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


                       FISCAL STATE OF THE UNION

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                    ONE HUNDRED EIGHTEENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, D.C., MARCH 29, 2023

                               __________

                            Serial No. 118-2

                               __________

           Printed for the use of the Committee on the Budget
           
                          Available on the Internet:
	                      www.govinfo.gov                            
           
                              __________

                   U.S. GOVERNMENT PUBLISHING OFFICE                    
53-462 PDF                  WASHINGTON : 2024                    
          
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                        COMMITTEE ON THE BUDGET

                  JODEY C. ARRINGTON, Texas, Chairman
RALPH NORMAN, South Carolina         BRENDAN F. BOYLE, Pennsylvania,
TOM McCLINTOCK, California             Ranking Member
GLENN GROTHMAN, Wisconsin            BRIAN HIGGINS, New York
LLOYD SMUCKER, Pennsylvania          JANICE D. SCHAKOWSKY, Illinois
MICHAEL C. BURGESS, Texas            EARL BLUMENAUER, Oregon
EARL L. ``BUDDY'' CARTER, Georgia    DANIEL T. KILDEE, Michigan
BEN CLINE, Virginia                  SCOTT H. PETERS, California
BOB GOOD, Virginia                   BARBARA LEE, California
JACK BERGMAN, Michigan               LLOYD DOGGETT, Texas
A. DREW FERGUSON IV, Georgia         JIMMY PANETTA, California
CHIP ROY, Texas                      JENNIFER WEXTON, Virginia
BLAKE D. MOORE, Utah                 SHEILA JACKSON LEE, Texas
DAVID G. VALADAO, California         ILHAN OMAR, Minnesota,
RON ESTES, Kansas                      Vice Ranking Member
STEPHANIE I. BICE, Oklahoma          DAVID J. TRONE, Maryland
LISA C. McCLAIN, Michigan            BECCA BALINT, Vermont
MICHELLE FISCHBACH, Minnesota        ROBERT C. ``BOBBY'' SCOTT, 
RUDY YAKYM III, Indiana                  Virginia
JOSH BRECHEEN, Oklahoma              ADRIANO ESPAILLAT, New York
CHUCK EDWARDS, North Carolina

                           Professional Staff

                      Gary Andres, Staff Director
                  Greg Waring, Minority Staff Director
                           
                           C O N T E N T S

                                                                   Page
Hearing held in Washington, D.C., March 29, 2023.................     1
    Hon. Jodey C. Arrington, Chairman, Committee on the Budget...     1
        Prepared Statement of....................................     4
    Hon. Brendan F. Boyle, Ranking Member, Committee on the 
      Budget.....................................................     7
        Prepared Statement of....................................     9
    Hon. David Walker, Seventh Comptroller General of the United 
      States.....................................................    11
        Prepared Statement of....................................    14
    Hon. John Taylor, Professor of Economics, Stanford 
      University, Former Under Secretary of the Treasury for 
      International Affairs 2001-2005............................    24
        Prepared Statement of....................................    26
    Mr. Scott Hodge, President Emeritus and Senior Policy 
      Advisor, Tax Foundation....................................    31
        Prepared Statement of....................................    33
    Dr. Mark Zandi, Chief Economist, Moody's Analytics...........    42
        Prepared Statement of....................................    44
    Hon. Sheila Jackson Lee, Member, Committee on the Budget, 
      submissions for the record.................................    85
    Hon. Sheila Jackson Lee, Member, Committee on the Budget, 
      statement for the record...................................   101
    Hon. Ilhan Omar, Vice Ranking Member, Committee on the 
      Budget, submission for the record..........................   120
    Questions submitted for the record...........................   154
    Answers submitted for the record.............................   156

 
                       FISCAL STATE OF THE UNION

                              ----------                              


                       WEDNESDAY, MARCH 29, 2023

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to call, at 10:03 a.m., in Room 
210, Cannon Building, Hon. Jodey Arrington [Chairman of the 
Committee] presiding.
    Present: Representatives Arrington, Norman, McClintock, 
Grothman, Smucker, Burgess, Carter, Cline, Good, Bergman, 
Ferguson, Roy, Moore, Estes, Fischbach, Yakym, Brecheen, 
Edwards, Boyle, Higgins, Schakowsky, Blumenauer, Kildee, 
Peters, Doggett, Panetta, Wexton, Jackson Lee, Omar, Trone, 
Balint, Scott, and Espaillat.
    Chairman Arrington. The first order of business is to 
showcase a larger gavel, more commensurate with the Lone Star 
State and the expectation of my citizens in Texas.
    Welcome. Good morning. Thank you to my colleagues for your 
time and your commitment, and especially thank you to our 
witnesses. My script here.
    The hearing will come to order.
    I yield myself such time as I may consume for an opening 
statement.
    This Committee is charged with the fiduciary responsibility 
of resourcing the people's government, and the fiscal 
trajectory of the United States of America, and right now, by 
any measure, we are well off track. We have convened this 
hearing today to sound the alarm for the American people and 
create a sense of urgency among our Nation's leaders. The 
Nation's fiscal outlook is rapidly deteriorating following a 2-
year avalanche of new spending that added more than $6 trillion 
to our national debt and triggered painful historic levels of 
inflation on working families across the country.
    Our unprecedented, almost incomprehensible $31 trillion of 
national debt has eclipsed the size of our economy, the largest 
in the world. Over the next decade, according to the 
nonpartisan CBO, our annual deficits will double, our interest 
payments will triple, and for every dollar we borrow, $0.50 
will go just to paying the interest on our debt. In just five 
years, interest payments alone will exceed what we spend on our 
entire national defense.
    The only other time in American history that our debt-to-
GDP ratio has been this high was in the aftermath of World War 
II. We were able to recover from, from that because we had the 
will to reduce our spending and the runway to grow our economy 
back to a healthy balance sheet. Today, we are looking at a 
very different picture. Reckless spending and record inflation 
have left a trail of economic destruction for working families 
and small businesses in the form of shrinking paychecks, 
soaring interest rates, labor shortages, and a whole generation 
of Americans trapped in a cycle of poverty and government 
dependency.
    What makes this all the more disturbing is that we were 
warned. For the last three decades, we have known the 
structural challenges we face, from the largest generational 
retirement in the world, to the rise in automatic spending 
consuming more of our revenues, and now, runaway interest on 
the debt, and for the last two years, this administration, I 
believe, has just thrown gasoline on that fire with its 
unbridled spending, and the proposed budget of the President 
would do more of the same, if not double down.
    If we don't change course and change soon, sustained 
stagnation could very quickly give way to a debt crisis that 
threatens not only our economy, but our national security, with 
dwindling resources and dire choices putting our republic and 
our children's future at risk. Folks, it's well past time to 
think about the unthinkable, but it doesn't have to be this 
way. We can change it. Together we can change it. The Fiscal 
State of our Nation is certainly unsustainable, but not 
unfixable. That window, I believe, is closing.
    The President had the opportunity to set a new course and 
provide real leadership earlier this month with his budget 
proposal. Instead, his vision calls for the highest levels of 
sustained taxes, spending, and borrowing in the history of our 
country. Even by Washington's standards, it is a budget binge 
of catastrophic proportions. In fact, even after trillions of 
dollars in new tax hikes on families, job creators, and energy 
producers, that still isn't nearly enough to make up for the 
vast and radical expansion of government that the President 
seeks. All ten years of the spending proposed in the 
President's budget are at a quarter of our entire economy--all 
ten years--a level that we haven't seen since the invasion of 
Normandy, and with his failed tax and spending policies 
constraining growth, our debt-to-GDP ratio will continue to 
deteriorate, hitting an unconscionable, almost incalculable 
level of 220 percent or more by 2053.
    At the State of the Union, the President kept saying, 
finish the job, but I believe his plan doesn't even start the 
job of addressing the real challenges and, in my opinion, the 
greatest challenge of the 21st century, the prospect of a debt 
crisis, and his vision, in my opinion, is too radical, too 
reckless, and too disconnected to meet this moment, but we have 
to. Members of this Committee, Republican and Democrat, we must 
reverse course by stopping the spending spree, unlocking 
economic growth, and fixing our Nation's finances before it's 
too late. As we look to lift our country out of this mess, 
several key principles emerge that must be included in any 
responsible plan, and these will certainly be the guiding 
principles for the budget that we will propose and open up for 
criticism, and contrast, and oversight.
    Number one, we must rein in wasteful, woke, and bloated 
bureaucracy and the out-of-control spending that created it.
    Number two, we must reduce unnecessary government burden 
and re-establish pro-growth policies that create jobs and 
promote prosperity for all Americans. We must end the era of 
dependency for able-bodied adults, encourage labor force 
participation, and restore the dignity of work in this country. 
We must stop the assault on U.S. energy production and unleash 
American energy dominance once again, and we must absolutely 
prioritize the first and most important job of the Federal 
Government, and that is the safety and security of the American 
people.
    With uncommon courage and common sense economic policies, 
we can stave off a debt crisis, we can strengthen America's 
balance sheet, and we can save the Union. That's our calling, 
that's our mission. We may have different views on how to do 
that, but I hope that we can at least agree that this current 
path is completely unsustainable, and we can't continue down it 
for the love of country and our children's future.
    The longer we wait to start this work, the more drastic our 
choices will be, the more likely it becomes that future 
generations will be trapped in a broken economy with a bleak 
outlook at best. If we don't have a sense of urgency about the 
task before us, as I said, our children will not inherit the 
blessings of liberty and opportunity. Instead, they will reap 
the whirlwind of an irreparable economic disaster in some form 
and at some point. Scary thing is, most people don't know when, 
but when it happens, it is hard to put it back.
    We have sounded the alarm, my friend and Ranking Member, 
and now we must answer the call to act.
    I now recognize my friend and colleague, the Ranking Member 
from Pennsylvania, Mr. Boyle, for his opening remarks.
    [The prepared statement of Chairman Arrington follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Boyle. Thank you, Mr. Chairman. Thank you for holding 
this hearing today. I would also like to welcome our witnesses, 
we really appreciate you taking the time to be here.
    The first thing that must be said when considering the 
Fiscal State of the Union is that we are having this discussion 
from a place of economic stability and strength that would have 
been unimaginable two years ago, and I know I began our last 
hearing by reciting this, and I will do so again because it is 
worth remembering. In March of 2021, exactly two years ago, the 
nonpartisan Congressional Budget Office was projecting that 
unemployment would remain above four percent for the rest of 
the decade, but after the passage of the American Rescue Plan, 
that picture changed dramatically. Unemployment fell rapidly, 
and the speed and size of our economic recovery has made 
America the envy of the world. Experts at Moody's Analytics 
found that the American Rescue Plan helped create four million 
additional jobs and doubled GDP growth in 2021. Today, American 
workers have benefited from a record 12.4 million jobs created 
since President Biden took office. So, there is no doubt the 
American Rescue Plan dramatically changed our fiscal state for 
the better, but it was a response to a once-in-a-generation 
pandemic and the associated economic crisis, not a permanent 
fix to address underlying issues impacting our society and our 
economic outlook.
    Which brings me to my next point. We agree--our Nation does 
face long-term fiscal challenges. Our population--like most in 
the Western world--is aging, so healthcare, Social Security, 
and Medicare costs are rising. Rising inequality is making our 
country more vulnerable to recessions and other economic 
shocks, hampering growth. Climate disruptions are becoming more 
frequent and more expensive, and we lag peer nations in 
investments in children, especially in the early years of their 
lives, where you get the best bang for your buck, and yes, 
deficits and debt are projected, especially in the next decade, 
to reach levels that simply none of us would be comfortable 
with. So, we are seeing a similar picture, and we do have very 
different ideas as to where the solutions lie.
    Democrats have used their fiscal space to make responsible, 
pro-growth investments that strengthen our communities and our 
economy while paying down the deficit. That is why Democrats 
followed up on the success of the Rescue Plan with historic 
legislation to set our Nation and our people up for long-term 
success, including the Infrastructure Investment and Jobs Act, 
the CHIPS and Science Act, Fiscal Year 2022 and 2023 
appropriations bills, and the Inflation Reduction Act.
    Now, I do want to address where I think there is some 
disagreement. Republicans believe we can cut our way to a 
balanced budget. That is not only false, it is dangerous. 
Analysis from the nonpartisan CBO proves this. An attempt to 
balance the budget without touching Social Security, Medicare, 
defense spending, veterans mandatory spending, and without 
increased revenues, would require eliminating every program, 
every service, and every investment Americans count on. In the 
end, it still wouldn't balance the budget, but it would gut 
government to the point society would no longer be able to 
function. These types of proposals have devastating 
consequences. Dr. Zandi and Moody's Analytics released a 
projection a few weeks ago that showed these policies would 
cause a recession in 2024, eliminate 2.5 million jobs, and push 
unemployment to about six percent. We can't escape the bottom 
line: to tackle our long-term fiscal challenges, we need to 
rebalance our tax code and prioritize investments with a high 
rate of return. For there is no better investment than 
investing in the American people.
    And with that, in just under the five minutes, I want to 
thank our witnesses for being here. I look forward to their 
testimony and I yield back the remaining 14 seconds.
    [The prepared statement of Ranking Member Boyle follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Arrington. I note your efficiency, my friend, and 
I appreciate that because we have a panel of experts here 
today, and I know they have tremendous insight to share with 
us, all of them across the board here.
    So the Honorable David Walker has joined us, and he is the 
seventh Comptroller General of the United States from 1998 to 
2008. Thank you, sir, for your service.
    Also joining us today on the panel, the Honorable John 
Taylor, Professor of Economics at Stanford University and 
former Under Secretary of the Treasury for International 
Affairs from 2001 to 2005.
    We also have Mr. Scott Hodge, President Emeritus and Senior 
Policy Advisor at the Tax Foundation.
    And then Dr. Mark Zandi, Chief Economist of Moody's 
Analytics.
    And we are honored by your presence and we appreciate your 
insight.
    So, we have received your written statements. As a 
Committee, they will be made part of the formal hearing record, 
and now you will each have five minutes to deliver your oral 
remarks.
    Mr. Walker, we will begin with you and I yield the five 
minutes.

 STATEMENTS OF THE HONORABLE DAVID WALKER, SEVENTH COMPTROLLER 
   GENERAL OF THE UNITED STATES; THE HONORABLE JOHN TAYLOR, 
   PROFESSOR OF ECONOMICS, STANFORD UNIVERSITY, FORMER UNDER 
SECRETARY OF THE TREASURY FOR INTERNATIONAL AFFAIRS 2001-2005; 
SCOTT HODGE, PRESIDENT EMERITUS AND SENIOR POLICY ADVISOR, TAX 
 FOUNDATION; DR. MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS

 STATEMENT OF THE HONORABLE DAVID WALKER, SEVENTH COMPTROLLER 
                  GENERAL OF THE UNITED STATES

    Mr. Walker. Thank you. Mr. Chairman, Ranking Member Boyle, 
Members of the House Budget Committee, appreciate the 
opportunity to testify.
    I am a political independent who has been fighting for 
fiscal responsibility and sustainability for 30 years, 
beginning when I was one of two public trustees for Social 
Security and Medicare, and we blew the whistle to say that 
those programs were not sustainable in their present form.
    When I became Comptroller General of the United States and 
head of the GAO in 1998, debt-to-GDP was about 60 percent and 
we were in surplus. When I left as head of the GAO in 2008, 
debt-to-GDP was a little over 60 percent before the banking 
crisis, but I could tell that we were in terrible shape and 
things were going to get a lot worse.
    Unfortunately, since I left GAO, the debt subject of the 
debt ceiling has tripled, debt-to-GDP has doubled, and both 
metrics are still increasing at a rapid rate. The latest CBO 
budget and fiscal report in February 2023 included the 
following direct quote, ``The fiscal outlook is far worse than 
last year due to legislation, executive actions, and economic 
changes.'' The latest consolidated and accrual based financial 
statements and GAO audit report for the Fiscal Year end of 2022 
made it clear that 2022 was a very bad year. Total liabilities 
and unfunded promises went up by almost $9 trillion, to over 
$900,000 per household.
    In addition, during the past two plus years the Congress 
has engaged in trillions of dollars of additional Federal 
spending, much of which related to COVID, some of which because 
of belief in the flawed and failed Modern Monetary Theory. The 
Fed intentionally or unintentionally enabled such actions by 
keeping interest rates too low for too long and bought 
trillions of dollars of Treasury securities directly. The 
resulting significant increase in interest rates resulting from 
the Fed's effort to combat inflation during the past year 
contributed to the recent bank failures and current uncertainty 
in our banking system.
    Looking forward, the latest CBO long range budget 
projection of February 2023 estimated the debt-to-GDP will 
climb to 193 percent by 2050. That is an eight percent increase 
above the projection last year.
    There is a tendency to focus on numbers when talking about 
budget proposals, but it is important to remember that the 
budget is not just about numbers, it is a proposed policy path. 
From a strategic standpoint, the plain and simple and hard 
truth is the United States is a declining great power and China 
is rising. The facts are clear and compelling. It is true that 
the U.S. is the leading global superpower today, but the real 
question is will we remain so in the future?
    One of the biggest differences between China and the U.S., 
is that China has a comprehensive, integrated, outcome based 
strategic plan to achieve its economic, diplomatic, military, 
and cultural objectives, and the United States does not. The 
Federal budget is a short-term policy proposal. It is not a 
long-term plan, and it is not outcome oriented. Today, America 
is flying blind in mountains of debt and without a navigation 
system. This is unacceptable and must change if we want our 
future to be better than our past.
    President Biden proposed his fiscal 2024 budget on March 9. 
It proposes a 57 percent increase from the pre-pandemic level 
in Fiscal Year 2019 and results in annual deficits in excess of 
five percent of GDP over the next ten years, despite $3 
trillion in tax increases during the same period. While it does 
propose some Medicare funding related reforms that will extend 
the solvency life of the HI Trust Fund, it does not deal with 
the other Medicare programs and does not touch Social Security. 
As a result, it continues to kick the can down the road in 
making the tough choices that are necessary to restore sanity.
    I have suggested a three-pronged approach to be able to 
restore fiscal sanity and sustainability outlined in my 
testimony. First, stop the bleeding. We need to cut 2024 
spending as compared to 2023. I outlined a number of ideas how 
to do that.
    Secondly, we must stabilize the patient. We have to have a 
mechanism that will help us to make the tough choices to close 
the gap between projected spending and projected revenue over 
the next ten to 15 years. That will require educating and 
engaging the American people in a very meaningful way. I 
outline the reasons why in my testimony, and I suggest that we 
need a statutory fiscal sustainability commission that will 
engage the American people with the facts, the truth, the tough 
choices, come back with recommendations, guaranteed vote in 
Congress. That is what we need to do. Simpson-Bowles was not 
focused that way. That should be an appropriate condition to 
raising the debt ceiling. We have to cure the disease.
    In that regard, statutory approaches have failed. The debt 
ceiling is a bad joke. We need a constitutional amendment that 
limits debt as a percentage of the economy, and I commend 
Chairman Arrington for introducing H.C.R. 24, and I would ask 
all of you to look at H.C.R. 24 and potentially co-sponsor it. 
You have a constitutional duty under Article V, and this 
Convention of States to propose a fiscal responsibility 
amendment should have been called in 1979, and I outline all 
the differences, and the dollar has gone down over 75 percent 
since then, and the debt has exploded from less than $1 
trillion to $32 trillion.
    In closing, we need to learn from history, and we need to 
learn from others. I will give you one piece of history. Rome 
lasted over 1,000 years. It was a superpower in its time. Rome 
no longer exists. It went out for several reasons. Fiscal 
responsibility, political instability, moral decline, 
overextended military, and inability to control its borders. Do 
those sound familiar? It is time to wake up, create mechanisms 
to make tough choices so that our future can be better than our 
past.
    Thank you, Mr. Chairman.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Arrington. Thank you, Comptroller General.
    Now yielding five minutes to Dr. Taylor.
    Dr. Taylor.

STATEMENT OF THE HONORABLE JOHN TAYLOR, PROFESSOR OF ECONOMICS, 
STANFORD UNIVERSITY, FORMER UNDER SECRETARY OF THE TREASURY FOR 
                INTERNATIONAL AFFAIRS 2001-2005

    Dr. Taylor. Thank you, Mr. Chairman, thank you, Ranking 
Member Boyle, all Members of the Committee, for inviting me to 
speak here today, it is a very important topic, the Fiscal 
State of the Union.
    I will begin by referring to some data recently submitted 
as part of the Budget of the United States, Fiscal Year 2024. 
Table 1 of my written testimony shows the growth rate of real 
GDP from 2021 to 2031. The average is only about two percent 
per year. I think it is due to policy. We could do better than 
this. We need to do better than this. Much is related to fiscal 
policy. It is not a good program. Table 2 of my written 
testimony shows the Federal budget as a percent of GDP going 
out the same number of years. Receipts, outlays, and the 
deficit all remain very high. The Fiscal State of the Union is 
not good. Efforts are needed to reduce these budget deficits.
    At previous hearings, including a 2015 hearing of this 
Committee, which was entitled ``Why Congress Must Balance the 
Budget'', I showed, using economic theory and empirical models, 
that imply high Federal Government deficits and debt have a 
cost. They reduce real income per household. Recent examination 
shows the same results.
    In previous testimony I also recommended a fiscal policy 
based on established economic principles. That policy should be 
permanent, should be pervasive, and should be predictable. This 
is not the kind of economic policy that has been proposed going 
forward. Rather than being predictable, the policy response has 
created uncertainty about the debts, growing Federal spending, 
future tax rate increases, new regulations, even how we will 
exit from rules based monetary policy. Rather than permanent, 
it is temporary and thereby not creating a lasting economic 
recovery. Rather than being pervasive, it targets certain 
sectors or groups. It is not surprising therefore, that the 
policy has left us with lower growth going forward.
    Going forward, I think we need a renewed set of principles, 
based on experience as well as economic theory. I recommend 
this alternative, a stimulus mantra: permanent, pervasive, and 
predictable. It is so important to get this right, and those 
are the three characteristics that I elaborate in my written 
testimony.
    Let me conclude, if I may, with the word about monetary 
policy, which is closely related, closely linked to fiscal 
policy as well as the regulatory policy, as well as 
international economic policy. I am very pleased that the Fed 
has again included in its monetary policy report rules, rules 
such as the Taylor Rule, named after me, in this monetary 
policy report. It is good that rules are back. I think it is 
terrific, but the Fed got behind, as we have already heard, 
informally incorporating rules or procedures into its actual 
decisions. Thus, inflation has risen. It is not the only 
reason, but it is a big reason. We are still living in a high 
inflation era unless monetary policy actions continue to be 
taken.
    If we use the so called Taylor Rule, plug in an inflation 
rate of four percent, which is where we are, a target inflation 
rate of two percent, where we want to be, an equilibrium 
interest rate of one percent is what the current estimate is, 
and the gap between real GDP's potential of zero, then you 
still get a Federal funds rate higher than it is now, maybe as 
high as six percent.
    There are now reasons greater than ever for the Fed to use 
a more rules based policy. The policy interest rate should 
increase as inflation rises, as has now begun to happen big 
time. It would, of course, be a contingency plan, as there are 
all rules or procedures, including fiscal rules and procedures. 
This would greatly reduce the chances of large damaging changes 
later.
    Thank you, Mr. Chairman.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Arrington. I thank the gentleman, and now yield 
five minutes to Mr. Scott Hodge.

STATEMENT OF SCOTT HODGE, PRESIDENT EMERITUS AND SENIOR POLICY 
                    ADVISOR, TAX FOUNDATION

    Mr. Hodge. Thank you, Mr. Chairman, Ranking Member Boyle, 
Members of the Committee.
    Last week I was in Kyiv, Ukraine. I was a guest speaker at 
the Ukrainian Tax Reform and Anticorruption Summit sponsored by 
the government. The goal of the summit was to provide Ukrainian 
leaders with best practices on how to reform their tax system, 
strengthen their economy, and get their fiscal house in order. 
They did not want theories, they wanted concrete examples of 
countries that have successfully reformed their tax code and 
kept government finances in check.
    I presented them with a number of examples. The U.S. was 
not one of them. The U.S. may be a symbol of many things to 
people around the globe, but it is not a model of fiscal 
discipline or restraint. Our national debt, at roughly 100 
percent of GDP, is the highest we have had since we were at war 
nearly 80 years ago. Our nearly $1.4 trillion deficit last year 
was equal to the GDP of Spain, and it is higher than the GDPs 
of 180 other countries. Many of these budget problems are being 
driven by entitlement programs that are already bankrupt on a 
cash basis and must rely on a massive infusion of general 
revenues to keep them afloat.
    The Federal budget is more of a museum of American history 
than the Smithsonian. Name an era in American history and there 
is an obsolete program or agency from past eras still being 
funded today. The budget is full of redundant programs that 
need to be streamlined. The General Accountability Office, or 
GAO, has identified hundreds of Federal programs that duplicate 
each other's missions and could be streamlined. The Federal 
budget is still running failing business enterprises such as 
the Tennessee Valley Authority, Amtrak, the Corporation for 
Public Broadcasting, and the U.S. Postal Service. These and 
many more Federal assets should be sold off and the proceeds 
used to pay down the national debt.
    We have an analog government in a digital world. It is more 
than ironic that while Congress prides itself for having passed 
the CHIPS Act, most Federal agencies are decades behind the 
technological curve. The IRS and the Air Traffic Control system 
are two of the most glaring examples. Waste, fraud, and abuse 
really does add up to real money. The Federal CFO website 
estimates that Federal agencies paid out roughly $250 billion 
worth of improper payments last year. Half of that came from 
Medicare.
    For a Nation that prides itself on being a beacon for free 
enterprise, both the tax code and the Federal budget are chock 
full of corporate welfare. The Inflation Reduction Act is 
perhaps one of the worst examples of corporate welfare ever 
enacted by this body.
    President Biden's budget plan makes the government's fiscal 
crisis worse. Not only would the budget plan increase the 
national debt from 100 percent of GDP to 110 percent of GDP, it 
is also bad for the economy. The Tax Foundation's macroeconomic 
tax model estimates that President Biden's tax plan would 
reduce the long-term size of the economy by 1.3 percent, reduce 
the capital stock, reduce wages, and eliminate 335,000 jobs. 
Mr. Chairman, Congress must take systemic and deliberate steps 
toward fiscal balance. You should put yourselves in the mindset 
of being consultants overseeing an enterprise that has been put 
in receivership. You must make hard choices, terminate obsolete 
and redundant programs, sell off state-owned enterprises, 
eliminate corporate welfare. If a company or industry cannot 
survive without taxpayer assistance, it should not be allowed 
to survive.
    Finally, you can no longer put off fixing our major 
entitlement programs. These programs are bankrupt now and are 
getting worse. No Member of this body is in a position to 
criticize the management of Silicon Valley Bank for failing to 
foresee the crisis in their balance sheet when the financial 
crises in Social Security and Medicare have been known and 
getting worse for years.
    In conclusion, Mr. Chairman, the Fiscal State of the Union 
is, frankly, embarrassing. Federal spending, deficits, and debt 
are at unsustainable levels. The budget is laden with 
redundant, obsolete programs, corporate welfare, nationalized 
industries. Moreover, Social Security and Medicare are bankrupt 
now. The Biden budget would just make all of these problems 
worse.
    America's ability to be a global moral authority is 
undermined by our lack of fiscal discipline and restraint. If 
the Ukrainians can stand up to corruption and the Russians, 
certainly this body can muster the courage to provide fiscal 
leadership and responsibility.
    Thank you, Mr. Chairman. I would be happy to answer any 
questions you might have.
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    Chairman Arrington. I thank the gentleman, Mr. Hodge, and 
yield five minutes to Dr. Zandi.

  STATEMENT OF MARK ZANDI, CHIEF ECONOMIST, MOODY'S ANALYTICS

    Dr. Zandi. Thank you, Chairman Arrington, Ranking Member 
Boyle, and the rest of the Committee for the opportunity to be 
here today.
    I should say I am the Chief Economist of Moody's Analytics 
but my views that I express here are my own, my own views, not 
Moody's.
    I will make three points in my remarks.
    Point number one, fiscal policies legislated since the 
pandemic hit three years ago have, in my view, in their 
totality, been successful. The pandemic rescue packages, 
beginning with the CARES Act that was passed three years ago, 
March of 2020, through the American Rescue Plan passed in March 
of 2021, have gone a long way to restoring the economy to full 
employment. You can see that clearly in the labor market, the 
job market. Congressman Boyle pointed out all the job growth, 
unemployment is back to 3.6 percent nationwide. That is 
consistent with the full employment economy. That would not 
have happened without the very aggressive, muscular response 
and the rapidity at which you responded to the crisis; very 
laudable.
    I think it is fair to say that the economy still is 
struggling with the fallout from the pandemic, and of course 
the Russian invasion of Ukraine has complicated things as well. 
Inflation is high, painfully high, interest rates are high, the 
economy is vulnerable, but I don't think you can lay these 
problems at the feet of the policy response to the crisis. The 
thing I would say about the policy response is without it, the 
economy would have been significantly diminished and our fiscal 
problems meaningfully, more severe. The hit to revenues, the 
demands through automatic stabilizers on our spending would 
have resulted in bigger budget deficits and a higher debt load 
than exists today.
    I also would like to point out that the legislation since 
the American Rescue Plan, which includes the infrastructure 
legislation, the CHIPS Act, the Inflation Reduction Act, I do 
think will be very important to the Nation's long-term economic 
growth. I think these are things that we needed to do and I 
think they will add to the economy's long-term growth prospects 
and help from a geopolitical perspective in terms of supply 
chains and the chip industry. So I think those are very 
important pieces of legislation that will be very positive to 
the economy as we move forward.
    Second point I would like to make is that lawmakers have an 
immediate challenge, and that is raising the debt limit. That 
has to happen. Very uncertain when the Treasury is going to run 
out of cash to pay all the government's bills on time, but by 
our calculation that is going to happen sometime in mid-August, 
and so I suspect when we come back after July 4th this is going 
to come to the fore in financial markets very significantly, 
and as we approach that so called X date in mid-August, 
pressures in the financial system are going to build, and as we 
can see from recent events, given the banking crisis, the 
system is very fragile at this point in time and adding the 
debt limit as an issue for investors would be particularly 
inopportune at this point in time.
    So this has to be addressed and I don't think there is any 
possibility it can be addressed through prioritization. We can 
talk about that, but a lot of work has been done in this area. 
Technically debt can be prioritized, but I don't think 
investors are going to be convinced that they are going to get 
paid before Social Security recipients, the military, or even 
the Federal Government's electric bill for very long. So it is 
not going to forestall a crisis.
    And finally, point number three, I very much agree there 
are very significant long-term fiscal challenges. I mean, just 
take a look at the CBO's February 2023 Economic and Budget 
Outlook, and the economic assumptions are very reasonable. The 
budget outlook is unsustainable. The kind of the headline 
number, debt-to-GDP 97 percent today, it is going to be 118 
percent under current law ten years from now.
    I think a good rule of thumb is every percentage point 
increase in the debt-to-GDP ratio ultimately adds two basis 
points to the 10-year treasury yield. So if you just do just a 
little bit of arithmetic, interest rates are going to be 40, 50 
basis points higher ten years from now, all else being equal, 
because of our fiscal situation. Obviously, the world doesn't 
end ten years from now. The budget outlook looks even worse 
after that. So we do need to address that, and I do think it 
does require both tax increases and government spending 
restraint to be able to do that going forward.
    Thank you for the opportunity to speak to the Committee 
today, and I will be happy to answer any questions.
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    Chairman Arrington. Thank you. Again, I appreciate the 
witnesses.
    Let's move now to the Q and A session and we yield five 
minutes to myself to begin.
    I didn't plan on asking this, but as I listened to you, Mr. 
Walker, before I arrived in this new role, I admired you from 
afar. As you, I don't know if you were on a bus or you were in 
a Volkswagen or what, your mode of transportation, but you 
criss-crossed the United States and you were sounding the 
alarm. I don't think we have ever talked about this. What was 
the response from the American people? Have they just gotten so 
numb to the debt clock ticking away with no major significant 
or serious consequences? I would like to get to a place where 
we can agree on the facts. I heard a lot of this about the 
unsustainability. I would love to get to a place, Ranking 
Member Boyle, where all of us could agree on the numbers, the 
facts, the path. We may disagree on how to address it, but 
where we can all take that to the American people and say, you 
know what, it's a problem, it's not a Republican problem or 
Democrat problem, it's a mathematic reality, and it is a 
problem for this great country.
    So what was the response, Mr. Walker?
    Mr. Walker. Thank you for the question, Mr. Chairman.
    Mr. Chairman, I have done public education engagement 
events in 47 states plus D.C. during my career, and I have done 
25 states just in the last 15 months. The most significant one 
was the ten million a minute tour. That is how much our total 
liabilities and unfunded promises were going up a minute. In 
2012, I went to 27 states, 10,000 miles. It was funded largely 
by H. Ross Perot, Senior, may he rest in peace, and what I 
found, in partnership with Alice Rivlin and others, and may she 
rest in peace, is the American people are a lot smarter than 
many people here realize. They know you can't spend more money 
than you make, charge it to the credit card without having a 
day of reckoning. They are willing to accept tough choices if 
they are part of a comprehensive plan designed to meet a 
specific objective consistent with principles and values that 
bring people together rather than divide them apart, and in 
fact, we were able to achieve over 90 percent agreement from 
representative groups of voters, statistically representative 
groups of voters, in the North and the South on a goal, a debt-
to-GDP goal, a ratio of spending to revenues, and specific tax, 
Social Security, Medicare, Medicaid, healthcare, defense, 
government organization operations, and political reforms. 
Minimum 77 percent over 90 percent. Simpson-Bowles did not do 
that.
    What has to be done is a statutory commission that engages 
the American people with the facts, the truth, the tough 
choices, helps them understand that we have to make tough 
choices sooner rather than later, get input from them, 
seriously consider it, and then set the table for a tough vote 
by Congress. So they are way ahead.
    And by the way, I brought something. This is one of the 
original charts used by H. Ross Perot in 1992.
    Chairman Arrington. Wow.
    Mr. Walker. The slope is not correct, the endpoint is. He 
predicted that the debt would be $8.5 trillion at the end of 
2006. What was it? $8.5 trillion. What is it now? Almost $32 
trillion, and as I mentioned before, that doesn't count 
unfunded civilian and military pensions, retiree healthcare, 
Social Security, Medicare. The real number is $123.5 trillion, 
going up by almost $10 trillion a year. That is the hole we are 
in, ladies and gentlemen.
    Chairman Arrington. Stunning.
    Dr. Taylor, I have made the statement that the President's 
failed economic policies and unnecessary massive spending, some 
necessary with the COVID situation and weathering that, but a 
lot unnecessary in my opinion. Can you connect the dots between 
fiscal policy--and is there a connection between the last two 
years of this President's economic agenda, fiscal policies, and 
the inflation, and the interest rates, and the sputtering and 
sinking economy into recession?
    I yield to you, Dr. Taylor.
    Dr. Taylor. Yes, there is a connection and I have written 
about it, testified at other committees about this already.
    The Fed got behind the curve. I don't think there is much 
disagreement about that at this point and they are beginning to 
catch up, but they still have a ways to go. I think that I 
mentioned monetary policy in my opening remarks because I think 
it's a very important part of the fiscal side. So it is a very 
important thing.
    What I try to do as well in my formal opening is refer to 
the President's budget. It has deficits growing as far as the 
eye can see, it has spending increases, it has tax revenue 
increases. These are the things that I think we need to 
address. We have been successful in the past by addressing 
those. So I urge the Committee to take this on and have 
substantive description of what we need to be doing.
    I outlined a little bit in my testimony, but I think it is 
important to get this deficit out of the picture as much as 
possible, and that requires some adjustments on revenues and 
adjustments on spending as well.
    Chairman Arrington. I thank the gentlemen. I have so many 
questions and so little time, so I am going to yield to my 
Ranking Member, Mr. Boyle for his questions.
    Mr. Boyle. Thank you.
    I want to pick up on the idea of balancing the budget in 
ten years because some of my colleagues on the other side of 
the aisle have committed to that, Speaker McCarthy has made 
that as a goal, but at the same time, they have also made as a 
goal no tax increases and no changes to Social Security, 
Medicare, or defense. I referenced this in my opening 
statement.
    To Dr. Zandi, given the analytics that Moody's did on this 
kind of a proposal a couple of weeks ago, can you talk about 
what level of cuts would have to go to everything else 
government does if you were to attempt to pursue a policy like 
that?
    Dr. Zandi. I think the CBO actually released a memo very 
recently documenting the severity of the cuts that would be 
necessary to achieve a balanced budget ten years from now under 
the restrictions that you articulated, and pretty clearly it is 
not realistic. It would require a complete cut of all 
discretionary non-defense spending to achieve that, and that 
probably understates things in the sense that it is a static 
score, meaning it doesn't account for the impact of those 
changes on the economy and what that would mean for revenue, 
what that would mean for the automatic stabilizers and 
spending. So it is probably not even possible to achieve that 
over a ten year period.
    And moreover, given the current state of the economy, the 
high inflation, the high interest rates, the vulnerabilities to 
the economy, significant cutting at this point in time, if it 
were anytime in the near future, I think would be the fodder 
for a recession, and you articulated kind of the fallout in 
terms of jobs and unemployment and it would be quite 
significant. So I don't think that proposal is at all feasible 
or realistic.
    Mr. Boyle. Thank you.
    And Moody's projected two and a half million job losses as 
well as a recession in 2024, if that sort of policy were to 
come about.
    Dr. Zandi. Exactly.
    Mr. Boyle. Let me pick up on the debt ceiling. Can you 
begin to describe what the consequences would be if for the 
first time in American history we breached the debt ceiling?
    Dr. Zandi. There is short immediate consequences and 
longer-term consequences. The immediate consequence, I think 
under any scenario would be we would go into recession. It 
would be severe. Financial markets would be upended, we would 
have turmoil in markets, as I mentioned earlier, particularly 
in the context of the current fragility in the banking system, 
financial system more broadly, that exists already today.
    So my sense is that if you want to kind of make it more 
concrete, if you remember back to TARP, that was the bailout 
package that was passed during the financial crisis, $700 
billion package for banks, the vehicle industry, and housing. 
Congress voted that down initially and when that happened, 
markets tanked, equity prices fell, credit spreads gapped out, 
and of course, it was so harrowing to watch. I can remember 
just watching the TV at that time it was very harrowing. 
Congress immediately reversed course and passed TARP. That is 
the same kind of dynamic in the near-term that would, I think, 
happen here.
    Mr. Boyle. What would be the effect on the status of the 
dollar as the world's reserve currency?
    Dr. Zandi. It would be significantly diminished. How could 
it not be? I mean, the reason why the rest of the world wants 
to put their savings into dollars as a reserve currency is 
because they feel it is money good. That if they hold dollars, 
hold bonds, U.S. Treasury bonds, that they are going to get 
their money back on time with no delay, as is in their 
agreement with the U.S. Treasury. If we break that, then 
interest rates will be higher for forever and the cost interest 
expense to us would be higher and our fiscal problems more 
significant, and governments would not want to hold the dollar 
to the same degree as a reserve currency. They will look for 
other currencies to hold their reserves in.
    Mr. Boyle. My time is about to expire. So you referenced 
this a little bit in your testimony, there is a bill that was 
passed out of Committee recently, so called debt 
prioritization. How would the rest of the world and the markets 
interpret this? Would they interpret it as legitimate or would 
they in fact interpret as basically default by another name?
    Dr. Zandi. They would view it as the U.S. Treasury bond I 
invested in is not money good, I am not going to get my money 
on time, as is agreed to. They would stop buying bonds, which 
would already send interest rates up because foreign investors 
are big purchasers of bonds, and then ultimately start selling 
bonds, depending on how things kind of unfold, but they would 
not remain as investors in U.S. Treasury, certainly not to the 
degree that they are right now.
    Mr. Boyle. Thank you. I yield back.
    Chairman Arrington. Thank my friend from the Commonwealth 
and yield to the gentleman from California, Mr. Tom McClintock.
    Mr. McClintock. Actually, most states have such a provision 
in their constitutions, and Ben Bernanke credited that 
provision with confidence in their bonds, but that is not what 
I want to talk about.
    Dr. Zandi, from your testimony, it sounds like you believe 
our fiscal policy is generally on the right track, especially 
the major spending programs over the last few years, although 
you think we need to raise taxes to reduce the deficit. Is that 
a fair summary?
    Dr. Zandi. Yeah, I would say----
    Mr. McClintock. Dr. Taylor, what is the history of tax 
revenues in this country? My understanding is that regardless 
of tax rates, tax revenues are historically amazingly stable at 
between 13 and 19 percent of GDP. Is there a natural limit to 
the percentage of GDP we can actually tax?
    Dr. Taylor. The limit is the effect on the economy, and you 
have a responsibility to make sure the economy doesn't tank, 
and so that is the limit.
    Mr. McClintock. At least going as far back as World War II, 
we have never exceeded about 19 percent of GDP. So are we 
pretty much at that limit now?
    Dr. Taylor. We are very close, very close.
    Mr. McClintock. Mr. Hodge, I know of only three ways of 
paying for government spending: current taxes, which reduce 
current productivity, borrowing, which crowds out the capital 
market that would otherwise be available to lend to consumers 
wanting to make consumer purchases. It runs up interest costs 
and has to be redeemed ultimately as future taxes, and, of 
course, inflation that hollows out people's savings and 
earnings. Are there any other ways to pay for spending?
    Mr. Hodge. No, Congressman.
    Mr. McClintock. So to borrow a Clinton maximum, it is the 
spending stupid.
    Mr. Hodge. There is only one place to get the money for 
Federal spending, and that is from American taxpayers and the 
private economy.
    Mr. McClintock. Now, inflation is caused by too many 
dollars chasing too few goods. When this administration took 
office, inflation stood at 1.4 percent. The Democrats then 
printed and spent trillions of dollars that we didn't have. 
Inflation in the last 25 months is up about 15 percent total, I 
believe. Does that mean that a savings account of $100,000 the 
day that Joe Biden took office is now worth about $85,000 in 
actual purchasing power?
    Mr. Hodge. Sadly, that is true, and I agreed with 
economists like Larry Summers and Jason Furman, who----
    Mr. McClintock. Oh, they were warned.
    Mr. Hodge. They said the American Rescue Plan was going to 
cause inflation, and it certainly did.
    Mr. McClintock. Yeah, they were warned by many in Congress.
    Mr. Hodge. They were warned.
    Mr. McClintock. Not by Dr. Zandi, but by many others.
    Mr. Hodge. Yeah.
    Mr. McClintock. Does that also mean that a $50,000 annual 
income the day that Joe Biden took office, it would now 
purchase about $42,500? So that is basically a tax of $7,500 on 
annual savings and $15,000 in that $100,000 savings account 
that a person has built up?
    Mr. Hodge. You have hit on the point here. Inflation is a 
tax on American people and their livelihoods and their standard 
of living, and right now, inflation is clawing away at their 
living standards.
    Mr. McClintock. The day that Biden took office, the 
Southern Border was under control, the Remain in Mexico policy 
had slowed phoney asylum claims to a trickle, border wall was 
nearing completion, ICE was enforcing court ordered 
deportations. That very day, Joe Biden reversed these policies, 
and since then, 1.9 million illegal aliens have been admitted 
to the country in violation of law, and while the Border Patrol 
has been overwhelmed with that, another 1.2 million known 
gotaways evaded them. Now, that is an illegal population 
admitted to this country in 25 months that is larger than the 
entire population of the State of Arkansas, a state with four 
congressional seats, in 25 months. How does that affect the 
income of working Americans?
    Mr. Hodge. Well, number one, we have the challenge of 
trying to care for these people and the demands that it is 
putting on the----
    Mr. McClintock. Plus the impact on taxpayers, on the social 
safety net, on our schools, on our hospitals. What is it doing 
to the incomes of working American families?
    Mr. Hodge. Well, some would believe that the influx of low-
income workers drives down the wages of current workers.
    Mr. McClintock. How can it be otherwise if you are adding 
millions of unskilled laborers in the marketplace?
    Mr. Hodge. Well, there is a lot of evidence, however, that 
we do need more workers in the United States because we have 
this gap.
    Mr. McClintock. 3.1 million?
    Mr. Hodge. We need to have more skilled workers in the 
United States.
    Mr. McClintock. On Inauguration Day, the average price of 
gasoline was $2.39 a gallon. We were energy independent for the 
first time in decades. That afternoon, Biden canceled the 
Keystone Pipeline, which today would have been completed and 
delivering 850,000 barrels of crude oil into American markets, 
he canceled oil exploration on Federal lands, he has presided 
over a virtual moratorium on new drilling permits. One study 
estimates that if the Trump energy policies had remained in 
place, we would be producing between three and five million 
barrels a day more oil. What are the implications of these 
policies on energy prices and economic growth?
    Mr. Hodge. Congressman, we are our own worst enemies when 
it comes to this. Here we were net exporters of oil in the 
United States. We could have solved Europeans' problems, both 
oil and gas, but I think this administration has gone the wrong 
direction and has caused the crisis that we now have with both 
of these things.
    It reminds me of the 1980s when we passed the Windfall 
Profits Tax, which actually reduced domestic production and 
caused us to be more dependent on foreign oil. It is completely 
ridiculous.
    Mr. McClintock. We have done it to ourselves.
    Mr. Hodge. We did it to ourselves.
    Chairman Arrington. I thank the gentleman from California.
    And if I might be indulged, I saw a group of students come 
in. I couldn't be more delighted to have the next generation of 
Americans here. This is an important conversation, and we all, 
I think, agree this is a serious issue, and I don't think it 
will impact anybody more than the young people that are sitting 
here in this hearing room. So welcome. We are delighted to have 
you.
    Now to my friend----
    Mr. Blumenauer. Mr. Chair.
    Chairman Arrington. Yes, sir. I yield.
    Mr. Blumenauer. Just a point of personal privilege.
    Chairman Arrington. You bet.
    Mr. Blumenauer. I think these young people are with the 
Constitution Team from Cleveland High School in Portland, 
Oregon.
    Chairman Arrington. Wow.
    Mr. Blumenauer. Young people that are understanding how it 
works.
    Chairman Arrington. That is great. Awesome.
    Mr. Blumenauer. They are amazing in terms of what they do, 
and we welcome them.
    Chairman Arrington. Hey, let's give them a round of hand.
    I thank my friend from Oregon, but now yield five minutes 
to the gentleman from New York, Mr. Higgins.
    Mr. Higgins. Thank you, Mr. Chairman.
    The proposed Biden budget of $6.9 trillion is about 29 
percent of the U.S. economy. The United States is less than 
five percent of the world's population and about 27 percent of 
the world's economy. A default on American debt would not only 
destroy the American economy with high recession, lost 
household savings, lost retirement savings, but it would drag 
the entirety of the world economy down with it.
    The past five recessions started under Republican 
administrations, July of 1981, July of 1990, March of 2001, 
December of 2007, and February of 2020. The national debt 
increased more rapidly under Republican administrations, under 
the past four administrations, an average rate of 10.2 percent, 
including $8 trillion under the previous administration, and 
the debt ceiling was raised by the very people that say that we 
have to do something about all of this. They did something. 
They contributed to the debt and therefore have a moral 
responsibility to raise the debt ceiling to help the American 
economy.
    As has been said here by many, the best way to grow an 
economy is to invest in it. We saw the 1990s under the Clinton 
Administration, they had four percent economic growth for each 
year over eight years. There wasn't budgetary deficits, there 
were budgetary surpluses. Those surpluses were taken by the 
next administration, a Republican administration, to provide 
tax cuts to the very, very wealthy on the faulty theory that 
trickled down would help grow the economy, and it didn't.
    So we just came off horrible three years in the pandemic. 
Nobody was lining up for Russian and Chinese vaccines. It was 
the messenger RNA vaccine, which is the genetic material that 
tells a cell to make a protein, which is the active ingredient 
in the vaccine. Two million Americans were saved because of 
that. The American economy was saved because of that. Yeah, we 
spent a lot of money, and inefficiently, some $5 trillion. 
Somebody said on the other side that too much money chasing too 
many goods created inflation. Guess what? Bloomberg Analytics 
forecast that inflation at this time next year will be down to 
2.5 percent from a high of 9.1 percent in July.
    The Inflation Reduction Act, somebody called that corporate 
welfare. The real corporate welfare truthfully is not the IRA, 
it is the IRS in tax avoidance. The previous administration's 
IRS Commissioner said that we are losing--we are losing $1 
trillion a year because of tax avoidance. Well, the IRS 
Commissioner, that is what he said.
    So you look at the CHIPS and Science Act. We talk real 
tough around here about China. Well, we need to talk a lot 
tougher. We got to be tougher in ourselves about China. Today 
there are 200 electric vehicle battery mega plants being 
constructed, and they will be finished in the next five years--
146 are in China, 24 are in Europe, and 11 are in the United 
States. What is the CHIPS and Science Act and the Inflation 
Reduction Act intended to do? It is intended to accelerate 
United States manufacturing, friends shoring, reshoring, call 
it what you will. The bottom line is we need to make more 
things here.
    In two years of the Biden Administration, he has created 12 
million jobs. It is a pretty good record. The unemployment rate 
is as low as it has been in 54 years, and we are accelerating 
the things that we made and sold to the rest of the world, now 
they make and sell to us. So a lot of bad news is being 
circulated through here, but this is an extraordinary country 
that does a lot of great things, and it is not the iPhone or 
TikTok that are the great products of American intervention, 
innovation, it is stuff like the messenger RNA, it is every 
technology in your cell phone, touchscreen technology, voice 
activated personal assistant, global positioning satellite, the 
internet. Guess who created it? Americans, through their 
investments in DARPA, and then Steve Jobs went and took all 
that technology that we paid for and made a billion smartphones 
in China.
    Look, let's be tough on China, but let's be tougher on 
ourselves about China, and to grow the American economy, you 
have to invest in it, and the CHIPS Act, the Inflation 
Reduction Act, the infrastructure bill are all intended to do 
that at a time when our economy took a major beating over the 
past 36 months.
    I will yield back, sir.
    Chairman Arrington. I thank my friend from New York and now 
yield to the gentleman from Wisconsin, Mr. Grothman, for five 
minutes.
    Mr. Grothman. I am going to go over a little what Mr. 
McClintock went over. Could one of you guys give me a little 
bit of history of debt as a percent of GDP, where we stand now 
compared to where we stood over the last 80 years?
    Mr. Walker. Let's start from the beginning. In 1789, to 
defeat the most powerful military on earth, to achieve 
ratification of the constitutional amendment, which included 
assumption of all state debt, debt-to-GDP was about 30 percent. 
It never exceeded 40 percent, no matter what, whether we were 
at war, peace, Great Depression, whatever, until we got to 
World War II. In World War II, it exceeded 100 percent, an all-
time high, because we defeated the axis powers, saved the free 
world, and avoided attack on the continental United States.
    After World War II, we pulled back spending dramatically, 
right sized the military, and made some targeted investments in 
human capital and physical infrastructure through the GI bill, 
which my dad benefited from, and through interstate highway 
system, and the economy grew much faster than the debt. Debt 
didn't go down, the economy grew much faster than the debt. We 
were down to 30 percent, roughly, of debt-to-GDP in 1980. It 
went up to defeat the Soviet Union and a variety of other 
things. We got back fiscal discipline in the 1990s. When I 
became Comptroller General in 1998, it was 60 percent. When I 
left in 2008, it was 60. If you add debt held by the public and 
debt held by the trust funds, which are guaranteed by the 
Constitution of the United States 14th Amendment, the only 
thing that is guaranteed by the 14th Amendment, nothing else, 
we are over 120 percent of GDP, and we are headed up to close 
to 200 percent of GDP in the next 30 years if we don't get our 
act together.
    So the key is here, not where we have been, not where we 
are, where we are headed. Both Democrats and Republicans are 
responsible for where we are, but enough is enough. We are 
headed off a cliff.
    Mr. Grothman. Okay, could you get--obviously, we are going 
deeper in debt every year, could you comment a little bit on--
well, first of all, is it true that next year our interest on 
the debt alone will cause our spending to go up $100 billion 
compared to this year?
    Mr. Walker. That sounds about right, and within ten years, 
we will be spending more on interest than national defense, and 
the shocking thing is, if you look at what the government is 
spending money on, and you compare that to the preamble of the 
Constitution, it is a total mismatch.
    Mr. Grothman. Is part of the problem that people around 
here don't understand the Constitution or what they can do. Do 
you think that is part of the problem? I keep hearing people 
say we are democracy, which was----
    Mr. Walker. My personal view, and I have said this 
publicly, I think every Member of Congress should be required 
to take an exam on the Constitution on Constitution Day in 
September and publish the results, and I would be interested to 
see what the results would be.
    Mr. Grothman. Very good. There are some people who feel the 
answer is to increase taxes. Could you comment a little bit on 
the Laffer Curve? In other words, if we----
    Mr. Walker. Well, I know Art Laffer. I mean, people take it 
to an extreme. Okay. There is a point of diminishing returns, 
right? Let me just give you the bottom line. I am a political 
independent, all right. There is a new four-letter word in 
fiscal policy, it is called math, all right. President Biden's 
proposed policy doesn't meet the test. What you articulated 
that is potentially being proposed by the Speaker, doesn't meet 
the test, all right. The problem is primarily a spending 
problem. Overwhelmingly, but not exclusively. We have waited 
too long to solve this problem. You can't grow your way out, 
you can't cut your way out, you can't tax your way out. You 
have to create a mechanism that will allow tough choices to be 
made where everything is on the table to differing degrees, all 
right. That is what you got to do.
    You will not solve the problem unless you do that, and you 
can't do it from Washington. You got to start with the people 
and end in Washington.
    Mr. Grothman. Okay. Could you comment on the degree to 
which spending must fall to begin to get us back on a 
potentially tenable tract?
    Mr. Walker. Well, I think the target needs to be debt-to-
GDP. We need to set a target that we can reach in about ten 
years, okay.
    Mr. Grothman. How about in the next two years? Because I 
think ten years is ridiculous. This place is not capable of 
sticking----
    Mr. Walker. It only does one year budgets. That is part of 
the problem, but yeah, that is part of the problem, but look, I 
put out in my testimony that you need to cut 2024 spending at 
least $200 billion as a down payment, and I gave you specific 
ideas how to do that. It isn't that tough. Okay.
    Mr. Grothman. You believe it is reasonable, but let's just 
say discretionary spending. You believe it is reasonable to cut 
discretionary spending by $200 billion this year compared to 
last year?
    Mr. Walker. Well, it is not all discretionary. I mean, the 
two things that I say is, number one, eliminate the emergency. 
All spending and subsidies associated with the COVID emergency 
alone, it is hundreds. It is a huge amount of money. Secondly, 
eliminate all one-time spending items. There were lots of one-
time spending item. If you just do that you get over $200 
billion. Just do that, all right.
    And, by the way, I am on the Defense Business Board. Over 
time, there is plenty of ways to cut defense spending without 
compromising----
    Mr. Grothman. Absolutely.
    Mr. Walker [continuing]. Without compromising national 
security.
    Chairman Arrington. I thank the witness and I thank the 
gentleman, but we are going to now yield five minutes to our 
colleague from Illinois, Ms. Schakowsky.
    Ms. Schakowsky. Thank you so much. I am glad you mentioned 
$200 billion because I think it came up earlier and it is all 
about spending. You said that of course, there were tax breaks 
of $200 billion that went mostly to the wealthiest Americans.
    Just a comment to the students, let me just say, I am sure 
that you are aware that it is in our Constitution that we have 
the duty, the United States of America, to pay our debts, put 
it simply, to pay the bills, and what is really important, and 
I think you can help us, is that what we are talking about is 
money that has already been spent, agreed to by Congress, and 
that we owe that money now and that we should pay our debts.
    And I know that, Dr. Zandi, you talked about the debt 
ceiling, which of course has passed more than 70 times and 
three times without any hullabaloo during the Trump 
Administration, and now what we are seeing is that Janet Yellen 
has told us that we actually have already reached our limit, 
our Secretary of the Treasury, and that if we fail to pay our 
debts that it can have pretty dramatic consequences not only to 
the overall economy, but to individual Americans.
    So I wanted to talk to you a little bit about that, Dr. 
Zandi. Right now, there are 40 million people who get the SNAP 
program, there are about 70 million Americans who are in Social 
Security, 65 million Americans on Medicare right now, and if we 
don't meet our obligation to pay our debts, seems to me that we 
are going to see some real difficult times for the people who 
rely on those.
    I wondered if you could comment not only about what might 
happen to the individuals, but what kind of impact does that 
have on our overall economy if so many millions of people now 
are unable to get the food on the table and the basic needs 
that they need to have met?
    Dr. Zandi. Obviously, it would be an extraordinarily 
significant hardship, financial hardship on all Americans if we 
breach the debt limit, and if we do breach, my guess is that 
the Treasury is going to try to pay bondholders, and they can 
technically do that through another payment system, but then 
everybody else, Social Security recipients, SNAP recipients, 
rental assistance, the military, everybody else, they would not 
be able to prioritize those payments. So what the Treasury 
would do is they would wait till they raise enough cash to pay 
everyone in a given day. So everyone is going to get their 
money late and over time it is going to get later and later and 
later. So the first payment might be a day late, the next go 
around, it might be a week late, the next payment after that a 
month late. So the most immediate effect is people that really 
need the cash to buy groceries, to pay their rent, just to do 
the typical things that people do, will not have the cash to be 
able to do it. So obviously, the hit to the economy would be 
enormous.
    And then there is all the financial market effects, right, 
because investors would see that, stock prices would fall, we 
would see interest rates ultimately rise, the value of the 
dollar would decline, that would add to inflationary pressures. 
It would be a significant hit to the wealth of all Americans, 
and then ultimately, we would start losing jobs, unemployment 
would start to rise, we would be in a very, very severe 
recession. So all of us would be hit hard by that kind of 
scenario, depending on how long it unfolds.
    Now, it is hard to imagine that one would go down that path 
and if we actually went down the path, that we go down it for 
very long because it would become very obvious to everybody 
that that was going to hurt everybody and made no sense 
whatsoever, but if you continue down that path, they hit the 
American people, every American. It would be very serious.
    Ms. Schakowsky. You say maybe it is just a day or a week. I 
just want to say as someone who works very closely on issues 
that affect older Americans for example, I want to tell you--or 
SNAP recipients, people who rely on it for their nutrition, 
even those short delays may not mean a lot to some people, oh, 
we can wait the week, these are really critical problems for 
people who rely on these benefits.
    So let's see. Am I out of time? Just about.
    So I want to thank you for illuminating that even more. 
Thank you so much, Dr. Zandi.
    Chairman Arrington. I thank the gentlelady from Illinois 
and yield five minutes to Mr. Bob Good from Virginia.
    Mr. Good. Thank you, Mr. Chairman. Again, thank you to our 
witnesses here.
    I agree with what my colleague was saying a few moments ago 
about the responsibility that we have as a House. We have 
primary responsibility for the power of the purse, if you will 
and we have responsibility to protect the ability of the 
Federal Government to borrow when necessary and to pay our 
debts, obviously, which is always absolutely necessary, and I 
would submit that a default will take place when we can no 
longer borrow, when we can no longer sell our debt, or when we 
can no longer make our payments.
    And so I would go to Mr. Walker. Help us with that. When 
would we begin to reach that, do you foresee, when we would 
have difficulty borrowing, selling our debt and/or making our 
payments on the debt?
    Mr. Walker. First, only God knows, and God's not telling 
us, but let me touch on your issue. There is a lot of 
disinformation and misinformation going around about the debt 
ceiling, okay. First, it is failed. It needs to be replaced 
with a debt-to-GDP approach, okay, which can succeed and has in 
other countries.
    Secondly, there is only one thing guaranteed by the 
Constitution of the United States financially, one thing, and 
that is debt and accrued interest on the debt. Nothing else is 
guaranteed--Social Security, Medicare. Those are important, but 
they are not guaranteed.
    Mr. Good. If I may interject, that is the only thing that 
is really mandatory, right?
    Mr. Walker. Right. Secondly, as long as the Social Security 
and Medicare Trust Funds have bonds in them, then you can pay 
benefits on a timely fashion, and they do have bonds in them. 
Why? Because they are closely held debt, they are accounted in 
the debt ceiling. So if you need cash, you end up just 
converting from intragovernmental bonds to bonds held by the 
public. It doesn't change the debt ceiling a dime. All right. 
So A, we are not going to default on our debt. We can't because 
of the Constitution. Secondly, we can pay Social Security and 
Medicare benefits, but you can't pay other things in a timely 
manner, alright, and if the Treasury says that they haven't 
been able to prioritize, then they better read the 
Constitution, okay. That is their job, okay.
    So you will have to make tough choices. Things won't get 
paid on time, but the bottom line is we are not going to 
violate the debt ceiling. The question is what are the 
conditions to raising it? And there should be conditions. We 
are out of control.
    Mr. Good. Yeah. The American people should be greatly 
concerned at the incompetency or perhaps the unwillingness to 
recognize the situation that you just described.
    To your point, we had the Budget Director--which is a funny 
term to apply to this Administration--we had the Budget 
Director here just recently for our last hearing, and to what 
you were speaking about earlier, Mr. Walker, I asked her, do 
you know what our percent debt-to-GDP is, and she did not know. 
She said it was 90-something percent. When I asked her, after I 
told her it was about 125 percent, I said when is the last time 
we were at that level of debt-to-GDP? She did not know. So, I 
had to tell her that it was some 80 years ago at the end of 
World War II, and, obviously, how would we absorb a crisis like 
that? How would we react to a crisis like that? How would we 
fund a real threat to the country when you come in with 125 
percent of GDP?
    That also said, to the point you just made a moment ago, I 
led a letter to Janet Yellen, Secretary of Treasury, asked her 
what is her plan to ensure we don't have a default, to 
prioritize payments, to prioritize spending, and she could not 
or would not answer that with the letter that she sent back to 
me.
    So, Americans should have great concern about the 
incompetency or the lack of ability to recognize the problems 
that we do have.
    I want to move to Mr. Hodge for a moment. The President's 
budget assumes an inflation rate of 2.4 percent, we are 
currently in the range of six percent. When you come out with 
an unprecedented $7 trillion budget, spending about $20,000 per 
American citizen just in a year's time, and projecting a $2 
trillion deficit the first time, is there any reason to believe 
that might bring down inflation?
    Mr. Hodge. Oh, goodness, no.
    Mr. Good. Yeah. Can you speak to how we got to the 
inflation that we have and what the President's proposed budget 
might do to inflation?
    Mr. Hodge. Congressman, over the next ten years, the 
President's budget is proposing to spend $82 trillion. I just 
let that sit out there. Let us absorb $82 trillion. 
Unfortunately, or fortunately, they are proposing to tax $65 
trillion. Both are over the baseline. These are breathtaking.
    I was here 30 years ago when John Kasich was Chairman, 
saying exactly the same thing, but the deficit was only $200 
billion, a pedestrian $200 billion. All of the things that I 
outlined in my testimony about cutting spending and solving the 
entitlement problems were true then in 1995 as they are today. 
The failure to deal with those problems in the interim has 
brought us to this point.
    Mr. Good. Thank you, Mr. Hodge. I have exceeded my time, 
but that $82 trillion is about $ 1 million per citizen--or 
excuse me, per taxpayer, about $1 million per taxpayer.
    Thank you, Mr. Chairman. I yield back.
    Chairman Arrington. I thank the gentleman from Virginia, 
and now to the proud Representative of the next generation of 
Americans here with us today, Mr. Blumenauer from Oregon, five 
minutes.
    Mr. Blumenauer. Thank you, Mr. Chairman.
    And I do appreciate your approach in terms of seeing if 
there are facts we can agree on. I think there are a number of 
things. I also appreciate you providing a provocative panel. I 
am listening to Mr. Hodge about selling the Post Office, the 
most trusted branch of the Federal Government and the greatest 
source of rural and small town family wage jobs, eliminating 
the Corporation for Public Broadcasting, which is the most 
trusted brand of American media and has a huge impact on rural 
and small town America. I welcome any of my colleagues to run 
with those suggestions, but I would rather sort of think about 
this notion of tough decisions.
    Congress has mandated, some of my Republican friends from 
Florida, that the Navy continue to operate the next generation 
of battleships that don't work, that they don't want, at a cost 
of billions of dollars. I mean, there are things that we ought 
to be able to focus on and agree upon.
    In terms of reforming agricultural subsidies, there has 
been interest to try and have more standards for poor people on 
nutrition programs. Yet nearly 20,000 farmers have received 
commodity subsidies for 37 straight years of $1 million or more 
without an income limit. I would think this is something that 
conservatives and liberals ought to be able to zero in on and 
be able to get more value.
    And in terms of health care, I mean, this is the big driver 
of the Federal budget, and that we don't have to continue 
paying twice as much for health care that on an international 
scale is mediocre, and there are a number of things that I 
think we can roll up our sleeves and make a difference. I mean, 
one little thing that I am working on in the Ways and Means 
Committee is to try and get some standards on some of these 
rip-off artists that have hospice programs that are shells and 
they keep getting money. Now, I think these are things that we 
ought to be able to get our arms around, work on, to get more 
value.
    One area that I would like to focus on, and Dr. Zandi, you 
have referenced, and some of our other witnesses, that there 
are going to be needs for more revenue. I would wonder, Dr. 
Zandi, if you could focus on having people pay the taxes they 
already owe, the tax gap that is estimated at approaching a 
half trillion dollars a year. It is interesting, the wealthiest 
Americans have the highest level of tax evasion. The top one 
percent forget to report $163 billion a year that is due and 
payable under the existing system.
    Could you comment on what impact it would have if we 
actually would collect the taxes due and payable in terms of 
our fiscal health and in terms of voluntary compliance of our 
tax system?
    Dr. Zandi. I think you make a good point. I think it is 
pretty clear and I think there is a lot of evidence of tax 
evasion, and that with greater enforcement by the IRS that 
needs the funding to be able to engage in that greater 
enforcement, we can raise that revenue, stop the evasion or 
curtail it, and generate a significant amount of revenue. How 
much is very uncertain. There is a lot of debate and discussion 
around that, and some of the tax revenue that would be 
generated is being used to pay for the Inflation Reduction Act, 
which is paid for. If you look at the IRA, it is paid for 
through other sources of revenue over the next ten years and 
actually significantly reduces budget deficits in the 
subsequent ten years. This is just based on CBO scores, static 
scores. So some of what you are talking about is already being, 
has been used, but I do think there is a tremendous opportunity 
there.
    And I think to your broader point, it just goes to 
fairness, and I think if people feel like everyone is paying 
their fair share, more likely they will pay as well and won't 
evade taxes. So hard to know what that means in terms of 
dollars and cents, but it certainly is intuitive.
    Mr. Blumenauer. Thank you, Mr. Chairman. I appreciate your 
courtesy.
    Chairman Arrington. You bet. I thank the gentleman from 
Oregon and now yield five minutes to the gentleman from Utah, 
Mr. Blake Moore.
    Mr. Moore. Thank you, Chairman, Ranking Member.
    I am not usually the prop guy, so this is a new experience 
for me, but I want to tell a story, and I want your input to 
look back over the last 100 years of our Nation and have 
history either dictate what can happen, in my opinion, what 
could happen, and then what should happen as we look at what we 
have gone through.
    I want to focus on three timeframes: World War II, the late 
1990s, and right now. I think all three are a very important 
inflection point in what we have got going on, and I just 
wanted to hear, primarily from Mr. Walker, but--well, I think 
Mr. Hodge and Dr. Taylor, you all played a significant role in 
the late 1990s and I look forward to your perspective.
    Look, particularly Mr. Walker, World War II, 106 percent of 
GDP. You have gross GDP, you have public, debt held by public, 
different factors. Let's just go with 106 percent of debt-to-
GDP. Thanks for focusing on that metric. We all know that is 
what we should be talking about always. What did we do? What 
were the important aspects post World War II that got us to be 
able to drive this debt-to-GDP down in the right trajectory?
    Mr. Walker. We restored fiscal responsibility, we 
dramatically downsized the military, obviously. At the same 
point in time, we adopted a number of pro-growth policies. We 
invested, had selective investments in human capital, the GI 
bill, we had selective investments in critical infrastructure, 
but they were investments that generated a positive return on 
investment. They weren't just called investments; they actually 
were investments. We do a lot of things around here that we 
call investments, but they don't generate a positive return on 
investment, which is important to keep in mind, and so we grew 
the denominator much faster than the numerator. We didn't pay 
off any debt. That is why debt-to-GDP went down, and the 
metrics really that we ought to focus on are debt-to-GDP, 
spending as a percentage of GDP, revenue as a percentage of 
GDP, mandatory spending as a percentage of the budget, and 
interest as a percentage of the budget. Those are the things 
that we ought to focus on like a laser.
    Mr. Moore. We saw this starting to uptick leading up to in 
the 1990s decade, and you saw--as you did that, you are saying 
people responded to what was going on at the time, and in the 
1990s, there was a group of people led by, like you mentioned, 
former Chairman of this Committee, John Kasich, Senator Bob 
Dole, as I understand, was impactful, you had Director and 
Secretary Leon Panetta at that time was President Clinton's 
Budget Director. Those individuals came together, and they 
achieved a balanced budget. Any takeaways from that type of 
leadership?
    Mr. Walker. First, the last fiscally responsible President 
in this country was Bill Clinton, and the one before him was 
George Herbert Walker Bush. We haven't had a fiscally 
responsible President since then. You had divided government. 
Newt Gingrich was Speaker of the House, President Clinton 
obviously was a Democrat, John Kasich was Budget Chair, I was 
Comptroller General during that period of time.
    Mr. Moore. And I will ask this to all three of you 
gentlemen. I am going to give you a chance here. One major 
concern I have was of the letter that came back from President 
Biden yesterday, says now we need a clean debt ceiling, we need 
to just raise this without any negotiations. Did President 
Clinton engage in good faith negotiations in the late 1990s to 
restore some fiscal sense of responsibility?
    Dr. Taylor.
    Dr. Taylor. You have got to get rid of that thing beyond 
the red. That is what you guys got to do. There is no reason 
why you can't. Look at the history.
    Mr. Moore. Thank you. That is the point I am trying to make 
here.
    Dr. Taylor. Just do it.
    Mr. Moore. We had another inflection point where we have to 
respond to what is going on. We had a record of spending during 
the pandemic. We have an opportunity--I know there is 
bipartisan support--to be able to do what other leaders of our 
Nation have done in the past and address this issue and get us 
going back down.
    Mr. Hodge, please.
    Mr. Hodge. I want you to be careful about taking too much 
out of the 1990s.
    Mr. Moore. I understand.
    Mr. Hodge. The reason the budget balanced in the 1990s were 
two factors primarily. One was the drawdown in defense after 
the Cold War ended where defense went from six percent of GDP 
down to three percent or three and a half percent, and the run 
up in Y2K with capital gains revenues that came flooding in and 
accidentally a bunch of--six months before we balanced the 
budget CBO was projecting $200 billion dollar deficits as far 
as the eye can see.
    Mr. Moore. Absolutely, yes.
    Mr. Hodge. It was an accident. The only----
    Mr. Moore. And with the dotcom busting we recognized the 
revenues weren't really there----
    Mr. Hodge. Yes.
    Mr. Moore. That was a bit of a--yeah.
    Mr. Hodge. There was not as much fiscal discipline then as 
is often----
    Mr. Moore. The planets aligned to make it happen, but the 
President was at least willing to negotiate, and we are not 
seeing that right now. It is a big, big concern for what we 
have got going on to be able to respond to post pandemic--
again, COVID was tough, but it was no World War II, right. This 
wasn't a catastrophic event of World War II. We have an 
opportunity as leaders in this Nation to address so we can get 
this going back in the right direction.
    Thank you and I yield back.
    Chairman Arrington. I thank the gentleman from Utah and now 
yield five minutes to my friend, Mr. Scott Peters, from 
California.
    Mr. Peters. Thank you very much Mr. Chairman.
    I did have questions for Dr. Zandi about the debt ceiling 
that were asked before. I think it is a tremendously risky 
thing. I would say sometimes this Committee can be performative 
and I want to credit my friend, Chairman Arrington, and my 
friend, Mr. Boyle, for really trying to make this a policy 
committee and I really appreciate that.
    I do agree with President Biden. We should do a clean debt 
ceiling. I also understand the realities that that is probably 
not in the cards right now. So, I think we should think about 
what the components are of an extension, and I would like to 
talk a little bit about where we are with respect to Social 
Security.
    And, Dr. Zandi, maybe you could tell us what happens if 
lawmakers fail to shore up Social Security Trust Fund before it 
becomes insolvent in 2035.
    Dr. Zandi. Well, it just adds to the instability of the 
system and the increasing angst of the population around their 
ability to----
    Mr. Peters. Specifically, the angst of the people who will 
have their benefits cut.
    Dr. Zandi. Exactly. Question that.
    Mr. Peters. So, my understanding that about $12,000 to 
$16,000 for a typical couple retiring in 2035, for a low-income 
couple, it is $7,000 to $10,000. I guess, can we talk a little 
bit about the effect of a $10,000 cut to a low-income couple?
    Dr. Zandi. Yeah, obviously, that would be a tremendous 
hardship. It is hard to imagine that that would happen, right. 
Because----
    Mr. Peters. It is hard to imagine that would happen, isn't 
it?
    Dr. Zandi. Yeah.
    Mr. Peters. I have had people say that to me so many times 
in this building.
    Dr. Zandi. It is not going to happen.
    Mr. Peters. But you know what? If you wanted to cut Social 
Security, what you would do is do nothing, and look, we had all 
these young people in here before who probably don't even 
imagine that Social Security will be there for them, and I just 
want to acknowledge that it is time to do something about it.
    I also want to say that it is unrealistic to take tax 
pledges that no one under $400,000 will pay any more taxes or 
Mr. Grover Norquist's pledge no one is going to pay any more 
taxes at all. I hope that people who are serious about this are 
not really thinking that that is the way to do it.
    I like the idea of a commission because what happens in 
this building is if you have any singular idea and you go to 
the microphone, you could lose your job. I think in many ways 
having a discussion among experts about what to do--and I don't 
favor cutting benefits, frankly. I think we recognize Social 
Security has been the most important anti-poverty program, but 
I recognize that we are facing an insolvency in a few years, 
and we have to do something about it. I think a commission 
would be constructive.
    Let me also suggest, though, that we may be asking too much 
of Social Security because it is an anti-poverty program. It is 
not really the full retirement program that perhaps people 
understand it to be today. When this was formed, pensions were 
very common, and we have a problem with getting people to save 
in this country that I think we should maybe think about 
remedying as part of a commission or as part of a total 
solution.
    Senator Coons and I had a bill a few terms back, Congresses 
back, called the Savings for the Future Act, which would have 
taken $.50 of any increase in the minimum wage and required 
that for every hour someone works, $0.50 is put aside for them 
for their retirement, and if you had done that from when 
someone was 18 to when they are 65, that is about $600,000 that 
they would have to retire on, and I hope that we will think a 
little bit more abundantly about what the role of the 
government is and what the role of private savings is and how 
this Congress might incentivize private savings, because I 
think that is got to be really what we are talking about is not 
saving Social Security. Really, that is not the task, the task 
is a dignified retirement for people that is more than Social 
Security.
    Mr. Walker, does that make sense to you?
    Mr. Walker. Real quickly. Thank you.
    First, if we do nothing on Social Security, benefits get 
cut 22 to 25 percent across the board. The reason that we 
reformed Social Security in 1983 is because we were within 
weeks of having across the board cuts that is not politically 
acceptable nor feasible.
    I used to be Assistant Secretary of Labor for ERISA, which 
oversees all private pension plans, defined contribution plans 
as well. You are right, Social Security is a floor. You can't 
live on the foundation; you have to build on it. Savings rates 
need to be higher, and one of the elements of the proposed 
Social Security reform that got 77 percent support was reform 
the defined benefit program to make it solvent, sustainable, 
secure, and have an automatic savings amount on top of that--
automatic savings on top.
    Mr. Peters. Dr. Zandi.
    Dr. Zandi. Yeah, just very quickly. I think just to make a 
point that the real problem or issue is the aging of the 
population. I mean, that is inexorable. I mean, if you look at 
the share of the population that is over the age of 65, it has 
risen from 12 and a half percent to 16 and a half percent since 
the last time we had a balanced budget, and that is what is 
really putting pressure on the budget and what is going to 
continue to put more pressure going forward. If you don't want 
to cut the benefit per beneficiary, and I don't think anybody 
wants to do that, therefore, you need more revenue to pay for 
that increase in spending that will occur just because of the 
aging of the population.
    Mr. Peters. I would also suggest that for that reason and 
for workforce reasons, we ought to really be having an honest 
conversation about immigration as a budget issue as well, but I 
have to leave that for another day. My time has expired.
    Thank you very much, Mr. Chairman.
    Chairman Arrington. I thank the gentleman from California 
and now yield to my fellow Texan, Dr. Burgess.
    Dr. Burgess. Thank you, Mr. Chairman. Unfortunately, the 
students are gone because this conversation really affects them 
more than it affects people of our generation, but I couldn't 
help--they probably left because Blake Moore kept talking about 
the 1990s and for me that would be like talking about the 
1800s.
    But remembering a day back in 1993 when my hospital 
administrator asked me to accompany him to a meeting of the 
Dallas Business Group on Health because they were going to hear 
from Senator Paul Tsongas. I kind of knew Senator Tsongas had 
run for President. I didn't think he had been successful, so I 
wasn't sure what the relevance was, but I also knew he was a 
Democrat, and I was pretty sure that our politics would not be 
aligned. However, this was the week after Bill Clinton had 
given his Health Security address in the Congress, a joint 
session, the House and Senate, big deal. All the House Members, 
Senators were all there and Bill Clinton unveiled his Health 
Security Act, and Senator Tsongas talked about this and said I 
hope you watched the speech. It was a beautiful speech, 
beautifully delivered, not a dry eye in the House, and I was 
crying like a baby because he proposed five new entitlement 
programs, and we can't afford the ones we have got, and mind 
you, this is 1993. I was considerably younger. I wasn't 
thinking much about Social Security, I wasn't thinking much 
about retirement, but he got my attention when he said that, 
and with the help of some charts and graphs he had, he said, if 
we--at the level we are at, if we don't do something within the 
next 20 or 30 years, we are going to have a generation of 
Americans who will not be able to afford to pay the benefits 
that previous generations of Americans have promised themselves 
and the result will be an intergenerational conflict the likes 
of which this country has never seen. That has stayed with me 
over the years, and as we have worked through some of these 
problems in Congress, but also recognized the reason we are 
doing it is not to so much solve the problems of today, but the 
problems of tomorrow that these youngsters are going to face, 
and guess what? When it comes time to do whatever is required 
to prevent that 22 to 20 percent cut in Social Security, the 
next generation of Americans may not be willing to do that. 
They may look at their pay stub and say, you know what, I am 
already paying 85 percent of my paycheck to someone I have 
never met, I would just as soon not pay any more, thank you 
very much.
    So I just wondered, and we have got a brilliant panel in 
front of us, I would just like to hear your thoughts on that 
concept of at some point the next generation of Americans may 
not be able to sustain us in the style to which we have become 
accustomed.
    Mr. Hodge. We are all reaching for the button at the same 
time.
    Dr. Burgess. We will just go down the row.
    Mr. Hodge. Congressman, I just returned from Europe and the 
payroll taxes that support the welfare systems in Europe, the 
retirement systems, are over 30 percent. So today in the United 
States, workers and employers split 12.65 percent on the 
payroll taxes. Imagine more than doubling that. Is anyone on 
this Committee ready to endorse a 30 percent or higher payroll 
tax in order to afford these welfare--or retirement benefits? 
That is the question you need to ask yourself, and I don't 
think anyone here is ready to do that.
    Dr. Burgess. It would be a career ending injury.
    Mr. Hodge. Yes.
    Dr. Taylor. One thing I love seeing, the students--I teach, 
hundreds of students, they are freshmen, sophomores. It is an 
exhilarating experience, by the way, to be in touch with the 
younger people, because that is what we are talking about, but 
I see these numbers, two percent growth. I mean, that is 
terrible. These budget numbers are astounding, 25 percent of 
GDP. The chart that the gentleman from Utah put up is 
astounding. Why not address those issues? There is a lot of 
factors that go into all of them, but I think if we look at 
these totals, we will do something about that. We just can't 
let that exist.
    Dr. Burgess. Yes, sir.
    Mr. Walker. Two things. For the first time in the history 
of the United States, 78 percent--all-time highs, never been 
over 50--of voters believe that life for their children will 
not be as good as theirs. That is immoral. Immoral, and it is 
largely because of this.
    Secondly, the frustration in Social Security. We can exceed 
the expectation of every generation of Americans because 
seniors think they are going to get taken advantage of. That is 
not right, it is not politically feasible. Young people think 
they are going to get nothing. We can reform the program 
gradually over time, make it solvent, sustainable, secure. 
Everybody gets more than they think they are going to get. I 
call that a win. But we are delaying, delaying, delaying.
    Dr. Burgess. Dr. Zandi.
    Dr. Zandi. Well, I would point out that I think there are 
sources of revenue that we can tap that would have very modest 
minor impacts on economic growth. The corporate tax rate would 
be a good example of that. So right now, as you know, under the 
TCJA, that was rolled from 35 percent marginal rate down to 21, 
and very hard to see any beneficial impact from that. At least 
the academic studies that are----
    Dr. Burgess. We are collecting more taxes than we have ever 
collected or ever expected to collect, even in spite of the 
pandemic, and that was the testimony of the CBO Director. He 
said we never anticipated collecting this level of taxes after 
the Tax Cuts and Jobs Act. So, thanks to our colleagues of the 
Ways and Means Committee, who made that happen.
    Dr. Zandi. But according to the CBO, every percentage point 
increase in the corporate tax rate would generate close to $75 
to $80 billion over a 10-year period.
    Mr. Smucker [presiding]. The gentleman's time has expired.
    I would like to recognize Mr. Kildee from Michigan for five 
minutes of questioning.
    Mr. Kildee. Thank you, Mr. Chairman, and thanks for holding 
this hearing, and thanks to the panel. While we may not agree 
on everything I am impressed with--I had to step out briefly, 
but everything I have heard, I am impressed with the quality of 
this panel, so thank you for helping to assemble it.
    And, Dr. Zandi, this may allow you to perhaps expand on the 
points that you were beginning to make, Congress has taken on 
some of these issues, and clearly not to the extent that we 
need to in as full a fashion as necessary, but we have made 
some progress in terms of the effect on the American people, 
cutting out-of-pocket costs, for example, when it comes to 
health care, capping the out-of-pocket costs for insulin for 
just example, legislation that I helped write, it caps that 
out-of-pocket at $35 a month for seniors. The way we wrote it, 
it would apply to all insurances, would have been I think, an 
important step. Making recommended vaccines free for seniors. 
These are helpful in terms of the way this all translates to 
the kitchen table, but we are also allowing for the first time 
Medicare to negotiate drug prices. The insulin cap is going to 
save significant money.
    I want to kind of get right to a question. The Inflation 
Reduction Act was comprised of lots of pieces, some of which 
did really translate to help to these American families, and, 
also whether people want to accept it or not had a positive 
effect on the national deficit. There are some who believe that 
we should just outright repeal that entire piece of 
legislation. All the benefits that would go to families would 
be gone, the economic, fiscal benefits to the Federal 
Government would go along with it. I disagree with that 
approach.
    So, Dr. Zandi, I wonder if you might just zero in on that 
specific area. How does expanding Medicare's ability to 
negotiate prices and resulting in savings to the Federal fisc, 
how does that improve the fiscal state of our country and what 
would be the implications of repealing it?
    Dr. Zandi. Yeah, I think this is a very important place to 
look for spending restraint. So, we have a fiscal problem. We 
need tax revenue, and we need restraint, and if you look at the 
budget, most of the growth in spending is really around the 
cost of medical care, goes to the Medicare program and the 
Medicaid program. So, we really need to think about how to 
reduce the growth rates in the cost of medical care, and I do 
think the steps taken in the Inflation Reduction Act around 
allowing for negotiation around the price for prescription 
drugs goes a long way to doing that and it is only a part way 
to doing that. I mean, it is quite limiting the number of drugs 
that will fall under the IRA negotiations. You have to wait. 
You know this better than I, 9-13 years before you can do that. 
It only applies to Medicaid and Medicare, which together 
account for about 40 percent of all drug spending. So, there is 
the other 60 percent of private plans that spend on drugs.
    So, I think this is a fruitful area for further exploration 
to see if we can't create more competition and get the cost of 
growth down in the price of drugs, prescription drugs.
    Rolling that back, as you say, would be going in the wrong 
direction. It would raise spending in the future, add to our 
future budget deficits and not help our long-term fiscal 
situation. So, I think that is a great place to look for the 
kind of spending restraint we need to address our long-term 
fiscal situation.
    Mr. Kildee. Thank you.
    And I wonder if you might now just turn briefly in a minute 
or so remaining to the question of Social Security. I have 
heard conversation about it. Social Security is a little bit 
like the weather, everybody complains about it, nobody ever 
does anything about it. In this particular case, there are some 
of us who have stepped forward with what we think would be a 
plan worth considering, Social Security 2100, a way to increase 
benefits, strengthen the long-term viability. It comes in a 
couple of different forms, so I would prefer not to have 
somebody pick on one version or the other, but doing so by 
dealing with the cap on Social Security taxation and applying 
that tax to income above that $147,000, actually above the 
$400,000 level.
    I wonder if you might just comment on that or any other 
approach that you might take that would avoid the cliff that we 
might face on Social Security.
    Dr. Zandi. Yeah, that is exactly where I would go. I mean I 
think we need more revenue. I mentioned higher corporate tax 
rates. Just roll back halfway the cuts that occurred under 
TCJA, and we would generate, according to CBO, at least $1 
trillion over a 10-year period.
    The other source of revenue would be exactly this, they 
would go right to Social Security. As everyone knows, there is 
a cap on the income that is taxed, and I would probably go to 
400K and above, I would say anybody making 400K and above, you 
pay that 12.4 percent tax, and then over time you will see the 
cap continue to rise as it currently does under law and then we 
would be paying on those earnings, and all we are doing is 
going back to the original Social Security system where 93--
when Social Security was put on the planet in the 1930s, 93 
percent of all earnings were taxed. That is not the case today 
because of the skewing of the income and wealth distribution 
that we are suffering with. So, all we are doing is going back 
to the future to the original intent of Social Security, and if 
you do that, you solve a lot of problems with the Social 
Security Trust Fund and also you generate a lot of revenue that 
will address our long-term fiscal problems.
    Mr. Kildee. Thank you very much, Dr. Zandi, and to the 
panel, to all of you.
    And I yield back.
    Mr. Smucker. Thank you.
    I would like to recognize Mr. Yakym from Indiana for five 
minutes of questioning.
    Mr. Yakym. Thank you, Mr. Chairman, and thank you to all 
the witnesses for being here today and sharing your insights on 
the current Fiscal State of our Nation.
    It has been talked a lot about the future of our children. 
It is the single biggest concern that I have for our children 
is the Fiscal State of our Nation. I can think of no higher 
responsibility that we have as Members of Congress to ensure 
that the United States of America passes on to the next 
generation a country that is in good fiscal condition and makes 
sure that it is more secure and better economically than the 
country that we inherited, and that is what concerns me so much 
about President Biden's budget request. It shows a complete 
disregard for the concept of fiscal responsibility, and instead 
it doubles down on the same policies that supercharged 
generational inflation, and we have been seeing that 
generational inflation ever since he took office, and we 
started spending a few trillion dollars per year more than what 
we are taking in.
    It also expands on an already bloated bureaucracy and 
suffocates businesses with more burdensome regulations. It 
disincentivizes work and sticks the IRS on unsuspecting middle-
class Americans, and that is not a future that I want to leave 
for my children, nor is $48 trillion in national debt.
    So, my first question is directed to Mr. Walker. Under 
President Biden's budget, discretionary spending will increase 
by six percent over Fiscal Year 2023. Can you explain the 
negative economic implications of consistently increasing the 
size of Federal spending at a faster rate than the growth of 
GDP?
    Mr. Walker. Well, there is an interrelationship here. With 
additional spending, results in additional deficits and debt, 
with additional deficits and debt, under recent monetary 
policies we have had a very loose monetary policy. It is now 
tightening up some. That resulted in excess inflation. Excess 
inflation results in higher interest rates, higher interest 
rates result in a number of factors, including the fact that 
contributed towards the failure of some recent banks, if you 
will. So, these things are all interconnected.
    Let me just mention two things quickly. Current political 
leadership is failing to discharge their fiduciary and 
stewardship responsibilities. That is a bipartisan comment. I 
am an independent, okay.
    Secondly, Indiana was the first state in 1957 to pass an 
application for a Convention of States to propose a fiscal 
responsibility amendment. That is going to solve the problem. 
Debt-to-GDP Constitutional Amendment. Please look at H.C.R. 24. 
Please join in. You are not going to solve this problem without 
a Constitutional change.
    Mr. Yakym. Can you comment even more on the negative 
consequences of these fiscal issues on American families? Just 
think of, like a middle-class family. Can you talk more about 
their issues?
    Mr. Walker. The cruellest tax of all is inflation. You have 
no choice, you don't vote, it just happens, right. It 
disproportionately adversely affects poor people, it 
disproportionately affects middle income people, it 
disproportionately affects people who are on a fixed income, 
and in the last two years, inflation has been 15 percent, so do 
the math. If you look at wage increases, wage increases have 
gone up, but much less than inflation. So, people are losing 
purchasing power during that time.
    Mr. Yakym. The President's budget over the next ten years, 
he states that they reduce the Federal deficit by $3 trillion. 
Is that actually the case, Mr. Walker?
    Mr. Walker. I think the way that that is calculated as 
compared to if we continue to spend--and I don't like to use 
the term drunken sailors, having taught at the Naval Academy, I 
think it is an insult to drunken sailors--but it is like we 
said, we cut the deficit dramatically. Well, we cut it because 
we didn't end up spending a lot of extraordinary amounts that 
were due to COVID, right. I mean what we have to focus on is 
the base budget. The base budget is out of control. That is 
what we got to focus on.
    Mr. Yakym. Thank you, Mr. Walker.
    And, Mr. Hodge, did the American Rescue Plan increase or 
decrease the amount of inflation in our economy?
    Mr. Hodge. Well, I would agree--again, as I mentioned 
earlier, I agree with Larry Summers and Jason Furman and other 
economists who warned against that legislation and the effect 
it would have on inflation, and I think that all of those 
warnings have borne out, and we are seeing the effects today, 
and those effects will carry on long into the future.
    Mr. Yakym. And the President's budget projects 2.4 percent 
inflation next year. Do you think that that is a reasonable 
projection?
    Mr. Walker. Not at all.
    Mr. Yakym. Thank you.
    And, Mr. Chairman, I yield back.
    Mr. Smucker. Thank you.
    I would like to recognize the gentleman from California, 
Mr. Panetta, for five minutes.
    Mr. Panetta. Thank you, Mr. Chairman, gentlemen, thank you 
and welcome. Appreciate your time today.
    I think even though there is a lot of talk about doom and 
gloom, I do believe that we have to give some acknowledgment to 
how resilient our economies are at this point. I mean, 
obviously, there has been a lot of talk about there being a 
soft landing or no landing and then, now a hard landing with 
the worry of the credit and uncertainty. However, you counter 
that with China's rebounding, bottlenecks are disappearing, and 
energy prices falling.
    Nevertheless, despite how we are positioning ourselves 
right now, I do believe you are going to find Members on both 
sides of this dais that are absolutely concerned with reducing 
our deficits, and we got to understand, though, that when we do 
have these discussions, it can't just be about relying on 
spending cuts. We have to at least talk about increasing 
revenues.
    And so, I think there are certain spending cuts that we can 
have to wasteful programs. At the same time, we can raise 
revenues that in certain areas that will have little impact on 
our economy.
    And so, Dr. Zandi, where do you think we can get most bang 
from our buck either on the spending cut side or on the revenue 
raising side, or both?
    Dr. Zandi. I agree we need both to address our long-term 
fiscal problems. I think we need to focus first on revenue. We 
talked about a couple of things. Higher corporate tax rate, 
just roll back the corporate tax rate halfway from the cuts 
that occurred under TCJA. So, they are currently 21 percent, 
let's take it back to 28. That would raise about $1 trillion 
according to CBO over a 10-year period. We talked about taxing 
earnings with the payroll tax to help Social Security above 
400K, that would raise another $650-700 billion, again 
according to CBO, over a 10-year period. The net investment 
income tax, this is in the President's budget, I think it is a 
very good idea, 3.8 percent to five percent, and there are 
earnings that are not taxed through pass through corporations 
and other entities that should be taxed. That is another $600-
650 billion. Those are three ideas that I think would go a long 
way to helping the long-term fiscal situation of the Nation and 
the negative economic consequences of those would be on the 
margin because you are taxing large corporations and high 
income, high net worth individuals and the impact that would 
have on their behavior would be small. I am not saying it would 
have no impact. It will.
    Mr. Panetta. Right.
    Dr. Zandi. But it will have a small and negative 
consequence and go a long way to addressing a long-term fiscal 
situation.
    In terms of spending, I think you need to go to the cost of 
medical care, because if you look at the budget forecast it 
really is the cost of Medicaid and Medicare, and you don't want 
to cut--nobody wants to cut; nobody has the willingness to cut 
the benefits per beneficiary. It is just simply we are aging, 
and we are going to have a lot more people that are in Medicare 
and in Social Security, and so, we need to think about how to 
reduce the growth rate of the cost of medical care, and we 
talked a little bit about prescription drug, negotiating 
prescription drugs. I think that is an excellent place to start 
in terms of working on those things.
    Mr. Panetta. Great.
    Dr. Zandi, you talked about automatic stabilizers, and you 
said that during the times that we were putting out many of the 
subsidies, we were guessing the right amount of aid that it 
would be. Could automatic stabilizers help us deploy the right 
amount of assistance in a future emergency?
    Dr. Zandi. Yeah, I think our automatic stabilizers really 
deserve a lot of focus among lawmakers. I mean they have been 
put in place over time and haven't really been thought through. 
I mean, one example is unemployment insurance. That is a great 
example. What a mess that has been. We relied very heavily on 
that during times of recession and very much so in the 
pandemic, but it is state, you know, state, Federal kind of, 
kind of program, and there are a lot of issues, problems in 
executing on that particular automatic stabilizer, and there 
are so many good ideas and examples overseas of better design 
that if we just thought about this, we would have a system in 
place that would be much more supportive of the economy at much 
lower cost in times of crisis.
    Mr. Panetta. Great. Once again, gentlemen, thank you for 
being here. I yield back, Mr. Chair.
    Mr. Smucker. Thank you.
    I would like now to recognize a gentleman from Georgia, Mr. 
Ferguson for five minutes.
    Mr. Ferguson. Thank you. Thank you, Mr. Chairman, and 
thanks to each of you for being here.
    The list of questions and topics is long and distinguished 
that I would love to dive into, but let me start with just a 
couple of them, and then I want to move to a bigger picture.
    Number one, and, Dr. Taylor, if you could possibly address 
this, I would appreciate it. What we have seen back home is 
that people are having a harder time paying for groceries, they 
are having a harder time paying for gas. The cost of building 
new homes is absolutely through the roof. Everything that 
American families need, and touch is going through the roof. At 
what point does the consumer run out of gas? Now we are seeing 
consumers do buy now, pay later programs for gas and groceries. 
At what point does the consumer run out of gas in all of this?
    Dr. Taylor. So, you are right to point to these rising 
prices. We have been talking about it for a lot. It is slightly 
less than it was before, but it is still very high and is yet 
to be applied to everybody.
    I think what you can do about it is make sure that you have 
some responsibility of the Fed. They have to make the 
adjustments, but the fiscal side is part of this. These charts 
that your colleague from Utah put up were quite striking. Why 
not try to deal with that? That will make it easier to deal 
with these inflation issues that you are pointing to. It is 
very important. It is not just monetary. It is fiscal and 
monetary together.
    Mr. Ferguson. But I just wonder, I mean it just feels like 
when my constituents are hitting this ceiling right now and you 
continue to drive the demand side of the equation with excess 
government spending--and look, my colleague from Pennsylvania, 
the Ranking Member, said we are just trying to get to balance 
by cutting. I would say we wholeheartedly disagree with that. A 
big part of this is about putting forth pro-growth policies 
that drive the economy, and why should we do that?
    Would everybody on this panel agree, just by nodding your 
heads, that we need to ask the very simple question in every 
policy we make, is does it put us in a more competitive 
position against the Chinese Communist Party? Do you think that 
we should be transferring wealth, build here in America, sell 
it around the world, transfer wealth from around the world to 
the U.S. to bolster our economy, our standard of living and our 
fellow Americans? Is that fair?
    So, the question that I have, if you look at what we did--
or what my colleagues did in the Inflation Reduction Act, we 
now have an estimate from Goldman Sachs advising investors that 
this is a good place to park their money because the estimates 
now are over $1 trillion of expenditures. Not 271, but almost 
$1.2 trillion. That is a huge number, and then yesterday the 
Administration announced, and I think they are still working on 
some of this, that we now have this ``free trade agreement''. 
We are going to expand the definition of a free trade agreement 
by going around Congress and allowing the Treasury Secretary to 
do it, where foreign governments get the benefit of the made in 
America tax credit for EV cars and batteries. I mean this just 
absolutely boggles my mind.
    Mr. Hodge, how does transferring taxpayer wealth to 
countries that we don't have a free trade agreement with 
bolster American competitiveness and our standard of living?
    Mr. Hodge. Well, with all due respect, Congressman, the 
Inflation Reduction Act violates all international standards of 
free trade, and so, the Europeans have a good case to make that 
it is a protectionist measure. It violates WTO standards.
    Mr. Ferguson. But specifically, don't you think that the--
--
    Mr. Hodge. It is an internationally illegal act. They have 
a right to sue us under the WTO.
    Mr. Ferguson. But at the core of it, made in America tax 
credits--and we can debate whether or not these things are good 
or bad for the economy----
    Mr. Hodge. They are bad.
    Mr. Ferguson. I don't disagree with you, but the fact that 
we have them, okay, can we at least make sure that they benefit 
Americans and not foreign governments?
    Mr. Hodge. You cannot do that, sir. Under the WTO--and it 
is bad policy to begin with. I mean the whole premise of the 
Inflation Reduction Act is bad policy. It is corporate welfare 
at its worst, and in fact, you mentioned the Goldman Sachs, 
look on page eight of the Goldman Sachs study, and it shows you 
how bad of a corporate welfare this is. It lists all the 
companies that they think are going to benefit from it.
    Mr. Ferguson. And by the way, on that same point, by the 
time you fold in all of these tax credits, it is going to be a 
net benefit to the largest corporate citizens in America and 
around the world, and all of the rhetoric about corporations 
having to pay their fair share, it just gets flushed down the 
toilet because you are giving a tax break to the very people 
that you are demanding pay a higher level.
    And with that, my time has expired.
    I yield back, Mr. Chairman.
    Mr. Smucker. Thank you.
    I would now like to recognize Ms. Jackson Lee of Texas for 
five minutes of questioning.
    Ms. Jackson Lee. Mr. Chairman, let me thank you and the 
Ranking Member for this insightful hearing.
    But let me lay as a premise that none of this enlightening 
testimony transpired during the Trump Administration. No 
Republican was interested in speaking clearly and loudly about 
the Trump corporate giveaway that has basically put us in a 
sizable hole, and none of you have taken into account, if you 
will, the investment that has been done.
    Interestingly enough, Donald Trump as President started 
buying America very clearly. No voices were raised, no 
witnesses came on behalf of Republicans to speak against it. 
The only way we are going to be fair on this process is if we 
speak clearly, no matter who is in the majority. That is not 
the case at this point.
    We have a hysterical statement--cut spending in 2024. That 
means leave children along the highway of despair, impoverished 
people, no housing, no investment in education.
    Dr. Zandi, I am going to question you in the backdrop of 
some of these points, but I ask unanimous consent to place in 
the record The Guardian expects prices to slow this year in 
sign that inflation is easing, March 29, 2023. I ask unanimous 
consent to put that in the record. Forbes magazine, February 
CPI report shows that inflation keeps falling, March 14, 2023.
    Mr. Smucker. Without objection.
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    Ms. Jackson Lee. I am not suggesting that we should not be 
here being serious about this issue, but let's be realistic and 
let's have all the facts.
    Now, as I question you, Dr. Zandi, allow me just a moment 
that I want to put on the record. A budget is a vision for 
America. In the President's budget he spoke to the horrors of 
gun violence, and I want to put on this record that we have yet 
to see the Republican budget, we have yet to see it, and yet I 
just came from standing again in front of the steps of the 
United States Capitol mourning the mass murder that occurred in 
Nashville, Tennessee. Three dead nine-year-olds, three 
wonderful adults are now having their families mourn. We cannot 
get an assault weapons ban; we cannot get universal background 
check, and guess what? The ending of all of this carnage saves 
money. Children dying, number one is homicide. It saves money 
if we begin to grapple with this violence that is taking over 
America, but we haven't seen the Republican budget, so we don't 
know whether they care about stopping gun violence or not. I 
know we do because we put money in there for violence 
intervention and we put money in there to increase safety as it 
relates to gun laws, but we can't move because if we have 
people being affronted by not having an assault weapon on their 
kitchen table. Enough is enough.
    Let me quickly ask you if I might, investment isn't--and 
can you answer the question, will we not consider the 
Bipartisan Infrastructure bill, the Inflation Reduction Act and 
I want to give you an opportunity to respond to the so-called 
corporate piggy bank, if you will, and the CHIPS Act, which I 
am so excited about, which is research and investment. Does 
that not give us investment? And, yes, we have private sector 
partners.
    My last point, because my time is running--want you to 
answer this all together--could you dive into how devastating 
the present law is that we raise the debt ceiling? That is the 
process. Prospective legislation, we can look at if it makes 
sense. We will need a lot of economists to tell us that we 
should do a balanced budget in the United States of America. I 
want my Republican friends to understand that this country is a 
rainy day umbrella for crisis in our states.
    Do you know what happened in Mississippi. No one is going 
to be able to help them with 25 dead, but the United States. 
So, this question of debt ceiling, the threat of not raising 
it, if you can do a deep dive to say how devastating that is.
    First the question of investment and how that impacts--you 
might want to comment on my articles that I just gave you an 
inflation, and then, of course--and forgive my voice--and then, 
of course, the deep dive on the question of debt ceiling having 
to be raised.
    Thank you.
    Dr. Zandi. I would say your voice is very strong. Hoarse or 
not, it is a very strong statement.
    Well, on the investment, I concur. I think the 
infrastructure legislation, the CHIPS Act, and the IRA, the 
Inflation Reduction Act, taken in their totality will be 
positive to long-term economic growth, address some of our 
pretty obvious geopolitical limitations when it comes to the 
chip supply chains that were so problematic during the 
pandemic, and also in terms of our relationship with China, 
very, very important.
    And I think it is very clear that climate change is a very 
serious issue. You can see it increasingly in the climate 
change and the impact that is having. So, I concur with that in 
certainly very positive long run investments.
    And generally, if you look at all the payfors that are in 
them, it is largely paid for, at least on a static basis, and 
again, I am using CBO estimates for that. Of course, now with 
the debt limit, I mean I think that is just pretty clear that 
that just has to be raised. It is an anachronistic law that is 
not helpful; it is very counterproductive, and it just needs to 
be raised without drama. Any drama in the current environment 
would be highly counterproductive, particularly in the current 
environment when everyone is on edge with what is going on in 
the banking system. Just doesn't make a lot of sense to go down 
any different path than let's just raise the debt limit and 
move on.
    Thank you.
    Ms. Jackson Lee. Thank you. Thank you very much. I yield 
back.
    [The submitted statement of Representative Jackson Lee 
follows:]
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    Mr. Smucker. Thank you.
    I would like to now yield myself five minutes for 
questioning.
    And I want--a few random comments, maybe. Go back, Mr. 
Walker, to some of the comments you made. You talked about 
heading off a cliff, you mentioned the decline of the Roman 
Empire, and I would like to just put a little more context on 
that. We can look at history, at the rise and fall of nations 
and empires, and you mentioned the Roman Empire, we can look at 
the Dutch Empire, we can look at the British Empire, we can 
look at Chinese Dynasties that have risen and fallen, and you 
compare where we are now, and it is pretty hard to say that we 
are not potentially declining, and I think it is going to be 
incumbent on us to think about what the future generation will 
say about us as policymakers here at this time. Will we be able 
to reverse that decline? Because every time there has been a 
decline you saw another rising world power, you saw political 
instability and incivility, and almost, maybe most importantly, 
you saw an expansion of the money supply, continuing reliance 
on the central government, and then the loss of the reserve 
currency as a result of fiscal policy, and it is pretty easy to 
see a pathway forward along those lines.
    The students were here earlier today. I don't know that the 
American--let me say one other thing. These cycles do not 
happen in a lifetime. They generally happen over a period of 75 
years or 100 years or hundreds of years, and so, whereas we 
look at the world through a lens of what we have experienced in 
our own lifetimes, that is not what is about to happen 
historically. So, what we have coming up in the next few 
decades will be different from what we have historically, will 
probably be different from what we have experienced in our 
lifetime.
    So, I guess the question, Mr. Walker, is you mentioned a 
commission where we have this conversation with the American 
people. I am not sure that the American people really 
understand what happens if this decline continues. How would 
you talk about that, and how can we make that more clear to the 
American people?
    Mr. Walker. Well, first, there are four things it takes to 
be a superpower: global economic power, global diplomatic 
power, global military power, global cultural influence. We 
have it today. The question is, are we going to have it in the 
future? The leading indicator on the way up, the leading 
indicator on the way down, is economic power. If you can't put 
your finances in order, you will lose economic power. If you 
lose economic power, you will lose the others. Facts are clear 
and compelling. History shows that we are not doing the right 
thing.
    Mr. Smucker. What does that mean to the average American 
today? What does the future look like if Americans----
    Mr. Walker. Well, Alice Rivlin and I had forums with 
demographically representative groups of voters to show them 
here is where we have been, here is where we are, here is where 
we are headed, here is what are the potential consequences. 
Very slow economic growth, higher inflation, less opportunity, 
okay, gradual decline in our diplomatic influence, gradual 
decline in our military capabilities. In addition to that, 
moving away from the dollar.
    Mr. Smucker. And I am going to cut you off. It would be 
potentially each generation doing worse than the generation 
before and have a dramatic impact on people's lives and freedom 
potentially as well.
    I want to also talk--there is this discussion about the 
debt ceiling, and the Democrats are fond of saying that we have 
to raise the debt ceiling, and I completely agree with that. 
Nobody is going to default here, but my question back is, 
because we have had some really good discussion. I have agreed 
with what the Ranking Member said when he said if you take 
Social Security, Medicare, taxes, and military off the table, 
there is not much left. We have to have a robust discussion 
about what it is going to take to save the country and move the 
country in the right direction.
    I think Democrats today recognize that we need to do that, 
so my question back would be why not at this inflection point 
of the debt ceiling have a serious discussion? So why shouldn't 
we be talking about the conditions to move forward and to raise 
the debt limit? So that would be my question to Democrats who 
are accusing Republicans of wanting to default. That will not 
happen. We want to have a serious conversation about what 
direction it takes the country.
    And then I want to talk just very briefly about the 
commission. I know I am out of time. You want to gavel me down, 
but just very briefly. We had a commission in Pennsylvania when 
I was the Chair of the Education Committee that looked at a 
difficult problem and we did exactly what Mr. Walker 
recommended, and that is, went out to the public and had a 
conversation about tough issues, and we found what you said 
today, and that is that people are ready to recognize a 
difficult problem and they are ready to have a conversation 
about the tough decisions that need to be made to go forward, 
and so, if an outcome here would be we have some commission 
that either looks at the mandatories or even more importantly, 
looks at how we can put us on the right path, I think that is a 
discussion--and it would need to be a discussion that is had 
with the public to let everyone know the situation that we are 
in.
    With that--I have no time to yield, but let's go to the 
Ranking Member of the Education and Workforce Committee, Mr. 
Scott. You want me to----
    Mr. Boyle. That is fine. If----
    Mr. Smucker. I didn't see Ms. Wexton was here. If you----
    Mr. Smucker. Yes. I am sorry, I didn't see Ms. Wexton here. 
We will go to Ms. Wexton of Virginia for five minutes.
    Ms. Wexton. I don't mind deferring to my colleague from 
Virginia if he wants to go first. You can go first, Mr. Scott.
    Mr. Scott. I will go. Thank you.
    Mr. Smucker. Thank you, Mr. Scott.
    Mr. Scott. Thank you, Mr. Chairman.
    Mr. Chairman, having been here I think probably longer--and 
probably the only one here that actually voted on the Clinton 
1993 budget, I get a little concerned about revisionist 
history, because we are talking about being lectured by 
Republicans who--ever since Kennedy, every Democratic 
presidential administration has left office with a better 
deficit situation as a percentage of GDP than they inherited. 
Every one, without exception, and every Republican since Nixon 
has left office with a worse deficit situation than they 
inherited without exception. President Trump was on the way to 
doing that before the pandemic. President Biden is on the way 
to fulfilling that trend, and yet we are lectured time and time 
again from the same group. We talk about--I also get a little 
anxious when people try to give Republicans credit for what 
happened during the 1990s, as if John Kasich was responsible 
for balancing the budget. The 1993 budget passed with no 
Republican votes in the House, no Republican votes in the 
Senate. Al Gore broke the tie in the Senate. It was a one-vote 
margin. The last vote was cast by Marjorie Margolies-Mezvinsky, 
and she was--they started a chant, bye bye, Marjorie, for 
casting that vote. By the time Kasich got involved to balance 
the budget, the deficit was virtually eliminated, and yet you 
try to take credit for it.
    In 2001, when President Clinton left office, the 
projection--you can disparage projections, but you can ask the 
head of the CBO about his projections--projection was that we 
are going to pay off the entire debt held by the public by 
2008, put all the money back in the trust funds by 2013. 
President Bush came in, two tax cuts not paid for, two wars not 
paid for, prescription drug benefit not paid for, and all of a 
sudden, surprise, we are back in the ditch, and yet we are 
hearing--we are being lectured by that group.
    Now we have a situation where we have President Biden is 
reducing the deficit. He has already done $1.7 trillion. 
Compared to what? Compared to doing nothing. He has improved 
the deficit and he has proposed $3 trillion more reduction in 
the deficit, and we have nothing to compare it to because there 
is no Republican budget. Now, the reason we don't have a 
Republican budget is because the numbers don't add up. You want 
to take out Social Security and Medicare and defense, you've 
got to take out interest on the national debt. Next big item is 
Medicaid.
    Now, Dr. Zandi, Medicaid people kind of think of low-income 
children. Where is most of the money in Medicaid? Where does 
most of the money in Medicaid go? Isn't it true that it goes to 
nursing homes?
    Dr. Zandi. Yes, that is correct.
    Mr. Scott. Okay, so if you do any meaningful cuts in that, 
people are going to have to leave nursing homes and you figure 
that out.
    What would a budget look like if you protected Medicaid, 
Medicare, Social Security, defense, interest on the national 
debt, what would a budget look like?
    Dr. Zandi. Well, I think you are down to about three, three 
and a half percent of GDP. So that is the discretionary non-
defense budget is three percentish of GDP. The total budget is 
24 percent of GDP. So that gives you a sense of magnitude. So, 
there is not much left.
    And of course, if you look at what that means, that is 
everything from NASA to housing assistance to transportation, 
the air traffic control, on and on and on. These are things 
that absolutely we need to have to function.
    Mr. Scott. Now, do tax cuts affect the balancing of the 
budget?
    Dr. Zandi. Yes, they do.
    Mr. Scott. And if you have massive tax cuts that aren't 
paid for, that will increase the deficit?
    Dr. Zandi. Yeah, I think the general principle here, at 
very least going forward, is that any new fiscal policy 
proposal, whether on the tax side or on the spending side, has 
to be paid for, that CBO scored, it has to be paid for. That 
seems like the simplest thing that we can do here so that we 
don't make things worse compared to the base that----
    Mr. Scott. Are you aware that there was PAYGO under 
Democratic control of Congress?
    Dr. Zandi. Yeah, yeah.
    Mr. Scott. And under Republican control of Congress, tax 
cuts don't have to be paid for.
    Dr. Zandi. I think it should apply to both, the spending 
side and the tax side.
    Mr. Scott. Thank you, Mr. Chairman.
    I yield back.
    Chairman Arrington. I thank the gentleman.
    I now yield five minutes to Mr. Josh Brecheen of Oklahoma.
    Mr. Brecheen. Thank you, Mr. Chairman.
    So, I greatly appreciated you talking about the $120 
trillion total debt liability that I think the Heritage 
Institute--or not Heritage Institute, Heartland Institute, I 
think, is the only one actually last year wrote about it, which 
maybe I am wrong. Maybe somebody at this table that wrote about 
it last year. If you did, I apologize, but it went without 
notice, and I think if I remember the Heartland Institute, the 
way they assessed that $120 trillion total debt liability, $31 
trillion, plus the Medicare and Social Security, veterans, 
Federal employee pensions, different trust programs, they said 
it is 86 percent of all wealth. If you assessed it against all 
valuation of all assets in America, it is 86 percent of all 
wealth in America, down to pieces of furniture. By the 
Administration's commentary for the Treasury Department, it was 
down to pieces of furniture. So, we are in a real mess.
    I want to be specific because we have got limited time. I 
want to talk about work requirements, something that is kind of 
coming up in this discussion, and I hope that the President 
will come to the table. I know that Speaker McCarthy is saying 
we need to have a negotiation, something that President Clinton 
and Gingrich did. They had conversations and were able to come 
up with solutions in divided government that included work 
requirements. So, I want to focus on work requirements.
    55 percent of able-bodied adults enrolled in Medicaid 
through Obamacare's Medicaid do not work at all, 64 percent of 
able-bodied adults on food stamps do not work at all. Even 
before COVID-19 pandemic and the related policy changes which 
increased benefits and decreased rules around work, 48.5 
million able-bodied adults who received Medicaid, food stamps, 
public housing, childcare benefits, only three million of that 
48.5 million were subject to work requirements. Before COVID-
19, a majority of able-bodied adults on Medicaid did not work 
at all, they reported zero earned income. Before COVID-19, 
three out of four able-bodied adults on food stamps did not 
work at all. So, there is a maxim from 1935, and I put it to 
memory because I think it is powerful, something that I think 
we can all agree on, maybe put our partisan hats aside. It 
says, you cannot help the poor man by destroying the rich man, 
you cannot strengthen the weak by weakening the strong, you 
can't lift the wage earner up by pulling the wage payer down, 
you can't build character and courage by taking away people's 
initiative and independence, and you can't help people 
permanently by doing for them what they could and should be 
doing for themselves, and you can't further the brotherhood of 
man by inciting class hatred.
    Mr. Walker, starting with you, what are your thoughts on 
work requirements? There is a CBO estimate out there that says 
that it could save as much as $300 billion while increasing 
revenue by another $221 billion, and couldn't this solve some 
of our worker shortage issues versus always looking to illegal 
immigration in addition to affecting our budget? And couldn't 
it change a lack of work ethic that is undermining this Nation?
    Mr. Walker. Several things. We ought to have work 
requirements. There is no question about it. At least looking 
for work, attempting to look for work.
    Secondly, it tells you that some of our programs are 
obviously pretty generous because people don't have to work, 
and they may not even be looking for work, if you will, but you 
also have to look at the difference between what does our 
economy need with regard to skills and knowledge versus what we 
have, and the biggest problem that we have is that we have a 
skills gap. We have a knowledge and skills gap, and our 
immigration policy really needs to be focused on that. By the 
way, most of our European allies have already figured this out. 
It shouldn't be focused just on relationship. It needs to be 
focused on what type of skills and knowledge do we need in this 
country in order to grow the economy, to make sure that 
everybody has an opportunity.
    And by the way, last thing on this, and it is related, but 
not direct, not everybody is going to go to college, alright. 
Not all college degrees are equal, not all colleges are equal. 
We need a lot of people in the trades. Let's learn from Germany 
and some other countries to try to figure out how we can end up 
doing a better job there. Thank you.
    Mr. Brecheen. Dr. Taylor.
    Dr. Taylor. Well, we need to invest more in people, for 
sure. That is what you seem to be saying, but I think that we 
can't lose sight of the big goals. I mean, two percent growth, 
this gigantic deficit. The gentleman from Utah, I don't know if 
you saw this chart, it's astounding. Why can't we deal with 
that? You can deal with that. What is the important thing to 
deal with?
    Mr. Brecheen. So a trillion dollars. It is a dated number. 
A trillion dollars out of a $6 trillion budget, and this is 
dated. It is going to be larger than a trillion. Of the 82 
Federally means tested program, which is direct cash, housing 
assistance, Medicaid, food. So, this is a sizable number, and 
so couldn't we affect change in our budget?
    Dr. Taylor. Put it on the table. Put it on the table and 
discuss it with your colleagues? I would not be in favor of 
that. I would be in favor of things that induce growth, induce 
income for all Americans, and that is what my preference would 
be.
    Mr. Brecheen. And, Mr. Hodge, before I ask, I want to say 
this, because I got one second left, Jamestown implemented a 
biblical requirement that finally made our colony successful--
thou shalt not work, thou shalt not eat. Jamestown was the 
first successful colonization because they took something that 
is pretty common sense.
    Mr. Hodge, what are your comments on this?
    Mr. Hodge. The welfare reforms that were passed during the 
Clinton Administration required work and I think they were very 
successful. Sadly, they have been watered down since and it 
leads to the kind of problems that you have just outlined in 
those numbers.
    The problem with our agencies today is they measure their 
success on how many people are on the rolls, not how many 
people they have helped off the rolls, and that is what we 
should be measuring, how many people we move from welfare to 
work, to success, and better living standards and we have got 
all the incentives wrong.
    Mr. Brecheen. I am out of time. I yield.
    Chairman Arrington. I thank the gentleman from Oklahoma and 
now yield five minutes to Ms. Wexton. Thank you for your 
patience--from Virginia.
    Ms. Wexton. Thank you very much, Mr. Chairman.
    I was temporarily regretting my decision, but I think I 
made a good decision anyway.
    Thank you all to the witnesses for coming and appearing 
before us today. It has been really, really informative. Very 
fascinating stuff.
    Mr. Walker, I 100 percent agree with you. We need more 
people in the trades. Absolutely we do. I mean the world needs 
more electricians, the world needs more plumbers, and those 
folks do really well in their jobs. Try telling that to any of 
the parents in my district, though, but yeah, we definitely 
need more people in the trades.
    One thing that was interesting to me in your opening 
remarks, you talked some about China and how they are taking 
over global dominance, but you would agree that the PRC 
actually has more certain characteristics which allow them to 
create a strategic long-term plans for global dominance, do 
they not? Things like their reliance on use of forced labor, 
enforced by brutally repressive surveillance state, things like 
government ownership of means of production, things like 
disregard for international law in areas of intellectual 
property and property generally. Is that true?
    Mr. Walker. Yeah. We don't want to be like China.
    Ms. Wexton. No.
    Mr. Walker. But we need a plan, because if you don't have a 
plan, all you have is prayer. I am for prayer, but we need 
prayer to plan.
    Ms. Wexton. Right. No, I don't disagree that we need a 
plan. It is just hard to do that when you have--when you think 
in terms of when your budget cycles or 4-year Presidential 
terms and everybody is planning for the next one. We here in 
Congress--and we have to start over again every two years. It 
makes it kind of hard for us, but yeah, I absolutely agree we 
need a plan, and I don't know how we are going to get there, 
but I think it is a good thing to want to do and to work 
towards.
    Also, I am fascinated by this discussion that you talked 
with when you and Alice Rivlin went around the country and 
talked to people. Is that published somewhere where you have 
the results of that?
    Mr. Walker. Yes, I can provide something for the Committee 
if you want as well.
    Ms. Wexton. I would love to see the results.
    Mr. Walker. Yeah. That was the Comeback America Initiative 
and I am happy to provide something for the Committee.
    Ms. Wexton. Thank you. That would be good to see. Last 
week, the Joint Economic Committee released a report 
highlighting the potential effects of a debt default on 
American families. According to their findings, if the 
Republicans push our country off over the cliff in a misguided 
attempt to cut discretionary spending by 20 percent or more, 
benefits for 65 million Americans on Social Security and 18 
million American veterans could be disrupted. The average 
worker could see the retirement savings drop by $20,000, in 
Virginia a typical new homeowner would see their monthly 
mortgage payment increase by $150, costing them an extra 
$54,000 over the life of the loan. That stuff would happen 
instantaneously. It doesn't even account for the long-term 
effects.
    Dr. Zandi, after all the economic shocks we have been 
through over the past few years, can American families afford a 
default? And are there other ways that a typical family might 
feel the effects of a default?
    Dr. Zandi. Well, their benefits would be delayed or 
ultimately cut, there would be loss of job, unemployment, 
people would see their stockholdings and housing wealth 
decline, so they would be less wealthy, their general 
financial--well, everyone's financial well-being would be 
significantly diminished.
    Ms. Wexton. How about those students who were here? Would 
they feel the effects of the default?
    Dr. Zandi. I suspect they would. I mean, their families 
would have a difficult time I think, many of them making ends 
meet for sure. If it dragged on for any length of time, again, 
hard to imagine. Once everyone sees exactly the implications of 
breaching the debt limit, very quickly I think people would 
reverse themselves and we would increase the debt limit pretty 
quickly, but if it dragged on for any length of time, it would 
be--I don't think it is hyperbole to say it would be 
cataclysmic.
    Ms. Wexton. And the last time we really came to the brink 
was in 2011. Would you confirm that statement?
    Dr. Zandi. It was.
    Ms. Wexton. And in 2011 we did ultimately--or Congress did 
ultimately do the right thing and raise the limit, but it took 
a long time.
    Dr. Zandi. That was pretty scary.
    Ms. Wexton. It was pretty scary, and in fact--now Moody's 
did not downgrade the U.S. credit worthiness, but Standard and 
Poor's did, did they not?
    Dr. Zandi. That is correct. They reduced----
    Ms. Wexton. That is the first time ever in American history 
that that happened, right?
    Dr. Zandi. Correct.
    Ms. Wexton. Now, do you think that the investment community 
is too confident that in the situation that we are going to do 
the right thing and come together before August?
    Dr. Zandi. I worry that they are too confident. I suspect 
they will come back after July 4th break and people will start 
to focus on that X date, which is, in my view, mid-August, and 
pressures will start to intensify pretty quickly depending on 
the dynamics here in the House, particularly with regard to how 
things are going, but I think it will be very important for 
investors to send a signal to lawmakers that, hey, this is not 
a good idea. This is going to be a real problem, because unless 
you get that signal, you may not act.
    Ms. Wexton. One thing we have going for us, Dr. Zandi, is 
that there is--August is usually our recess time, and I am sure 
a lot of people have CODELs planned, so hopefully they won't 
want to miss out on their CODELs and they want to come to a 
solution way before August 1st.
    Thank you very much, Mr. Chairman. I will yield back.
    Chairman Arrington. I thank the gentlelady from Virginia 
and now yield five minutes to Chuck Edwards from North 
Carolina.
    Mr. Edwards. Thank you, Mr. Chair.
    First of all, I think that hearing some of the myths from 
the other side of the aisle, I think the American people 
deserve to hear a few pieces of the truth. First of all, the 
Republicans have not yet put forth a budget. Number one, 
because the President drug his feet on getting us a budget, and 
that begins the process, and I really have a tough time 
believing that he would be so delayed in doing that, knowing 
the critical nature of the decisions that we have got to make 
here in just a few months. Another reason that I see that we 
have not put forth a budget is that Republicans are being very 
deliberate in bringing professionals like this in to testify 
and give us some thoughts that we should consider as we are 
developing that budget. Another reason that you have not seen a 
budget from the Republicans is because Speaker McCarthy has 
desperately been trying to get a meeting with President Biden 
to discuss the debt ceiling being raised and under what 
conditions that would happen, and to my knowledge, the 
President has refused to have such a meeting.
    Another set of myths that I continue to hear from the other 
side is that Republicans are wanting to cut Social Security and 
Medicare, and I have not had any conversation with any Member 
of this Committee that believes that that is the right thing to 
do, and quite frankly, I am just tired of hearing that 
political point.
    So now I will move on. I am off on my rant, and I would 
like to ask a couple of questions.
    Mr. Hodge, can you discuss the economic effects of the Tax 
Cuts and Jobs Act?
    Mr. Hodge. On a whole, the Tax Cuts and Jobs Act was pro-
growth. There were two really important elements to it. One, it 
was pro-growth, and two, especially the corporate tax reforms 
made the United States much more competitive. Before the Tax 
Cuts and Jobs Act, the United States had the highest corporate 
tax rate in the industrialized world. We are now at least 
modestly competitive, and we are down now into the middle of 
where our economic competitors are. To raise that corporate tax 
rate would have severe economic effects.
    Our model shows that the Biden budget, by increasing the 
corporate rate, would knock about 0.7 percent off the long-term 
effects of the GDP and it would cause both a reduction in 
wages, but also jobs. So, we do not want to raise the corporate 
tax rate. We don't want to put ourselves in--again, being the 
highest corporate tax rate in the industrialized world. So, 
there are a lot of positives with the Tax Cuts and Jobs Act.
    There are some things I would not have done, like raising 
the Child Tax Credit, but those are political decisions.
    Mr. Edwards. Thank you. Mr. Hodge, for Americans out there 
that don't deal in budgets from day to day, and for students 
like we had in here earlier, can you illustrate to folks in 
practical terms why raising the corporate tax rate loses us 
jobs in the U.S.?
    Mr. Hodge. Yeah, there are a lot of studies that have been 
done looking at the effects of the corporate tax rate on wages, 
and a very important study done a few years ago looked and 
found that increasing the corporate tax rate, the economic 
effects of that on workers was about 50 percent, meaning that 
raising the corporate tax rate lowered wages for workers, and 
the most harmed workers were marginal workers. Women, low-
skilled workers, and younger workers were most impacted by 
that, and I think we need to take that to heart as we look at 
trying to raise revenues to lower the deficit.
    Mr. Edwards. Not to mention that companies typically like 
to do business offshore when tax rates are better over there, 
rather than having jobs here.
    Mr. Hodge. When other countries are more competitive, that 
is where the capital flows.
    Mr. Edwards. Yeah. Thank you.
    What is your analysis of the tax increases in the 
President's budget proposal?
    Mr. Hodge. Yeah, we found that it would be very harmful. 
Our model shows that the President's budget would lower GDP by 
at least 1.3 percent over the next decade, would lower wages, 
the capital stock, and ultimately eliminate about 335,000 jobs.
    And I should mention that we didn't even model all of the 
President's budget proposals. Some of them are too new and 
untested to be modelled. So, we think the economic damage would 
be much more severe than what we have modelled.
    Mr. Edwards. Thank you. I am out of time, so I yield.
    Chairman Arrington. I thank the gentleman and now yield 
five minutes to the gentlelady from Vermont, Ms. Balint.
    Ms. Balint. Thank you, Mr. Chairman.
    Dr. Zandi and the rest of the panel, thank you so much for 
being here. I appreciate your time.
    The Biden Administration has consistently prioritized 
health and well-being of Americans, it has prioritized 
preventing homelessness, supporting first-time homeowners, and 
ensuring that Americans can keep their homes and keep their 
homes heated, and some of my Republican colleagues have 
suggested that eliminating or reducing some programs, such as 
the Low Income Home Energy Assistance Program, would be 
beneficial to the budget. This program helps five million 
Americans. They have also suggested that ending critical rental 
assistance for ten million Americans is the way to go.
    As a former teacher and as a parent myself, I know that 
safe and stable housing is essential for a child's mental and 
physical health, and it is critical for a student's ability to 
succeed.
    So, Dr. Zandi, what are some of the economic consequences 
and personal consequences of ending or reducing programs that 
keeps families in their homes?
    Dr. Zandi. Well, this goes to the discretionary non-defense 
spending part of the budget, that three percent of GDP, and in 
that are many of the different things you just mentioned around 
homelessness and housing assistance, and I think LIHEAP is 
probably in there as well.
    Ms. Balint. Yes.
    Dr. Zandi. So, it is important to point out that as a share 
of GDP, spending on these programs have been declining pretty 
consistently over recent decades and now are at record lows 
again as a share of GDP. So, we have been collectively deciding 
to reduce the priority that we place on these different types 
of programs, but I think it is pretty clear that the households 
that are being affected, the people that are being affected by 
this are financially very stressed. They are living paycheck to 
paycheck, they don't have any savings, and they are the folks 
that are now borrowing against their credit cards and unsecured 
personal lines. You can see delinquency rates on cards and 
unsecured personal lines, auto loans, particularly used for 
used vehicles, are now well above where they were pre-pandemic, 
and this is at a time when the unemployment rate is at a 50-
year low. Can you imagine if there is any kind of unemployment? 
So that kind of gives you the level of stress that exists among 
that group, and of course, you would be putting additional 
pressure, financial pressure, and it is just unclear how that 
would play out. The implications of that are enormous, 
obviously, for those households, but for the communities that 
they live in, what it means for the broader economy can't be 
good, can't be good.
    Ms. Balint. Thank you, Dr. Zandi. I am hearing that same 
thing from the credit unions back in my home state of Vermont. 
They are starting to see delinquency rates on payments that 
they haven't seen in recent years, and this is a foreboding 
development.
    So, the other thing that I want to say here is that our 
country seems to be headed for a debt crisis, and as my 
colleague said earlier, this is not the first time that we face 
this dangerous brinksmanship, and it is wholly disingenuous. 
That is the point that I want to make here. It is wholly 
disingenuous. They had no concerns about raising the debt 
ceiling under previous Republican Presidents, including 
multiple times under President Trump, and so, you have to 
question, why are we here again having this same sham 
conversation when my colleagues knew what was at stake when 
President Trump was in office and raised the debt ceiling?
    So, Dr. Zandi, how would defaulting on our debt impact 
Americans, like my Vermonters back home who own a home want to 
keep their home, or people who want to aspire to own a home?
    Dr. Zandi. Yeah, I think I have mentioned that it is hard 
to imagine that we would go down that path because the 
consequences, the immediate consequences, would be very 
serious. You would see it immediately in financial markets, 
obviously, you would see it immediately in that people won't be 
getting paid on time. The benefits that they are owed or the--
even the electric company is not going to get their payment on 
time, potentially, and then longer it drags on, it goes from 
hours to days to weeks, then we will start to see lots of lost 
jobs, unemployment would rise, we would be in a very severe 
economic downturn, but that is the most obvious thing, I think 
longer run, the damage it would do would be incalculable. I 
mean, since Alexander Hamilton assumed the debt, the world 
knows that Americans pay their debts. We are money good, and 
because we are money good, we pay the lowest interest rates in 
the world, and most importantly in times of crisis, money comes 
here because everyone knows it is safe. No one is going to take 
that away from you, you are going to get paid on time. If we 
just dissuade them of that notion and lose that hard fought 
benefit that we have accumulated over the course of our entire 
history, it would be incalculable to the cost to the folks, the 
young people that are here just an hour ago.
    So, it is not only the immediate effects, it is the longer-
term consequences of doing that. So, it is just unimaginable we 
would even be thinking about this.
    And this goes to the counterproductive nature of this piece 
of legislation.
    Ms. Balint. Yes. Thank you, Dr. Zandi. I yield back.
    Chairman Arrington. I thank the gentlelady and yield five 
minutes now to Mr. Buddy Carter from Georgia.
    Mr. Carter. Thank you, Mr. Chairman and thank all of you 
for being here and we appreciate everything you have got to 
say.
    I think that we would all agree that the general theme here 
today is that we are in dire straits. We are in dire straits, 
and it just does not seem like we have a concrete plan to 
address where we are going. My hope is that this Committee will 
assist with that, and I am committed to doing everything I can 
to assist us in doing just that and helping us to be 
successful, but I certainly don't feel like the President's 
proposed budget does it. I don't see a concrete plan there. It 
continues to be an addiction to spending. I mean, you have 
talked numerous times today about how much this proposed budget 
is going to be spending over the next decade. Unbelievable.
    Dr. Taylor, you even pointed out in your testimony that the 
Biden Administration doesn't anticipate a growth rate of any 
more than 2.2 percent over the next ten years. I mean, that is 
the only thing that is really gotten us any kind of relief at 
all is that we have been prosperous and we have been able to 
grow our economy. If this is true, that we only grow it at 2.2 
percent and we have all this interest that we are going to have 
to pay on this debt, we are really in a mess.
    I think the biggest indication of just how much of a mess 
we are in is the interest on our debt. I mean, it is 
unimaginable. You talk about unimaginable for us not to pay our 
debt and we are going to pay our debt, we know that. We are not 
going to default on anything, but the only thing more 
unimaginable than that is that $32 trillion in debt and the 
interest on that debt, that we are going to be paying more on 
the interest on our debt than we are going to be paying for 
defense. The number one responsibility of this Federal 
Government is to protect our homeland and protect our country, 
and we are going to be paying more on the interest on the debt.
    Dr. Taylor, let me ask you, what do we get from interest 
spending? What do we get when we pay the interest? Do we derive 
anything from it?
    Dr. Taylor. It just reminds us of the debt we have already 
incurred, and so that is the issue.
    Mr. Carter. And we are not even talking about the 
principal, we are just talking about the interest. That makes 
it even worse. Does it make any sense to be on track to have 
interest be the largest Federal program? And it is predicted, 
and I think you all even mentioned that it is going to be the 
largest line item in our budget. Does that make any sense, Dr. 
Taylor?
    Dr. Taylor. No, it doesn't make sense. That is why I say 
look at the whole picture of the budget. Get it down, get it 
to--I say balance, whatever you want to--get it down, and we 
have seen so many illustrations of that already in this hearing 
that you need to drill down, your colleagues need to drill 
down. You need to get a hold of it.
    Mr. Carter. Let me ask you--and I will ask any of you--what 
is it going to take to get people's attention? What is it going 
to take to get people's attention? Members of Congress, what is 
it going to take to get our attention--and I will include 
myself in that--to recognize just how serious of a problem this 
is?
    Mr. Walker.
    Mr. Walker. We have three maladies in America: myopia, 
tunnel vision, and self-interest. People are very short-term 
focused, they look at one issue at a time without understanding 
the big picture, the domino effect, and they are concerned 
about themselves. Okay, that is just not typical Americans, 
that is here, too.
    What is going to get your attention here is a 
constitutional amendment. A constitutional amendment that says 
you cannot take on more than a certain amount of debt as a 
percentage of the economy. That will force pro-growth policies, 
but it will force tough decisions with regard to spending, 
mandatory and discretionary, as well as revenues. That is what 
you need, and if you don't get that, I am not very hopeful 
about our future.
    Mr. Carter. Thank you.
    Anyone else?
    Mr. Hodge. Well, the sad fact is, Congressman, that our 
Federal budget is what we call in economics, a tragedy of the 
commons. Every Member of this body is responsible for spending 
the money, and no one is accountable for how it is spent or how 
poorly it is spent. Until we can change some of those dynamics, 
we are going to continue to have these problems. Somebody is 
going to have to take responsibility, and it has to begin now.
    Mr. Carter. I couldn't agree with you more, and I 
appreciate that. I know somebody made the comment a minute ago 
that we got a revenue problem. No, we don't have a revenue 
problem, we got a spending problem.
    I am sorry. Did you want to speak?
    Dr. Zandi. No, just count me naive, but I am hopeful. I 
think the last time we collectively made a lot of progress on 
our long-term fiscal situation was in the 1990s and that is the 
last time interest expense rose to a point where it was greater 
than the amount we spent on defense and other things that we 
all can agree that are very important, and we are going to be 
there pretty soon.
    So, my sense is that over the next couple, three, four 
years, you will get a consensus that we do need to change.
    Mr. Carter. Well, let's hope we have the political courage 
to do just that and the political sense. Thank you all for 
being here.
    Thank you, Mr. Chairman. I yield back.
    Chairman Arrington. I thank the gentleman from Georgia and 
now yield five minutes to the gentlelady from Minnesota, Ms. 
Omar.
    Ms. Omar. Thank you, Chairman. Thank you all for being here 
with us and for your patience today.
    In my district, a lot of retirees' hard-earned dollars are 
at risk, and many of them are worried about what might happen 
with some of the conversations around raising the retirement 
age. In France, we are seeing the consequences of raising the 
retirement age against the interest and will of workers. I hope 
Congress is taking notice of that. It is not trivial to propose 
raising the age to retire when many working class people are 
living paycheck to paycheck with exhausting jobs, and we have 
better ways to address solvency and fiscal issues with 
important programs like Social Security and Medicare.
    Dr. Zandi, can you outline proposals that would make our 
social safety net more sustainable and effective, which 
shouldn't require workers to pick up the tab?
    Dr. Zandi. Yeah, I think we were talking a little bit about 
this with Congressman Kildee. I think a way to put Social 
Security on sound financial ground, or sounder financial 
ground, is to impose the payroll tax on folks that make over 
$400,000 a year. Right now, there is a cap. I think last year 
was $164,000. It goes up this year, I can't remember what the 
number is, but if you impose it on the folks that make over 
$400K, that would generate a significant amount of revenue, 
that would go a long way to putting Social Security on very 
solid ground.
    And all we would be doing is ultimately raising the 
percentage of earnings that are affected by the payroll tax 
back to where it was when Social Security was first established 
back in the 1930s, and the reason we have gotten into this kind 
of situation--many reasons, but one is the ongoing skewing of 
the income and wealth distribution, and this would go a long 
way to addressing that issue.
    So, I think that would be a good way of--in the case of 
Social Security. Medicare and Medicaid are more difficult 
because it goes to the cost of medical care, and that is, as we 
all know, a very complex issue, and we talked a little bit 
about prescription drug negotiations as an example of something 
that we could work on to make that a way of restraining the 
growth in medical care expenditures, not cutting benefits, but 
making them more affordable. So those are two examples.
    Ms. Omar. I appreciate that. It is good to know that there 
are options that don't require Americans to work longer.
    Mr. Chairman, I would like to enter into the record a 
report released this week from the Center for American Progress 
on the fiscal and socioeconomic causes of tax cuts.
    Chairman Arrington. Without objection, so ordered.
    [The information follows:]
   [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Omar. Thank you.
    Without the Bush and Trump tax cuts, debt as a percentage 
of the economy would be declining permanently. Over the past 25 
years tax cuts enacted initially during the Republican trifecta 
severely slashed Federal revenues. It is estimated that these 
tax cuts have added $10 trillion to the debt since their 
enactment.
    Dr. Zandi, could you explain why making the Trump tax cuts 
permanent would harm our fiscal and economic outlook?
    Dr. Zandi. It would be very costly. I mean, in fact, in the 
baseline budget, the budget that we have all been alluding to 
here, that the CBO scores, assumes that the tax cuts will 
expire as they are currently legislated under law. So, if they 
are made permanent, then that baseline budget would show much 
worse fiscal outlook than we are talking about here and to a 
significant degree.
    And you make a great point, the last time, I think the good 
benchmark here is in the Fiscal Year 2000, we had a surplus. 
That was the last year we had a surplus, and you are right, 
there are many reasons for that, some of which were fortuitous, 
but some of which were the result of good policy making in the 
1990s during the Clinton Administration, and a number of things 
have conspired to erode our fiscal situation. The tax cuts 
under President Bush, the tax cuts under President Trump 
contributed and the spending that will also increase 
significantly because of a number of crises, the financial 
crises, very significant increase, the pandemic, a massive 
increase, and also the conflicts overseas, the wars that we 
have been fighting in the Middle East. So, you add all that up, 
that has now put us into the position that we are in today with 
a debt-to-GDP, publicly traded debt-to-GDP, that is close to 
100 percent.
    So, it is a combination of things that have gotten us into 
this predicament.
    Ms. Omar. I really appreciate that. Thank you so much. It 
is obviously clear with that that these tax cuts shouldn't even 
be on the table if we are trying to be serious about our fiscal 
responsibility. It is one thing for our Republican colleagues 
to say they want to be fiscally responsible and it is another 
for them to continue to push for tax cuts for the rich and 
corporations. This kind of hypocrisy really puts the health of 
our economy at risk, and I hope that we become sensible in 
addressing the fiscal health of our country.
    Thank you.
    Chairman Arrington. I thank the gentlelady from Minnesota 
and now yield five minutes to Mr. Ben Cline from Virginia.
    Mr. Cline. Thank you, Mr. Chairman. I was worried that I 
was going to come in too late to join the conversation, but I 
think I am coming in at just the right time because I need to 
correct the record.
    And the record should reflect that this country has record 
revenues this year. We don't have a revenue problem, we have a 
spending problem, and when we cut taxes, the only way that 
those tax cuts would contribute to the deficit, or the debt is 
if they are not matched by spending cuts. It is the other side 
of the aisle that decided they were not going to match those 
tax cuts with spending cuts because this side of the aisle 
would be happy to make the spending cuts that are necessary to 
keep this budget in balance. We were in balance once. It does 
require growth. More growth comes from lower taxes. Less growth 
comes from higher taxes. So allowing the tax cuts to expire 
will have a negative impact on growth, will have a negative 
impact on revenues, and will have a negative impact on this 
economy unless we take necessary action to cut non-defense 
discretionary spending, get rid of all the woke and weaponized 
government that has created such chaos across this country, and 
actually begin to exert some signs of fiscal responsibility 
that are so woefully lacking across this government.
    The world is watching. We are at risk of losing the dollar 
as our global reserve currency, and you want to see a 
recession? Take that away, replace that with currency from some 
other country, and you will see inflation like you have never 
seen, you will see deficits like you have never seen, you will 
see a recession like you have never seen.
    But what I want to get focused on is, I want to ask Dr. 
Taylor, just as government spending crowds out private 
investment, the reckless spending habits here in Washington is 
crowding out our own capacity to spend, as more dollars must be 
committed to paying off interest. This issue of interest on the 
debt and the fact that it is crowding out spending, can you 
talk about the economic harm resulting from such a large 
increase to interest payments on the debt?
    Dr. Taylor. Yes. This is really one of the reasons to deal 
with this debt problem, because of this interest on the debt, 
but all evidence says that restraining the growth of government 
to modest levels, much different than what is in this current 
budget, would be beneficial to growth, beneficial to all 
Americans. Rather than less than two percent, we would have two 
percent plus, and that is so powerful. That is the thing that 
should be--I don't hear enough about that. That should be 
emphasized more. These are growth inducing policies.
    The tax cuts, if you like, or at least leaving the tax rate 
where they are would be growth inducing, and it is just part of 
the picture. I mentioned monetary policy. That is also part of 
it. So, I think it is very important to emphasize these things.
    Mr. Cline. Well, let's talk about MMT and those that insist 
upon ignoring realities and adding to this reckless spending. 
Can you talk about the fantasy world in which these MMT 
theorists live?
    Dr. Taylor. Well, I think it is a good description. We look 
at it as carefully as we can, and I think you can't say much 
about it. It is just another way to think about--the reality is 
the government thrives because of good economic policy. Good 
economic policy is good fiscal policy, good monetary policy, 
good regulatory policy, good international policy. They all go 
together. We focus on the budget because this is the Budget 
Committee, but it all goes together, and you heard people say 
about, talk about that already. I emphasize that, like I teach 
students. That is what I do. I emphasize this all goes 
together.
    Mr. Cline. Mr. Hodge, President Biden has proposed raising 
the corporate tax rate to 28 percent, larger than China. Do you 
think that raising the corporate tax burden above Communist 
China would make us less competitive against our top foreign 
adversary?
    Mr. Hodge. It would actually be worse than raising above 
the Chinese level. It would actually put the U.S. tax rate back 
to one of the highest corporate tax rates in the industrialized 
world, and we know from economics, economists at the OECD have 
found that the corporate income tax is the most harmful tax for 
economic growth and economic studies also show that the 
economic burden of the corporate tax largely falls on workers 
through lower wages. This would be a very, very harmful policy 
impact on the U.S. economy.
    Mr. Cline. Thank you. I appreciate the time.
    Mr. Chairman, I yield back.
    Chairman Arrington. I thank the gentleman from Virginia and 
now yield five minutes to Mr. Trone from Maryland.
    Mr. Trone. I thank the Chairman and I apologize being late. 
I missed most of the testimony. We had two Appropriations 
subcommittee hearings, but that is over with and we are here.
    Dr. Zandi, I would address these things to you since you 
went to the same school I went to. You got two degrees, I only 
got one. I got an MBA at Wharton and I serve as a trustee there 
at the Wharton School of Business also. I probably created more 
jobs than anybody on the Committee. I have created over 12,000 
employees and I have a $6 billion business that I own. So, I 
understand a little bit about taxes, just a little bit, and it 
is an honor to pay taxes in America. The individual tax rate 
graduate up to 39.6. Fantastic. We ought to pay taxes, and we 
have a lot of good things that happen with our taxes, and we 
are fortunate we live here.
    I take exception that we have a point, that we do have a 
revenue problem. We blew a hole in the revenue problem when we 
dropped that corporate rate from 35 down to 21, because you 
don't just pay a rate, you pay an effective rate, and so, we 
should talk about the effective rate, otherwise it is all 
political rhetoric. Talking about a rate that nobody pays, that 
is just BS in my mind.
    So, the effective rate before the Trump tax cut, which was 
24 percent for the U.S. effective rate, the G7 rate was 23 
percent. I find that competitive, and guess what? In my years 
of building a business, I never once on an investment decision 
said, what is the tax rate before I make an investment? What I 
said was, what is the competitive milieu out there and how do I 
beat my competitor and then how I create a P&L statement that 
works for me at the end of the day? And that seemed to have 
worked over the years, but nobody is asking what is the tax 
rate to create a job. That is coming from Members that have 
only served their life in state legislators or been lawyers all 
their life and they have never paid a payroll on Friday for 40 
years.
    So, my point was, if we were at 24 percent before effective 
on a 35 percent top, and the G7 was 23, we were competitive. 
What now is the effective rate for C corporations?
    Dr. Zandi. You know, I don't know the answer to that.
    Mr. Hodge. 15 percent?
    Dr. Zandi. Is it 15? Yeah, 15 percent.
    Mr. Trone. 15?
    Dr. Zandi. 15 percent.
    Mr. Trone. I think it is lower than that. I believe he is 
wrong on that point, but we can follow up on that and get back 
and I would appreciate that.
    Dr. Zandi. Yeah, sure. Yeah.
    Mr. Trone. The second issue we have got problems on is the 
Trump budget in the third year was roughly $980 billion 
deficit. The last year of the Obama budget was about $470 
billion--round numbers. Well, that delta, that was the biggest 
increase ever in our deficit other than war, et cetera. From 
Obama's final year to Trump year three pre-COVID, that was a 
hole blown in the budget of $200 billion every year. A revenue 
problem, a revenue problem, which the Wharton Econometric study 
and everybody else estimates at $2 trillion over ten years. A 
$200 billion revenue problem every single year giving C 
corporations and all their lobbyists and all their cronies a 
nice, wonderful tax break, and we pretend, well they might go 
overseas, God knows, but these guys never run a business, so it 
is all just a lot of blather, a lot of campaign talk.
    So, at the end of the day, what do we need to do to try and 
bring some sanity back to this and what should we change and 
affect, like carried interest loophole, like step up basis? I 
mean Elon Musk paid eight percent last year because all he does 
is borrow off his stockholdings, live a life of a multi huge 
billionaire and doesn't have any earnings. I mean nobody takes 
payroll tax, that is tax inefficient. No one would do that. 
LLCs are paying the personal rate now. So, all your small 
businesses that are creating all the economic growth in 
America, they are paying the personal rate, top rate, 39.6, but 
the C Corps, they are paying, I believe, close to single 
digits.
    So, what are some of the things we should do to bring us 
back to sanity and get the rates up? Because business will do 
fine. Let's not worry about business doing fine, they are going 
to figure it out. I figured it out for 40 years.
    Dr. Zandi. Well, I hope your colleagues don't hold the 
Wharton degree against you, and I am also not just an egghead. 
I started my own company and sold it to Moody's, and I can tell 
you as a person who created not 12,000 jobs--congratulations on 
that--but a few hundred jobs, that I never asked the question 
about the tax rate. You know what the thing I asked was, the 
thing that was key to me was just tell me what the tax rate is, 
keep it there, and let's just go forward, because I can 
navigate around anything. I just need to know what the rules of 
the game are.
    But in the case of--and here, I think, where we should find 
common ground, it is really critical that we figure out exactly 
what was the impact of the TCJA cuts on the economy. You can 
tell a lot of debate, but the academic research I have seen 
seems to suggest that the impacts are really on the margin, 
that they have not had much of an impact. Therefore, rolling 
back the tax rates halfway--they were 35, they went to 21, 
let's say go back to 28, like President Biden has proposed 
would have on the margin kind of negative economic 
consequences, generate a boatload of revenue that we need to 
address our fiscal issues going forward as the population 
continues to age.
    But I agree with you and as a researcher looking at the 
consequences of corporate taxes on investment spending, 
expansion and hiring, those kinds of things, very difficult. 
The cost of capital isn't what really matters. It is, can I 
sell what I produce and just give me the rules and I will win. 
I just need to know what the rules are.
    Chairman Arrington. I thank the gentleman, Mr. Trone, and 
now yield five minutes to my friend from Kansas, Ron Estes.
    Mr. Estes. Well, thank you, Mr. Chairman. It is good to be 
here. Thank you for all the panelists for being here. I know 
Members have been in and out for different things.
    I do want to make a comment about the last several of us 
have talked about tax rates and talked about revenue versus 
spending. One of the statistics maybe I think is more important 
than rates itself is what are the actual tax revenues that the 
Federal Government collects, and the Congressional Budget 
Office, which is our scorecard, when the Tax Cuts and Jobs Act 
was passed in 2017, CBO estimated that in 2022, we would 
collect $4.0 trillion in tax revenue. Now that 2022 is passed, 
even after working through COVID, we actually raised $4.9 
trillion. So, we actually received over $900 billion in tax 
revenue after Tax Cuts and Jobs Act because of people being 
able to have that economic growth in activity there. So that is 
one of the things I just wanted to highlight as far as tax 
revenue and the net impact of good economic policies.
    Jumping back into--I know I don't have much time here--the 
Fiscal State of the Union, I was a little concerned about some 
of the comments earlier. Let's see, I heard from the panelists 
that the Fiscal State of the Union is not good, that it is 
embarrassing, that a continuing increasing debt-to-GDP drives 
up the actual interest rate that the Federal Government has to 
pay for borrowing. Which tells me that we need to make sure 
that we stop borrowing as much through that process. So, I've 
looked at some statistics. Our Federal Government borrows $1 
out of every $5 it spends this year, $1 out of every $5, and 
President Biden's budget proposed to increase that next year to 
borrow $1 out of every $4 that is being spent. It adds $17 
trillion to the national debt. I mean never before has a U.S. 
President proposed to add $17 trillion to the deficit in ten 
years.
    And they try to talk that it is actually a $3 trillion cut 
in the deficit because they are not raising it $20 trillion. So 
that just doesn't make sense from where we are today to where 
we need to be going into the future.
    Also, the spending programs have had massive negative 
impact on families and businesses. Inflation is up 14 percent 
on average. Things that are critical on a day-to-day basis, 
like food, is up 20 percent, energy is up 37 percent for gas 
and heating our home.
    I want to talk through--I have got a couple of questions 
here, I hope I can get to all of those. Is one of the 
challenges year after year, spending outpaces our revenue. It 
is unsustainable. It is unsustainable in our personal lives, 
unsustainable in business, unsustainable for state and local 
governments. Yet the borrowing that we do is $47,000 a second 
in terms of the Federal Government borrowing, which obviously, 
as I mentioned before, had an impact on interest, crowds out 
capital in funding other programs, as well as funding the 
economy.
    Professor Taylor, our current net interest spending is 
about eight percent of the Federal budget, it is expected to go 
to 14 percent by 2033 and 24 percent by 2053. Do you agree with 
assessment and what challenges do you foresee in the next ten 
years when about a sixth of our budget is on the interest 
alone?
    Dr. Taylor. These numbers are very concerning. That is why 
I emphasize so much to get the budget deficit down so we don't 
accumulate so much debt.
    And the question for you is how fast do we do that? How do 
you convince your colleagues one way or the other? I think 
personally, I think the faster the better, because it is so 
large at this point, and that will deal with the problem you 
are indicating. The exact amount is hard to calculate but will 
deal with the problem you are indicating and that is what we 
should do.
    Mr. Estes. Thank you.
    Mr. Walker, I mean, my colleagues, particularly on the 
other side of the aisle, have indicated that there is no real 
correlation between some of the massive amounts of spending and 
the interest rates being near 40-year highs. Can you help us 
walk through how those are related?
    Mr. Walker. Economics 101. Too much spending has resulted 
in additional deficits, additional deficits increases debt, 
debt-to-GDP slows economic growth. That has been facilitated in 
part by the Fed, which had very loose money part of policy with 
regard to interest rates and also bought a lot of our Treasury 
securities. That resulted in excess inflation, that resulted in 
the need to increase interest rates, that resulted in some of 
the things that frankly led to the fall of these two banks 
recently and uncertainty in the banking sector. It is all 
interconnected, okay?
    And by the way, the two major things are too much spending 
and 180-degree reversal on energy policy. We were energy 
independent. That is not just with regard to energy prices, it 
is with regard to agricultural. I mean, fertilizer is relied on 
that. So those two things, get control of spending and get back 
to energy independence are the two important things. You are 
going to have to have more revenues as a percentage of GDP. The 
math doesn't work without it. The question is how do you get 
there? Pro-growth policies, how do you do tax reform where you 
can generate more revenue as a percentage of GDP? Spending is 
the primary problem, overwhelmingly, but it is not the only 
problem.
    Mr. Estes. Well, thank you, and thank you all, and I yield 
back, Mr. Chairman.
    Chairman Arrington. I thank the gentleman from Kansas and 
now yield five minutes to my fellow Texan, Mr. Chip Roy.
    Mr. Roy. I thank the Chairman, thank the witnesses for 
being here today.
    I know there has been a lot of back and forth about revenue 
side, differences in opinion about corporate tax rates, 15 
percent, 20X percent higher, how that compares to pass through 
rates, subchapter S. Fine. Why don't we just concede and 
stipulate that we could continue to work to improve the tax 
code to adjust those rates one way or the other? We can have 
that debate, but at the end of the day, true or false was the--
and I would ask this question, I don't know, to maybe Dr. 
Taylor or Mr. Hodge--this last year was our overall tax revenue 
brought into the Treasury as a percentage of GDP at a relative 
historic high, 19.6 percent close to 20 percent? Are we not 
talking about a relative historic high for our Nation in terms 
of revenues as a percentage of economic output?
    So, what we are talking about here when we hear a 
question--and, Mr. Walker, you just speculated and I agree with 
what you are saying on energy and other issues--saying, well, 
we are going to have to have more revenue, and I think what I 
am assuming and what you are saying is we got to have more 
revenue if we are going to continue to spend at the levels we 
are spending, and that you are arguing that we are going to 
have to spend at those levels because of mandatory spending 
that we owe and that we continue to grow discretionary 
spending, whatever that might be, so therefore you are going to 
need more revenue if you want to make that math work, but I 
think it is really important for the American people to 
understand, and I just want to double down on this that for the 
record, for the American people to understand, we are at 19.6 
percent, almost 20 percent of relative amount of inflow revenue 
to the Treasury as a percentage of GDP, and we have, for the 
most part, give or take a few decimal points, never been higher 
than that, post-World War II, at the beginning of our country, 
now. True or false? I just want to make sure we are agreement 
on that.
    Mr. Walker. One time. 2000 was the peak we were over 20 
percent of GDP----
    Mr. Roy. But just slightly, correct?
    Mr. Walker. That is correct, that is correct.
    Mr. Roy. Say that again, Dr. Taylor. I am sorry, Mr.----
    Mr. Hodge. That was an accident in 2000 because of the--it 
was the internet bubble drove up capital gains rates and so 
forth. So, it was pure accident.
    Mr. Roy. Right. So, to the point, though, being at the 
relative level, 20 percent, and agreed that there was a spike 
there at the end of the dotcom boom in the 1990s where that all 
kind of collided and we were able to get to a point there where 
we obviously had zero deficits, right.
    A reason that is so critical is because everything we are 
talking about here, we are talking about revenue side, we have 
got to maintain economic growth, right. You guys have talked 
about that. Nothing we are talking about here, zero, will do 
anything relative to economic growth. Would you all agree that 
in order to solve our debt crisis at the moment, and we have a 
debt crisis, that economic growth is certainly the key driver 
to our ability to get out of it? Sort of post-World War II 
example? Go ahead.
    Mr. Walker. We ought to focus on debt-to-GDP. That is what 
matters, not balanced budgets, debt-to-GDP. So, you grow the 
denominator faster than the numerator, okay, and by the way, 
that was the number one principle that a supermajority, over 90 
percent of registered voters agreed to.
    Mr. Roy. But if I can get to the point though on economic 
growth, Dr. Taylor, Mr. Hodge, do you agree economic growth is 
the key driver for our ability to get out of the debt crisis we 
are in now?
    Dr. Taylor. Absolutely. It is in my written testimony, oral 
testimony, it is so important.
    Mr. Roy. In order to achieve economic growth, is it better 
or worse to have a larger Federal bureaucracy?
    Mr. Hodge. Oh goodness, no. Right now, we have a government 
that is draining the private sector of productive capital and 
it is dragging down the U.S. economy, and until we reverse 
that, we are not going to have the growth that we really 
deserve and really need to get out of this debt crisis.
    Mr. Roy. So, as we look ahead and recognize the need to 
deal with mandatory spending, and I invite any one of my 
Democrat colleagues to sit down at the table and address 
mandatory spending rather than just giving speeches about it 
and giving commercials about it, but put that as a conversation 
that needs to be dealt with on a bipartisan basis. True or 
false, if we are going to address what we need to do to get 
economic growth and deal with spending in order to combat 
inflation, would it make sense for us to currently go back and 
restrain Leviathan and go reduce the size and scope of the 
overall Federal bureaucracy and discretionary spending right 
now and go take some of those dollars that have already been 
committed in some of the student loans, go take some of those 
dollars sitting over to Interior, EPA, and other places where 
they are using that as regulations to strangle economic growth 
and opportunity, constrain that in order to get the American 
people freed up. Would that do more to deal with inflation by 
constraining spending, put us on a path to save $3 or $4 
trillion over ten years, and then create economic growth by 
getting Leviathan out of the way? I would ask you all to give 
quick answers on that because my time is just about out.
    Mr. Walker. Yes, and one of the things I suggested is end 
the emergency in all subsidies and spending associated with the 
emergency, including student loan.
    Mr. Roy. Amen. Agreed.
    And I would ask just Dr. Taylor, Mr. Hodge, to answer that 
real quick, and then I will yield back.
    Dr. Taylor. No, I agree. You got it exactly right.
    Mr. Roy. Mr. Hodge.
    Mr. Hodge. Yes, sir. I just returned from Europe and the 
European countries are growing very slowly because of the size 
of their government, and we are inching toward that level 
ourselves, and we are going to have the same economic outcome.
    Mr. Roy. Thank you, gentlemen. Thank you for being here.
    Chairman Arrington. I thank the gentleman from Texas and 
yield five minutes to my friend, Mr. Ralph Norman, from the 
Palmetto State.
    Mr. Norman. Thank you, Mr. Chairman. Thank you for each of 
you. Sorry, I had another meeting so I hadn't heard all 
discussion that is going on.
    Mr. Walker, we have talked about the balanced budget 
amendment and how now it is more important than ever and has 
been agreed to with leadership. Ten years is what we pretty 
much agreed to. You have testified before Congress over 300 
times. Can you kind of go over, walk me through how important 
this is and how important this is now?
    Mr. Walker. Well, it is critically important that we do 
something to get our debt-to-GDP down to reasonable level. I 
would respectfully suggest, Mr. Norman, that the right metric 
is not balanced budget, because balanced budget can also be 
gamed with because it is a cash basis approach rather than 
accrual basis approach, and our huge increases in unfunded 
obligations are the real problem.
    So, I think the only way you are going to get control of 
runaway spending and to restore fiscal sanity and 
sustainability is a constitutional amendment that will limit 
how much debt as a percentage of the economy we can take on. 
That is pro-growth. It says you got to deal with the numerator, 
but it didn't tell you how to deal with it, and Chairman 
Arrington has introduced H.C.R. 24, which I respectfully 
request that you take a look at and potentially join.
    Mr. Norman. Any others want to comment on that?
    Mr. Hodge. I don't want to wait for a balanced budget 
amendment to start the process of reducing the size of 
government and fixing the problems that are inherently there. 
If we wait, I mean, as much as a good idea a balanced budget 
may be, if we wait, then it will be too late.
    Mr. Norman. Yeah, and that is in addition. I mean, we have 
over 504 amendments on specific cuts, including the woke 
dollars that have been spent in the military to address, the 
immediate spending for the 2023-2024 year. So, we are out of 
runway as far as what you are talking about, and I agree 100 
percent with you. That is just the spending trajectory that we 
have got to get down, and it starts today, and I think the 
public, everybody, I understand we complained about it, we 
blamed other people, now is the time to actually do something 
with it, and it will be a long sled with a constitutional 
amendment, but what we can do is take basically a non-Biden 
budget that is unacceptable to pretty much everybody, including 
his clean debt limit, which makes no sense at all, and trying 
to come up with the plan where--we calculated the interest on 
the $32 trillion, for every $1 trillion is $30 billion. How is 
this accounted--I know it is monetized, but how is this 
accounted for, in your opinion, in an upcoming budget?
    Dr. Taylor. So, I want to address this question in the 
broader context. So, your question is balanced budget, why not 
aim for that? It doesn't have to occur overnight, but that is a 
strategy that makes sense to people. On top of that, you have 
to realize we have these automatic stabilizers. So, if we booms 
and slump, there is a change in the deficit, as usually--so I 
would add that as well. That is the way I would answer your 
questions.
    Mr. Norman. Yeah, I agree with you, and it has got to be 
done now, but we have got to start the path toward that, and 
what I am asking is--and you all realize this, how hard it is 
up here--for every dollar spent, there is an advocate and there 
is a constituent that wants that dollar. That is the bind, but 
now I think people are asking me is not economic security 
national security? And it is. So, we don't have the time, we 
don't have the luxury of blaming it on another administration.
    As bad as the Biden budget is, it is time. How are we going 
to fix it? And the only way I know to fix it is what we are 
doing. I know what Chairman Arrington and others, and others in 
the Freedom Caucus are doing is proposing things that the 
public doesn't agree with anyway once they see it.
    Anybody else have any comments on that? Mark? Mr. Walker?
    Mr. Walker. Real quickly, I suggest three things. In my 
testimony there is a lot more detail. Cut, absolute cut in the 
2024 budget as compared to 2023. Secondly, create a mechanism, 
a statutory fiscal sustainability commission that will help 
engage the people and make recommendations to close the gap 
between spending and revenues over ten years, and thirdly, a 
constitutional amendment that will limit how much debt as a 
percentage of the economy we can take on. That is absolutely 
critical.
    And by the way, Congress should have done it in 1979. There 
were 39 states that filed for applications for a convention of 
states to propose a fiscal responsibility amendment and 
Congress did not act, and this will go to the Supreme Court if 
Congress doesn't act, and it is a conservative Supreme Court.
    Mr. Norman. Thank you. I yield.
    Chairman Arrington. I thank the gentleman.
    Let me make a comment because my name has been invoked in 
association with, and proudly so, in association with this 
constitutional amendment. Some people have encouraged me to 
stay neutral on everything. That is the problem. You stay 
neutral, we lose the country. You got to take a position, and I 
respect my colleagues for putting some of their thoughts on 
paper. I may totally disagree with them, but we have got to 
have this conversation, and I am so heartened, quite frankly, 
with the constructive tone and conversation on substance, 
obviously some stark differences in the vision and path forward 
for our country, but I am proud as the Chairman of this 
Committee that we are having this. I think this is the most 
important conversation, if not one of the most conversations 
that is going on in the People's Capitol, and it has been long 
overdue to focus on this.
    But what is more overdue, is my friend from Texas who beat 
George W. Bush for this seat, Kent R. Hance. He used to tell me 
and he warned me before I got here, that after all is said and 
done in Washington, more is said than done, and we have got to 
start getting to doing instead of just talking.
    But with respect to the constitutional amendment, I find it 
very intriguing, and for those who are curious about history 
relative to this issue, to know and to learn--I learned this 
from Mr. Walker--that states, there is a mechanism for states 
to say, the sovereign states, the free and sovereign states 
that formed the United States. There is a mechanism for them to 
say we have a problem with the way this Republic is being 
governed and if you don't change it, Federal Government, 
representatives of the people, then we will intervene, and 
apparently, they had enough people--states rather, petition for 
the opportunity to intervene. Most of those petitions were 
related to a fiscal responsibility amendment. I won't say a 
balanced budget amendment, some of them were, some of them 
weren't, but the majority were. They had the threshold, and the 
Constitution is very clear and expressly written such that 
Congress' job at that point is to tally that result and to 
convene a time and place for that convention. It didn't happen.
    You already had a threshold even if you haven't studied it, 
you want to go do your own homework on this. There has been a 
threshold at a level for our country that states have had to 
rattle their sabres and petition Congress to come together.
    And you know, last point here, and it is a point of 
personal privilege, and I will try not to abuse that as the 
Chairman. Use a context that is relevant to a lot of 
conversations in the halls of Congress these days, climate 
change and the policies that are being put forward to deal with 
them. I will try to keep this very neutral and focused on the 
fiscal implications. Switzerland has some form of balanced 
budget amendment. When Switzerland took the Paris Climate 
Accord and the emission reductions for their country, and I 
would suggest their country and their governing body is more 
progressive when it comes to that issue, but they were forced 
to do what Dr. Zandi did in his business and what Mr. Trone had 
to do in his business, what local and state governments have to 
do, what almost virtually--virtually every organization has to 
do except for this institution, and that is they had to 
consider the cost of that particular set of programs to reduce 
emissions. So how did they do that? Well, they didn't cut, but 
they offered revenue raisers in the following: a surcharge on 
plane tickets and excise tax at the gas pump, and the people of 
Switzerland rejected it.
    Now, I find that refreshing, I find that a healthy 
democratic system. It is not healthy when you don't have to 
consider cutting somebody's favorite program--it is always 
somebody's favorite program--or hitting somebody in their 
pocketbook. That is the reality most people live in, and when 
you put a dose of that reality, it changes people's behavior, 
and we don't have that context. When you borrow on the backs of 
future generations and you don't have the consideration I just 
mentioned, our behavior is irrational here and the outcome has 
been disastrous.
    And again, we can debate how to best address it at this 
point, but I stand with the Honorable David Walker, that there 
was an effort, and it was not enabled constitutionally by this 
body and we need to recognize that.
    So thank you for that.
    Last person to testify. You guys have been tremendously 
patient. I appreciate it. Highest ranking member of the 
military, veteran, distinguished service to our country, 
General Jack Bergman from the great state of Michigan. Wrap it 
up for us, General Jack.
    Mr. Bergman. I am wrapping it up?
    I see in this august group that anything I would say as 
just a simple Marine would be--and I know that my colleagues 
sitting up here with me, they know that I have kind of a unique 
sense of humor. There is nothing funny about poor spending 
policy. There is nothing humorous about a governmental entity 
at whatever level, that doesn't take itself serious in what its 
role is to provide the environment where others within the 
private sector, working together with the public sector, could 
do good things for the American people that they are honored to 
represent.
    So, having said that, I got a couple of questions. Oh, by 
the way, I am a Marine. Did I already mention that? I am not 
cheap, I am frugal, because as the Marines, we know we are 
always going to be, for the most part, initially under 
resourced, but we don't hesitate to go look for what we need 
when we need it.
    So, Mr. Hodge, President Biden has repeatedly promised that 
he would not increase tax burdens on those making less than 
$400,000. In fact, we heard last week, one of his folks 
reiterating, that is not going to happen, but I don't 
necessarily see that in this budget. Do the proposals in his 
budget live up to that promise?
    Mr. Hodge. Well, the question of directly or indirectly, 
and perhaps directly they have avoided taxing directly people 
earning under $400,000, but people earning under $400,000 will 
be severely impacted by the collateral effects of these tax 
increases, whether it is increasing the corporate tax rate, 
increasing taxes on small businesses, et cetera. There will be 
an impact on those folks, and it will not be good. Our 
estimates are that at least 335,000 people will lose their job 
because of these tax increases. Most of those people earn under 
$400,000 a year, and so, yes, they will be impacted.
    Mr. Bergman. So said a different way, just to make sure 
that well, technically--technically, if you make under $400,000 
a year, your tax rate will not be affected.
    Mr. Hodge. Correct.
    Mr. Bergman. But if you don't have a job, it really doesn't 
make any difference because if the taxes, as they are laid out, 
force a decrease in the number of those kinds of jobs that are 
available, you do, in effect--yeah, you are not paying any more 
taxes, but you are not able to pay your heating bills, you are 
not able to pay your--all the things that it takes to raise 
your family. Am I correct in that assessment?
    Mr. Hodge. Absolutely. Everyone's standard of living will 
decline as a result.
    Mr. Bergman. Okay. Along that same line, how would the 
proposed tax increases in the budget affect small businesses 
that already are faced with some really tough decisions that 
small business owners--as it relates to the rampant inflation, 
the broken supply chains, severe workforce shortages, and--oh, 
by the way, before you answer that, I think the number that I 
heard was today roughly 40 percent or less of those folks in 
the workforce were in the workforce in the late 1970s under the 
Carter Administration. Can you validate that as--that is a 
number that is been--but the fact--just look at the age, look 
at the age of the workforce. You can tell if you are in the 
workforce today at age 40, 40 years ago you weren't in the 
workforce. You weren't even born.
    So, the point is almost half of our people in the workforce 
have no relative earlier experience in their life to compare 
what they are facing today.
    So, getting back affecting the small business?
    Mr. Hodge. Well, overall the Biden budget is the largest 
attack on business, the largest tax increase on business 
perhaps in our history. Small business will be a big part of 
that. With the increase in the various payroll taxes, the net 
investment tax, et cetera, it will be a huge impact on small 
businesses across the board.
    Mr. Bergman. Okay, and there is a lot of--I will just say 
not exactly true information. True information can be just 
accidentally wrong or it can be intended to be wrong, okay, to 
misinform. Could we close the budget deficits or pay for all of 
the progressives spending proposals, like Medicare for all is 
one example, by simply cutting defense spending or just taxing 
the rich? Could we close the budget deficits by doing that?
    Mr. Hodge. At some point, Congressman, you run out of other 
people's money, and there is simply not enough wealth in the 
United States to tax in order to close this gap.
    Mr. Bergman. And along the same line if--and this is a 
subject that we have here, take the cap off of earnings which 
you pay Social Security into--if we took all the caps off of 
Social Security, would that then--extra revenue coming in 
through payments--would that solve the deficit problem?
    Mr. Hodge. I don't believe so, no.
    Mr. Bergman. Because I remember--because when Chairman 
Arrington and Congressman Estes and a couple of others came in 
on the Budget Committee seven years ago now, I remember that 
was one of the first things that we were told, you could take 
all the caps off of Social Security and it is not even going to 
begin to be a dent in it. So, I wanted to make sure we weren't 
living--by the way, I have a lot of acronyms in the military, 
you have acronyms for the acronyms in some cases, but this is a 
strong term. Some people could be offended by this and I just 
take it for what it is. It is an acronym, and the acronym is 
liar, L-I-A-R, living in altered reality. You are not a bad 
person, but you are not in the real world, and what we are 
trying to do here is put the government, the Federal Government 
and the spending into the real world that our citizens and our 
folks who work can make the best out of a temporarily bad 
situation.
    With that, I just want to thank you for what you do every 
day. Thank you, Chairman, for the unprecedented level of 
information flow on our Committee that is helping us as Members 
to come to grips with some tough decisions. Thank you, sir.
    Chairman Arrington. Well, to the General and my friend, I 
have got to say I am very pleased with the conversation. I 
thought it was apropos that a group of students, General, 
before you got here sat in this committee room to hear the 
conversation and to be made aware of what is at stake for their 
future with respect to the spending, the debt, our growing 
deficits, et cetera. I also think it is appropriate that 
somebody like yourself, representing veterans throughout the 
country who were willing to make the ultimate sacrifice for our 
country.
    We are closing this because there are a lot of ways to 
solve problems here, maybe ten ways to skin every cat in this 
town, and we are not short on information, we are not short on, 
in some cases, solutions and alternative solutions. It is the 
political courage and the sacrifice to do it.
    And so, I will let you have the last word, General, but in 
summary, we have different views, in some cases wildly 
different views on how to address this, but one thing I heard 
from every witness, and I think pretty much from every Member 
of this Committee, is the Fiscal State of the Union is rapidly 
deteriorating and that the path that we are on is just 
completely unsustainable, and I would just add, and this is my 
commentary, doing nothing is not just unacceptable, it is un-
American, and I pray to God that our efforts here, thanks to 
the wisdom, insight, and perseverance as witnesses on this long 
hearing, we will execute on a plan that will give our children 
and our fellow Americans hope for the future.
    General Jack.
    Mr. Bergman. Chairman, you just triggered something today. 
Today is March 29th, and a few years ago, much delayed, we 
established March 29th as the official, basically welcome our 
Vietnam veterans back.
    I would just like to say for the public record and to those 
who are listening, welcome home, brothers and sisters.
    Chairman Arrington. Amen. Amen. Nothing else to say there 
but to stand in support of our heroes.
    For the record here. Mr. Walker, Dr. Taylor, Mr. Hodge, Dr. 
Zandi, thank you so much again.
    Please be advised that Members may submit written questions 
to be answered later in writing. Those questions and your 
answers will be made part of the formal hearing record. Any 
Member who wishes to submit questions for the record may do so 
within seven days.
    With that, the Committee is adjourned.
    [Whereupon, at 1:40 p.m., the Committee was adjourned.]
    
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