WASHINGTON, D.C. — Joint Economic Committee Chairman Dan Coats (R-Ind.) chaired a committee hearing entitled “Federal Debt: Direction, Drivers and Dangers” on September 8, 2016. At the hearing, JEC members examined the causes of our growing debt, the potential consequences and possible solutions, including a bill recently introduced by Chairman Coats.

 

 

Chairman Coats explained that despite acceptance that federal spending is a serious problem, few have sincerely attempted to develop a solution:

“Despite numerous attempts over decades to address this issue [of a growing federal debt], it has come to the point where serious action needs to be taken before serious consequences set in. … CBO on an annual basis, more than an annual basis, warns us of the coming fiscal catastrophe. Yet it’s discussed for a day or two on the Floor of the House or the Floor of the Senate and we move on to the issue of the day.”

 

Mitch Daniels, President of Purdue University, former Governor of Indiana and former Director of the Office of Management and Budget, outlined the severe consequences of our worsening debt:

“You know, or you should, that public debt this large weighs heavily on economic growth, crowding out private investment and discouraging it through uncertainty. And that much faster growth than today’s is the sine qua non of the greater revenues that will be necessary to meet federal obligations, let alone reduce our debt burdens.

“You know, or you should, that the unchecked explosion of so-called entitlement spending coupled with debt service, is squeezing every other federal activity, from the FBI to basic scientific research to our national parks to the defense on which the physical survival of the country depends.”

 

 

Judd Gregg, Co-Chair of Campaign to Fix the Debt, former Chairman of the Senate Budget Committee and former Governor of New Hampshire described why it has been so hard to solve our debt crisis:

“We came to the conclusion that these numbers are overwhelming. The policies behind getting these numbers under control are extremely difficult politically because they involve very tough decisions. Reducing the rate of growth of entitlements involves very tough decisions. Reforming tax laws involves tough decisions. We came to the conclusion that the standard political process was not going to do it.”

 

 

Alice Rivlin, Senior Fellow of the Brookings Institution, former Director of the Office of Management and Budget and former Vice Chair of the Federal Reserve Board of Governors, detailed what actions need to be taken to improve the debt outlook:

“Growth alone won’t get the debt to come down, although for many reasons we need to grow the economy. … We need to do a serious restructuring of entitlements and taxes and we need to start soon. It must be bipartisan; neither party can do this alone. Any party that steps out to do these difficult things gets savaged by the other and it’s happened time after time after time. So some form of bipartisan action with the leadership in the White House and the Congress as part of the action has got to happen.”

 Congressman Richard Hanna (R-NY), asked witnesses about the types of policies should be on the table when discussing our debt problems, specifically he asked about spending reform, overhauling the federal tax code and enacting pro-growth proposals. President Daniels responded:

“Clearly all these things that have been talked about need to be pieces [of a solution]. Again, I think we need to be making every single decision until further notice in favor of growth for all the reasons we’re gathered here about today. … We’ve got a transcendent problem facing us and we can’t get out of the starting blocks with the policy mix we have today.”

Chairman Coats recently introduced a civilian BRAC proposal to address the debt crisis. He explained the proven benefits of a BRAC-type commission:

“When it was impossible to close any of over 1,000 bases that were no longer needed. … We finally turned it over to a non-partisan commission that went through under some guidance and presented a [base closure] proposal to Congress for an up or down vote only. It has been an extraordinary success in terms of forcing action that has not been taken by either the Congress or the administration. … We do have a model that may allow us to address this significant problem.”

Senator Gregg testified that the bill would be an effective way to bring our debt under control:

“This would be a bridging exercise until you got an appropriation process, budget process and an entitlement process that worked. It would be an effective way to address it. … I think a BRAC approach makes a great deal of sense and I congratulate Senator Coats for bringing it forward.”

Senator Mike Lee (Utah) agreed that enacting a solution sooner rather than later would relieve the pressure on future generations:

 “I’m worried about the fact that not only are we driving up the government’s debt with costly decisions in Washington, but the current regulatory environment seems to be dampening growth so that the debt burden on our kids is going to be heavy, is going to be that much heavier. Private investment has been falling recently and that increases the risks as well.”

To view the hearing in its entirety, click here. To access the witnesses’ written testimony, click here.