[Senate Hearing 118-76]
[From the U.S. Government Publishing Office]




                                                         S. Hrg. 118-76

                 THE DEFAULT ON AMERICA ACT: BLACKMAIL,
                     BRINKMANSHIP, AND BILLIONAIRE
                             BACKROOM DEALS

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                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                          UNITED STATES SENATE

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

                              May 4, 2023

                               __________

           Printed for the use of the Committee on the Budget






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                        COMMITTEE ON THE BUDGET

               SHELDON WHITEHOUSE, Rhode Island, Chairman
PATTY MURRAY, Washington             CHARLES E. GRASSLEY, Iowa
RON WYDEN, Oregon                    MIKE CRAPO, Idaho
DEBBIE STABENOW, Michigan            LINDSEY O. GRAHAM, South Carolina
BERNARD SANDERS, Vermont             RON JOHNSON, Wisconsin
MARK R. WARNER, Virginia             MITT ROMNEY, Utah
JEFF MERKLEY, Oregon                 ROGER MARSHALL, Kansas
TIM KAINE, Virginia                  MIKE BRAUN, Indiana
CHRIS VAN HOLLEN, Maryland           JOHN KENNEDY, Louisiana
BEN RAY LUJAN, New Mexico            RICK SCOTT, Florida
ALEX PADILLA, California             MIKE LEE, Utah

                   Dan Dudis, Majority Staff Director
        Kolan Davis, Republican Staff Director and Chief Counsel
                   Mallory B. Nersesian, Chief Clerk 
                  Alexander C. Scioscia, Hearing Clerk  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

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                         THURSDAY, MAY 4, 2023
                OPENING STATEMENTS BY COMMITTEE MEMBERS

                                                                   Page
Senator Sheldon Whitehouse, Chairman.............................     1
    Prepared Statement...........................................    43
Senator Charles E. Grassley, Ranking Member......................     4
    Prepared Statement...........................................    46

                    STATEMENTS BY COMMITTEE MEMBERS

Senator Patty Murray.............................................    18
Senator John Kennedy.............................................    19
Senator Debbie Stabenow..........................................    22
Senator Mitt Romney..............................................    23
Senator Chris Van Hollen.........................................    25
Senator Roger Marshall...........................................    27
Senator Jeff Merkley.............................................    29
Senator Rick Scott...............................................    31
Senator Ben Ray Lujan............................................    34
Senator Mike Braun...............................................    35
Senator Alex Padilla.............................................    38

                               WITNESSES

Dr. Mark Zandi, Chief Economist, Moody's Analytics...............     7
    Prepared Statement...........................................    49
Mr. Fred Krupp, President, Environmental Defense Fund............     8
    Prepared Statement...........................................    58
Ms. Abigail Ross Hopper, President and CEO, Solar Energy 
  Industries Association.........................................    10
    Prepared Statement...........................................    63
Mr. Brian Riedl, Senior Fellow, Manhattan Institute..............    12
    Prepared Statement...........................................    76
Dr. Jason J. Fichtner, Vice President & Chief Economist, 
  Bipartisan Policy Center.......................................    13
    Prepared Statement...........................................    80

                                APPENDIX

Responses to post-hearing questions for the Record
    Dr. Zandi....................................................    84
    Mr. Krupp....................................................    85
    Mr. Riedl....................................................    88
    Dr. Fichtner.................................................    90
Chart submitted by Senator Rick Scott............................    93
Statements submitted for the Record by Chairman Sheldon 
  Whitehouse.....................................................    94
Statements submitted for the Record by Ben Ray Lujan.............   102
Statement submitted for the Record by the National Education 
  Association....................................................   131

 
                 THE DEFAULT ON AMERICA ACT: BLACKMAIL, 
                     BRINKMANSHIP, AND BILLIONAIRE 
                             BACKROOM DEALS 

                              ----------                              


                          THURSDAY MAY 4, 2023

                                           Committee on the Budget,
                                                       U.S. Senate,
                                                    Washington, DC.
    The hearing was convened, pursuant to notice, at 10:00 
a.m., in the Dirksen Senate Office Building, Room SD-608, Hon. 
Sheldon Whitehouse, Chairman of the Committee, presiding.
    Present: Senators Whitehouse, Murray, Stabenow, Warner, 
Merkley, Kaine, Van Hollen, Lujan, Padilla, Grassley, Romney, 
Marshall, Braun, Kennedy, and R. Scott.
    Also present: Democratic Staff: Dan Dudis, Majority Staff 
Director; Joshua P. Smith, Budget Policy Director; Kara Allen, 
Senior Energy and Climate Advisor, Energy Lead; Tyler 
Evilsizer, Senior Budget Analyst; Dan Ruboss, Senior Tax and 
Economic Advisor and Member Outreach Director.
    Republican Staff: Chris Conlin, Deputy Staff Director; 
Erich Hartman, Director of Budget Policy & Review; Nic 
Pottebaum, Professional Staff Member; Jordan Pakula, 
Professional Staff Member.
    Witnesses:
    Dr. Mark Zandi, Chief Economist, Moody's Analytics
    Mr. Fred Krupp, President, Environmental Defense Fund
    Ms. Abigail Ross Hopper, President and CEO, Solar Energy 
Industries Association
    Mr. Brian Riedl, Senior Fellow, Manhattan Institute
    Dr. Jason J. Fichtner, Vice President & Chief Economist, 
Bipartisan Policy Center

          OPENING STATEMENT OF CHAIRMAN WHITEHOUSE \1\
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    \1\ Prepared statement of Chairman Whitehouse appears in the 
appendix on page 43.
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    Chairman Whitehouse. Good morning everyone. I am delighted 
to call this hearing to order, and I want to thank the 
witnesses who are here with us, and also our witness who is 
going to be appearing remotely. Senator Grassley and I will 
provide brief opening remarks, and then I will introduce the 
witnesses, and we'll get into all of the witness statements, 
which I urge you to confine to five minutes, so that we can 
then get into a conversation with colleagues who are here.
    The point of the hearing this morning is to examine Kevin 
McCarthy's so-called Limit Save Grow Act, more accurately known 
on our side as the Default on America Act, an Act cobbled 
together by House extremists in back rooms in the dark of 
night. Since the House didn't hold a single hearing on this 
extreme and dangerous measure, the Senate will.
    MAGA Republican's dangerous bill poses a terrible choice. 
Default on our financial obligations, causing widespread pain 
and wrecking our economy, or gut basic federal programs 
essential to our economic strength causing widespread pain and 
wrecking our economy.
    It is a false and unnecessary choice. MAGA Republicans have 
claimed they are averting a catastrophe by setting up this 
rotten choice. Do not believe it. They are causing one. Many of 
them want one. Our Republican House friends care about the debt 
sporadically. With Republican presidents they pass huge tax 
cuts for the wealthy and large corporations adding trillions to 
the debt.
    More than $7 trillion of debt was added under President 
Trump and almost $3 trillion was added under President George 
W. Bush, the last two Republican presidents. But when there's a 
Democrat in the oval office they seek to interfere with the 
ability of government to function, whether it's shutdowns, or 
near defaults, or blocking economic recovery legislation.
    They seek to cause chaos. Not coincidentally this serves 
the eccentric and secretive billionaires and polluting 
industries who are the Republican party's funders, whose stated 
goal is to destroy the socalled administrative state. 
The agencies that protect regular people against powerful 
polluters and special interests.
    The party's funders, chief among them, the fossil fuel 
industry, demand reward. And 275 out of 315 pages of the dirty 
Default on America Bill are devoted to giveaways to the fossil 
fuel industry. 275 out of 315 pages. What is the history here? 
Since Bill Clinton took office 30 years ago Congress has raised 
or suspended the debt limit on 24 separate occasions, 14 times 
under Democratic presidents and 10 times under Republican 
presidents.
    We've raised it under divided Congresses and under unified 
ones. We've even raised the debt limit twice under unified 
Republican control, with no strings attached, with President 
Trump in office. And two of the three times we raised the debt 
limit under President Trump were paired with spending 
increases.
    On Monday, Leader Schumer, along with Senators Murray, 
Wyden and I introduced a two page bill to stave off default 
through the end of 2024. The section that would actually 
suspend the debt limit is 31 words. The Senate should pass this 
bill immediately, particularly as we learned on Tuesday the 
Treasury could run out of funds as soon as June 1st.
    Attempting to extract partisan policy concessions with 
threats to intentionally drive the American economy off a cliff 
is the very definition of extremism. Democrats have been 
threatened default unless Congress also passes gun control 
legislation, or climate legislation, even though those are 
desperately needed policies with popular support.
    Why not? Because crashing the global economy if we don't 
get what we want isn't policymaking, it's hostage taking, and 
it's extremism. So let's examine the two terrible options the 
dirty DOA Bill tees up. Option one is the Republican default 
option. What will that cost? Dr. Zandi estimates that the 
default of even just a few days would lead to a recession, 
close to a million jobs, and raise unemployment from 3.4 
percent to 5 percent.
    A long-term default would cost over 7 million jobs and push 
the unemployment rate over 8 percent. Interest rates on car 
loans, mortgages and credit cards would rise for decades. Their 
other option is their Default on America Act, with its massive 
backroom devastating cuts to things like border security, law 
enforcement, education, affordable energy, opioid treatment, 
Meals on Wheels, elderly housing and administering social 
security benefits, supports vital to our economic health and 
well-being.
    Dr. Zandi analyzed the effects of this option, and 
estimates the DOA Act would cost 790,000 jobs, and shrink the 
economy by $141 billion next year. We're supposed to choose 
between 790,000 and nearly 1 million jobs lost between 
recession and 141 billion dollar hit to the economy, pick your 
poison.
    It's a false choice, and we shouldn't go either way. In 
addition to the cuts the bill imposes what it calls 1 percent 
caps. Those caps on discretionary spending will affect a huge 
swath of what the government does, including the Defense 
Department and veteran's healthcare.
    Republicans maintain the defense and veterans would not be 
cut, but no exemption for veterans appears in the 315 pages. 
When Congress imposes spending caps, defense and veterans 
programs get the squeeze, along with everything else. Even if 
defense and veterans health programs were allowed to grow with 
inflation, that just shifts cuts to the remaining discretionary 
programs.
    Under this future law enforcement, child nutrition, and 
scientific research would all be cut 33 percent below baseline 
next year, and by 2033 they'd be cut 60 percent. Even the 
republican Chairman of the House subcommittee that oversees 
transportation and housing spending implied that the proposed 
cuts are ``essentially unworkable''.
    Here's some gems. Republican's DOA Act would rescind the 
extra funding we provided to the IRS to go after wealthy tax 
cheats and serve Americans better. This would add $120 billion 
to the deficit, and help super wealthy individuals and 
corporations who evade their tax responsibilities. After all 
our work on healthcare the DOA Act would put 21 million people 
at risk of losing their health insurance.
    The DOA Act is a field day for polluters, repealing clean 
energy tax credits that are already generating over 142,000 
jobs for more than 190 projects, including projects Republicans 
have touted back home before coming to Washington to pull down 
those very credits.
    Freeze frame that, and read it at your leisure. Those were 
comments by Republican House members lauding projects funded by 
those tax credits they're trying to undue. It would even let 
fossil fuel interests leak polluting methane emissions with no 
fee for that pollution.
    By contrast, President Biden's budget proposed $3 trillion 
of deficit reduction by raising taxes on the wealthy and large 
corporations. It was win/win. People and corporations dodging 
tax responsibilities would pay a fair share, and the economy 
would grow.
    This DOA proposes raising costs on working families. It's a 
lose/lose. Pick your poison, default or disaster. Simply put, 
we must raise the debt limit. We must do it now. And we must do 
it without wrecking lives and livelihoods to appease eccentric 
billionaires.
    Chairman Whitehouse. Senator Grassley.

           OPENING STATEMENT OF SENATOR GRASSLEY \2\
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    \2\ Prepared statement of Senator Grassley appears in the appendix 
on page 46.
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    Senator Grassley. If you really care about working 
Americans why wouldn't you want to do something about the 
terrible energy policies of this administration, and the 
terrible spending policies of this administration that has 
raised inflation to a 40 year high, and gas prices to a 
historic high last year, and shooting up again?
    It seems to me that the Republicans have taken the right 
approach in this effort because we do care about working 
Americans. I think that when it comes to inflation I'd like to 
remind everybody of a statement that Paul Volcker made way back 
in 1981, but it was the same historical time we're in right 
now, a time of high interest rates, and high inflation.
    His words and advice to Congress, and it was advice to 
Congress, ``Cutting spending may appear to be the most painful 
part of the job, but I'm convinced that the pain for all of us 
will ultimately be much greater if it is not accomplished.'' I 
think in my opening comments I'm going to try to make it clear 
that in I think, out of 11 times in over how many years, I 
don't know the debt limit has been increased.
    It's been coupled, six or seven times at least with debt 
reduction, spending reduction I should say, and it also is 
something that I'm going to show you that many Democrats had 
proposed in the past. So Mr. Chairman, I thank you for holding 
today's hearing on the House passed Limit, Save and Grow Act.
    I think the Grow Act is the most important part of that 
title because we're not going to improve the economy by taxing 
and spending more, and I don't know who out there believes that 
the government--of our witnesses--believes that the government 
is the answer to every problem in the world.
    But remember, Washington consumes wealth. It's the people 
out there in middle America, and both on the west coast and 
east coast that do the work, that feed the money to this city 
that we spend, and we consume, so House Republicans have acted 
responsibly by passing a debt limit increase, while also 
beginning to tackle our country's unsustainable debt and 
deficits.
    Now in contrast, President Biden and Biden's Senate 
Democrats have sat idly by, watching the clock tick down to 
default, by not thoughtfully engaging they hope to avoid a 
substantive debate on a very serious fiscal issue, and that 
issue we all now was facing 330 million Americans.
    Now I know that they're going to start meeting next 
Tuesday, but they wasted, I suppose as of now, about 97 days 
since Biden and McCarthy met in the White House, way back in 
early February. So, in a last bid effort to avoid an honest 
debate on our nation's finances, this week do you know what 
Senator Schumer did?
    He introduced legislation to suspend the debt limit until 
2025. Schumer is too little and too late, as a growing number 
of Congressional Democrats, yes, Congressional Democrats, are 
starting to call on President Biden to negotiate. It's time for 
President Biden, and Biden's Senate Democrats to come to the 
realization that their reckless, and irresponsible strategy of 
delay has failed, and begin negotiations in earnest.
    No longer can Biden Democrats ignore that over the next ten 
years deficits will average $2 trillion, or ignore that the 
public debt as a share of our economy is set to rocket past the 
previous World War II era records of 106 percent of GNP by 
2028, or that interest costs are set to triple from $475 
billion last year, to $1\4/10\ trillion by 2033.
    Our out of control debt is a bipartisan problem. But once 
President Biden and Biden's democratic Congress, exacerbated 
through budget busting partisan legislation and costly 
executive fiats. And they were warned in December of 2020 by 
their own economists, importantly Harvard economists and former 
Secretary of Treasury Summers, saying listen, the economy is 
turned around by December 2020, we're on a path of growth.
    Don't spend anymore money. Within less than 60 days another 
$1\9/10\ trillion. On January 20, 2021 inflation 1.4 percent. 
Don't forget, it immediately shot up to 9.1 percent, so our out 
of control debt is a bipartisan problem, and that's where it's 
going to have to be fixed.
    Don't forget that the deficits that CBO are currently 
projecting through 2031 are $6 trillion higher than what the 
agency expected when Biden took office. Given our dismal, 
fiscal outlook, it would be irresponsible not to follow the 
historical practice of pairing an increase in the debt limit 
with fiscal control to reign in Washington's chronic 
overspending.
    Simply kicking the can down the road can no longer be an 
option. The House bill starts to improve our unsustainable 
fiscal trajectory by repealing the President's unconstitutional 
student loan giveaway, another thing that's going to exacerbate 
inflation. Also, pairing back the reckless spending of Biden 
Democrat's inflation increasing Reconciliation Act, and capping 
discretionary spending for next year at fiscal year 2022 
levels--levels agreed to by a Democratic Congress, and in 
effect as recently as December.
    On that last point, it would be up to Congress, 
particularly appropriators to determine how to meet the 
discretionary top line. Nothing in this legislation mandates 
cuts to defense, veteran's healthcare, border security, or 
other activities that Republicans have already prioritized.
    Biden Democrats contend that doing anything but 
rubberstamping an unconditional increase in the debt limit is 
irresponsible. Well, just a few years ago, the very same 
Democrats, Biden Democrats, were singing a different tune. In 
2017, Senator Schumer boasted about using the debt limit as, 
his words, ``leverage'' in negotiations with the White House.
    And in 2019, then Speaker Pelosi demanded that any debt 
ceiling suspension be paired with an increase in discretionary 
budget caps. She said, ``When we lift the caps, then we can 
start talking about lifting the debt ceiling.''
    And last, but not least, then Senator Biden had this to say 
in 1984, shortly before he voted against raising the debt 
limit. ``I cannot agree to vote for a full increase in the debt 
limit without any assistance or assurance that steps will be 
taken earlier next year to reduce the alarming increase in 
deficits and the debt.''
    The fact is that debt limit legislation has always been the 
product of negotiations between White House and Congress. And 
it's long past time for President Biden to sit down with the 
Speaker, and negotiate a deal like the one he brokered as Vice 
President in 2011. If it worked then, it can work now.
    Republicans aren't the only ones saying so. Even many 
Democrats are now telling the President he needs to sit down 
with Congressional leaders. Well, we know that's going to 
happen next Tuesday. One Senate Democrat said that the 
President's refusal to meet with the speaker, ``signals a 
deficiency of leadership,'' so by now maybe 95 days have been 
lost.
    Another Democrat in the House says that President and 
Speaker, ``Ought to get to work and get it done for the sake of 
the country.'' The House Republicans bill is meant to start a 
conversation. To start a conversation, not end it. Speaker 
McCarthy has said many times that he wants to negotiate with 
President Biden.
    So all the barbs and attacks on the House bill today are 
meaningless. Everyone knows it. This is an opening bid. It's 
time for President Biden to stop playing politics, and 
demonstrate real presidential leadership by negotiating in good 
faith, and we'll find out whether it's in good faith next 
Tuesday.
    I'm glad that the President finally agreed to meet with 
Congressional leaders, but a meeting is not the same as 
negotiation. I hope when the President sits down with the 
Speaker he will bring an open mind, and a serious counteroffer 
because the longer the President spends dragging his feet, and 
putting off negotiations, the closer President Biden brings us 
to the first ever federal default in U.S. history. Thank you.
    The Chairman. Thank you Senator Grassley. Our first witness 
is Dr. Mark Zandi. He is Chief Economist of Moody's Analytics, 
where he directs their economic research. Dr. Zandi's research 
interests encompass macroeconomics, financial markets, and the 
economic impact of government spending policies, and monetary 
policies, and he will evaluate the default and Default on 
America options. Dr. Zandi, thank you for being here.
    After that, appearing remotely we have Fred Krupp, 
President of the Environmental Defense Fund. And since 1984 he 
is an advocate for harnessing the power of the marketplace to 
protect our environment and help steward the acid rain 
reduction program into the 1990 Clean Air Act.
    Recently, EDF has focused on the problem of methane 
emissions from the oil and gas system. Thank you for appearing 
Mr. Krupp.
    Our third witness is Abby Hopper, President and CEO of the 
Solar Energy Industries Association. Ms. Hopper oversees all of 
SEIA's activities, including government affairs, research, 
communications and industry leadership, and is focused on 
creating a marketplace where solar will constitute a 
significant percentage of America's energy generation.
    Unfortunately right now there are Republican efforts in 
this bill, and in the CRA to try to destroy the American solar 
industry. Ms. Hopper, thank you for joining us.
    Next, we have Brian Riedl. Riedl is a Senior Fellow at the 
Manhattan Institute, where his research focuses on budget, tax 
and economic policies. Previously, he worked for six years as 
Chief Economist to our friend, Senator Rob Portman of Ohio. Mr. 
Riedl, welcome.
    And finally, we'll hear from Dr. Jason Fichtner, who is 
Vice President and Chief Economist at the Bipartisan Policy 
Center. His research focuses on Social Security, federal tax 
policy, federal budget policy, retirement security, and policy 
proposals to increase saving and investment. Dr. Fichtner we 
appreciate you being here. Thank you. Dr. Zandi, please 
proceed.

STATEMENT OF DR. MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS 
                              \3\
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    \3\ Prepared statement of Dr. Zandi appears in the appendix on page 
49.
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    Dr. Zandi. Thank you Senator Whitehouse, Ranking Member 
Grassley, and the rest of the Committee for the opportunity to 
participate today. I am the Chief Economist at Moody's 
Analytics, but my remarks today are my own views.
    I should also say, just for sake of disclosure, I'm on the 
Board of Directors of a publicly traded mortgage insurer. I 
will make three points in my remarks. First, by my calculation 
the X date, the day on which the Treasury will run out of cash 
to pay all the government's bills on time will be June 8th.
    This estimate of the X-date is very uncertain because it 
depends on the very uncertain tax receipts. But it's very clear 
that the April tax revenues came in very weakly, about a third 
of what we took in last year. We don't quite know what the 
revenue numbers are going to look like in coming days, but by 
my best calculation June 8th will be the day when Treasury 
can't pay its bills.
    There is a possibility, a worst case scenario that it will 
be June the 1st. It will be very close. Best case scenario will 
be August 8th. So that gives you a sense of timing here. Point 
number two, this is an especially opportune time to have a 
political debate over the debt limit. Recession risks are 
uncomfortably high. I'd say a majority of economists, many CEOs 
and investors firmly believe that a recession is likely over 
the next 12 to 18 months.
    The economy is struggling with the increase in interest 
rates. There was a rate increase by the Federal Reserve again 
yesterday. The Fed has raised rates over 5 percentage points in 
a little over a year. That's created tremendous pressure on the 
economy, and of course on the banking system. The banking 
system is struggling as well at this point.
    And while it feels like the worst of the crisis is over, 
it's still simmering, and the fallout is yet to be felt in 
terms of credit availability, and what it means for small 
business, commercial real estate and other parts of the 
economy. This leads me to one of my concerns about the Limit 
Save and Grow Act, and that is it entails significant cuts to 
spending, government spending, beginning in fiscal year 2024, 
which begins at the end of this year, right at the point in 
time when the economy is going to be the most vulnerable to 
going into recession.
    By my calculation the Act will shave spending equal to 
about a half a percent of GDP in 2024, and that's a half a 
percent that the economy does not have. And you will see, under 
any scenario, significant, meaningful job loss in 2024, 
unemployment will rise.
    I go into much more detail with regard to my assessment of 
the macroeconomic effects of the Limit Save and Grow Act in my 
written testimony, but just to summarize, it will reduce 
employment by the end of 2024 by about 800,000 jobs, and add 
meaningfully to unemployment by almost a half of a percentage 
point, putting the unemployment rate, which is currently 3 and 
a half percent, closer to 5 percent.
    So, the timing here is particularly difficult. Finally, I 
think there's a path forward. A viable, political path forward 
here, and I think the first thing that needs to be done is the 
debt limit needs to be suspended. There's no time to get this 
done before the X date. In the current debt limit negotiations, 
I recommend suspending the debt limit to the end of FY 2023 to 
line it up with the budget negotiations so legislation 
increasing the debt limit can be passed.
    I highly recommend the legislation increases the debt limit 
enough to push the next debt limit negotiations to the other 
side of the 2024 election, because if you don't, the 
uncertainty that will be prevalent between now and when we 
debate this again next year, is going to be very, very 
significant, and again, contribute to the potential economic 
recession.
    So, move the suspension to the other side of the election. 
Pass a piece of legislation increasing the debt limit, then 
pass a piece of legislation the same time funding the 
government in fiscal year 2024. Debate, discuss, appropriate 
spending levels, composition of that spending, and any other 
fiscal policy that's necessary to pass that budget legislation 
for fiscal year 2024.
    Do them at the same time. Get this done and let's move 
forward. I will say, of course, all this will not address the 
nation's long-term fiscal problems. We are on an unsustainable 
fiscal path. We need both additional tax revenue, and we need 
spending restraint, both of those things need to happen, but we 
can't do that in the current environment. This is not the time 
to do it.
    We need to end this drama as quickly as possible. If we 
don't we're going to go into recession, and our fiscal 
challenges will be made even worse. Thank you, Senator.
    Chairman Whitehouse. Thank you very much. Mr. Krupp, do we 
have you standing by?
    Mr. Krupp. You do indeed.
    Chairman Whitehouse. All right. You may proceed with your 
statement. Thank you for joining us electronically.

STATEMENT OF FRED KRUPP, PRESIDENT, ENVIRONMENTAL DEFENSE FUND 
                              \4\
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    \4\ Prepared statement of Mr. Krupp appears in the appendix on page 
58.
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    Mr. Krupp. Thank you Chairman Whitehouse, Ranking member 
Grassley, and members of the Committee. I am Fred Krupp, 
President of the Environmental Defense Fund, with more than 3 
million members. EDF is working across the United States, and 
in 28 countries to create transformational solutions to the 
most serious environmental problems.
    I want to thank you for the opportunity to testify today. 
The House Republicans plan to tie the debt ceiling increase to 
repeal of critical Inflation Reduction Act provisions threatens 
our economy, our health, and our clean energy future. I'm going 
to focus my verbal testimony on the proposed repeal of the 
Methane Emissions Reductions Program, MERP.
    It's an example of the smart policies and tremendous 
opportunities that would be taken away by the House passed 
bill. Now methane is the main component of natural gas, and 
U.S. companies currently waste enough methane to meet the 
annual energy needs of more than 12 million households.
    Put another way, it's a third of the gas that Europe was 
importing from Russia before the invasion of Ukraine. And this 
gas could be brought to our allies without the need for any 
additional new export capacity. At a time of uncertainty and 
instability in global energy, allowing companies to continue to 
waste this energy resource is just unconscionable.
    Reducing methane pollution is also the fastest, most cost-
effective way to immediately slow our current rate of global 
warming. Oil and gas companies are the largest industrial 
source of methane.
    U.S. companies emit at least 13 million metric tons of 
methane annually. That's an amount that has a greater near term 
climate impact than over 200 million cars driven for an entire 
year.
    And cutting methane, and other dangerous air pollutants 
emitted alongside it, are important to protect the health of 
the roughly 10 million Americans who live near an active oil or 
gas site. So MERP provides a strong incentive to cut pollution 
with its charge on excessive methane emissions from the U.S. 
oil and gas facilities.
    Now many operators will choose to invest in preventing 
pollution, rather than pay for the excess emissions. That's 
what we want. The charge applies to emissions from large 
operators that emit above levels consistent with the industry's 
own pollution targets. Operators can avoid the charge by just 
cutting their emissions.
    Let me stress that point. By meeting the industry's own 
emission reduction targets operators would not pay the charge. 
MERP also directs $1.55 billion to state and tribal agencies, 
communities, and producers, to help reduce the emissions. 
Funding that would be eliminated if this program is repealed.
    MERP also supports job creation by keeping more product in 
pipelines and out of the atmosphere. The growing methane 
mitigation industry provides the goods and services needed to 
help the companies measure and reduce their emissions.
    This industry is nearly doubled in size since 2017, with 
more than 200 companies today providing family sustaining jobs 
that can't be offshored.
    Now, EPA's current method of quantifying methane emissions 
does not accurately reflect today's oil and gas production 
practices and equipment. Studies have found that methane 
emissions are as much as 60 percent higher than current EPA 
estimate. To fix the problem, we must accurately understand the 
magnitude and source of the pollution.
    MERP addresses this by directing EPA to update the 
greenhouse gas reporting program to incorporate real data that 
will ensure emissions estimates and MERP's waste charge 
accurately reflect the total emissions from oil and gas 
facilities.
    We need strong and comprehensive pollution standards from 
EPA to ensure robust pollution reductions from every company, 
for every community.
    A charge will discourage wasteful levels of methane 
emissions, and hold companies accountable, while exempting 
those that are in compliance. Congress was right to enact MERP. 
Our health and the environment will benefit because of it, and 
it should be left in place to do its job.
    Chairman Whitehouse. Thank you very much Mr. Krupp, and 
wonderful precision on the five minutes, to the second. Ms. 
Hopper, please proceed with your testimony. Thank you.
    Ms. Hopper. Thank you.

  STATEMENT OF ABIGAIL ROSS HOPPER, PRESIDENT AND CEO, SOLAR 
               ENERGY INDUSTRIES ASSOCIATION \5\
---------------------------------------------------------------------------

    \5\ Prepared statement of Ms. Hopper appears in the appendix on 
page 63.
---------------------------------------------------------------------------
    Ms. Hopper. Chairman Whitehouse, Ranking Member Grassley, 
and members of the Senate Budget Committee, thank you for 
inviting me here today to share what we are already seeing 
because of the Inflation Reduction Act, and the impact that the 
proposed repeal of this legislation would have on our economy.
    My name is Abigail Ross Hopper, and I am the President and 
CEO of the Solar Energy Industry's Association. I am privileged 
to represent the 255,000 working Americans who are employed in 
the solar and storage industry. The policies enacted by the 
Inflation Reduction Act are having a huge impact across the 
country in the form of new American jobs, new American 
manufacturing capacity, and improved U.S. energy security.
    That is why it is essential that the IRA remain intact in 
its current form. The certainty that the law provides, the 
investments that are being made, the jobs that are being 
created are all contingent on the continuation of this statute. 
Nearly every week I travel across the country visiting company 
headquarters, manufacturing facilities, and solar and storage 
installations.
    Don't ask my children how they feel about that. Among the 
biggest takeaways is that the IRA is an engine for American job 
creation for all renewable energy sectors, storage, solar, 
wind, offshore wind, and EVs to name just a few.
    These investments are being made across the country in 
states led by Republicans and Democrats alike. Climate Power 
recently announced that within six months of the IRA being 
signed into law, clean energy companies have announced more 
than 142,000 new jobs across 41 states.
    Climate Power has also tracked 191 clean energy projects, 
and 242 billion in investments. Our team at SEIA is tracking 
announcements of new manufacturing facilities for the solar 
supply chain that would grow our domestic manufacturing 
capacity from 7 gigawatts per year to nearly 50 gigawatts per 
year, thanks again to the IRA.
    This is proof positive that we are in the midst of a next 
evolution of our economy, one that focuses on economic growth, 
well-paying jobs, and rebuilding our country's manufacturing 
sector. For example, upwards of 40 new electric vehicle battery 
manufacturing sites will be coming to Michigan, Arizona and 
South Carolina, with an additional 22 companies sharing their 
plans for expanding manufacturing in places such as Oklahoma, 
Alabama and Michigan.
    Wind manufacturing facilities have been announced across 
states that include South Dakota, Iowa, Georgia, excuse me, 
Georgia, Arizona, South Carolina, Texas and Tennessee and 
Qcells is investing $2.5 billion in cell and module 
manufacturing in Dalton, Georgia.
    Qcells also recently announced an investment of $160 
million in formerly shuttered REC silicon plant in Washington 
State. Collectively, these factories and dozens more like them 
represent tens of billions of dollars in new investments, and 
100,000 home grown jobs across the country, and again, all the 
result--the direct result, of the Inflation Reduction Act.
    Any threat to the IRA is a threat to these factories and 
these jobs. The investments also continue to help build 
workforce demand, and rebuild opportunity in low-income 
communities, communities of color, and traditional energy 
communities. I've been talking a lot about numbers, and I 
anticipate will continue to do that through the course of this 
hearing, but I want to personalize this just a little bit.
    Last week I was in the great State of Arizona, and I was on 
a manufacturing floor, and I met a woman named Michelle. 
Michelle has worked in that manufacturing facility for the last 
few years. They manufacture tracker systems for utility scale 
projects. They use American steel and are an American company.
    Michelle has been promoted a couple of times over the 
course of the last few years, and since the passage of the IRA 
there's been even more demand. The company is growing, and the 
production continues there. In addition to the jobs and 
economic growth that the IRA has produced, it has also made our 
country more secure, producing energy at home with renewable 
energy, and making the materials to deploy that energy here in 
this country will insulate us from global conflicts, and allow 
us to make needed upgrades to our grid with confidence.
    The IRA is a landmark law, that through the deployment of 
clean energy is not only building our economy through 
manufacturing and jobs, but is the foundation of our country's 
next and greatest evolution, and that my friends, is real 
energy dominance.
    Chairman Whitehouse. Thank you Miss Hopper. With consent I 
would like to put an additional exhibit into the record 
supplementing your testimony, which represents the investment 
in jobs in states represented by members of this Committee 
since the passage of the IRA, and spoiler alert, it's over 
56,000 jobs just in states that this Committee represents, and 
nearly $60 billion in investment and with that we turn to Mr. 
Riedl.\6\
---------------------------------------------------------------------------
    \6\ Statement submitted by Chairman Whitehouse appears in the 
appendix on page 94.
---------------------------------------------------------------------------

 STATEMENT OF BRIAN RIEDL, SENIOR FELLOW, MANHATTAN INSTITUTE 
                              \7\
---------------------------------------------------------------------------

    \7\ Prepared statement of Mr. Riedl appears in the appendix on page 
76.
---------------------------------------------------------------------------
    Mr. Riedl. Good morning Chairman Whitehouse, Ranking Member 
Grassley, and members of the Committee. Thank you for inviting 
me to participate in today's hearings at a Committee where I 
have many fond memories of staffing so many hearings back when 
I was Chief Economist to Senator Portman.
    Today I will make three main points. First, that the 
current debt path is unsustainable, and required immediate 
attention. Second, that there is a long and bipartisan history 
of attaching deficit reforms to debt limit bills, and third, 
that ultimately the debt limit must be raised no matter what.
    On that first point the debt is totally unsustainable. The 
deficit will likely settle in around $1.5 trillion this year, 
and approach $3 trillion within a decade, even assuming peace, 
prosperity and low interest rates. This comes to $20 trillion 
in new borrowing over the decade, even if the 2017 tax cuts 
expire on schedule.
    The long-term projections are even worse. CBO forecasts a 
staggering $114 trillion in deficits over the next 30 years, 
pushing the debt to nearly 200 percent of GDP. Virtually, the 
entire projected shortfall comes from social security and 
Medicare systems that CBO forecasts were running deficit of 
$116 trillion over the next 30 years.
    Those two programs themselves will be running 13 percent of 
GDP deficit by 2052. Even under those baseline assumptions of 
low interest rates, interest costs will set a record share of 
GDP within a decade, and consume half of all tax revenues 
within three decades. If interest rates rise, as we're seeing, 
each percentage point will add $3 trillion over the decade, and 
$30 trillion over 30 years.
    That's each percentage point. By that point interests costs 
would consume easily 70 or even 100 percent of tax revenues. 
With respect to interest rates and soaring debt we are sitting 
on a ticking timebomb. Congress should be working diligently to 
avert an otherwise inevitable debt crisis, and raising the debt 
limit has historically been one opportunity to address the 
underlying debt problem.
    For decades the debt limit served as a legitimate tool for 
both Republicans and Democrats to address deficits. Debt 
showdowns were relatively rare--debt limit showdowns were 
relatively rare because both sides recognized the need to 
include fiscal reforms. Indeed, of the eight largest deficit 
reduction laws since 1985, all eight were attached to debt 
limit bills.
    This includes both Graham Redmond laws in the 1980's. The 
1990 Bush tax hikes, the 1993 Clinton tax hikes, the 1997 
Balance Budget Act. The 1996 line item veto Law, the 2009 Pay 
Go Law, and the 2011 Budget Control Act. Every single one of 
those deficit reforms was attached to a debt limit hike.
    Many of these laws occurred in '80s and '90s when a 6 
percent of GDP deficit, kind of similar to today, was 
eliminated and turned into a budget surplus by 1998. Clearly, 
both parties have gotten away from using the debt limit to 
address red ink, just as both parties bear responsibility for 
the past decade's deficits, but the unsustainable debt means 
that all legislative avenues should again be open.
    This is perhaps why a new survey shows that 74 percent of 
voters, including 58 percent of Democrats agree with the 
statement that, ``President Biden should agree to negotiations 
and try to find common ground around the debt ceiling, 
including some reductions in government spending.''
    Just 26 percent believe the President should resist 
negotiating, and demand a clean debt ceiling hike. All that 
said, I agree the debt limit must be raised on time no matter 
what. Hitting the debt limit would force an immediate 20 
percent cut in federal spending, and possibly default on the 
national debt.
    The affect on families, businesses, financial markets, and 
the broader economy would be devastating. Hitting the debt 
limit is not a solution to soaring debt. It must be raised. In 
fact, replacing the debt limit should be an option, but only if 
Republicans and Democrats can come up with an alternative 
process that would allow members to vote on the entire budget 
with the true ability to trade off between competing tax and 
spending priorities.
    You see right now the debt limit, as flawed as it is, is 
the only real true lawmaker vote available that truly covers 
and trades off the whole federal budget. If we don't want 
lawmakers to use this risky and flawed process to address 
soaring deficits, then let's debate and come up with a better 
budget process tool to have these debates and trade-offs. Thank 
you.
    Chairman Whitehouse. Here, here on the better budget 
process.
    Mr. Riedl. Thank you, sir.
    Chairman Whitehouse. Next, Dr. Fichtner, please proceed.

 STATEMENT OF DR. JASON J. FICHTNER, VICE PRESIDENT AND CHIEF 
            ECONOMIST, BIPARTISAN POLICY CENTER \8\
---------------------------------------------------------------------------

    \8\ Prepared statement of Dr. Fichtner appears in the appendix on 
page 80.
---------------------------------------------------------------------------
    Dr. Fichtner. Thank you. Good morning Chairman Whitehouse, 
Ranking Member Grassley, and members of the Committee. Thank 
you for inviting me to testify today. My name is Jason 
Fichtner. I am Vice President and Chief Economist at the 
Bipartisan Policy Center, and apparently all the economists 
came today with three main takeaways for you.
    So, for my testimony I hope to leave you with the following 
three. First, Congress must raise the debt ceiling. Second, the 
nation's debt is on an unsustainable trajectory, and action 
must be taken now. Further delay will only make the problem 
worse, and the necessary corrections more harmful to the 
country, and to the most vulnerable in our society.
    And third, raising the debt ceiling and tackling the fiscal 
challenges facing our nation will require both a bipartisan 
effort, and presidential engagement. Turning these three 
takeaways in slightly more detail, first again, Congress must 
raise the debt ceiling. Period. Full stop.
    Taking the nation near the brink of defaulting on any 
payment obligations, or going over the cliff and failing to 
make any obligated payments will cause unnecessary fiscal 
expense, potentially damage the full, faith and credit of the 
United States, and cause financial harm to millions of 
Americans, even under a situation where the Department of 
Treasury can prioritize certain payments, such as interest on 
the debt, and social security benefit payments. The problem of 
paying the rest of the nation's bills remain.
    Second, the nation's debt is on an unsustainable 
trajectory. According to the Congressional Budget Office, this 
year's deficit is estimated to be $1.4 trillion, with annual 
deficits averaging $2 trillion over the next 10 years. A $1.4 
trillion deficit is slightly higher than the $1.2 trillion we 
spent on social security benefits last year. Further, the 
national debt now stands at just over $31 trillion. It's hard 
to comprehend a number this large. As an illustration, imagine 
you had hundred dollars bills. I'm sure everyone here has a 
hundred dollar bill in their pocket. A 10,000 dollar stack of 
100 dollar bills would measure about a half inch thick.
    A pile of 100 dollar bills totaling 1 million dollars would 
fit inside a standard school backpack, while $100 million would 
fit on a standard construction pallet, and one billion of 
hundred dollar bills would be ten standard construction 
pallets, but a trillion of one hundred dollar bills, a million, 
million, a thousand billion, would require 1,000 of these one 
billion dollar pallets, which double stacked would take up an 
entire football field. That's $1 trillion.
    There are 32 football teams in the National Football 
League, just enough NFL home stadiums to hold the nation's 
$31.46 trillion national debt if we printed it in 100 dollar 
bills. Our fiscal problem is real. According to CBO the 
national debt is on track to exceed 46 trillion dollars in 
2033, or 118 percent of GDP.
    The interest payments alone will near $1.5 trillion in 
2033. More than our nation is planning to spend on national 
defense at that time. Third, bipartisan cooperation is 
imperative. If you are not sitting at the table, you are not 
negotiating. While the debt limit is not a good mechanism to 
facilitate the necessary and thoughtful conversation on 
addressing the nation's physical challenges, it is the 
opportunity currently present and available.
    I encourage members of the House and Senate Democrats, 
Republicans, and President Biden to sit down and negotiate 
before the Treasury Department runs out of options to continue 
making full payments on the government's obligations.
    Finally, I would add that it's critically important for the 
U.S. to avoid future debt ceiling brinkmanship. My BPC 
colleagues and I proposed a solution, which I address in my 
written testimony, which I ask Mr. Chairman, with your 
permission my written testimony be submitted into the record.
    Chairman Whitehouse. Without objection.
    Dr. Fichtner. Thank you.
    Chairman Whitehouse. The written testimony of all witnesses 
will be a matter of the record.
    Dr. Fichtner. And since I have one minute remaining Mr. 
Chairman and Mr. Grassley, I want to take a few moments to 
personally thank you. The last time I testified before both of 
you was back in February of 2020, right before COVID hit, and 
it was before the Senate Finance Committee.
    I was a nominee for the Social Security Advisory Board, and 
while my nomination never received a vote on the floor, I did 
pass favorably out of Committee with both of you recommending 
me for confirmation. So I appreciate then, and I appreciate 
now, your support, and also your willingness to reach across 
the aisle. Thank you for the opportunity to testify today, and 
I look forward to your questions.
    Chairman Whitehouse. Thank you, and we appreciate your 
being here and your long work in this cause, and to the issue 
of getting rid of this debt limit bear trap in the bedroom, 
again here, here. Mr. Zandi we are being presented by House 
Republicans with curtain number one and curtain number two.
    Behind curtain number one is default. You have assessed 
that as financial calamity as I understand. Is that correct?
    Dr. Zandi. That's the word, yeah.
    Chairman Whitehouse.. It would pitch us into recession?
    Dr. Zandi. Severe recession.
    Chairman Whitehouse. Severe recession, and it would cost 
perhaps a million jobs.
    Dr. Zandi. That's the short period of default, yeah.
    Chairman Whitehouse. Correct. Longer period of default much 
more job loss?
    Dr. Zandi. Correct.
    Chairman Whitehouse. Behind curtain number two is Speaker 
McCarthy's what we call Default on America Act. You assess the 
economic harm to America of that bill if it were to pass as 
also very severe, correct?
    Dr. Zandi. Yeah. It would put the economy on the brink of 
recession, if not in recession, yes.
    Chairman Whitehouse. And knock $141 billion off our GDP?
    Dr. Zandi. GDP. Correct. Close to 800,000 jobs.
    Chairman Whitehouse. Nearly 800,000 Americans would lose 
their jobs if this bill were to pass?
    Dr. Zandi. Correct.
    Chairman Whitehouse. For the record, the MAGA extremists in 
the House who were essential to McCarthy's speakership have 
said that nothing less than the Default on America Option will 
pass. Just so it's clear. Those are the two options that the 
extremists in the House are now presenting us.
    Ms. Hopper in simple terms, layman's terms, what becomes of 
the American solar industry if the Default on America Bill were 
to pass?
    Ms. Hopper. The Default on America Bill were to pass as you 
call it, all of the investment that we anticipate, both in 
solar deployment, and in solar manufacturing would not take 
place, so the 50 gigawatts of investment, the over 100,000 jobs 
in solar manufacturing alone would not happen.
    Chairman Whitehouse. Would it be fair to describe that as 
crashing the American solar industry?
    Ms. Hopper. It certainly would be fair to describe it that 
way, and it would also be fair to describe it as just gutting 
the vision of rebuilding the domestic manufacturing base here 
in the United States.
    Chairman Whitehouse. And just from my purposes, it comes as 
no surprise that a bill from House Republicans, of whose 315 
pages, 275 are dedicated to handouts to the fossil fuel 
industry, would if implemented, also crash their competition, 
the solar industry. I think that that is not coincidental.
    Mr. Krupp, what does it tell you when 275 out of 315 pages 
of this bill are dedicated to handouts and favors for the 
fossil fuel industry?
    Mr. Krupp. Well to me, Mr. Chairman, it is--it would have 
the affect of you know, causing tremendous more pollution, and 
it's just unconscionable because it's not just the pollution. 
As I said in my testimony we are wasting gas that Europe needs. 
How? I don't understand how anyone in any party could be in 
favor of repealing this.
    Chairman Whitehouse. Where is the methane leakage support 
caucus to be found?
    Mr. Krupp. Well usually they're hiding, Senator.
    Chairman Whitehouse. I've never heard from them. I've never 
heard a colleague say you know what? Methane leakage is a 
really good thing. We're for that. And yet here we are with a 
bill that does exactly that. It repeals the measure we just 
passed to constrain methane leakage in the economy. To me that 
is yet another measure of extremism.
    And extremism in the service of default, or put it the 
other way, default in the service of extremism is a place we 
should not be going, and I'm delighted that all three of the 
economists firmly agree that default is not an option no matter 
what. With that I'll yield to my Ranking Member, Senator 
Grassley, for his five minutes, and then to Senator Murray.
    Senator Grassley. Just one statement before I get to Mr. 
Fichtner, Dr. Fichtner, and that's for everybody to think about 
what we've heard about the dire consequences of the solar 
industry. I never heard those dire consequences stated when we 
all agreed and worked with the industry to phase out the tax 
credit that was going to happen on 2022, until it was extended 
in recent legislation.
    And that was a multi-year phase out. For you, Dr. Fichtner, 
it's interesting how we only hear about brinksmanship when it's 
Republicans who want to negotiate a debt ceiling. I'd note that 
Senator Schumer's bill lifts the debt limit through the end of 
2024, maybe to maintain their leverage if we have a Republican 
president in 2025.
    So to you, is it fair to say that both parties have used 
the debt ceiling as leverage in negotiations?
    Dr. Fichtner. It is fair to say that, Senator, and I would 
add that because of that that's one reason why negotiation, 
whatever we do with the debt ceiling should be pushed off as 
Dr. Zandi said, until after the election. And I would go one 
further and say it no longer does what it's intended to do.
    It doesn't control spending, so let's just get rid of the 
debt ceiling all together.
    Senator Grassley. And the Chairman mentioned what used to 
be called Enzi-Whitehouse, but now Whitehouse something that I 
want to help him with. I would like to see.
    Chairman Whitehouse. I was looking for it to being White 
House Grassley.
    Senator Grassley. Us deal with those things. I don't think 
you're going to have a problem from me. Good. Okay. To Mr. 
Riedl, as I mentioned Democrats have no problem using the debt 
ceiling as leverage in negotiations with Republican presidents. 
What did Democrats demand and get in exchange for raising the 
debt ceiling under President Trump?
    Mr. Riedl. Thank you, Senator. The debt limit was raised 
three times under President Trump. Twice it was attached to 
large spending bills raising the spending caps by $620 billion 
over 4 years. And once it was part of a bill that included 
disaster rate spending. Even with that spending, the majority 
of House Democrats still voted against the 2018 debt limit 
hike. And if we just want to go back a little further, there 
were three clean debt limit hikes under President Bush with a 
full Republican Congress, and House and Senate Democrats voted 
against the clean debt limit hike at a 98.8 percent rate, 
including then Senator Barack Obama and Biden.
    So, I think it's fair to conclude that really neither 
party's hands are really clean on debt limit hikes.
    Senator Grassley. To you also, President Biden likes to 
claim that he's lowered the deficit, a falsehood repeated so 
often that the Washington Post awarded him what's called a 
bottomless Pinocchio rating. You've been critical of fiscal 
legacies of presidents in both parties.
    What do you make of President Biden's track record on the 
budget?
    Mr. Riedl. Thank you. I mean in all my reports, I've done 
reports scoring presidential records of Democrats and 
Republicans, and the proper measure is against the baseline the 
President inherited because something like one-time pandemic 
spending, expiring on schedule, is not new deficit reduction.
    When President Biden was elected CBO forecast deficits of 
$2.3 trillion, and then $1.1 trillion. Instead, we got $2.8 
trillion and 1.4, which is $800 billion higher than the 
baseline. Overall, as you mentioned earlier when President 
Biden was inaugurated, CBO forecast $14 trillion in deficits 
over ten years, and now they're forecasting $20 trillion in 
deficits over the same 10 year period.
    Five trillion of that increase has come directly from 
legislation and executive orders, pushing deficits towards $3 
trillion, so in that context, I don't think keeping the deficit 
below a past one-time pandemic spike is really the right 
measure.
    Senator Grassley. And then also to you. CBO and Joint 
Committee on Taxation released their scores of the House Bill. 
They revealed that many of the new tax credits in last year's 
partisan Reconciliation Bill are actually going to cost much 
more than initially advertised.
    Knowing what we know now, was last year's Reconciliation 
Bill, the so-called Inflation Reduction Act, fiscally 
responsible legislation supporters portray it to be?
    Mr. Riedl. Well at the time of enactment CBO scored the 
bill as saving $238 billion over the decade, including the IRS 
revenues. Now, OMB says the same bill is going to add $216 
billion of ten year deficits. Much of that change is due to the 
electric vehicle incentives that were originally scored by JCT 
as $12 billion, and are now estimated by Goldman Sachs and 
Brookings as costing $390 billion over ten years.
    So, no, the law at this point does not appear to be a 
deficit reducer.
    Senator Grassley. Thank you Mr. Chairman.
    Chairman Whitehouse. Senator Murray.

                  STATEMENT OF SENATOR MURRAY

    Senator Murray. Well thank you Chair Whitehouse for holding 
this really important hearing because the stakes are really 
high, and the clock is ticking. We have, as we all know, until 
June 1st to raise the debt ceiling. That is weeks away. The 
American economy right now is heading for a cliff, and last 
week the House Republicans voted to drive it off full speed 
ahead.
    This should not be hard. When you are heading for a cliff 
you turn the wheel. You don't say, well I'll turn the wheel if 
you let me cut the brakes, or disable the airbags, or trash the 
engine, but that is essentially what the House Republicans are 
offering us.
    Mr. Chairman, you called it door one or door two, I 
believe, because House Republicans are saying if you don't let 
us wreck the economy, and whittle down essential government 
services to the point where we're laying off people like our 
air traffic controllers, then we will just wreck the economy by 
refusing to pay the bills instead.
    Make no mistake, it doesn't matter who you vote for, what 
state you live in, or what you make. If House Republicans get 
their way it is going to make your life worse. The cuts they 
are proposing in the Default on America Act won't just kick 
families off food benefits, or rip away housing support for 
veterans, it will gut funding that keeps our planes in the 
skies, trains on the rails, our food and medicines safe, our 
cops on the street, and helps get deadly fentanyl off of them.
    And despite Republicans protesting, the reality is that 
this bill will not protect veterans from cuts, just read it. 
What House Republicans passed does nothing to protect the 
benefits and support that veterans have earned and are counting 
on to get housing or higher education, or start a business.
    The Default on America Act doesn't even protect veterans 
healthcare, one of our fundamental obligations to the men and 
women who put their lives on the line for our country. It just 
cuts across the board medical research, childcare, workforce 
training, disaster relief, border security, small business 
grants cut. That is their big idea.
    That is the Default on America Act that House Republicans 
are taking our economy hostage for, except that's only half of 
it because House Republicans are also demanding spending caps 
that will lock in even more cuts over the next decade. That is 
10 years of our competitors, who are going to be investing in 
their economies growing stronger and gaining ground, while 
House Republicans tie our hands and force us to fall further 
and further behind.
    A lost decade for America. That is what MAGA Republicans 
are proposing. What House Republicans have voted for is one 
massive gift to the Chinese government because guess what? Our 
competitors are not debating whether to pay their debts or 
wreck their economy. They are not debating whether to invest in 
their future, or cut and cap the investments that keep them 
competitive.
    They are doing everything they can to get ahead. So I'm 
asking my Republican colleagues here at the brink of economic 
calamity, do not let Speaker McCarthy's partisan, hostage 
taking win the day, and lose the 21st Century. Do not force an 
unprecedented economic crisis on our country in a vain attempt 
to slash funding for families and veterans and communities 
across America.
    Come to the table. Work with us to simply pay our country's 
bills like we have so many times before, including three times 
under the last president, and then let us work together on our 
bipartisan spending bills that invest in America, and keep us 
moving forward, which is--I will tell my committee members, 
exactly what we are focused on doing in the Senate 
Appropriations Committee.
    So with that, Dr. Zandi, let me ask you can you speak to 
the potential macroeconomic damage of House Republican's 
Default on America Act, both to our economy, and our nation's 
competitive edge on the world stage over the next decade?
    Dr. Zandi. Thank you for the question, Senator. I think 
there are two broad macroeconomic issues. One, I mentioned in 
my oral remarks, and that is the cuts are going to occur later 
this year under the legislation that's been passed by the 
House, later this year, and in 2024, when the economy is going 
to be very, very fragile, at risk of going into recession, 
grappling with the higher interest rates, the banking crisis, 
and now the drama related to the debt limit.
    So it's starting to do damage in the financial markets, and 
I suspect significantly more damage before lawmakers act and 
increase the limit. So the risks here are quite significant in 
the near term.
    The second macroeconomic impact that I think is worth 
considering is if you do the arithmetic, the cuts to non-
discretionary non-defense spending will take the spending from 
3.5 percent of GDP currently--and 3.5 percent by the way, is 
less than it's average over the past 50-60 years, so this isn't 
really--this is a place where spending has remained very 
restrained, and not grown more quickly than the economy--it's 
been equal to the economy.
    But under the Limit, Save, Grow Act it would fall to 2 
percent of GDP by the end of the decade, and of course this 
goes to very significant cuts to all of the things that you 
described, everything from healthcare and education training, 
NASA, national parks, you know, things that I think Americans 
count on as essential services, and critical income support.
    And that would be incredibly difficult for the economy. And 
at the end of the day would not address our long-term 
unsustainable fiscal situation.
    Senator Murray. Thank you. And takeaway our competitive 
edge.
    Dr. Zandi. And severely limit our competitive edge, yes.
    Senator Murray. Thank you. Thank you.
    Chairman Whitehouse. Thank you Senator Murray. My friend 
Senator Kennedy is next.

                  STATEMENT OF SENATOR KENNEDY

    Senator Kennedy. Thank you Mr. Chairman. I don't know any 
fair-minded person that wants us to default on America's debt. 
You don't have to be Mensa material to understand the 
consequences would be terrible. And I want to thank President 
Biden for agreeing to meet with the Speaker.
    I thought he should have done it sooner. You can only be 
young once, but you can always be immature, and I thought he 
was being a trifle immature. I hope he will negotiate in good 
faith. Please, please, please, Mr. President negotiate in good 
faith. Please with sugar on top.
    I don't think you want to be responsible for defaulting on 
America's debt. I believe you're better than that. Mr. Riedl, 
let me ask you a couple of questions. Did you know that since 
the 1950's we have had ten periods of disinflation in America? 
Did you know that?
    Mr. Riedl. Not at that exact number, but that makes sense.
    Senator Kennedy. Okay. And disinflation is when inflation 
is too high, and we have to reduce the rate of growth of 
inflation. It's not deflation, where prices go down, we just 
reduce the rate of growth. Is that correct?
    Mr. Riedl. Yes.
    Senator Kennedy. Okay. And did you know that if you look at 
history at all ten of these times when we had to reduce 
inflation, that in order to get inflation down 2 percent we had 
to raise on average, the Federal Reserve had to raise interest 
rates such that it raised unemployment about 3.6 percent. Did 
you know that?
    Mr. Riedl. That sounds similar to what Mr. Summer has said. 
He's made similar points. That sounds very correct.
    Senator Kennedy. Okay. All right. So the current 
unemployment rate is 3.5 percent. Is it not?
    Mr. Riedl. Yes.
    Senator Kennedy. And the current inflation rate is 5 
percent is it not?
    Mr. Riedl. Approximately. Yes.
    Senator Kennedy. So if history tells us in order to get 
inflation down 2 percent, the Federal Reserve has to raise 
interest rates such that it increases unemployment 3.6 percent. 
Then if you do the math, given that the current unemployment 
rate is 3 and a half percent, and the current inflation rate is 
5 percent, that would indicate, would it not, that the Federal 
Reserve, if history is any indication, will probably have to 
eventually raise interest rates to between 7 and 8 percent. Is 
that correct?
    Mr. Riedl. It could have to go that high depending on how 
the economy responds to current rise.
    Senator Kennedy. Okay. Now can we agree that the best way 
to get inflation down is to attack it on the fiscal side and 
the monetary side?
    Mr. Riedl. Absolutely.
    Senator Kennedy. We can agree on that? We can agree on 
that?
    Mr. Riedl. Well you can wind the economy into a recession.
    Senator Kennedy. Okay. We can agree on that. And when you 
attack it on the monetary side, the Federal Reserve raises 
interest rates, it's trying to slow the economy. It doesn't 
want to, but the way you measure the slowing of the economy is 
in unemployment rate.
    When you attack it on the fiscal side you reduce your rate 
of growth of spending and debt accumulation. Did I describe 
that right?
    Mr. Riedl. You did.
    Senator Kennedy. So is it not the case that if you vote 
against slowing the rate of growth of spending and debt 
accumulation, you're voting to raise interest rates even higher 
are you not?
    Mr. Riedl. Generally, I would agree with that viewpoint, 
yes.
    Senator Kennedy. I mean that's just basic economics 101, 
right?
    Mr. Riedl. Right. The Federal Reserve's tool----
    Senator Kennedy. I mean I saw Mr. Portman taught you did 
he. Yeah. Okay. All right. Let me ask you a couple more 
questions. So putting aside all the politics here, we're 
talking about people's lives. If we don't reduce the rate of 
growth of spending and debt accumulation, Jay Powell is going 
to do what he's got to do to get control of inflation. And he's 
going to keep raising rates, and that's going to put people out 
of work.
    He doesn't want that, but if he has to raise rates between 
7 and 8 percent, then that could be six, seven, eight million 
people out of work. Dr. Zandi, I have to ask you this. You made 
some pretty bold predictions today, and some of them I agree 
with, and some of them I don't.
    But were you at Moody's in the mid-2000's when Moody's 
graded a lot of these mortgage backed securities, AAA and A 
good as gold that promptly tanked, and almost dragged down the 
world economy. Were you there then? Or was that before you 
time?
    Dr. Zandi. No. It was before my time. I sold my company to 
Moody's in late '05.
    Senator Kennedy. I'm glad you missed that.
    Dr. Zandi. Yeah.
    Senator Kennedy. If you were there.
    Dr. Zandi. If you're interested I can send you a couple 
studies I did at that time that you would find very 
interesting.
    Senator Kennedy. Please do. That would be great. I wish 
Moody's would have them then. Ms. I can't see your name.
    Ms. Hopper. Hopper.
    Senator Kennedy. Hopper. Ms. Hopper. I love solar energy. I 
just want you to know that, and I love electric cars. But I've 
got to ask you this question. I've been waiting to ask this. If 
electric cars are so swell, how come government has to pay 
people to drive them?
    Ms. Hopper. So I think like most government policies right, 
are put in place to incent certain behaviors, and so that's 
part of the policy is that if we want more electric cars----
    Senator Kennedy. Yeah, but if they're so swell why couldn't 
they just in a competitive market people--why wouldn't they be 
choosing electric cars over internal combustion engine cars? 
Why do we have to pay people to drive them?
    Ms. Hopper [continuing]. I wouldn't characterize it as 
paying people to drive them.
    Senator Kennedy. Well sure we are. We're giving them the 
big ole tax credit.
    Ms. Hopper. It's the government having a policy to incent 
more purchase of electric vehicles.
    Senator Kennedy. Okay.
    Chairman Whitehouse. Senator Stabenow.
    Senator Kennedy. Thank you Mr. Chairman.
    Chairman Whitehouse. Thank you Senator Kennedy.

                 STATEMENT OF SENATOR STABENOW

    Senator Stabenow. Well good morning. Thank you Mr. 
Chairman. I love to talk about EVs at another time here. I wish 
we had a tax code that actually worked that we passed, so, but 
let's talk about an extremely serious issue this morning. And 
I'm glad my friend raised the issue of Federal Reserve Chairman 
Jerome Powell, and you know, what might happen. Let me just 
quote again what he said yesterday to the press. ``No one 
should assume that the fed can really protect the economy and 
the financial system, or our reputation globally from the 
damage that a U.S. default might inflict. We shouldn't even be 
talking about a world in which the U.S. doesn't pay its 
bills.'' It's pretty simple, pretty straightforward. I just 
came from an agriculture committee meeting Mr. Chair, and I can 
tell you it was on credit and crop insurance, and nobody there 
thought it was a good idea for farmers and ranchers to see 
their interest rates go up, which will happen.
    So this is a very, very serious thing, and unfortunately, 
we know that last week House Republicans pushed our country 
closer to this default, this catastrophic default and chaos 
that would arise from it, and I think over and over again that 
we need to stress that while republican colleagues are 
concerned about the debt, we know that about 25 percent of all 
the debt of the country ever came from four years of Donald 
Trump's presidency, of which folks voted for.
    But at that time it was about billionaires and large 
corporations getting big tax cuts. So if we want to have a real 
discussion about revenues and spending, that's great, that's 
great, let's do that. Don't default, but let's have that debate 
about what's fair for the majority of American people, 
including the fact that the largest corporations and 
billionaires should just pay their fair share like everybody in 
Michigan. That's all. We just want folks to pay their fair 
share.
    But instead, we are seeing this bill, the Default on 
America Act, targeting millions of working families, so many 
things I don't even know Mr. Chairman how to go through all of 
them. I will just mention three. One million seniors no longer 
getting Meals on Wheels. Actually that's a pretty big deal if 
you want to eat for an awful lot of seniors that are homebound 
in our country.
    30,000 law enforcement jobs gone. What does that do to our 
public safety? 80,000 VA jobs. How do we do veterans healthcare 
if that's cut? And when we talk about all of this, 7 million 
jobs lost, unemployment over 8 percent, more than doubled, and 
higher mortgage, car payments, lower 401K's and so on and so 
on.
    This is not a good idea. When we're coming out of a 
pandemic, we're seeing the fastest growth ever in a generation, 
which is extraordinary actually, after all of this. We're 
bringing jobs home. In my state we are cheering about creating 
manufacturing jobs.
    And then we want to put the country in a default? The only 
people that want chaos, and want to play politics would even be 
considering this. So let me just ask, one area that is so great 
that we are seeing right now is the number of increases in 
small businesses. We're really seeing a renaissance in small 
business, more than 12,000 new small business applications were 
submitted just in April. And Mr. Zandi, I wonder if you might 
speak to how the environment for small business owners would 
change in the event of a default?
    Dr. Zandi. Yeah, thank you for the question, and yeah this 
is amazing, the small business formation we've seen during the 
pandemic.
    Senator Stabenow. Amazing. Yeah.
    Dr. Zandi. It's one very significant bright spot in our 
economy.
    Senator Stabenow. Yeah.
    Dr. Zandi. It is across all industries, and all regions of 
the country, really quite incredible to see. But I didn't fear 
that small businesses are now under significant threat. I mean 
of course the banking crisis is a very serious problem because 
many small banks that are under a lot of pressure provide 
credit to small business.
    I mean when I started my company I got my loan from Malvern 
Federal Savings, my first loan from Malvern Federal Savings 
Bank, three branches, still operating in Malvern, Pennsylvania. 
So they're already under a lot of pressure, and with a debt 
default, you know, the problems are going to be magnified many 
times over.
    The banking crisis will continue on. The availability of 
credit, the cost of credit will become prohibitive. I think 
it's going to be very difficult for small businesses to not 
only operate and thrive, but to actually survive. We will 
instead of seeing a significant increase in formation, see a 
significant increase in bankruptcy and default.
    I think we should buckle in for some of that anyway, even 
without the debt limit drama, but with the drama and a breach 
that would just be over the top I think for small business.
    Senator Stabenow. Thank you. Mr. Chairman, I would just say 
the message we should send today to our Republicans in the 
House is don't default. Come and work with us within the budget 
process, within appropriations process, within the Farm Bill 
process. Some of what they did is actually Farm Bill 
jurisdiction, we'll have that debate.
    We'll have that debate during the Farm Bill, but don't 
create chaos in the American economy that's just beginning to 
thrive here. Thank you.
    Chairman Whitehouse. Which has the additional benefit of 
public daylight, rather than back room dealings.
    Senator Stabenow. Absolutely.
    Chairman Whitehouse. Senator Romney.

                  STATEMENT OF SENATOR ROMNEY

    Senator Romney. Mr. Chairman, thank you and thank you to 
the panelists. A couple of you I know pretty well, respect you 
all. These comments don't refer to you, but to us, which is I 
think we ought to be embarrassed. This Committee ought to be 
embarrassed, which is the American people expect us to work in 
a bipartisan basis to address the challenges that America 
faces, rather than holding hearings that are about preening and 
posturing, and politicizing, and trying to blame the other 
party. It's really embarrassing. This is a Committee 
responsible for setting a budget every year. We're supposed to 
have already done it. We've never even met to discuss doing 
that. We don't even have a budget.
    This is a Committee that could be talking about what things 
we could do to restrain the amount of spending we have, the 
debt that we're seeing increase, that's a real concern. I think 
people on both sides of the aisle agree on, but we're not doing 
that. We're coming here saying the obvious, which is of course 
we can't default on our debt, and it would be terrible if we 
did. We know that.
    We also know that every time the debt ceiling had been 
raised in the past there had been questions about whether we 
should restrain spending, and about half the time that we've 
raised the debt ceiling in the past there's been efforts, and 
there's been provisions and agreements to curb spending. We've 
got to find a way to reduce our spending, or deal with our 
fiscal problems, but instead we're just preening and posturing.
    You know, I agree with all the people who say it would be 
terrible to default on our debt. We're not going to default on 
our debt. I certainly hope not, it would be awful, but don't 
forget that that could have been solved a long time ago by our 
Democrat friends simply in their Reconciliation Bill doing what 
Leader McConnell asked them to do, which is just raise the debt 
ceiling yourselves. They didn't need a single Republican vote, 
not a single vote.
    But they chose not to because politicking is the way of 
this city. And it just it makes the American people sick. 
Frankly, it makes a number of us who serve in these positions a 
little ill as well, that with such critical issues being faced, 
and instead of solving them and working together.
    I don't think this Committee has ever come together since 
I've been here to sit down, Republicans, Democrats and these 
back rooms that we talk about where deals are getting done. We 
never had a back room meeting to talk about these things, to 
negotiate, to talk about how we're going to rein in spending.
    Look, there's no question, but that we're going to have to 
deal with our entitlements, both on the revenue side, and on 
the spending side. We're going to have to deal with 
discretionary and non-discretionary spending, but we don't talk 
about it. We basically just blame the other side.
    And every year we add another trillion dollars to the debt. 
Let me just ask, and Mr. Zandi, Dr. Zandi, is it your view, and 
Moody's view, that the amount of debt we're adding is 
ultimately going to become a real problem for the American 
economy, and for the American people, and for our ability as a 
nation to protect ourselves, and to have a robust and growing 
economy. Is this a problem we need to deal with?
    Dr. Zandi. These are my views, Senator, not Moody's. And I 
hear you. I hear your words. They resonate with me, and it's 
very clear that we're on an unsustainable path fiscally. And 
it's in our face. It's not 10 years from now, it's not a 
generation from now, it's now.
    And I agree. We need to address this both with regard to 
spending restraint, and you mentioned the entitlement programs, 
and tax revenue. We can't do one without the other. Both have 
to be done. And I think it's critical that lawmakers come 
together and talk about this, and figure out how to do it. I 
don't think it should be done, or can be done in the context of 
a debt limit debate.
    I don't think that's possible. And I think our politics is 
in a place now that we are increasingly coming to the edge of 
defaulting, and we will default if we continue down this 
political path that we're on. We've just got to get off that 
road and come together. And I totally agree with you. You know, 
we need to stop posturing, and we need to start acting.
    Senator Romney. Yeah. Thank you. Mr. Riedl, good to see you 
again, and appreciate your help some years ago. Let me ask you 
the same question. Is this an issue we ought to be addressing 
and dealing with, which is the excessive spending we have, the 
borrowing that we're doing, the fiscal challenge, and I realize 
there are two parts of a fiscal challenge, tax revenue as well 
as spending.
    But is this something we're ought to make an urgent 
priority? I saw one group, a non-partisan group in the house 
called the No Labels Group. They said hey, let's just get a 
Commission together to talk about how we can restrain spending. 
Isn't this something we ought to be talking about as opposed to 
just pointing at each other and saying you're to blame, no, 
you're to blame?
    The debt went higher under Trump. No it didn't, it went 
higher under--it's like guys, solve the problem. Don't just hit 
each other with brick pads. Is this a challenge we've got to 
deal with?
    Mr. Riedl. Yeah. Erskine Boules years ago said this is 
going to be the most predictable economic crisis in history. 
Again, we're on pace by the CBO to borrow $114 trillion over 
the next 30 years under the rosy scenario of peace, prosperity, 
low interest rates, no new spending, no new tax cuts. $114 
trillion.
    Who is going to lend us $114 trillion? China and Japan have 
already reduced their holdings to $2 trillion. The Federal 
Reserve holds $5 trillion. They're not going to monetize it. So 
are we really going to borrow $100 trillion from domestic 
investors over the next 30 years?
    And if we do so, what's going to happen to interest rates 
and the economy? If Congress doesn't deal with this, the bond 
market will cut us off at some point, and then it's going to be 
much more painful.
    Senator Romney. Thank you. I could go on a long time, but I 
already have, so Mr. Chairman, back to you.
    Chairman Whitehouse. You've been fine Senator Romney. 
Senator Van Hollen.

                STATEMENT OF SENATOR VAN HOLLEN

    Senator Van Hollen. Thank you Mr. Chairman. Welcome to all 
of you. I wish I shared Senator Romney's optimism about the 
chances of not defaulting this year, having been very involved 
in the 2011 debate. I am much more worried that this time it 
will go over that cliff.
    Ms. Hopper, great to see you. Thank you for your work in 
Maryland. I'm going to start by questioning Mr. Zandi. I think 
many of us are grateful, Mr. Zandi, for sharing over many years 
your expertise on fiscal issues. If I could just ask you 
regarding inflation today. We know we still have work to do in 
the economy.
    But inflation has now fallen 40 percent compared to the 
peak of last year. It's at a two year low. Chairman Powell, the 
Chairman of the Federal Reserve was recently asked about what 
he thought the pressures on inflation were at the current time, 
and he indicated that in his view it's not fiscal policy that's 
driving inflation now. Do you agree?
    Dr. Zandi. Agreed. I think the inflation we're suffering 
through right now is the continued fallout from the impact of 
the pandemic on supply chains, labor markets, and the Russian 
War on Ukraine, and its impact on energy, food and commodity 
markets. And what's happened is those two shocks conflated and 
affected inflation expectations in wage and other dynamics in 
the labor market.
    So lots of reasons for the high inflation. At the very 
tippy top is the fact that we're still working through the 
fallout from those two massive shocks to the supply side of the 
economy. At this point I don't think fiscal policy has played 
any role. Just one quick other point, if you had asked me that 
question back in 2021, I would have said fiscal policy yes, is 
playing a role.
    But at that point hard to remember back, that was deemed to 
be good inflation. We had been through a decade of suboptimal 
inflation. We wanted to see higher inflation. It wasn't an 
issue.
    Senator Van Hollen. My time is running short.
    Dr. Zandi. I'm sorry.
    Senator Van Hollen. A couple more questions. So I did see 
your assessment that if you actually passed the House 
Republican plan we would lose 790,000 jobs in the economy. Have 
you had a chance to look at the Biden budget proposal, and 
determine whether it would cause anything in that range of job 
loss?
    Dr. Zandi. No. I mean they both had deficit reduction long 
run over the course of the House legislation on the spending 
side, the President mostly on the tax side. But in the next 
year, year and a half, when the economy is incredibly 
vulnerable, the President's budget does not have the same kind 
of negative consequence.
    So in the longer run the negative consequence of the higher 
taxes in the President's budget, all else being equal, weigh on 
economic growth, but to a very modest degree compared to the 
budget cuts that are in the House legislation.
    Senator Van Hollen. Thank you Mr. Zandi. Mr. Riedl, you 
mention in your testimony that we actually eliminated our 
deficits and saw a surplus back around the turn of the century. 
Do you recall what share revenues were as a percent of GDP when 
we did that?
    Mr. Riedl. Back then revenues had jumped to 20 percent, 
spending fell to about 17 percent. Essentially the balance, the 
budget was balanced by a huge defense savings, and a revenue 
bubble. And then the bubble burst and 911 happened.
    Senator Van Hollen. Right. So as you said, at that time 
revenues were around 20 percent.
    Mr. Riedl. Correct.
    Senator Van Hollen. And I think you're aware of the fact 
that if you look at the current budget and project it out a 
couple of years, we're talking about 18 percent. Now 2 percent 
may not sound like a big gap, but when you're putting 2 percent 
on top of this huge economy, that's a lot of revenue that we 
had back in 2000 as a percentage of GDP that we do not have 
today.
    Here's my question to you. President Biden has put a budget 
plan on the table. In fact, much more detailed than the plan 
that passed the House of Representatives. It has $3 trillion in 
deficit reduction. Do you think President Biden should take the 
position that he would veto a debt ceiling increase unless he 
gets his way on how we reduce the deficit by $3 trillion?
    Mr. Riedl. I think both sides need to negotiate.
    Senator Van Hollen. No, no, that's--I'm asking you a 
question because the House has said if you don't adopt this, 
this is our bill. You don't adopt this we're going to default. 
All right. I'm asking you should President Biden take that 
position and say if you don't reduce the deficit in my way by 
$3 trillion by raising taxes on very rich people, increasing 
taxes on corporations to actually lower than it was a number of 
years ago, and requiring that you know, prescription drug 
companies contribute more, so Medicare pays less.
    Should he say if you don't adopt my plan I'm not going to 
sign a debt ceiling increase?
    Mr. Riedl. I think the President should say we need to 
adopt a deficit reduction plan. I've made an opening offer, but 
I'm flexible to negotiate.
    Senator Van Hollen. And if we don't do that we should 
default, he should say that?
    Mr. Riedl. I don't think anyone should say that.
    Senator Van Hollen. Well that is what the House Republicans 
are saying, and so why you have number three point in your 
testimony, avoid a default at all costs, that is not what the 
House Republicans are saying. They're saying if you don't adopt 
our plan we will default. That is reckless.
    You know it. Others know it, and the President knows it, 
which is why he hasn't taken the position that it's either his 
way or the highway. Thank you Mr. Chairman.
    Chairman Whitehouse. Senator Marshall.

                 STATEMENT OF SENATOR MARSHALL

    Senator Marshall. Thank you Mr. Chairman. There's not a 
single person on our side of the aisle that wants the country 
to default on its debt. I want the American public to know 
that. There's not one of us that wants to default on our debt. 
But we also want to see responsible spending, and we know we 
cannot give the White House another credit card.
    Look, we can walk and chew gum. We can solve both problems. 
Why does it have to be either or? Why does this Capitol Hill 
live working in silos? I'll never understand it. What we can't 
do is push this problem onto my grandchildren, and cripple 
their generation with burdensome debt and interest payments.
    And for the life of me I don't understand why my colleagues 
across the aisle want to destroy future generations all so that 
they can function as climate demagogues. Let me tell you what 
I'm talking about. You know, Jupiter is the Roman god of 
climate and weather. Indra was the Hindu god. Horus, the 
Egyptian god of climate and weather, Zeus, the Greek mythology 
god.
    I ask you who is America's climate god? Is it John Kerry? 
Is it Al Gore? Why do we have this religious experience with 
climate, rather than using common sense. Talking about 
affordability, reliability, and all the while America's carbon 
footprint is going down?
    Today's White House and the Democrat Party become the 
European Green Socialist party. That's who they are today. They 
worship climate. And even the bank's meltdowns have been 
impacted by the worship of climate. Even our own Federal 
Reserve is upside down now, ignoring the same interest rate 
risk problems that Silicon Valley Bank ignored, all impacted by 
their climate worship.
    I just can't tell you enough how much I'm disappointed by 
the name of this hearing. The Default on America Act, 
Blackmail, Brinkmanship and Billionaire Back Room Deals. I 
don't know if I could come up with a more misleading and unjust 
title for a hearing. Again, there's not a single person on this 
side of the aisle that wants us to default on our debt.
    There's been no back room deals, no brinkmanship, there's 
been no blackmail involved in this bill sent to us from our 
colleagues in the House. I believe the House GOP bill is a good 
solution. And let me be absolutely clear. There's no cuts to 
the VA, or veterans benefits in the House Republican proposal, 
despite the lies coming from the left to the contrary.
    Democrats fear mongering and scare tactics, using our 
veterans as political pawns are beneath the office we've been 
elected to serve. And of course, Republicans are going to keep 
fighting to protect and save Medicare and Social Security from 
White House policies that cut funding to those programs, and 
dilute the resources.
    The irony is that your side of the aisle truly knows a 
thing or two about back room deals. You've got a marvelous 
warmup with the American Rescue Plan and truly refined the art 
with the also misnamed Inflation Reduction Act. What a joke. 
While drafting the IRA in secret behind closed doors, there 
were no hearing. No bills, no debate, and no discussion.
    One minute there was no bill. The next we're voting on this 
sprawling wish list of EU Socialist Green Party agenda items, 
like saddling small oil and gas producers in Kansas with 
devastating methane fees that won't have any impact on the 
environment. I'd love to talk, I'd love to have a real debate 
about methane in this room, in this hearing.
    I'm here to tell you what won't work. I care too much about 
my children and my grandchildren, and my parents, and hard-
working Americans, already suffering by 15 percent overall 
inflation since Democrats took control of government policy. 
The American people and the national media know that the ball 
is in Joe Biden's court.
    Speaker McCarthy and the House GOP have put a deal on the 
table that claws back reckless government spending, and 
hopefully will slow inflation while taking care of the debt 
ceiling for a year. That's a win/win opportunity. A deal is on 
the table. These are good things that the American people want 
and deserve. Our country can not keep racking up debt on the 
backs of hard-working Americans.
    We must face this head-on, and all we're asking is that the 
Democrats stop all the political theatrics long enough to 
participate in good faith negotiations, so we can pay America's 
bills. We can do both.
    If anybody is listening today, I want to remind them when 
it comes to addressing America's debt crisis Republicans have 
done something, and put forward a solution. Democrats have not. 
Mr. Riedl, what would your advice be to the President right 
now?
    Mr. Riedl. My advice to the President is to sit down and 
negotiate. The American people at least want to have a 
discussion, and he should sit down and negotiate with an open 
mind towards raising the debt limit, and reducing a deficit 
that both sides can agree on.
    Senator Marshall. And the bill on the table does both of 
those. The deal that the Republicans on the House side have put 
forward does both of those, responsible spending, and solves 
the debt limit crisis.
    Mr. Riedl. It raises the debt limit, and it addresses the 
deficit.
    Senator Marshall. Thank you. I yield back.
    Chairman Whitehouse. Oh, for the record, since I sit on the 
Finance Committee also, since I sit on the Environmental Public 
Works Committee, let me just note that the tax credit 
provisions in the IRA came through the Finance Committee, were 
publicly debated in the Finance Committee, were voted on in the 
Finance Committee, and the methane program came out of the 
Environmental Public Works Committee based on my methane fee, 
which was also a matter of a lot of conversation in the 
Environment Public Works Committee.
    Senator Marshall. So we want to have that debate as well 
today?
    Chairman Whitehouse. No. Just correcting the record that 
there was in fact a lot of committee public action on the 
measures that ended up in the IRA.
    Senator Marshall. When did we get the bill?
    Chairman Whitehouse. Senator Merkley.
    Senator Marshall. When did we get the bill from the time we 
got it until we voted? How much time passed?
    Chairman Whitehouse. The provisions were clear well before, 
and were subject to hearings and debates.
    Senator Marshall. Was it minutes or seconds?
    Chairman Whitehouse. Hearing and debate months before.

                  STATEMENT OF SENATOR MERKLEY

    Senator Merkley. My colleague from Utah, Mitt Romney, said 
you know, why can't we figure out a path forward. And you know, 
here we are. It's very clear that many people on my side of the 
aisle think we need to reduce the deficit by raising revenue 
from those who pay the least, that is the rich and the 
corporations.
    And my colleagues on the other side of the aisle say we 
want to do it on spending cuts. And I'm taken back in time to 
1974. This Committee exists because a bill was passed in 1974. 
And that bill, which was titled The Congressional Budget and 
Impoundment Control Act, passed with 100 percent of the 
Senators. Every single Senator, both sides of the aisle.
    And the deal was for reducing the deficit. Only for 
reducing the deficit, we will create a filibuster free pathway. 
Now you might recall that there was intense supporters of the 
filibuster, and yet every single one of them said for one 
purpose, decreasing the deficit, we will have a filibuster free 
pathway.
    And that held for 20 years. And you all as experts in this 
area, I'm sure you're well familiar with what happened. And 
what happened in 1996. In 1996 you have the Gingrich 
revolution, and we had essentially a series of bills. One of 
them was a line item veto bill, and that was struck down by the 
Supreme Court.
    We also had a debate over a balanced budget amendment, and 
that fell one vote short here in the Senate from passing, and 
failed. And then at that point the Senate pivoted. The Senate 
leadership pivoted at that point and said let's do a massive 
revenue reduction, a tax cut, a massive tax cut.
    Well Democrats said no, and so Republicans in this body 
said you know what, let's use that filibuster free pathway from 
1974, and they proceeded to ask Robert Dove, the 
Parliamentarian for a ruling. That instead of using that 
filibuster free pathway for deficit reduction, they could use 
it for a tax cut that would increase the deficit.
    And they got the ruling they wanted. Robert Dove was 
previously an employee of Robert Dole, and he conceded. We will 
change this purpose. And it was challenged, and there was a 
vote on the floor, and the vote was sustained by the majority. 
The ruling was sustained by the majority.
    And now we have, after 22 years, we blew up this bipartisan 
strategy of only using this for deficit reduction. That opened 
the door to what we did last year with the Inflation Reduction 
Act, in which Democrats said well it's going to be used for the 
republican priorities to increase the deficit. Hell, we'll use 
it for our priorities to increase the deficit, our particular 
things that we would like to see accomplished that are 
important to America.
    I just want to give this history because we quickly lose 
track that this has been a struggle that we have been engaged 
in for 50 years. And there was a pretty significant legislation 
in 1974 saying deficit reduction. We don't agree on how to do 
it, but it's so important we will create this sacred, 
protected, filibuster free highway, and then it got blown up in 
1996.
    And here we are, kind of having the same question on how do 
we reclaim that. The former Chair of this Committee from North 
Dakota, he proceeded to change the rule back to saying it could 
only be used for deficit reduction, Kent Conrad. Conrad Rule. 
And immediately, as soon as the Democrats were out of power 
here, Republicans changed it back.
    So there's a lot of posturing over who's right and who's 
wrong, the fact is we have failed as a Senate to wrestle with 
this, and we blew up the one tool we had come together 
universally to support. And are you all familiar with this 
history Dr. Zandi?
    Dr. Zandi. I have to say I forgot a lot of it, but that was 
very helpful. Yeah.
    Senator Merkley. And Dr. Fichtner, this is in your 
bailiwick.
    Dr. Fichtner. Yeah, Senator, you're spot on. So one, thank 
you for bringing it up, and make a offer to the Chairman that 
if the Chairman and Ranking Member want to reintroduce the 
bipartisan Congressional Budget Reform Act, I would like 
nothing better than to spend hours up here testifying about the 
benefit, the biannual budgeting, making the budget resolution 
stronger, going back to having deficit reduction, a priority 
and how to do that. I would welcome the opportunity sir.
    Senator Merkley. Well my commentary to using, not using if 
you will, the debt ceiling in this fashion, which we hold each 
other hostage. This has happened because we blew up the common 
collective tool that we worked out in 1974, and it worked for 
22 years.
    And so, this is a very dangerous path we're on. We're in a 
game of chicken, and it may very well blow up the economy, and 
you know, I'm a blue collar kid, we still live in a blue collar 
community, and I'm thinking about the folks who have the car 
loans on adjustable, or they have adjustable rate mortgages, 
they're worried about the interest rates on their student 
loans, and they're all going to be really hurt. Not a lot of 
people have stock, but some of them have some stock through 
some--they're fortunate to have an IRA or something of that. 
And so they have that little bit of savings there. They're 
going to be hurt on that if the stock market crashes.
    So, I don't know how to put this back together, because 
even if we were to recreate the '74 Bill, that '74 consensus, 
what we now know is that under political pressure, on party or 
the other, and it could be the blue side or the red side, is 
going to get a ruling from a Parliamentarian. Blow it up, and 
use it exactly the opposite way that it was intended as a 
moment of political convenience.
    So, I think the right way to deal with this is that we 
wrestle with spending bills, and those require bipartisan 
cooperation because they're subject to 60 votes, unless we're 
doing it through reconciliation. We wrestle with the revenue 
side.
    If those things, that's what produces a deficit, the 
difference between revenue and spending. And so, when the bill 
comes due I'm always reminded of President Reagan saying you do 
not mess with the American debt. And I'm not sure how he 
phrased it, but basically it was the American credit.
    I'm out of time. I actually wanted to ask a bunch of 
questions, but I wanted to bring up that piece of history 
because it's relevant to what this Committee does, and wrestles 
with, and the impasse we're at today.
    Chairman Whitehouse. It is important history, and as I turn 
to Senator Scott, I would say we actually got pretty close With 
Enzi-Whitehouse. It made it into the bicameral, bipartisan Debt 
Commission, and it passed there in bipartisan fashion as I 
recall, perhaps even unanimously, and then neither body took it 
up on the floor.
    So, don't think that there isn't an avenue to complete the 
work that so many have talked about. It is there. Senator 
Scott, thank you for your patience.

                   STATEMENT OF SENATOR SCOTT

    Senator Scott. Thanks for the history. I knew most of it, 
but it's good to have a reminder. You know I became Governor of 
Florida, and everybody thinks these states balance their 
budgets. They don't. My state had not balanced its budget in 20 
years before I became Governor, and I walked into a 4 million 
dollar budget deficit, not as big as the federal one, but we 
just said this is what our revenue base is going to be, and we 
figured out how to allocate the dollars. And we actually were 
able to grow our economy, and as a result we paid off a third 
of the state debt in eight years, so. I've been up here four 
years, and I think the most frustrating thing is that we don't 
do budgets. We don't even have a fight over spending bills, we 
just get these bills, these spending bills. And it's not like 
one side is bad, and the other side is good.
    Both sides have been doing this. And we just give, I think 
what Senator Marshall, it's not just that bill, but all these 
things. I mean it happened when Republicans controlled it. I 
mean we had these omnibus bills that we had no power to make 
them, it never went through a Committee or anything.
    So, for each of you, so we have 31, almost $32 trillion of 
debt.\9\ What's the limit? So I guess our GDP is around 26, so 
whether it's a dollar amount, or whether it's a percentage of 
GDP what do you guys think? I mean what's the limit?
---------------------------------------------------------------------------
    \9\ Chart referenced by Senator Scott appears in the appendix on 
page 93.
---------------------------------------------------------------------------
    In my experience at least is that when we raise taxes we 
never get the revenues, so I mean because I want everybody to 
pay their fair share, and figure out how to balance this, but 
we never get the revenues. We are reciting the other people say 
if we do this we're going to save money, we never get the 
savings either.
    So, what do you guys think the limit is? Maybe we just go 
this way. Either way.
    Dr. Fichtner. Thank you Senator. Many of us have been 
calling for this to be a problem for years, and I think one day 
I'm going to be right. I'm just not sure when that day comes. 
But I'll tell you now where I think it's going to happen is 
2033 because that's when the social security retirement trust 
fund becomes depleted, and that's when if no action is taken by 
Congress, we're going to have to borrow 300, $350 billion a 
year to make up the difference in general revenue shortfalls, 
if we don't raise taxes, or cut benefits, which I don't think 
Congress will do at the last minute.
    That's where you're going to start seeing the bond markets 
interact and say this borrowing could go on for how much 
longer, and that's when I think we're going to start hitting 
our limit.
    Senator Scott. So the CB score, the Congressional Budget 
Office I think has this if we continue the path we're going 
down, we would be at 48, something like that, trillion dollars 
of debt on top of that.
    Mr. Riedl. Yeah. I think once the debt gets up to 150 to 
200 percent in GDP, you're really in rare territory with the 
global economy, and with the experience of other countries. I 
mean just to put a number on it, imagine we get to 200 percent 
of GDP, and we have a 5 percent interest rate.
    You're paying 10 percent of GDP in interest. Well if 
revenues are usually what? 17, 18, 19 percent of GDP, you're in 
rough shape if the majority of your revenue is just paying 
interest, so you don't want to get to that point. The bond 
market may cut you off before you get there, but even if they 
don't you don't want to be paying 10 percent of GDP just in 
interest.
    Ms. Hopper. So, I'm a lawyer, not the economist, so I'm 
going to not--I'll defer to my colleagues here.
    Dr. Zandi. I think the way I would think about it is it's 
not a cliff event, it's a corrosive on the economy. And a good 
rule of thumb, this is empirically based with a lot of debate, 
and CBO comes pretty close, is that for every percentage point 
increase in the debt to GDP ratio, it adds about 2 basis points 
to 10 year treasury yields.
    So, just to make that concrete, if the----
    Senator Scott. On average?
    Dr. Zandi [continuing]. On average. And it is not linear 
over time, but that feels roughly right, so if you go up 10 
percentage points, you add 20 basis points, but if you do the 
arithmetic here, you know, obviously of course it undermines 
the economy, you know, out in the long run, so we clearly have 
to change this.
    Senator Scott. So let me ask you another question. We're 
at, I guess we're at a little over six times debt to what we 
anticipate we'll collect in revenues, right? How much of your 
net worth would you invest in a company like that? So, how many 
of you are buying 30 year Treasury's right now? Anybody? 
Anybody buying 30 year?
    Dr. Zandi. No 30 year.
    Senator Scott. What would you buy?
    Dr. Zandi. I have great faith in you, that you will resolve 
this, and that the U.S. will remain the----
    Senator Scott. I'm hopeful.
    Dr. Zandi [continuing]. No. And I would invest. And by the 
way so does the rest of the world. We still are the AAA credit 
on the planet, money comes here when times are tough, and 
that's because when times are tough we ultimately do the right 
thing.
    Senator Scott. It does say something when nobody is sitting 
here saying they would buy 30 year treasuries, because we're 
supposed to be the safest investment in the world.
    Dr. Fichtner. And a lot of money is held right now in cash. 
It's paying a good interest rate in the money market.
    Dr. Zandi. I'd say a lot of people are buying U.S. treasury 
debt at this point, but now they're counting--and I will say 
this, if you look at yields on short-term treasury securities, 
one month, three month, they're now, you can see the yields are 
now rising and falling based on when investors think it's 
possible that we do default on the debt, so the idea that 
people don't think we're going to default, that's slowly 
breaking down here at some point there's going to be a problem.
    Senator Scott. Supposedly worse than any time in our 
history.
    Dr. Zandi. Yeah. You'll get one month versus three month 
treasury is a beautiful chart, just take a look at it. I mean 
in fact it's in my written testimony. It's unprecedented. So, 
investors, and you can look at treasury security yields by day, 
and people are now looking at you know, when receipts are 
coming in, when expenditures are going out, and they can say oh 
on this day it's the most likely day that treasury is going to 
run out of cash, and therefore I'm not going to get paid.
    Senator Scott. It's probably positive. People are getting 
engaged. Right.
    Dr. Zandi. It's actually critical that they get engaged.
    Senator Scott. Thanks.
    Chairman Whitehouse. Thank you Senator Scott. Senator 
Lujan, then Senator Braun, then Senator Padilla.

                   STATEMENT OF SENATOR LUJAN

    Senator Lujan. Thank you Mr. Chairman, and thank you to 
everyone that's here in person, and also helping us 
electronically to be here today with the panelists. It's been a 
good discussion, one that I have appreciated and learned from.
    I want to take this back to what the Republican legislation 
that was passed this last week, which I think similar to 2017, 
when the American people dubbed the Trump tax policy as a tax 
gap that was promised to be targeting middle class, and those 
aspiring to be in the middle class, to prioritize them.
    The proof is in the pudding, and everyone knows where that 
money went, and to the dissatisfaction of many constituents I 
represent, they were trying to figure out how to submit their 
taxes next year because the withholding table changed a little 
bit, and less was taken from their checks, but when April 15th 
came they were thinking what happened last year is probably 
going to happen again, and it didn't. And it hurt their 
budgets.
    So I hope that when we talk about budgets we also include 
the budgets of the people that we represent, when we're talking 
about this. And with me saying that, I don't know if the Chair 
knows, or if any of you know, do you know how many U.S. 
Senators went to Head Start? There's two. There's only two U.S. 
Senators that went to Head Start. I'm one of them.
    Now I think that if those programs would have been stronger 
in other parts of the country, colleagues would have benefited 
from them as well. But nonetheless, I bring that up because 
this Default on America Act that came through the House 
recently would dramatically reduce and eliminate investments in 
Head Start.
    I've heard economist after economist tell me that one of 
the greatest returns on the dollar is an investment in 
education in children. Dr. Zandi, does what I say hold true?
    Dr. Zandi. Yes. I mean there's very strong academic 
research that shows that investments in young children, you 
know, pay off enormously, not only for their financial well-
being, but for the communities they live in and for the broader 
economy.
    Senator Lujan. I appreciate you sharing that. I know that I 
benefited from this education, and I didn't realize until later 
in life what opportunity that I had that presented itself to my 
family. Not just that I was able to get a jump start if you 
will on those classes, and socializing with other students, and 
you know, the power of a nap.
    I think that America could learn something about that on 
occasion. But you know, during those Head Start days to ensure 
that I could learn a little bit more, and look, we sometimes 
had a little lunch that would be available to us too, to keep 
us nourished and keep us strong, which would help us learn 
more.
    But my parents also didn't need to find childcare for me 
when I was growing up, which let them stay in the workplace and 
work more. That sounds like good economic policy to me. And so, 
what I wanted to raise Mr. Chairman was my concern associated 
with the devastating cuts that were listed in these programs, 
in the area of early childhood education.
    But one other area I wanted to raise that's not been raised 
just yet is as a reminder to all of us the United States has a 
treaty obligation to tribal nations in America. The United 
States has a horrible track record of meeting.
    The plan that came out of the House would devastate 
investments into tribal communities. A one billion dollar cut 
to Indian health service, a 60 million dollar cut to the Bureau 
of Indian Affairs, 200 million dollar cut to the Bureau of 
Indian Education.
    And I certainly hope that we're having this conversation as 
all this moves forward. You know, when I was elected to the 
U.S. House of Representatives in 2008, I proudly supported Pay 
Go. A simple policy that was instituted in 2006 that was moved 
forward to 2008, and then it was erased.
    The majority changed and it went away. But that's a pretty 
simple policy that I think everyone across America can 
understand. If you're going to buy something you've got to pay 
for it. And so while I'm not as smart as all the folks that I 
learned from, I know that. I think that's a strength of mine. I 
surround myself with smart people.
    But I also understand simple concepts. And if we can go 
back to there's an acronym, I'll leave the last S off, but if 
you can keep it simple, and we can all come together and do 
some things, we can make things better, and so Mr. Chairman, I 
apologize for my approach to some of this, but I think 
sometimes we just need to step into the shoes of the people 
that we represent and try to communicate in a way that complex 
policy takes them into consideration when we have to make these 
really tough decisions. I thank you for the time. I yield back.
    Chairman Whitehouse. No apology needed, Senator Lujan, you 
have a very important voice. Senator Braun.

                   STATEMENT OF SENATOR BRAUN

    Senator Braun. Thank you Mr. Chairman. To put into context 
this is a Budget Committee, and at least today I think we're 
talking about budget. I've been on it, as a Committee I was 
most interested in being on, since I got here four and a half 
years ago, and we've not even gotten to first base on a budget 
resolution that was accepted broadly, let alone a budget.
    So, I'd like to ask the Chairman of the Budget Committee, 
this Senator here had to take as a privileged motion, a budget 
to the floor about a year ago. And that's when it doesn't get 
done in the regular order of business.
    Would you commit to you and I at least working when the new 
fiscal year starts on October 1st, that we will bring a budget 
to the Senate floor that we craft here, and spend the time on 
the Budget Committee through regular order, like you do 
everywhere else, to get a budget that we would at least get out 
of this Committee?
    Chairman Whitehouse. I'm going to have to wait and see how 
the present circumstance plays out because if the House 
Republicans set off the default hand grenade that they're 
negotiating with right now, we are in a very different world, 
and I can't predict that world.
    Senator Braun. Well let's assume that doesn't happen.
    Chairman Whitehouse. What I've already said I will do is to 
get back to work on the Enzi-Whitehouse Budget Reform Proposal 
that can lead in that direction, and set up the terms for 
precisely the conversation you want. I think we've talked about 
this before.
    Senator Braun. Yeah.
    Chairman Whitehouse. My recollection is that you were 
favorable, Senator Kaine has been here, I think we've got some 
real bipartisan interest there, and I will pursue that. I think 
we're pretty comfortable with the President's budget, so I 
don't know that we need to do more. That's now between the 
White House----
    Senator Braun. I think if we still have a Budget Committee, 
we ought to use it through regular order to at least put 
something out there. The other House needs to do that as well. 
So let's get to what I've observed other places, everywhere 
else. You don't have the printing press in the basement, and 
you do not have a credit card that is automatically renewable. 
I think that's the context that we work within here.
    Obviously, that would be pandemonium anywhere else. Sooner 
or later things like your sovereign currency are at risk. We 
saw what happened in Europe when Greece, Spain, Portugal and 
Italy fell off the wagon not too many years ago. We got them 
back in line.
    And my observation has been that the ability for our unique 
economy to raise revenue, we ought to at least look to see what 
that maximum amount would be without threatening economic 
growth. And here's a statistic that I have not heard anyone 
mention that it's over 50 years regardless of the tax rate, we 
generate about 17 and a half to 18 percent of our GDP in 
revenue.
    So, that means through high rates obviously you get lower 
economic growth. The Trump tax cuts, those were chump change if 
you give the full $150 billion to them, that would only be 7 
percent or so of our current structural deficits. So my 
question is going to be to every one of you, and give me a 
fairly brief answer because I am going to have another one, is 
that a reasonable place to be?
    Then where we just live within it? Is there more capacity? 
Is there not? Tell me why only three times I think during the 
Clinton years did we hit 20 percent of our GDP in tax revenue. 
We'll start over with Mr. Zandi.
    Dr. Zandi. I think there's more room. I think the average 
revenue to GDP is about 18 percent, but I think there's more 
room, and there needs to be because of the aging of the 
population. There's more folks that need social security and 
Medicare, and that is a significant--just keeping spending per 
person constant in real dollars.
    Senator Braun. Do you have a level that you think that you 
would be comfortable with that wouldn't strain economic growth, 
and that would be reasonable?
    Dr. Zandi. Yeah. I think somewhere between 20 and 22 
percent, in that range.
    Senator Braun. Okay.
    Dr. Zandi. Yeah. I think that would go a long way to 
addressing our long-term fiscal issues, but we need spending 
restraint on top of that.
    Senator Braun. And by the way, that would be about 3 to 5 
percent lower than where we're currently at with $7 trillion 
divided by what is our GDP, like $26 trillion, roughly?
    Dr. Zandi. 25.
    Senator Braun. Okay. So we're way above 25 percent 
currently, and that's not sustainable. Ms. Hopper what do you 
say?
    Dr. Zandi. Of course, I was talking long-run, you know, 
not, yes.
    Senator Braun. Yes. I know long run. Ms. Hopper?
    Ms. Hopper. Yes. I will say I'm the attorney, not the 
economist again, so I will defer to my colleagues here.
    Senator Braun. Okay.
    Mr. Riedl. I've modeled out the tax numbers, and you could 
probably get to about 20 percent of GDP tops, especially on 
terms of taxing the rich. You can throw every proposal out 
there that we've seen on taxing the rich, you'll get about 2 
percent of GDP from that. And with spending going to 30 percent 
of GDP, you've got a ways to go.
    Dr. Fichtner. And I'll echo Mr. Riedl's point. In my 
lifetime basically, the long-term average for revenues it 
averages 17.4 percent to your point. When you get above 18 
there's calls for tax cuts. When you get below there's calls 
for revenue increases. That's kind of historical, even if we 
have a range going up to 20. Let's just give ourselves that 
there's some flexibility to go to 20.
    2033 we're going to have 25 percent GDP in outlays. That's 
the big gap, so you can't make it up all on revenue.
    Senator Braun. So right here, historically, we've got 18 
percent, let's round it up a half a percent. We have one 
witness that says 20 to 22 percent. We're currently approaching 
30 percent, so Mr. Chairman, I would think that one simple way 
to get bipartisanship would be to at least establish what the 
capability is of this federal government, and then live within 
it because otherwise you're ending up basing this on an 
increasingly indebted economy, which now puts us only number 
two to Japan, in terms of percentage, of debt, debt as a 
percentage of our GDP.
    And to me that's a shameful, bad business plan that is not 
sustainable.
    Chairman Whitehouse. Since I was asked the question I'll 
take a minute of Chairman's time before I turn to Senator 
Padilla to say that the way that the Enzi-Whitehouse program 
worked was very aligned with what you have just said, Senator 
Braun. It was--I think everybody agrees the debt to GDP is the 
right metric to be looking at.
    I see all the economists' heads nodding, all three. And 
then the question is what debt level per for the GDP is the 
appropriate one, and that's something on which we can have a 
civilized and thoughtful and sensible discussion informed by 
experts.
    And once you've determined what the range of a suitable 
debt to GDP ratio is, you then have to figure out how quickly 
you can get there without destroying the economy along the way, 
because of sudden, brutal cut shocks to the economy like the 
House has proposed, as Dr. Zandi has said, will cost 700,000 
jobs, and put us into a recession.
    So that's not a smart way to get there. You've got to have 
a glide slope, and then you've got to think about how do you 
enforce the glide slope with warnings that you're off the glide 
slope? And then you have the revenue and spending discussions, 
and I think that's the way we should do that.
    Senator Braun. Mr. Chairman, just not to long----
    Chairman Whitehouse. I've got to yield to Senator Padilla's 
time.
    Senator Braun [continuing]. Are you going to do another 
round or?
    Chairman Whitehouse. Sure. You can stick around, but it's 
Senator Padilla's time now, so.
    Senator Braun. Okay.
    Chairman Whitehouse. Senator Padilla, excuse my 
intervention into your time.

                  STATEMENT OF SENATOR PADILLA

    Senator Padilla. Thank you, Mr. Chairman, I'll just make up 
for it in the backend.
    Chairman Whitehouse. Everybody else has, why not you.
    Senator Padilla. Let me also try to sort of level set not 
just the conversation we're having here today, but why we're 
having it here.
    Despite the slimmest of majorities in the House of 
Representatives, Republicans are effectively saying to 
President Biden, and to Senate Democrats and the America people 
that we must have to accept their random demands, or they'll 
force the country to default on its debt for the first time in 
history.
    Let's be clear. That the hostages they're taking, or 
threatening to take isn't the federal government, it's the 
American people, including their own constituents. A default 
would plunge our economy into recession.
    All the economists have established that, costing millions 
of American jobs, increasing loan payments for working families 
on everything from their homes to cars, to student loans, and 
threatens to cut social security and healthcare payments as a 
result.
    So, much of what we're discussing here today as big, and 
significant, is it going to be sound, is frankly only 
scratching the surface of what the country will face should 
Republicans refuse to allow the federal government to meet its 
obligations.
    Let me ask questions about some of the specifics. So as you 
saw during a recent hearing with OMB Director Shalanda Young, 
Republicans take great offense at the idea that they would cut 
Social Security and Medicare, and yet because of this 
manufactured crisis that would result in seniors not receiving 
their Social Security and Medicare benefits, benefits that they 
have paid into their entire life, and they have earned, a 
default would keep the federal government from actually paying 
them out.
    Mr. Zandi, can you describe the implications for Social 
Security and Medicare if the federal government defaults on its 
debts?
    Dr. Zandi. Of course it would be devastating. I mean the 
first thing that would happen is people wouldn't receive their 
checks on time. They'll eventually get the money, but it will 
take longer and longer for that to occur the longer the impasse 
continues.
    Obviously, the hit to financial markets would be serious 
immediately, and in fact that's already going to start to 
happen even before we breach the debt limit because investors 
are going to anticipate the breach. Stock prices will decline, 
interest rates will rise, and of course that undermines the 
financial well-being of all Americans, but most significantly 
those retirees that are going to count on that.
    And then ultimately it's going to cost jobs, the economy, 
income, and that will affect obviously all Americans and the 
entire global economy, and Social Security recipients, Medicare 
recipients would be casualties like everybody else as a result 
of that.
    Senator Padilla. Now I was planning to raise an issue of 
veterans, and I'm glad that Senator Marshall made reference to 
it in his remarks because my understanding is that nowhere in 
the House Republicans Default on America Act does it say that 
veterans benefits are exempt from the 22 percent cut in 
domestic spending, right?
    So, we've covered Social Security, covered Medicare, now 
let's talk about veterans benefits. It would have been 
perfectly straightforward to write such an exemption in the 
bill. In fact, House Democrats offered two amendments in the 
House Rules Committee to protect veterans benefits from 
spending cuts. And as we watched that Committee do its work we 
saw House Republicans vote down those offered amendments.
    They did, however, rewrite the bill to protect ethanol 
subsidies. So, it seems pretty clears to me that House 
Republicans made a conscious choice to subject veterans 
benefits to their spending cuts, despite protests to the 
contrary. Back to you Mr. Zandi, can you identify a provision 
in the Default on America Act that would exempt veterans 
benefits from the spending cuts proposed by House republicans?
    Dr. Zandi. Not that I'm aware of. The cuts are to total 
discretionary spending, so that would include defense, non-
defense, VA benefits, so that would be determined in the 
appropriations process, but in the legislation I'm not aware of 
any language related to the VA program.
    Senator Padilla. Exactly. And look, Mr. Chairman, in the 
interest of time I can go on and on with other specific 
examples. Republicans have put us in this place of a looming 
crisis. We can and should do, we've done numerous times before 
under democratic and republican administrations, pass a clean 
lifting of the debt ceiling.
    But to hold hostage for a budget conversation is wrong, and 
the exact budget plan not being offered or suggested, or 
considered, but passed by House Republicans would only make a 
horrible, horrible situation that much worse.
    We can outline further examples, but the examples most 
talked about, Social Security, Medicare, veterans benefits, 
despite the bellyaching on the other side, are clear on the 
chopping block. Thank you Mr. Chair.
    Chairman Whitehouse. Thank you very much. That more or less 
concludes the hearing, except that Senator Braun asked for 
additional time, and I will gladly, as Chair, yield it to him, 
then I will offer some concluding remarks, and that will be the 
end of this, and thank you very much for the witnesses' 
testimony and participation. Senator Braun.
    Senator Braun. Thank you Mr. Chairman. So, in 2019 we spent 
about 4.5 trillion. 2020 we did the CARES Act, and that was 
bipartisan. Everyone agreed out of uncertainty, kind of an 
emergency. I think we spent too much there. We didn't need--if 
we had not shut the economy down to the extent we did now that 
we know the healthcare information that came around sooner or 
later, 6.5 trillion.
    But then, you've got 21, 22, and 23. So, is it legitimate 
to get off of the baseline of where we were before with 
trillion dollar structural deficits when we were spending $4.5 
trillion taking in about 3 and a half. Do we need to keep at a 
level that was based upon something extra normal? Is it 
healthy, and can we cede the territory that we need to be where 
we are to have a healthy federal government, and should it be 
occupying that much of our GDP?
    So, in other words, just because you were able to spend it, 
and borrow the money to do it, is that the new baseline that we 
should operate on that takes us up to 25 percent plus of our 
GDP? Or, should we go back to where we were before the 
extranormal spending took place in the first place? We'll start 
over with Mr. Zandi again.
    Dr. Zandi. Well those are a lot of numbers.
    Senator Braun. That's where we are. Those are actuals.
    Dr. Zandi. I need a spreadsheet to disentangle all of that. 
But let me just say this Senator. The fiscal problems we have 
today are ecumenical. They're both Republican and Democrat.
    Senator Braun. I'd agree.
    Dr. Zandi. The Trump tax cuts were $2 trillion, and they 
were not paid for.
    Senator Braun. Well I mean that's $200 billion over ten 
years, so, put it in per year.
    Dr. Zandi. The fiscal response to the pandemic, which was 
bipartisan up until the American Rescue Plan, but you know, in 
2020, that was an additional $3 trillion, ecumenical. Both 
sides agreed to that. And then the $2 trillion in ARP that was 
Democrats.
    Senator Braun. Yep.
    Dr. Zandi. The situation we're in now is on both the 
parties.
    Senator Braun. And I'm talking about going ahead. Going 
back to the original baseline, or should we be at the elevated 
level?
    Dr. Zandi. I think we need to get government, I don't know 
precisely where it should go because I have to look at the 
numbers more carefully, but the spending as a share of GDP has 
to get back down to something close to 20 to 22--where I think 
revenue should be is where spending has got to get, and it 
shouldn't get there next year.
    It doesn't need to get there in the next five years, it 
doesn't even need to get there in the next 10, but there has to 
be a clear path to that over the next 10-20 years. If we can 
accomplish that, if you can accomplish that, we're golden.
    Senator Braun. 20 to 22 percent. What about the other 
panelists?
    Mr. Riedl. I think spending has grown rapidly in the last 
couple years, and I will add that discretionary appropriations 
themselves have grown 23.4 percent in the past two years. And 
so the idea that any cut to discretionary appropriations is 
going to be a devastating starving of the government, it's 
grown 23.4 percent in two years.
    I don't know how that level will have to be the sacred 
floor that will cause chaos if we go below it. I think that at 
some point we have to align spending growth with the economy, 
and the fundamentals in the deficit.
    Dr. Fichtner. Well Senator, I'll make my answer quick. I 
work at the bipartisan Policy Center. We are the only 
organization in the District of Columbia with the word 
bipartisan in its title. Now as an economist, I'm not sure if 
that's a supply problem, or a demand problem, but it is a 
problem.
    And what I would come back to and say with the Chairman's 
offer, to sort of put that back into White House Bill, and 
you're trying to get a process in place, is very, very 
important, and that should be in some ways get the debt 
ceiling, get a budget, and make that priority number three Mr. 
Chairman.
    To your point about where we should go back to, it is pre-
COVID baseline. We all kind of agree here that somewhere tax 
revenues may, I'll use the word may, go up to 20 percent. I'm 
not sure we can do 22, but maybe 20, and spending should be 
close to that. Spending average is about 21 percent of GDP on 
average.
    So, you get that little range, you have something----
    Senator Braun. So most of our heavy lifting has to address 
spending, and it's a question of timing, how you get it back to 
a sustainable level.
    Dr. Fichtner. And I'll state about the incidence of tax, 
and where you could have different sort of tax policy, maybe 
think about a carbon tax, or a financial transaction tax, 
instead of relying on labor so much, or income for your tax 
revenue.
    Senator Braun. Thank you.
    Chairman Whitehouse. And here, here to that last comment 
may I say. First of all, let me thank Senator Braun for his, I 
think, extremely sincere and thoughtful interest in all of 
this, and I particularly appreciate his efforts in this regard, 
and hope that we can work together.
    I was delighted to hear my Ranking Member say that he was 
interested in pursuing this, and to have bipartisan witnesses, 
both says that reviving the Enzi-Whitehouse idea of a proper 
procedure that gets to debt GDP over time, which as Dr. Zandi 
just said, could be we're golden.
    And that would be a better outcome than we're looking at 
right now. So let me turn to the particularly bad side of where 
we are right now in my closing remarks. If we end up going into 
this Republican threatened default, and all the pain and 
calamity that all of the witnesses have forecast comes to pass, 
people in America are going to want to know who is responsible.
    And this is a personal comment, do not blame any of the 
other Democrats, and certainly I don't think it would be 
logical to blame any of my Republican friends, but my hard 
earned experience tells me that when the Republican Party acts 
on pollution related and corruption related issues, the Party 
acts as the glove for fossil fuels dark hand.
    Essentially every movement of the glove can be explained by 
the movement of the underlying fossil fuel industry hand. So, 
House Republicans have armed the default hand grenade, and 
pulled the pin, and have it in their hands, threatening to blow 
it up with all of the consequences that each of you have 
forecast, and the question is for whom?
    Edgar Allan Poe wrote about the Purloined Letter, where was 
it found? In plain view. Look in plain view. What is in plain 
view in this bill? What is in plain view in the House Default 
on America Act is 275 out of 315 pages that are giveaways to 
the fossil fuel industry.
    The fossil fuel hand in the Republican glove. If we go 
there, if this default is provoked by what looks like a 
desperate last attack on clean energy competition by a massive 
polluting, and heavily political industry, that will come back 
to them. There will be a story to tell.
    People will be looking at this, and I promise that I will 
do everything in my power to connect the dots, so that the 
American people clearly see the dark fossil fuel industry hand 
behind the Republican glove in the Default on American Act. 275 
out of 315 pages is one hell of a tell, and with that I will 
conclude the hearing.
    If any members have questions for the record for the 
witnesses, we ask that they be in by noon tomorrow. The 
witnesses, if you receive questions for the record, are 
requested to provide your responses within a week, and may I 
hope that we reconvene in brighter days with the pin back in 
the hand grenade, and go forward on a bipartisan path to do the 
work that I think has been quite well outlined in the subtext, 
if not the main text of this hearing. Thank you all very much.
    [Whereupon, at 12:19 p.m., Thursday, May 4, 2023, the 
hearing was adjourned.]   




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