He rebutted these assertions, speaking about entitlements, saying:
And yet, somehow we don’t want to talk about it. I think I know why we don’t want to talk about it, because if you ask the American people they say you don’t need to touch Medicare, you don’t need to touch Social Security, you don’t need to touch defense, you don’t need to touch revenue.
Well, I just say this. If that really is the conclusion, that Social Security doesn’t have to be touched, and it is cash negative today, Medicare doesn’t have to be touched, defense doesn’t have to be touched, revenue doesn’t have to be touched, you can’t solve the problem. It is a mathematical certainty you cannot solve the problem.
So, some of us are going to have to help the American people understand the unfortunate reality here. And the unfortunate reality is I believe all those things are going to have to be touched, and the sooner we do it the better, because the less draconian the solutions will be later on. The worst time to deal with this is when you are in a crisis. If there is anything Greece should have taught us, and Ireland should have taught us, and Portugal should teach us, is the worst time is when you are in a crisis.
Well said, Senator. We would also like to highlight a portion of Mr. Malpass' testimony. In his policy recommendations, he called for deep spending cuts as part of a deal to raise the debt limit, which Treasury Secretary Geithner says will occur between March 31 and May 16. Furthermore, he advocates tying the debt ceiling increase to placing a firm limit on the U.S. debt as a percentage of GDP. He states:
A better limit would be based on the marketable debt-to-GDP ratio, say at 50% of GDP, enforced by escalating penalties on government leaders and institutions if the limit is exceeded. Like the Constitution, this type of limit might last decades or centuries. As a complement, I would support a spending per GDP limitation, though federal expenditures vary substantially from decade to decade based on demographic needs, defense posture and interest rates.
CRFB has proposed setting fiscal goals tied to lowering the debt-to-GDP ratio. The tone set today by Chairman Conrad and the ideas put forth by the witnesses are important contributions to the national discussion on changing our fiscal trajectory. We applaud Sen. Conrad for his leadership and hope his colleagues heed his call to action.