Washington, DC – Chairman Casey and I have agreed to share the task of organizing hearings for the Joint Economic Committee during the 112^th Congress.  Pursuant to our agreement, I convened this hearing because the once vigorous American economy is languishing. 

A recent op-ed by Harvard University Professor Martin Feldstein entitled, “The Economy Is Worse than You Think,” laments that final sales grew at an anemic annual rate of 0.6 percent during the first quarter of 2011.  The month of May witnessed the unemployment rate rising above 9 percent again and a collapse of payroll employment gains.  Feldstein offers us another wakeup call.

President Obama’s economic policies have failed to launch a vigorous expansion.  Instead, his policies have increased the cost of doing business, heightened uncertainty, and deterred job-creating investment.  Moreover, his policies have burdened our children with an enormous federal debt that continues to grow as a share of the economy. 

One of our witnesses, Stanford University Professor John Taylor, published a graph that depicts President Obama’s last two spending proposals, his Budget in February, and his informal framework in April, and compares them with the House budget resolution.  From this graph, it is clear that President Obama and Congressional Democrats want to make federal spending a permanently larger share of our economy, whereas Congressional Republicans want merely to return federal spending to its pre-recession share of our economy.

Returning federal spending to a pre-recession share of the economy is normal and prudent.  Nevertheless, President Obama and Congressional Democrats have embraced a radical, historically unprecedented expansion in the size and scope of the federal government.

Let me be clear.  Excessive federal spending is our disease.  Large federal budget deficits and accumulating federal debt are symptoms of this disease.  If you cure our spending disease, the symptoms will vanish.  If you treat the symptoms, you may temporarily alleviate some of the pain, but over time our economy will continue to weaken, our international competitiveness will erode, and our children will become the first generation in American history that is poorer than the previous generation.

In response to these grave fiscal challenges, the House of Representatives passed a responsible budget resolution that would bring federal spending in line with revenue over time.  Unfortunately, the Senate has failed to even consider, let alone pass, a budget resolution. 

Congressional Republicans want to cure our spending disease, in part, by reforming entitlement programs to make them sustainably solvent for future generations.  In contrast, President Obama and Congressional Democrats have reverted to the discredited notion that entitlement programs can largely continue as they are without reforms if we only “tax the rich” enough. 

Congressional Republicans are demanding that any debt ceiling legislation must contain substantial spending reductions and new fiscal guardrails to ensure these reductions actually take place.  In response, President Obama and Congressional Democrats have launched all-out political attacks, asserting cuts in federal spending would push the economy back into recession and destroy social programs.  These false attacks must cease if Americans are to come together to reduce federal spending and grow our economy.  

On March 15, 2011, I released a JEC Staff Commentary entitled Spend Less, Owe Less, Grow the Economy.  This study examined other developed countries – our international competitors – that had large, persistent government budget deficits and a high level of government debt.  This study found:

• Countries that adopted fiscal consolidation plans to reduce their government budget deficits and stabilize the level of government debt that were based predominantly or entirely on government spending reductions were successful in achieving their goals, while countries that included significant tax increases in their fiscal consolidation plans failed to achieve their goals.
• Fiscal consolidation plans based predominantly or entirely on government spending reductions not only increased economic growth over the long term, but also provided a significant short-term boost in many cases.

Today, I am releasing another JEC Republican Staff Commentary entitled Maximizing America’s Prosperity.  This study examined what fiscal “guardrails” would keep Congress on track to reduce federal spending relative to the size of our economy.  This study found:

• A balanced-budget amendment to the U.S. Constitution would not counteract the bias toward higher federal spending unless it contains explicit spending limitations.
• The federal government needs a statutory spending cap with a credible enforcement mechanism regardless of whether a constitutional balanced-budget amendment is ratified. 
• The item-reduction veto has reduced the growth of state spending by strengthening the role of the governor relative to the legislature in making spending decisions.  Enhanced rescission authority would also help to control the growth of spending at the federal level.
• Sunset provisions, which have been effective in eliminating inefficient and unnecessary programs and agencies in U.S. states, would be helpful at the federal level.

So long as President Obama and Congressional Democrats continue to behave in politically expedient, but fiscally irresponsible ways, American families and businesses will look to the future with trepidation. 

I look forward to hearing the testimony of our witnesses.