tv House Financial Services Committee Hearing on the National Debt CSPAN December 20, 2018 8:01pm-10:10pm EST
>> fully prepared for the full range of outcomes that may come out of that we were happy to see those developments today that was a big result for the time being. honestly it shouldn't have major implications but there is a lot of uncertainty that has happened before so we will be watching that carefully. thank you very much
authorized at any time and then five days with extraneous materials in the record. with the national debt my apologies to the witnesses we are starting one hour late and i now recognize myself in five minutes for opening statements. most people know i am getting ready to leave congress at the end of the year hopefully with many friends may be an enemy or to the body of work i am proud of but have no greater regret that my inability to leave this unaddressed national debt having been a veteran of the less than super committee and the simpson
bowles commission that the debt is unsustainable in many respects i feel i have been in this hearing 20 times before. for those that will see tax reform and as the treasury numbers show that tax revenues are slightly up that is a significant part but we are about to hear an array of numbers not to mention a lot of budgets to look at those
images of that fiscal crisis and what it looks like? so my story six years ago across the atlantic a photojournalist went to greece during the financial crisis because the greece unemployment rate went up to 20 percent. one of the workers at the factory actually was due to get married instead was laid off and that ended in an act of violence and the factory was shut down with the greek
predated the fiscal crisis but as one government worker said so they cannot treat many addicts that they had in athens. this is a picture of the main square once again i will remind you it exceeded 20 percent. this is a gentleman by the name of nick he was is affected by the economic crisis i lost my job and i lost everything. this is the picture of a back of a young lady.
she lost her telecom services job and spent all day looking for work she was quoted to say i don't even listen to music now. next this is a picture of george. and the profit margins were cut by 50 percent or production cost was 30 percent we will forgo the other slides i think people get the picture. we will see that dizzying array of numbers and hear budget speak for right before
i came to office our nation suffered a great tragedy of 911 and with the 911 commission that indictment that our nation failed to have failure of imagination and it is important that if we imagine what a fiscal crisis can be. i don't believe america will be greece but i wonder if we can take the risk. so i said in similar hearing hearings, i'm sorry but they are still necessary. i would consider this a success of every single member acknowledged the debt is an existential threat to the
america that we know and collectively to have some modicum of responsibility that it could manifest itself once we have all left congress how convenient. i hope every other member is how history judges them. >> that that public tax can push through by republicans and trump in this congress expose the deficits through
2028 for the future generations to fit - - but the bill. and with tax fairness the countries sixth largest wall street banks with $14 billion the tech scam includes a 20 percent reduction with the hedge funds or other wall street and to make matters worse they are using the tax scam not to hire more workers or raise wages or to buy back shares. this law has been deliberately deconstructed by my colleagues
on the other side of the aisle to benefit the millionaires and billionaires and the american public and future generations of the controlling congress and the bush tax cuts are major contributors to the deficit so to talk about fiscal responsibility and then it must be understood that it is rhetoric especially with tax cuts for the wealthy. this committee will reject harmful policies like these.
with consumers and investors to prevent another financial crisis and to support affordable housing opportunities to encourage responsible innovation and technology and to ensure that hard working americans have access to the financial system. i think you and i heal back the balance of my time. >> today we welcome more witnesses to the committee president from the american in action forum getting his phd from princeton after joining the american action form he was the chief economist at the council of economic advisers of the cbo and began his
career at syracuse in columbia university. at the manhattan institute with a masters degree from princeton to be the chief economist so for his career extending policy at the heritage foundation senior fellow receiving his phd from columbia university with the senate budget policy priorities and chief economist to vice president biden. and last but not least president of the committee for a responsible federal budget receiving her ba from
northwestern university and then went to harvard law - - harvard. and was a member of the washington post editorial board and has advised both candidates. >> without objection the written statements will be made part of the record you are now recognized to give an oral presentation of your testimony thank you for being here. >> thank you chairman and ranking member it is our privilege to be here today but i will take this moment to thank the chairman for his service i have sat on the side of the table many times also congratulations as well and ms. waters your continued service on the committee talking about the budget i could drown you with numbers
the outlook is dire and it will have consequences the cbo estimates 5 percent is extraordinarily high for an economy that is a full employment the debt will go from 70 percent up at 100 percent over the next ten years and continue to supply real on the unsustainable track either because foreign markets like the pictures that you showed us her to stave that off future congress will muddle along and will never really come to grips with the problem and economies will suffer second at the heart of this is the need of permanent
reform. it is also the case that people envision that nobody cares about their welfare but in those under current law 25 percent retirement benefits in a little over a decade that's a terrible pension program that could be done with $40 billion per year. similar stories before that like medicare or medicaid and other entitlements we need better programs and in that process medicare will grow at 8 percent a year medicaid will grow 6 percent the affordable care act subsidies will grow
there is no tax system of the economy that is conceivable to grow at those rates over the next ten years without stripping our capacity so those that are sustainable are at the heart of the budget problem. the third thing i would say is these changes are very difficult about the size of the changes necessary if you want to stabilize the debt to gdp by 2050 or 2048 you have to impose every year a deficit reduction of $640 billion that is an enormous amount of work and it will be difficult for a future congress to do that.
that requires public education don't think the american public understand the scale of the problem the phone faces them they haven't been told the truth and it will require not just what my friends on the right say which is controls and growth but big tax increases that a steady data creekmont - - dedication of growth and revenue increases to make economic sense to continue the effort to broaden the tax base. that is a very difficult political exercise but the most important thing facing this country and fortunately for the past 15 years i've said it's something for every year the last 15 years this time i hope it makes a difference.
>> mr. riedl you are recognize. >> good morning chairman and ranking member and members of the committee thank you for inviting me to participate in today's hearing. my purpose is described the policies that are driving a historic long-term surge of budget deficits i will begin by asserting the fiscal avalanche that has begun the budget deficit is on pace to surpass $1 trillion as soon as next year on its way to $2 trillion of current policies continue and that is a rosy scenario because of interest rates at the 1990 level projected deficit is $3 trillion in ten years according to data from the cbo. the long-term picture is worse. the cbo projects 84 trillion-dollar combined budget deficit over the next three years that's when the
tax cuts expire that would the national debt at 150 percent of gdp and that assumes peak prosperity and the interest rates that is the rosy scenario. so what is driving the red ink? we can start with a $250 billion of annual tax cuts and the 150 billion-dollar of higher discretionary spending caps according to cbo those contribute to the deficit but combining 400 billion-dollar cost is projected to be steady over the next ten years it does not explain why the deficit will jump from 800 billion up at two.1 trillion over the next ten years under the correct policy baseline though spending caps do not explain that trillion dollar avalanche that's coming for that increase the cbo data clearly
looks at social security and medicare because payroll taxes and premiums do not cover all the benefit social security and medicare require a general revenue to cover the shortfall. the cost of filling the medicare and social security shortfalls including the interest will jump from $400 billion in 2018 about one.$6 trillion a decade from now. one.2 trillion dollar increase in the cost of general revenue transfer that is 90 percent of the increase of the deficit over the next ten years according to the cbo policy baseline. in total social security will require a general revenue
transfer and that a local require a five.6 trillion. when including the $2 trillion of interest cost the social security and medicare of nine.$8 trillion of general revenues over the next decade the rest of the budget of what the ten was 1 percent of gdp. long-term it's even more dire. the cbo baseline projects the social security medicare system will run a $100 trillion shortfall over the next 30 years the rest of the budget will run $16 trillion surplus. specifically social security will run a deficit of 18 trillion medicare will have 41 trillion deficit and the interest cost following to pay
for those will add 41 trillion more. so look again at annual growth. cbo projects over the next 30 years, social security and medicare deficits and the interest cost will go from 10 percent to 12.6 percent the rest of the budget will have a three.1 percent of surplus as a result of raising revenues and falling spending simply put, the long-term debt problem is a social security and medicare issue and it is protected by cbo over those surpluses but it's not enough for the budget with 100 trillion-dollar projected shortfall of social security and medicare.
>> you are now recognized for your testimony. >> thank you for the opportunity to justify a suspect we all agree it's not enough that our debt is perilous but we need a way to deal with it without damaging growth are hurting foldable americans the first thing to do when you are deep in a hole is to stop digging according to the cbo the tax cap passed last year will add almost $2 trillion over the next decade but that is the opposite of stopping the digging to exchange your shovel for the excavator. but that's how it looks with the role of government with the social insurance and safety nets with market failures along with the aging demographics that my testimony will stress significant cost savings must be pursued in healthcare to have far more
share of our economy there is no serious path to reduce the growth rate however it is that central pursuit to protect those living standards of middle income americans here's what i hope to understand we must avoid the analysis ignoring the shortfall side is highly partisan analysis that is unlikely to generate political cooperation needed to sustain fiscal responsibility this is when considering near and medium term challenges like climate change and an equality and needs of investments of public goods but also on the spending side i argue the growth rate has to be on the deficit reduction agenda the affordable care act has made some progress with sustainable fiscal policies demanding some efforts are strengthened the
2017 tax law is responsible for this years lower than expected federal revenue gdp well below the historical average especially with low unemployment revenue as a share of gdp 18.4 percent or 400 billion that that linkage between the strong economy and higher revenues rollback parts of the tax cut including the estate tax reduction and the new loophole. the cbo long-term projections further underscore the revenue shortfall the biggest score in my testimony shows the forecast for primary outlay spending and revenues for the long-term budget outlook 12010 the most recent 2018 now the
logic implies that projected outlay accounts for a higher share of gdp with that projected revenue share to make it more comprehensible that they should show the fiscal gaps are driven by more spending not by less revenue and in fact it is the opposite not only are the outlays lower by two percentage points on average, but revenues in the 2018 budget outlook are much lower on average so in other words called for both higher spending and higher revenues and given that the revenues
between the two forecasts were more than twice that on average with the primary spending decline frames the debt problem largely a spending problem is not defensible. spending bills do not find themselves in tandem revealed that year upon year the congressional majorities that current has been unwilling to raise those revenues necessary to pay for those preferences but also significantly cut the revenue inflow the essence is best accurately tagged if it was a revenue were spending problem congress is unwilling to raise the resources to pay for the spending preferences. think you. >> your now recognized for your testimony.
>> thank you chairman and ranking member and members of the committee for holding this hearing today on a personal note it's been great working with you and thank you on your focus over the years i agree with pretty much everything my colleagues have said so we can move through this quickly but to reiterate the federal deficit is extremely bleak relative to the economy the highest it has been since world war ii but then we had just bought a world war interest rates are the fastest-growing part of the debt we are already on track to spend more on interest next year and more on interest next year meaning we will do more to finance our spending from the past then investing in the future. for years from now we will spend more on interest than on defense and that should be cause for everybody to have a wake-up cal call. the spending is unsustainable the vast majority is on
automatic pilot as our tax expenditures and finally it is at such a fast pace with strong economic growth it is nearly unprecedented so is mister holt he can set out a few moments ago this could be really difficult we are stabilizing the debt at levels that are too high twice the average that would take savings of $4 trillion balancing the budget would take $7 trillion so to put that into perspective almost in no years has congress passed net savings every year they add to the debt this debt reduction plan over the past decade with a budget control act of 2011 was designed to save two.$1 trillion most of that we have ignored.
if we don't change course we are likely to see slower economic growth and be much less prepared for emergencies over the next recession interest payments squeeze out other important parts of the budget in this budgetary flexibility for new priorities that we will face in the quickly changing economy. to be dependent on borrowing from abroad that comes with its own risk especially when they are not aligned and we are seeing them pull back and because we borrow so much structurally it is very dependent certainly the primary drivers are there growing mandatory spending over the next ten years 82 percent of the growth in spending come from social security and interest payments
it has already grown significantly as a share of the budget and these programs undoubtedly need to be reformed that is not the same as how they need to be reformed there needs to be more of a focus now let's argue there are many options every year that we delay to make those fixes. second, we need to start making the problem worse the minimum thing we should agree to his will not add more to the debt we recently had a tax bill two.$7 trillion to the debt and likewise we just had an increase of spending that didn't get much attention that
had is another two.4 trillion and we have done a lot of digging in the past congress we need to pay for what we spend is a nation if we will not get spending under control and there seems to be very little appetite for that, then we need to increase revenue if you want a smaller government the way to do it is not to cut revenue but cut spending that is where the focus needs to be if that is your vision of government so take a step back because as a huge problem to the economy it also represents how we are governing these days. this is a real difficult issue this is that what people like to talk about there are hard choices and that it is about trade-offs and hard choices but to fix the situation it has to be bipartisan and we know that is a difficult
environment with cooperation it will require to focus on policy more than politics right now that system is consumed over politics we tend we always lead legislate at the last possible minute now the huge problem existed often times political motivation to keep the problem out there then you can demagogue against it and there will always be preferences about the size of government so it shouldn't just be because we can't agree we punt but that the process helps us to figure it out but really there are external challenges with external policy threats to democracy economic and competitive threats from china security threats and different kinds of
work patterns from technology so that starting point is the budget. thank you mister chairman. >>. >> is there anyone on the panel believes we can do it otherwise crack. >> so this is a very serious matter so i think that taxes are the sideshow like discretionary spending is the sideshow. but what we do about healthcare and retirement spending a reasonable if not better health care retirement security at a cost that does not bankrupt future generations but just for the record i will state again those who were here fiscal
year over fiscal year revenues are up don't take my word for it take at the cbo in the treasury numbers so isn't it true ms. macguineas the tax cut and jobs act creates two.3 percent economic growth than what it pays for itself? >> if you do not caught the one - - count the cost of the extenders it does pay for itself. >> i will point out we currently have gdp growth which is commensurate. >> but i want to qualify that is every year over the decade. >> i understand that but if you believe that is part of the problem or part of the solution is a small part of the solution but almost every witness said something similar and i am paraphrasing but the long-term debt is overwhelmingly social security
and medicare and i believe you specifically said 9 percent of the increase of debt is attributable to medicare and social security. >> 90 percent of the increase will be social security. >> and ms. macguineas you said the largest drivers of long-term debt problem is healthcare spending and social security. and you said no serious path of the nation spending that does not go to healthcare cracks and then you said the budget deficiency healthcare spending does anybody disagree? so again this is our challenge. so something i read in your testimony but you did not speak to it in your oral
presentation but treating this from the size on the revenue side, can we just tax the rich to take care of our national debt cracks what size increase would be necessary? with that hit working families crack. >> that's a very good question. right now one way to look at it is if we would take every dollar earned over that million dollar threshold every dollar they earn would raise 5 percent of gdp which is not enough to balance the budget let alone do anything new long-term additionally if we doubled the 37 percent tax bracket that would raise one.6 percent of gdp before you take into account any economic effect deficits going at five or ten or 12 percent
mathematically is not just the taxes. >> can we grow our way out the figures say we have to have something approaching double-digit economic growth for almost one generation. can we grow our way out of this? >> no. there is no plausible rate that would solve this problem. >> where does this leave this? >> we cannot grow our way out of this problem. >> you agree also. >> so that means back to health care and security of retirement. >> so if you have been working since your twenties there is the grand bargain i remember
when i was on the less than super super committee walking in to offer my friends on the other side of the aisle a deal that was then chairman paul ryan support for medicare with tax size increased you need to give it to us? we were told that was off the table but indeed significant entitlement reforms would be presented but that did not occur. so again if there is a great bargain i agree it will take a bipartisan lift it will be heavy and it will take leadership. yes i am leaving congress kong - , but i would say once again if both sides come to the table with indexing and social security carveouts i would certainly lend my voice if i
was in congress i would lend my vote to a tax increase as bad as that policy is to save us from a national bankruptcy and those images that we saw from greece and i am now well over my time i yield to the ranking member for her questions. >> according to research prepared by the tax policy center 87 million households make under $200,000 per year. will you see their taxing increase burden as a result of the new tax law can you explain how this increased burden will affect wealth creation for middle-class families crack. >> i'm glad you asked me about that what has been left out of the discussion so far in particular was social security
and medicare but some programs actually do the number we haven't heard yet today the average social security benefit to the retired worker is 17000 per year. i find it hard to believe members of this committee believe that is lush pickings that need to be cut to sustain a fiscal path that is much more promising that the one we are on but medicare benefits are far less comprehensive traditional medicare covering hearing and dental and vision care so the idea of a middle-class tax increase , while reforming which i believe they really mean cutting with these programs that the families depend on way very much would be to the
detriment of millions of families in this country. >> you stated in your testimony that healthcare must be done in such a way to protect the living standards of middle income americans should they be reduced and what affect on the debt over time? >> i am not at all disagreeing with the concerns of the chairman for the panelist on the sustainability but i say that the notion to cut benefits i think it is unacceptable. so we have to look at reforms in the delivery system talking about accountable care organizations with the cost of
prescription drugs and one issue that is particularly exciting with the political dynamics and then to grow significantly more slowly in the public sector than the private sector so that expansion in greater medicare potential ability can provide more access to affordable care and this will reduce the health care bill. but i am saying that shifting people to the private care is one way to reduce that pressure point. >>.
through quality investment. we haven't talked much about that i respectfully disagree with the chairman that is not an important source of what we are talking about. so on that side of the budget at a historical low. >> thank you very much i yield back. >> the chair recognizes the gentleman from kentucky. >>. >> i don't think there is anything we are doing in congress that is more important and as a driver of the deficit mister douglas
holtz eakin our revenues up since the enactment of the tax cut jobs act mister douglas holtz eakin our revenues up since the enactment of the tax cut jobs act also the cbo with its analysis go back to that previous baseline there is no implications. >> so the federal government is taking in new revenues today? is that correct. >> let me ask you a question about the possible solutions. talk about cutting benefit benefits, could the congress actually increase benefits while at the same time reducing the deficit and then
to gradually raise the retirement age of social security and medicare back. >> i don't think that alone will solve the problem. it makes sense parts of the population are living longer. >> how much of a solution is that? those who have a longer life expectancy how much is that? >> it just depends and with that longevity. so depending on how aggressive you are. and when social security
started we should have known it would be a hundred that should have been assigned the actuaries are not always right. that is one of the most sensible. >> so word it be feasible with that contribution that we make to enhance that benefit structure for the current retirees while at the same time adjusting the workers who do have longer life expectancies as part of a solution. >> yes to make this as comprehensive as possible with that social security simulator but to be part of a comprehensive plan and then to
have where poverty is highest but the truth is many who are retired are well off so those who don't defend on the one - - depend on the program but for political benefits and those that shut down the road. >> that this is the point that was made earlier but they are not necessarily good programs to enhance the safety net of those and then to raise the retirement age to have a safety net that would work better. and then to take in those
unemployment, replacing higher paid jobs, opioids, suicide and a decline of life expectancy. we would be able to build the highest house of cards before it collapses because the whole world love sending us many. it has been made the reserve currency and our cost of borrowing went down. like every other institution to be given the unlimited credit line until it collapses. we have to look at spending and taxes for the crisis that we face and there's more to be
done with dodd frank with the enormous trade deficit and then threw tromp to focus on it not necessarily having any success not necessarily the right way. outside of expenditures and then to have that ideologies and objectives and is not enough to get those european allies but it should be a way we can spend less otherwise there is no advantage to it for the american taxpayer. and then to generate
$100 billion profit with quantitative easing and not to disparage them for that. and then to encourage the fed every business person says why can't you run the federal government more like a business? we have the hundred billion dollar profit center and then to say ignore profits and be embarrassed by them. them so that the fed has the secondary objective with low unemployment generation of a profit in addition every one tenth of 1 percent of
increased interest rates raises debt by $15 billion with a strong interest of interest rates if we want to reduce the deficit. healthcare how to pay the skyrocketing cost or to provide healthcare and a critical part is to regulate pharmaceutical prices. and with the lavish social security benefits if we could just convince them they were healthy. so in the last years we were down to six.3 percent gdp.
and then to spend 37 percent. and with 20 percent of gdp was 16.5 percent in a prosperous year and when it comes to the irs we have cut the enforcement budget by 24 percent even though every dollar we vest collects six dollars and generates another $18 of encouraged voluntary compliance from people that are not directly audit is.
and corporate taxes are now one.1 percent of gdp in other prosperous years it is roughly double and with corporate taxes and with international taxation to collect zero when factories move overseas. we have a lot to do i yield bac back. >>. >> and those witnesses to be to talk about the real peril of the debt. but we always talk about it. but it has never been put into practical terms.
and to think about $1 trillion in debt and with that liabilities. and then that does link at $1 trillion. but the average person could look at this if you knock the nine zeros off of it and equate that to a family very roughly, $40000 per year income spending $25000 a year on rent you cannot live off the difference. without $210,000 on mastercard
hyperinflation that we are invariably going to suffer if we continue to accumulate like i'm sure you're familiar with we don't have time to discuss all of them. but the video of the chair man said before hand if leeds eventually to hunger and violence and so i would hope that somebody with the knowledge and ability could articulate this in a way that the average american could understand, the average american family if they had $2 million in the bank right now.
i often times see adversaries think we actually need to spend more money and the only people that come through these challenges are the middle-class and the poor get crushed every time this happens so there are clearly some people in the country in positions that would like to see this happen because they would like to have in other countries where they've destroyed economies and it also helps their social agenda so i would like to ask each of you what you think is the most dire prediction of the hyperinflation with a continuing to spend without increasing productivity that we have now we have slashes
and the spending that would exacerbate the economic downfall and that would concentrate largely in the united states. so social security reform compared to what. >> the time of the gentle man has expired and the chair recognizes the gentle lady from new york i would like to ask doctor bernstein you mentioned in your written testimony of the
main challenges in the near to long-term as climate change i would like you to expand on that the congress consistently has to make emergency spending appropriations to offset the. the. the latter being referenced is related to climate change and it is a key point that i wanted to underscore because there is no private sector.
the downturn for roughly eight years so my question is did the treasury do enough to walk in the low interest rates for taxpayers over the past decade could they have reduced future interest payments for the government by issuing more long-term 30 year bond was at very low interest rates. >> that's an interesting question. i know the treasury doesn't try to implement those kinds of timing. not just here but other economies as well, so i think that is worth considering and looking at a.
>> thank you very much. >> the gentle lady yields back into the chair now recognizes the gentleman from arkansas mr. hill. >> thank you for this important hearing it as a hearing that i wish we had every congress several times during each congress so that we could keep this critical issue as an existential threat to the country and national defense and economic well-being and household well-being and that in the four years i served in congress it is the first hearing that i've participated in where the national debt was a topic so thank you for doing it at his
private insurance and private coverage and so using to be arguing that more government is what we need and your answer to the question you said you didn't support it so are you for more government and that is how we are going to lower prices in the health sector? this is just an empirical fact when the price increase of the public program is considerably below that of the private sector part of that is the public programs are not running a profitable kind of enterprise.
you are right to suggest that does mean more people under government coverage. >> yet medicare is growing at 6% a year is that approximately how it's growing? >> approximately that is about right. >> so three times inflation. >> what is the private sector are growing as it is more like 12 or 14 that is the difference. >> anybody else want to comment on that? >> if you are making the comparison between private and government used often move the
resources so we see this a lot in the medicare debate when people say if we nationalize healthealthcare national health expenditures might fall. even if that is true if you are going to move the private sector to government you have to come up with a 32 trillion-dollar tax and at this point nobody has come up with a tax to move it all so when we are talking about moving more people even if it is cheaper for the individual you still have to come up with a tax. >> someone is paying for that differential and it's the american people no matter how it is disguised. we voted on a balanced budget amendment last year in the congress and that's something that over the years i've reluctantly supported now and called on kevin mccarthy to bring it to the floor for a boat it was narrowly passed in the '90s during the period when democrats and republicans seem
concerned about the budget deficit, so it failed but i think it's an important part of the household awareness factor. i think it could be crafted to produce a long-term benefit beno the country but get get on the r screen in a way that is sustained. how do you feel about a balanced budget amendment? >> i've reluctantly come to the conclusion that's a good idea. it's an example of the fiscal rule you could have a transition to get to the balance that's not abrupt and for the war and
emergency. >> i alsemergency. >> i also reluctantly have moved in that direction. i don't think this basis is important it's the business cycle so you want to think about that and it shouldn't be a replacement for the policies of i get uncomfortable when people talk about a balanced budget amendment. another thing i would direct people to look at is the joint select committee on the glide path to i think that could be a solution as well. >> the time of the gentle man has expired. the gentleman from texas ranking member of the oversight and investigations subcommittee. >> we will gladly yield.
thank you for the opportunity. for the edification purposes, when we talk about it might be appropriate to let people know we are talking about social security is that a fair statement? anybody differ? let's talk about how we are talking about it today. social security is the largest component of the retirement income for middle to low income people.
it's important for the people at home there are other forms of retirement security when we talk about medicare we are talking about a program that covers pre-existing conditions is that a fair statement? as a matter of fact we have medicare because quite frankly insurance companies don't want to cover pre-existing conditio conditions. if they cover pre-existing conditions permit me to ask this because i'm looking and the people at home can see what i see. why do we have medicare tell me why do we have that?
why is it harder to get insured when you get older? >> because it's more expensive. >> insurance companies don't want to insure sick people, they want to make profits. medicare on the other hand takes anyone who is at the appropriate age and get coverage. there are people who don't get coverage at one time before obamacare until they can get medicare is that a fair statement there are people who couldn't get health care until they were at the age of receiving the kind o of health care that insurance would ordinarily provide.
the uninsured rate is close to zero and that is the function of medicare so we can have the insurance companies in control, and they are. language is a wonderful thing but it doesn't take care of a sick person saying we are going to have better health care for you really doesn't take care of a sick person. the reason medicare exists is because insurance companies don't want to cover sick people. the debate that we have here you
clearly have one side that took a good amount of time to develop a health care program that covered a pre-existing conditions to say we are going to repeal and replace they have the house, th house, the senatee presidency and they haven't repealed and replaced. the model that they use is a model that benefits the insurance companies as well so at some point we have to ask ourselves are the companies more important than sick people? this is why people talk about medicare for all because you can cut out those at the top.
>> the time has expired and the chair recognizes the gentleman from pennsylvania. with the regime that's in place everyone's premiums have skyrocketed and made it very difficult for people to afford health insurance they are not enough to pay however this revenue from all of the programs fall short of bridging the gap to the mandatory spending. what would happen to the economy if we increase taxes to fill the budget gap? there would be detrimental impacts on the long-term trend growth in the economy and in the standard of living.
there is no way to tax your way out of the problem without great damage. >> what people have less incentive to work? >> talk a little bit about the impact of what the interest payments are going to do with the interest payments on the dead are rising to levels that crowd up spending on the national defense and domestic infrastructure and another critical government activity. the u.s. national security adviser recently characterized it as an economic threat with national security consequences. talk about the impact of the growing interest obligation that we are going to have. >> they are skyrocketing as you know the cbo assumes low interest rates in 30 years from now we are going to be paying 4% interest on a debt that's huge so it's going to skyrocket with higher cost of tax payers who
have economic growth and less investments. >> 20192028 is expected to be $12.4 trillion. that is in the result of the tax cut jobs act is it lacks >> it's the result of the social security and medicare that the d total $10 trillion over dutch period. >> to have a healthier growing economy so more people get back to work in the game again look at the participation rate doing what we can is another issue that's out there that doesn't get enough attention.
1995 i was working in law school taking applications and we were getting information from the association that therassociatioe 800,000 fewer 22-year-olds in 1995. a precipitous drop in the number 22-year-olds and you can do the math an and figured out with 195 minus 22 was. fewer children were born and then you look at the data over the years. a million. fewer people coming into this world and that could have lived lives of productivity and would have been able to fulfill god-given dreams, taking their talents and skills and joined the labor force.
1995 there were 800,000 fewer of those people and year after year, fewer people coming in. i noticed today or yesterday "the wall street journal" had a piece it grew at the slowest pace in more than 8 80 years and inevitably we have to look at people coming into the country and people who want to come here pursue their god-given dreams to tell us that they've been blessed with that at some level it is a people issue if we want more revenue, there needs to be more people out there pursuing their dreams. i wonder if anybody would want to reflect on that a little bit as we look to grow this country. >> two things. one of the remarkable pieces of the past has been the number of people drawn into the labor force and into work.
i didn't think the economy could give 200,000 jobs a year over the past 12 months, the sort of typical would have taken half of that so it's a huge success. you need not just more people with more productivity and revenue per person and that is the challenge. the chair recognizes the gentleman from connecticut. >> let me just respond to something that was said about the cost. the other side my good friends have done everything they can to sabotage the affordable care act, kill the individual mandate and refused to accept the expansion of medicaid. in texas we have $100 billion recorded in the state body and through its agent of the governor refused to accept the money so there are good reasons of what's going on and they are
associated with sabotage. thank you for the time. good afternoon everybody thank you for being here. >> i hate sitting in rooms like this about how important this issue is while doing everything they can to make it worse i've seen up now for ten years and i'm not even going to get into the partisan finger-pointing nobody is interested in this problem. i would probably gain 10 pounds over the years with the dinners that mr. mcguinness has tried to bring people together to think about this and it's not just us it's the outside world. this is th a national security crisis of that time.
my republican friends have been saying interest rates are going to skyrocket. none of this happened so this is the ultimate boy cried wolf,, nobody'nobody is taking it seriy because we've never frankly you guys have not contributed to the sense of urgency or how we solve this. i am a pessimist on this and i've given up. none of us are going to go to our constituents and t to say we can cut spending or raise taxes. my question is i believe it is going to be forced upon the congress. eventually it will prove not to be sustainable so my question, and i will try to make a point here, what is the timing and characteristic of that function? i heard ten years ago we were at the moment of truth my good friends since amanda bowles what
is the timing and the characteristic of that which forces the congress to finally deal with this problem in a meaningful way? >> one of the frustrating things you would know from your background and financing also is we cannot time the market. we wish we knew there was a limit and it was suddenly going to switch so much of this is about other options i and how other countries are doing to quote many people often times it's the best looking worse people still are in better shape than others and that is not what we want it to be that it depends the point when the markets change and lending to us it is worrisome japan and china have held back over the past two years but when that changes it's hard to get the heart of the problem and you are one of the most people focused you can't give up before the political leaders we need you to lead on this because if we believe this it will leave us in a weakened
condition. >> i get that they are hard to predict and i'm interested in listening i would also be interested in hearing when that happens does it have been slowly or quickly is that a massive market dislocation with 200 basis point rise or overtime clacks >> go ahead. >> it happens quickly in emerging markets i suspect it would have been less quickly here. i do have one fact about timing you may find interesting and useful. when the debt to gdp ratio is around 80% one argument i have with the urgency of reducing the debt to gdp ratio there is a recession somewhere in the next few years and if we stay on the trajectory we are on we are
likely to do less to offset which would mean more pain for american families and househol households. i just want to add we were told it was the moment in truth when the sky didn't fall. it did fall if we believed in shielding those under 55. a long time ago we said no changes to anybody over the age of 55 that was the moment of truth and now we are to the point a third of the baby boomers have retired and another third in the next six years so the moment of truth in the shielding has passed if you would indulge me for five more seconds, i don't believe we are going to act so what we need you to do is tell us what it looks like and what we can do to fix the problem thank you.
i appreciate it and i know this is your last hearing and i salute you for the work that you've done in the state and district and country. >> i salute you for your candor on this issue. i'd like to tell a quick story in asp questions on what happened. my background is in the management area i come from the private sector, so this isn't a courier for me. walking into my office we knew a little in advance $4.3 billion shortfall in the benefits is a big deal. at the time it was a budgetary
issues pending 17 of every dollar we collected in maine to pay for these benefits and after working with our actuaries it became clear in several years we are going to spend on the fourth of all state revenues collected so we made it clear to the stakeholders and it took six months to do this and we were very clear reaching out to everybody you could possibly imagine beyond the legislature but also in the state of maine they are at risk and the legislation used to make the decision you are either going to pave the roads by school books for kids, put cops on the streets or spend the money to pay for the retirement benefits. so that got everybody's attention. we fixed the problem and maine now has one of the highest retirement benefits in the
country and you haven't heard anything about this in the last six or seven years because we've state. it's incredibly painful. now they have much more secure to be in their retirement benefits because adjustments were made for younger people coming in. i'm glad you are keeping that in front of us because you should. today the interest payments or $300 billion roughly. it's very interesting because i'm in the veterans affairs committee the total budget is about 200 billion a year to pay for all the healthcare retirement benefits and disability issues for the veteran paying 300 billion.
i agree congress is not structured to fix your problem like this there is too much self-interest. you go out and tell the people of the country or the district about the problem and the pain they've got to go through to fix it that criticism will come over and they don't touch it. so the question becomes how the heck do you fix this? is it an outside event where all of a sudden the creditors don't buy the paper anymore, i don't know i think it's going to be a budgetary issue and add some point in time the debt is so big the economy continues to grow and put up the pressure on the rate they told us at some point
in time everybody sitting in the use chairs in the executive office will say we can't afford infrastructure. that is the reality that i see on this side of the table. so my question in the time i have, what would you like to tell us here in congress where is there an opportunity and i think you said the answer is no poini'm going to ask again. the folks in social security and medicare which is a 17 trillion-dollar pension plan can you not touch these benefits that they have heard in the retirement and medical benefits they grew into them.
can you design a system where that is not touch that adjustments can be made to save the program. you and i have had this conversation with some proposals and i'm glad to share them with you. >> the gentleman from washington. >> i want to ask about the business investment to preface there were some of us that would like to have had a tax reform measure that we could have embraced into some of us believe it is fair to undertake a deep dive analysis about the competitive nature of the corporate tax rate as well. i would like the grades to have
gone down. they've gone down more than i thought was prudent from a physical standpoint. and all along we were ensured that the tax cut would pay for itself notwithstanding the assertions because in part it wasn't terribly well designed to achieve that. i would have much preferred the business investment or non- residential fixed investment. now here's my understanding of the data which is not as much was prone projected and we are just not seeing the benefits of the tax reduction going into business investment and part of why i am personally so sensitive to that is because i think we have a productivity issue in
this country which i cannot help but feel having not been any better than it is, so i want to ask you to comment about that. if we had designed this. i shared your even though i think i'm a very progressive economists when it comes to tax issues at this, i shared your interest in the on the statutory corporate rate which was arguably uncompetitive but the
context of this hearing what continues in this area was revenue natural, revenue neutrality should have been the lowest bar and the idea that we would have these cost trillions over a decade is antithetical to all we are talking about today with the skepticism about this endeavor. it's too early to tell the impact in the longer term no question but my view i think it would have had more of an effect than they did and while i expected the buybacks to surge i didn't expect as much as they have so it's very much synced up with your question however it's
still the near-term. capital was already cheap and companies were sitting on trillions. you can argue if you make it cheaper you should expect more investment. i don't think what's driving -- i agree the productivity problem is surely a function of inadequate in estimates. the tax cut isn't going to that it's one of a structural problem. >> are you saying it isn't even possible given the context of at the time of the capital cost pretty low to even have designed a tax proposal that would have accelerated the business investment? >> to some extent i am. with the interest rates have been low and investment hasn't responded. some people called the secular stagnation that seemed to be
depressing. what i will say is there are measures in the tax plan such as 100% expensing that you would expect more and to some extent they have but not nearly as much as was advertised what you might have expected. >> or that could have helped fuel the material wage increases. thank you very much. >> i will yield back all four seconds. >> the gentleman from indiana. >> others have asked about some of these issues, but i want to get back to how we fix this. you have all the spells to the challenges of the rising interest payments over time about how large the federal government in outstanding debt is and how it is going to be to repay that over time. i stipulate all of that, but history over the last 2500 years
clearly points out that the democracies over time go towards more so we can talk about the one time fix old we want to but how do we set up a process where we get a sustainable process for getting to a better outcome. >> i'm a manufacturing guy if we exclude from the beginning so that's what i'm asking is how do we fix the process to get to a
better outcome? >> there are two answers to that. one is really an issue of public education so that it is in your interests to make the public happy. there's no explanation to the american people that it's so important as endangered. you can go down that path that builds pressure on the existing political process or you can circumvent that. therthere's an experience globay and things were imposed from the outside into those have been proven successful to take the budget control act.
>> certainly the inclination to the sustainability is borne out of their cultural experiences the future may be in doubt because of the finances requiring sacrifice today but putting the clear restrictions on the members of congress, on senators handed the presidency and the executive branch to deliver a better fiscal position year in and year out and it seems to me to be the better
answer. >> we are experiencing the fallout of having budget problems already. the growth of entitlement spending has pushed the spending out of the budget and that is everything. it's a national defense infrastructure education and you go through this then it isn't feasible for the policies so there is no place in a democracy now for th further response to e initiative. i love that you believe that the problem is that it's a self-perpetuating cycle because what happens is discretionary gets crowded out. no adverse impact happens today. eat a chocolate bars over time you do it the pig to go to the doctor so we are learning the wrong lessons from that because the public has been conditioned that we can just borrow away the
problem and that works until it doesn't. we worry they are learning the wrong lessons. >> or transparency there is about the target into them or boughthe morethought into it thc works. balancing the budget is out of reach right now and we are looking at the dead targets. one of the things you can do is say when you get to the dead targets you get a tax rebate and tax dividend. i would start thinking about desperate measures because it is going to be a crisis we need things like the balanced budget
amendment to ensure the incentives are aligned. >> thank you so much and i yield back my time. >> want to thank our experts we've been blessed to have the council for so many years i just wish we could take the advice more often then we have. there is an argument for fairness in whatever route we take to try to deal with the debt. we just had a trump tax bill passed and i was going through the budget priorities simulator to plug in some none. with that fairness in mind, ipod
chin a married couple making $50,000 would receive a tax break of about 600 bucks. then i punched in a married couple making a million dollars received a tax cut of about $34,500. there needs to be a certain aspect of fairness to get the tax payer to buy in because if we are going to do something here along the lines you talked about we need to have the body and from our constituents. the other thing i thought was objectionable, we have had hearings in this committee on wells fargo. wells fargo robbed of their customers. they created fake accounts and distant strangers come if the ie people that came to the bank so they rubbed their customers and
we gave them a fine per billion dollars. then in this tax bill we gave them a tax rebate of 3.8 billion. wells fargo was the biggest winner from the tax bill. it's just unbelievable and i can see where people would lose faith in their government when stuff like this happens. i know we can't solve everything at once but there are some suggestions about tackling social security for instance. right now the limit on taxable income for the purpose of social security is like $128,400 above that we don't ask anybody.
you've done a lot of work on this. what would it take to rebalance things and extend the life of social security if we agree to raise that limit so people making 300,000 or a million dollars had a pay social security tax on that money as much as everybody below 128,400. >> it wouldn't be lifting the cap from the beginning that isn't going to be as much. if you don't pay benefits on that additional money it would close about two thirds to three quarters of the gap. it's less over time if you do pay benefits much less but if you exempt people you still have to make a number of other changes no matter what and look at the benefits side or retirement age or other things. >> so you don't create a doughnut hole. >> these are the choices that the important thing is the sooner we make the changes, the
more people that depend on the program can be reassured of what they are going to get so you need to look at the revenue, the retirement and savings aside. >> i see young people coming out up to their necks in debt and so we have to find a way to provide social security at the end of their working lives. >> i would add that there will the other knee as the economy changes one thing that is clear we are going to be needing to learn through our entire career so there's a lot of other needs that are being pushed out as we focus on that piece of the social contract and a lot of investments we have to think about as well. >> we've seen that at the state level where we have restricted federal funding for infrastructure, roads and bridges and things like that and then i go to my town meeting and i see the local communities in the state and cities are
increasing their taxes because they've got to pick up more of the load. i think ten years ago the contributions oforcontributionsl for infrastructure was around 67%. ten years later it's almost 72%, so by our willingness here at the federal level to raise taxes and provide revenue for infrastructure, we are just pushing that responsibility onto the states so the taxpayer is paying at the end of the day anyway. >> it is like a balloon we are pushing in one part and it's in another part of the bottom line we are all taxpayers whether federal or state or local level we have to come to terms with what we want to spend, how much and how we are going to raise the revenue to cover the cost and we are always looking for a free one way out of it.
>> thank you for your testimony and i will yield back the balance of my time. >> the gentleman from california. >> thank you all for being here. it's a great dialogue even from across the aisle for the structure, the decision-making and the candor on this issue. speaking of urgency, folks but growing national debt is one of those pressing problems of the time. it threatens national security and programs like medicare and medicaid and it threatens to drown out the necessary spending on other important initiatives. even though most are not working full-time at the think tanks to look at the amount of money we take in each year and the amount of money that the spend and when they say congress hasn't done it job they are exactly right. one of my concerns is looking how much we're spending on the debt interest each year. the fact we are spending more on
interest in things like education, infrastructure, other important research, that should be a sign to all of us that we have a problem. >> i would like to start with you for a question and let me first say i've enjoyed our time earlier in the term. we were able to first start talking about this issue so thanks for all you do not only with our office but so many others and keeping this front and center. ultimately, we are leaving them with a massive debt. can you comment on how much we spend on interest versus how much we are spending on issues related to supporting our children in the future? >> we are spending $300 billion roughly on interest now and it's going to triple over a decade as of next year that's going to be more than we spend on children of the federal leveat the federo think that the budget about priority is such a clear mistake that we are focusing on
financing the past instead of investments in the future and this is more than anything and that reflects on it on the choices we are making. >> thank you for joining us and i would like to switch over and ask you you've written about the currenacurrent policy to contine national debt to reach unprecedented 194% of gdp within 30 years. what is the source of your projection and in your view inadequate tax revenues or defense or other discretionary and as the root cause of this? >> 194% is in the current baseline is 152% and adjusting to the current policy baseline that assumes the taxes extended. the danger is 194% assuming interest rates never rise above 4.4%. if they go up to five, six,
seven or 8% you could easily have the debt ratio of 250 to 290% of gdp and most would agree if it's getting that big of course there will be some interest rate effect. in terms of what's causing it to revenueatthe revenues are 17.4%p and it's at about 19 or 20 depending on the tax cuts the next 30 years. spending is going to 30 so just mathematically speaking you will have the highest revenue in american history but it can't keep up with spending going up 10% of gdp. >> according to the cbo baseline, the total deficit for the period 2019 through 2028 is expected as we talked about this morning 12.4 trillion. is it reasonable to think the u.s. could cover this estimated 12.4 when a trillion dollar deficit entirely by cutting discretionary spending and if not, why not?
>> it is probably mathematically impossible. [laughter] >> let me make a quick point -- i am short on time. >> to make them go higher than they would otherwise is to threaten default when the debt ceiling debate comes up next year and i advise members of the committee to avoid getting into that really destructive -- >> i want to continue on. could tax increases solve this deficit problem? the >> if you double the top two brackets of 70 to 74% would get 1.5% of gdp against a current baseline of 7% so no. >> how about if we include the middle-class families? quickly solve this problem without increasing the tax burden on middle-class families?
>> if you just want to stabilize 95% of gdp just to stabilize that you would need a 45% payroll tax rate was 60%. >> may be attended to this issue and have many merry christmases to come. thank you. >> the time of th the gentlemans expired and i want to thank the witnesses for their testimony today prior to adjourning, i want to recognize that depending upon the timing it's not my last hearing but it may be others depending on the timing of such a vote and although i cannot literally hand over the gavel to my successor since all of the eyes haven't been dotted and t. it.'s crossed i do want to rhetorically hand over the gav gavel.
first it's been an honor to be able to lead the committee for three terms and in this committee we have had a partisan differences and there is a reason or two in the major political parties that i also take great pride in the fact we've been able to achieve many great bipartisan pieces of legislation and indeed versus every other committee in congress i take pride that we have passed more bills and have more signed into law than any other standing committee in congress and although there've been a few exceptions, i think by and large we've contacted the debate in this committee with the koran and respect and it's those that are worthy of the american people and so with the election there will be a change in power in congress including this committee, and as i've said before as a very conservative republican i'm getting ready to
hand the gavel over to a liberal democrats so there's very little that i agreed with the ranking member on that here i would disagree with just about everything she's said and done but here's what i know in the 16 years i've been on the committee but gentle lady from california has been a leader and has commanded respect and people's attention. as i've been th maturing for the terms, she's always negotiated in good faith and she's been thoughtful on the issues and most importantly to me, her word has always been good. so, somebody may miss construe the word that i am about to order now. i don't believe she will. the ranking member and i are of different ages and she has come to exceed two great political
[applause] thank you very much a. >> i didn't exactly recognize you but now you are recognized. >> thank you very much i am a bit overwhelmed with your generosity and describing our relationship to me we are on different sides of the aisle with different perspectives and how you have indicated your respect for me and what i have been able to do even when i disagree. i want you to know when i was
observing you even though you did not know i was observing you you manage that in a very fair fashion i will emulate what i have seen you do because you have done it so well that when you start to warn the speakers that you do it so well so let me just say as we sit here next to each other with those moments we are in close conversations enjoying laughter between us what could they possibly be
laughing about? understanding perhaps prior to the laughter that didn't sound so generous or so nice. >> but you and i know and understand and understood and there were times we could agree on bipartisan efforts and then to work with you and to stick to your principles. and then to reach bipartisan solutions to work together in a productive and effective way that is confused. and to be very dedicated to
her work one - - your work i'm so appreciative that i could work with you and i appreciate your graciousness even though a little bit rhetorical i want you to know that it has been done it's all right for you at some point. [applause] >> i think the gentle lady for her kind words and ie thank you to our witnesses indulgence those would be forwarded to the witnesses for their response to respond as promptly as you are able we are now adjourned.