[House Hearing, 117 Congress]
[From the U.S. Government Publishing Office]
WHY CONGRESS NEEDS TO
ABOLISH THE DEBT LIMIT
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HEARING
BEFORE THE
COMMITTEE ON THE BUDGET
HOUSE OF REPRESENTATIVES
ONE HUNDRED SEVENTEENTH CONGRESS
SECOND SESSION
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HEARING HELD IN WASHINGTON, D.C., FEBRUARY 16, 2022
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Serial No. 117-6
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Printed for the use of the Committee on the Budget
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]
Available on the Internet:
www.govinfo.gov
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U.S. GOVERNMENT PUBLISHING OFFICE
47-122 PDF WASHINGTON : 2022
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COMMITTEE ON THE BUDGET
JOHN A. YARMUTH, Kentucky, Chairman
HAKEEM S. JEFFRIES, New York JASON SMITH, Missouri,
BRIAN HIGGINS, New York Ranking Member
BRENDAN F. BOYLE, Pennsylvania, TRENT KELLY, Mississippi
Vice Chairman TOM McCLINTOCK, California
LLOYD DOGGETT, Texas GLENN GROTHMAN, Wisconsin
DAVID E. PRICE, North Carolina LLOYD SMUCKER, Pennsylvania
JANICE D. SCHAKOWSKY, Illinois CHRIS JACOBS, New York
DANIEL T. KILDEE, Michigan MICHAEL BURGESS, Texas
JOSEPH D. MORELLE, New York BUDDY CARTER, Georgia
STEVEN HORSFORD, Nevada BEN CLINE, Virginia
BARBARA LEE, California LAUREN BOEBERT, Colorado
JUDY CHU, California BYRON DONALDS, Florida
STACEY E. PLASKETT, Virgin Islands RANDY FEENSTRA, Iowa
JENNIFER WEXTON, Virginia BOB GOOD, Virginia
ROBERT C. ``BOBBY'' SCOTT, Virginia ASHLEY HINSON, Iowa
SHEILA JACKSON LEE, Texas JAY OBERNOLTE, California
JIM COOPER, Tennessee MIKE CAREY, Ohio
ALBIO SIRES, New Jersey
SCOTT H. PETERS, California
SETH MOULTON, Massachusetts
PRAMILA JAYAPAL, Washington
Professional Staff
Diana Meredith, Staff Director
Mark Roman, Minority Staff Director
CONTENTS
Page
Hearing held in Washington, D.C., February 16, 2021.............. 1
Hon. John A. Yarmuth, Chairman, Committee on the Budget...... 1
Report submitted for the record.......................... 3
Prepared statement of.................................... 8
Hon. Jason Smith, Ranking Member, Committee on the Budget.... 10
Prepared statement of.................................... 12
Letter submitted for the record.......................... 45
Hon. Steny Hoyer, Majority Leader of the House of
Representatives............................................ 15
Prepared statement of.................................... 17
Dr. Laura Blessing, Senior Fellow at the Government Affairs
Institute at Georgetown University......................... 18
Prepared statement of.................................... 21
Dr. Louise Sheiner, the Robert S. Kerry Senior Fellow in
Economic Studies and Policy Director for the Hutchins
Center on Fiscal and Monetary Policy at the Brookings
Institution................................................ 27
Prepared statement of.................................... 29
Ms. LaJuanna Russell, Founder and President of Business
Management Associates, Inc. and Chair of the Small Business
Majority................................................... 33
Prepared statement of.................................... 35
Hon. Mick Mulvaney, former Director of the Office of
Management of Budget, Chief of Staff to the President of
the United States, and also former representative from the
state of South Carolina.................................... 37
Prepared statement of.................................... 39
Hon. Sheila Jackson Lee, Member, Committee on the Budget,
statement submitted for the record......................... 84
Questions submitted for the record........................... 91
Answers submitted for the record............................. 92
WHY CONGRESS NEEDS TO ABOLISH THE DEBT LIMIT
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WEDNESDAY, FEBRUARY 16, 2022
House of Representatives
Committee on the Budget
Washington, DC.
The Committee met, pursuant to notice, at 11 a.m., via
Zoom, Hon. John A. Yarmuth [Chairman of the Committee]
presiding.
Present: Representatives Yarmuth, Jeffries, Boyle, Price,
Schakowsky, Morelle, Chu, Plaskett, Wexton, Scott, Jackson Lee,
Peters, Jayapal; Smith, McClintock, Grothman, Smucker, Carter,
Cline, Boebert, Donalds, Feenstra, Hinson, Obernolte, and
Carey.
Also present: Representative Hoyer.
Chairman Yarmuth. This hearing will come to order.
Good morning and welcome to the Budget Committee's hearing
on ``Why Congress Needs to Abolish the Debt Limit''.
Without objection, the Chair is authorized to declare
recesses of the Committee at any time.
Before I begin, I want to welcome the newest Member of the
Budget Committee, representing Ohio's 15th District, Mike
Carey. Mike served in the Army National Guard and the energy
industry before coming to Congress. Welcome, Mike Carey, to the
Committee. We are happy to have you here.
In addition, we are honored to have Majority Leader Steny
Hoyer here with us this morning.
Without objection, the gentleman from Maryland, the
distinguished Majority Leader, is permitted to join the
Committee for the purposes of participating in this hearing.
Without objection, so ordered.
Now, before I welcome our witnesses, I will go over few
housekeeping matters. Today the Committee is meeting virtually.
Before we begin, I would like to remind Members participating
in this proceeding to keep your camera on at all times, even if
you are not under recognition by the Chair. Members may not
participate in more than one committee proceeding
simultaneously. If you choose to participate in a different
proceeding, please turn your camera off.
Members are responsible for their own microphones. Please
mute your microphones when you are not speaking. This will help
prevent feedback and other technical issues. Please remember to
unmute yourself when you seek recognition. Note that the Chair
or staff designated by the Chair may mute participants'
microphones when they are not under recognition for the
purposes of eliminating inadvertent background noise. We are
not permitted to unmute Members unless they specifically
request assistance. If I notice that you have not unmuted
yourself I will ask if you would like staff to unmute you. If
you indicate approval by nodding, staff will unmute your
microphone. They will unmute your microphone under any other
conditions.
I would like to remind Members that we have established an
email inbox for submitting documents before and during
committee proceedings. We have distributed that email addressed
to your staff.
Now, I will introduce our witnesses.
This morning we will be hearing from Dr. Laura Blessing,
Senior Fellow at the Government Affairs Institute at Georgetown
University, Dr. Louise Sheiner, the Robert S. Kerry Senior
Fellow in Economic Studies and Policy Director for the Hutchins
Center on Fiscal and Monetary Policy at the Brookings
Institution, Ms. LaJuanna Russell, Founder and President of
Business Management Associates, Inc. and Chair of the Small
Business Majority, and one of our former colleagues and a
friend, the Honorable Mick Mulvaney, former Director of the
Office of Management of Budget, Chief of Staff to the President
of the United States, and also former representative from the
state of South Carolina.
We welcome all of our witnesses.
I will now yield myself five minutes for an opening
statement.
We have made remarkable strides to heal our economy in
2021, with the fastest GDP growth in nearly four decades, the
most jobs created a single year ever, and unemployment down to
4 percent, more than three years ahead of projections. And we
recently received a CBO report that showed record wage growth
and increased consumer purchasing power. I would like to thank
Ranking Member Smith for requesting this enlightening report,
which also found that wage growth is in fact outpacing
inflation, and I would like to submit it into the record at
this point.
Without objection, so ordered.
[Report submitted for the record follows:]
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Make no mistake, these gains were not inevitable. Thanks to
the American Rescue Plan and President Biden's and
congressional Democrats' economic agenda, our recovery is
beating projections and setting records. We have made
tremendous progress in a short period of time, but there is
still more work to be done. Elevated prices, which we believe
are mostly temporary, are a serious issue. That is why we have
passed legislation to fix supply chain bottlenecks, lower costs
for families, revitalize American innovation and manufacturing,
and create good-paying jobs here in America. The investments in
the Bipartisan Infrastructure Bill are quickly being rolled out
to every state across the country, and soon we will enact the
America COMPETES Act to get our economy fully firing on all
cylinders.
However, there is a problem. The debt ceiling now plays an
outsized role in our politics and congressional deliberations--
something that was never intended. This century-old law was
created to make borrowing easier, not harder. Its misuse has
already jeopardized our ongoing recovery once, and now
threatens the future of our economy and the American people. We
will get into the details of why we think it needs to be
abolished during this hearing, but because I cannot think of
another provision of budget law that has been as misused,
misunderstood, and misrepresented as much as the debt limit, I
want to lay down the facts right away.
The debt ceiling is not the amount we can spend. It is not
like the limit on credit card, an analogy we hear a lot. The
debt limit is the amount we already owe. It is the bill for
previous spending and tax decisions made by Congress. You
cannot reduce the national debt by failing to raise the debt
ceiling, and we have 100 years of evidence of that.
Now, you will default on the full faith and credit of the
United States by failing to raise the debt ceiling, and that
would be cataclysmic for our economy and American households.
The debt ceiling has been raised to pay for the actions of
both Democratic and Republican Congresses. Here is an example:
Republicans enacted massive tax cuts for big corporations and
the rich in 2017. Congress has needed to raise the debt limit
every year since and will need to for several more years just
to cover the growing debt from this tax giveaway.
So even if Congress did not spend a single additional dime
after President Biden was elected, no COVID aid, no
infrastructure bill, nothing, we would still need to raise the
debt ceiling to cover Republicans' deficit ballooning and
regressive tax policy.
Clearly, the only real role the debt ceiling now plays is a
chip to be exploited for political gain. But there is a real
human cost to this political gamesmanship. Every threat of
default comes with the risk of actually defaulting. And in a
closely divided Congress, with Members who have openly called
for destroying the full faith and credit of the United States,
that is a risk we can no longer afford.
As I said before, a full breach of the debt limit would be
catastrophic. The immediate fallout would have severe,
widespread, and painful consequences for the American people
and our economic and national security. Treasury would be
unable to fund Social Security, Medicaid, nutrition benefits,
military salaries, law enforcement, unemployment insurance, and
more. Americans would be forced to go without these vital
supports until Congress managed to lift this imaginary ceiling.
A breach would also cause immediate financial market chaos,
which would likely spread around the world. This would lead to
higher interest rates and make consumer products, like car
loans and mortgages, more expensive, hurting American families.
It would also likely threaten our status as the global
reserve currency and create an opening for a global competitor,
like China, to step in and take our place at the top of the
global economy. Again, Americans would be forced to pay the
price of Congress failure with a weakened U.S. Dollar and
higher costs.
In Congress, in this environment, and as long as the debt
limit remains in place, there is a direct threat to our entire
economy, and Congress is becoming less and less capable of
defusing it.
It is time to abolish the debt ceiling.
I look forward to hearing from our panel of witnesses who
will share their expert analysis and first-hand experience with
the costs and risks of this outdated law.
With that, I would like to yield to the Ranking Member, Mr.
Smith. Unmute your microphone please and you have five minutes
for your opening statement.
[The prepared statement of Chairman Yarmuth follows:]
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Mr. Smith. Thank you, Mr. Chairman.
I would like to welcome our newest Member of the Committee
as well, Mr. Carey from Ohio. It is great that our Committee is
at full representation. Hopefully, the Democrat Party will not
remove any more from our Committee and we get to keep this same
membership moving forward.
But I would also like to welcome our witnesses today, which
includes one of our former colleagues and former Member of this
Committee, Director Mulvaney, who coincidentally was sworn in
as head of the White House Office of Management and Budget
almost exactly five years ago today. At the time, that was the
latest ever that an OMB Director assumed the job in a new
administration, a little less than one month after a new
president was sworn in. But under the Biden Administration, we
are now a year longer than that without an OMB Director.
There is a lot to unpack today, but before I start I have
to address the CBO score, the CBO letter that you submitted
into the record. I am glad that you did because in fact that
record shows and proves, according to the Congressional Budget
Office, that inflation is outpacing wage growth. And when you
talk to any American--any American--they won't buy what you are
selling. They know that they can't purchase as many goods today
as what they could a year ago and it is because of inflation.
And whenever you try to say that increases in prices are only
temporary, they are not buying it either. And you know what,
the economists aren't either--7 1/2 percent, year-to-year, the
highest inflation in 40 years--give me a break. But I am glad
you put that in the record because in fact that CBO score
showed that inflation in rural areas is 130 percent more than
in urban areas. So thanks for putting that into the record, Mr.
Chairman.
There is a lot to unpack today, but I will start by saying
that it seems Budget Democrats are working at cross-purposes.
Last year we had a hearing about Congress' power of the purse
and how to reassert our constitutional role in budgeting and
spending so that it wasn't being unserved by executive branch
decisionmaking. What we learned was that if Congress did its
job, budgeting, appropriating, and authorizing programs on a
timely basis, it would go a long way to removing the ability of
unelected bureaucrats to make decisions about government
spending while also restoring some fiscal sanity to Washington.
And yet today we are talking about passing off Congress'
responsibility for the debt to unelected career government
employees. This would severely undermine, if not destroy, the
power of the purse my colleagues claimed they believed in less
than a year ago. It would allow Congress to take credit for
spending without being accountable for the debt it creates.
Which brings us back to today's hearing. The real reason we
are here is because Democrats want to get rid of any obstacles
standing in the way of their radical agenda, an agenda that has
unleashed a multitude of crises, the highest spike in prices in
40 years, and national debt above $30 trillion--and that is
with a ``t''-businesses facing chronic worker shortages, and a
supply chain crisis.
For the last 12 months, Mr. Chairman, Democrats have been
focused on their partisan agenda while the check engine of the
Biden economy has been on and flashing bright. Inflation rose
faster in Joe Biden's first year in office than President
Trump's entire first term. Democrats first denied inflation
existed. You denied today and said that it is only temporary in
some cases and then dismissed it as transitory. Even Members of
this Committee, like you, Mr. Chairman, said panicking over
inflation was uninformed and misguided. Economists warned for
months of the impact that reckless government spending would
have on inflation. What did Democrats do? They spent $2
trillion in the President's bailout bill, a bill they claim was
meant for COVID, but less than 9 percent went to combatting the
virus.
The crisis has been especially painful for Americans living
in rural communities. Recently, the CBO found inflation--what
you just submitted to the record--in rural areas was 130
percent that of urban areas and they experience 25 percent
slower real wage growth than urban areas.
Now Democrats are claiming a $5 trillion spending bill will
fix inflation, even though it was written while Democrats were
either denying inflation or calling it transitory. And even
though the CBO has confirmed it would add $3 trillion to the
debt, if we combined the $68 trillion in spending Democrats
called for in their Fiscal Year 1922 budget, with what they
have passed since Nancy Pelosi became Speaker in 2019, it would
be more than all taxes paid by every American in U.S. history.
For the last 40 years the debt limit has typically been one of
the only times that Congress has had a serious conversation
about the national debt. Debt limit negotiations has given us
real checks on government spending, including statutory limits
on discretionary spending like those in the Budget Control Act
of 2011.
If the debt limit didn't exist or was raised to a gazillion
dollars, as the Chairman has suggested in the past, Washington
Democrats would spend without end. Democrats claim the
government can print as much money as it wants to spend----
Chairman Yarmuth. If the gentlemen--if the gentleman
could----
Mr. Smith [continuing]. and budget----
Chairman Yarmuth. If you could wrap up please. Your time
has expired. I have given you much more time, but if you can
wrap up please.
Mr. Smith. All right.
Well, Mr. Chairman, we have seen what happens when Congress
tries to exempt itself from the basic laws of economics. We
should not allow Congress to exempt itself from our budget laws
and hand over more responsibility to unelected bureaucrats.
I yield back.
[The prepared statement of Jason Smith follows:]
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Chairman Yarmuth. I thank the Ranking Member for his
opening remarks.
I would now like to welcome the Majority Leader of the
House of Representatives, Steny Hoyer, to our hearing today.
And he is recognized for his opening remarks.
Majority Leader Hoyer, welcome to the Committee.
Mr. Hoyer. Mr. Chairman and Mr. Smith, thank you very much
for this opportunity to testify on this very important issue.
Frankly, I won't take the time to rebut Mr. Smith's
remarks, but I will do so in the future. But there are not
relevant. Either when Republicans were in charge and had the
presidency, the Senate and the House, nor are they relevant
today. As a matter of fact, America is one of the few countries
in the world that has a debt limit and none of them go through
the crises that we do. There are three others at least in the
industrialized world, go through the gyrations that we go
through when we meet the debt limit in position, which would
shut down the government and destroy the economic system in the
world if we breached that debt.
I appreciate the opportunity to speak today to the need to
abolish the debt limit as it exists today. The United States is
one of only two major industrialized nations to have an
arbitrary limit on the amount of debt its government can issue.
But we are the only one for which the limit is even remotely
within reach.
Denmark had the good sense to set theirs so high as to be
effectively repealed. I will expect we will hear from our
panelists today about the many ways that hitting the debt limit
and allowing for default on our nation's obligations would
cripple our economy and likely the global financial system,
which is why every major Republican leader and president and
every Democratic leader has said the debt limit has to be
raised any time we need to raise it. Those consequences are
what makes the debt limit so dangerous and such a tempting
hostage, such a tempting hostage.
The weaponization of the debt limit puts our country at
risk. The serious threat of potential default in 2011 caused
Standard & Poor's to downgrade America's credit rating for the
first time based on its assessment that our political
dysfunction could inadvertently trigger a financial
catastrophe, rather than our economic or fiscal health. Sadly,
Mr. Chairman, I share that assessment. I take some comfort
though in knowing that I am not alone in believing that we must
act aggressively to protect the full faith and credit of the
United States.
Last September Doug McMillon, Walmart's CEO and Chair of
the Business Roundtable, wrote a letter with then BRT president
Josh Bolten to Congress. It said, and I quote, ``Congress has
the authority to lift the debt ceiling to safeguard the full
faith and credit of the United States and the responsibility to
do so.'' They were right, of course.
Safeguarding the full faith and credit of the United States
is our responsibility. And to the extent that we are not
meeting our responsibility, fine on us, whether we are
Republicans or Democrats.
We now are operating on a CR. That is a failure of us doing
our job on time. Very frankly, in this instance, it is because
the Senate has not passed a single appropriation bill. Why?
Because the Senate Republicans would not cooperate.
Given recent history, it is clear to me that the best way
to do so is to eliminate the debt limit entirely, not eliminate
the concern about the debt, not eliminate fiscal
responsibility, but eliminate the arbitrary and capricious debt
limit which is demagogued repeatedly every time we address it.
Short of that, significantly deweaponize the near constant
threat of default posed by the debt limit in its current form,
which is what Senator McConnell has proposed. Chairman Yarmuth
and Representative Brendan Boyle just yesterday introduced a
proposal to that end. Building off a process, as I said, first
proposed by Senate Minority Leader McConnell back in 2011. They
are not the only ones with a proposal. Representative Bill
Foster has a bill of his own to repeal the debt limit, the
Bipartisan Policy Center has worked with members like
Representative Scott Peters and Jodey Arrington on a more
complex option to replace it.
Over the years, Democrats, Republicans, labor unions,
business leaders, and economists have endorsed the notion that
at the end of the day default should not be an option. That is
why this hearing is so important and why I am joining you today
to make clear that eliminating the threat of default would be
an act of fiscal responsibility. It would not eliminate our
responsibility and nor would it eliminate our concern about a
debt that is large and growing larger.
I thank the Committee for holding a hearing on this issue
and I look forward, Mr. Chairman and Mr. Smith, to continuing
to work with all of you--with all of you--to ensure the United
States always pays its bills on time. The option is not
available to us nor should it be.
Thank you very much.
[The prepared statement of Majority Leader Hoyer follows:]
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Chairman Yarmuth. Thank you, Majority Leader Hoyer, for
your remarks.
In the interest of time I ask that any other Members who
wish to make a statement submit their written statements for
the record to the email in box established for receiving
documents before and during committee proceedings. We have
distributed that email address to your staffs and you have that
available to you.
Once again, I want to thank our witnesses for being here
this morning. The Committee has received your written
statements and they will be made part of the formal hearing
record. You each will have five minutes to give your oral
remarks.
Dr. Blessing, you are up first. You may unmute your
microphone and begin when you are ready.
STATEMENT OF DR. LAURA BLESSING, SENIOR FELLOW, THE GOVERNMENT
AFFAIRS INSTITUTE AT GEORGETOWN UNIVERSITY
Dr. Blessing. Chair Yarmuth, Ranking Member Smith, Members
of the Committee, my name is Laura Blessing and I am a Senior
Fellow at the Government Affairs Institute at Georgetown
University.
Thank you for inviting me to testify on the topic of why
Congress needs to abolish the debt ceiling. My goal is to
provide additional context for how the debt ceiling has
functioned over time and congressional negotiations and its
consequences.
I would like to make three main points today.
One, Congress had evolved regarding the debt ceiling with a
trend toward greater brinkmanship. Two, the current situation
is particularly worrisome, prompting legislative brinkmanship.
and risking the catastrophe of default.
One, the evolution of the debt ceiling. The debt ceiling
was created in 1917 and further modified in 1939. Notably
raising the debt limit does not incur additional spending.
Rather, it allows the Treasury to borrow money to cover
spending Congress has already voted for. Congress has lifted
the debt ceiling over 100 times under administrations and
congresses of both parties. Both parties have politicized it,
in rhetoric, by having the majority of their caucus or
conference vote in opposition, by the refusal to bring up a
vote, and more since 1953.
From these early years, substantial by not symmetrical
partisan voting patterns are present that worsened over time.
There have also been different reforms with lessons for today.
The 1970's brought two relevant major reforms. The first is the
1974 Budget Act, which reformed a more ad hoc appropriations
process, providing regular oversight in a comprehensive
consideration of total spending and created a new expert body,
the CBO.
Previously, the debt ceiling, while still problematic, had
functioned as a regular vehicle for such consideration in a
process that otherwise largely lacked this. Fiscal stewardship
is an important congressional responsibility. The debt ceiling
is ill suited for this function, but the larger goal is
important.
The second major reform was the creation of the Gephardt
Rule in 1979, whose procedural reform reduced but need not
eliminate the number of House votes on the debt ceiling. And it
was helpful, but vulnerable to reversal. Speaker Gingrich
suspended it in 1995 and it was more definitely repealed in
2011 only to be brought back and modified in less effective
form in 2019.
These reforms show us that fiscal oversight can happen
without the debt ceiling, as well as the benefits and
limitations of procedural reform. The 1980's through 2010
brought greater deficits, greater partisanship, and more
contentious episodes of debt ceiling showdowns.
In this increasingly partisan but not perilous years, a
pattern became clear, those in power tended to vote to raise
the limit.
Point two, the current era. We are now in an error where
Congress has risked default. In 2011 the debt ceiling started
to have teeth. President Obama and Speaker Boehner seriously
attempted a grand bargain, only to be stymied by failures of
communications and fundamentally a GOP position to not raise
taxes in any bargain. Negotiations came down to the wire.
Finally, Vice President Biden and Senate Minority Leader
McConnell forced a deal at the last minute.
Our credit was still downgraded from its perfect AAA rating
for the first time in history. The agreement called for a super
committee to find $1.2 trillion in cuts over a decade. Its
failure led the Budget Control Act of 2011 to create a decade
of sequestration, with those caps raised roughly every two
years by Congress.
Treasury now regularly relies on extraordinary measures to
avoid default. 2013 featured another high stakes debt ceiling
showdown, also affecting markets. This past December a debt
ceiling increase barely passed the Senate on a party line vote
right before Treasury's deadline for default.
Point three, the debt ceiling's effects. The debt ceiling
causes brinkmanship, but there is little evidence that the debt
ceiling provides fiscal restraint. The debt keeps increasing
and the debt ceiling has virtually never been lowered. Consider
where it is in the process. Voting separately to service debt
that has already been incurred by earlier voting decisions is a
reactionary exercise.
Some claim that the debt ceiling has prompted negotiations
that have resulted in fiscal restraint. The counter factual
that even though the ceiling keeps rising, that it could have
risen faster.
A fuller reading of congressional history would note that
amending debt ceiling votes or otherwise using the debt ceiling
to negotiate reforms have had truly minor effects, but also
that such policies have both saved and cost money. In the early
1970's debt ceiling votes attracted additional Social Security
benefits, in the 1980's non germane amendments included both
raising and cutting taxes, increasing the federal gas tax,
repealing the windfall profits tax, increasing the tariff on
imported oil and more. Current discourse centers around the
2011 Budget Control Act sequestration regime put into place
after the 2011 scare. But that has provided little in fiscal
restraint as top line spending caps were regularly raised.
Of course, there have been other costs to the Treasury
connected to the lack of timeliness of debt ceiling increases.
The debt ceiling invites catastrophic risk, aggravates
legislating, and does not deliver on fiscal restraint.
Thank you again for the opportunity to testify and I look
forward to your questions.
[The prepared statement of Laura Blessing follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. I am sorry. I wasn't unmuted.
I now recognize Dr. Sheiner for five minutes. Please unmute
your microphone and begin when you are ready.
STATEMENT OF DR. LOUISE SHEINER, ROBERT S. KERR SENIOR FELLOW
IN ECONOMIC STUDIES, AND POLICY DIRECTOR FOR THE HUTCHINS
CENTER ON FISCAL AND MONETARY POLICY, THE BROOKINGS INSTITUTION
Dr. Sheiner. Sorry. I had little technical problems.
Chairman Yarmuth, Ranking Member Smith, and Committee
Members, thank you so much for inviting me to talk about the
need to abolish the U.S. debt ceiling.
I just want to make three points today.
First, the debt ceiling does not serve any useful purpose.
It has not imposed any significant fiscal discipline on
Congress.
Second, we don't know exactly what would happen to interest
rates and the standing of the United States if Congress someday
failed to raise the debt ceiling. But we do know the effects
would be negative and possibly calamitous. This is not a risk
we should take.
Third, our country really does face a lot of long-term
economic challenges. We have high levels of inequality and
limited economic mobility, we have slow productivity growth, we
face the perils of climate change, high healthcare cost, and an
unsustainable trajectory for the federal debt. We should
address these, but we should address these directly. Bickering
over the debt ceiling is a waste of time and energy. It creates
unnecessary uncertainty, it threatens the benefits that we
enjoy of issuing the world's safest asset, and it undermines
public confidence in our public institutions.
It is important to recognize that the debt limit does not
govern the revenues and spending obligations of the federal
government. Those are governed by legislation enacted by
current and previous congresses. Instead the debt limit is a
political roadblock that when reached prevents the federal
government from fulfilling its already incurred obligations. It
is like spending money and then refusing to pay the credit card
bill.
The debt ceiling would only be a nuisance if Congress left
it as a matter of course whenever the need arose. However, that
has not been the history in recent years. Instead, the debt
ceiling has become a political weapon used to try to extract
concessions, or more recently, simply score political points.
Using the debt ceiling as a political weapon or as a way to try
to impose fiscal discipline is not a wise choice. At a minimum,
the mere possibility that the federal government will not honor
its debt obligations undermines confidence in the U.S. economy
and in our political institution.
It also creates completely unnecessary economic stress for
people, as federal employees, contractors, Social Security
beneficiaries, the military, and the like have to worry about
whether or not the U.S. federal government will pay them what
they are owned in a timely manner. It also really distracts
policymakers from the serious work of addressing our nation's
problems.
And using the debt ceiling in this way is also a very risky
game. Last fall we were perhaps just weeks away from having the
debt ceiling actually bind, meaning that Treasury would soon
have to start delaying payments to people to whom it owned
money. While that situation was resolved in time, we may not be
so fortunate the next time.
As I describe in my written testimony, the economic costs
of a protracted debt ceiling impasse would most likely be
substantial. The sharp cut on federal spending that would be
required under a binding debt limit would likely lead to a
recession. While Treasury would likely choose to prioritize
making interest and principal payments on its securities, it is
unclear how long that policy could last, both legally and
politically.
So concerns about actual debt default on debt would likely
mount over time, leading to higher interest rates and possibly
a failed Treasury auction. In a worst case scenario, Treasury
would actually miss a payment on one of its securities.
Any of those outcomes would undermine the reputation of the
Treasury market as the safest and most liquid in the world.
This would not only increase interest rates in the short-term,
but possibly in the long-term as well because confidence once
lost may not be quickly regained.
Now, some might argue that the debt ceiling is a necessary
evil because it provides a measure of fiscal discipline to the
budget process. I think that view is misguided.
First, there is little evidence that debt ceiling impasses
have led to any long-term fiscal restraint. Indeed, the debt
rose from 70 percent of GDP in fiscal 2011, the year the Budget
Control Act was passed as part of the resolution of the 2011
debt ceiling crisis, to 79 percent of GDP in 2019, the year
before COVID. And this increase in borrowing reflects, at least
in part, the tax cuts enacted in 2017.
Second, I think much more importantly, the questions of how
to address our long-term fiscal sustainability problem. We need
to decide when changes should be made, what is the mix of
spending and tax increases we need, and which specific policies
are best. These are complicated questions and they require
careful deliberation.
These types of fundamental policy decisions shouldn't be
made in a hurry because the economy is being held hostage.
Instead, Congress should confront tax and spending issues
directly, not as a byproduct to lifting the debt ceiling.
In sum, the debt ceiling should be abolished.
Thank you. I look forward to your questions.
[The prepared statement of Louise Sheiner follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. Thank you, Dr. Sheiner.
I now recognize Ms. Russell for five minutes. Please unmute
your microphone and begin when you are ready.
STATEMENT OF LAJUANNA RUSSELL, FOUNDER AND PRESIDENT OF
BUSINESS MANAGEMENT ASSOCIATES, INC; AND CHAIR OF THE SMALL
BUSINESS MAJORITY
Ms. Russell. Thank you, Chairman Yarmuth, Ranking Member
Smith, and other Members of the Committee.
My name is LaJuanna Russell. I am the Founder and President
of Business Management Associates, a human capital firm with
approximately 60 employees. I am also the Chair of the board of
the Small Business Majority, a national small business
organization that empowers America's entrepreneurs.
I am pleased to provide insights today as to why Congress
should eliminate the U.S. debt ceiling to mitigate financial
risk and uncertainty for the small business community. This is
an important proposal that will better serve American
entrepreneurs like me who are still trying to recover from the
damaging effects of the COVID-19 pandemic.
The United States is home to 32.5 million small businesses
that employ 61.2 million people--32.5 million businesses, 61.2
million Americans. This makes up about half of all American
employees. Needless to say, our impact on the economy is
critical to the success of this country. And as you can
imagine, uncertainty and risk are not welcome, especially those
that could be more easily mitigated or managed, like the debt
ceiling.
As a small business owner with more than 20 years of
experience, I understand firsthand the importance of
reliability and having support of government agencies in times
of crisis. For example, during the 2019 government shutdown,
the longest government shutdown in American history, my
business lost thousands of dollars over the course of 35 days.
My employees had questions. Will their jobs still be there,
will they still have the same level of benefits, will their pay
decrease to cover the loss. Similarly, I had questions. How are
we going to recoup, will these employees find other positions
or will they stay with our company. In this case the risk was a
little more definitive. We anticipated the shutdown and could
somewhat mitigate internally before it happened, but the
impacts were still there.
But what would happen if our government were to default on
its debt? This is a risk that small businesses simply cannot
afford. As you well know, it has been a difficult journey over
the last two years. Uncertainty has taken on a whole new
meaning and unfortunately small businesses have taken the brunt
of this new definition. At first, thankfully, BMA didn't feel
the significant impact, but as days turned into weeks and weeks
into months, we slowly realized that COVID-19 wasn't just a
temporary crisis. BMA, like so many other small businesses,
began to experience accounting and processing delays, which
meant that we either weren't going to get paid or our contracts
were going to be put on hold indefinitely.
Obviously my story is one example. But let us get down to
some additional facts. A recent Small Business Majority survey
found that small businesses are still facing challenges in
maintaining their operations since the onset of COVID. More
than one in four of those surveyed say that they may not
survive the next six months without additional funding or
market changes. 37 percent said their business is on the
decline compared to the previous month. 37 percent equates to
real jobs for real people with real families.
I believe that we elect officials to manage resources and
minimize uncertainty for small businesses and all Americans
alike. Over the years, lawmakers from both sides of the aisle
have used the argument of raising the debt ceiling to justify
political in fighting. But what is really good for the people?
Every time our government gets closer to defaulting on our debt
uncertainty ensues and our very livelihoods are threatened.
Small and large businesses alike are affected.
We consider ourselves the global force, yet we allow this
ongoing dilemma to undermine our stance in the global markets.
Imagine if the United States, a global leader, were unable to
pay its own debt and make right on fiscal promises.
Let us not forget the ongoing discussion and challenge for
small businesses on access to capital. Defaulting on the debt
limit will have severe consequences for us, higher interest
rates for small business loans, even those from the Small
Business Administration, personal and small business credit
cards would carry higher interest rates, harder for us to pay
our debts, stock market would be in jeopardy, large businesses,
everyone across the overall economy. Payments to contractors
like me would be even more delayed, which undermines our
ability to pay our employees and our vendors promptly. It could
even create a precedent where banks deny us lines of credit due
to the risk level.
I am 100 percent not saying that we cannot or should not be
fiscally responsible. I see it as Congress' job to teach us all
the importance of doing so by setting a great example. Think
about the fiscal responsibility that we teach our children.
Congressional leaders must take a closer look at our budget,
analyze how we are prioritizing certain expenditures, and how
we can get back to supporting small business.
We have an opportunity here. Let us work together to
stabilize the economy. A bill to eliminate the debt limit is
one that can largely address and reduce financial uncertainty
for businesses of all sizes. I urge you to refrain from using
the debt limit as a political tactic to undermine each other's
political priorities. We deserve more from you than that. Small
businesses have been pushed to their breaking point in the past
two years. We can no longer bear the financial uncertainty of
constant debt limit negotiations.
Thank you.
[The prepared statement of LaJuanna Russell follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. Thank you, Ms. Russell.
I now yield five minutes to our former colleague and former
director of the Office of Management and Budget, Mr. Mulvaney.
You have five minutes.
STATEMENT OF THE HON. MICK MULVANEY, FORMER DIRECTOR OFFICE OF
MANAGEMENT AND BUDGET
Mr. Mulvaney. Thank you, Mr. Chairman. Thank you for having
me. Thank you to Ranking Member Smith for the invite. It is
good to see everybody. It is good to see the Majority Leader--I
haven't seen him in a while--as well as a lot of the old
colleagues. It is hard to imagine that I think five years ago
today I was still one of your colleagues. I didn't realize it
was the anniversary.
Listen, I am not going to read my opening statement. I am
going to say just a couple of things and we can start the
hearing. I was talking yesterday with Jeb Hensarling, who all
of you know--or most of you know. Wrote a great op-ed in the
Wall Street Journal back in September on this very topic. And
he and I were trying to figure out the right analogy. You know,
was the debt ceiling--was it a smoke alarm in your house, was
it the check engine light in your car. Something that reminds
you from time to time to go look at something. And then Dr.
Sheiner said something that I actually agree with, which is
that wouldn't it be great if we could actually, you know, deal
with our debt and our deficit situation directly. Yes, it would
be. And that is what made me think of a different analogy,
which is the debt ceiling is really that buzzer that goes off
when your battery is busted in your smoke alarm. It always goes
off at an inconvenient time, it is always a pain to change it,
but you always do it. It is not easy, you have got to get on a
ladder at two o'clock in the morning, but you do it because you
know it is the right thing to do and you do it so that you know
that six months later, god forbid, you have a fire in your
house, you know that the tool works.
That is what the debt ceiling is. I sit and I was listening
to folks, I read all the materials from the other witnesses.
Very, very smart people, some really good points made. I hope
we get a chance to talk about a lot of them. But it seems like
one of the overriding themes here is that you want to get rid
of it because it is hard, it is messy, it is a distraction. OK,
yes, it probably is. So is passing a budget. That is not easy.
By the way, I have been involved with several budgets. I was
involved--heavily involved in the 2017 debt ceiling increase
for--President Trump. You all know I know how hard they are and
how messy they are and how partisan they are. Budgets are the
same way, approps are the same way. Congress hasn't passed all
12 appropriations bills since 1996. Just because it is hard,
does that mean we want stop doing it?
I think no one ran on a campaign slogan that said send me
to Washington so I don't have to do anything hard, so I don't
have to take any messy votes, so that I don't actually have to
make any hard decisions. Ask yourself this, how often would you
as Members of Congress be talking about the debt and the
deficit if not for the debt ceiling? I can't remember ever
coming up on the floor of the House when we were there outside
of that--yes, we talked about it during some of the
appropriations mark ups and so forth, but generally speaking it
never came to the forefront. That is what this debt ceiling
does and I happen to think it does it well.
Ask yourself this question, would Congress be more or less
likely to be prudent about how they manage their taxpayer
dollars with or without the rule? Ask yourself this, would our
debt situation be better or worse if we didn't have the bill?
Yes, we have not fixed it and yes the long-term trends are very
bad, but would it be better or worse if we had not had the debt
ceiling rules available to us?
The bottom line I think is this, the rule is not broken,
the rule is not broken. The rule does exactly what it is
supposed to do. It forces us to have a discussion that we
otherwise would not have and from time to time allows us to
pass legislation that we otherwise would not pass. The debt
ceiling gave us Gram-Rudman-Hollings, the debt ceiling gave us
the Omnibus Act of 1991, which led to a balanced budget by the
end of that decade, the debt ceiling gave us the Budget Control
Act of 2011. Were these fixes permanent fixes to our deficits
and our debts? No, they absolutely weren't. In fact we voted as
a body to undo a lot of those things as we moved forward. But
we never would have had those without the debt ceiling.
The rules are not broken, Congress is broken. And the
reason it is so hard to do this, it doesn't have to be
hyperbolic. There is nothing in the rule that says this has to
be divisive and hyperbolic and brinkmanship. That is not in the
rule. That is how you as--that is how we addressed that as a
body when I was there. The rule is not broken, Congress is not
broke--excuse me, Congress is what is broken. And I think what
we should be spending our time on is fixing that. I think if
you fix that, you get a chance to fix the debt ceiling, you get
a chance to fix the appropriations process, you get a chance to
fix the budget process. And by doing that, you get better
fiscal outcomes.
So I hope we get a chance to talk all about that again
today and I really appreciate the chance to be here. It is
great to see so many friends and colleagues.
And thank you for your time.
[The prepared statement of Mick Mulvaney follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Chairman Yarmuth. I thank the gentleman for his remarks.
We will now begin the question and answer portion of the
hearing.
I defer my questioning until the end, so I now recognize
the gentleman from New York, Mr. Jeffries, for five minutes.
Mr. Jeffries. Thank you, Mr. Chairman, for convening this
very important hearing. I thank all the witnesses. And, Mr.
Mulvaney, it is good to see you. Welcome back to the people's
house, even if it is virtual.
Mr. Mulvaney, you ran the Office of Management and Budget
for President Trump before becoming his chief of staff, is that
right?
Mr. Mulvaney. That is correct. I think I ran OMB for two
years. I ran it from February 17 through about December 18.
Mr. Jeffries. Is it fair to say that many Republicans only
care about the debt and deficits when there is a Democrat in
the White House?
Mr. Mulvaney. I think it is fair to say that not as many
Republicans care about the debt and deficit as I want them to.
I will never forget, I was walking down the hallway early in my
days in Congress, what we all referred to as the `` old bulls''
. I honestly can't remember his name, so I am not shielding
him, and I just got there in the Tea Party wave and he looked
at me and he says, oh, you are Mulvaney, you are one of those
fiscal hawks. And I said yes and he laughed. He said yes, you
know, you all came around a little bit with Newt and then you
left and I was here. You were around a little bit with Reagan,
you left and I was here. And now you are here and I am here,
you are going to leave and I am still going to be here. There
are Republicans who love spending money just as much as
Democrats do.
Mr. Jeffries. Well, thank you, Mr. Mulvaney.
And I think this is consistent with what you once said,
which is my party is very interested in deficits when there is
a Democrat in the White House. The worst thing in the whole
world is deficits when Barack Obama was the president. Then
Donald Trump became president and we are a lot less interested
as a party. You said that on February 19, 2020.
Now, in 2017 Republicans passed the ``GOP tax scam'' where
83 percent of the benefits went to the wealthiest 1 percent, is
that correct?
Mr. Mulvaney. Was that the official name of the bill? I
don't remember that.
Mr. Jeffries. That is the informal name.
Mr. Mulvaney. OK.
Mr. Jeffries. It is the affectionate name for a very
interesting piece of legislation to subsidize the lifestyles of
the rich and shameless.
But in terms of that particular bill, it is estimated that
it increased deficits by $1.9 trillion over a 10 or 11 year
period of time. Is that correct?
Mr. Mulvaney. I have not seen that estimate. What are you
looking at, Hakeem?
Mr. Jeffries. It actually came from the Congressional
Budget Office.
Now, during President Trump's time in office the national
debt rose by approximately $7.8 trillion. Is that correct?
Mr. Mulvaney. Again, I don't have the numbers in front of
me, but it sounds about--we increased the deficit considerably
during the Trump Administration, yes.
Mr. Jeffries. All right. $7.8 trillion, that is a record
amount over a 4-year period of time. Yet, despite opposing the
``GOP tax scam'' and all the other reckless spending that is
country was forced to absorb, Democrats in Congress voted to
increase the debt ceiling three times because that is the
responsible thing to do as Leader Steny Hoyer indicated.
But it also has become a political weapon often used with
great hypocrisy, as you yourself eloquently articulated in
England several years ago. And that is why I believe the
responsible thing to do is to move beyond it.
Let me ask Dr. Sheiner, am I correct that the United States
is the only major, high-income, industrialized nation to have a
debt limit?
Dr. Sheiner. I actually don't know the history of the debt
limit across countries. I think, as Representative Hoyer said,
that Denmark has one, but that it is not binding. But it is
very unusual across countries to have this kind of weird rule
that says you pass money and then you have some other law
that--inconsistent with what--the other law that you have
passed.
Mr. Jeffries. And what was its intention when it was
created?
Dr. Sheiner. So, again, not aneconomic historian, but from
what I understand it was, again as Representative Hoyer said,
to allow Treasury more flexibility than they had in order to
borrow money to keep the country rolling, so.
Mr. Jeffries. And am I correct that debt limit is simply
designed to allow the Department of Treasury basically to pay
the bills that Congress has already acquired? Like if you were
not to do that you would be blocking a checking account from
paying off a credit card bill that you have already
accumulated? True?
Dr. Sheiner. Exactly. Congress passes something that says
Treasury pay this person $100 and then the debt limit says but
you can't.
Mr. Jeffries. Is there any evidence to suggest that the
debt limit has ever incentivized a Democratic or a Republican
controlled Congress to reduce spending? This is particularly
apropos given what we saw explode during the Trump years,
particularly in 2017 and 2018.
Dr. Sheiner. I think if you look at the history of the debt
ceiling you will find that it has not had any material effect
on deficits.
Mr. Jeffries. Thank you very much.
I yield back the balance of my time.
Chairman Yarmuth. The gentleman's time has expired.
I now recognize the Ranking Member, Mr. Smith, for 10
minutes.
Mr. Smith. Thank you, Mr. Chairman.
Before proceeding further, my fellow Republicans on this
Committee and I, we sent you a letter over two months ago
calling for an oversight hearing on the $2 trillion of so
called COVID-19 relief, the legislation that was signed into
law in March 2021. In our letter, Mr. Chairman, we highlighted
numerous examples of waste and mismanagement of that funding,
including millions of dollars spent to build parking lots in
South Carolina, millions to plant trees in New York, build golf
courses in Florida, and it even sent Japanese citizens living
in Japan and convicted prisoners $1,400 stimulus checks, not to
mention the billions diverted from the COVID-19 purposes, like
testing supplies and the strategic national stockpile to house
illegal immigrants at the Southern Border.
All of it, frankly, Mr. Chairman, cries out for more
oversight by this Committee on the Administration's COVID
spending. Given that the White House is reportedly now asking
for more funding to supposedly combat COVID-19, now more than
ever we ought to be holding a hearing on how the Administration
has spent or how they have misspent the trillions already
handed to it. Particularly, Mr. Chairman, if we are going to
take the time today to talk about how to loosen congressional
oversight over spending, I would like to ask unanimous consent
to include this letter we sent to you in the record for today's
hearing, Mr. Chairman.
Chairman Yarmuth. Without objection.
Mr. Smith. Thank you, Mr. Chairman.
[Letter submitted for the record follows:]
[GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
Mr. Mulvaney, great to have you. As I am sure you heard
during your time as a Member of Congress, whenever there is a
discussion around raising the debt limit, our Democrat
colleagues predict there will be catastrophic impacts
accompanying a U.S. credit downgrade that they say will occur
if the limit is not raised quickly and without debate. They are
eager to cite the S&P downgrade of U.S. credit that occurred at
the time of the 2011 debt limit debate, claiming that downgrade
was a consequence of the debate and discussions that occurred,
the premise being that negotiating about how to handle
America's debt crisis, rather than just thoughtlessly lifting
the debt limit.
Is it itself a threat to our credit rating?
Mr. Mulvaney, can you speak to the circumstances
surrounding that decision by S&P at that time and what they
said some of the reasoning was behind that decision?
Mr. Mulvaney. Sure, Jason, because I was there in 1911
during the showdown over the debt ceiling. I remember the S&P
crisis, the S&P downgrade. I don't know how many Members of
this Committee were here at that time.
But, yes, it has always surprised me how that history has
been revised, the history has been portrayed that it was
because of the fight, because of the debt ceiling fight that we
got the downgrade. That is actually not true. If you go and
look at the S&P report, which I have got in front of me--you
know, I will read sections to you. It says we lowered our long-
term rating on the U.S. because we believe that prolonged
controversy over raising statutory debt ceiling and the related
fiscal policy debate indicate that further near-term progress
containing the growth and public spending
[inaudible] or in reaching an agreement on raising revenues
is less likely than we previously assumed. We also believe that
the fiscal consolidation plan that Congress and the
Administration
[inaudible]. So they downgraded us after the deal.
The one they agreed to this week falls short of the amount
we believe is necessary to stabilize the government debt burden
by the middle of the decade. And they go on to say that our
opinion is that elected officials remain wary of tackling the
structural issues that effectively address the rising U.S.
public debt burden in a manner consistent with a AAA
[inaudible]. Republicans and Democrats have only been able
to agree to relatively modest savings on discretionary spending
while delegating the Select Committee decisions on more
comprehensive measures.
It had nothing to do with the fight and everything to do
with the compromise that came out--we got downgraded. The S&P
knew that we didn't solve our problem. Did we kick the can down
the road? Yes. And they were finally holding us to account over
it.
So I know that that is not the history that gets told to
the press. I know it is not the history that gets told in
politics. That the reason we got downgraded and could get
downgraded again is not because we bicker over the debt
ceiling. We always raise the debt ceiling. Everybody knows we
are going to raise the debt ceiling. It is what we do. The
question becomes, what do we do as part of raising the debt
ceiling? Do we spend less or do we spend more? Keep in mind,
and Mr. Hoyer will remember this, the Democrats only agreed to
help us raise the debt ceiling in the Trump Administration if
we spent more money. So the leverage works both ways, depending
upon who is in charge.
So the debt ceiling, again, not the problem. Congress is
the problem and changing the debt ceiling isn't going to make a
difference. It probably will just make it worse.
Mr. Smith. You know, Mr. Mulvaney, Congress is now facing
another debt limit discussion within the next year or so. And
perhaps sooner if more of the $7.5 trillion in new spending
House Democrats have passed becomes law.
As you know, the debt limit has often been paired with
spending restraints or other long-term policy to reign in
deficit spending, like you pointed out. But given that the 2011
S&P downgrade was a result of the markets having no confidence
that Washington would curb its appetite to spend, and since we
are facing a new debt limit crisis end of this year, when that
next conversation over the debt limit occurs, what specific
reforms do you think, Mick, that Congress should consider as
part of any potential debt limit increase apart from just
abolishing the debt limit, like Democrats are proposing? Should
Congress consider bringing back caps on annual spending or
other such policies that--put into law real spending
restraints?
Mr. Mulvaney. Jason--excuse me, Mr. Chairman, you know, my
gut tells me caps would be great. But keep in mind we did that
in 2011 and then all Congress did every two years was raise the
caps again. So even when we took those hard decisions in 2011
to do the Budget Control Act, we let ourselves out of that
every two years as we went forward. And as a result--again, I
think it was Dr. Sheiner who mentioned that, you know, the
Budget Control Act didn't really have that much impact on long-
term debt and she is right. But it really wasn't the fault of
the Budget Control Act as much as it was of Congress relieving
itself of those burdens.
Look, we can go through a budget if you want to. I can't do
it in three minutes, but if you want to start with places that
I actually think there is a basis for compromise, was that we
had really good discussions when I was in Congress about fixing
some of the entitlements. Put Medicare aside for a second, it
is really, really hard to do because it is a defined
contribution, undefined benefit program. But Social Security is
the type of thing that needs to be fixed and can be fixed. And
it might not be politically easy, but it is mathematically
easy. All of those programs are moving toward insolvency by the
time that
[inaudible] needs to retire, so it probably doesn't affect
him, but when you and I retire, Jason, I think we are looking
at automatic across the board 20 or 25 percent Social Security
payments unless Congress does something now.
So, yes, is there stuff that we could do to get our fiscal
house in order? Yes. But generally speaking, what you have to
do is just--going to spend money more wisely, you are going to
spend less money when you can. And take fiscal matters
seriously. The debt ceiling gives you an excuse to be rid of
it. I am not sure when you are ever going to discuss deficits
and debts anymore.
Mr. Smith. You know, Mick, you have put together budgets,
both as a House Member and at OMB, and the gentleman from New
York who spoke right before me, tried to criticize the Tax Cut
& Jobs Act. And whenever you are looking at budgets, you have
to pay attention to the revenues coming into the country. And I
would like to point out for the record that the tax revenues
that came in last year was at 18 percent. That is the highest
in 52 years. That follows President Trump's Tax Cut & Jobs Act.
This year alone we are right at 28 percent for this year. And
that is under the Tax Cut & Jobs Act that was passed under this
Administration. So these higher revenues is how you put
together a budget.
But also something you do when putting together a budget is
you calculate inflation. Given, Mick, that the inflation has
proven not to be transitory, regardless of what Chairman
Yarmuth says and what the Biden Administration says, if you
were at the OMB today what sort of inflationary projection
might you apply when drafting the President's Fiscal Year 1923
budget?
Mr. Mulvaney. Yes, when he mentions that inflation is
transitory, I keep asking what thar means, because last time I
checked life is transitory, so it could be around forever for
my lifetime and it would still technically be transitory.
Everything is transitory.
[inaudible]
You know, the inflation numbers are tough. I haven't gone
back to look at the Administration's picture yet as to what
their projections were for this year. For those of you who
aren't familiar with this process, when you write a--well, of
course you are----
Mr. Smith. They projected 2.1 percent for this year. That
is what the Administration projected.
Mr. Mulvaney. You have to project out for 10 years what you
think the inflation numbers are going to do. And what they
really need to do is--I would be curious to see. They always--
this week? Is the budget due out from the Administration this
week?
Mr. Smith. No, it was due last week. They are late again.
But last year, of course, was the latest budget in the history
of America for any president.
Mr. Mulvaney. Yes. And I would be curious to see what their
inflation projections are. Will it be 7 percent this year and
then 6 and then 5, or will it go back to 2.1? Because, you
know, inflation at a real level of 5 or 6 percent, it drives
deficits in a huge manner.
Mr. Jeffries I think was correct. I think that Donald Trump
did set a record for the amount of deficit in any four year
term by any president, but my--I would be willing to bet
anybody in this Committee that that number is going to be blown
away from the 4-years of the Biden Administration.
Mr. Smith. I will just say, Mick, with the budget that was
proposed last year of $68 trillion and all of the spending that
Nancy Pelosi has done as Speaker of the House in the last three
years, if you used all the taxes that have been collected since
our country was founded, you couldn't even pay for all that
spending. That is how unconscionable this spending is right
now.
Thank you, Mick, for being before our Committee.
Chairman Yarmuth. The gentleman's time has expired.
I now recognize the gentleman from Pennsylvania, Mr. Boyle,
for five minutes.
Mr. Boyle. Well, thank you, Mr. Chairman, for holding this
hearing. And I want to thank the Committee as well.
As you know, my enthusiasm for this issue, I have worked on
it for the last seven years now. So I appreciate you and the
Committee holding this hearing.
And as Steny Hoyer, Leader Hoyer, already previewed, I
thank you, as well as Senate Majority Whip Durbin, for joining
me to co-author and introduce the Debt Ceiling Reform Act,
which we introduced yesterday.
And let me talk about that a little bit, because
something--and it is great to see my good friend Mick back with
us. I was always sad when he got demoted to the executive
branch. So it is great to see Mick back homewith the first
article of the Constitution: Congress. Mick expressed a real
confidence or a certitude. I think he said something to the
effect of well, we know we are going to raise the debt ceiling,
we always raise the debt ceiling. I wish I shared that 100
percent certainty. One of the reasons why I started working on
this seven years ago was because of my increasing fear that god
forbid because of our increasing political dysfunction, at one
point in the future we will fail either by intention or more
likely by accident not to raise the debt ceiling. That would be
calamitous. And, no, Ranking Member Smith, it is not just
Democrats who will point out it is calamitous, it is economists
across the ideological spectrum. In fact, one thing that has
always stuck with me is I recall--this would have been about
three, four years ago now, on the Ways and Means Committee,
when I asked then Secretary Mnuchin--I asked him, because I
supported his push to raise the debt ceiling at that point, and
I said could you describe for us what would be the consequences
if Congress failed to raise the debt ceiling. And he replied,
Congressman--he stuttered a little, but he said, Congressman,
the consequences would be so catastrophic I can't even begin to
describe them. That was Donald Trump's secretary of the
Treasury and, indeed, every treasury secretary of my lifetime
of both parties has pushed for raising the debt ceiling.
So, Dr. Sheiner, I will ask you--and just let me--actually,
before I turn to Dr. Sheiner, let me explain real quick about
my legislation, the Debt Ceiling Reform Act. It actually would
not eliminate the debt ceiling, but it would take it away from
this increasing political dysfunction that we see in Congress.
It would vest in the Treasury secretary the authority to raise
the debt ceiling while still reserving to Congress the
authority to overrule that decision if Congress ever wanted to
exercise that authority. It would improve the mechanism and
take away that catastrophic possibility of one day failing to
raise the debt ceiling and plummeting us into a worldwide
depression.
So, with that, let me invite in Dr. Sheiner. If you wanted
to perhaps describe some of the consequences that Secretary
Mnuchin couldn't even imagine if we were one day to fail to
raise the debt ceiling.
Dr. Sheiner. So back in last fall I totally agree with you,
I was not 100 percent sure that we weren't going--that we were
going to raise the debt ceiling in time. It seemed like
possible that actually we would step into the breach. And we
though quite carefully--I wrote something with my colleague,
Wendy Edelberg, about what would happen if that occurred. And
there was a lot of uncertainty because we thought--I mean,
clearly, if we have an impasse that lasts for any material
amount of time, that is quite devastating to the economy. If it
turns out that, you know, the federal government has to keep
delaying payments, then that means the federal government is
spending much less than what it was before and people's incomes
are down. And that in itself has been projected to cause a
recession. So the Federal Reserve has done projections. They
did projections in 2011. They though a month impasse would
cause a short recession.
What we really don't know is what the whole--what it would
look like because Treasury had a plan in 2011 that if people
thought they would follow again, which is that they would still
pay principle and interest, but they would just delay payments
to everybody else. They would just like wait until they had
enough cash.
Mr. Boyle. Yes. And let me----
Dr. Sheiner. Yes.
Mr. Boyle. And, Dr. Sheiner--just because I only have nine
seconds left.
Dr. Sheiner. Yes.
Mr. Boyle. Perhaps you will get a chance to expand upon
that with someone else.
So let me just conclude with this. And I say sincerely to
my Republican colleagues on this committee, I think the idea
that I have come up with, it is not inherently liberal or
conservative or Democratic or Republican, it would give
Treasury secretaries of both parties this authority. And I
think it is a responsible mechanism far better than the one we
have.
So I would encourage my Republican colleagues to take a
look at it, to contact me if they would like to be supportive,
if they would like to offer suggestions. I do think this is
something that we need to fix before it is too late.
Thank you, Mr. Chairman.
Chairman Yarmuth. Thank you. The gentleman's time has
expired.
I now recognize the gentleman from California, Mr.
McClintock, for five minutes.
Mr. McClintock. Thank you, Mr. Chairman.
It is interesting, the Democrats began this session with
the budget hearing on restoring Congress' power of the purse.
Now we are hearing how Democrats want to relinquish Congress'
constitutional power of the purse to the executive branch to
establish debt levels. This is the topsy turvy we have come to
expect from the majority.
The debt limit is a speed bump. It is designed to prompt
the Congress to ask what it is doing wrong when we find
ourselves spending more than we are taking in in revenue. And
it has worked repeatedly over the years. The Democrat witnesses
who say it has had no effect on budget reforms is simply wrong.
The Balanced Budget Emergency Deficit Control Act of 1985 and
its extension and the PAYGO provisions of 1997 and the Pay As
You Go Act in 2010 and the Budget Control Act of 2011, they
were all enacted as part of the debt ceiling negotiations.
Now, it is true the debt limit is not a panacea, but it is
a useful tool.
And the crux of the problem is that in the last 10 years
while inflation and population have grown a combined 27
percent, revenue has grown 58 percent. That is with the
Republican tax cuts. Revenues have grown twice as fast as
inflation and population combined. The problem is the spending
in the same period has grown 89 percent. And that spending
would be even higher, and with it our debt, if it wasn't for
the reforms over the years that were enacted because of the
debt ceiling discussions.
But the Democrats don't even want to have those discussions
anymore. They are proceeding on the assumption the federal
government can spend unlimited amounts of money with no
consequences. And the problem with that is there are
consequences. It turns out all of that free money is very
expensive. The fact is, government can't put a dollar into the
economy that it first hasn't taken out of the same economy. And
there are only three ways to do that. Either current taxes,
which rob you of your current purchasing power, borrowing,
which robs you of your future purchasing power, or printing
money, which robs of every time you go shopping by reducing the
value of your earnings while it silently hollows out your
savings and retirement funds. That is the 7 1/2 percent
inflation rate that is being caused by these trillions of
dollars of free government money. What that means is, if you
earn $50,000 a year, inflation just took $3,750 from your
annual purchasing power. If you have managed to put aside
$100,000 for retirement, the December inflation rate just took
$7,500 of that. That is the consequence of excessive debt
financed by monetary policy.
And the crux of the Democrats' argument appears to be that
an impasse on the debt limit risks a catastrophic default on
our debt payments. You may remember that during the Obama
Administration they argued the same thing. I introduced the
Full Faith and Credit Act and then the Default Protection Act
to make it crystal clear the Administration did have the full
authority to prioritize payments to protect the nation's
credit. They both passed the House without a single Democrat
supporting them. Democrats in the Senate refused to take them
up. But, frankly, these measures were superfluous. The organic
law that established the Treasury Department in 1789
specifically gives the Treasury secretary the authority and
responsibility to ``manage the revenue and support the public
credit''. And the GAO clearly spelled out what that means to
the Senate Finance Committee way back in 1985. They said
Treasury is free to liquidate obligations in any order it finds
will best serve the interest of the United States. Meanwhile,
the Constitution commands that the public debt is not to be
questioned. Prioritization is the practical mechanism for doing
that. Most state constitutions provide first call on any
revenues is to maintain and protect their sovereign credit.
This is simply a canard. We discovered that even while the
Obama Treasury Department was denying that they had the ability
to prioritize to protect debt payments, they were actually
making preparations to do so. And we also discovered documents
revealed the Federal Reserve officers were appalled when they
Administration denied their intention to give priority to debt
payments because such statements they said contribute in
panicking credit markets. That is exactly what we are hearing
from the Democrats and their witnesses on this committee and
from this Administration.
And, with that, Mick, do you have anything to add?
Mr. Mulvaney. You know, I was going to say that, Tom, you
are absolutely right. If the concern here is that we will miss
it by accident, then clarify prioritization. The Obama
Administration thought we could do it, I thought we could do it
when I ran OMB, but some folks say that we can't. So let us
clarify it. Say, OK, so the sovereign debt gets paid first, you
know, as Hensley pointed out in his
[inaudible] just except sovereign debt from the debt
ceiling so you focus on discretionary and mandatory spending.
There are all sorts of ways to address these issues without
getting rid of the debt ceiling.
Now, one of the best four minute summaries I think I have
heard on this topic on a long time. I do miss being there.
Mr. McClintock. I yield back.
Chairman Yarmuth. Thanks. The gentleman's time has expired.
I now recognize the gentleman from North Carolina, Mr.
Price, for five minutes.
Mr. Price. Thank you, Mr. Chairman. And thanks to all of
our witnesses. Particularly happy to welcome back our former
colleague, Mr. Mulvaney, who for years shared the
representation with me in our delegation of the Carolinas.
Mr. Mulvaney has offered a kind of a revisionist history
here this morning. And I want to maybe set up a chance for our
other panelists, perhaps starting with Dr. Blessing, our
economic historian, but others are welcome to chime in. I want
to set up a dialog regarding some of issues directly relevant I
think to assessing how the debt limit works in practice.
The Budget Control Act of 2011 was the direct result of the
debt ceiling debate of that year. I would agree, it was a gift
that kept on giving. I don't share the positive assessment of
the way it worked in practice.
But, first of all, Dr. Blessing, this notion that the S&P
downgrade that came after that projected debate, that it really
had very little to do with the debt ceiling, that the S&P
downgrade was about--I guess Mr. Mulvaney is saying it probably
would have been imposed even without the debt ceiling debate
because it really had to do with our levels of indebtedness.
Would that be your understanding of that downgrade and what
precipitated it?
Dr. Blessing. Sure. The credit agencies were threatening
downgrade from earlier in the year. They had also threatened
downgrade in previous episodes of debt ceiling brinkmanship.,
including 1995 to 1996. So this is something that they have
threatened in connection specifically with debt ceiling
problems in the past.
Mr. Price. It was directly linked to the debt ceiling
prospect, that--the prospect that was posed of default?
Dr. Blessing. Yes.
Mr. Price. Alright. Now, the give that kept on giving, the
Budget Control Act. The Budget Control Act was a symbolic
gesture. It put forth for 10 years budget ceilings that were
kind of talking points. They were totally unrelated to budget
reality, appropriations reality, but they did have an effect.
They did have an effect because for 10 long years we had drama
every other year. We required four two year budget agreements,
but it didn't come easily. It came at the end of the budget
cycle. A lot of drama, a lot of threatened shutdowns, and then
finally an adjustment to more realistic budget numbers.
Would you regard that as a positive history? I mean there
is a case to be made of course for budget parameters that last
for two years, maybe even five years. But do you require a
budget ceiling showdown to get that result or to adopt those
kinds of parameters?
Dr. Blessing. The general understanding of sequestration is
that it is really troubled in an already troubles
appropriations process, particularly over the past decade. It
has also been difficult for the exact same reasons as the first
time we tried. It is both difficult for appropriators as well
as it doesn't substantially lend itself to, you know,
controlling the debt.
Mr. Price. Right. So the Budget Control Act in a sense
disrupted that process rather than facilitated a kind of
orderly budget process.
Well, then let us think about the Trump tax cuts, the kind
of adjustments that were required in the debt ceiling in the
last decade. Is it true that the Trump tax cuts required major
adjustments in the debt ceiling? And is it not true that--going
back here to what Mr. Hoyer said--is it not true that the
Democrats tried to break the fever on this? Tried to say we
shouldn't be making this kind of a showdown, purely political
showdown, every time we need to raise the debt ceiling. Raised
in fact three times, cooperated in that. And so it was an
unpleasant surprise in the current Administration when
Republicans reverted to that kind of adamant refusal.
What would you say about that?
Dr. Blessing. Vis a vis your first question, when Congress
voted on the Tax Cuts & Jobs Act in 2017 the estimated cost was
$1.5 trillion over 10 years. It is re-scored to be more than
that. I believe CBO re-scored it to be about $2 trillion over
10. So that, in addition to all other spending, both tax
expenditures as well as appropriations, is going to add to the
debt ceiling.
Vis a vis partisanship and difficulty raising the debt
ceiling, both parties over a very large historical span of time
have both played political hardball with it. We are in the most
dangerous period right now, from 2011 to the present time,
which has been particularly exaggerated because default is
actually at risk. And I think we have all seen what happened
this past December with that.
Mr. Price. Well, just to revisit my question, did Democrats
cooperate in raising the debt ceiling three times over the past
decade?
Dr. Blessing. Yes.
Chairman Yarmuth. OK.
Mr. Price. Thank you, Mr. Chairman.
Chairman Yarmuth. The gentleman's time has expired.
I now recognize the gentleman from Pennsylvania, Mr.
Smucker, for five minutes.
Mr. Smucker. Thank you, Mr. Chairman. Thanks for holding
this hearing. I would like to thank the Ranking Member as well.
I had just a few points I would like to make. The first in
response to the charges that the TCJA contributed to the
deficit. Now, I completely agree that during the Trump
Administration that the debt increased significantly, more than
I would certainly have liked to have seen. But it wasn't the
TCJA, because if you are arguing that that contributed you
essentially would be saying that the tax cuts that came as a
part of that resulted in less revenue, which was absolutely not
the case. In fact revenues were higher every single year after
2017. And in 2021 they are 22 percent higher than in 2017. So
it wasn't as a result of the TCJA, which, by the way, worked
very, very well in bringing lots of jobs, lifting people out of
poverty, and so on, but did not contribute to less revenue.
What contributed to the debt increase was more spending.
And based on the record of the Biden Administration in its
first year, we are going to see far higher debt increases
during his administration if we continue on this same track.
Now, on whether we should have a debt limit, I think it is
a good discussion and I think we are having a good discussion
here today, but in some ways it feels sort of tone deaf to me.
Americans are experiencing the highest inflation in 40 years.
It is affecting their pocketbooks. I hear it throughout my
district everywhere I go, and I am sure you all do as well. And
Americans are going to see this hearing as the Democrats
essentially asking for a blank check, to spend even more and
contribute more to these inflationary policies.
So it is sort of tone deaf.
What we really should be talking about is the real problem
that we have--$30 trillion in debt. It is unfathomable and in
fact if you do a quick calculation, I think the debt went up
just during the time of this hearing by another $120 million.
Think about that. We know how it ends when countries overspend,
over promise, and spend money we don't have. And we are
starting to see the effects of that.
So back to the discussion on the debt limit, I get the
concerns with it, but when else will we talk about? In fact the
entire time we have been here in Congress I don't remember much
discussion about the problem with the debt. I don't remember
much discussion about spending much more money than we have.
The debt limit at least forces to talk about it. And I would
like to ask other members here. I would like to as the Democrat
leadership, when will be the right time to talk about this
excessive spending? When will be the right time to talk about
the impact that the debt is going to have on future generations
and on our economy in America? When will it be? At least when
we are talking about the debt increase, it is one time, the
only time, frankly, since I have been here, when we have at
least some semblance of these discussions.
And so, you know, my fellow representative, Representative
Boyle, from Pennsylvania, you know, love to work with him to
find solutions to ensure we put our country on a different
track. But it feels like talking about the debt limit is
sidestepping the major issue that we----
Mr. Boyle. Would my fellow----
Mr. Smucker. I am sorry?
Mr. Boyle. So you invoked me, will my fellow Pennsylvanian
yield just for a second? Because I will----
Mr. Smucker. I don't want to give up my five minutes, but
it is up to the chairman.
Chairman Yarmuth. You can yield your time.
Mr. Boyle. Yes, I will just say----
Mr. Smucker. Well--go ahead.
Mr. Boyle. I will just say briefly, I am happy to work with
you or anyone else on this issue in good faith. I will point
out the argument though that the debt ceiling is somehow--the
drama around the debt ceiling and the dysfunction----
Mr. Smucker. All right. Now, I am going to need to retake
my time, because I didn't hear the chairman he would give me
an----
Chairman Yarmuth. I will give you----
Mr. Smucker. OK. All right. Fine. Thank you.
Mr. Boyle. Thank you. We have a deal, see?
I will say this, the idea that it is only the debt ceiling
drama that is needed for us to talk about deficit and debt is
not accurate. I would point out in 1992 Ross Perot built an
entire independent Presidential campaign, the most successful
since Teddy Roosevelt, got 19 percent. Literally his entire
campaign was about deficit and debts and him hosing
infomercials showing charts. And that wasn't at all brought
about by the debt ceiling issue.
So, with that, I will yield back.
Mr. Smucker. Yes, and I would like to thank you for that
comment because I think a real discussion around our debt and
the future of our financial responsibility in America is what
is needed. So I would love to have that substantive discussion.
But until we have other mechanisms that provide
accountability, I have concerns about removing the debt limit.
So, you know, we should be talking about a balanced budget,
how can we get to a balance budget in 10, 20 years from now.
These are the kind of discussions that I think we should be
having. And we should be talking about redoing the Budget Act
of 1974 to insert more accountability in the process here in
Congress.
So, again, love to have those conversations with you.
I am concerned about just the interest payments. And,
Director Mulvaney, you know, we are going to see rising
interest payments. It is already nine percent in the budget.
This is going to crowd out other obligations, other priorities.
Do you have any concern with that and what do you see that
trajectory being over the next 10 years or so?
Chairman Yarmuth. Mick can answer the--you can answer the
question and then your time----
Mr. Mulvaney. I mean it--I am not very good at math, but I
mean--if interest rates are, you know, 6 percent, you are
looking at $1.8 trillion in interest payments. I mean that is--
it is a huge number. You are already looking at interest
payments I think that are bigger than every appropriations bill
except defense. It is just--it is a huge number and it is only
going to continue to get bigger.
Mr. Smucker. Thank you, Mr. Chairman, for your generosity
there.
Chairman Yarmuth. Thanks. Absolutely. The gentleman's time
has expired.
I now recognize the gentlelady from Illinois, Ms.
Schakowsky, for five minutes.
Ms. Schakowsky. Thank you so much, Mr. Chairman, for having
this hearing.
Mr. Mulvaney, you said, you know, that is what we do, we
pass the debt ceiling, we do it every time. And so what I am
hearing is that this is really a message opportunity. And I see
it as a very, very political opportunity to raise this question
at a time when so many Americans and businesses are at risk and
very nervous about what happens. And my understanding from--I
think it was Dr. Blessing saying that we don't have any real
evidence that that particular conversation or that threat has
resulted in a reducing of the spending of the United States.
And there are many, many opportunities.
We have committees that deal with this, not just the
Appropriations Committee, but, you know, we have lots of
committees that can hold hearings, et cetera. And I think it is
really cynical to say that.
And I wanted to talk to Ms. LaJuanna Russell about small
businesses.
You know, you talked about uncertainty, but I wondered if
you could go into more detail about what that means. For
example, let me say, if you are planning to expand or buy, you
know, another outlet or raise the wages of your workers, or get
access to capital, are these things affected when the question
of the debt ceiling is looming?
Ms. Russell. Yes, yes. Thank you so much for the question.
They are because people tend to stop. So if you are working
with a bank and you are working with a financer, especially
when you are looking at access to capital, which already for
small businesses is a very difficult process, then
organizations just stop because they have fear, they don't
know, they have uncertainty, small businesses may seem more of
a risk. So while you are in a process to expand your business,
to create tools that help your customers move forward, you will
end up with a stop. And then your business suffers because you
cannot move forward. You have to kind of stay where you are and
your growth is hindered.
Ms. Schakowsky. Thank you.
You know, I say it is cynical because, you know, I was on
the Simpson-Bowles Commission. It was a commission over a
decade ago talking about how we should deal with issues of
debt. One of the major suggestions--fortunately it didn't
pass--was to cut Social Security. Entitlements were on the
table. And so when you talk about the--you know, the debt
ceiling, that is a reasonable conversation. But when you say
that the consequence could be by not raising it Social Security
actually being cut, Medicare, Medicaid being cut, don't make
any mistakes, people get nervous about that and they should.
And that anxiety--even though you say, oh, well, that is what
we do, we always pass it--is a real problem. Let us find other
venues.
I am just wondering, if I could ask Dr. Sheiner to talk
about real life consequences to businesses, et cetera and
investors from the debt ceiling.
Oh, did I just run out of time? No, I have a minute. Go
ahead.
Dr. Sheiner. Yes, so I think we have seen that investors
clearly react to the prospect of a debt ceiling. And you see
rates on treasuries that are going mature right around the time
the debt ceiling might bind, rising. You know, we haven't--we
have luckily so far not seen anything that has lasted a very
long time. And so we have seen inklings of what would happen,
but we haven't seen, you know, the--you know, the thing that we
are most worried about is going over the cliff.
But clearly I think you are right, that everything is going
to seize up because it just creates a whole bunch of
uncertainty for businesses, but for people too. Am I getting my
Social Security check in time. It may be that eventually I will
get it, but it might two weeks late, three weeks late. That is
a very big cost to impose on people when you are going to go
fix it later anyhow.
It is just like this own goal, right. There is no reason to
put the economy through this when we know you are going to--the
only thing to do is going to be to raise the debt ceiling.
Ms. Schakowsky. You know, we have shut down the government
before for a time and we have seen all the public services
stop, we have seen such a halting in the ability of ordinary
people--ordinary people to get things done.
So to have this conversation, let us find another way. This
does not make sense and it is very hurtful.
And I yield back.
Chairman Yarmuth. The gentlewoman's time has expired.
I now recognize the gentleman from Georgia, Mr. Carter, for
five minutes.
Mr. Carter. Well, thank you, Mr. Chairman, and thank all of
the witnesses for being here. Mick, it is always good to see
you, my friend. I am glad you are here, I am glad you are doing
what you are doing.
You know, the premise of this hearing is absurd. I can't
believe we are actually having a hearing to talk about doing
away with the debt limit. You have got to be kidding me. I mean
it is obvious the negative consequences of out of control
spending and what they are having. Inflation is at a 40 year
high right now. Do we realize that? A 40 year high. And instead
of debating whether we should have a debt limit, we ought to be
debating the real consequences that tax--that spending cuts
should have in--on our debt ceiling. This is ridiculous. Our
debt is not going away.
Folks, I opened my small business on November 21, 1988. I
borrowed money for inventory, I borrowed money to get me
started. I did not get a salary for two years. Nothing
whatsoever. I set out to retire my debt and I did that. The
first thing I did is I retired my debt, then I retired my
mortgage. I haven't owned anybody anything since 1994. This is
ridiculous that we have this kind of debt in our country. And
it is not sustainable. We have seen it happen over history,
over time, what it has done to countries.
You know, some people talk about Japan and their enormous
debt-to-GDP ratio. Well, folks, Japan's GDP growth rate is
abysmal. And similar things are happening right now in Italy.
And some of you argue that the interest rates are lower than
the growth rate and we can continue to roll over debt,
borrowing new money to pay interest on old money. That is
simply ridiculous. This is unsustainable. And who is going to
be paying this? My children, your children, my grandchildren,
your grandchildren. This is inter-generational theft.
We have got to stop this. And to debate stopping one of the
only things that makes us even think about it has been pointed
out here by Mr. Mulvaney and by others. The only time we think
about this is when we come up against a deadline. And Mr.
Mulvaney is right, that is the only time we do anything about
it. And it does result in good fiscal policy. It does.
Mr. Mulvaney, I want to ask you, CBO has noted that rising
debt will result in less private investment and lower output
and outcome and a lower standard of living for Americans. In
fact, their projections show that the long-term impact of debt
rising to 200 percent of GDP, which is where are headed with
this budget, as it brings us to 117 percent, is a $9,000 annual
income loss for Americans. A $9,000 annual income loss.
Mr. Mulvaney, are you concerned that the massive growth in
debt will crowd out other spending and result in negative
economic impacts?
Mr. Mulvaney. Yes. And thank, Mr. Carter. Thanks. It is
good to see you.
I think we are all familiar with the term. Honestly I think
you are seeing some of it now. You are already starting to
see--I think one of the many reasons we are experiencing
inflation is because the government has become so big. And,
yes, I do worry about that in the near-term and in the long-
term. This whole concept that, you know, the debt ceiling is
the problem is just befuddling to me. I heard Dr. Sheiner
mention that no good has come of it, but go down the list of
all we have done in the past. You know, I mentioned Gram-
Rudman, I mentioned the 1991 Act, the 2011 Act, Mr. McClintock
did the whole list that goes back even further than that. Ask
yourself this, what would you have done on fiscal policy if not
for the debt ceiling? I mean show me a couple of pieces of
legislation dealing with reducing spending and getting the
fiscal house in order that wasn't tied to the debt ceiling.
And your point, Mr. Carter, is a good one and I wish my
Democrat friends would see it from this same perspective, which
is, yes, it crowds out private sector spending, but it also
crowds out other government spending. If you want money to
spend on other government programs it won't be there because it
is going to go to pay down the debt.
So even if we disagree about how government should spend
money, I wish we could agree that we would rather spend it on
doing things than paying off debt in the past. And it worries
me that people don't look at that side of it. The interest
payments by themselves are getting ready to be the largest
single line item in our budget outside of----
Mr. Carter. Absolutely.
Mr. Mulvaney [continuing]. entitlements and that is a
problem.
Mr. Carter. Just real quick, Mick, I want to ask you one
other thing. If we were to reverse our fiscal trajectory and
put the federal budget on a sustainable course, what would be
some of the positive economic effects?
Mr. Mulvaney. I think you would see less inflation, I think
you would see more private investment. One of the good things
that came from our Tax Cuts Act was we encouraged private
investment, so you get growth without inflation. You got great
growth right now, but you have got it with inflation, which is
sort of running on a treadmill.
So there are all sorts of benefits that come from spending
more money in the private sector and spending less in the
government sector.
Mr. Carter. Great. Thank you so much.
And I yield back.
Chairman Yarmuth. The gentleman time has expired.
I yield five minutes to the gentleman from New York, Mr.
Morelle. Mr. Morelle, are you there? I don't hear from him, so
I will yield five minutes to the gentlewoman from California,
Ms. Chu.
Ms. Chu. Thank you, Mr. Chair.
Ms. Russell, I wanted to expand on Congressmember Jan
Schakowsky's questions about small business. I am a Member of
the House Small Business Committee, so I understand how the
U.S. Government's small business lending programs underpin so
much of our economy, supporting business growth and employment.
But what many of my colleagues may not realize is that the
SBA's loan guarantee programs frequently operate at zero
subsidy. And that means that despite offering billions of
dollars in government backed loans to small businesses that
otherwise would not secure affordable financing on the private
markets, these programs typically require no appropriations
from Congress. They don't cost our taxpayers anything.
But a breach in the debt ceiling would be catastrophic for
these programs, which do not even contribute to the federal
debt. Even if SBA were to find a way to continue offering
loans, they would require exorbitantly high interest rates
because the government would have no other way to guarantee the
loans.
So could you spend some time talking about how these
programs contribute to the small business economy and discuss
the potential impacts to the lending environment if SBA could
no longer offer low interest loans?
Ms. Russell. Thank you so much for that question.
It is really, really important to understand how that
little ecosystem works, right. Because SBA works with many
banks across the country to work with small businesses. And
those are banks that are taking on the guarantees from SBA and
understanding how to work with small businesses specifically.
And that is not necessarily federal contracting small
businesses, it is all small businesses across the board.
So when you remove that, then you are talking about the mom
and pop organizations, you are talking about small businesses
that are in high technology, you are talking about such a huge
part of the American economy. You know, in my comments we
talked about 32 million small businesses. That is a huge number
of American workers where that understanding of having some
level of support from the Small Business Administration is
critical to that business getting up and developed.
Even for the gentleman speaking earlier about how he
started his small business and now he is out of debt. Well,
that is important to understand because so many small
businesses are starting--I started my business without debt at
all. I started my business at my kitchen table with $500,
right. And so while some have that opportunity, others may not
have that opportunity. And so it is our responsibility to give
them that opportunity because we know and understand that small
business is the undergird of this entire economy. SBAs and
their ability to fund the small businesses, to get these ideas
off the ground, it is incredibly.
Ms. Chu. Yes. Well, thank you for that.
Dr. Blessing, I wanted to discuss the impacts that debt
ceiling hostage taking has had on government's most important
and basic functions, including the ability to collect revenue
and promptly disburse refunds during tax season.
Debt ceiling standoffs, including the one perpetrated by
the Republicans in 2011, have not had any impact on reduced
federal spending, but instead have allowed for Republicans to
defund crucial government services while spending more on their
own priorities, like tax cuts for the rich. Now, that is why
the IRS's operating function is 20 percent lower today, even
when adjusted for inflation. And this is despite federal
spending increasing between 2010 and 2019. Defunding the IRS
has led to a tax gap as high as $1 trillion annually, which
means even more lost revenue to reduce the deficit.
So the result is delay tax refunds, overburdened staff, and
more difficulty getting much needed assistance during the busy
crunch before tax day. And any similar stories can be told for
similar essential government functions.
So can you talk about the impact that debt ceiling fights
have had on essential government services like revenue
collection and have these service cuts led to deficit
reduction?
Dr. Blessing. You made a good point with drawing out all of
these different elements that you put together connected to
debt ceiling standoffs. And underfunding the IRS is an
incredibly important problem that we should definitely focus
on. You know, when we have these different debt ceiling
standoffs, when we underfund these different services, you
know, there are real costs to the government and to our ability
to collect what is on the books. You know, it is not a tax
raise, it is simply, you know, collecting what is on the books.
And the tax gap should be a really low hanging fruit item for
reformers who are looking to kind of build a coalition for, you
know, ways to start recouping some revenue in a serious way.
Chairman Yarmuth. The gentlewoman's time has expired.
I now recognize the gentleman from Virginia, Mr. Cline, for
five minutes.
Mr. Cline. Thank you, Mr. Chairman.
I have been listening over the past hour and I have got to
say, this disconnect that is going on right now is profoundly
disturbing between one side that wants to pretend that there is
nothing wrong, that we can continue to proceed as we have with
spending, record spending levels, record deficits, record
levels of debt, and that we don't need to worry about debt
limits anymore, and the other side which actually wants to have
a frank and honest conversation about the looming crisis that
we are facing right now.
Director Mulvaney, thank you for being here. Do you believe
we should be focused on stabilizing current important programs,
like Social Security and Medicare, to make sure we can maintain
them, or on expanding these programs and creating a bunch of
new programs on top of them?
Mr. Mulvaney. Mr. Cline, thank you very much for the
question.
It is an easy answer. Yes, we have come to depend on Social
Security and Medicare and Medicaid. Faced with that automatic--
let us be clear--and I know you folks know this as well as
anybody--for folks who might be watching this, those cuts are
automatic. Social Security, for example, is not allowed to
borrow money. It can only operate with the funds that it has.
The day that it runs out the money that is in the trust fund,
it is going to have to unilaterally borrow. Last time I looked
at it, which was three or four years ago, it was 22 percent.
That--you want to talk about something that will be a shock to
the system, would upset everything from small business to just
social cohesion. Take Social Security and cut it 25 percent
overnight. Those are the types of things you should be looking
at.
How do you shore up those programs before you look at doing
new ones? You know, we will end up spending the money at some
point in the future, but, you know, sooner or later people
might stop lending you money or might not be happy with you
printing more money. It is prudent to take care of the existing
programs that help people before you start talking about
expanding or creating new ones.
Mr. Cline. Right. The Social Security trustees project that
the trust fund should become depleted in 2033. although the two
funds are legally separate, they are often considered in
combination and the trustees that the combined trust funds will
be depleted in 2034. They projected last year that the combined
trust funds would become insolvent because incoming tax revenue
would be sufficient to pay only about 78 percent of scheduled
benefits. You have essentially conflicting laws. Under the
Social Security Act, beneficiaries would still be legally
entitled to their full scheduled benefits, however the Anti
Deficiency Act prohibits government spending in excess of
available funds, so the Social Security Administration would
not have legal authority to pay full Social Security benefits
on time.
Dr. Sheiner, you mentioned that there might potentially, if
a debt ceiling weren't increased, be a delay of a week or two
in a check. Wouldn't this be much, much worse than a delay of a
week or two of a Social Security check?
Dr. Sheiner. Oh, definitely, this would be much worse. But
the debt ceiling doesn't really have anything to do with it,
right. And so the question is, what do we do to put Social
Security on a sounder footing. And frankly this kind of rule
that they couldn't pay out money is very similar to a debt
ceiling. It is like the people are entitled to the money, but
the Treasury is not allowed to pay them, the Social Security
Administration is not allowed to pay them. So----
Mr. Cline. But you would agree--to reclaim my time--that if
we can do something to set Social Security on a firmer
foundation and a solid fiscal footing, that the need to
increase the debt ceiling would reduce on a similar scale?
Dr. Sheiner. It depends what we do. I mean you could
imagine changing that rule and allowing general revenues to be
used for Social Security and then thinking about a more gradual
deliberative process.
So it depends on what you did.
Mr. Cline. OK. Thank you.
Director Mulvaney, similar question. Modern monetary
theory, or MMT, using the word theory loosely, proponents
insist that debt doesn't matter because the government can
never run out of money. We can always print more. Many of my
colleagues on the other side are proponents of MMT and believe
in increasing federal debt is essentially a free lunch.
Do you believe that policies based on MMT would be harmful
to the economy? And what would you expect that to be--the
impact on inflation, which is already a problem?
Mr. Mulvaney. Yes, you know, we heard the term earlier I
think when the majority leader was talking about a de facto
default. That, you know, when you don't pay money you have
appropriated, it is a de facto default. If I borrow $100 from
you, right, I expect $100 back. But if you pay me back in money
that is only work $.50, is that a de facto default as well? And
that is what modern monetary theory--so it looks that way,
which is just we can print as much money as we possibly want.
My problem with MMT, Mr. Cline, is that it is right until
it is not. Certainly I am sympathetic. I mean there have been
folks like me saying that the end would be--was nay for 30
years. In fact, during Reagan we were worried about the debt
and deficits, right. And it hasn't come up to bite us yet. I
feel sometimes like I am a guy on the corner standing up
holding the sign saying, you know, repent, the end is near.
Sooner or later, though, I am going to be right. But MMT works
until it doesn't. And I am not really sure how you get out of
the box after you have printed all of that money or borrowed
all of that money. How do you then get it back? You don't. So
you either deal with dramatic economic slowdowns, inflation,
loss of trust in the system. Nothing good comes from MMT.
Mr. Cline. Yes, but devaluation of your currency and your
economy is in shambles.
I yield back, Mr. Chairman. Thank you.
Chairman Yarmuth. The gentleman's time has expired.
Now, I yield five minutes to the gentlewoman from Texas,
Ms. Jackson Lee.
Ms. Jackson Lee. Thank you very much, Mr. Chairman, and
thank you for this hearing.
Let me just place in the record that the debt ceiling is a
fixture, a some would say figment of your imagination in terms
of its validity for making us fiscally sound and responsible.
It is obviously something that the Congress delegated the
authority to the executive branch in terms of paying our bills,
but then placed a ceiling or limit on the total amount of the
debt that could be outstanding. It has no effect, as has been
said often, on federal spending or the amount we need to
borrow. It only restricts the Treasury Department's ability to
honor financial commitments.
In fact, what I would argue is that it creates havoc. And
the havoc can be enormously difficult to address.
So I want to pose these questions in particular.
And I want to start, Ms. Russell, with you. And thank you
so very much for being here. I would like to say that my life
has been spent on championing small businesses because I very
much agree with your testimony. You are the economic engine of
this nation. And I just want to recite 32.5 million small
businesses and growing. And particularly women-owned
businesses, though they have been impacted severely by the
pandemic. And then 61.2 million people.
So give me your sense of havoc being created by a debt
ceiling on average working Americans. And my time is short, so
if you can be succinct so I can ask questions to others.
Thank you very much and thank you for your testimony.
Ms. Russell. Thank you so much for the question.
Yes, I mean so we have to remember that a business is made
up of people and people make up the communities are made up of
other small businesses. And we are all that ecosystem that
continue to thrive of each other. So when one element--and we
keep talking about this as if it is one element and one little
piece of something--this piece of something impacts the entire
ecosystem of small businesses. If I am not going to work then
that means my cleaners is not going to have payment, my coffee
shop isn't going to have payment, the place I go to lunch isn't
going to have payment, the place where I would take my child
isn't going to have payment. It is an entire ecosystem that we
have to consider that is disrupted every time we decide that we
are going to use the debt ceiling as a poker chip in a
political discussion.
Thank you.
Ms. Jackson Lee. Thank you.
Dr. Blessing, all kinds of havoc have been proposed. Our
children, our grandchildren, our grandchildren's children are
then going to be loaded down with debt. Does the debt ceiling
make a difference on being loaded down with debt?
And then can you speak to the debt ceiling being lifted,
modified, on the impact of we won't be able to pay Social
Security, we won't be able to provide for Medicare and
Medicaid, which are obviously very strong anchors of survival
for Americans. I have got constituents who get their $700 check
and that is the only thing they get to survive on.
Dr. Blessing?
Dr. Blessing. Excellent questions.
The debt ceiling does not function to effectively control
debt, to answer your first question. You know, there is--and,
you know, in terms of the importance of of continuing to pay
for Social Security, absolutely. You know, this is not
something that is--you know, there are so many different
reforms that we could make at the debt ceiling that would be
really productive, whether it is abolishing it or something
very clean, like the newly introduced Boyle bill. And, you
know, Social Security is not connected to the abolition of the
debt ceiling.
Ms. Jackson Lee. Dr. Sheiner, let me ask you the question
of havoc and what happens if--wouldn't it give an opportunity
for Congress to be more responsible because they could remove
from their decisionmaking political shenanigans? But let me
also say that I am glad to see my good friend, Mick Mulvaney.
He might want to comment. He wants Congress to be better.
Removing the debt ceiling might get us at the table of
compromise and engagement.
Dr. Sheiner--we want to be fiscally responsible, not create
a political explosion. Dr. Sheiner? And maybe Mick if we have
the time.
Dr. Sheiner. So I think apart from the cost of the debt
ceiling that there are the political costs, which is the it is
a distraction that doesn't address the real problems that we
have. And it just creates political, you know, disagreement and
increases political polarization and frankly makes people not
believe in our country and in our institutions when they are
hearing this bickering about whether or not you are going to
pay your bills.
And so when we think about what we need to do to move
forward to address our long problems, it is not only just
Congress, it is the whole American people that have to be part
of this solution and this kind of bickering gets in the way and
makes us think like they are just like having these internal
fights that make no sense.
Ms. Jackson Lee. Chairman--Mick? Wouldn't it make us
better----
Chairman Yarmuth. Mick, do you want to take a shot at that?
Mr. Mulvaney. Yes, real quickly. Listen, I think you have
got a much better argument if you are doing it anyway. If you
are sitting down anyway outside of the boundaries of the debt
ceiling to talk about fiscal responsibility and you have done
that for a couple of years, then you come back and say, look,
we don't need the debt ceiling because we are doing it anyway.
I think right now you get rid of the debt ceiling, you haven't
really satisfied--certainly haven't satisfied me and many of my
colleagues here that you would have those discussions but for
the debt ceiling.
So, yes, listen, I am open for that discussion, but think,
you know, you have got to prove first that you can sit down and
have those talks in a reasonable fashion.
Ms. Jackson Lee. Well, I am glad you are open for that
discussion because I think we need to move to eliminating the
debt ceiling. And let us see how Congress can behave on the
better half of the American people.
I think we can do that.
Mr. Chairman, thank you for yielding. Unfortunately, I have
to yield back. Thank you, sir, very much.
Chairman Yarmuth. The gentlewoman's time has expired.
I now recognize the gentleman from Iowa, Mr. Feenstra, for
five minutes.
Mr. Feenstra. Thank you, Chairman Yarmuth and Ranking
Member Smith.
This hearing has been very interesting. You know what, let
us just look at it this way, it is all about accountability.
Accountability, people. The federal government being
accountable to we the people. We are government. And yet I
often think that you--all other people think, oh, government is
in D.C. No, it is not, it is we the people. We are government.
And this hearing to abolish the debt limit completely flies in
the face of every family, of every business.
Think about this, every family has got a debt ceiling.
There is only so much that we can spend. We have a credit card
debt limit, our banks say, hey, this is all that you can--we
can loan you out, right. Every day our businesses and our
families deal with a debt limit. And yet we think we are above
that. We think that we don't need this debt limit anymore
because it doesn't make a difference. Well, it makes a
difference to our families and it makes a difference to our
businesses. I just think this is absolutely shameful. I really
do.
You know, we have $30 trillion in debt, we spent $7.5
trillion with agencies that we can't spend fast enough, we have
7.5 percent inflation, the highest in 40 years, and yet today
in the Budget Committee we are addressing this little thing,
this one single law that forces Congress to acknowledge--to
acknowledge the damage that we are doing to runaway spending. I
don't understand it. This is so wrong.
Mr. Mulvaney, the Federal Reserve has shifted from
inflation being transitory to an expectation that they will
increase interest rates in the coming months. The rate
increases might go as high as 4 percent before this is all
done. If the Federal Reserve continues to increase interest
rates, how does that affect the interest on our national debt?
And could this put us in a death spiral?
Mr. Mulvaney. Yes. And in fact, thanks for the question,
because we used to talk about this when I was on the committee,
was that you end up in a circumstance--was the Federal Reserve
during the Obama Administration actually sort of encouraging us
to borrow more money. I heard President Obama make the argument
when interest rates are so low we should be borrowing more
money. That is when you should borrow it. Of course, that
applies in a world where you actually have to pay back debt,
which we never do.
But did the Federal Reserve sort of make it easier to
borrow money because there was no consequences to our actions?
Yes, they certainly did.
And if interest rates do go up, then you are going to start
to see those consequences. Again, I come back to this idea that
you would think that everybody could agree that there are
better things to spend money on than interest, but at the--4
percent, by the way, Mr. Feenstra, that doesn't bother me. I am
old enough--I am older than I look. I mean I remember when
interest rates were, you know, on mortgages were 14, 16, 18
percent. You get that on $30 trillion worth of debt and you
have got a real problem. In fact, you have to ask yourself,
would the Federal Reserve actually have the nerve, the will, to
raise interest rates much past 4 percent if they needed to,
recognizing the impact that has on the Treasury.
Mr. Feenstra. That is exactly right. And I am glad you
pointed that out, because when we had the debt ceiling, these
are the things that come out. These are decisions that we have
to make. You know, the Congressional Budget Office projects by
2031 that as much as 15 to 18 percent of our money will go to
interest rates. By 2051, close to 50 percent of our money
coming in, our revenue coming in, will go to strictly interest.
And then we talk about Social Security, Medicare, Medicaid,
that is looking to go bankrupt. But, no, we don't want to talk
about that because it is inconvenient, because, oh, it hurts.
You know what? I think this is the most important topic that we
should be talking about today. Of what does our future look
like? And yet we want to bury it in the sand and we don't want
to go down this path of holding each other accountable. You
know what? Our families do, our businesses do, I think the
government needs to also.
Thank you and I yield back.
Chairman Yarmuth. The gentleman yields back.
I now recognize the gentleman from California, Mr. Peters,
for five minutes.
Mr. Peters. Thank you, Mr. Chairman.
I have been listening for a while and, you know, it strikes
me as the one thing we have learned from the debt ceiling
discussion is that the debt ceiling is not the answer. Whatever
the problem is, the existence of the debt ceiling is not
keeping us from being $30 trillion in debt. And the reason is
because it has been--the real analogy is not some warning
light, it is the credit card bill. You have already spent that
money, you, your family, your spouse, your kids, they already
rang up that account and the only responsible thing to do is to
pay the bill. And by the time you get to the bill it is too
late to talk about the spending.
Let us face facts that the debt ceiling become a political
cudgel rather than some sort of useful policy tool. So those of
us who are worried about debt and deficit shouldn't just talk
about whether this is good or bad. It is clearly not doing the
job. Let us talk about something new.
And I think a lot of my good colleagues on the Democratic
side support repealing the debt ceiling limit altogether and I
think there is good reason for that. Because it is an
artificial tool. It carries too much risk to be used for
political games.
But I don't think--one of my Republican colleagues just
thinks we can get rid of it.
So last year--I just want to let you know--I teamed up with
Congressman Jodey Arrington in the Bipartisan Policy Center to
craft and introduce the Responsible Budgeting Act. So this bill
would eliminate the danger of debt limit brinkmanship and
offers Congress two ways to actually deal with the national
debt. First we would pass a budget resolution that satisfies
specific debt reduction measures while simultaneously passing a
joint resolution the president can sign to suspend the debt
limit until the next fiscal year. And then if Congress fails to
pass that concurrent budget resolution, the second option
allows the president to suspend the debt ceiling him or
herself, which Congress could vote to override. And with the
suspension, the president is obligated to send a debt reduction
to the Hill. Congress would have to consider that proposal or
come up with something of its own. It is a little bit complex,
but it is a heck of a lot better than pointing fingers at each
other and dodging the bullet every year or two.
So, Dr. Blessing, you noted that while the debt ceiling
debate may bring attention to fiscal issues, it carries too
much risk to be considered a useful tool. Do you think a reform
like the one I described could move the ball forward in having
a more productive conversation about controlling federal debt?
Dr. Blessing. A very important question.
I mean my testimony has emphasized both the benefits and
limitations of procedural reform like this. Having the
president be allowed to, you know, suspend the debt ceiling
with Congress being able to then disapprove of it and you have
paired it with additional things, that is sort of a mechanism
would absolutely be safer than the status quo. The safest
possible thing of course is to remove it from the field of
political contestation altogether.
Mr. Peters. Right.
Dr. Sheiner, you agreed that breaching the debt limit would
affect the standing and competitiveness of the United States in
the global economy, right?
Dr. Sheiner. Definitely.
Mr. Peters. I don't know if you think something like our
proposal, which would eliminate the hostage taking and reduce
the risk of default--I mean I think probably there is an
appetite of getting rid of it altogether, but failing that is
that the kind of thing we should be looking for?
Dr. Sheiner. Yes, definitely. That is why I agree with Dr.
Blessing. Getting rid of it would be great, but if--what you
need to do is get rid of the uncertainty, right. You need to
basically take it off the table as a possibility. And so
whatever procedural reforms could get you there that could
actually pass, you know, would be a step in the right
direction.
Mr. Peters. Well, I must say I think that both parties have
been responsible for adding to the debt, I think for good
reasons and other reasons. It would be great if this
Committee--the Members of this Committee could come together if
you are really concerned about reducing the deficit, forcing us
to make those tough decisions through a bill like the one we
proposed.
Mr. Chairman, I support eliminating the debt ceiling. In
the event that that doesn't happen, I think we need to reform
it. But I don't want to pretend that this is somehow the answer
to any problem, to any question that we face. This is not the
tough--this is not the tough decisionmaking we say we want to
be called on to make.
And I thank you for having this hearing and I yield back.
Chairman Yarmuth. The gentleman yields back.
And I now recognize the gentleman from California, Mr.
Obernolte, for five minutes
Mr. Obernolte. Thank you, Mr. Chairman, and thanks to
everyone for participating in this critically important
hearing.
I want to touch on something that Congressman Smucker
brought up, which is that the fact that we are having this
discussion about the debt limit, you know, really is--means we
are not talking about the larger picture here, which is the
federal deficit and our rising national debt. The one thing
that the debt limit does force us to do is periodically have a
discussion about the debt and how we are going to pay back the
money that we are borrowing.
So we have had a discussion here in this hearing about the
recent letter from the Congressional Budget Office and a debate
about whether or not real wages are keeping up with inflation,
but I wish that we were talking more about another document
from the CBO a few months ago, which was there budget forecast.
I think Congressman Feenstra touched on this a little bit. That
forecast is eye opening. I mean it paints--even under the most
rosy scenario, which is that we don't have another major
recession, we don't have another major war, Congress doesn't
enact any new spending measure that promote deficit spending,
and the 2017 tax cuts expire on time. You know, if all four of
those things happen, then by the end of the forecast period,
which is 2051, our national debt will only be 200 percent of
our gross domestic product. Just paying interest on that
national debt will consume 9 percent almost of our entire
economy, which is over half of federal tax revenue. And, you
know, the really distressing thing about that is that is
assuming that interest rates are within the range that the CBO
projects now. If we have to raise interest rates to control
inflation, the CBO says that easily just paying interest on the
debt could be 25 percent of GDP and over 100 of all of our
federal tax revenue.
So that is what, you know, we need to focus on. And I think
any discussion of eliminating the debt ceiling has to be paired
with a discussion about what our solution is to getting that
national debt and our federal spending under control.
So I really wish if we were talking about eliminating the
debt ceiling, we would pair that with a measure, for example,
maybe a congressional budget--a constitutional amendment
requiring a balanced budget. I have introduced legislation that
does that. I know other Members of the Committee have induced
legislation that requires that. This is not a new idea. Almost
all of the states require a balanced budget. My home state of
California, I mean obviously a very blue state, but we have one
of the strongest balanced budget requirements. And before my
two years on House Budget I spent five years as what we would
call Ranking Member of the Budget Committee in the California
legislature. And, you know, we made it work. And sometimes the
minority party even voted for it.
So this could be a template for what the federal government
does.
And then last, before I get to a question or two here, I
just want to talk about the specific proposal that has been
raised here in the hearing today, which is to transfer
responsibility for raising the debt ceiling from the
legislative branch to the executive branch and giving the
Department of the Treasury that authority. And this is
something that I have spent some time thinking about and I
would strongly say that that is a bad idea. A few years ago I
wrote a doctoral dissertation on managing budgetary conflict
between the Legislative and executive branches, and as part of
that research we looked at the mechanisms that shift the
balance of power between the Executive and legislative branches
at the federal level. And here is the problem with giving the
Department of the Treasury that authority, there time horizon
is much shorter because administrations come and go every four
years, or at most every eight years. Doing something like
controlling federal spending is really politically difficult
and it is not something that you can get done on that short a
time horizon and politically it is going to be much more
difficult for the executive branch to do that.
So I would urge caution there.
So let me ask, Mr. Mulvaney, I think you have got some
fascinating experience having served in both the Legislative
and the executive branches. Do you think that Congress should
essentially abdicate its responsibility for this and give it to
the executive branch? And if not, what do you think the long-
term solution is to controlling federal spending? Do you think
it is something like a balanced budget requirement?
Mr. Mulvaney. The longer answer is it just will. It is
political will. The voters have to send people to office who
care about balancing the budget and spending less. Not doing
that yet. So, yes, it would take a cultural change to
Washington. Washington is set up right now to spend more every
single year because of the way that budget process works,
because of the way the CBO project works. Listen, that is a
longer discussion for another day.
As to Mr. Boyle's suggestion about giving the Treasury, I
am sitting here, oh, I am torn. Because I think the chances of
me going back into the legislative branch are probably pretty
low. The chances of me going back in the executive branch,
probably pretty good. So, yes, give us more authority please,
give us more power. No, don't do that. I mean isn't that part
of the problem we have right now? Is that we--you guys delegate
so much authority to the executive branch and then you don't
let the executive branch actually do it. They can't fire
people, they can't hire people, they can't actually run the
government. Then you try to micromanage them on how you spend
money by putting line items in appropriations bills and the
whole thing just starts to break down. No, don't give more
authority to the executive branch.
By the way, you have got the same authority right now I
think on regs. You delegate all the regs down to the executive
branch and you can oversee them, but you never do. You can
overrule them, but you never do. So, no, please don't give more
authority to the executive branch. That is not a resolution to
hardly anything.
Mr. Obernolte. Well, thanks.
And I see my time is expired, but let me just highlight
something that you said, which is that the rules aren't broken
here, Congress is broken. And in the future as we have these
discussions, Mr. Chairman, I hope that we can pivot away from
pointing fingers at each other about which administration
racked up the debt and whose fault it is and instead focus on
what the long-term solutions are. Because, you know, that is
really what--I think the elephant in the room.
I yield back.
Chairman Yarmuth. The gentleman's time has expired.
I now recognize the gentlewoman from Washington, Ms.
Jayapal, for five minutes.
Ms. Jayapal. Thank you very much, Mr. Chairman, for holding
this important hearing. I think we have heard multiple times
how the national debt ceiling is a source of much dysfunction
in Congress without serving a substantive purpose.
And it is important to note that limits on the Treasury
were not originally instituted to constrain deficit spending at
all, but rather evolved from a bill aimed at granting the
Treasury more authority to issue bonds to pay for World War I,
to loosen restrictions on borrowing by imposing a one-time
arbitrary limit on bond issuance instead of authorizing war
spending on an as needed basis.
So I thought it would be good to take a little trip down
the historical lane just to show how far we have strayed and
how today the debt ceiling simply does more harm than good.
So, Dr. Blessing, when prior to World War I Congress
authorized the Treasury to issue debt in varying types of bonds
for specific purposes and amounts, how did that change--how did
Congress change the Treasury's authority during the war and
what was the rational? Briefly.
Dr. Blessing. Congress--thank you for the historical
correction. I think it is really important for people to
understand this. Congress saw that under war time conditions
that Treasury was going to need more flexibility and be able
to, you know, better address the war effort. And in order to,
you know
[audio malfunction]
Ms. Jayapal. Dr. Blessing, you are coming in and out
unfortunately.
Dr. Blessing [continuing]. effort at constraining either
overall debt--oh, gosh, how is this?
Ms. Jayapal. You are back again.
Chairman Yarmuth. Your--Dr. Blessing, your audio----
Dr. Blessing. Is that better? I am sorry.
Chairman Yarmuth [continuing]. is cutting out. And you are
frozen now on screen. Let us see if she--are you back? No, you
are still frozen.
Ms. Jayapal. OK. I could go to some other----
Dr. Blessing. I can see you.
Ms. Jayapal. Turn off your camera maybe.
Chairman Yarmuth. Oh, OK. Want to try that, Dr. Blessing?
Turning off your camera for a second and see if we can just
hear you?
Dr. Blessing. Of course. How is that?
Ms. Jayapal. That is much better.
Chairman Yarmuth. We can--we can hear you.
Ms. Jayapal. And, Mr. Chairman, if you wouldn't mind
restoring some of my time, that--I would appreciate it.
Chairman Yarmuth. No, I will.
Ms. Jayapal. Thank you.
Go ahead, Dr. Blessing.
Dr. Blessing. The Congressman is absolutely right. With the
change in the 1917 law with the Second Liberty Bond Act, the
idea was not to, you know, enable the Treasury Department to
have greater flexibility and to also modernize the federal----
Ms. Jayapal. Shoot, Dr. Blessing, unfortunately we are just
not able to hear you. So I think I am just going to go a
different----
Chairman Yarmuth. Yes, no, your sound is not working. No,
we can't hear you either.
Ms. Jayapal. OK.
Chairman Yarmuth. Ms. Jayapal, go ahead and----
Ms. Jayapal. All right. We are going to try this again. And
I am going to do--I am going to ask questions of a different
witness. Sorry about that, Dr. Blessing. I was looking forward
to that.
But let me go to Dr. Sheiner. Even after Congress raises
the ceiling after a default, the damage will be done. And by
some estimates six million jobs will evaporate and delays to
crucial social safety payments would devastate families already
living hand to mouth. How long would it take for the economy to
recover after breaching the debt limit?
Dr. Sheiner. I mean I think we don't know the answer to
that question. It really does depend on what happens to
financial market perceptions, whether people understand that
yes, we have reached the limit, but it is going to be very
short and we can take it in stride, or whether it really says,
oh my god, there is so much dysfunction here and that would
just undermine confidence. And that could take a very long time
to get back.
And so we have never done that before. And so I think the
uncertainty is huge. And so the way I think about it is not
that it would necessarily be, you know, many, many chorus of
recession, but it has the possibility. And why risk that,
right. And it has the possibility of just deeply undermining
faith in the U.S. economy that might last many, many years.
Ms. Jayapal. Well, that is a really important point as well
because it has been a major priority of Congress to help
maintain America's competitiveness in a globalized economy. And
so, you know, if we were to breach the debt limit, could you
give us a sense of what that would do to the standing of the
United States in the global economy?
Dr. Sheiner. I think that the U.S. federal government has
this reputation as, you know, our Treasury having savings in
there, they are the most liquid and we have a huge advantage
and our borrowing costs are lower because of that. And so that
puts that at risk. Even if it put it at, you know, we just lost
some of the advantage, it would cost a lot given the size of
our debt. And so why risk it.
And then I think there is a broader question that I can't
really answer, but it is beyond just interest rates. It is this
view of the U.S. as a global leader. And when your politics get
so dysfunctional that you don't pay your bills and that you
cause a recession because you couldn't get the political act
together, that just has really unpredictable but obviously not
good repercussions for the U.S. as a global leader.
Ms. Jayapal. And what about the potential global spillovers
from a breach in the debt limit?
Dr. Sheiner. Right. I mean so we have a global capital
market, people rely on U.S. treasuries everywhere as the safest
asset. We have seen other episodes where there have been minor,
you know, dysfunctions in the treasury market kind of affecting
the whole world. And if this was something major, yes, it could
throw, you know, global markets in turmoil, you know. And then
much would depend on what the Federal Reserve did and did they
come in and fix it, could they do that.
It is just this huge unknown about what would happen, but
it does have serious repercussions and just really hard to
assess exactly what those would be.
Ms. Jayapal. Well, given all of that--I was going to go
down history lane with Dr. Blessing. I know you said you are
not a historian, so I am not making you answer those questions.
But here is my last question that I was going to ask her that I
think you could answer, which is given the fact that the debt
ceiling has evolved into a practice so far from its original
intent and carries the enormous risk that you have laid out,
why has this policy persisted for so long and what are the
repercussions if we continue to allow it to persist?
Dr. Sheiner. I mean it is not just that it is persistent,
but I think it has gotten more pernicious over time, right. We
have come closer to breaching it in the past 10 years. As I
siad, I wasn't sure what was going to happen this time. It
seems like we are getting closer and closer to the point where
we actually might step over that breach. So I think it is a
very dangerous thing to have and I don't think it does anything
good in terms of thinking about our long-term problems in a way
that makes sense. And so I think it should go. I think it is a
risky and not a helpful part of our process.
Ms. Jayapal. Thank you, Dr. Sheiner.
And thank you, Chairman Yarmuth. I appreciate the latitude
there given our tech problems.
Chairman Yarmuth. Absolutely. No, no problem at all.
The gentlewoman's time has expired.
I now recognize the gentleman from Florida, Mr. Donalds,
for five minutes.
Mr. Donalds. Thank you, Mr. Chairman.
This has been a very interesting hearing, to say the least.
I mean what the reality is, before I got to Congress I never
liked hearing you all talk about the debt ceiling, and now that
I am in Congress I don't really like hearing you all talk about
the debt ceiling because the truth is is that this is not about
``paying our bills'' , this is about us not changing our
spending habits and wanting more money from capital markets so
we don't have to change.
This whole idea about brinkmanship. to me is what the
legislative process is supposed to be about. If you cannot find
a way to work on both sides of aisle to actually figure out a
path forward for raising the nation's national credit card,
then that means that you can't even get together to figure out
how to reform your spending. And if you can't reform your
spending, you are going to run amok. So that is why capital
markets and the credit rating agencies look at us from a funny
perspective of are they ever going to get their act together,
because we never do the hard things in D.C. That is what I have
seen before I got here and that is frankly what I am seeing
now.
There is no way we should be abolishing the debt ceiling
vote and getting rid of the debt ceiling vote. That makes no
sense at all. Because if we are going to be the body,
especially in the House, that authorizes all spending, then we
should also be the body that authorizes the debt position of
the United States. And you can't just put it in the executive
branch's hands, especially when we do that with so many other
things in Congress.
I really do want to thank the witnesses, because I have
been listening intently. And as far as I am concerned, I think
all of the questions have really been asked. But I think it is
more important for me to just, you know, for whatever it is
worth, make the clear statement that the Members of the
Congress, both sides of the aisle, we actually need to let this
Committee do its full job, which is actually creating a budget,
actually figuring out what our spending parameters can be,
figuring out what that is going to be looking like in the
future. And we should not be turning over borrowing of debt to
the executive branch without a save from Congress. And I
understand one of the proposals that Congress would have to
vote to not let the executive branch do something, that doesn't
make any sense because you can hardly get Congress to agree on
a lot of things.
We have to do the hard work. It starts with us in the
people's body. We should not be moving those spending decisions
and those borrowing decision off to the executive branch.
I yield back.
Chairman Yarmuth. The gentleman yields back.
I now recognize the gentleman from Wisconsin, Mr. Grothman,
for five minutes.
Mr. Grothman. Thank you.
First of all, I want to--one of my colleagues a little bit
earlier talked about making Congress more responsible. And I am
just going to point out, I have been here for seven years. I
can imagine saying making Congress less irresponsible, but to
say we are building off the responsibility of Congress is not
something I have noticed so far.
Now, we still have--Mick Mulvaney is still there. Hey,
Mick. Glad to see you again. I got a question for you. It seems
to me that one of the results of excessive spending is
inflation. And I am not even sure all members of the Federal
Reserve get that right now. But is that true? And do you
believe the current--I guess I would call it cruel tax, because
Congress never votes on it, it is really a regressive tax. It
hurts the little guy the most. But do you believe the current
penalty on the average American, housing costs, fuel costs,
food costs, is caused by excessive federal spending?
Mr. Mulvaney. Yes. You know, Glenn, you and I are old
enough, as are a couple of people on this Committee, not nearly
as many as I would like, because I don't want to feel like I am
the elder statesman here, remember what inflation is. Inflation
is too much money chasing too few goods. And right now, because
a lot of the policies you have got in Washington, DC, you all
are pumping money into the system. Now, granted, a lot of that
was necessary because of COVID. I am not trying to criticize
everything that happens, but you have had the--the end result
of what you have done is to dump a whole bunch of money in the
system. At the same time, because of COVID, but also because of
some of the policies, re-regulating the economy, for example,
you--it has been harder and harder to get goods to market.
So more money chasing fewer goods equals inflation. And it
is the worst kind of tax. It absolutely is. Yes, you don't vote
on it, but it does impact the folks that my Democratic friends
say they care the most about, the folks at the bottom end of
the economic scale. It affects them more than anybody else and
negatively.
I own assets, OK. Many people on this call own assets. Our
assets are going up in value because of inflation. If you are
the bottom end of the scale, you don't own anything. You are
living paycheck to paycheck and you are spending 100 percent if
not more of that paycheck on things you need every single week.
And your quality of life is going down.
So, no, inflation I think is one of those--it is the
scourge--listen, it was bad, it was really bad in the late
1970's, early 1980's. People remember it nowadays--to know how
debilitating inflation can be. And, yes, Washington is a
driving factor behind that. Not the only one, COVID certainly
plays a role. But Washington can and should be doing more to
alleviate inflation instead of making it worse, which is what I
think you all are doing.
Mr. Grothman. I am going to give you a question. Maybe it
is an unfair question because you didn't know it was coming.
But obviously the day of reckoning is coming, right. And when
the day of reckoning happens there is going to have to be some
reduction in spending. I personally don't think we should ever
cut Social Security. People have paid into that and that is the
one thing we shouldn't cut, which means many other programs
which are arguably--or maybe not even arguably--under our
Constitution shouldn't be the role of the federal government
are going to have to be looked at very carefully.
Do you know--if we try to balance the budget, say next year
or the year after, and we leave Social Security and Medicare
off the table, percentage wise, how much of everything else
would we--do you--unfair question?
Mr. Mulvaney. Yes, I don't--I mean I used to know that off
the top of my head, that used to be my job. But I haven't
looked at that in a while. My guess is--I don't know, it is
probably 20 percent. If you take Social Security and Medicare--
keep in mind, Social Security, Medicare, and Medicaid are 75
percent of government expenditures. The budget--you guys know
this better than anybody--you all only budget roughly 25
percent of what the government spends. So if you take 75
percent of the spending off the table and you try and balance
it based upon the rest of it, it is going to be very, very
difficult. I used to, you know, tell people we could--you know,
we could cut the defense budget to zero and you still wouldn't
balance the budget. In fact, last year you could have cut all
discretionary spending to zero and you wouldn't have balanced
the budget because you are more than a trillion--what is the
budget this year, $1.4 trillion, $1.5 trillion? It is huge.
Listen, the better question is if you needed to, could you
balance the budget next year. If you really needed to. The most
severe circumstances, could Congress get together and balance
the budget next year if they needed to. I am not sure you
could.
Mr. Grothman. OK. I am kind of jealous of Chairman Yarmuth
and maybe jealous of you, Director Mulvaney. I can't remember
when you got here. You were here when the sequester was put in
place. I think maybe the best piece of public policy we have
seen in the last 20 years. Do you believe the sequester would
have happened without the requirement for a debt deal?
Mr. Mulvaney. Guaranteed, 100 percent, the Budget Control
Act, which included the sequester, never would have happened
but for a debt ceiling discussion.
Mr. Grothman. When I look at the last seven years--go
ahead.
Mr. Mulvaney. Does anybody on this Committee, anybody in
Congress who would disagree with that statement?
Mr. Grothman. Absolutely tremendous. I think maybe people
on the Committee--or we can distribute next time we meet the
increase every year in discretionary spending for the last 20
years and see the wonderful seven year period of sequester.
Now, I know eventually when the Republicans were in charge
some people felt the need to break it, but I think it is
something that we could perhaps revisit in the future since
this is something that both sides agreed upon once.
Chairman Yarmuth. I think--can I ask--did his clock
malfunction. Doesn't seem like he has been there for five
minutes.
It shows expired, Mr. Grothman, but I am going to give
you----
Mr. Mulvaney. That is just because Grothman is so engaging,
he slows down time when he talks.
Chairman Yarmuth. If you have one more question, Glenn, go
ahead and ask it.
Mr. Grothman. OK. That is OK. We will leave it at that, but
I appreciate you having the hearing. As you know, I am hopeful
for many more hearings. I have always loved the Budget
Committee.
So thank you for having this hearing, Chairman Yarmuth. I
hope it is the first of several.
Chairman Yarmuth. All right. Thanks very much.
The gentleman's time has expired.
And now we welcome to the Committee once again for his
first appearance before us, Mr. Carey of Ohio. You have five
minutes.
Mr. Carey. Well, I won't take that, Mr. Chairman, but I do
thank you for the opportunity to speak. I do thank the
witnesses for their testimoneys.
I guess, you know, most of the questions that have been
addressed kind of--really were kind of line with what I was
going to ask. I guess, Director, what I would like to ask you
is I remember working as a young staffer in the 1990's. We had
wanted to push a balanced budget amendment. And had we
accomplished that in 1995, 1996, where would we be today in
terms of the issue that we are discussing that is before us
this afternoon.
I will wait for your answer.
Mr. Mulvaney. Yes, I think the debt ceiling was probably
what, a couple of trillion dollars back in the mid-'90's? So,
granted, you probably have to go into debt a little bit to
handle COVID, probably some other things that--the financial
crisis of 2008, probably incur some debt there, so maybe it is
up, you know, a trillion or two. Listen I was not a big fan of
the war in Iraq, which contributed to the deficit as well. So,
yes, so ballpark maybe you are $6 trillion or $8 trillion in
debt right now if you--if that passes and if we lived up to it.
Listen, I had a chance to vote on it in 2012 I think and it
didn't pass in large part because some Republicans didn't vote
for it. So it is a real shame. Someone mentioned earlier that
California has a balanced budget amendment.
By the way--and I don't want to filibuster your question,
but I would encourage this because this is one of the, you
know, rare possibilities for bipartisanship. state government
works. state government works better than the federal
government does. One of the reasons the state government works,
in addition to the fact that the minority has rules that
protect it, is that they have to balance the budget and they
have to sit down and work together with folks in the other
party. You all don't have to do that because you own the
printing press. If you had a balanced budget amendment, it
might actually make your jobs more enjoyable, not less, because
you would actually be forced to do things on a bipartisan
basis.
I will get off my soap box.
Mr. Carey. Now, Director, I appreciate the candidness and I
appreciate you being the first person I have ever asked a
question to.
So, Mr. Chairman, Ranking Member Smith, I appreciate the
time and I do yield back.
Chairman Yarmuth. The gentleman yields back the balance of
his time. Once again, we welcome him to the Committee.
I now yield myself 10 minutes and I probably won't take all
10, but I do want to comment on a few things.
First of all, let me say that I think this hearing has been
done with a great deal of though and civility and I think with
a very positive attitude about dealing with this question of
the debt ceiling. So I know one person said we blamed--going
back and forth with blame. We really didn't. There were a
couple of times, but not like normal for sure.
So I appreciate all the Members' contributions and the
witnesses' answers as well.
You know, one of the things it occurs to me, and I know
people have said so many times during this hearing, that it is
not the rules that are broken, it is the Congress that is
broken. And back in 2017 I was part of a joint select
committee, members House and Senate, bipartisan, former
Chairman and Ranking Member Womack of Arkansas was one of the
co-chairs of that group. And we met periodically for the entire
year in 2017. It was a joint select committee on budget and
appropriations reform and the whole idea was trying to figure
out if there were things we could do better, there were rules
that we could change that would make the budget process more
effective and so forth.
And after months and months and months, I think we had
seven different hearings, we had people from across the
philosophical spectrum, economists, and others, the conclusion
that we all reached was it wasn't the rules, it was the people
and the willingness of the members of the House and Senate to
responsibly deal with their responsibilities.
And it wasn't--you know, we talked about triggers on
spending, we talked about balanced budget amendments, we talked
about no budget, no pay, all of those things. And, again, the
conclusion on a bipartisan basis was none of those things would
really change unless the members change and unless the
willingness of the member to be--again, to be responsible and
responsive to the environment change.
So I say that having called this hearing about the debt
ceiling and proposals to change a significant rule. And the one
thing that I know--I think Mr. Mulvaney talked about--I loved
the first names, but I am going to remain somewhat formal--
talked about in terms of giving up power of the purse, I think
you could argue that having the debt ceiling gives--has already
taken the power of the purse away from us because it says we
are going to execute our responsibilities, we are going to
appropriate funds, and then we don't allow those--if we have
the debt ceiling, we don't allow those decisions to be
implemented freely.
And so, again, I think this discussion has been very, very
important and useful. And I am not sure we will have another
hearing on it, but I think it has prompted discussions.
And then, finally, the notion of the fact that we don't
discuss the deficit and the debt without talking about the debt
ceiling, I think that is not true. I think we talk about the
debt and the deficit all the time. Now, do we do anything about
it? Not really. But we talk about it all the time and there is
a great deal of consciousness of it, which says to me that the
one justification for keeping the debt ceiling, which I have
heard today, is that it is an effective extortion measure to
get policies enacted that otherwise wouldn't be very popular or
couldn't generate enough support to be passed, like
sequestration. That to me to me does not justify keeping it. It
actually is a good reason, as far as I am concerned, to get rid
of it. If all it is is a wedge to either get difficult policies
passed or to--again, to force us to--to force one side or the
other to make concessions.
So, anyway, what I would like to do in the remaining five
minutes is just to give--because I know a lot of the--Dr.
Blessing, her sound went out. I don't know if you are back on
line. But just to give you all a minute or two--give each of
you one minute and 15 seconds to--if you have comments about
things that have been said today that you have been waiting to
respond to one way or another. If there aren't, that is fine.
So, Dr. Blessing, do you want to take a shot? Is there
anything you would like to say in summary? Things you have
heard today that you would like to make a comment on?
Dr. Blessing. Sure. Well, first of all, thank you for a
wonderful hearing and thank you for everyone at the committee.
Some of the later responses were vis a vis giving up power
to the executive branch. And here is the thing, while I think
we should be concerned about Congress as an institution and
making it more powerful, a congressional capacity, I don't
believe that doing away with the debt ceiling or any of the
reforms that have been mentioned would mean giving up power to
the executive branch because they are only lifting the debt
ceiling, they are not making policy. Congress has already made
all of the spending policy, all of the taxing policy that would
affect the debt ceiling in the overall levels of debt.
So I don't see this as an abrogation of Congress', you
know, fiscal responsibility or any--giving of any policy
relevant power to the executive branch.
So I just wanted to address that in particular in addition
to all of my comments.
Chairman Yarmuth. Great. Thank you, Dr. Blessing. And, by
the way, if you would like to provide it in writing, your
response on the historical context of the debt ceiling that we
couldn't get you in on the audio, we would love to have your
comments in writing for the record.
Dr. Blessing. Happy to.
Chairman Yarmuth. Great. Thanks.
Dr. Sheiner?
Dr. Sheiner. I don't have much to add. I will say I was--I
am glad you said that you always talk about the debt, because I
am like we--I always talk about the debt and the--is it really
possible that you guys never do? I thought that was unlikely,
so I am glad to hear that you do. It is a big issue.
The only one thing I want to say is when we talk about like
anything that you do that lowers the debt is a good thing. Like
that is not necessarily the case. The reason this is such a
hard problem is that you really have to balance the benefits of
what you are--what--the money that you are spending, the costs
of any taxes, what is the best way forward what is the timing.
Low interest rates have a lot to do with how much room that you
may have.
And so I just think this notion that, well, the debt
ceiling forces us to make action and therefore every action is
definitely good, I think is something that is not exactly
right, which is why this conversation needs to be done not
about the debt ceiling where you are under--you know, under the
gun, but really in a way where you can really address the
nuances of policy.
Chairman Yarmuth. Thank you.
Ms. Russell, any final----
Ms. Russell. Thank you. Thank you so much for the
opportunity to speak today and to listen to this fantastic
conversation.
Just want to reiterate the importance of, you know,
stability from the small business perspective and looking at
our ecosystem and looking how small business really impacts the
American economy. It is really important. I think sometimes
small businesses get lost in the mix because we are always
talking big economics and big business. But when you look at
the impact of small businesses across the country, we are
really making the most difference in the most areas, and
especially in our communities.
And so I thank you for this opportunity to represent small
businesses and to keep them and keep us at top of mind.
Thank you so much.
Chairman Yarmuth. Thank you.
And, Mr. Mulvaney, would you like the final word?
Mr. Mulvaney. John, I will because I will say something
that hopefully is interesting, which is I think that the best
thing that I am going to take away from this is that Sheila and
I may have hit on something. And I am willing to accept your
premise that you guys talk about debt and deficits more than
maybe I perceive now that I am no longer inside the building.
Sheila talked about, you know, sitting down at the table.
Listen, if you all were to pass one or two or three really good
fiscal reforms bills without having the debt ceiling held to
your head, you might convince folks like me that we don't need
it anymore. Again, I think we are all concerned about the same
thing, which is how do we make sure the debt doesn't ruin us. I
think we are just disagreeing on the best way to accomplish
that. But if you all sit down and hack out something that
reduces the deficit without having it be under the Sword of
Damocles the debt ceiling makes, then maybe you can convince me
we can get rid of it after that.
So, anyway, thanks for the chance to do this. It is good to
see everybody. And it is one of the rare, rare days I miss
being in my old job.
Chairman Yarmuth. Well, I will join you in a few months and
we can miss it together and hopefully get out on the golf
course.
Once again, thanks to all the witnesses. It has been a very
enlightening hearing. I appreciate your time and responses.
And unless there is any further business before the
Committee, this hearing is adjourned.
[Whereupon, at 1:37 p.m., the Committee was adjourned.]
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