House Spenders Question Administration Troika on Deficits, Fiscal Commission, and Job Growth
In today’s hearing before the full House Appropriations Committee, the troika (OMB Director Peter Orszag, Treasury Secretary Geithner, and Dr. Christina Romer, Chair of the Council of Economic Advisors) faced tough questions for 3.5 hours on the fiscal commission, unemployment figures, and the deficit. The three witnesses discussed the Administration’s economic assumptions as well as the Administration’s plans to improve economy growth. And all three talked about the need for fiscal responsibility. In particular, Secretary Geithner took up the cause of fiscal responsibility, arguing while that the
An excerpt of the written testimony:
That is how these projected deficits over the next decade arose and how our long-term fiscal future is dominated by health care costs. But whatever their cause, our future prosperity may be threatened if we do not address our medium- and long-term fiscal trajectory. Of course, we must bear in mind that it is not a sensible to begin fiscal contraction when the unemployment rate is nearly 10 percent. What we need to do is put into place sensible measures to reduce the deficit as we recover from the recession. So what are we doing?
First, we have already taken action to ensure that we do not make the fiscal hole deeper. Congress has now enacted statutory pay-as-you-go (PAYGO) legislation. PAYGO forces us to live by a simple but important principle: Congress can only spend a dollar on a non-emergency mandatory spending increase or tax cut if it saves a dollar elsewhere. In the 1990s, statutory PAYGO encouraged the tough choices that helped move the Government from large deficits to surpluses, and it can do the same today.
Second, as the economy recovers, the deficit will naturally decline. Our projections show the deficit falling from roughly 10 percent of GDP to roughly 5 percent of GDP by the middle of the decade as a result of this effect.
The President's Budget represents another important step toward fiscal sustainability...the deficit reduction steps include:
- imposing a three-year freeze on non-security discretionary funding.
- requiring the financial service industry to fully pay back the costs of the Troubled Asset Relief Program (TARP).
- allowing the 2001-2003 tax cuts for households earning more than $250,000 to expire.
- Eliminating funding for inefficient fossil fuel subsidies.
Some highlights of congressional concerns and questioning:
Rep. Marcy Kaptur (D-Oh) was upset that the three witnesses focused far too much on the deficit and not enough on the unemployment figures. She was joined by a few Republican colleagues and Chariman David Obey (D-Wi) in wanting the Administration to emphasize lowering unemployment.
Fiscal Commission: Rep. Frank Wolf (R-Va) (who sponsored a commission proposal with Rep. Jim Cooper, (D-TN)) was very critical of the executive order-created fiscal commission. He urged the Administration to require the commission to hold open forums across the country and to amend the order to push the vote on the commission’s recommendations until the 112th Congress (rather than during the lame duck session).