[Joint House and Senate Hearing, 118 Congress]
[From the U.S. Government Publishing Office]
S. Hrg. 118-36
COUNTING THE COSTS: HOW A U.S. DEFAULT
CRISIS HARMS AMERICAN FAMILIES AND BUSI-
NESSES
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HEARING
BEFORE THE
JOINT ECONOMIC COMMITTEE
OF THE
CONGRESS OF THE UNITED STATES
ONE HUNDRED EIGHTEENTH CONGRESS
FIRST SESSION
__________
MAY 17, 2023
__________
Printed for the use of the Joint Economic Committee
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available via the World Wide Web: http://www.govinfo.gov
__________
U.S. GOVERNMENT PUBLISHING OFFICE
52-690 WASHINGTON : 2023
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JOINT ECONOMIC COMMITTEE
[Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]
SENATE HOUSE OF REPRESENTATIVES
Martin Heinrich, New Mexico, David Schweikert, Arizona, Vice
Chairman Chairman
Amy Klobuchar, Minnesota Jodey C. Arrington, Texas
Margaret Wood Hassan, New Hampshire Ron Estes, Kansas
Mark Kelly, Arizona A. Drew Ferguson IV, Georgia
Peter Welch, Vermont Lloyd K. Smucker, Pennsylvania
John Fetterman, Pennsylvania Nicole Malliotakis, New York
Mike Lee, Utah Donald S. Beyer Jr., Virginia
Tom Cotton, Arkansas David Trone, Maryland
Eric Schmitt, Missouri Gwen Moore, Wisconsin
J.D. Vance, Ohio Katie Porter, California
Jessica Martinez, Executive Director
Ron Donado, Republican Staff Director
C O N T E N T S
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Opening Statements of Members
Page
Hon. Martin Heinrich, Chairman, a U.S. Senator from New Mexico... 1
Hon. David Schweikert, Vice Chairman, a U.S. Representative from
Arizona........................................................ 2
Witnesses
Dr. Wendy Edelberg, Director, The Hamilton Project, Senior Fellow
in Economic Studies, Brookings Institution, Washington, DC..... 4
Mr. Indivar Dutta-Gupta, President & Executive Director, Center
for Law and Social Policy, Washington, DC...................... 6
The Honorable Mick Mulvaney, Former Director of the Office of
Management and Budget, Charlotte, NC........................... 7
Submissions for the Record
Prepared statement of Hon. Martin Heinrich, a U.S. Senator from
New Mexico..................................................... 33
Prepared statement of Dr. Wendy Edelberg Director, The Hamilton
Project Senior Fellow in Economic Studies, Brookings
Institution, Washington, DC.................................... 38
Prepared statement of Mr. Indivar Dutta-Gupta, President &
Executive Director, Center for Law and Social Policy,
Washington, DC................................................. 45
Graphs submitted by Vice Chairman Schweikert:
Graph 1 ``Excerpts from S&P Report on 2011 U.S. Credit
Downgrade''................................................ 65
Graph 2 ``Why the Debt Limit Matters: All 8 Major Deficit-
Reduction Laws Since 1985 Were Attached to Debt Limit
Legislation''.............................................. 66
COUNTING THE COSTS: HOW A U.S. DEFAULT CRISIS HARMS AMERICAN FAMILIES
AND BUSINESSES
----------
WEDNESDAY, MAY 17, 2023
United States Congress,
Joint Economic Committee,
Washington, DC.
The hearing was convened, pursuant to notice, at 2:32 p.m.
in 216 Hart Senate Office Building, before the Joint Economic
Committee Chairman, Martin Heinrich.
Senators: Hassan, Heinrich, Klobuchar, Lee, and Schmitt.
Representatives: Arrington, Beyer, Estes, Ferguson, Moore,
Porter, Schweikert, and Smucker.
Staff: Nicolas Aguelakakis, Christina Carr, Tess Carter,
Sebi Devlin-Foltz, Ron Donado, Michael Farren, Tomas Gallegos,
Owen Haaga, Colleen J. Healy, Jeremy Johnson, Jessica Martinez,
Michael Pearson, Elisabeth Raczek, Christopher Russo, Jeff
Schlagenhauf, Alex Schunk, Nita Somasundaram, and Garrett
Wilbanks.
OPENING STATEMENT OF THE HON. MARTIN HEINRICH, A U.S. SENATOR
FROM NEW MEXICO, CHAIRMAN, JOINT ECONOMIC COMMITTEE
Chairman Heinrich. This hearing will come to order. I'd
like to welcome everyone to the Joint Economic Committee's
first hearing in this Congress. It's an honor to lead this
Committee and I'm excited to build on the success of former
Chairman Beyer's leadership this last Congress and I'm also
looking forward to working with my fellow Committee members,
including our new Vice Chairman. Congratulations, Congressman
Schweikert.
I want to welcome the new members of the Joint Economic
Committee, Senators Welch, Fetterman, Schmitt, and Vance and
Representatives Ferguson, Smucker, and Malliotakis, is that how
you say it?
More important, today's hearing will begin with five-minute
opening statements from myself and Vice Chairman Schweikert and
each of our three witnesses. We will then proceed with
questions, alternating between parties, and in order of member
arrival. Members are reminded to keep their questions to no
more than five minutes. Now for opening statements.
By most estimates, we are now less than one month from a
default on our obligations as a nation. This is unacceptable.
It's unprecedented and it's caused by too many members putting
politics ahead of people. The United States simply does not
skip out on its bill. The United States pays its bills. And
when we do, like when we voted to do so since 1960, including,
I would point out three times under President Trump, we don't
just signal to the world that we are a responsible nation. We
also avoid economic catastrophe for the people who sent us to
Congress in the first place.
Let's be clear. A default will drive up costs for working
families, for mortgages, car loans, student loans, and small
business loans to the cost of consumer goods and it will cost
jobs, millions of them. Nationwide, Moody's Analytics predicts
a drawn-out default would cost us between seven and eight
million jobs, and that includes as many as 38,000 jobs lost in
my home state of New Mexico.
For two years now Republicans have been predicting a
recession. Now they have manufactured a default crisis that
could actually cause that recession. Using the economic
wellbeing of the entire nation as a bargaining chip is wrong
and shouldn't be condoned. Democrats, Republicans, and
Independents should all absolutely negotiate on our annual
appropriation bills and as a member of the Senate
Appropriations Committee, I've been part of these negotiations.
I know how opinionated we can all be and how hard we fight
for our constituents and the issues that we believe in and
that's exactly what we should do in our appropriations process,
but holding the economic wellbeing of our country hostage over
appropriations and legislation we have already negotiated and
passed is wrong.
For one thing, I would welcome revisiting the Bush and
Trump Administration's tax cuts for the wealthiest of the
wealthy which contributed $10 trillion to our national debt.
But that is not the question at hand. The question now is will
Congress avoid default and with it save the American economy.
The answer must be yes. We must pass a clean debt limit
increase and continue our economic recovery. The danger we are
putting our constituents in if we fail to deliver on this
fundamental responsibility is what we will explore in this
hearing. And I will now turn things over to Vice Chairman
Schweikert for his opening statement.
[The prepared statement of Chairman Heinrich appears in the
Submissions for the Record on page 33.]
OPENING STATEMENT OF THE HON. DAVID SCHWEIKERT, A
REPRESENTATIVE FROM ARIZONA, VICE-CHAIRMAN, JOINT ECONOMIC
COMMITTEE
Vice Chairman Schweikert. Thank you, Mr. Chairman. First,
just an off the script comment. Senator Heinrich and I are
fairly friendly with each other. We are going to have these
moments where we will differ, but in my early days of being on
the Joint Economic Committee this was actually an
intellectually credible committee.
Yes, we have partisan views. We have supply side, Keynesian
whatever your underlying philosophy. I'm hoping, as we continue
to move forward, when it's our turn to choose a hearing, their
turn to choose, that we continue to try to step up the quality
because at some point we have a moral obligation as well as a
technical obligation to provide information for the
construction of a debt and policy.
I do want to make it absolutely perfectly clear,
Republicans are not walking us to default. We're misusing that
definition, as I fear, a scare tactic. Please understand 2011,
and I have the quotes here if you want to read them. Standard &
Poors lowered the U.S. credit rating to AA+ based on the fiscal
consolidation plan negotiated between the White House and
Congress because it fell short. The actual quote was
``necessary to stabilize medium and long-term debt.'' That was
2011. The debt today is dramatically worse, dramatically worse.
If you do understand since January 20, 2021, when the new
Administration took place, we are now borrowing $4.4 billion a
day. That's $50,000 a second since the new Presidency. In nine
years the math says over 90,000 a second.
If you start to layout the cruelty that means to retirees
and most likely coming inflation, but also what we're doing to
our young people. Mr. Chairman and to everyone, the other thing
is the discussion about Social Security. We need to actually
have it. The math says in now eight and a half years, according
to CBO's report six weeks ago, the Social Security Trust Fund
is gone. CBO says a 25 percent cut to seniors. Is this
Committee, of all the committees, ready to deal with the moral
implications of doubling senior poverty?
I will argue that absolutely moral and my heartbreak of the
President's State of the Union speech where many of us had
spent a year quietly negotiating to see if there was a fix we
could bring to the table and then to stand up and give a speech
to the American people saying don't touch it and we all applaud
with understanding that was signing a contract on doubling
senior poverty in this country in eight and a half years. That
is cruel and unacceptable.
The other point I really, really want us to understand is
my personal sort of rage at the theater that has been this debt
ceiling. And having read both your testimonies, I appreciate
the partisanship, but there are some things that are
technically absolutely incorrect. Please take a look at what
happened in this body 2017, 2019. Are you telling me that the
$620 billion of additional spending and the lifting of spending
caps that was absolutely required in dealing with Democrats at
that time on the debt ceiling was a clean debt ceiling? If
we're going to judge each other, let's be honest and judge each
other by the same standards.
We have incredible concern on the scale and growth of this
debt and the stresses that puts on society and ultimately the
crushing of the poor by not dealing with these things. To
pretend that the other side, my brothers and sisters on the
left, have stood up and said let's do clean debt clean debt
ceilings that's intellectually dishonest as well as just
factually not true.
Please let this hearing be about where we're at, how we
mechanically do this, and how we meet the morality of the
crushing debt that is coming to this society.
Last thing also the Chairman in his opening statement said
the 2017 tax reform and threw out the number of $10 trillion.
We have vetted that number multiple, multiple times when we do
the growth effects and we can't find that number anywhere in
the actual literature. We'd love to see it. And with that, Mr.
Chairman, I yield back.
Chairman Heinrich. Now I'd like to introduce our three
distinguished witnesses. Dr. Wendy Edelberg is the Director of
the Hamilton Project and a Senior Fellow in Economic Studies at
the Brookings Institution. Dr. Edelberg is a macroeconomist
whose research spans a wide array of topics from household
spending and savings decisions to economic effects in fiscal
policy to systemic risks in the financial system.
She frequently writes reports and articles for the Hamilton
Project on a variety of macroeconomic topics, most recently
with a focus on issues affecting the post-pandemic labor force
and the debt ceiling. Prior to her time at the Hamilton
Project, Dr. Edelberg spent more than 15 years working in the
public sector, including as Chief Economist at the
Congressional Budget Office and also served at the Council of
Economic Advisers and the Federal Reserve Board.
Mr. Indivar Dutta-Gupta is the President and Executive
Director of the Center for Law and Social Policy. Prior to
that, Mr. Dutta-Gupta, was the Co-Executive Director of the
Georgetown Center on Poverty and Inequality where he lead work
to develop and advance policy recommendations that elevate
poverty and inequality, advance racial and gender equity and
expand economic inclusion for all people.
He also previous served as the Senior Policy Advisor at the
Center on Budget and Policy Priorities and as a professional
staff member on the House Ways and Means Subcommittee on Income
Security and Family Support.
The Honorable Mick Mulvaney is a Co-Chair at Hatem, LLC, a
global consultancy designed to solve diverse public and private
sector challenges. Mr. Mulvaney previously served as Acting
White House Chief of Staff and as Director of the Office of
Management and Budget under the Trump Administration. Prior to
that, Mr. Mulvaney represented the Fifth Congressional District
of South Carolina in Congress.
Dr. Edelberg, let's begin with your testimony and then
we'll continue in the order of introductions. The floor is
yours.
OPENING STATEMENT OF DR. WENDY EDELBERG, DIRECTOR, THE HAMILTON
PROJECT, SENIOR FELLOW IN ECONOMIC STUDIES, BROOKINGS
INSTITUTE, WASHINGTON, DC
Dr. Edelberg. Thank you, Chairman Heinrich, Vice Chairman
Schweikert, and members of the Committee, my name is Wendy
Edelberg and I'm Director of the Hamilton Project and a Senior
Fellow at the Brookings Institution.
The effects of the debt ceiling crisis are unambiguously
negative and they could be quite severe for families,
businesses, and the health of the economy even if Treasury
continued to make timely principal and interest payments. To do
that, Treasury would likely need to cut non-interest payments
by 35 percent.
Proposed workarounds such as increasing borrowing despite
the debt limit or priorities some non-interest payments would
bring chaos and create legal uncertainty and are not
sustainable. The only effective solution is for Congress to
increase the debt ceiling without delay or better yet abolish
it.
In my remarks I will make three points. First, raising the
debt ceiling gives Treasury the means to pay obligations that
result form already enacted laws. It is not about allowing
future obligations to be incurred. Second, if Treasury were
forced to delay payments, the negative economic effects would
be swift and would escalate. Third, the only solution is to
raise or eliminate the debt ceiling.
U.S. taxpayers owe people money because of legislation
enacted in the past. In some cases, 90 years ago. We owe
interest to those who have lent to the U.S. by purchasing
Treasury securities. We owe doctors and hospitals who've
treated Medicare and Medicaid patients and millions of people
are entitled to benefits, including four million disabled
veterans whose payments scheduled for June 1st are now
uncertain.
Because the U.S. runs a deficit, Treasury needs to increase
federal debt to meet these obligations. Should the debt ceiling
bind the negative economic effects would risk triggering a deep
recession. How bad it could get depends on how long the
situation lasts, how it is managed, and how much investors lose
their faith in Treasury securities with a Stock Market crash
the first day that a payment is delayed.
Would the Treasury's securities market, the world's most
important, function smoothly? Would there be a run on money
market funds that hold Treasury securities? If people expected
a short-lived impasse with full and timely payments on Treasury
securities, it is possible that the initial response could be
muted. However, even if the crisis only lasted a few days, the
damage could be lasting.
At the very least, investors would likely anticipate short-
term interruptions in federal payments each time the debt
ceiling nears a signification escalation from their current
expectations for negotiations to run right up to the last
minute. If the impasse were to drag on, market conditions would
likely worsen with each passing day as optimism about resolving
the crisis wanes and pessimism about a deep recession expands.
Entitlement beneficiaries could face trouble with expenses
such as rent and utilities. Government agencies' work could be
disrupted and federal employees required to work because the
federal government would not be shutdown, wouldn't know how
long their paycheck would be delayed. Moreover, because tax
revenues would be dampened, the fiscal outlook and necessary
cuts to spending would be exacerbated.
The reputation of the Treasury securities market would be
undermined. Up until now, the U.S. Government has enjoyed a
borrowing rate that has estimated to be lowered by roughly one-
quarter percentage, meaning interest savings of more than $750
billion over the next decade. If just a portion of that
advantage were lost by allowing the debt ceiling to bind, the
cost to the taxpayer could be significant and already financial
markets are concerned.
For Treasury bills that are scheduled to mature in June,
investors are demanding a significant premium of nearly 1
percentage point for the risk of not being paid on time.
I want to be clear that none of the proposed workarounds
would avoid the chaos that would ensue if the debt ceiling were
to be bind. If Treasury used a workaround to make all payments.
It would be viewed as circumventing the will of Congress. It
would bring legal challenges that would add to uncertainty and
it would roil financial markets. Indeed, legal challenges are
likely no matter what Treasury does as the law imposes
contradictory requirements.
Treasury is required to make payments, honor the debt, and
not go above the debt limit, three things that cannot happen
all at once. No action other than raising or eliminating the
debt ceiling will prevent a debt ceiling crisis.
[The prepared statement of Dr. Edelberg appears in the
Submissions for the Record on page 38.]
Chairman Heinrich. Mr. Dutta-Gupta.
OPENING STATEMENT OF MR. INDIVAR DUTTA-GUPTA, PRESIDENT &
EXECUTIVE DIRECTOR, CENTER FOR LAW AND SOCIAL POLICY,
WASHINGTON, DC
Mr. Dutta-Gupta. Thank you Chairman Heinrich and Vice
Chairman Schweikert and members of the Committee. My name is
Indivar Dutta-Gupta and I'm President and Executive Director of
the Center for Law and Social Policy or CLASP. CLASP is a
national, nonpartisan nonprofit using research and analysis to
promote effective policy solutions to end poverty and advance
racial and gender equity.
I'm honored to discuss why many people rely on federal
programs to achieve a basic living standard. Why the deep cuts
mandated under the McCarthy Debt Ceiling bill would undermine
the wellbeing of the nation's people and the importance of
raising revenues alongside the dangers of failing to raise the
debt limit. So first, why do people rely on federal programs to
achieve a basic living standard? The United States suffers from
an unusual number of low-paid jobs, ranking 39th out of 42 OECD
countries. As a result, many who benefit from support programs
are simply workers paid too little to make ends meet.
This is particularly true for many women, Black and Latino
working people who are disproportionally employed in low-paid
jobs. Others experience low incomes due to the hazards of life
including illness, disability, death of a family member,
outliving savings, under employment, intimate partner violence,
and caring for a loved one. These life events are experienced
across all races and classes, if unevenly due to unequal
wealth, social and cultural expectations, labor market
discrimination, mass incarceration, and more.
Now fortunately a vast array of empirical studies proves
that individual programs like health coverage, food assistance,
and cash assistance and our social protection system overall
help families with low incomes stabilize their lives, maintain
employment, and advance in the labor market as well as help
their children thrive.
So unsurprisingly then, the McCarthy bill's deep cuts would
undermine the nation's wellbeing. The House debt ceiling bill
would set dangerously low caps on appropriations that would
grow harsher over time. If House Republicans later allow
spending on defense, border security, and veterans medical care
to grow virtually all other appropriated spending would need to
be eliminated under the caps.
So of course, supports on the chopping block include
childcare which helps parents while they work or go to school
to improve their employment prospects, post-secondary education
and workforce development, which can offer credentials required
for better jobs and support our small businesses, and food
safety, public health, basic transportation programs that
benefit everyone.
The bill also would use work reporting requirements to
limit access to Medicaid, SNAP, and TANF, programs that help
families, including more than one million veterans access
opportunity and thrive. Extensive evidence proves that such
requirements do little to promote work, but do increase
hardship harming many who merely failed to overcome the red
tape that these requirements create.
So instead, revenues must be a major part of the answer.
The United States is a relatively low tax country, ranking 32
out of 38 OECD countries in total government revenues as a
share of GDP while total government spending is also low
compared to other wealthy countries, recent tax cuts have
helped propel us to our current debt levels. The Bush tax cuts,
their extensions, and the Trump tax cuts alone are responsible
for most of the increase in the ratio to debt to economic
output since 2001, adding trillions to deficits.
The McCarthy bill would actually reduce revenues by cutting
the IRS budget and making it harder to collect taxes owed by
the wealthy and corporations. Now we face serious dangers if we
fail to raise our arbitrary debt limit. A default could spark a
financial crisis causing millions of job losses and decimating
retirement savings for people of all income levels. It would
make borrowing more expensive and reduce families' ability to
build wealth through home ownership, education, or
entrepreneurship.
Millions of people would immediately feel the impact of a
stop in government spending through delays in Social Security,
veterans' disability payments, and more. A recession, which the
proposed cuts could trigger, could harm everyone, particularly
workers paid the lowest wages, young people and communities of
color, many of whom are among the last hired and first fired.
The House passed bill tells American families heads you
lose, tails you lose. Tying passage of debt limit bill cuts is
dangerous and would increase costs, deprivation, and suffering
for American families or gutting investments that ensure our
nation's long-term competitiveness. Congress should not pass
any deal that increases hardship, never mind one that asks
struggling families to foot the bill so the richest
corporations and households can evade their taxes. Thank you.
[The prepared statement of Mr. Dutta-Gupta appears in the
Submissions for the Record on page 45.]
Chairman Heinrich. Director.
OPENING STATEMENT OF MR. MICK MULVANEY, FORMER DIRECTOR OF THE
OFFICE OF MANAGEMENT AND BUDGET, CHARLOTTE, NORTH CAROLINA
Director Mulvaney. Thank you. Thank you for the invite.
It's nice to be back in the room. As a former House member, I
always like to comment that you all's meeting rooms are a lot
nicer than ours, so it's always nice to be over on this side of
the building and it's welcomed to have the chance to talk about
the debt and the deficits.
We don't do that enough. The last time I was in this room
having that conversation was in the spring of 2011. I was
sitting where Ms. Moore is sitting right now and the debt was
$14.3 trillion and we did very little about it. Today it's
$31.4 trillion. We got there, in large part, because we don't
have these discussions. There's never a good time to have these
discussions.
If you try to have discussions about the debt around the
debt ceiling, people cry default. If you try and have a
discussion about the debt around appropriations, as the
Chairman suggested at the outset, people don't want to have
that discussion. They cry government shutdown. It seems there's
never a good time to talk about how and why we got $31 trillion
into debt and how we might get out of it. In fact, ignoring it
is how you get where we are.
And my fear is we'll continue to ignore it. We're having
the hearing. I understand the Senate majority leader asked for
these hearings. I appreciate that, but we'll probably ignore it
again. We'll probably ignore Social Security, which is a
complete travesty. What, we've got nine years left before
there's 24 percent across the board cuts and we're not having
hearings today on Social Security? The same is true with
Medicare. Ignoring these problems won't make them go away. If
we need proof of that look at what's happened since we sat in
this room in the spring of 2011.
Mr. Schweikert said something that caught my attention in
his opening statement about the intellectual credibility of
this Committee. I loved serving on this Committee. I served
under both Senator Casey from Pennsylvania and Congressman
Brady from Texas and we prided ourselves on having really good
and meaty intellectual conversations. We all know that hearings
in this place can tend to become sensationalized. They can tend
to be the type of things that people only go to in order to get
their social media clips, to get their input that they need to
raise money. It's one giant charade after another.
This Committee was always different and I hope it continues
to be the case. We need to have intelligent conversation about
the debt. There's not a single person in this room that I know
of who is arguing for default, not one. In fact, of all the
people sitting in this room, there's a couple who've actually
voted not to default, not everybody, but some.
I don't know of a single person here who says, you know
what, I think default would be a great idea. There are folks
having discussions about what is a default. Is not paying the
employees of the Department of Education, is that a default? Is
that a default of an obligation as the Chairman mentioned, or
is not paying your interest on your debt a default as defined
by the rating agencies? Those are the types of differentiations
or distinctions that I think is important for this Committee to
make because no other committee will make them.
You can get away with saying, oh, not paying the Department
of Education is a default in other committees. You shouldn't be
able to get away with it here. This has always been one of the
most reputable committees in Congress. I hope it continues to
be. We need to have conversations about tough, important issues
and this may be the only place we can do it. I hope we have a
chance to have those types of conversations today about the
fact that we are $31.4 trillion in debt and that we have to
have a discussion about how to raise the debt ceiling between
now and sometime in June. With that, thank you, Mr. Chairman.
Chairman Heinrich. Thank you all for your testimony today.
Director Mulvaney brought up the issue of the debt. I'm curious
to hear from all three of you actually. There are multiple ways
that you can get at the debt. You can cut spending. You can
grow the economy and you can raise revenues. Obviously, this
broader body has chosen several times in recent years to cut
revenues. I'd love to know from each of you what your opinion
is of whether or not revenues should be part of this
conversation as well as cutting spending and what the
relationship between those two things and growing the broader
economy is, starting with Dr. Edelberg and we'll go straight
across.
Dr. Edelberg. I'm absolutely sympathetic to the concerns
about the fiscal trajectory. It's unsustainable. When you look
at the spending pressures on the U.S. economy over the next 30
years, they're significant. They are largely a result of the
aging population and rising healthcare costs. And those are
going to be demands on the U.S. population whether the federal
government meets those demands or the private sector meets
those demands. But of course, if we got the route that the
federal government meets those demands, then I think it
requires more revenue.
So I think that the difficult question before you is what
do we want our federal government to do for us and then how do
we want to pay for it. I think revenues should absolutely be on
the table and I think thinking about all of the tradeoffs for
who gets harmed by spending cuts and how incentives change from
increasing revenues. All of those tradeoffs have to be
considered, but there is no shortage of ideas. They're just
difficult political questions that have to be dealt with.
Mr. Dutta-Gupta. Thank you, Senator Heinrich. Sorry for my
volume earlier, so let me just note that the U.S. again is a
relatively low tax country compared to other countries with
comparable or sometimes higher living standards and our
spending is relatively low, but not as low, so there's a gap.
So we're towards the top of the bottom on spending and we're at
the bottom on taxes. So it seems to me that it's quite clear
that what other countries with comparable living standards have
figured out is that you need more revenues.
The U.S. obviously had a benefit with being able to borrow
more cheaply than other countries, but I think we need more
revenues. The final thing I'll just note is that those revenues
can be used for obviously meeting the nation's needs, including
some investments that have extraordinary ROI that we're talking
about things like the expanded child tax credit we had before
which had an 8 to 1 ROI that no other stakeholder could make
such an investment but the United States Government, so there
are things we can do. It's not that everything needs to pay for
itself. Sometimes we just care for people. We live our values.
I appreciate Vice Chairman Schweikert's commitment to
addressing poverty among the elderly and others, but there are
also a lot of fantastic uses for revenues that could be cost
beneficial.
Chairman Heinrich. Director.
Director Mulvaney. I think traditionally we pull between
like 18 and 20 percentage GDP in revenues. I think we're at the
high end of that right now. Even when you say it's low, it's
low compared to other countries. We're at the fairly high end
of scale right now for us. To answer your question, Mr.
Chairman, if you go back and look--and we did this back in the
Budget Committee back in 2011 and '12. We did a pretty decent
investigation into fiscal consolidations. Other countries,
smaller countries without a reserve currency that had been
through what we anticipated then that we were going to go
through and I think the two examples we used were Canada and
Australia. And what you saw that they used--successful fiscal
consolidations tend to have a mix of cost reduction versus
revenue enhancement of about 85 percent to 15 percent. And
every time I say that people say, oh, well let's raise taxes by
15 percent. That's not the point. You can get all sorts of
revenue enhancement from other things such as changing
deductions and so forth.
We did this in the 2017 Tax Act by limiting the state and
local tax deductions and so forth. So the answer to your
question is, is everything part of the discussion? I think
traditionally successful fiscal consolidations are 85 to 15
spending versus revenue.
Chairman Heinrich. So whether you define those as taxes or
other revenues, as you pointed out, they should be on the table
as part of an overall package?
Director Mulvaney. I don't remember why Canada did it the
way that they did. It may simply be that there was the
political expediency and it worked. Keep in mind those are also
democracies and they probably had to get parties from both
sides to agree to something, so I don't know if it was the math
and the economics that was driving it or if it was politics.
I'm just telling you that if you look historically to the
fiscal consolidations that seems to be the blend.
Chairman Heinrich. Vice Chairman.
Vice Chairman Schweikert. Thank you, Chairman Heinrich. I
was so engrossed in the discussion, I was losing myself there.
And to the doctor, thank you. Actually, you get a brownie
point, if there's such a thing. Having a seven-year-old we do
lots of little gold stars for being actually intellectually
credible on the willingness to point out Social Security and
Medicare, some of the things in just that it's a shame that
even our side, but in reaction to the politics, is no longer
talking about some of our major drivers.
Obviously, I'm going to ask Mr. Mulvaney one or two things
and then we'll bounce around. But for my brothers and sisters
on the Committee, between today and 30 years from now, back of
the napkin math of $128 trillion of borrowing. One hundred
percent of that borrowing, 75 percent Medicare, 25 percent if
we backfill Social Security. The rest of the budget actually is
deemed to actually have somewhat of a positive balance.
Nine years, actually, less than nine years, we can get rid
of all discretionary, including Defense. All discretionary is
gone and we still have to borrow hundreds of billions of
dollars just to cover the mandatory spending; Social Security,
Medicare, Medicaid, and that's actually without Social
Security. I don't think we understand the driver of our
incredible growth in borrowing, turns out it's really not
Democrats or Republicans. It's demographics. We got old and
we're often unwilling to talk about that. But first a fixation
just because it's important that we get this on the record.
And as some of you know, I have a compulsion with boards,
try not to hit the Chairman with this, but Mr. Mulvaney, you
may actually remember some of this discussion because you and I
were around for this. We were downgraded as a nation by
Standards & Poors in 2011 and we were downgraded not because of
the fight over the debt ceiling. We were downgraded, for those
who would like to actually read it, we were downgraded because
we didn't demonstrate credibility on how we were going to
manage the future.
A couple of your comments, the numbers are dramatically
worse today than 2011. Is this possibly coming back at us
because you've actually had conversations with some of the
rating agencies?
Director Mulvaney. Sure. And the conversations I'm having
are quite interesting because I asked them again what is
default and you ask a rating agency what a default is. Default
is nonpayment of your interest--principal and interest. But
principal is easy because we borrow money to pay it back. We
take new debt to pay it off old debt, but we have to also
borrow money to pay off interest.
They do not consider not paying doctors for Medicare to be
a default. It could be something that looks bad, but it's not a
technical default. What was really eye-opening to me when I had
the conversation was that I remember when that happened in 2011
our borrowing costs actually went down for a period of time and
it turns out there was actually other stuff happening around
the world that created a flight to Treasury that drove down our
interest rates.
And we're having that conversation and one of the rating
agencies pointed out to me--I honestly can't remember which one
it was--said if it happens again then--there's three rating
agencies. You've been downgraded by one. If you're downgraded
by two of the three, then there's all sorts of financial
institutions that aren't allowed to hold our debt and that that
could be absolutely traumatic. There's no question about it.
And my fear is they do it for that reason that you just
mentioned.
So let's say that we go out and we raise the debt ceiling
tomorrow. Let's say you have a clean debt ceiling vote
tomorrow. Everybody votes for it, okay, all 435 of you in the
House, all 100 of you in the Senate, do you really think that's
going to solve the problem? Do you think that would cause the
rating agencies to go, wow, that's just great. This is
absolutely Triple A. They didn't have a discussion about what
was happening, don't have a plan to solve the problem. It's
just going to get worse, and in fact, probably makes a
downgrade more likely if you just stick your head in the sand
and vote for a clean debt ceiling and it would cause the rating
agencies to look at us and say they're never going to deal with
it. If they won't deal with it now, they're never going to deal
with it. We're going to put them on negative outlook and we're
going to downgrade them. That's what frightens me is that the
same thing that happens now that happened in 2011 and that
people decide to get in the political blame game on one party
over the other over realizing that it's our fiscal situation
that is driving that downgrade, not necessarily our politics.
Vice Chairman Schweikert. And we've seen some of the
subscription issues on some of the recent debt options. The
other thing, and just because it's important, is as members of
Congress and the Senate, we seem incapable of actually doing
things unless we live in a stressor. Avoidances, let's be
honest. It's like our term paper at the end of the session, we
stall and stall and stall until we're being screamed at.
The fact of the matter is if you look at when we have
actually done something, it's been moments of stress. It has
been being up against the debt ceiling. It has been we're up
against we don't have appropriations documents. I'm not
thrilled that those of us as board members of the largest
economy in the world--we can't do our homework until we're
fearful, but this is a list and the fact of the matter is when
we've made differences, whether it be with the Clinton
Administration all the way back to Reagan, to others, when
we've actually done something adult-like it's been inflection
moments like this. And with that, I yield back, Mr. Chairman.
Chairman Heinrich. Representative Porter.
Representative Porter. Whether you're the United States
Government or a single mom like me, we all have things that we
need to buy. Just like my kids need food and clothes, our
country can't live without public safety, roads and bridges,
and services like veterans' healthcare and senior food
assistance.
There's another thing that I have in common with our
government. I buy on credit and I've never defaulted on my
debt. Dr. Edelberg, given my credit history and that I've never
defaulted, how many credit card companies assess my
creditworthiness?
Dr. Edelberg. You sound like a good risk.
Representative Porter. So let's say my credit card company
has given me a card that allows me to buy everything that I
could ever possibly want, but because I'm fiscally responsible
I'm going to create a debt ceiling for myself. It's modeled on
Congress. So I set my personal debt ceiling on a thousand
dollars. I don't want more than a thousand dollars of debt. I
want to be fiscally responsible no matter how much my credit
card company is willing to loan me because of my stellar credit
card history.
So I go to the store and I have a lot I need to buy for my
family. I fill my cart to the top, I get to the front of the
store and I ring up $500. I look at the bill, I reach for my
card, I worry because I know I've already spent probably a
thousand dollars in the last few weeks because of an ER visit,
braces for my daughter, Dr. Edelberg, will my credit card
company respect my personal $1,000 debt ceiling or will this
transaction go through?
Dr. Edelberg. The transaction will go through.
Representative Porter. I hate to disrespect my debt
ceiling, but my kids have to eat, they need their school
supplies, their feet keep growing, so I swipe the credit card.
The charge goes through. Now fast forward. My credit card bill
arrives. It's more than my $1,000 debt ceiling. I call up my
credit card company and I tell them I've exceeded my debt
ceiling. I'm not going to pay back the $500 above my debt
ceiling even though I've already spent it, even though my kids
have already eaten the food, worn the clothes. Dr. Edelberg,
will my credit card company accept this, my personal debt
ceiling, as an excuse for why I'm not paying my bills.
Dr. Edelberg. They will consider you in default.
Representative Porter. So my lender expects to be repaid no
matter I set as my debt ceiling. If I decide to stick with my
debt ceiling and I do default--you said they'll consider me in
default. What's going to happen to me?
Dr. Edelberg. They'll lower your credit limit. They'll
raise your interest rate. They might even cancel the card.
Representative Porter. So I really have no choice here as a
consumer, as a mom to suspend my $1,000 debt ceiling and pay
off the debt that I've taken. Buy the ticket, pay the ride. I
did the spending. I've got to pay it back. Dr. Edelberg, I'm
confused because I thought if I created a debt ceiling that
would make me fiscally responsible. Did it change my spending
in this hypothetical?
Dr. Edelberg. It might've slowed you down, but at the end
of the day, you blew through your debt ceiling.
Representative Porter. Did it make me have less debt
somehow to announce that I had a debt ceiling to the credit
card company? Did that help me get my debt forgiven?
Dr. Edelberg. It did not help you get your debt forgiven.
Representative Porter. Did it make me fiscally responsible?
Did it help lenders think, at least, that I'm a good credit
risk?
Dr. Edelberg. Only if they thought it was credible that you
were going to keep your spending under the debt limit, which
apparently would've been a good assumption.
Representative Porter. Wow. This didn't work out for me,
but Congress swears by this debt ceiling. In fact, it has gone
through this exercise of changing or suspending the debt
ceiling 78 times since 1960. Dr. Edelberg, given 78 times of
this debt ceiling that we think is going to somehow curve our
budget decisions has the United States lowered its debt? This
didn't work for me in this hypothetical, has it worked for the
U.S.?
Dr. Edelberg. There's no evidence that the debt ceiling has
led to lower federal borrowing. No.
Representative Porter. So I must be missing something. If
having a debt ceiling didn't do anything for me and it hasn't
worked for the United States, what is its purpose?
Dr. Edelberg. It served a purpose a long time ago to
actually try to make things easier, not harder for Treasury to
pay the obligations on time without jumping through hoops. It
now serves no purpose. It should be abolished.
Representative Porter. So you're saying that now that we
actually have computers and can keep track of what we owe and
when we're going to owe it and model to anticipate revenue and
when it's coming and how we're going to meet our bills, this is
just doing as little good as my personal hypothetical $1,000
debt ceiling?
Dr. Edelberg. We now have extraordinary transparency over
how much Treasury is borrowing, what securities they're issuing
or what their timetable is for issuing those that the debt
limit does not serve a useful purpose.
Representative Porter. Thank you. I yield back.
Chairman Heinrich. Representative Estes.
Representative Estes. Thank you, Mr. Chairman, and thank
you to our witnesses for being here today. You know our country
today is again racing towards a debt ceiling. You'd think that
President Biden would take the negotiations seriously, but
unfortunately, he's taken 97 days to get together with Speaker
McCarthy.
As of right now the only plan passed by either chamber to
raise the debt limit is the House Republicans' Limit Save Pro
Act. Unfortunately, reaching the debt limit, as mentioned
earlier, isn't a new problem. It's one we repeatedly face and
will face again unless we act to get our spending under
control.
Let's start with some basic facts we can all agree on. Our
national debt's $31.4 trillion. We're borrowing one out of
every five dollars the federal government spends, which means
we're borrowing about $50,000 a second. When my time at the
hearing is done, we'll accumulated nearly $14 million more in
debt and every taxpayer is on the hook for over $250,000 of
debt. These are the facts.
I'm glad that we are talking about an agreement. As stated
earlier, we don't want the United States to default. I'm so
glad, Director Mulvaney, you helped to clarify the definition
of what a default was because that sometimes gets thrown around
loosely and it's really not the best way to describe our
situation since we do have revenue coming in we're just
spending more than what the revenue is.
And the budget proposed by President Biden adds another $17
trillion to the deficit over 10 years. Think about that.
Another $17 (sic) over the 10 years would make our debt about
$50 trillion. The sticker shock of deficit spending only gets
worse. If the government borrows a million dollars today, the
total cost to the American taxpayers is more than $2.3 million
by the time that 10 years is up because there is no plan to
repay that money.
And while the President proposes borrowing in mass sums of
money, he's also included taxes as part of that, which is going
to slow down the economy which will impact the amount of tax
revenue that comes in. Even one of the Democrat witnesses in
the House Budget Committee hearing last week admitted that
people making less than $40,000 would need to pay more in taxes
to help cover the cost of some of those wide-ranging spending
policies from the Biden Administration.
And as we talked about earlier with the tax cuts, one of
the things I want to mention is thank goodness for the Tax Cut
Jobs Act in 2017. As we've seen now actual tax revenues are
coming in higher than what the Congressional Budget Office
projected. In 2022, it was over $900 billion more than the CBO
projected when the bill was passed in 2017. In 2021, it was
roughly $200 billion more and so actually the economy is
turning in more tax revenue for us.
So let's think about the federal spending sort of like a
personal budget. If someone is making $48,000 a year, but
spends $63,000 a year and carrying a $314,000 on a credit card,
do you think it's fiscally responsible for that person to go
get another $15,000 on the credit card just to spend over the
next year just so they can overspend their debt limit.
Now the first place we need to start looking at is how do
we reduce our spending so that we can match that up with the
revenue. If we don't, we'll get back in the same point of where
we are today. So the only responsible plan we have out there is
the Limit Save and Grow Act that's been passed by the House
Republicans. I'll note that this hearing today is how a U.S.
default crisis harms American families and businesses.
Nobody wants the U.S. to default and we want to make sure
that the bill that the House Republicans passed helps prevent
that and it's the only bill that's going to do that and it
helps strengthen our financial footing for the future.
Mr. Mulvaney, when I came to Congress six years ago, the
estimate was that if we could save about six trillion dollars
in a 10-year period we'd have a balance budget. Now that's
roughly $16 trillion, based on where we're at today. How do we
address our out-of-control spending to actually make sure that
we get back in right direction?
Director Mulvaney. How do you address out-of-control
spending? You try and convince in the other party and your own
party, by the way, that spending is a problem. Face it. You
don't get $31 trillion in debt by one party doing it to you.
There are folks in my own party who are just as eager to spend
as some Democrats are. So yes, you've got to fight to do it.
It's always easier to say yes. It's always easier to say yes. I
can't tell you what we went through when I was in the OMB. I
know I'm over time. I'll tell you a story. When I was down
there one day when I was writing the first version of one of
the budgets and we were cutting pretty heavily and then we got
some instructions from up above to sort of spend a little bit
more money and I want you to know the meetings were a lot
easier after that.
When you can tell people, oh yeah, we'll spend more on
this. Spend more on this. It's really easy to spend other
people's money, which is what you all do, right? So you have to
sort of figure out how to do the right thing and realize that
you're spending your grandkids' money and not your own.
Representative Estes. Make those tough choices. Thank you.
I yield back, Mr. Chairman.
Chairman Heinrich. Senator Klobuchar.
Senator Klobuchar. Thank you very much, Mr. Chair. I
started my day today meeting with small businesses. And Dr.
Edelberg, could you talk about what a default would mean for
small businesses and access to credit?
Dr. Edelberg. I can. And I should say when I use the word
``default,'' I really do actually think it can be used in two
different ways. I try to be very clear when I mean defaulting
on the national debt. I think that that would have
extraordinary effects on financial markets and quite immediate.
I think also defaulting on obligations would also have an
effect.
Senator Klobuchar. I just have only five minutes.
Dr. Edelberg. Yes. Sorry. So that's what I mean by default.
I think, yes, we would see a sharp loss of confidence. I
suspect that small and large businesses would immediately
postpone any plans that they had to expand or hire.
Senator Klobuchar. Okay. Very good but not very good for
them. Why don't we turn to the bank failures that we've seen
recently. Another shock to the financial system could further
destabilize the banking system, cause panic from depositors.
How could a default, as you defined it, impact the banking and
financial system and what would a default effect access to
credit for consumers?
Dr. Edelberg. Absolutely. So commercial banks, the deposit
institutions, have about two trillion dollars of U.S.
treasuries on their balance sheets. Financial institutions more
generally have four trillion dollars. If the value of those
securities were sharply hit after a default just on obligations
on non-interest payments, that could have cataclysmic effects
on our banking system.
Senator Klobuchar. Okay. And then, Mr. Dutta-Gupta, on
Monday Secretary Yellen updated Congress. She said the federal
government were run out of funding as soon as June 1st. That's
in just 15 days. In your testimony you state that a default
would likely trigger a recession. What factors from the default
do you think would be most harmful to the economy and could you
explain how even what they call a short-term default if then
something changed in even a few days or a week how that could
still impact the economy and the financial system.
Mr. Dutta-Gupta. Yes, thank you, Senator Klobuchar. So
according to estimates from the Council of Economic Advisors, a
default could result in the loss of over eight million jobs by
the end of summer. The employment rate could more than double
to 8.4 percent and $10 trillion in household wealth could be
wiped out. Real GDP could shrink by 6 percent and the stock
market could plummet by nearly half of its current value.
Senator Klobuchar. In the short-term, I talked to Mark
Zandi this morning and he was stressing how even this
brinkmanship can start causing problems if we're unable to
reach some kind of an agreement or simply reach an agreement
that we will discuss this on the budget, which is where it
belongs.
Mr. Dutta-Gupta. That's right. We saw Vice Chairman
Schweikert's quote from before that used the word
``brinkmanship,'' which can cause a lot of uncertainty. People
will be reluctant to take measures they would've otherwise
invest in, whether it's a small business or even families
potentially, so you would see effects sort of pervasively
throughout the economy even for a short-term default.
Senator Klobuchar. And do you want to address that, Dr.
Edelberg when it comes to say mortgage rates or the like?
Dr. Edelberg. So I mean we already see that anyone who's
holding a Treasury bill that is scheduled to mature in the
first half of June is now demanding a premium of nearly 1
percentage point and that's just what brinkmanship would bring
about. If this crisis were to actually reach the day where the
debt ceiling binds the effects on interest rates I think would
be more chaotic and more abrupt.
Senator Klobuchar. Yes. I mean our nation right now our
bonds are viewed as safe, correct, safe, liquid, backed by full
faith and credit of the U.S. I just remember back in 2011 when
Congress waited until the last possible day to avoid a default.
One of the credit rating agencies downgraded the U.S. from
Triple A to Double A Plus, which cost the country nearly 20
billion in increased borrowing costs; is that correct?
Dr. Edelberg. That sounds right.
Senator Klobuchar. And can you explain how an actual
default would impact the credit rating and borrowing costs?
Dr. Edelberg. So I think even if Treasury were able to make
the principal and interest payments, I think financial markets
would be roiled for several reasons. One, it's not at all clear
that Treasury is legally allowed to prioritize principal and
interest payments over non-interest payments, so I think the
legal challenges would come right away. So I don't think
anybody holding a Treasury security would feel terribly
comforted that at least for now they were getting paid. I think
the credit rating agencies would have no choice but to re-
estimate how safe they think U.S. Treasury securities are,
again, simply if non-interest payments were delayed.
Senator Klobuchar. Thank you.
Chairman Heinrich. Representative Smucker.
Representative Smucker. Thank you. Thank you, Mr. Chairman.
I appreciate the opportunity to be a member of this Committee.
This is my first hearing with the Committee. I think this is a
potential forum where we can come together, as Mr. Schweikert
said, have intellectual real discussions about both the state
of the economy and steps that we can take to improve the
economy to ensure that all Americans can live their own
American dream.
It's one of the reasons I ran for Congress is to ensure
that we put policies in place to lift people out of poverty and
ensure that they can do well in this great country of ours. I
hope that's what this Committee is and so I was disappointed,
Mr. Chairman, when I saw the title of the first hearing. How a
U.S. Default Crisis Harms.
And then after hearing some of the opening comments, it's
clear this is an attempt to smear Republicans with some--what's
the word I just heard--brinkmanship that would lead us to a
default. There is no argument on my side that there should be
default or at least in my point. It would be terrible for the
future of the country. It would be terrible for American
citizens. And so then you say, well, we should just do a clean
debt ceiling, but I want to remind folks that's a hollow
argument because in seven of the last ten debt ceiling
increases there were changes, there were budget reforms made.
Thirteen times since 1985 that happened. That's the norm, not
the exception. I also want to remind folks that the only group,
the only party in this discussion that has done anything to
raise the debt ceiling has been the House where we have a bill
in the Senate now that could be advanced that would raise the
debt ceiling, could be signed by the President today within the
next hour if they chose to do so.
If you don't like the provisions of the bill, then tell us
what you do like and that's what we've been asking the
President to do for the last months. And after he said he won't
negotiate now negotiations are taking place, as they should be,
and as is the norm. You know I serve on the Budget Committee as
well, serve on Ways and Means Committee and am focused on
trying to correct the trajectory that we're on.
I was encouraged when we quickly got to a discussion in
this hearing today about that trajectory and the impact that
will have if we don't change it because today we are the
highest level debt compared to GDP than since World War II when
we had ramped up after a national crisis and we're in an
uncertain world right now and in a bad position to be able to
take on any crisis that may come along.
Projected to grow to double GDP in the next 30 years. I'd
like a hearing, Mr. Chairman, on what that means for the
American people, on what that means for people in poverty and
people in the middle class if we don't change the trajectory.
You know a sovereign debt crisis will occur when our creditors
no longer believe in the faith or the ability of the U.S.
Government make good on its debt or when they believe
policymakers cannot take the actions necessary and that's why
the work of this Committee is so important.
At least the Limit, Save, Grow Act begins to change that
trajectory. I want to show a chart here. It just starts to
change the trajectory; it would start to build confidence in
our creditors that we can move in the right direction. It's
just a start. It's just a start, but we have to get started. So
let's come together on this. We're going to raise the debt
ceiling. We need to, but it's an inflection point when we
should be talking about putting the country on the right path.
Mr. Mulvaney, I appreciate your perspective. The House
passed the debt ceiling increase in April. When did the Senate
vote to raise the debt ceiling?
Director Mulvaney. This afternoon. No, I'm joking of
course. They haven't voted yet. I think they haven't voted
because they know they can't pass it.
Representative Smucker. Would you talk about the trajectory
we're on and the dangers to the country going forward if we
don't take this opportunity to being to change that?
Director Mulvaney. The bottom line, in 23 seconds or less,
inflation. That's it. That's what you're looking at, right, is
because the only way you're going to be able to function is to
print the money. Whether or not you create it down at the Fed
and they put it on a computer screen or actually run the
machine, it doesn't make any difference. This is going to be
inflationary. That's what you are looking at, not only this
year, but for the next 30, 50 years. That's the only way this
gets solved and that is not much of a solution.
Representative Smucker. Thank you. Thank you, Mr. Chairman.
Chairman Heinrich. Representative Moore.
Representative Moore. Thank you so much, Mr. Chairman, and
I do want to thank our panel for appearing today. I've been in
Congress for a little while. I remember serving with Mr.
Mulvaney and I've been around during some of this and I guess I
won't call it brinksmanship in order not to incur any wrath of
anyone, but these so-called debt negotiations. And I do
remember when Barack Obama was around really sort of being
forced to restore some of the Bush tax cuts in order to come to
an agreement on raising the debt ceiling.
You know under former President Trump we raised the debt
ceiling by $10 trillion just under him. And then with the Bush
era tax cuts, the unpaid for wars, we have really increased the
debt a lot for things like that.
The question I guess I have for you, Dr. Edelberg, is had
the tax cuts that have promised so much in terms of trickle
down and in terms of revenue raising have they been
commensurate with the GDP, with the growth in GDP?
Dr. Edelberg. So the tax cuts that were in the 2017 Tax
Act, on net, increased the deficit by about two trillion
dollars.
Representative Moore. So the claims that they just somehow
just lifted our country have not borne themselves out yet. All
right.
The question that I have for you, Mr. Dutta-Gupta, I'm just
trying to recall what you said about the United States being 39
out of 42 in the OECD countries in terms of--you talked about
it in terms of work requirements. Can you please remind me of
what you said?
Mr. Dutta-Gupta. Absolutely, Congresswoman Moore. So in
terms of the share of jobs that are considered low-paid or low-
wage jobs, among high income and some middle-income countries,
the OECD in the United States ranks very close to the bottom,
so we have a very large share of jobs that do not pay well in
this country.
Representative Moore. So when we start talking about work
requirements as a solution to our spending problems, forcing
people into the low-wage workforce is that not a solution?
Mr. Dutta-Gupta. Well, it turns out it doesn't even do
that, so it doesn't really do much to increase employment and
earnings you're going to mostly kick people off essential
benefits like Medicaid, SNAP, and TANIF, who actually could
benefit from those programs and then do better in the labor
market.
Representative Moore. Thank you. And so, Mr. Mulvaney, I
was very eager to hear your testimony, given your tremendous
role that you have played in our government and I was really
surprised to hear that you thought that the downgrade of S&P in
2011 was related to just uncertainty and not directly related
to the brinksmanship--I can't think of any other word. The
Government Accounting Office says that $1.3 billion just in
that one year it costs us increased borrowing costs. The
Bipartisan Policy Center said that the 10-year cost would be
$18.9 billion and GAO also found that in 2013 the federal
government borrowing costs increased by 38 to $70 million and I
could go on, but my time would expire and I do want to give you
an opportunity to respond to this.
I do understand that confidence is a really big part of
investing, but doesn't it seem curious to you that for the very
time in history that this occurred after this brinksmanship?
Director Mulvaney. No, because I read the report.
Representative Moore. They said it was because of partisan
brinkmanship.
Director Mulvaney. Mr. Schweikert's got the language. I
mean you could look at it. Yes, actually it does. It mentions a
bunch of different things, but the narrative has become that it
was because of the brinksmanship and that's just false. They
did mention the fact that Congress couldn't get along. There
was dysfunction in Washington, D.C. and that was concerning to
them.
Representative Moore. Well, it was curious coincidence.
Okay. I have 25 seconds left and so I just want to point out
that one of the features of the bill that the Republicans are
so proud that they passed regarding the debt ceiling includes
repealing something like the Inflation Reduction Act which, in
fact, reduced our deficit by some $350 billion, if I'm
remembering it correctly. Something the Republicans have not
done, although they talk on and on and on about reducing
deficits.
President Biden and the Democrats have been the only ones
who's done it. I just want to thank you, Mr. Chairman, for your
indulgence and I would yield back. And thank all of you all for
your very candid answers.
Chairman Heinrich. Representative Ferguson.
Representative Ferguson. Thank you, Mr. Chairman, and thank
you to our panelists. Again, it's been said many times here,
but I think it's worth reiterating. We've done something to
avoid the debt limit in the House and we've passed a bill. And
to my colleague, Mr. Smucker, had a great comment. If you don't
like that, we call on our Senators to pass something else over
here that we can then get into conference and move ahead. But
we'll continue to do this and these things that we did are
common sense, thoughtful ways to get this country back on
track. It's not final, but it's a step in the right direction.
Encouraging people to go to work is pretty meaningful.
Look, I've lived in a community where we saw the evisceration
of a manufacturing base of the textile industry following NAFTA
and we saw a generation move into poverty and on government
assistance and it wasn't until actually we revitalized our
area, brought in an automotive plant and people went back to
work that they actually got out of poverty. Okay? So jobs
count, jobs matter, and getting people back engaged is
important.
Rescinding money for a pandemic that is no longer here and
a public health emergency that has been declared over, that's
pretty common sense, right? I mean why would we keep that money
there when the pandemic is over and that's what the money was
for. Let's pull that back. And when you look at the spending
levels that we're recommending, the first step of that is
fiscal year '24 spending would be at fiscal year '22 levels,
which is exactly where we are right now and the world has not
fallen apart.
And I think when I look at where we are with our energy
policy, it makes no sense to continue to burden and punish
American families with high energy costs when there are some
very thoughtful, bipartisan things that we can do with
permitting reform that makes sense to get our country back on
track from an energy perspective.
And then when I look at those things, these are things that
make sense to Americans. And by the way, putting in something
like the Reins Act which simply says that if an agency puts in
a regulation that has more than $100,000 impact on the economy
we should have a say in that. It's pretty common-sense stuff.
These aren't Draconian cuts. This isn't crazy stuff that folks
have been talking about it, but I think that the House plan is
something that, if again, to my colleague on the Senate side,
please send us something else. If you don't like that, sitting
there saying the clean debt limit, if you can pass that, pass
it. We'll have a discussion about it. But make no mistake,
House Republicans have voted to raise the debt ceiling. We're
just simply waiting on the rest of Washington to catch up with
us.
Mr. Mulvaney, we've heard a lot about raising revenue. One
of the proposals in the President's budget, President Biden's
budget is to raise the corporate tax rate from 21 to 28
percent. How much revenue would that raise over a 10-year
period?
Director Mulvaney. I have no idea. My guess is probably
zero.
Representative Ferguson. Dr. Edelberg, real quickly, you
got a number of how much money that would raise going from 21
to 28 percent over a decade? Is that a hundred billion dollars,
is that a trillion, 1.2 trillion?
Dr. Edelberg. I don't have the number with me, but there
are certainly estimates out there.
Representative Ferguson. Okay.
Dr. Edelberg. And I think that change was also proposed to
be made alongside a host of other changes that would----
Representative Ferguson. I'm reclaiming my time. I'm just
saying you're talking about raising revenue here, right?
Dr. Edelberg. That would raise revenue. Yes.
Representative Ferguson. All right. So if we're talking
about raising revenue and going up from 21 to 28 percent
probably raised, what, about 1.2, 1.5 trillion dollars. I'm
looking down at my colleague from Arizona who does a whole lot
of math real quickly in his head, but it's probably about a
trillion and a half dollars, right? So if we're asking our job
creators and our innovators, our companies in America to pay a
28 percent rate in order to raise revenue, then why in the
world would we turn around and allow them to escape their tax
liability by giving them a $1.2 trillion green energy tax
credit?
Director Mulvaney, is this something that makes sense?
Director Mulvaney. That's why I get you to zero. I mean
you're playing with tiny numbers. The corporate tax doesn't
generate enough money to worry about. It doesn't. Where's the
money? The money is on income taxes on the middle class. That's
where the money is, right? There's an old saying, ``Why do you
rob banks?'' Because there's where the money is.
If you're going to do this by raising taxes, you have to do
it on the middle class and nobody wants to do that and you
shouldn't do that, right?
Representative Ferguson. And the downside of doing that is
it makes of raising it on our job creator is it makes us less
competitive in the global economy.
Director Mulvaney. Which also makes the middle class less
able to pay taxes, so yeah.
Representative Ferguson. Mr. Chairman, I yield back.
Chairman Heinrich. So I am going to pass the gavel over to
Representative Beyer, who is going to preside as I go to the
Senate floor to vote. Thank you.
Representative Beyer. Thank you for being here and I really
appreciate it. It's been fascinating listening to you all and
also listening to my friends here on the Dias.
Director Mulvaney, I was fascinated by your comment that
every time we get to a debt limit we cried default and every
time we get a budget omnibus we cry shutdown. So let me make a
couple quick points and move on. Number one is there is a
solution on Social Security. In fact, there are a number of
solutions. The one that I favor is John Larson's Social
Security 2100 that he's been pushing for a number of years that
makes it viable through the end of the century and raises
benefits for the people at the very lowest end. It does
increase the 6.2 percent by a measly 400th of 1 percent per
year over 25 years, so completely invisible to the taxpayer.
The second thing is the tax surge. 2022 was very good for
taxes, 19.2 percent, but you can ascribe an awful lot of that
to the American Rescue Plan, to the economic impact payments,
to the CARES Act, to the $800 billion unemployment insurance,
and they've been following it pretty precipitously in 2023.
The third point I'd like to make is we're 34th out of 38 in
the OECD in terms of taxes to GDP. Our ratio is 26.6 percent.
Theirs is 34.1, on average. And yet, American citizens want the
same benefits as those people in the OECD countries. We're not
a cutting back on the safety net. In fact, our safety net is
smaller than most of those countries.
And as Donald Trump points out again and again, it's
difficult to touch that safety net. People don't want us to cut
Social Security. They don't want us to cut Medicare. And he
realizes it's the wrong thing to do and he encourages all of
our friends, Republican and Democrat not to touch it.
And then, fourth, and Director you know very well that the
critical issue here is the mandatory spending, the Medicare,
the Medicaid, Social Security and let's assume we can solve.
And yet, with all that mandatory spending, we have the lowest
life span of any of those OECD countries. We're failing our
citizens. I look at the 17 and 18 percent of our GDP that we're
spending on healthcare and with the next highest, 12 percent,
most of then are 10 or 11 percent.
We look at diabetes where 25 percent of our Medicare
budget, maybe it's 20. The last number I heard was 25 percent.
It's just on in-stage renal disease, so that's just on diabetes
treatment. With dental care, which is terrible for most
American with the consequent impact. Tele-Health, a big move
forward in a bipartisan way.
I'm very optimistic that Artificial Intelligence may give
us a way to move forward on a lot of those healthcare issues.
But now let me move to my question.
One party doesn't want any new revenues. The other party is
critical aware that we don't want to cut any benefits. We had
Simpson Bowles. You were there for that nice Commission, 18
people. It needed 12 votes to approve it. We had five Democrats
vote yes, five Republicans vote yes, one Independent, but we
couldn't get the last vote and it didn't happen.
So Dr. Edelberg, here we are with a $31 trillion deficit
that's going to go way up, over the debt. What do we do? How do
we in this difficult political world, what's the way forward?
Dr. Edelberg. There are a host of ideas. The problem here
is not a shortage of ideas. There are many ideas for how most
effectively to raise tax revenue while minimizing any kind of
negative incentive effects. There's a whole host of ideas of
where we can cut spending. I think one of the reasons why this
is so politically challenging is that the direct economic
effects of having higher debt are actually rather modest.
So I believe the empirical models that show that higher
debt as a share of GDP raises interest rates and crowds out
private investment, but take the significant reduction in debt
as a share of GDP under the GOP's plan where the sum was put
up. CBO's projections are that GDP per person will rise from
78,000 to 88,000 per person in 2022 dollars under the baseline
through 2033.
That very significant reduction in debt as a share of GDP
would mean instead of rising to 88,000 per person, it would
rise to 89,000 per person. These effects are moderate and so
the tradeoffs are hard and it makes the politics hard.
Representative Beyer. Thank you. My friend, Mr.
Schweikert's pointed out that 31 percent of medicare costs are
diabetes right now. Astonishing. One last quick idea. I had
dinner with Martin Wolfe the other night from the Financial
Times, who in his latest book he's dedicated a whole chapter to
citizen juries. The idea that in our very polarized political
world it sometimes makes sense to go get a bunch of citizens
randomly picked, put them together for a year of studying the
thing and come up with a bipartisan--not even bipartisan--a
citizen and then present it to the Congress where we get to
vote yes or no on it as opposed to the internal fights that we
always seem to have.
Director Mulvaney. I hate to interrupt, but wasn't there
some famous American one time who said he'd rather be governed
by a random selection of 400 people from the D.C. phone book
than by the elected officials? Looking at Mr. Lee, who was
that? It's a famous Libertarian. I can't remember who it was.
Representative Beyer. With that, I yield back to myself,
and recognize Senator Lee.
Senator Lee. I think it might've been Bob Murray--not Bob
Murray, Charles Murray.
Director Mulvaney. I'll look it up while you're doing, but
yeah. I think it was Cato, yeah--but no. It might've been--
well, anyway.
Senator Lee. We'll think about it. All right. Mr. Mulvaney,
let's start with you. Back when you were Congressman Mulvaney,
which was awesome in addition to the many other awesome hats
you've worn, but in 2014, almost a decade ago, you had an
exchange with then Treasury Secretary Jack Lew, do you remember
this? You had an exchange with him in which you were asking him
some questions about why the government was pretending to lack
the capacity to prioritize income revenue to ensure that the
first money in the door went out the door to cover interest on
debt? Do you remember this exchange?
Director Mulvaney. I do.
Senator Lee. Now do you recall and can you provide some
thoughts as to why Democratic appointees in both the Obama
Administration and now the Biden Administration, particularly
in their Treasury Departments, so consistently so defiantly
refuse to state that bond holders will be paid in full if, in
fact, we go past the X date?
Director Mulvaney. My professional opinion is that it's
leverage politically.
Senator Lee. It's leverage politically. Did they provide
you an answer at the time?
Director Mulvaney. I don't remember what the answer was.
Senator Lee. What you did not hear from them was any legal
reason or any mathematical reason or any financial reason why
they couldn't' and shouldn't and under the 14th Amendment,
wouldn't already be required to--pay first those creditors
whose payments have become due.
Director Mulvaney. The explanation I've always heard, at
least since--there used to be an argument back when I first got
to Congress that it might not be legal, but I think we put that
aside now. I heard Dr. Edelberg mention it, but I'm pretty sure
there's a GAO report from the eighties that makes it clear it's
okay to prioritize them, at least it's legal.
The argument I've heard ever since that is that they're
simply not capable of doing it from a technological standpoint.
Their systems don't allow it to do that, but they've taken no
steps to change the systems.
Senator Lee. Now you referred a month ago to when you first
got to Congress. I believe you and I were both elected in the
same year, back in 2010. We arrived here, were sworn into
office in our respective chambers in 2011. We had debt ceiling
fight back in 2011. Remember that one?
Director Mulvaney. I do.
Senator Lee. That one was memorable. One of the many things
that was interesting about it and somewhat memorable. It's been
brought up here today is the downgrade, the downgrade that was
issued. Do rating agencies downgrade people for not borrowing
enough?
Director Mulvaney. No.
Senator Lee. Did they then?
Director Mulvaney. No.
Senator Lee. Did they downgrade us specifically because we
were not eager to raise the debt ceiling without significant
conditions attached to it?
Director Mulvaney. My understanding from reading the report
is that the primary reason that they downgraded us was because
we had no plan to fix our fiscal condition going forward, even
though they--keep in mind they downgraded us after we cut the
deal. So we had raised the debt ceiling and still got the
downgrade because they looked at the deal we cut and said, you
know what, that's not even close.
Senator Lee. So in other words, they weren't satisfied that
we had an adequate plan moving forward to reduce overall debt.
Director Mulvaney. And we still don't.
Senator Lee. And yet, to this day, for the last 12 years it
has become an almost accepted trope, an almost accepted
narrative as if it were canonical scripture that we got
downgraded because we were not so eager to increase the debt
ceiling that we were willing to increase the debt ceiling
without a plan moving forward. In fact, it's quite the opposite
of how it's often characterized, isn't it?
Director Mulvaney. It is. In fact, I don't believe that any
of the Democratic Committees have ever asked the rating
agencies to come in and talk about why they gave the downgrade.
Senator Lee. Gee, I wonder why that is? Now there are
reason of course why these things matter because what is it
that happens to us if we continue to punt it, if we continue to
kick it forward, we continue to increase the debt ceiling,
continue to increase the debt as a percentage of GDP without
addressing the underlying spending problem. What does that
ultimately do and what does that do to our actual risk of an
actual default?
Director Mulvaney. My fear is that the same thing happens
to us on debt that has happened to us on modern monetary theory
which you don't hear much about anymore the last couple of
weeks or the last couple of months since we had inflation.
Remember that theory that you can just spend as much money as
you wanted to and it doesn't make any difference.
Senator Lee. I do. And I be darn it turned out not to be
true.
Director Mulvaney. It's true until it's not. And all these
theories about debt to GDP doesn't really make any difference,
which Dr. Edelberg has mentioned here today, might be true
until it's not and then what do you do? We have no plan to get
out of the debt. Listen, I have nothing but respect for Mrs.
Porter. I served with her, Representative Porter, as she told a
wonderful little analogy about her credit card, but I'll bet
you there's a significant difference. I bet she has a plan for
how to pay off her credit card. We have none.
Senator Lee. Indeed. We do, however, have a plan. We have a
plan that was passed by the House of Representatives, a plan
that would bring down our debt by five trillion dollars over
the 10-year budget window with something in the neighborhood of
around a trillion dollars, depending on which accounting method
you use, a little over or a little under a trillion the first
year alone. It would do so in a way that would help us approach
this debt issue more responsibly.
To date, it is the only plan on the table. It is the
negotiation. People say, well, it still needs to be negotiated.
Right now it is the negotiation because for 100 days President
Biden refused to even to speak to Speaker of the House, Kevin
McCarthy about this, insisting that all the time, all the while
that he would take nothing less than a clean debt ceiling
increase. Yet, another one of the same sorts of things that
would predictably lead to a credit rating downgrade.
I urge all involved, including and especially President
Biden, move forward with this. There is only one plan on the
table and with as late you've waited, you need to move forward.
Let's pass the House Pass bill. Thank you.
Representative Beyer. Thank you. And I recognize the
Chairman of U.S. House of Representatives Budget Committee, Mr.
Arrington.
Representative Arrington. Thank you, Mr. Beyer. Just to
follow on Senator Lee's closing comments, I don't think it's
too much to ask the President, who at one time as senator and
most recently as Vice President, negotiated fiscal reforms and
a debt ceiling negotiation. I am a little taken aback when
people act like this is somehow unprecedented and wring their
hands as if we're just completely out control or we can't raise
the debt ceiling responsibly while dealing with this
unsustainable deficit spending and debt.
Well, we've done it. In fact, some of the most significant
fiscal reforms have come out of a debt ceiling legislation and
negotiations and it only makes sense. I mean I really think
most Americans say let me see, debt ceiling, evaluating the
indebtedness of our country, it's impact on our financial
health, and our future and then act responsibly.
I'm from Hale County and we say, hell, every American
family is doing that, not necessarily because they want to, but
because they have to. And they have to more today, my friend,
than they have in the past because their wages and income are
shrinking relative to inflation. It's a fact that since '21,
January of '21, a family of four has lost $13,000 over an
entire year. Now that's, what, a thousand dollars a month. And
six out of ten Americans live paycheck to paycheck. I don't
know how in the world they're doing it.
But I think it is quite disconnected, and I appreciate that
there are other ways to solve this than maybe the solutions
that we've put forward, but to do nothing or to say or suggest
that we have to do a clean debt ceiling or it's reckless is so
out of touch with what the American people are having to do
tighten their belts and change their spending habits.
That's why three out of four American says we expect the
President and my Democratic colleagues and all political
leaders of this greatest country in human history to come to
the table and act like adults. I am the proud author of the
Limit Save Grow Act. I think we have to limit spending by
rightsizing a bureaucracy that's 40 percent bigger than it was
in '19. Let's just start there. It's 30 percent bigger from a
discretionary spending perspective than it was going into
COVID.
CBO said that we'd be spending in '19 before COVID this
year hundreds of billions of dollars less than we're spending
today. We're suggesting we go back six months and apocalypse
and people aren't buying that and they're imploring and praying
that our leaders come together and do what the House did, which
is past the debt ceiling. One that pay our bills and protect
our good faith and credit while acting responsibly,
acknowledging that $10 trillion in two years.
And again, Republicans have contributed to these problems
over the years, and I'm first to say it, and I'll say it at
every meeting for credibility because it's true. But $10
trillion in two years, six of which was added to the national
debt a sustained record inflation, soaring interests,
nosediving into recession, closer to the precipice of a debt
crisis, which we don't know when it hits, but when it does you
can't bail out of that one.
You can bail out of COVID and other crises. What if we have
a war with China? How are we going to borrow the money at 123
percent debt to GDP? When we're paying $600 billion in interest
alone, not a single soldier, sailor safety net for seniors
anti-poverty program, that's going to triple in 10 years. In
two or three years, we'll spend more on interest than the
entire budget of the Defense Department.
If that doesn't make you shutter to your core, and I don't
care what your political views are or your affiliation, party
affiliation, then you're not reading the same material I'm
reading.
Mr. Mulvaney, I've said a lot. I just ask you to comment
about a debt crisis. We talked a lot about default. We've
remedy that with our legislation. Do you worry about a debt
crisis down the road at some point that could be catastrophic,
maybe irreparable? And I know my time's expired. If the
Chairman would just indulge the answer.
Director Mulvaney. The short answer is yes. As the former
budget director, it's the thing that keeps you up at night.
Again, the comparison to monetary theory, it holds which is
that, okay, it seems to explain things until it doesn't and
right now we sort of assume that things are okay until they're
not. And when they're not, I don't know what we do because
we've got no plan to get out of debt. Our plan right now is to
continue to add to the debt.
I think that the budget that I wrote in 2018 and maybe the
one right after that Russ Vought wrote was the last proposed
budget that we expect to balance in 10 years. You'd be hard
pressed to balance the budget right now. You really would. It
does worry me that we wake up one morning and people don't lend
us money. And when that happens we will print money because we
will continue to want to spend it and that's inflationary and
that's how great countries fail and that's what worries me.
Representative Arrington. I thank Chairman Beyers for his
indulgence.
Representative Beyer. Thank you, Mr. Arrington. Let me
yield to my friend, Mr. Schweikert, for a few comments while
we're waiting for Senator Schmitt.
Vice Chairman Schweikert. Thank you, retread Chairman
Beyer. I don't know if that's polite, but it was meant to be
funny. We will be working on I believe, the next hearing will
be on the House side--I will work with Chairman Heinrich. We
would actually like to have a discussion on some of the primary
drivers of U.S. sovereign borrowing and we have to be honest
here, it's healthcare.
Substantially, the single biggest input is diabetes. We
will also, if we're going to be intellectually honest, we
should also talk about some of the latest statistics on obesity
in America. You take a look at how many of our brothers and
sisters in America are dying early and how much of that is
health, but it's also there's some back of the napkin math that
says it could be the single greatest impact we have on U.S.
sovereign debt, income inequality. From some of my Tribal
groups, it is what would happen if we basically spent a decade
taking on diabetes, whether it be from the new stem cell
potential care to GLP-1s to the farm bill and other things.
There are ideas out there and the beauty of that
discussion, we haven't turned that one partisan yet. It's
caring about people and obesity and diabetes is that Republican
or Democrat? At this point it's just moral. So please, if
anyone has input to those of us, please send it our way. Yield
back.
Representative Beyer. Thank you, Representative Schweikert.
I recognize Senator Schmitt for his comments and questions.
Senator Schmitt. Thank you. Mr. Dutta-Gupta, I wanted to
follow up on a couple of things. I know in your written
testimony it talked about you object to any repeal of the so-
called Inflation Reduction Act is ill advised, is that
accurate?
Mr. Dutta-Gupta. I think we're talking about energy
provisions.
Senator Schmitt. Yes.
Mr. Dutta-Gupta. The tax provisions.
Senator Schmitt. Right.
Mr. Dutta-Gupta. They help us achieve our climate goals.
Senator Schmitt. Does that make things more expensive at
all? Do you think those sorts of onerous regulations on, say,
things like dishwashers or refrigerators make those items more
expensive?
Mr. Dutta-Gupta. I'm not familiar with or did not focus on
regulations.
Senator Schmitt. Okay. Let's look at--because I do want to
talk about inflation. So I think there's no way you could argue
that the amount of money that we have spent in the last couple
years hasn't contributed to inflation. You would agree with
that, right?
Mr. Dutta-Gupta. I think throughout the world. Yes.
Senator Schmitt. Well, no, I'm talking about the United
States in this Congress or the previous Congress spending money
in the United States. You would agree with that, right?
Mr. Dutta-Gupta. I think that among other factors there may
have been more demand in the economy than the supply could
meet, but in my view it's the supply that was the challenge,
especially in the pandemic.
Senator Schmitt. So spending has helped lead to inflation.
Correct?
Mr. Dutta-Gupta. Relative to the supply challenges. Yes.
Senator Schmitt. And you mentioned that one of your
objections with any work requirement is that we shouldn't do
anything to increase hardships. That was your testimony
earlier, right?
Mr. Dutta-Gupta. That's right.
Senator Schmitt. Does the amount of spending that the
federal government undertake, and thereby inflation, doesn't
that lead to hardship for lower-income individuals?
Mr. Dutta-Gupta. All other things being equal, inflation
can be harmful to lower-income individuals, but we also for the
first time in recorded history completely closed the black/
white employment gap and had the lowest unemployment rates in
half a century.
Senator Schmitt. Well, I mean you also mentioned that
communities of color are usually last in, first out, right?
Mr. Dutta-Gupta. In the labor market, yes.
Senator Schmitt. Right. But I just want to stay on the
topic of hardship. If things are more expensive for lower-
income individuals, if milk is more expensive or gas is more
expensive, that disproportionally affects lower-income
individuals. You would agree with that, right?
Mr. Dutta-Gupta. Yes.
Senator Schmitt. Yes. And I think that's the challenge,
right, we're facing. That the sheer amount of money that's
being spent, and including in the budget that the President has
submitted, seven trillion dollars' worth of new spending, five
trillion dollars' worth of revenue, it's deficit spending,
number one. But the amount of money that's being pumped into
the economy that and our energy policy I mean it's not a
tornado or an act of God. Inflation there's a formula for it
and if you have more expensive energy or less energy and you're
spending trillions and trillions and trillions of dollars that
the cost of everything is going to go up and I appreciate you
advocating for disadvantaged communities.
I would think that that's exactly what I'm doing by--when
we make things more expensive like we have.
Mr. Dutta-Gupta. We just don't want to cause mass
unemployment. And of course the Federal Reserve will respond as
prices go up.
Senator Schmitt. Right. Well, they raise interest rates,
which makes things more expensive, right, and so that's one
issue. And you talk about employment. I do want to talk about
some other policies that have contributed to this, vaccine
mandates, in particular. We saw millions of people displaced
from their jobs from vaccine mandates and the Chairman had
mentioned previously that we're talking about spending. We're
talking about revenue. We're talking about overall economic
growth. The idea that we were firing nurses because of vaccine
mandates that's certainly didn't help the situation either,
right?
Mr. Dutta-Gupta. For me?
Senator Schmitt. Yes.
Mr. Dutta-Gupta. I don't know. Probably protects public
health, so that could keep more people able to work and well.
Senator Schmitt. So firing a nurse because she doesn't want
to take a vaccine your argument is that protected public
health?
Mr. Dutta-Gupta. That would be the argument for vaccine
mandate. Yes.
Senator Schmitt. Right. Well, okay. Well, I would argue
that didn't happen and we're talking about people who are
disproportionately affected. I mean you're talking about
advocating for communities of color probably had a lower
vaccination rate, right?
Mr. Dutta-Gupta. Yes.
Senator Schmitt. Correct. So probably disproportionately
more fired because they chose not to take a vaccine, right?
Mr. Dutta-Gupta. I don't know if it was for particular
occupations. I don't know the data, but of course we kept
people alive with those mandates.
Senator Schmitt. Okay. All right. I'm not going to get into
a COVID debate with you, but I would argue that by forcing 80
million people through OSHA to have a medical procedure or lose
your job was COVID tyranny and affected people. We're talking
about advocating for people who already find it difficult to
afford things by losing their job because they were making that
decision I can't believe that that's the best policy for the
United States of America. So anyway, all of these things in a
vacuum don't make a lot of sense. The spending is out of
control and I don't hear anything really in your testimony
about controlling spending. It's about revenue and it's about
not creating any hardships, but inflation, in and of itself,
has created a hardship.
Mr. Dutta-Gupta. I have lots of ideas about controlling
spending if we have time.
Senator Schmitt. Well, I just want to ask one final
question very quickly. Doctor, there was a scenario before I
came back and I'm the last person to inquire, so I promise I'm
going to wrap this up very quickly. But we went through the
scenario of what happens if I overspend and what happens to the
credit rating and that sort of scenario. I mean there's a new
proposed rule by the Biden Administration to punish people who
actually have a good credit rating, who played by the rules,
who didn't go down that road, right, to actually pay more for
their mortgage to subsidize mortgages for people who have lower
credit scores. Do you think those are appropriate incentives
that we ought to encourage?
Dr. Edelberg. I apologize. I'm not familiar with the
Executive Order.
Senator Schmitt. So if you have a good credit rating you
will pay more for your mortgage to subsidize mortgages for
people with poor credit ratings. Do you think that's good
policy?
Dr. Edelberg. So we use housing policy in this country and
mortgage policy in this country in all sorts of complicated
ways and part of is redistributive. Think about the support
that we offer to FHA. So I can believe that one of the policies
that we would want to incorporate into the enormous federal
support for mortgages and homeownership in this country
includes redistribution to spur home ownership among lower-
income communities. That would just be part of a panoply of
policies.
Senator Schmitt. It's interesting. And I'll close with
this. It's fascinating that you're here telling us that--which
I agree with, by the way, this idea that we continue to deficit
spend and this is terrible policy and it's irresponsible and
then later on in your testimony you're now saying it's actually
okay to punish people who played by the rules to have to pay
more for their mortgage. I find that incredibly inconsistent,
so I don't have any other questions, Mr. Chairman.
Representative Beyer. First of all, let me thank you all
for being here. I'm eager to fact-check the million people that
lost their jobs because of vaccine. I'm going to have to do
that today.
Senator Schmitt. Love to do that. Yes.
Representative Beyer. Also in defense of Dr. Edelberg, that
is not what she said. When you asked her about this new rule,
she said she didn't know about the rule. I paid great attention
and I've never heard of this rule either. This sounds like a
QAnon rule, but we will----
Senator Schmitt. Excuse me, Mr. Chairman. What did you say?
Representative Beyer. I said that this sounds like a QAnon
rule.
Senator Schmitt. Well, unless Joe Biden is a member of
QAnon, I would encourage you to look at the rule.
Representative Beyer. Once again, I will look at it.
Senator Schmitt. Sure.
Representative Beyer. And with that, I would like to thank
you for sitting here these two and a half hours to be part of
this. The risk to our country's wellbeing couldn't be greater
and millions of American jobs are at risk if we don't solve
this, as is our standing with the nation that pays its bills.
Congress must act to raise the debt limit. I think we're all in
agreement on that. And I would like to thank each of our
panelists for their contribution to this ongoing discussion.
And thank you to my colleagues for being part of this
discussion, the ones who remain.
Questions for the record may be submitted after the
hearing. The record will remain open for three business days
and the hearing is now adjourned.
[Whereupon, at 4:08 p.m., Wednesday, May 17, 2023, the
hearing was adjourned.]
SUBMISSIONS FOR THE RECORD
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