[Joint House and Senate Hearing, 118 Congress]
[From the U.S. Government Publishing Office]


                                                      S. Hrg. 118-36

                 COUNTING THE COSTS: HOW A U.S. DEFAULT 
                  CRISIS HARMS AMERICAN FAMILIES AND BUSI-
                  NESSES

=======================================================================

                                HEARING

                               BEFORE THE

                        JOINT ECONOMIC COMMITTEE

                                OF THE

                     CONGRESS OF THE UNITED STATES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              MAY 17, 2023

                               __________

          Printed for the use of the Joint Economic Committee
          
[GRAPHIC NOT AVAILABLE IN TIFF FORMAT]          


        Available via the World Wide Web: http://www.govinfo.gov
        
                               __________

                                
                    U.S. GOVERNMENT PUBLISHING OFFICE                    
52-690                      WASHINGTON : 2023                    
          
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                        JOINT ECONOMIC COMMITTEE

    [Created pursuant to Sec. 5(a) of Public Law 304, 79th Congress]

SENATE                               HOUSE OF REPRESENTATIVES
Martin Heinrich, New Mexico,         David Schweikert, Arizona, Vice 
    Chairman                             Chairman
Amy Klobuchar, Minnesota             Jodey C. Arrington, Texas
Margaret Wood Hassan, New Hampshire  Ron Estes, Kansas
Mark Kelly, Arizona                  A. Drew Ferguson IV, Georgia
Peter Welch, Vermont                 Lloyd K. Smucker, Pennsylvania
John Fetterman, Pennsylvania         Nicole Malliotakis, New York
Mike Lee, Utah                       Donald S. Beyer Jr., Virginia
Tom Cotton, Arkansas                 David Trone, Maryland
Eric Schmitt, Missouri               Gwen Moore, Wisconsin
J.D. Vance, Ohio                     Katie Porter, California

                  Jessica Martinez, Executive Director
                 Ron Donado, Republican Staff Director
                            
                            C O N T E N T S

                              ----------                              

                     Opening Statements of Members

                                                                   Page
Hon. Martin Heinrich, Chairman, a U.S. Senator from New Mexico...     1
Hon. David Schweikert, Vice Chairman, a U.S. Representative from 
  Arizona........................................................     2

                               Witnesses

Dr. Wendy Edelberg, Director, The Hamilton Project, Senior Fellow 
  in Economic Studies, Brookings Institution, Washington, DC.....     4
Mr. Indivar Dutta-Gupta, President & Executive Director, Center 
  for Law and Social Policy, Washington, DC......................     6
The Honorable Mick Mulvaney, Former Director of the Office of 
  Management and Budget, Charlotte, NC...........................     7

                       Submissions for the Record

Prepared statement of Hon. Martin Heinrich, a U.S. Senator from 
  New Mexico.....................................................    33
Prepared statement of Dr. Wendy Edelberg Director, The Hamilton 
  Project Senior Fellow in Economic Studies, Brookings 
  Institution, Washington, DC....................................    38
Prepared statement of Mr. Indivar Dutta-Gupta, President & 
  Executive Director, Center for Law and Social Policy, 
  Washington, DC.................................................    45
Graphs submitted by Vice Chairman Schweikert:
    Graph 1 ``Excerpts from S&P Report on 2011 U.S. Credit 
      Downgrade''................................................    65
    Graph 2 ``Why the Debt Limit Matters: All 8 Major Deficit-
      Reduction Laws Since 1985 Were Attached to Debt Limit 
      Legislation''..............................................    66

 
 COUNTING THE COSTS: HOW A U.S. DEFAULT CRISIS HARMS AMERICAN FAMILIES 
                             AND BUSINESSES

                              ----------                              


                        WEDNESDAY, MAY 17, 2023

                    United States Congress,
                          Joint Economic Committee,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 2:32 p.m. 
in 216 Hart Senate Office Building, before the Joint Economic 
Committee Chairman, Martin Heinrich.
    Senators: Hassan, Heinrich, Klobuchar, Lee, and Schmitt.
    Representatives: Arrington, Beyer, Estes, Ferguson, Moore, 
Porter, Schweikert, and Smucker.
    Staff: Nicolas Aguelakakis, Christina Carr, Tess Carter, 
Sebi Devlin-Foltz, Ron Donado, Michael Farren, Tomas Gallegos, 
Owen Haaga, Colleen J. Healy, Jeremy Johnson, Jessica Martinez, 
Michael Pearson, Elisabeth Raczek, Christopher Russo, Jeff 
Schlagenhauf, Alex Schunk, Nita Somasundaram, and Garrett 
Wilbanks.

 OPENING STATEMENT OF THE HON. MARTIN HEINRICH, A U.S. SENATOR 
      FROM NEW MEXICO, CHAIRMAN, JOINT ECONOMIC COMMITTEE

    Chairman Heinrich. This hearing will come to order. I'd 
like to welcome everyone to the Joint Economic Committee's 
first hearing in this Congress. It's an honor to lead this 
Committee and I'm excited to build on the success of former 
Chairman Beyer's leadership this last Congress and I'm also 
looking forward to working with my fellow Committee members, 
including our new Vice Chairman. Congratulations, Congressman 
Schweikert.
    I want to welcome the new members of the Joint Economic 
Committee, Senators Welch, Fetterman, Schmitt, and Vance and 
Representatives Ferguson, Smucker, and Malliotakis, is that how 
you say it?
    More important, today's hearing will begin with five-minute 
opening statements from myself and Vice Chairman Schweikert and 
each of our three witnesses. We will then proceed with 
questions, alternating between parties, and in order of member 
arrival. Members are reminded to keep their questions to no 
more than five minutes. Now for opening statements.
    By most estimates, we are now less than one month from a 
default on our obligations as a nation. This is unacceptable. 
It's unprecedented and it's caused by too many members putting 
politics ahead of people. The United States simply does not 
skip out on its bill. The United States pays its bills. And 
when we do, like when we voted to do so since 1960, including, 
I would point out three times under President Trump, we don't 
just signal to the world that we are a responsible nation. We 
also avoid economic catastrophe for the people who sent us to 
Congress in the first place.
    Let's be clear. A default will drive up costs for working 
families, for mortgages, car loans, student loans, and small 
business loans to the cost of consumer goods and it will cost 
jobs, millions of them. Nationwide, Moody's Analytics predicts 
a drawn-out default would cost us between seven and eight 
million jobs, and that includes as many as 38,000 jobs lost in 
my home state of New Mexico.
    For two years now Republicans have been predicting a 
recession. Now they have manufactured a default crisis that 
could actually cause that recession. Using the economic 
wellbeing of the entire nation as a bargaining chip is wrong 
and shouldn't be condoned. Democrats, Republicans, and 
Independents should all absolutely negotiate on our annual 
appropriation bills and as a member of the Senate 
Appropriations Committee, I've been part of these negotiations.
    I know how opinionated we can all be and how hard we fight 
for our constituents and the issues that we believe in and 
that's exactly what we should do in our appropriations process, 
but holding the economic wellbeing of our country hostage over 
appropriations and legislation we have already negotiated and 
passed is wrong.
    For one thing, I would welcome revisiting the Bush and 
Trump Administration's tax cuts for the wealthiest of the 
wealthy which contributed $10 trillion to our national debt. 
But that is not the question at hand. The question now is will 
Congress avoid default and with it save the American economy. 
The answer must be yes. We must pass a clean debt limit 
increase and continue our economic recovery. The danger we are 
putting our constituents in if we fail to deliver on this 
fundamental responsibility is what we will explore in this 
hearing. And I will now turn things over to Vice Chairman 
Schweikert for his opening statement.
    [The prepared statement of Chairman Heinrich appears in the 
Submissions for the Record on page 33.]

       OPENING STATEMENT OF THE HON. DAVID SCHWEIKERT, A 
  REPRESENTATIVE FROM ARIZONA, VICE-CHAIRMAN, JOINT ECONOMIC 
                           COMMITTEE

    Vice Chairman Schweikert. Thank you, Mr. Chairman. First, 
just an off the script comment. Senator Heinrich and I are 
fairly friendly with each other. We are going to have these 
moments where we will differ, but in my early days of being on 
the Joint Economic Committee this was actually an 
intellectually credible committee.
    Yes, we have partisan views. We have supply side, Keynesian 
whatever your underlying philosophy. I'm hoping, as we continue 
to move forward, when it's our turn to choose a hearing, their 
turn to choose, that we continue to try to step up the quality 
because at some point we have a moral obligation as well as a 
technical obligation to provide information for the 
construction of a debt and policy.
    I do want to make it absolutely perfectly clear, 
Republicans are not walking us to default. We're misusing that 
definition, as I fear, a scare tactic. Please understand 2011, 
and I have the quotes here if you want to read them. Standard & 
Poors lowered the U.S. credit rating to AA+ based on the fiscal 
consolidation plan negotiated between the White House and 
Congress because it fell short. The actual quote was 
``necessary to stabilize medium and long-term debt.'' That was 
2011. The debt today is dramatically worse, dramatically worse. 
If you do understand since January 20, 2021, when the new 
Administration took place, we are now borrowing $4.4 billion a 
day. That's $50,000 a second since the new Presidency. In nine 
years the math says over 90,000 a second.
    If you start to layout the cruelty that means to retirees 
and most likely coming inflation, but also what we're doing to 
our young people. Mr. Chairman and to everyone, the other thing 
is the discussion about Social Security. We need to actually 
have it. The math says in now eight and a half years, according 
to CBO's report six weeks ago, the Social Security Trust Fund 
is gone. CBO says a 25 percent cut to seniors. Is this 
Committee, of all the committees, ready to deal with the moral 
implications of doubling senior poverty?
    I will argue that absolutely moral and my heartbreak of the 
President's State of the Union speech where many of us had 
spent a year quietly negotiating to see if there was a fix we 
could bring to the table and then to stand up and give a speech 
to the American people saying don't touch it and we all applaud 
with understanding that was signing a contract on doubling 
senior poverty in this country in eight and a half years. That 
is cruel and unacceptable.
    The other point I really, really want us to understand is 
my personal sort of rage at the theater that has been this debt 
ceiling. And having read both your testimonies, I appreciate 
the partisanship, but there are some things that are 
technically absolutely incorrect. Please take a look at what 
happened in this body 2017, 2019. Are you telling me that the 
$620 billion of additional spending and the lifting of spending 
caps that was absolutely required in dealing with Democrats at 
that time on the debt ceiling was a clean debt ceiling? If 
we're going to judge each other, let's be honest and judge each 
other by the same standards.
    We have incredible concern on the scale and growth of this 
debt and the stresses that puts on society and ultimately the 
crushing of the poor by not dealing with these things. To 
pretend that the other side, my brothers and sisters on the 
left, have stood up and said let's do clean debt clean debt 
ceilings that's intellectually dishonest as well as just 
factually not true.
    Please let this hearing be about where we're at, how we 
mechanically do this, and how we meet the morality of the 
crushing debt that is coming to this society.
    Last thing also the Chairman in his opening statement said 
the 2017 tax reform and threw out the number of $10 trillion. 
We have vetted that number multiple, multiple times when we do 
the growth effects and we can't find that number anywhere in 
the actual literature. We'd love to see it. And with that, Mr. 
Chairman, I yield back.
    Chairman Heinrich. Now I'd like to introduce our three 
distinguished witnesses. Dr. Wendy Edelberg is the Director of 
the Hamilton Project and a Senior Fellow in Economic Studies at 
the Brookings Institution. Dr. Edelberg is a macroeconomist 
whose research spans a wide array of topics from household 
spending and savings decisions to economic effects in fiscal 
policy to systemic risks in the financial system.
    She frequently writes reports and articles for the Hamilton 
Project on a variety of macroeconomic topics, most recently 
with a focus on issues affecting the post-pandemic labor force 
and the debt ceiling. Prior to her time at the Hamilton 
Project, Dr. Edelberg spent more than 15 years working in the 
public sector, including as Chief Economist at the 
Congressional Budget Office and also served at the Council of 
Economic Advisers and the Federal Reserve Board.
    Mr. Indivar Dutta-Gupta is the President and Executive 
Director of the Center for Law and Social Policy. Prior to 
that, Mr. Dutta-Gupta, was the Co-Executive Director of the 
Georgetown Center on Poverty and Inequality where he lead work 
to develop and advance policy recommendations that elevate 
poverty and inequality, advance racial and gender equity and 
expand economic inclusion for all people.
    He also previous served as the Senior Policy Advisor at the 
Center on Budget and Policy Priorities and as a professional 
staff member on the House Ways and Means Subcommittee on Income 
Security and Family Support.
    The Honorable Mick Mulvaney is a Co-Chair at Hatem, LLC, a 
global consultancy designed to solve diverse public and private 
sector challenges. Mr. Mulvaney previously served as Acting 
White House Chief of Staff and as Director of the Office of 
Management and Budget under the Trump Administration. Prior to 
that, Mr. Mulvaney represented the Fifth Congressional District 
of South Carolina in Congress.
    Dr. Edelberg, let's begin with your testimony and then 
we'll continue in the order of introductions. The floor is 
yours.

OPENING STATEMENT OF DR. WENDY EDELBERG, DIRECTOR, THE HAMILTON 
     PROJECT, SENIOR FELLOW IN ECONOMIC STUDIES, BROOKINGS 
                   INSTITUTE, WASHINGTON, DC

    Dr. Edelberg. Thank you, Chairman Heinrich, Vice Chairman 
Schweikert, and members of the Committee, my name is Wendy 
Edelberg and I'm Director of the Hamilton Project and a Senior 
Fellow at the Brookings Institution.
    The effects of the debt ceiling crisis are unambiguously 
negative and they could be quite severe for families, 
businesses, and the health of the economy even if Treasury 
continued to make timely principal and interest payments. To do 
that, Treasury would likely need to cut non-interest payments 
by 35 percent.
    Proposed workarounds such as increasing borrowing despite 
the debt limit or priorities some non-interest payments would 
bring chaos and create legal uncertainty and are not 
sustainable. The only effective solution is for Congress to 
increase the debt ceiling without delay or better yet abolish 
it.
    In my remarks I will make three points. First, raising the 
debt ceiling gives Treasury the means to pay obligations that 
result form already enacted laws. It is not about allowing 
future obligations to be incurred. Second, if Treasury were 
forced to delay payments, the negative economic effects would 
be swift and would escalate. Third, the only solution is to 
raise or eliminate the debt ceiling.
    U.S. taxpayers owe people money because of legislation 
enacted in the past. In some cases, 90 years ago. We owe 
interest to those who have lent to the U.S. by purchasing 
Treasury securities. We owe doctors and hospitals who've 
treated Medicare and Medicaid patients and millions of people 
are entitled to benefits, including four million disabled 
veterans whose payments scheduled for June 1st are now 
uncertain.
    Because the U.S. runs a deficit, Treasury needs to increase 
federal debt to meet these obligations. Should the debt ceiling 
bind the negative economic effects would risk triggering a deep 
recession. How bad it could get depends on how long the 
situation lasts, how it is managed, and how much investors lose 
their faith in Treasury securities with a Stock Market crash 
the first day that a payment is delayed.
    Would the Treasury's securities market, the world's most 
important, function smoothly? Would there be a run on money 
market funds that hold Treasury securities? If people expected 
a short-lived impasse with full and timely payments on Treasury 
securities, it is possible that the initial response could be 
muted. However, even if the crisis only lasted a few days, the 
damage could be lasting.
    At the very least, investors would likely anticipate short-
term interruptions in federal payments each time the debt 
ceiling nears a signification escalation from their current 
expectations for negotiations to run right up to the last 
minute. If the impasse were to drag on, market conditions would 
likely worsen with each passing day as optimism about resolving 
the crisis wanes and pessimism about a deep recession expands.
    Entitlement beneficiaries could face trouble with expenses 
such as rent and utilities. Government agencies' work could be 
disrupted and federal employees required to work because the 
federal government would not be shutdown, wouldn't know how 
long their paycheck would be delayed. Moreover, because tax 
revenues would be dampened, the fiscal outlook and necessary 
cuts to spending would be exacerbated.
    The reputation of the Treasury securities market would be 
undermined. Up until now, the U.S. Government has enjoyed a 
borrowing rate that has estimated to be lowered by roughly one-
quarter percentage, meaning interest savings of more than $750 
billion over the next decade. If just a portion of that 
advantage were lost by allowing the debt ceiling to bind, the 
cost to the taxpayer could be significant and already financial 
markets are concerned.
    For Treasury bills that are scheduled to mature in June, 
investors are demanding a significant premium of nearly 1 
percentage point for the risk of not being paid on time.
    I want to be clear that none of the proposed workarounds 
would avoid the chaos that would ensue if the debt ceiling were 
to be bind. If Treasury used a workaround to make all payments. 
It would be viewed as circumventing the will of Congress. It 
would bring legal challenges that would add to uncertainty and 
it would roil financial markets. Indeed, legal challenges are 
likely no matter what Treasury does as the law imposes 
contradictory requirements.
    Treasury is required to make payments, honor the debt, and 
not go above the debt limit, three things that cannot happen 
all at once. No action other than raising or eliminating the 
debt ceiling will prevent a debt ceiling crisis.
    [The prepared statement of Dr. Edelberg appears in the 
Submissions for the Record on page 38.]
    Chairman Heinrich. Mr. Dutta-Gupta.

   OPENING STATEMENT OF MR. INDIVAR DUTTA-GUPTA, PRESIDENT & 
     EXECUTIVE DIRECTOR, CENTER FOR LAW AND SOCIAL POLICY, 
                         WASHINGTON, DC

    Mr. Dutta-Gupta. Thank you Chairman Heinrich and Vice 
Chairman Schweikert and members of the Committee. My name is 
Indivar Dutta-Gupta and I'm President and Executive Director of 
the Center for Law and Social Policy or CLASP. CLASP is a 
national, nonpartisan nonprofit using research and analysis to 
promote effective policy solutions to end poverty and advance 
racial and gender equity.
    I'm honored to discuss why many people rely on federal 
programs to achieve a basic living standard. Why the deep cuts 
mandated under the McCarthy Debt Ceiling bill would undermine 
the wellbeing of the nation's people and the importance of 
raising revenues alongside the dangers of failing to raise the 
debt limit. So first, why do people rely on federal programs to 
achieve a basic living standard? The United States suffers from 
an unusual number of low-paid jobs, ranking 39th out of 42 OECD 
countries. As a result, many who benefit from support programs 
are simply workers paid too little to make ends meet.
    This is particularly true for many women, Black and Latino 
working people who are disproportionally employed in low-paid 
jobs. Others experience low incomes due to the hazards of life 
including illness, disability, death of a family member, 
outliving savings, under employment, intimate partner violence, 
and caring for a loved one. These life events are experienced 
across all races and classes, if unevenly due to unequal 
wealth, social and cultural expectations, labor market 
discrimination, mass incarceration, and more.
    Now fortunately a vast array of empirical studies proves 
that individual programs like health coverage, food assistance, 
and cash assistance and our social protection system overall 
help families with low incomes stabilize their lives, maintain 
employment, and advance in the labor market as well as help 
their children thrive.
    So unsurprisingly then, the McCarthy bill's deep cuts would 
undermine the nation's wellbeing. The House debt ceiling bill 
would set dangerously low caps on appropriations that would 
grow harsher over time. If House Republicans later allow 
spending on defense, border security, and veterans medical care 
to grow virtually all other appropriated spending would need to 
be eliminated under the caps.
    So of course, supports on the chopping block include 
childcare which helps parents while they work or go to school 
to improve their employment prospects, post-secondary education 
and workforce development, which can offer credentials required 
for better jobs and support our small businesses, and food 
safety, public health, basic transportation programs that 
benefit everyone.
    The bill also would use work reporting requirements to 
limit access to Medicaid, SNAP, and TANF, programs that help 
families, including more than one million veterans access 
opportunity and thrive. Extensive evidence proves that such 
requirements do little to promote work, but do increase 
hardship harming many who merely failed to overcome the red 
tape that these requirements create.
    So instead, revenues must be a major part of the answer. 
The United States is a relatively low tax country, ranking 32 
out of 38 OECD countries in total government revenues as a 
share of GDP while total government spending is also low 
compared to other wealthy countries, recent tax cuts have 
helped propel us to our current debt levels. The Bush tax cuts, 
their extensions, and the Trump tax cuts alone are responsible 
for most of the increase in the ratio to debt to economic 
output since 2001, adding trillions to deficits.
    The McCarthy bill would actually reduce revenues by cutting 
the IRS budget and making it harder to collect taxes owed by 
the wealthy and corporations. Now we face serious dangers if we 
fail to raise our arbitrary debt limit. A default could spark a 
financial crisis causing millions of job losses and decimating 
retirement savings for people of all income levels. It would 
make borrowing more expensive and reduce families' ability to 
build wealth through home ownership, education, or 
entrepreneurship.
    Millions of people would immediately feel the impact of a 
stop in government spending through delays in Social Security, 
veterans' disability payments, and more. A recession, which the 
proposed cuts could trigger, could harm everyone, particularly 
workers paid the lowest wages, young people and communities of 
color, many of whom are among the last hired and first fired.
    The House passed bill tells American families heads you 
lose, tails you lose. Tying passage of debt limit bill cuts is 
dangerous and would increase costs, deprivation, and suffering 
for American families or gutting investments that ensure our 
nation's long-term competitiveness. Congress should not pass 
any deal that increases hardship, never mind one that asks 
struggling families to foot the bill so the richest 
corporations and households can evade their taxes. Thank you.
    [The prepared statement of Mr. Dutta-Gupta appears in the 
Submissions for the Record on page 45.]
    Chairman Heinrich. Director.

OPENING STATEMENT OF MR. MICK MULVANEY, FORMER DIRECTOR OF THE 
   OFFICE OF MANAGEMENT AND BUDGET, CHARLOTTE, NORTH CAROLINA

    Director Mulvaney. Thank you. Thank you for the invite. 
It's nice to be back in the room. As a former House member, I 
always like to comment that you all's meeting rooms are a lot 
nicer than ours, so it's always nice to be over on this side of 
the building and it's welcomed to have the chance to talk about 
the debt and the deficits.
    We don't do that enough. The last time I was in this room 
having that conversation was in the spring of 2011. I was 
sitting where Ms. Moore is sitting right now and the debt was 
$14.3 trillion and we did very little about it. Today it's 
$31.4 trillion. We got there, in large part, because we don't 
have these discussions. There's never a good time to have these 
discussions.
    If you try to have discussions about the debt around the 
debt ceiling, people cry default. If you try and have a 
discussion about the debt around appropriations, as the 
Chairman suggested at the outset, people don't want to have 
that discussion. They cry government shutdown. It seems there's 
never a good time to talk about how and why we got $31 trillion 
into debt and how we might get out of it. In fact, ignoring it 
is how you get where we are.
    And my fear is we'll continue to ignore it. We're having 
the hearing. I understand the Senate majority leader asked for 
these hearings. I appreciate that, but we'll probably ignore it 
again. We'll probably ignore Social Security, which is a 
complete travesty. What, we've got nine years left before 
there's 24 percent across the board cuts and we're not having 
hearings today on Social Security? The same is true with 
Medicare. Ignoring these problems won't make them go away. If 
we need proof of that look at what's happened since we sat in 
this room in the spring of 2011.
    Mr. Schweikert said something that caught my attention in 
his opening statement about the intellectual credibility of 
this Committee. I loved serving on this Committee. I served 
under both Senator Casey from Pennsylvania and Congressman 
Brady from Texas and we prided ourselves on having really good 
and meaty intellectual conversations. We all know that hearings 
in this place can tend to become sensationalized. They can tend 
to be the type of things that people only go to in order to get 
their social media clips, to get their input that they need to 
raise money. It's one giant charade after another.
    This Committee was always different and I hope it continues 
to be the case. We need to have intelligent conversation about 
the debt. There's not a single person in this room that I know 
of who is arguing for default, not one. In fact, of all the 
people sitting in this room, there's a couple who've actually 
voted not to default, not everybody, but some.
    I don't know of a single person here who says, you know 
what, I think default would be a great idea. There are folks 
having discussions about what is a default. Is not paying the 
employees of the Department of Education, is that a default? Is 
that a default of an obligation as the Chairman mentioned, or 
is not paying your interest on your debt a default as defined 
by the rating agencies? Those are the types of differentiations 
or distinctions that I think is important for this Committee to 
make because no other committee will make them.
    You can get away with saying, oh, not paying the Department 
of Education is a default in other committees. You shouldn't be 
able to get away with it here. This has always been one of the 
most reputable committees in Congress. I hope it continues to 
be. We need to have conversations about tough, important issues 
and this may be the only place we can do it. I hope we have a 
chance to have those types of conversations today about the 
fact that we are $31.4 trillion in debt and that we have to 
have a discussion about how to raise the debt ceiling between 
now and sometime in June. With that, thank you, Mr. Chairman.
    Chairman Heinrich. Thank you all for your testimony today. 
Director Mulvaney brought up the issue of the debt. I'm curious 
to hear from all three of you actually. There are multiple ways 
that you can get at the debt. You can cut spending. You can 
grow the economy and you can raise revenues. Obviously, this 
broader body has chosen several times in recent years to cut 
revenues. I'd love to know from each of you what your opinion 
is of whether or not revenues should be part of this 
conversation as well as cutting spending and what the 
relationship between those two things and growing the broader 
economy is, starting with Dr. Edelberg and we'll go straight 
across.
    Dr. Edelberg. I'm absolutely sympathetic to the concerns 
about the fiscal trajectory. It's unsustainable. When you look 
at the spending pressures on the U.S. economy over the next 30 
years, they're significant. They are largely a result of the 
aging population and rising healthcare costs. And those are 
going to be demands on the U.S. population whether the federal 
government meets those demands or the private sector meets 
those demands. But of course, if we got the route that the 
federal government meets those demands, then I think it 
requires more revenue.
    So I think that the difficult question before you is what 
do we want our federal government to do for us and then how do 
we want to pay for it. I think revenues should absolutely be on 
the table and I think thinking about all of the tradeoffs for 
who gets harmed by spending cuts and how incentives change from 
increasing revenues. All of those tradeoffs have to be 
considered, but there is no shortage of ideas. They're just 
difficult political questions that have to be dealt with.
    Mr. Dutta-Gupta. Thank you, Senator Heinrich. Sorry for my 
volume earlier, so let me just note that the U.S. again is a 
relatively low tax country compared to other countries with 
comparable or sometimes higher living standards and our 
spending is relatively low, but not as low, so there's a gap. 
So we're towards the top of the bottom on spending and we're at 
the bottom on taxes. So it seems to me that it's quite clear 
that what other countries with comparable living standards have 
figured out is that you need more revenues.
    The U.S. obviously had a benefit with being able to borrow 
more cheaply than other countries, but I think we need more 
revenues. The final thing I'll just note is that those revenues 
can be used for obviously meeting the nation's needs, including 
some investments that have extraordinary ROI that we're talking 
about things like the expanded child tax credit we had before 
which had an 8 to 1 ROI that no other stakeholder could make 
such an investment but the United States Government, so there 
are things we can do. It's not that everything needs to pay for 
itself. Sometimes we just care for people. We live our values. 
I appreciate Vice Chairman Schweikert's commitment to 
addressing poverty among the elderly and others, but there are 
also a lot of fantastic uses for revenues that could be cost 
beneficial.
    Chairman Heinrich. Director.
    Director Mulvaney. I think traditionally we pull between 
like 18 and 20 percentage GDP in revenues. I think we're at the 
high end of that right now. Even when you say it's low, it's 
low compared to other countries. We're at the fairly high end 
of scale right now for us. To answer your question, Mr. 
Chairman, if you go back and look--and we did this back in the 
Budget Committee back in 2011 and '12. We did a pretty decent 
investigation into fiscal consolidations. Other countries, 
smaller countries without a reserve currency that had been 
through what we anticipated then that we were going to go 
through and I think the two examples we used were Canada and 
Australia. And what you saw that they used--successful fiscal 
consolidations tend to have a mix of cost reduction versus 
revenue enhancement of about 85 percent to 15 percent. And 
every time I say that people say, oh, well let's raise taxes by 
15 percent. That's not the point. You can get all sorts of 
revenue enhancement from other things such as changing 
deductions and so forth.
    We did this in the 2017 Tax Act by limiting the state and 
local tax deductions and so forth. So the answer to your 
question is, is everything part of the discussion? I think 
traditionally successful fiscal consolidations are 85 to 15 
spending versus revenue.
    Chairman Heinrich. So whether you define those as taxes or 
other revenues, as you pointed out, they should be on the table 
as part of an overall package?
    Director Mulvaney. I don't remember why Canada did it the 
way that they did. It may simply be that there was the 
political expediency and it worked. Keep in mind those are also 
democracies and they probably had to get parties from both 
sides to agree to something, so I don't know if it was the math 
and the economics that was driving it or if it was politics. 
I'm just telling you that if you look historically to the 
fiscal consolidations that seems to be the blend.
    Chairman Heinrich. Vice Chairman.
    Vice Chairman Schweikert. Thank you, Chairman Heinrich. I 
was so engrossed in the discussion, I was losing myself there. 
And to the doctor, thank you. Actually, you get a brownie 
point, if there's such a thing. Having a seven-year-old we do 
lots of little gold stars for being actually intellectually 
credible on the willingness to point out Social Security and 
Medicare, some of the things in just that it's a shame that 
even our side, but in reaction to the politics, is no longer 
talking about some of our major drivers.
    Obviously, I'm going to ask Mr. Mulvaney one or two things 
and then we'll bounce around. But for my brothers and sisters 
on the Committee, between today and 30 years from now, back of 
the napkin math of $128 trillion of borrowing. One hundred 
percent of that borrowing, 75 percent Medicare, 25 percent if 
we backfill Social Security. The rest of the budget actually is 
deemed to actually have somewhat of a positive balance.
    Nine years, actually, less than nine years, we can get rid 
of all discretionary, including Defense. All discretionary is 
gone and we still have to borrow hundreds of billions of 
dollars just to cover the mandatory spending; Social Security, 
Medicare, Medicaid, and that's actually without Social 
Security. I don't think we understand the driver of our 
incredible growth in borrowing, turns out it's really not 
Democrats or Republicans. It's demographics. We got old and 
we're often unwilling to talk about that. But first a fixation 
just because it's important that we get this on the record.
    And as some of you know, I have a compulsion with boards, 
try not to hit the Chairman with this, but Mr. Mulvaney, you 
may actually remember some of this discussion because you and I 
were around for this. We were downgraded as a nation by 
Standards & Poors in 2011 and we were downgraded not because of 
the fight over the debt ceiling. We were downgraded, for those 
who would like to actually read it, we were downgraded because 
we didn't demonstrate credibility on how we were going to 
manage the future.
    A couple of your comments, the numbers are dramatically 
worse today than 2011. Is this possibly coming back at us 
because you've actually had conversations with some of the 
rating agencies?
    Director Mulvaney. Sure. And the conversations I'm having 
are quite interesting because I asked them again what is 
default and you ask a rating agency what a default is. Default 
is nonpayment of your interest--principal and interest. But 
principal is easy because we borrow money to pay it back. We 
take new debt to pay it off old debt, but we have to also 
borrow money to pay off interest.
    They do not consider not paying doctors for Medicare to be 
a default. It could be something that looks bad, but it's not a 
technical default. What was really eye-opening to me when I had 
the conversation was that I remember when that happened in 2011 
our borrowing costs actually went down for a period of time and 
it turns out there was actually other stuff happening around 
the world that created a flight to Treasury that drove down our 
interest rates.
    And we're having that conversation and one of the rating 
agencies pointed out to me--I honestly can't remember which one 
it was--said if it happens again then--there's three rating 
agencies. You've been downgraded by one. If you're downgraded 
by two of the three, then there's all sorts of financial 
institutions that aren't allowed to hold our debt and that that 
could be absolutely traumatic. There's no question about it. 
And my fear is they do it for that reason that you just 
mentioned.
    So let's say that we go out and we raise the debt ceiling 
tomorrow. Let's say you have a clean debt ceiling vote 
tomorrow. Everybody votes for it, okay, all 435 of you in the 
House, all 100 of you in the Senate, do you really think that's 
going to solve the problem? Do you think that would cause the 
rating agencies to go, wow, that's just great. This is 
absolutely Triple A. They didn't have a discussion about what 
was happening, don't have a plan to solve the problem. It's 
just going to get worse, and in fact, probably makes a 
downgrade more likely if you just stick your head in the sand 
and vote for a clean debt ceiling and it would cause the rating 
agencies to look at us and say they're never going to deal with 
it. If they won't deal with it now, they're never going to deal 
with it. We're going to put them on negative outlook and we're 
going to downgrade them. That's what frightens me is that the 
same thing that happens now that happened in 2011 and that 
people decide to get in the political blame game on one party 
over the other over realizing that it's our fiscal situation 
that is driving that downgrade, not necessarily our politics.
    Vice Chairman Schweikert. And we've seen some of the 
subscription issues on some of the recent debt options. The 
other thing, and just because it's important, is as members of 
Congress and the Senate, we seem incapable of actually doing 
things unless we live in a stressor. Avoidances, let's be 
honest. It's like our term paper at the end of the session, we 
stall and stall and stall until we're being screamed at.
    The fact of the matter is if you look at when we have 
actually done something, it's been moments of stress. It has 
been being up against the debt ceiling. It has been we're up 
against we don't have appropriations documents. I'm not 
thrilled that those of us as board members of the largest 
economy in the world--we can't do our homework until we're 
fearful, but this is a list and the fact of the matter is when 
we've made differences, whether it be with the Clinton 
Administration all the way back to Reagan, to others, when 
we've actually done something adult-like it's been inflection 
moments like this. And with that, I yield back, Mr. Chairman.
    Chairman Heinrich. Representative Porter.
    Representative Porter. Whether you're the United States 
Government or a single mom like me, we all have things that we 
need to buy. Just like my kids need food and clothes, our 
country can't live without public safety, roads and bridges, 
and services like veterans' healthcare and senior food 
assistance.
    There's another thing that I have in common with our 
government. I buy on credit and I've never defaulted on my 
debt. Dr. Edelberg, given my credit history and that I've never 
defaulted, how many credit card companies assess my 
creditworthiness?
    Dr. Edelberg. You sound like a good risk.
    Representative Porter. So let's say my credit card company 
has given me a card that allows me to buy everything that I 
could ever possibly want, but because I'm fiscally responsible 
I'm going to create a debt ceiling for myself. It's modeled on 
Congress. So I set my personal debt ceiling on a thousand 
dollars. I don't want more than a thousand dollars of debt. I 
want to be fiscally responsible no matter how much my credit 
card company is willing to loan me because of my stellar credit 
card history.
    So I go to the store and I have a lot I need to buy for my 
family. I fill my cart to the top, I get to the front of the 
store and I ring up $500. I look at the bill, I reach for my 
card, I worry because I know I've already spent probably a 
thousand dollars in the last few weeks because of an ER visit, 
braces for my daughter, Dr. Edelberg, will my credit card 
company respect my personal $1,000 debt ceiling or will this 
transaction go through?
    Dr. Edelberg. The transaction will go through.
    Representative Porter. I hate to disrespect my debt 
ceiling, but my kids have to eat, they need their school 
supplies, their feet keep growing, so I swipe the credit card. 
The charge goes through. Now fast forward. My credit card bill 
arrives. It's more than my $1,000 debt ceiling. I call up my 
credit card company and I tell them I've exceeded my debt 
ceiling. I'm not going to pay back the $500 above my debt 
ceiling even though I've already spent it, even though my kids 
have already eaten the food, worn the clothes. Dr. Edelberg, 
will my credit card company accept this, my personal debt 
ceiling, as an excuse for why I'm not paying my bills.
    Dr. Edelberg. They will consider you in default.
    Representative Porter. So my lender expects to be repaid no 
matter I set as my debt ceiling. If I decide to stick with my 
debt ceiling and I do default--you said they'll consider me in 
default. What's going to happen to me?
    Dr. Edelberg. They'll lower your credit limit. They'll 
raise your interest rate. They might even cancel the card.
    Representative Porter. So I really have no choice here as a 
consumer, as a mom to suspend my $1,000 debt ceiling and pay 
off the debt that I've taken. Buy the ticket, pay the ride. I 
did the spending. I've got to pay it back. Dr. Edelberg, I'm 
confused because I thought if I created a debt ceiling that 
would make me fiscally responsible. Did it change my spending 
in this hypothetical?
    Dr. Edelberg. It might've slowed you down, but at the end 
of the day, you blew through your debt ceiling.
    Representative Porter. Did it make me have less debt 
somehow to announce that I had a debt ceiling to the credit 
card company? Did that help me get my debt forgiven?
    Dr. Edelberg. It did not help you get your debt forgiven.
    Representative Porter. Did it make me fiscally responsible? 
Did it help lenders think, at least, that I'm a good credit 
risk?
    Dr. Edelberg. Only if they thought it was credible that you 
were going to keep your spending under the debt limit, which 
apparently would've been a good assumption.
    Representative Porter. Wow. This didn't work out for me, 
but Congress swears by this debt ceiling. In fact, it has gone 
through this exercise of changing or suspending the debt 
ceiling 78 times since 1960. Dr. Edelberg, given 78 times of 
this debt ceiling that we think is going to somehow curve our 
budget decisions has the United States lowered its debt? This 
didn't work for me in this hypothetical, has it worked for the 
U.S.?
    Dr. Edelberg. There's no evidence that the debt ceiling has 
led to lower federal borrowing. No.
    Representative Porter. So I must be missing something. If 
having a debt ceiling didn't do anything for me and it hasn't 
worked for the United States, what is its purpose?
    Dr. Edelberg. It served a purpose a long time ago to 
actually try to make things easier, not harder for Treasury to 
pay the obligations on time without jumping through hoops. It 
now serves no purpose. It should be abolished.
    Representative Porter. So you're saying that now that we 
actually have computers and can keep track of what we owe and 
when we're going to owe it and model to anticipate revenue and 
when it's coming and how we're going to meet our bills, this is 
just doing as little good as my personal hypothetical $1,000 
debt ceiling?
    Dr. Edelberg. We now have extraordinary transparency over 
how much Treasury is borrowing, what securities they're issuing 
or what their timetable is for issuing those that the debt 
limit does not serve a useful purpose.
    Representative Porter. Thank you. I yield back.
    Chairman Heinrich. Representative Estes.
    Representative Estes. Thank you, Mr. Chairman, and thank 
you to our witnesses for being here today. You know our country 
today is again racing towards a debt ceiling. You'd think that 
President Biden would take the negotiations seriously, but 
unfortunately, he's taken 97 days to get together with Speaker 
McCarthy.
    As of right now the only plan passed by either chamber to 
raise the debt limit is the House Republicans' Limit Save Pro 
Act. Unfortunately, reaching the debt limit, as mentioned 
earlier, isn't a new problem. It's one we repeatedly face and 
will face again unless we act to get our spending under 
control.
    Let's start with some basic facts we can all agree on. Our 
national debt's $31.4 trillion. We're borrowing one out of 
every five dollars the federal government spends, which means 
we're borrowing about $50,000 a second. When my time at the 
hearing is done, we'll accumulated nearly $14 million more in 
debt and every taxpayer is on the hook for over $250,000 of 
debt. These are the facts.
    I'm glad that we are talking about an agreement. As stated 
earlier, we don't want the United States to default. I'm so 
glad, Director Mulvaney, you helped to clarify the definition 
of what a default was because that sometimes gets thrown around 
loosely and it's really not the best way to describe our 
situation since we do have revenue coming in we're just 
spending more than what the revenue is.
    And the budget proposed by President Biden adds another $17 
trillion to the deficit over 10 years. Think about that. 
Another $17 (sic) over the 10 years would make our debt about 
$50 trillion. The sticker shock of deficit spending only gets 
worse. If the government borrows a million dollars today, the 
total cost to the American taxpayers is more than $2.3 million 
by the time that 10 years is up because there is no plan to 
repay that money.
    And while the President proposes borrowing in mass sums of 
money, he's also included taxes as part of that, which is going 
to slow down the economy which will impact the amount of tax 
revenue that comes in. Even one of the Democrat witnesses in 
the House Budget Committee hearing last week admitted that 
people making less than $40,000 would need to pay more in taxes 
to help cover the cost of some of those wide-ranging spending 
policies from the Biden Administration.
    And as we talked about earlier with the tax cuts, one of 
the things I want to mention is thank goodness for the Tax Cut 
Jobs Act in 2017. As we've seen now actual tax revenues are 
coming in higher than what the Congressional Budget Office 
projected. In 2022, it was over $900 billion more than the CBO 
projected when the bill was passed in 2017. In 2021, it was 
roughly $200 billion more and so actually the economy is 
turning in more tax revenue for us.
    So let's think about the federal spending sort of like a 
personal budget. If someone is making $48,000 a year, but 
spends $63,000 a year and carrying a $314,000 on a credit card, 
do you think it's fiscally responsible for that person to go 
get another $15,000 on the credit card just to spend over the 
next year just so they can overspend their debt limit.
    Now the first place we need to start looking at is how do 
we reduce our spending so that we can match that up with the 
revenue. If we don't, we'll get back in the same point of where 
we are today. So the only responsible plan we have out there is 
the Limit Save and Grow Act that's been passed by the House 
Republicans. I'll note that this hearing today is how a U.S. 
default crisis harms American families and businesses.
    Nobody wants the U.S. to default and we want to make sure 
that the bill that the House Republicans passed helps prevent 
that and it's the only bill that's going to do that and it 
helps strengthen our financial footing for the future.
    Mr. Mulvaney, when I came to Congress six years ago, the 
estimate was that if we could save about six trillion dollars 
in a 10-year period we'd have a balance budget. Now that's 
roughly $16 trillion, based on where we're at today. How do we 
address our out-of-control spending to actually make sure that 
we get back in right direction?
    Director Mulvaney. How do you address out-of-control 
spending? You try and convince in the other party and your own 
party, by the way, that spending is a problem. Face it. You 
don't get $31 trillion in debt by one party doing it to you. 
There are folks in my own party who are just as eager to spend 
as some Democrats are. So yes, you've got to fight to do it. 
It's always easier to say yes. It's always easier to say yes. I 
can't tell you what we went through when I was in the OMB. I 
know I'm over time. I'll tell you a story. When I was down 
there one day when I was writing the first version of one of 
the budgets and we were cutting pretty heavily and then we got 
some instructions from up above to sort of spend a little bit 
more money and I want you to know the meetings were a lot 
easier after that.
    When you can tell people, oh yeah, we'll spend more on 
this. Spend more on this. It's really easy to spend other 
people's money, which is what you all do, right? So you have to 
sort of figure out how to do the right thing and realize that 
you're spending your grandkids' money and not your own.
    Representative Estes. Make those tough choices. Thank you. 
I yield back, Mr. Chairman.
    Chairman Heinrich. Senator Klobuchar.
    Senator Klobuchar. Thank you very much, Mr. Chair. I 
started my day today meeting with small businesses. And Dr. 
Edelberg, could you talk about what a default would mean for 
small businesses and access to credit?
    Dr. Edelberg. I can. And I should say when I use the word 
``default,'' I really do actually think it can be used in two 
different ways. I try to be very clear when I mean defaulting 
on the national debt. I think that that would have 
extraordinary effects on financial markets and quite immediate. 
I think also defaulting on obligations would also have an 
effect.
    Senator Klobuchar. I just have only five minutes.
    Dr. Edelberg. Yes. Sorry. So that's what I mean by default. 
I think, yes, we would see a sharp loss of confidence. I 
suspect that small and large businesses would immediately 
postpone any plans that they had to expand or hire.
    Senator Klobuchar. Okay. Very good but not very good for 
them. Why don't we turn to the bank failures that we've seen 
recently. Another shock to the financial system could further 
destabilize the banking system, cause panic from depositors. 
How could a default, as you defined it, impact the banking and 
financial system and what would a default effect access to 
credit for consumers?
    Dr. Edelberg. Absolutely. So commercial banks, the deposit 
institutions, have about two trillion dollars of U.S. 
treasuries on their balance sheets. Financial institutions more 
generally have four trillion dollars. If the value of those 
securities were sharply hit after a default just on obligations 
on non-interest payments, that could have cataclysmic effects 
on our banking system.
    Senator Klobuchar. Okay. And then, Mr. Dutta-Gupta, on 
Monday Secretary Yellen updated Congress. She said the federal 
government were run out of funding as soon as June 1st. That's 
in just 15 days. In your testimony you state that a default 
would likely trigger a recession. What factors from the default 
do you think would be most harmful to the economy and could you 
explain how even what they call a short-term default if then 
something changed in even a few days or a week how that could 
still impact the economy and the financial system.
    Mr. Dutta-Gupta. Yes, thank you, Senator Klobuchar. So 
according to estimates from the Council of Economic Advisors, a 
default could result in the loss of over eight million jobs by 
the end of summer. The employment rate could more than double 
to 8.4 percent and $10 trillion in household wealth could be 
wiped out. Real GDP could shrink by 6 percent and the stock 
market could plummet by nearly half of its current value.
    Senator Klobuchar. In the short-term, I talked to Mark 
Zandi this morning and he was stressing how even this 
brinkmanship can start causing problems if we're unable to 
reach some kind of an agreement or simply reach an agreement 
that we will discuss this on the budget, which is where it 
belongs.
    Mr. Dutta-Gupta. That's right. We saw Vice Chairman 
Schweikert's quote from before that used the word 
``brinkmanship,'' which can cause a lot of uncertainty. People 
will be reluctant to take measures they would've otherwise 
invest in, whether it's a small business or even families 
potentially, so you would see effects sort of pervasively 
throughout the economy even for a short-term default.
    Senator Klobuchar. And do you want to address that, Dr. 
Edelberg when it comes to say mortgage rates or the like?
    Dr. Edelberg. So I mean we already see that anyone who's 
holding a Treasury bill that is scheduled to mature in the 
first half of June is now demanding a premium of nearly 1 
percentage point and that's just what brinkmanship would bring 
about. If this crisis were to actually reach the day where the 
debt ceiling binds the effects on interest rates I think would 
be more chaotic and more abrupt.
    Senator Klobuchar. Yes. I mean our nation right now our 
bonds are viewed as safe, correct, safe, liquid, backed by full 
faith and credit of the U.S. I just remember back in 2011 when 
Congress waited until the last possible day to avoid a default. 
One of the credit rating agencies downgraded the U.S. from 
Triple A to Double A Plus, which cost the country nearly 20 
billion in increased borrowing costs; is that correct?
    Dr. Edelberg. That sounds right.
    Senator Klobuchar. And can you explain how an actual 
default would impact the credit rating and borrowing costs?
    Dr. Edelberg. So I think even if Treasury were able to make 
the principal and interest payments, I think financial markets 
would be roiled for several reasons. One, it's not at all clear 
that Treasury is legally allowed to prioritize principal and 
interest payments over non-interest payments, so I think the 
legal challenges would come right away. So I don't think 
anybody holding a Treasury security would feel terribly 
comforted that at least for now they were getting paid. I think 
the credit rating agencies would have no choice but to re-
estimate how safe they think U.S. Treasury securities are, 
again, simply if non-interest payments were delayed.
    Senator Klobuchar. Thank you.
    Chairman Heinrich. Representative Smucker.
    Representative Smucker. Thank you. Thank you, Mr. Chairman. 
I appreciate the opportunity to be a member of this Committee. 
This is my first hearing with the Committee. I think this is a 
potential forum where we can come together, as Mr. Schweikert 
said, have intellectual real discussions about both the state 
of the economy and steps that we can take to improve the 
economy to ensure that all Americans can live their own 
American dream.
    It's one of the reasons I ran for Congress is to ensure 
that we put policies in place to lift people out of poverty and 
ensure that they can do well in this great country of ours. I 
hope that's what this Committee is and so I was disappointed, 
Mr. Chairman, when I saw the title of the first hearing. How a 
U.S. Default Crisis Harms.
    And then after hearing some of the opening comments, it's 
clear this is an attempt to smear Republicans with some--what's 
the word I just heard--brinkmanship that would lead us to a 
default. There is no argument on my side that there should be 
default or at least in my point. It would be terrible for the 
future of the country. It would be terrible for American 
citizens. And so then you say, well, we should just do a clean 
debt ceiling, but I want to remind folks that's a hollow 
argument because in seven of the last ten debt ceiling 
increases there were changes, there were budget reforms made. 
Thirteen times since 1985 that happened. That's the norm, not 
the exception. I also want to remind folks that the only group, 
the only party in this discussion that has done anything to 
raise the debt ceiling has been the House where we have a bill 
in the Senate now that could be advanced that would raise the 
debt ceiling, could be signed by the President today within the 
next hour if they chose to do so.
    If you don't like the provisions of the bill, then tell us 
what you do like and that's what we've been asking the 
President to do for the last months. And after he said he won't 
negotiate now negotiations are taking place, as they should be, 
and as is the norm. You know I serve on the Budget Committee as 
well, serve on Ways and Means Committee and am focused on 
trying to correct the trajectory that we're on.
    I was encouraged when we quickly got to a discussion in 
this hearing today about that trajectory and the impact that 
will have if we don't change it because today we are the 
highest level debt compared to GDP than since World War II when 
we had ramped up after a national crisis and we're in an 
uncertain world right now and in a bad position to be able to 
take on any crisis that may come along.
    Projected to grow to double GDP in the next 30 years. I'd 
like a hearing, Mr. Chairman, on what that means for the 
American people, on what that means for people in poverty and 
people in the middle class if we don't change the trajectory. 
You know a sovereign debt crisis will occur when our creditors 
no longer believe in the faith or the ability of the U.S. 
Government make good on its debt or when they believe 
policymakers cannot take the actions necessary and that's why 
the work of this Committee is so important.
    At least the Limit, Save, Grow Act begins to change that 
trajectory. I want to show a chart here. It just starts to 
change the trajectory; it would start to build confidence in 
our creditors that we can move in the right direction. It's 
just a start. It's just a start, but we have to get started. So 
let's come together on this. We're going to raise the debt 
ceiling. We need to, but it's an inflection point when we 
should be talking about putting the country on the right path.
    Mr. Mulvaney, I appreciate your perspective. The House 
passed the debt ceiling increase in April. When did the Senate 
vote to raise the debt ceiling?
    Director Mulvaney. This afternoon. No, I'm joking of 
course. They haven't voted yet. I think they haven't voted 
because they know they can't pass it.
    Representative Smucker. Would you talk about the trajectory 
we're on and the dangers to the country going forward if we 
don't take this opportunity to being to change that?
    Director Mulvaney. The bottom line, in 23 seconds or less, 
inflation. That's it. That's what you're looking at, right, is 
because the only way you're going to be able to function is to 
print the money. Whether or not you create it down at the Fed 
and they put it on a computer screen or actually run the 
machine, it doesn't make any difference. This is going to be 
inflationary. That's what you are looking at, not only this 
year, but for the next 30, 50 years. That's the only way this 
gets solved and that is not much of a solution.
    Representative Smucker. Thank you. Thank you, Mr. Chairman.
    Chairman Heinrich. Representative Moore.
    Representative Moore. Thank you so much, Mr. Chairman, and 
I do want to thank our panel for appearing today. I've been in 
Congress for a little while. I remember serving with Mr. 
Mulvaney and I've been around during some of this and I guess I 
won't call it brinksmanship in order not to incur any wrath of 
anyone, but these so-called debt negotiations. And I do 
remember when Barack Obama was around really sort of being 
forced to restore some of the Bush tax cuts in order to come to 
an agreement on raising the debt ceiling.
    You know under former President Trump we raised the debt 
ceiling by $10 trillion just under him. And then with the Bush 
era tax cuts, the unpaid for wars, we have really increased the 
debt a lot for things like that.
    The question I guess I have for you, Dr. Edelberg, is had 
the tax cuts that have promised so much in terms of trickle 
down and in terms of revenue raising have they been 
commensurate with the GDP, with the growth in GDP?
    Dr. Edelberg. So the tax cuts that were in the 2017 Tax 
Act, on net, increased the deficit by about two trillion 
dollars.
    Representative Moore. So the claims that they just somehow 
just lifted our country have not borne themselves out yet. All 
right.
    The question that I have for you, Mr. Dutta-Gupta, I'm just 
trying to recall what you said about the United States being 39 
out of 42 in the OECD countries in terms of--you talked about 
it in terms of work requirements. Can you please remind me of 
what you said?
    Mr. Dutta-Gupta. Absolutely, Congresswoman Moore. So in 
terms of the share of jobs that are considered low-paid or low-
wage jobs, among high income and some middle-income countries, 
the OECD in the United States ranks very close to the bottom, 
so we have a very large share of jobs that do not pay well in 
this country.
    Representative Moore. So when we start talking about work 
requirements as a solution to our spending problems, forcing 
people into the low-wage workforce is that not a solution?
    Mr. Dutta-Gupta. Well, it turns out it doesn't even do 
that, so it doesn't really do much to increase employment and 
earnings you're going to mostly kick people off essential 
benefits like Medicaid, SNAP, and TANIF, who actually could 
benefit from those programs and then do better in the labor 
market.
    Representative Moore. Thank you. And so, Mr. Mulvaney, I 
was very eager to hear your testimony, given your tremendous 
role that you have played in our government and I was really 
surprised to hear that you thought that the downgrade of S&P in 
2011 was related to just uncertainty and not directly related 
to the brinksmanship--I can't think of any other word. The 
Government Accounting Office says that $1.3 billion just in 
that one year it costs us increased borrowing costs. The 
Bipartisan Policy Center said that the 10-year cost would be 
$18.9 billion and GAO also found that in 2013 the federal 
government borrowing costs increased by 38 to $70 million and I 
could go on, but my time would expire and I do want to give you 
an opportunity to respond to this.
    I do understand that confidence is a really big part of 
investing, but doesn't it seem curious to you that for the very 
time in history that this occurred after this brinksmanship?
    Director Mulvaney. No, because I read the report.
    Representative Moore. They said it was because of partisan 
brinkmanship.
    Director Mulvaney. Mr. Schweikert's got the language. I 
mean you could look at it. Yes, actually it does. It mentions a 
bunch of different things, but the narrative has become that it 
was because of the brinksmanship and that's just false. They 
did mention the fact that Congress couldn't get along. There 
was dysfunction in Washington, D.C. and that was concerning to 
them.
    Representative Moore. Well, it was curious coincidence. 
Okay. I have 25 seconds left and so I just want to point out 
that one of the features of the bill that the Republicans are 
so proud that they passed regarding the debt ceiling includes 
repealing something like the Inflation Reduction Act which, in 
fact, reduced our deficit by some $350 billion, if I'm 
remembering it correctly. Something the Republicans have not 
done, although they talk on and on and on about reducing 
deficits.
    President Biden and the Democrats have been the only ones 
who's done it. I just want to thank you, Mr. Chairman, for your 
indulgence and I would yield back. And thank all of you all for 
your very candid answers.
    Chairman Heinrich. Representative Ferguson.
    Representative Ferguson. Thank you, Mr. Chairman, and thank 
you to our panelists. Again, it's been said many times here, 
but I think it's worth reiterating. We've done something to 
avoid the debt limit in the House and we've passed a bill. And 
to my colleague, Mr. Smucker, had a great comment. If you don't 
like that, we call on our Senators to pass something else over 
here that we can then get into conference and move ahead. But 
we'll continue to do this and these things that we did are 
common sense, thoughtful ways to get this country back on 
track. It's not final, but it's a step in the right direction.
    Encouraging people to go to work is pretty meaningful. 
Look, I've lived in a community where we saw the evisceration 
of a manufacturing base of the textile industry following NAFTA 
and we saw a generation move into poverty and on government 
assistance and it wasn't until actually we revitalized our 
area, brought in an automotive plant and people went back to 
work that they actually got out of poverty. Okay? So jobs 
count, jobs matter, and getting people back engaged is 
important.
    Rescinding money for a pandemic that is no longer here and 
a public health emergency that has been declared over, that's 
pretty common sense, right? I mean why would we keep that money 
there when the pandemic is over and that's what the money was 
for. Let's pull that back. And when you look at the spending 
levels that we're recommending, the first step of that is 
fiscal year '24 spending would be at fiscal year '22 levels, 
which is exactly where we are right now and the world has not 
fallen apart.
    And I think when I look at where we are with our energy 
policy, it makes no sense to continue to burden and punish 
American families with high energy costs when there are some 
very thoughtful, bipartisan things that we can do with 
permitting reform that makes sense to get our country back on 
track from an energy perspective.
    And then when I look at those things, these are things that 
make sense to Americans. And by the way, putting in something 
like the Reins Act which simply says that if an agency puts in 
a regulation that has more than $100,000 impact on the economy 
we should have a say in that. It's pretty common-sense stuff. 
These aren't Draconian cuts. This isn't crazy stuff that folks 
have been talking about it, but I think that the House plan is 
something that, if again, to my colleague on the Senate side, 
please send us something else. If you don't like that, sitting 
there saying the clean debt limit, if you can pass that, pass 
it. We'll have a discussion about it. But make no mistake, 
House Republicans have voted to raise the debt ceiling. We're 
just simply waiting on the rest of Washington to catch up with 
us.
    Mr. Mulvaney, we've heard a lot about raising revenue. One 
of the proposals in the President's budget, President Biden's 
budget is to raise the corporate tax rate from 21 to 28 
percent. How much revenue would that raise over a 10-year 
period?
    Director Mulvaney. I have no idea. My guess is probably 
zero.
    Representative Ferguson. Dr. Edelberg, real quickly, you 
got a number of how much money that would raise going from 21 
to 28 percent over a decade? Is that a hundred billion dollars, 
is that a trillion, 1.2 trillion?
    Dr. Edelberg. I don't have the number with me, but there 
are certainly estimates out there.
    Representative Ferguson. Okay.
    Dr. Edelberg. And I think that change was also proposed to 
be made alongside a host of other changes that would----
    Representative Ferguson. I'm reclaiming my time. I'm just 
saying you're talking about raising revenue here, right?
    Dr. Edelberg. That would raise revenue. Yes.
    Representative Ferguson. All right. So if we're talking 
about raising revenue and going up from 21 to 28 percent 
probably raised, what, about 1.2, 1.5 trillion dollars. I'm 
looking down at my colleague from Arizona who does a whole lot 
of math real quickly in his head, but it's probably about a 
trillion and a half dollars, right? So if we're asking our job 
creators and our innovators, our companies in America to pay a 
28 percent rate in order to raise revenue, then why in the 
world would we turn around and allow them to escape their tax 
liability by giving them a $1.2 trillion green energy tax 
credit?
    Director Mulvaney, is this something that makes sense?
    Director Mulvaney. That's why I get you to zero. I mean 
you're playing with tiny numbers. The corporate tax doesn't 
generate enough money to worry about. It doesn't. Where's the 
money? The money is on income taxes on the middle class. That's 
where the money is, right? There's an old saying, ``Why do you 
rob banks?'' Because there's where the money is.
    If you're going to do this by raising taxes, you have to do 
it on the middle class and nobody wants to do that and you 
shouldn't do that, right?
    Representative Ferguson. And the downside of doing that is 
it makes of raising it on our job creator is it makes us less 
competitive in the global economy.
    Director Mulvaney. Which also makes the middle class less 
able to pay taxes, so yeah.
    Representative Ferguson. Mr. Chairman, I yield back.
    Chairman Heinrich. So I am going to pass the gavel over to 
Representative Beyer, who is going to preside as I go to the 
Senate floor to vote. Thank you.
    Representative Beyer. Thank you for being here and I really 
appreciate it. It's been fascinating listening to you all and 
also listening to my friends here on the Dias.
    Director Mulvaney, I was fascinated by your comment that 
every time we get to a debt limit we cried default and every 
time we get a budget omnibus we cry shutdown. So let me make a 
couple quick points and move on. Number one is there is a 
solution on Social Security. In fact, there are a number of 
solutions. The one that I favor is John Larson's Social 
Security 2100 that he's been pushing for a number of years that 
makes it viable through the end of the century and raises 
benefits for the people at the very lowest end. It does 
increase the 6.2 percent by a measly 400th of 1 percent per 
year over 25 years, so completely invisible to the taxpayer.
    The second thing is the tax surge. 2022 was very good for 
taxes, 19.2 percent, but you can ascribe an awful lot of that 
to the American Rescue Plan, to the economic impact payments, 
to the CARES Act, to the $800 billion unemployment insurance, 
and they've been following it pretty precipitously in 2023.
    The third point I'd like to make is we're 34th out of 38 in 
the OECD in terms of taxes to GDP. Our ratio is 26.6 percent. 
Theirs is 34.1, on average. And yet, American citizens want the 
same benefits as those people in the OECD countries. We're not 
a cutting back on the safety net. In fact, our safety net is 
smaller than most of those countries.
    And as Donald Trump points out again and again, it's 
difficult to touch that safety net. People don't want us to cut 
Social Security. They don't want us to cut Medicare. And he 
realizes it's the wrong thing to do and he encourages all of 
our friends, Republican and Democrat not to touch it.
    And then, fourth, and Director you know very well that the 
critical issue here is the mandatory spending, the Medicare, 
the Medicaid, Social Security and let's assume we can solve. 
And yet, with all that mandatory spending, we have the lowest 
life span of any of those OECD countries. We're failing our 
citizens. I look at the 17 and 18 percent of our GDP that we're 
spending on healthcare and with the next highest, 12 percent, 
most of then are 10 or 11 percent.
    We look at diabetes where 25 percent of our Medicare 
budget, maybe it's 20. The last number I heard was 25 percent. 
It's just on in-stage renal disease, so that's just on diabetes 
treatment. With dental care, which is terrible for most 
American with the consequent impact. Tele-Health, a big move 
forward in a bipartisan way.
    I'm very optimistic that Artificial Intelligence may give 
us a way to move forward on a lot of those healthcare issues. 
But now let me move to my question.
    One party doesn't want any new revenues. The other party is 
critical aware that we don't want to cut any benefits. We had 
Simpson Bowles. You were there for that nice Commission, 18 
people. It needed 12 votes to approve it. We had five Democrats 
vote yes, five Republicans vote yes, one Independent, but we 
couldn't get the last vote and it didn't happen.
    So Dr. Edelberg, here we are with a $31 trillion deficit 
that's going to go way up, over the debt. What do we do? How do 
we in this difficult political world, what's the way forward?
    Dr. Edelberg. There are a host of ideas. The problem here 
is not a shortage of ideas. There are many ideas for how most 
effectively to raise tax revenue while minimizing any kind of 
negative incentive effects. There's a whole host of ideas of 
where we can cut spending. I think one of the reasons why this 
is so politically challenging is that the direct economic 
effects of having higher debt are actually rather modest.
    So I believe the empirical models that show that higher 
debt as a share of GDP raises interest rates and crowds out 
private investment, but take the significant reduction in debt 
as a share of GDP under the GOP's plan where the sum was put 
up. CBO's projections are that GDP per person will rise from 
78,000 to 88,000 per person in 2022 dollars under the baseline 
through 2033.
    That very significant reduction in debt as a share of GDP 
would mean instead of rising to 88,000 per person, it would 
rise to 89,000 per person. These effects are moderate and so 
the tradeoffs are hard and it makes the politics hard.
    Representative Beyer. Thank you. My friend, Mr. 
Schweikert's pointed out that 31 percent of medicare costs are 
diabetes right now. Astonishing. One last quick idea. I had 
dinner with Martin Wolfe the other night from the Financial 
Times, who in his latest book he's dedicated a whole chapter to 
citizen juries. The idea that in our very polarized political 
world it sometimes makes sense to go get a bunch of citizens 
randomly picked, put them together for a year of studying the 
thing and come up with a bipartisan--not even bipartisan--a 
citizen and then present it to the Congress where we get to 
vote yes or no on it as opposed to the internal fights that we 
always seem to have.
    Director Mulvaney. I hate to interrupt, but wasn't there 
some famous American one time who said he'd rather be governed 
by a random selection of 400 people from the D.C. phone book 
than by the elected officials? Looking at Mr. Lee, who was 
that? It's a famous Libertarian. I can't remember who it was.
    Representative Beyer. With that, I yield back to myself, 
and recognize Senator Lee.
    Senator Lee. I think it might've been Bob Murray--not Bob 
Murray, Charles Murray.
    Director Mulvaney. I'll look it up while you're doing, but 
yeah. I think it was Cato, yeah--but no. It might've been--
well, anyway.
    Senator Lee. We'll think about it. All right. Mr. Mulvaney, 
let's start with you. Back when you were Congressman Mulvaney, 
which was awesome in addition to the many other awesome hats 
you've worn, but in 2014, almost a decade ago, you had an 
exchange with then Treasury Secretary Jack Lew, do you remember 
this? You had an exchange with him in which you were asking him 
some questions about why the government was pretending to lack 
the capacity to prioritize income revenue to ensure that the 
first money in the door went out the door to cover interest on 
debt? Do you remember this exchange?
    Director Mulvaney. I do.
    Senator Lee. Now do you recall and can you provide some 
thoughts as to why Democratic appointees in both the Obama 
Administration and now the Biden Administration, particularly 
in their Treasury Departments, so consistently so defiantly 
refuse to state that bond holders will be paid in full if, in 
fact, we go past the X date?
    Director Mulvaney. My professional opinion is that it's 
leverage politically.
    Senator Lee. It's leverage politically. Did they provide 
you an answer at the time?
    Director Mulvaney. I don't remember what the answer was.
    Senator Lee. What you did not hear from them was any legal 
reason or any mathematical reason or any financial reason why 
they couldn't' and shouldn't and under the 14th Amendment, 
wouldn't already be required to--pay first those creditors 
whose payments have become due.
    Director Mulvaney. The explanation I've always heard, at 
least since--there used to be an argument back when I first got 
to Congress that it might not be legal, but I think we put that 
aside now. I heard Dr. Edelberg mention it, but I'm pretty sure 
there's a GAO report from the eighties that makes it clear it's 
okay to prioritize them, at least it's legal.
    The argument I've heard ever since that is that they're 
simply not capable of doing it from a technological standpoint. 
Their systems don't allow it to do that, but they've taken no 
steps to change the systems.
    Senator Lee. Now you referred a month ago to when you first 
got to Congress. I believe you and I were both elected in the 
same year, back in 2010. We arrived here, were sworn into 
office in our respective chambers in 2011. We had debt ceiling 
fight back in 2011. Remember that one?
    Director Mulvaney. I do.
    Senator Lee. That one was memorable. One of the many things 
that was interesting about it and somewhat memorable. It's been 
brought up here today is the downgrade, the downgrade that was 
issued. Do rating agencies downgrade people for not borrowing 
enough?
    Director Mulvaney. No.
    Senator Lee. Did they then?
    Director Mulvaney. No.
    Senator Lee. Did they downgrade us specifically because we 
were not eager to raise the debt ceiling without significant 
conditions attached to it?
    Director Mulvaney. My understanding from reading the report 
is that the primary reason that they downgraded us was because 
we had no plan to fix our fiscal condition going forward, even 
though they--keep in mind they downgraded us after we cut the 
deal. So we had raised the debt ceiling and still got the 
downgrade because they looked at the deal we cut and said, you 
know what, that's not even close.
    Senator Lee. So in other words, they weren't satisfied that 
we had an adequate plan moving forward to reduce overall debt.
    Director Mulvaney. And we still don't.
    Senator Lee. And yet, to this day, for the last 12 years it 
has become an almost accepted trope, an almost accepted 
narrative as if it were canonical scripture that we got 
downgraded because we were not so eager to increase the debt 
ceiling that we were willing to increase the debt ceiling 
without a plan moving forward. In fact, it's quite the opposite 
of how it's often characterized, isn't it?
    Director Mulvaney. It is. In fact, I don't believe that any 
of the Democratic Committees have ever asked the rating 
agencies to come in and talk about why they gave the downgrade.
    Senator Lee. Gee, I wonder why that is? Now there are 
reason of course why these things matter because what is it 
that happens to us if we continue to punt it, if we continue to 
kick it forward, we continue to increase the debt ceiling, 
continue to increase the debt as a percentage of GDP without 
addressing the underlying spending problem. What does that 
ultimately do and what does that do to our actual risk of an 
actual default?
    Director Mulvaney. My fear is that the same thing happens 
to us on debt that has happened to us on modern monetary theory 
which you don't hear much about anymore the last couple of 
weeks or the last couple of months since we had inflation. 
Remember that theory that you can just spend as much money as 
you wanted to and it doesn't make any difference.
    Senator Lee. I do. And I be darn it turned out not to be 
true.
    Director Mulvaney. It's true until it's not. And all these 
theories about debt to GDP doesn't really make any difference, 
which Dr. Edelberg has mentioned here today, might be true 
until it's not and then what do you do? We have no plan to get 
out of the debt. Listen, I have nothing but respect for Mrs. 
Porter. I served with her, Representative Porter, as she told a 
wonderful little analogy about her credit card, but I'll bet 
you there's a significant difference. I bet she has a plan for 
how to pay off her credit card. We have none.
    Senator Lee. Indeed. We do, however, have a plan. We have a 
plan that was passed by the House of Representatives, a plan 
that would bring down our debt by five trillion dollars over 
the 10-year budget window with something in the neighborhood of 
around a trillion dollars, depending on which accounting method 
you use, a little over or a little under a trillion the first 
year alone. It would do so in a way that would help us approach 
this debt issue more responsibly.
    To date, it is the only plan on the table. It is the 
negotiation. People say, well, it still needs to be negotiated. 
Right now it is the negotiation because for 100 days President 
Biden refused to even to speak to Speaker of the House, Kevin 
McCarthy about this, insisting that all the time, all the while 
that he would take nothing less than a clean debt ceiling 
increase. Yet, another one of the same sorts of things that 
would predictably lead to a credit rating downgrade.
    I urge all involved, including and especially President 
Biden, move forward with this. There is only one plan on the 
table and with as late you've waited, you need to move forward. 
Let's pass the House Pass bill. Thank you.
    Representative Beyer. Thank you. And I recognize the 
Chairman of U.S. House of Representatives Budget Committee, Mr. 
Arrington.
    Representative Arrington. Thank you, Mr. Beyer. Just to 
follow on Senator Lee's closing comments, I don't think it's 
too much to ask the President, who at one time as senator and 
most recently as Vice President, negotiated fiscal reforms and 
a debt ceiling negotiation. I am a little taken aback when 
people act like this is somehow unprecedented and wring their 
hands as if we're just completely out control or we can't raise 
the debt ceiling responsibly while dealing with this 
unsustainable deficit spending and debt.
    Well, we've done it. In fact, some of the most significant 
fiscal reforms have come out of a debt ceiling legislation and 
negotiations and it only makes sense. I mean I really think 
most Americans say let me see, debt ceiling, evaluating the 
indebtedness of our country, it's impact on our financial 
health, and our future and then act responsibly.
    I'm from Hale County and we say, hell, every American 
family is doing that, not necessarily because they want to, but 
because they have to. And they have to more today, my friend, 
than they have in the past because their wages and income are 
shrinking relative to inflation. It's a fact that since '21, 
January of '21, a family of four has lost $13,000 over an 
entire year. Now that's, what, a thousand dollars a month. And 
six out of ten Americans live paycheck to paycheck. I don't 
know how in the world they're doing it.
    But I think it is quite disconnected, and I appreciate that 
there are other ways to solve this than maybe the solutions 
that we've put forward, but to do nothing or to say or suggest 
that we have to do a clean debt ceiling or it's reckless is so 
out of touch with what the American people are having to do 
tighten their belts and change their spending habits.
    That's why three out of four American says we expect the 
President and my Democratic colleagues and all political 
leaders of this greatest country in human history to come to 
the table and act like adults. I am the proud author of the 
Limit Save Grow Act. I think we have to limit spending by 
rightsizing a bureaucracy that's 40 percent bigger than it was 
in '19. Let's just start there. It's 30 percent bigger from a 
discretionary spending perspective than it was going into 
COVID.
    CBO said that we'd be spending in '19 before COVID this 
year hundreds of billions of dollars less than we're spending 
today. We're suggesting we go back six months and apocalypse 
and people aren't buying that and they're imploring and praying 
that our leaders come together and do what the House did, which 
is past the debt ceiling. One that pay our bills and protect 
our good faith and credit while acting responsibly, 
acknowledging that $10 trillion in two years.
    And again, Republicans have contributed to these problems 
over the years, and I'm first to say it, and I'll say it at 
every meeting for credibility because it's true. But $10 
trillion in two years, six of which was added to the national 
debt a sustained record inflation, soaring interests, 
nosediving into recession, closer to the precipice of a debt 
crisis, which we don't know when it hits, but when it does you 
can't bail out of that one.
    You can bail out of COVID and other crises. What if we have 
a war with China? How are we going to borrow the money at 123 
percent debt to GDP? When we're paying $600 billion in interest 
alone, not a single soldier, sailor safety net for seniors 
anti-poverty program, that's going to triple in 10 years. In 
two or three years, we'll spend more on interest than the 
entire budget of the Defense Department.
    If that doesn't make you shutter to your core, and I don't 
care what your political views are or your affiliation, party 
affiliation, then you're not reading the same material I'm 
reading.
    Mr. Mulvaney, I've said a lot. I just ask you to comment 
about a debt crisis. We talked a lot about default. We've 
remedy that with our legislation. Do you worry about a debt 
crisis down the road at some point that could be catastrophic, 
maybe irreparable? And I know my time's expired. If the 
Chairman would just indulge the answer.
    Director Mulvaney. The short answer is yes. As the former 
budget director, it's the thing that keeps you up at night. 
Again, the comparison to monetary theory, it holds which is 
that, okay, it seems to explain things until it doesn't and 
right now we sort of assume that things are okay until they're 
not. And when they're not, I don't know what we do because 
we've got no plan to get out of debt. Our plan right now is to 
continue to add to the debt.
    I think that the budget that I wrote in 2018 and maybe the 
one right after that Russ Vought wrote was the last proposed 
budget that we expect to balance in 10 years. You'd be hard 
pressed to balance the budget right now. You really would. It 
does worry me that we wake up one morning and people don't lend 
us money. And when that happens we will print money because we 
will continue to want to spend it and that's inflationary and 
that's how great countries fail and that's what worries me.
    Representative Arrington. I thank Chairman Beyers for his 
indulgence.
    Representative Beyer. Thank you, Mr. Arrington. Let me 
yield to my friend, Mr. Schweikert, for a few comments while 
we're waiting for Senator Schmitt.
    Vice Chairman Schweikert. Thank you, retread Chairman 
Beyer. I don't know if that's polite, but it was meant to be 
funny. We will be working on I believe, the next hearing will 
be on the House side--I will work with Chairman Heinrich. We 
would actually like to have a discussion on some of the primary 
drivers of U.S. sovereign borrowing and we have to be honest 
here, it's healthcare.
    Substantially, the single biggest input is diabetes. We 
will also, if we're going to be intellectually honest, we 
should also talk about some of the latest statistics on obesity 
in America. You take a look at how many of our brothers and 
sisters in America are dying early and how much of that is 
health, but it's also there's some back of the napkin math that 
says it could be the single greatest impact we have on U.S. 
sovereign debt, income inequality. From some of my Tribal 
groups, it is what would happen if we basically spent a decade 
taking on diabetes, whether it be from the new stem cell 
potential care to GLP-1s to the farm bill and other things.
    There are ideas out there and the beauty of that 
discussion, we haven't turned that one partisan yet. It's 
caring about people and obesity and diabetes is that Republican 
or Democrat? At this point it's just moral. So please, if 
anyone has input to those of us, please send it our way. Yield 
back.
    Representative Beyer. Thank you, Representative Schweikert. 
I recognize Senator Schmitt for his comments and questions.
    Senator Schmitt. Thank you. Mr. Dutta-Gupta, I wanted to 
follow up on a couple of things. I know in your written 
testimony it talked about you object to any repeal of the so-
called Inflation Reduction Act is ill advised, is that 
accurate?
    Mr. Dutta-Gupta. I think we're talking about energy 
provisions.
    Senator Schmitt. Yes.
    Mr. Dutta-Gupta. The tax provisions.
    Senator Schmitt. Right.
    Mr. Dutta-Gupta. They help us achieve our climate goals.
    Senator Schmitt. Does that make things more expensive at 
all? Do you think those sorts of onerous regulations on, say, 
things like dishwashers or refrigerators make those items more 
expensive?
    Mr. Dutta-Gupta. I'm not familiar with or did not focus on 
regulations.
    Senator Schmitt. Okay. Let's look at--because I do want to 
talk about inflation. So I think there's no way you could argue 
that the amount of money that we have spent in the last couple 
years hasn't contributed to inflation. You would agree with 
that, right?
    Mr. Dutta-Gupta. I think throughout the world. Yes.
    Senator Schmitt. Well, no, I'm talking about the United 
States in this Congress or the previous Congress spending money 
in the United States. You would agree with that, right?
    Mr. Dutta-Gupta. I think that among other factors there may 
have been more demand in the economy than the supply could 
meet, but in my view it's the supply that was the challenge, 
especially in the pandemic.
    Senator Schmitt. So spending has helped lead to inflation. 
Correct?
    Mr. Dutta-Gupta. Relative to the supply challenges. Yes.
    Senator Schmitt. And you mentioned that one of your 
objections with any work requirement is that we shouldn't do 
anything to increase hardships. That was your testimony 
earlier, right?
    Mr. Dutta-Gupta. That's right.
    Senator Schmitt. Does the amount of spending that the 
federal government undertake, and thereby inflation, doesn't 
that lead to hardship for lower-income individuals?
    Mr. Dutta-Gupta. All other things being equal, inflation 
can be harmful to lower-income individuals, but we also for the 
first time in recorded history completely closed the black/
white employment gap and had the lowest unemployment rates in 
half a century.
    Senator Schmitt. Well, I mean you also mentioned that 
communities of color are usually last in, first out, right?
    Mr. Dutta-Gupta. In the labor market, yes.
    Senator Schmitt. Right. But I just want to stay on the 
topic of hardship. If things are more expensive for lower-
income individuals, if milk is more expensive or gas is more 
expensive, that disproportionally affects lower-income 
individuals. You would agree with that, right?
    Mr. Dutta-Gupta. Yes.
    Senator Schmitt. Yes. And I think that's the challenge, 
right, we're facing. That the sheer amount of money that's 
being spent, and including in the budget that the President has 
submitted, seven trillion dollars' worth of new spending, five 
trillion dollars' worth of revenue, it's deficit spending, 
number one. But the amount of money that's being pumped into 
the economy that and our energy policy I mean it's not a 
tornado or an act of God. Inflation there's a formula for it 
and if you have more expensive energy or less energy and you're 
spending trillions and trillions and trillions of dollars that 
the cost of everything is going to go up and I appreciate you 
advocating for disadvantaged communities.
    I would think that that's exactly what I'm doing by--when 
we make things more expensive like we have.
    Mr. Dutta-Gupta. We just don't want to cause mass 
unemployment. And of course the Federal Reserve will respond as 
prices go up.
    Senator Schmitt. Right. Well, they raise interest rates, 
which makes things more expensive, right, and so that's one 
issue. And you talk about employment. I do want to talk about 
some other policies that have contributed to this, vaccine 
mandates, in particular. We saw millions of people displaced 
from their jobs from vaccine mandates and the Chairman had 
mentioned previously that we're talking about spending. We're 
talking about revenue. We're talking about overall economic 
growth. The idea that we were firing nurses because of vaccine 
mandates that's certainly didn't help the situation either, 
right?
    Mr. Dutta-Gupta. For me?
    Senator Schmitt. Yes.
    Mr. Dutta-Gupta. I don't know. Probably protects public 
health, so that could keep more people able to work and well.
    Senator Schmitt. So firing a nurse because she doesn't want 
to take a vaccine your argument is that protected public 
health?
    Mr. Dutta-Gupta. That would be the argument for vaccine 
mandate. Yes.
    Senator Schmitt. Right. Well, okay. Well, I would argue 
that didn't happen and we're talking about people who are 
disproportionately affected. I mean you're talking about 
advocating for communities of color probably had a lower 
vaccination rate, right?
    Mr. Dutta-Gupta. Yes.
    Senator Schmitt. Correct. So probably disproportionately 
more fired because they chose not to take a vaccine, right?
    Mr. Dutta-Gupta. I don't know if it was for particular 
occupations. I don't know the data, but of course we kept 
people alive with those mandates.
    Senator Schmitt. Okay. All right. I'm not going to get into 
a COVID debate with you, but I would argue that by forcing 80 
million people through OSHA to have a medical procedure or lose 
your job was COVID tyranny and affected people. We're talking 
about advocating for people who already find it difficult to 
afford things by losing their job because they were making that 
decision I can't believe that that's the best policy for the 
United States of America. So anyway, all of these things in a 
vacuum don't make a lot of sense. The spending is out of 
control and I don't hear anything really in your testimony 
about controlling spending. It's about revenue and it's about 
not creating any hardships, but inflation, in and of itself, 
has created a hardship.
    Mr. Dutta-Gupta. I have lots of ideas about controlling 
spending if we have time.
    Senator Schmitt. Well, I just want to ask one final 
question very quickly. Doctor, there was a scenario before I 
came back and I'm the last person to inquire, so I promise I'm 
going to wrap this up very quickly. But we went through the 
scenario of what happens if I overspend and what happens to the 
credit rating and that sort of scenario. I mean there's a new 
proposed rule by the Biden Administration to punish people who 
actually have a good credit rating, who played by the rules, 
who didn't go down that road, right, to actually pay more for 
their mortgage to subsidize mortgages for people who have lower 
credit scores. Do you think those are appropriate incentives 
that we ought to encourage?
    Dr. Edelberg. I apologize. I'm not familiar with the 
Executive Order.
    Senator Schmitt. So if you have a good credit rating you 
will pay more for your mortgage to subsidize mortgages for 
people with poor credit ratings. Do you think that's good 
policy?
    Dr. Edelberg. So we use housing policy in this country and 
mortgage policy in this country in all sorts of complicated 
ways and part of is redistributive. Think about the support 
that we offer to FHA. So I can believe that one of the policies 
that we would want to incorporate into the enormous federal 
support for mortgages and homeownership in this country 
includes redistribution to spur home ownership among lower-
income communities. That would just be part of a panoply of 
policies.
    Senator Schmitt. It's interesting. And I'll close with 
this. It's fascinating that you're here telling us that--which 
I agree with, by the way, this idea that we continue to deficit 
spend and this is terrible policy and it's irresponsible and 
then later on in your testimony you're now saying it's actually 
okay to punish people who played by the rules to have to pay 
more for their mortgage. I find that incredibly inconsistent, 
so I don't have any other questions, Mr. Chairman.
    Representative Beyer. First of all, let me thank you all 
for being here. I'm eager to fact-check the million people that 
lost their jobs because of vaccine. I'm going to have to do 
that today.
    Senator Schmitt. Love to do that. Yes.
    Representative Beyer. Also in defense of Dr. Edelberg, that 
is not what she said. When you asked her about this new rule, 
she said she didn't know about the rule. I paid great attention 
and I've never heard of this rule either. This sounds like a 
QAnon rule, but we will----
    Senator Schmitt. Excuse me, Mr. Chairman. What did you say?
    Representative Beyer. I said that this sounds like a QAnon 
rule.
    Senator Schmitt. Well, unless Joe Biden is a member of 
QAnon, I would encourage you to look at the rule.
    Representative Beyer. Once again, I will look at it.
    Senator Schmitt. Sure.
    Representative Beyer. And with that, I would like to thank 
you for sitting here these two and a half hours to be part of 
this. The risk to our country's wellbeing couldn't be greater 
and millions of American jobs are at risk if we don't solve 
this, as is our standing with the nation that pays its bills. 
Congress must act to raise the debt limit. I think we're all in 
agreement on that. And I would like to thank each of our 
panelists for their contribution to this ongoing discussion. 
And thank you to my colleagues for being part of this 
discussion, the ones who remain.
    Questions for the record may be submitted after the 
hearing. The record will remain open for three business days 
and the hearing is now adjourned.
    [Whereupon, at 4:08 p.m., Wednesday, May 17, 2023, the 
hearing was adjourned.]
      

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