The Best Metric to Reverse the Curse: A 3% Deficit-to-GDP Path to Fiscal Sustainability

The hearing will come to order. Welcome to the Committee on the Budget's hearing regarding the merits of deficit-to-GDP as a measure of our nation's fiscal health, with the goal of a glide slope from close to wartime, let's just say emergent levels of deficits to a 3 percent in 10 years. I've been looking forward to this conversation for some time, and I'm excited to have our witnesses here this morning and to get their insights and counsel on the matter and to debate this with my colleagues. Before I begin, we have some additional members or at least one joining us today. I don't know that he's here yet, but Bill Huizenga of Michigan has introduced a bill related to the 3 percent. There may be others, but I know he has a great interest in this, and we're going to waive him on today and ask unanimous consent that Mr. Huizenga be permitted to participate in today's hearing without objection, so ordered. Today we'll hear from a panel of expert witnesses, and I'd like to introduce them briefly, starting with Mr. Jonathan Burks, Executive Vice President for Economic and Health Policy at the Bipartisan Policy Center. Mr. Burks previously served as Chief of Staff to former Speaker of the House Paul Ryan, a policy advisor to former Senate Majority Leader Mitch McConnell, and policy director at the House Budget Committee. Welcome back. Mr. Kurt Couchman, good friend and fellow fiscal hawk, Senior Fellow for Fiscal Policy for Americans for Prosperity. Mr. Couchman previously served in the offices of several members of the House of Representatives. And then my dear friend, Ms. Maya MacGuineas, President of the Bipartisan Committee for a Responsible Federal Budget. Ms. MacGuineas previously worked at the Brookings Institution and on Wall Street as well. And then the Honorable Jared Bernstein, former Chair of the Council of Economic Advisers from 2023 to 2025. We all appreciate your time again and your insights today on this important matter. I yield myself such time as I may consume. We need to change our long-term budget framework as it relates to budget resolutions for the following reasons. We need to live in reality for one. We need to measure, we need the most meaningful measure of the fiscal health of our country. And I think debt and deficit-to-GDP by most expert accounts is a better way to do that than just nominal savings over any time period. The recent tradition, at least for Republicans, has been to establish a goal of balancing the budget in 10 years. When I was a freshman member, Mr. Bernstein, in 2017 on this committee, the savings required to balance was about $6 trillion or close to $6 trillion. Today it's $16 trillion. So while I'm all for ambitious goals, I think aspirational goals that are just politically impractical to achieve don't help anybody. In fact, in every endeavor I've undertaken, when you set goals beyond stretch and into impractical and unachievable, you give people an excuse to do nothing. So why not do a few things? Let's get a more meaningful measure of fiscal health, let's establish an achievable goal, and let's do something that is rare in this institution and novel to this committee, not since we took over, Brendan, but let's agree together as Republicans and Democrats, as proud lawmakers of the greatest country in the world, on this framework, and then we can debate the strategies and the inputs and what dials should move in what ways. And I think if we could do that, I think we would be, we would do much better to move this country onto a more fiscal, a sustainable fiscal trajectory. This 3 percent over 10-year goal has been endorsed by financial experts like Ray Dalio and Warren Buffett. I noticed it was also endorsed by Barack Obama, President Obama. But it's embraced by experts, economists, business leaders on both sides of the aisle, center-right, center-left, advocacy groups and think tanks like the ones represented today. I think people understood when the rating agencies downgraded us, I think was probably, they were a lot more patient maybe than they should have been, but when they did, their commentary included that they were looking for a plan, a long-term plan and a commitment from both parties to that plan. And again, when people elect Republicans in these two chambers, I think the strategies on how to achieve that should reflect that philosophy and the values of those voters. And when it shifts to Democrats, I would expect that it would reflect more of the Democrat strategies on how to achieve. But what we should agree on is that we're off the rails and we're in dangerous territory, and a debt-related crisis of any kind, including a sovereign debt crisis and undermining our reserve currency, would be potentially irreparable and unacceptable for everybody in this on this committee. And I believe that most if not every member here is concerned about it, it's just how we go about addressing it. So that's the debate today. Hopefully we'll have a hearing where we can mark it up and change the paradigm altogether so that we can again actually make real progress. And that progress, by the way, of getting the 3 percent, Scott Bessent, our Secretary of Treasury, mentioned it in his Senate confirmation hearing. Getting there would get us to lower than the average 50-year average on annual deficits. It would create the fiscal space to absorb some of the shocks like the conflict with Iran or some other exigent circumstance that we can't predict like another COVID. We're not particularly ready for that in my opinion, and that's a problem. So with that, I'm going to turn it over to my ranking member for as much time as you need to make your opening statement.

Well thank you, Mr. Chairman. I want to thank all of the invited guests here, the witnesses, for taking the time out. I first want to start actually asking for a little help from this committee and the public at large. We have someone who's gone missing. Perhaps you could help me find him. His name is Russell Vought. He is the OMB Director, and for 15 months Mr. Vought has been MIA. He is supposed to testify before this committee as every previous OMB Director has done, including Mr. Vought himself the first time he was OMB Director. Here we are 15 months into this Congress, 15 months this committee has been waiting for the OMB Director to testify. Where is he? So if anyone spots this gentleman, if you could call the House Budget Committee and let us know, because we would like to know why exactly he is so afraid to testify before this committee. Other Trump cabinet secretaries have testified before this committee and withstood public scrutiny. Why is Russell Vought so afraid to come before us in public and answer questions about his record and the record of this administration? Perhaps he doesn't want to talk about the fact that according to fresh new polling this past week, this is the single most unpopular president when it comes to the handling of the economy since George W. Bush during the Great Recession. When asked in a poll by Reuters about President Trump's handling of the economy, do you approve or disapprove, only 29 percent of Americans approve. That is far lower than each of the last three presidencies. Again, you have to go back 20 years to the Great Recession to find numbers that low. Different poll, Yahoo YouGov, Trump handling on cost of living, approve 26 percent. Other polls from Fox News and CBS News finding similarly low results. So maybe Russ Vought doesn't want to be asked about that. Maybe Russ Vought's afraid to testify before this committee because he doesn't want to be asked about the Republican tax bill that they passed and the President signed into law last July, which included of course the largest healthcare cuts in American history, with CBO projecting that 15 million Americans will lose their healthcare as a result of that bill. Maybe he doesn't want to come before us because relevant to our hearing today, he doesn't want to be asked about the $4.7 trillion increase in the national debt that is a result of the Republican tax bill. No other piece of legislation in American history increased deficit and debt more than the Republican tax bill they passed this past summer. Or perhaps he doesn't want to answer questions about the illegal impoundments that he executed last spring, which included withholding $11 billion in disaster relief funding to states. Or finally, and this list could go on and on, maybe he doesn't want to address in public what the full cost of this Iran war will be. I understand there's a secret meeting this afternoon that Budget Committee Republicans are holding with officials from DOD. I think the American people deserve to know, and we deserve to ask to get this information, what the full cost of this war of choice will be. We have heard publicly the figure $200 billion. That is a massive sum. That is enough money that you could have extended the Obamacare tax credits in full for seven years. So again, the list goes on and on, and actually come to think of it, I might have answered my own question. I actually can understand why Mr. Vought has gone missing, because those would be very difficult questions to answer. Finally, in the 30 seconds I have left, let me say this, and I've said this publicly in previous hearings before, I've said it in private to a number of my Republican friends on the other side of the aisle like Mr. Arrington, Mr. Smucker and others. At some point I agree, and at some point soon, we do need to tackle the real and growing problem of deficit and debt, and I'm looking forward to having that discussion. But let's make sure it is a discussion truly based on facts, and if we're going to go down the road of the first step of setting the goal, then we need to very quickly get to step two and talk about what that plan looks like. We don't want this to be, Mr. Chairman, what I have done for the last 30 years, and that is every New Year's Day had the resolution that this will be the year I finally get into shape. As I have come to learn, without an actionable plan, that continues to be an unfulfilled resolution every single year. So I see my time has expired, with that I'll yield back.

I thank the ranking member. In the interest of time, if any other member has an opening statement, I ask you submit it for the record. I will hold the record open until the end of the day to accommodate those members who may not yet have prepared written statements. Before I yield to the witnesses, we have another member joining us, Representative Tom Suozzi from New York. I don't know if he's here yet, but he will join us, and I ask unanimous consent that Representative Suozzi be permitted to participate in today's hearing. Without objection, so ordered. Once again, thank you to the witnesses for your time. The committee has received your written statements, and they'll be made part of the formal hearing record. You will each have five minutes to deliver your oral remarks. Mr. Burks, you may begin when you are ready. We yield five minutes.

Thank you, Mr. Chairman, Ranking Member Boyle, and distinguished members of the Budget Committee. Thank you for inviting me to testify about the role a 3 percent deficit target could play in improving the nation's fiscal health. I'm especially pleased to appear here today, having served this committee as policy director over a decade ago. I only wish I came with better news. The federal government's finances are in a parlous state. For decades, political leaders of both parties have pursued unbalanced fiscal policies that have led to ever-growing levels of spending and stagnant levels of revenue. The result is an unprecedented level of publicly held debt at a time when the economy is relatively healthy, there is no national emergency, and until very, very recently, we were at peace abroad. This level of debt is especially troubling given the challenges that the nation faces. First, the population is rapidly aging, fueled both by falling birth rates and rising life expectancy. Second, healthcare costs are growing faster than the economy. In recent years, we've seen more than 7 percent year-over-year growth, and the public sector is bearing the majority of those costs. Third, technological advancements threaten disruptions to the workforce that could require significant time and resources to help Americans adjust to. And finally, international challenges are leading to higher levels of spending for national security. Ideally, in such a moment, the federal government would have ample room for fiscal expansion to meet these challenges. Even on the eve of World War II, with the nation recovering from the Great Depression, publicly held debt stood at only 42 percent of the economy. Today we are at 100 percent. We are pushing into uncharted territory. Today's hearing is focused on one promising idea to help us correct course: establishing a binding fiscal rule that deficits cannot exceed 3 percent of annual economic output would roughly stabilize the debt as a share of the economy and alleviate some of the upward pressure high public debt levels are putting on interest rates, inflation, and the cost of living. The reforms necessary to achieve that deficit level would also restore some of the fiscal flexibility policymakers will need if any of the aforementioned challenges become crises. Of course, stating a fiscal rule is simple. Designing one that works has proven more challenging historically. For example, when the European Union's Stability and Growth Pact was new, it was effective in providing a political constraint on member states' fiscal decisions. However, as time passed and political will weakened, the pact's formal enforcement mechanisms proved politically infeasible, such that last June, the EU reprimanded one-third of its members for violating the pact's 3 percent deficit ceiling. Closer to home, in 1985, Congress enacted Gramm-Rudman-Hollings. GRH established a series of deficit targets with the goal of balancing the budget by 1991. However, honoring GRH's deficit targets would have required more aggressive fiscal tightening than was politically bearable, and in 1990, Congress abandoned the deficit targeting approach as the road to balance. The common thread connecting these experiences is the reality that there has to be a genuine political consensus on the benefits of keeping deficits to modest levels if the rules are to be honored. I commend the Bipartisan Fiscal Forum led by Chairman Huizenga and Peters, as well as Congressman Smucker and Quigley and additional members of the Budget Committee, for their leadership in this respect. You are doing the hard work of forging consensus across the political divide, and you deserve credit for that effort. Furthermore, Mr. Chairman, hearings like today's serve an important purpose in bringing to light the very real harms Americans are facing from excessive government debt. Our growing debt puts upward pressure on interest rates, which in turn impact every corner of the economy. Elevated mortgage rates are putting homeownership out of reach for far too many Americans, while the increased cost of debt makes it harder for new housing development to be profitable, for childcare centers to cover operating costs, and for new energy infrastructure or private healthcare investments to make financial sense. As our debt grows, the risk compounds. Net interest spending on the national debt now consumes nearly one-fifth of all tax revenue and represents the second largest category of spending after Social Security. A rising stock of debt makes the budget more sensitive to interest rate shocks and increases the risk our lenders could lose faith in the federal government's ability to repay our debt without high inflation. We need to actively pursue solutions, which why I commend the committee for its historic support for establishing a bipartisan fiscal commission. Building on the legacy of prior efforts like the Domenici-Rivlin Commission that we hosted at BPC, such a commission would be a substantial step in the right direction, bringing together bipartisan, bicameral negotiators to both engage the public and present Congress with an actionable plan to stabilize the debt. One final element that could help create the political consensus needed for tackling our deficit problem is a return to the regular annual adoption of budget resolutions. While the process is never easy, and returning to the pre-2002 norm of bipartisan resolutions would make it harder, there is simply no substitute for the difficult negotiations and compromises that such an achievement requires. Thank you for the opportunity to share my views, and I look forward to taking your questions.

I thank the gentleman and now yield five minutes to Mr. Couchman.

Chairman Arrington, Ranking Member Boyle, members of the committee. Thank you for holding a hearing on a budget target with broad support.

I thank the gentleman and now yield five minutes to Mr. Couchman.

Chairman Arrington, Ranking Member Boyle, members of the committee, thank you for holding a hearing on a budget target with broad support. This is urgent. The debt burden already crowds out opportunity and prosperity, pushes up inflation and interest rates, and threatens the calamity of a debt crisis. To illustrate, my home state of Pennsylvania defaulted in 1842. It borrowed over $40 million for an ambitious canal and railroad network. Revenue only covered half of the interest costs. Then came the Panic of 1837. Credit markets froze. Projects stopped mid-construction. The state's credit was ruined. Assets were auctioned on the cheap and taxes went up. Eight other states also defaulted, and it was no picnic for non-defaulting states. States began to limit borrowing. Finally, in 1857, Pennsylvania adopted a constitutional amendment to restrict debt. Nick Karen, deputy state director of Americans for Prosperity's Pennsylvania chapter, and other grassroots leaders from AFP's 50-state grassroots movement are here today. Wave, guys. They have been visiting with members of Congress this week on America's Affordability Agenda to reform government, remove barriers, and reduce prices. All three connect closely to better budgeting. A 3 percent of GDP deficit target makes good sense. Figure one of my written testimony shows it would stabilize and reduce the debt burden, especially if moving toward full budget balance follows. Resolutions embracing the target have broad support from members of Congress and outside experts across the political landscape. This target is a neutral, predictable benchmark. Agreement on it will let Congress focus more on policy solutions and the institutional upgrades to unlock even more options. That said, the deficit-to-GDP ratio is variable, as figure two shows. It is the convergence of outlays, revenue, interest rates, the debt, and economic growth. Congress cannot control them precisely in the near term. Congress needs mechanics for stable and predictable budgeting under the hood of the 3 percent deficit-to-GDP target. Something of an American adaptation of the Swiss debt break, the Responsible Budget Targets Act from then-Senator Braun and Representative Emmer is an excellent start to that engineering. The RBTA would provide a glide path to structural primary balance, balancing non-interest spending to revenue over the medium term. Figure one shows that a path to primary balance tracks the 3 percent deficit target closely over the next decade or so. RBTA's targets would adjust for revenue changes and for program expansions during downturns, sometimes called automatic stabilizers. RBTA would let emergency spending happen when needed, and those amounts would be offset subsequently. This balances immediate action with keeping emergency response from being a magical Easter basket unconnected to the rest of the budget. That said, the current budget process will frustrate Congress in reaching budget targets. Appropriations are one-fourth of spending, stable or declining as a share of GDP, and well picked over as the only part of the budget that Congress tries to do every single year. So, do the whole budget, as Representative Blake Moore's Comprehensive Congressional Budget Act proposes. It too is a neutral, predictable way for all members to represent their constituencies in committees and on the floor. See figures three and four. Every committee could manage its portfolio every year. You could make progress regularly on difficult issues through quiet bipartisan deals in subcommittees and committees. Deeper relationships to advance priorities would improve collegiality and strengthen the legislature. A complete budget would also maximize Congress's dials to meet targets. In addition, let's take unpopular shutdowns off the table and keep members of Congress in D.C. and focused on appropriations until they are done, as Chairman Arrington and Representative Panetta have proposed. Shattering illusions of shutdown leverage would focus Congress on the art of the possible through supporting a more bottom-up, inclusive process. An effective version of automatic enforcement would be a useful backstop too. Finally, on the debt limit, Congress must avoid default in the near term and in the long term. Ranking Member Boyle's Debt Limit Reform Act could provide language for conditional debt limit relief. Thank you, Chairman Arrington, Representatives Huizenga, Peters, Smucker, Panetta, Houchin, Moore, Estes, Edwards, and all others supporting the 3 percent deficit-to-GDP targets and other reasonable, responsible budget upgrades. I believe this committee is uniquely capable of leading America's fiscal turnaround to reverse the curse. I look forward to your questions.

Thank you, Mr. Couchman. I now yield five minutes to Ms. MacGuineas.

Thank you, Chairman Arrington, Ranking Member Boyle, members of the committee. Thank you for holding this hearing today and for having the Committee for a Responsible Federal Budget attend and testify. We all know the federal budget is on an unsustainable trajectory. There are too many scary numbers and facts to list. Right now, I'm pretty consumed with the fact that we spend more on interest than we do on national defense. Also, that we spend $6 per senior on every $1 we spend on children. And also that right now, interest payments run about $7,300 per household on average. The solutions are not easy. They are straightforward, but they're not easy. And that we are deeply divided politically makes them even more difficult. We need less spending and more revenue, which is the opposite politically of what there is pressure to do. And the risks are growing. Our fiscal space is diminishing. The new war reminds us that new threats and emergencies seem to appear with increasing regularity. The bond market continues to remind us that borrowing has a cost and it creates risks. We're no longer fiscally prepared for the various challenges we face. It's most urgent that we break this damaging fiscal stalemate. The Committee for a Responsible Federal Budget is very supportive of the fiscal target effort because a 3 percent deficit target helps break the stalemate in a number of ways. First, we need to have budgets in order to reflect our values, lay out strategic plans, resolve competing priorities. Given that our resources are not infinite, budgets need to have some form of restraint, something we currently don't have. So picking a target is a necessary first step. Second, there is no magic number. I admit 3 percent is higher than I would like in a perfect world. But given our current abysmal fiscal situation, we are in a very deep hole. It strikes the sweet spot between what's desirable and what is possible. We need a metric aggressive enough to reassure markets and lenders, but realistic enough that lawmakers will not just throw in the towel or resort to gimmicky workarounds. So given its balance between meaningful and doable, we believe the 3 percent appears to be the closest thing to a Goldilocks target that we have. Third, it would succeed in stabilizing the debt with a tiny bit of wiggle room and bringing the debt down very gradually over time. Again, it's far short of ideal, but it will take trillions, close to $10 trillion in savings, which is a huge undertaking. Anything larger than this seems destined to fail. Another important point is that there's widespread, broad-based support. At a time when we can agree on very little, it is notable that all board members of the Committee for a Responsible Federal Budget, Secretary Bessent, President Obama's budget in the past, Ray Dalio, Hank Paulson, Jason Furman, just to name a few, have all supported 3 percent as an appropriate target, along with outside groups like the Peterson Foundation, Progressive Policy Institute, Third Way, Bipartisan Policy Center, Americans for Prosperity, National Taxpayer Union Foundation. These are organizations that do not often agree, and they all do on the 3 percent target. The next step is to operationalize it. Once there's an agreed-upon target, all budgets, all budgets should include it and meet it. The budget committees, the president's budget, outside alternative budgets, which are a very helpful thing for different groups to put forward. I've always thought every member of Congress should support some budget, that we need to have a plan that's the starting point of everything and everybody should be signed on to one budget. Having the 3 percent target creates an actual comparison of different ways to achieve the goal. There is no right way to get there, and the multiple paths forward will allow us more serious discussion than we currently have where everybody's kind of competing to see who can give away the most. I do want to emphasize this point that there are two important parts of budgeting. The first is the numbers and the second is the values that they reflect. When it comes to the numbers, debt growing faster than the economy, interest payments being the fastest growing part of the budget, interest rates on their way to be higher than economic growth, those are numbers people should all be able to agree are problematic. When it comes to values, there's no single right answer or simple agreement. We have different views about the role of government, the size of government, our favorite policies, national security, transfer payments, universal, targeted. There's no right answer there. The goal is to agree on a reasonable and sustainable budget with parameters so that we can discuss, compare, and hopefully compromise on the values part without tanking the economy, weakening the country, or causing a debt crisis. So 3 percent is not an answer to everything, it's not an endpoint, it's a starting point. And even with that, our debt will still be too high and we will need to go further. It doesn't do the heavy lifting of resolving the policy differences, but I do hope we can agree it is a reasonable parameter to put in place to start the real heavy lifting of addressing our serious debt challenges. Thank you.

Very well. Thank you, Ms. MacGuineas. And now I yield five minutes to Dr. the Honorable Bernstein.

Mr. Chairman, Ranking Member, members of the committee, I thank you for the opportunity to testify today. Let me begin by commending the committee for focusing on our challenging fiscal path. The proposed 3 percent cap on deficits is a laudable goal, one that would close the fiscal gap and turn an unsustainable path into a sustainable one. But it matters greatly how we get there from here. It is entirely possible to do a lot more harm than good in that pursuit. My testimony therefore lays out a framework that I hope the committee finds useful in achieving sustainability without hurting economically vulnerable Americans who are already struggling with affordability concerns that have been worsened by budget policies coming out of Washington, including tariffs that raise their prices and cuts to health and nutrition programs. Point one. Fighting over whether the problem is too much spending or too little revenue is a dead end. No matter how often policymakers say they are displeased with the fiscal outlook, their actions, what economists call their revealed preferences, show that our deficits are born of an unwillingness to raise the revenue we need to meet the spending policymakers believe is warranted. Of course, there are members who would like to lower today's deficits and tomorrow's debt through spending cuts and tax increases, but I'm talking about the broad majority-driven outcome, which is as I've described it. The essence of our fiscal problem is thus neither obviously a revenue problem nor a spending problem. It is that Congress has long been unwilling to raise the resources necessary to pay for the institution's revealed spending preferences. Point two. It matters how you get to the 3 percent cap. Supporters of last year's budget bill have already revealed a willingness to take away vital protections from economically vulnerable families, including nutritional and health coverage to partially offset the cost of tax cuts. If that's how advocates of this approach intend to cap the deficit at 3 percent, it will do much more economic harm than good. Such destructive cuts are in part a function of taking the majority of the budget off the table, including Social Security, defense, Medicare, and so on. But I can assure this committee that they cannot, and in terms of causing deep and unnecessary suffering, should not achieve the 3 percent cap by further cutting programs for the poor and non-defense discretionary programs. Point three. I agree with our chairman that a deficit target can help Congress focus on our unsustainable fiscal path. But we must be sure that it's flexible and can expand if needed in downturns. Since Keynes, it's been widely understood that when the private sector is in a recession, the federal government can avoid much unnecessary suffering by temporarily at least partially replacing the lost demand. Point four. The flip side of deficits expanding in downturns is that they should contract in strong economies. We will be very unlikely to achieve a more sustainable fiscal path if we do not return cyclicality to the revenue flows into our government coffers. Bobby Kogan and I recently focused on this problem, linking it to a relentless one-way ratchet on tax policy this century, wherein tax cuts have resulted in a weaker connection between economic growth and revenue flows to the Treasury. Point five. In considering how to get on a more sustainable path, it is essential to recognize that spending is below where CBO thought it would be while revenues are much lower. These are all as shares of the economy. Compared to CBO forecasts from over a decade ago, spending outside of interest payments is actually on a lower trajectory by a few percentage points. The revenue line, however, is five to eight percentage points of GDP lower now than it was then. Point six. The tariffs reveal that we can raise new revenues. Though the Supreme Court has declared Trump's reciprocal tariffs to be illegal, the fact that almost $290 billion was raised in tariffs in 2025 compared to around $50 billion pre-pandemic demonstrates that revenues can be raised. The tariffs have not been costless, of course. They've put upward pressure on inflation, raising the inflation rate by just under one percentage point, and they were and are a source of stress for American consumers and businesses, especially small businesses. They're also a regressive tax, hitting middle and low-income households more so than higher-income households, and thereby exacerbating existing affordability struggles. This argues for replacing the tariffs with other revenue raisers that are not targeted at families with the least ability to absorb them, but it is a contemporary example of a rare action going in the other direction of the tax cut ratchet. My final point is that the timing of a budget crunch is unknowable, but the shift in the budget math, the unfavorable shift, makes it a lot closer than it used to be. Thank you, and I look forward to your questions.

I thank the gentleman, and now we will begin our Q and A session, and I'll yield myself five minutes. I'm not sure that the bigger deficit in Washington isn't intellectual honesty and political courage, to be frank. Really easy to pick out the flaws and shortcomings and hypocrisies of one party when you belong to the other party. I could go through the litany of things that I believe have more than exacerbated the cost of living for our fellow Americans and the interest expense on our debt that is now 50 cents, 50, it's more than 50 cents, 60 cents on every dollar. I don't think that's helpful, actually. I mean, I get it, let's try to score some political points. It is the season, but it always feels like the season in the House. It feels like it's always the season in Washington. I think right now we should just take a deep breath, step back, try to be objective and say, at a minimum, let's start with both parties have failed to meet this challenge in their own way and their own right. The IRA still being upwardly revised in terms of the deficit impact, recently on the drug price provision, by hundreds of billions, by the way. We know it was hundreds of billions in increased revised costs to the tax subsidies in the green energy space. But I would also concede we could have had more fiscally responsible tax reform. We did, actually, in the House, and then the Senate changed it, and we had to make a choice, and we accepted less than ideal, but we got something that we believed would reignite the growth of this economy, which I think, and would like to ask this question at some point, is a key component in the equation of restoration of fiscal health of the country. We saw a 3.8 growth in the second quarter, a 4.4 GDP in the third, and if it weren't for the shutdown, according to CBO, we'd have had a 2.5 percent GDP in the fourth. What would that have put the GDP at for last year? Mr. Bernstein, it would have been 2.5, north of 2.5 percent. Well, you know what, that's what we assumed in our big beautiful bill. It's not the panacea, but we assumed it, and we were mocked and ridiculed as just being way out of bounds, including CBO who downgraded our growth projections for that year from 1.8 to 1.5. So look, we have our strengths, we have our weaknesses, and we have all failed to step up to meet this challenge. So why not start from the fundamental place of agreeing on what is success and over what time period can we reasonably expect to achieve that? I mean, I'll ask you, Mr. Bernstein, wouldn't that be just, if we weren't in Washington, if we weren't in a congressional hearing, if we were just proud patriots trying to solve a problem in a conference room with a whiteboard, would we not start at that, just what's success and what's the right goal that we could all work on in spite of the differences on strategy?

There's very little you just said that I would disagree with. I will say one thing that's just some flavor, and I think it's important, I mentioned in my testimony. We have a very tough situation, other panelists have mentioned this as well, where GDP growth no longer generates the revenue flow to the Treasuries that it used to. And I have a table in my testimony showing that when we had very low unemployment back in the early 2000s or in the 2017-19 period, unemployment around 4 percent, we had 19.5 percent of GDP in revenue collection, 1998 to 2000, with the unemployment rate around 4 percent. In 2023-25, with the unemployment rate around 4 percent, actually a little lower, 3.9, we barely, we didn't even collect 17 percent of revenue. So I take your point on GDP growth, but we have broken that linkage, and that's a real problem.

And I think the real threat, or one of the biggest threats, is the crowding out that was mentioned. I mean, $2 trillion out of the private sector for investment capital, it's going to be hard to get to 3 percent growth, which would be ideal, with all that we're taking on in terms of debt. That $2 trillion will be $3 trillion in 10 years, and by the way, interest will consume 25 percent of all revenue back to the Treasury. Kurt, maybe you just get the last word here on growth, because I do like the debt-to-GDP, deficit-to-GDP, because it does say what is this debt increasingly relative to the output of this great economy. Just make a comment or two about that and then I'll let the Ranking Member.

Economic growth is absolutely crucial to expanding prosperity and opportunity for the American people. It does help with the fiscal situation as well, and it is a critical component of getting our fiscal house in order. It's also great for the American people. We will have to do more in the budget than simply growing the economy, although that's a piece of the puzzle.

I take Dr. Bernstein's response and agree it is more challenging now. But if we can get 1 percent over the 1.8 that is projected, it's $3 trillion towards deficit reduction. It's a laudable goal, we can do it, but we're going to have to work together and you can't have $2 trillion deficits and expect to get there. Mr. Ranking Member.

Thank you, Mr. Chairman, and I just want to first start off by thanking all four witnesses. I have to say as a panel, that was maybe the highest quality testimony that we've had in certainly the last year and three months in this Congress. I do want to ask a couple questions about none of these, by the way, are gotcha questions. I actually genuinely want to know what I'm asking. The first is if if there is agreement that debt-to-GDP is the right metric as opposed to some nominal figure, I can understand why that would be, although with the necessary caveat that Mr. Bernstein raised, there would need to be something in there for a provision that when you have an economic downturn, I completely agree with that. But if okay, if there is general agreement on debt-to-GDP ratio being the right measure, why 3 percent? I mean, I know there might not be a perfect figure. I don't know if Mr. Burks or Ms. MacGuineas, start with you, if you have an answer, I'm curious, okay, why is it 3 percent and not two or two and a half, three and a half or four and a half? I hope you give me a better answer than the times I have privately asked Fed, so why is 2 percent the right inflation target? And I've generally gotten, well, two and a half seems like too much and one and a half seems like not enough. Like they're candidly off the record, economists' answer on why 2 percent, which we accept as gospel, is it's a little less than convincing, so hopefully you can do better.

So there is no one right answer, so I'm not I'm not going to do much better. And we've always known sort of the same question is when are we going to hit the limit, when we're going to hit debt where there's going to be a crisis? And we don't know, so we don't know what the right amount is is necessarily. We initially years and years, decades ago, focused on debt-to-GDP and we focused on getting back to 60 percent of GDP. That is so far out of the realm, it's impossible.

It's like having a speed limit today of like 25 miles on the highway.

Exactly. So nobody's going to abide by it, it's not going to work. Same with balancing the budget, which would cost which would require $18.5 trillion in savings over a decade. Not going to happen. It happens that 3 percent of GDP deficit target is consistent with stabilizing the debt where it is over the 10-year period. So we looked at that as the right initial target and then you would work...

It would stabilize, it would ensure the situation doesn't get worse. Is that basically the same answer as I want to make...

Yeah, and the reason for that is obviously that the goal over the long term, 3 percent is seen as sort of a good median average of what economic growth is. And so that's how you get to to that stability.

CBO projects 3.8 economic growth, 3 percent's a little bit less than that, so as long as the debt is growing slower than the economy, the debt burden will come down.

I want to support the spirit of your question in the in the following sense. It's fine to have a target, as as has been said, 3 percent closes the fiscal gap in precisely the way you've heard. I personally would feel much better if we started seeing these metrics just going down in a period when we're in a strong economic expansion. So I'd be far less hung up on hitting the target and much more hung up on hitting the delta, just getting the change going in the right direction.

Well, this is actually a very good segue because I wanted to double down or underscore your point number five in your testimony. You read it already, but I'll reread it to remind people. Number five, in considering how to get on a more sustainable path, it is essential to recognize that spending is below where CBO thought it would be while revenues are much lower. And you included the chart that you already referenced in your answer to Mr. Arrington's question, showing that tax revenues as a percentage of GDP are much lower than where they were in in past economic expansions. And I raise this because it goes against the conventional wisdom around here and if you were to ask most people, they think, oh, there's a deficit, must be a spending problem and not looking at the other side of the ledger, revenues. So if you wanted to talk a little bit more about that.

Yeah, it's the point is is surprising in the sense that most people think that programmatic spending is what you're measuring there because that's what committees like this have jurisdiction over, is actually lower than what CBO thought it would be in measures, you know, from over a decade ago. A lot of that has to do is because we've actually done a little bit better on healthcare spending than than we expected back then. I just want to be clear though that that doesn't mean that spending is at precisely the right level. And that I just don't think we get from where we are to where we need to go without both sides being on the table. And I guess the other point in my testimony that I would just underscore again is that, you know, Congress consistently supports the levels of spending that we've seen and that's what I call a revealed preference. I think that has to be brought into the discussion as well.

There are about 15 more minutes worth of questions I would love to ask, but already out of time, so out of respect for my colleagues, I'll yield back.

Thank you, Ranking Member. We'll now yield to the vice chairman of the committee, also from the Keystone State, Mr. Lloyd Smucker, for five minutes.

Thank you to the chairman for bringing out this hearing. So I do want to just very quickly address Dr. Bernstein. You mentioned spending as a compared to what CBO had been projecting, but historically over the last 50 years, revenues have been at roughly 17 percent. Yes, there's been fluctuations up and down, but have been roughly at 17 percent and spending has steadily risen. So it's been, you know, if you look 50 years ago, it was maybe 17, 18 percent and now it's 23. So I think you look at the historic perspective, I'm not sure that we're getting exactly the the picture from you, but and I don't have time to have you respond to that, but I did since the ranking member brought it up, I wanted to mention it. I want to say this, I think all of the comments in regards to this target have been very good. I've agreed again with most of what Dr. Bernstein said, certainly what the chairman has said and the other witnesses. Thank you for being here. And I want to thank the ranking member for at least the last 30 seconds of his opening statement. And by the way, I hope that was whole milk, being from a good dairy state, I hope that was whole milk in your yeah. But I really do appreciate I really do appreciate what you said in your opening statement because I think the real value of this isn't necessarily that it's 3 percent, because I agree it's a pretty low bar just to get to 3 percent. Like we all know that, you know, we should really get to a balance eventually. But, you know, it's a target that does, I forget who answered it, but it's, you know, if you can get the economy growing faster than the debt, we start to get there long term. And you have to look back to World War II when we the last time we were at these levels of debt. And by the way, that was after we had a major conflict. So we're now, you know, one of the problems is we may not be prepared today if we see an acceleration of what's happening now or some other conflict. But the point I want to make is, and I think this was to Dr. Bernstein's point, the real goal here should just be moving it in the right direction. And if we can get to 3 percent within 10 years, that's fabulous. After World War II, it took about three decades of exactly that happening where we're gradually moving in the right direction. And so I think that's where we need to go. But I think the real value here today, if we're able to do this, if we would get to the point where on a bipartisan basis we advance something like this out of Budget Committee, it may be the first time that a bipartisan group of members of Congress put forward a resolution all coming together and recognizing that listen, we do have a problem. We get it, as the chairman said, both parties have contributed to it. We get it that all solutions have to be on the table here. But if we could just come together and say we've got to somehow work through the differences that we have in policy to begin to address this, to do what's right for the American people, to stabilize our economy, to avert a kind of debt crisis that really would help the the poor that we want to help would hurt the poor that we want to help. If we can make that statement as a committee on a bipartisan basis and then pass that on the House floor, I think that'd be a huge first step. And back to the ranking member's points, we will have I think great differences. I agreed with some of what you said, Dr. Bernstein, but then the rest of it maybe not. We will have a lot of differences in terms of how we address this, but if we could make the statement, we know we're going to have those differences, but we've got to get to a solution that's a lot of hard work to work through all of that. But we could do it. And if we would state together as a committee and recommend move this to the floor, recommend that the House take this up, the Senate hopefully takes it up and we as a body finally realize that when you're spending a trillion in debt, if you want to help people, think about that. That's a trillion dollars that could be going to to other people and the risk that we're putting ourselves in as a country to be able to address the challenges that we have and the burden that we're placing on future generations. So we can address all of that and it starts with a resolution like this and I think that's that's the real value of a resolution like this. So thank you, Mr. Chairman.

I thank the gentleman and yield to another Lloyd, Lloyd Doggett of the great state of Texas, for five minutes.

Thank you very much. I share the view of our witnesses and colleagues that we have a debt problem here in this country that demands some new approaches. And I think the approach being suggested here is certainly much better than the irresponsible balanced budget amendment that was advanced last week, which would have only prevented us from ever correcting the many inequities in our tax code, among other things. However, I must say that I'm also alarmed by the announcement that today another step will be taken to increase our debt. And that is the plan apparently that I just learned about coming to the hearing today, that the Trump administration, instead of coming here in open discussion about its unjustified war in Iran, plans to have a secret meeting to discuss those matters. It continues to meet in secret to prepare its cheerleaders rather than to face the American people and explain the goals and the policies and to answer questions. And just like Mr. Vought not showing up here to discuss the budget and multiple witnesses not coming before other committees, indeed as relates to the Iran war, we have yet to have in this Congress a single hearing in public where administration officials come and answer the questions that so many people in America have. It's interesting that the Republican Americans for Prosperity in 2019 actually paid for ads across the country against endless war and pointed out that the last colossal mistake that was made in this country with foreign wars had cost us about $2 trillion, not paid for, over 4,500 American lives, and urged Americans to speak out against endless wars. I think it's time for you to run another ad series because I believe that if we we are in a situation already where over 200 American service members have been wounded, more than a dozen have been killed, and 168 children and their teachers were killed, innocent people in Iran by a misdirected U.S. bomb. More than with this situation and being here in week four of what Trump told us was a four to five week war in one of his many statements, all that we have is more death and destruction and soaring gas prices. Everyone who goes to a gas station in America should read the sign there which says pay for the Trump war tax here because that's what's happening as Americans are called on to pay more and more in gas prices. And we have an Iranian regime that is still intact and is likely to be even more hardline in the future. Those are the kind of questions that need to be asked about where we are headed with a war where all we are getting are not facts in public, but we at the same time the Iranians are being bombed are being bombarded with lies. We find that the President is so desperate about those soaring gas prices that he's actually removed the sanctions that we worked to impose on Iranian oil so that we're actually paying on hundreds of millions of barrels of Iranian oil, we are helping to pay those who are fighting our troops. All of this I believe a more significant immediate issue that will only contribute an immense cost to our debt and an immense loss to our country and leave us all in a more danger than when this unjustified war began. As to the specific issue that is before us today, Ms. MacGuineas, let me ask you about what you referred to as the relationship between how fast our economy is growing compared to the interest rate that we have to pay to finance a debt that can only be expanded by endless wars and one tax cut after another. Could you comment on that?

Certainly, thank you for the question. So borrowing has many risks and it's that it crowds out in the rest of the macroeconomy, it can leave you less prepared for emergencies, it leaves you less able to respond to emergencies, your interest payments grow, but there is and there's no one threshold as I said before. But there is one relationship between the interest rates and the growth rate of the economy that's critically important, which is as long as your growth rate is higher than your interest rate, you're not automatically going to get into a debt spiral. We are projected right now to have that relationship between interest rates and growth rates turn in 2031, very soon, where suddenly we will start to be moving where the interest rate is higher than the growth rate under projections. That means and it's really important that every time we borrow more or our debt turns over, and remember about one-third of our debt is in short-term debt so we're reissuing it regularly, you are issuing it at higher interest rates. That can lead to a debt spiral where your interest rates are pushing up your interest payments, you have to borrow more, that can lead to inflation, to higher interest rates. That is a situation we want to avoid and we're being warned right now that it is in just a few years that would hit.

And Dr. Bernstein, I think you have made it clear that we cannot solve the challenges we have with our debt with spending cuts alone. We have to look at revenues particularly after the Republicans added, depending on the estimates, $3 trillion, $4 trillion to our debt with their last round of the big ugly bill.

Let's leave that one there. The gentleman's time's expired. Let's yield to the gentleman from California, Mr. McClintock, for five minutes.

Well Mr. Chairman, I have to express a sense of deja vu and increasing frustration at the subject of today's hearing. As I heard it said this morning that balancing the budget is a foolish and unrealistic goal, I was reminded of the story of Newt Gingrich who told a meeting in 1995 when Budget Chairman John Kasich balked at the realistic prospect of producing a balanced budget then. As he shouted, where is it written in stone that we have to balance the budget? Well the next week Gingrich brought him a stone tablet etched with the words thou shalt balance the budget, and they did. That year and for the next three years after that. Now granted the deficit was much smaller than we've allowed it to grow, but debating 10-year budget windows is as useless as debating how many angels can dance on the head of a pin. We don't control the budget 10 years out or even two years out. We can only control the current budget. All that matters is what we do this year. If we just do that, the out years will take care of themselves. So that's the question, what are we prepared to do this year? We have a budget process carefully designed to bring spending in line with revenues, but we've not faithfully used it in the 18 years that I've served here. That process starts with both houses passing a budget resolution setting spending limits on both the discretionary and the mandatory side. And here's the sad truth of the matter. The deadline for adopting that budget resolution for the current fiscal year that we're in right now came and left 11 months ago. Not only did we fail to produce such a resolution, we never even tried. In three weeks, we are legally required to adopt a budget resolution for the coming fiscal year. And here we are with precisely no effort toward complying with that legal responsibility. Instead, we busy ourselves promising each other to keep the deficit to 3 percent 10 years from now. Why? Because it's just a lot easier than actually doing everything we can right now. If we had followed the Budget Act, the budget resolution would have set limits for both discretionary and mandatory spending. The discretionary limit would have been met by the Appropriations Committee through the appropriations bills. The mandatory limit would have been met by the committees of jurisdiction based on the budget resolution instructions and implemented in the annual Reconciliation Act. Now do we have the votes to balance the budget in a year? Well you've got me there, we don't. But that doesn't excuse us from our unfulfilled responsibility at least to use our existing process to reduce the deficit by as much as our current votes will allow us in the here and now, rather than promise ourselves to do better 10 years from now. And I do want to turn to the theme of the minority that we have to raise more revenue by raising tax rates. History warns us that is a fool's errand. The history of taxation is very clear. In the last 60 years, the top income tax rate has been as high as 91 percent, it's been as low as 28 percent. But federal tax revenues have stayed remarkably steady at between 13 and 20 percent of GDP. We're at about 17 percent now. Now that doesn't mean raising rates will produce more revenue. History warns us that some of the lowest tax revenues came in when the top tax rate was at its highest. California and New York are relearning that painful lesson right now the hard way. Some of the highest revenues have come in when our tax rates were quite low. But although the tax rate within this envelope has remarkably little effect on revenues, it has a huge impact on economic growth. And economic growth is the only healthy way to raise revenues. The fact is that taxes, deficits, and inflation are all the product of spending. Once we've spent a dollar, the only question left is whether we tax it now, borrow it now and tax it later, that's the deficit, or inflate the currency. Now Mr. Couchman, doesn't all this come down to four simple words, it's the spending stupid?

That is a huge part of the conversation, no question. To go a little further back in history, before the progressive era, the federal government spent two to three percent of the nation's economy on the functions of the federal government. Now post the progressive era, we're a much larger share of the economy. So that has changed dramatically. But of course when we're looking at policy going forward, we have to start with where we are now and then figure out a better way forward. I share your frustrations with Congress's fiscal capabilities and that's why I spent so much time in my testimony talking about better institutions to provide better incentives and better opportunities for members of Congress to come together and chart that path forward.

Well we have the opportunity, it's right here before us. We just don't take it.

The incentives in the Budget Act are perverse and need to be fixed. There were a lot of really important things that the Budget Act created, the budget committees, CBO, the structure of the budget process. But separating appropriations from the rest of the budget other than Social Security has created dynamics that have led us to where we are today.

Well agreed, but I think the only truly perverse thing about the Budget Act is it requires Congress to make hard decisions and they're not going to get any easier the more we delay them.

I thank the gentleman and now yield to my friend Scott Peters from California, five minutes.

Thank you Mr. Chairman, thank you Ranking Member Boyle, thanks to all the witnesses for being here. The American public now holds more than $30 trillion in national debt. Interest payments on that alone approach $1 trillion annually and that's more than we spend on defense. If we do nothing, the debt will climb from roughly 100 percent of gross domestic product to 120 percent or 53 trillion by 2035. The President's so-called big beautiful bill did make the problem harder to solve. According to a new analysis by Third Way, the new law will account for nearly 20 percent of all new federal borrowing over the next decade. And it's not just that. We did not reach this point overnight. Over the last 25 years, we've had conflicts in Afghanistan and Iraq, President Bush's tax cuts, President Obama's extension of the Bush tax cuts, the Trump tax cuts, COVID relief programs, on top of the interest on our annual borrowing, that's added up to upwards of $10 trillion of to the national debt and we're not done. We have new challenges because when the tariffs were ruled to be unconstitutional or illegal by the Supreme Court, that created a hole of potentially $1.45 trillion over the next decade. And of course now we have a war that Mr. Doggett referenced, we're hearing that the ask for that initially will be $200 billion. All in all, the United States has an annual deficit of just over 6 percent of the size of the economy, which means we borrow nearly $2 trillion every year just to keep the lights on, just to pay our expenses. The borrowing is not free and I appreciate you so many of you addressing that. Ms. MacGuineas, when when did we start to routinely run deficits that exceed 5 or 6 percent? What generations of Americans will bear the heaviest burden of that shift?

Thank you, thanks for the questions and the comments. This is a huge tax on the younger generation, younger workers and the future generation. It's not much more complicated than that there is a whole lot of spending we like to do, we want to do today, and we don't care for paying for it. And so we are saying to the next generation, which is inheriting a very complicated world where we see geopolitical risks, we see workforce disruption risks, we see all sorts of tensions and costs, and an economy that's growing much more slowly because of the demographics and we've pre-promised all of these benefits to seniors through mandatory spending, we are giving all of this to them along with that 30 trillion in debt. So it's a huge tax on them at a time that they face tremendous risks.

Yeah. I mean, there's a lot of folks, younger folks behind you in the audience here, not so much on the dais. What's it going to look like for them? So how they when they when they reach peak earning years, what do you think the tax burdens are going to be like? What are what are the public services going to be like for these folks?

That is not a happy scenario to think about. First off, for the younger people, we need to have the younger people be more organized and effective and as powerful as seniors are when they come to push policies. We need younger people to have a bigger voice because we know that not only will tax rates be much higher, significantly higher, we will not be able to prompt make good on all the promises that we've made to them in the budget. There will be additional costs to national security, and our economy will grow much more slowly if we don't get ahead of this. What I really worry about is that the risks of new things that come along, it's not just that a debt crisis could happen. It's that we won't be prepared to respond to the huge other emergencies that may hit them.

That's one reason to have a good balance sheet. But young people today are already face already facing sky-high housing costs, utility bills through the roof, stagnant job market with I think affected frankly by a lot by the the chaotic use of tariffs we've seen over the last past year or so. Piling more federal debt debt on them at it's just not good fiscal policy. It's generational theft. And what I would say to you all is our generation has paid for a lot of stuff by borrowing and left you with this interest cost that you're going to be paying for. And if I were you, I would take this up as young people's issue. This is something you should be talking about. And I I think you should be angry about it and you should be forceful about it. I do think that a fiscal target is an important start. I look I understand what Mr. McClintock says, but you know we're not there. We've got to start somewhere. And you you know the first way to get out of a hole is stop digging. So that's a 3 percent target. I think that makes sense. It's not sufficient, but as experts from Ken Rogoff to Ray Dalio have warned, continuing our current tra- trajectory will erode confidence in the dollar. It'll drive up interest rates for every American family and business, eventually invite a true fiscal meltdown. And the countries that have stabilized deteriorating deteriorating fiscal con- conditions like Sweden, Canada, Denmark, or Ireland did so not by waiting for a crisis. They built consensus on a credible target and then let the target drive their reforms. And that's what I ask this body to do and that's what I think we're aiming for with the 3 percent. So I appreciate the bipartisan discussion we've had today. Look forward to working with all my colleagues on both sides to pass this resolution in this committee, get it to the House floor, and we can make it clear that Congress is serious about getting our economy back on track. Mr. Chairman, I yield back. pass this resolution in this committee, get it to the House floor, and we can make it clear that Congress is serious about getting our economy back on track. Mr. Chairman, I yield back.

I thank the gentleman. Yield five minutes to the gentleman from Georgia, Mr. Buddy Carter.

Thank you, Mr. Chairman. And thank each of you for being here. And Mr. Chairman, I want to compliment you on on this hearing. This is something obviously as a father, as a grandfather, I am very concerned about. With eight precious grandchildren, leaving them this kind of debt is is just irresponsible. And it's something that we need to address. And I'm glad that you're leading the charge on that, Mr. Chairman. 39 trillion dollars. That's hard to even get your arms around. It's hard to imagine. I don't know if I could even write that on paper. 39 trillion dollars. Unbelievable. If we reduce our deficit, our federal deficit to 3 percent of GDP, and it'll help stabilize our debt burden and ensure our debt growth won't outpace economic growth. But Mr. Mr. Couchman, I'm going to start with you. Why is the 3 percent deficit-to-GDP ratio a notable goal? If I if I had to explain this to a constituent, not somebody inside baseball like we are here, but somebody just just trying to explain, what would what would I say in layman's terms?

Right now, the federal government is borrowing 6 percent of GDP every single year. This would cut that in half. And it would make it below the growth rate of the economy. And so the debt burden would stabilize and then slowly decline. It's going to stabilize too high because that debt drag that we're getting from that high debt burden won't come down until we get it down below 70 or 80 percent, but it will avoid worse harm from it going further up.

So we could we could avoid worse harm by doing this. How would our our current debt-to-GDP ratio change if if this target was was sustained? So it would as you say, it would just stabilize it.

Yes, sir. And figure one of my written testimony, I have some graphs that show this, the the baseline debt projections and then also...

Graphs are good. People like pictures.

Yep. Yep. That's right. So in the CBO baseline, it goes up and to dangerous dangerous levels. With the 3 percent deficit-to-GDP target, it basically flattens out and then starts to decline very similar to a path to structural primary balance. And of course, if we were to go to full balance, which is what the resolution that informed this hearing talks about once we've gotten to the 3 percent deficit target, then it would go down much faster and we would be able to unleash more of economic growth.

Okay. One of the things that we've been talking about in this administration and and for the past year and a half has been the Department of Government Efficiency and and the amount of waste, fraud, and abuse that we have. And that's what really irritates people and really irritates our our constituents. It's the Government Accountability Office has estimated that the federal government could lose about 500 billion dollars annually due to fraud. Thankfully, we've been trying to address that. And and I'd like to think we've made some progress. Not enough, but some. What are some of the specific ways that Congress can continue working with agencies and legislate to prevent and reduce fraud and improper payments?

One of the things that you have to be able to do is revisit the programs to figure out which designs are working well for anti-fraud efforts and also for providing the the services and benefits that people are expecting, the taxpayers are expecting. But if you don't have a regular opportunity to do that work, especially in a bipartisan way where you can hold hands and jump together and then not fight over it for all time to come, then you're able to redesign the programs in ways that get the incentives right for everybody down the chain, whether it's the federal agencies or state agencies that are often implementing these programs or the beneficiaries themselves. But if you don't have that opportunity, these problems will continue to fester.

When I was in the Georgia State Legislature, one of the things that we discussed was zero-based budgeting. And I'm sure you're familiar with that. How do you is that is that doable on a federal budget?

President Jimmy Carter made it a big thing. They took a lot of time and investment. A lot of good information was produced. Congress didn't necessarily have a good opportunity to use it. And an interesting historical fact, President Reagan killed it on the day that I was born. It is something that a number of states that have this in place and...

So it's your fault.

It's my fault. Yeah. I came into being and then poof, it was gone. But there are a number of states that have this in place and I'm always open to finding out that it does have an impact, but I haven't seen tangible evidence of that yet.

Okay. Ms. MacGuineas, really quick. You called a 3 percent deficit-to-GDP target realistic enough to be achievable and aggressive enough to reassure markets and lenders that the debt is on a sustainable path. What what's the logic behind a 3 percent deficit? Why not two? Why not I mean, why why three?

I was thinking about your question of how you answer this in a layman's terms, and I was thinking it's kind of how you eat an elephant, right? It's one bite at a time, which is we need to cut the deficit in half, and then we need to cut it in half again, then we need to cut it in half and again, and we need to get rid of it. But the 3 percent target really is aligned with stabilizing the debt so it's not growing faster than GDP. The definition of unsustainable is when your debt is growing faster than the economy, and we have to make sure we stop that as quickly as possible.

That is a great way to end it. Thank you for bringing that up. I I truly believe that that's one of the things that hinders us here in Congress is trying to put perfect in the way of very good. Just like when we talked about zero-based budgeting, you ain't got to do it all at once. Do it over time and I think you can achieve it. I'm out of time, but I I yield back. Thank you very much.

Well said, Mr. Carter. Now we will yield five minutes to our friend Jimmy Panetta from California.

Thank you, Mr. Chairman, Ranking Member, and thanks to the witnesses. I appreciate that this is, at least according to your resumes, an ideologically diverse panel. But the good thing is is that it's in agreement that we need to act, we need to act now to address our debt and deficit. I also want to comment on the positive nature for most for the most part of your answers, of the questions, and realize and kind of hitting on Mr. Peters' comments about addressing the young people. I think that's important, but we've also got to address our colleagues here in Congress. This conversation needs to be had outside of the Budget Committee. It needs to be had outside of the caucuses that we put together on debt and deficit. We need to make sure that young and old members of Congress, and not so old members of Congress, realize that this is something that we have to do. I get that this is a start, but clearly more needs to be done. Because what we're seeing and with your consensus today, it reflects the troubling reality that we have placed our country on an unstable fiscal trajectory that can no longer be ignored. We have fallen into a pattern of cutting taxes and spending more regardless of whether the economy is expanding or contracting. As a result, our debts are no longer driven by temporary or emergency spending but have become structural with persistent deficits that are built into the federal budget. That is why I support the Huizenga and Peters resolution to reduce the federal budget deficit to 3 percent of GDP, a target far more sustainable than our current deficit level which hovers around 6 percent of GDP. If implemented responsibly, responsibly, this target can promote fiscal discipline, enhance accountability, and drive the concrete actions needed to put our nation on a more sustainable path. It's also why I was one of only three Democrats on this committee last term to vote for a fiscal commission. To stabilize our our fiscal outlook, we need clearly defined targets. We need bipartisan buy-in and we need an approach that places all options on the table. We cannot get stuck in a blame game about whether revenue or spending is a real problem. I think it's clear, especially based on what I've heard from all of you, the answer is both. Now, Mr. Couchman, you note in your testimony that legislating targets can be useful, but that if the targets are too difficult and the consequences of missing them are too draconian, man, Congress always finds a way to legislate around them. I mean, we see this in the Statutory PAYGO Act. You know, that means we're going to have to sequester if Congress does not offset its legislation. It doesn't happen. We get around it. So my question is, do you think a 3 percent deficit-to-GDP ratio is an achievable achievable goal? And if so, how the heck do we enforce it while maintaining the needed flexibility?

Thank you, Mr. Panetta. You raise exactly all the right questions on this. All options have to be on the table and you have to have a a clear set of enforcement opportunities and also a backstop for automatic enforcement. You're absolutely right, the statutory pay-as-you-go mechanism is draconian. Congress has never let it happen. So I propose, I very much gloss over it in my testimony, but in a little pocket guide that we've put together for building up Congress, we talk about it more. There's a blog that kind of lays out what that could look like where you have incremental tweaks to a whole variety of programs across the budget and light pressure on discretionary spending because you don't actually want to trigger it, but you want it to spread the pain around enough politically across the budget and over time that it won't be so necessary to turn it off because you could let it happen. It might be a little bit unpleasant, but it wouldn't be so awful that you just have to stop it.

Got it. Got it. And Ms. MacGuineas, you state unequivocally that both and we've had these conversations, that both revenue increases and spending reductions are needed to address the fiscal crisis that we are in. A 3 percent deficit-to-GDP target is policy neutral and can be achieved by either revenue increases or spending reductions. Why do we got to do both?

Great question. So yes, the great thing about the target is that it is neutral. It leaves this open. We are now in a fiscal situation where it is impossible that we will fix it, even get to 3 percent without looking at both sides of the budget. If you look at where we how we got to this moment from when we had budget surpluses in 2001, about 37 percent of that came from legislated tax cuts. About 33 percent of it came from legislated increases in spending. And the rest of it came from responses to emergencies. About three-quarters of all of those policies were bipartisan. So many things, basically everything except a few exceptions of bills that have reduced the deficit in the past years and even decades are what got us to this moment. But it is now clear, and we can just look at the willingness of Congress to do the hard things. The hard things are reducing spending, fixing our greatly in need of fixes entitlement programs, and raising revenues, not just on millionaires, but across the board, you know, real revenues. There's very little willingness to do that. We're going to have to do a little bit of all of it to spread the pain as much as possible and do it in a way that hopefully spreads it over time.

Great. Thank you. And Mr. Chairman, if I may, just quickly. Look, I think having this type of hearing today is important not just during this crisis, but I think it demonstrates that there are members of Congress willing to lead on this issue and that's needed now more than ever. Thank you, Mr. Chairman. I yield back.

I thank the gentleman. And yield five minutes to our friend from Oklahoma, Mr. Josh Brecheen.

Thank you, Mr. Chairman. I'm reminded, given the topic today, of a quote that Zig Ziglar, I think, is famous for, where he says, "A goal casually taken is easily abandoned upon first obstacle." And that's where we've been. We've been there for years where the budget resolution is a goal that's casually undertaken. No one really expects it to go anywhere, and it's easily abandoned. And everyone can do their post and, you know, we can all pretend that we're really serious about doing something about it, but at the end of the day, nothing is modified. So I'm grateful that we're not going to be set up for failure if we can move this direction. Many of us in this building know this is the week where a lot of the appropriation decisions are being made. This is the week where a lot of different industry and money discussions are happening, people asking for more. I had conversations this week with some groups, and it's such a hard thing to try to relate to people because whether it be industry-specific or association-specific, everyone is so short-term focused about their need and more federal funds. And where I'm trying to set this up is trying to explain to someone to see the bigger picture, that if we can get to a 3 percent deficit-to-GDP, which is what the goal of this is, which is going to require restraint, real restraint, not proposed restraint, but actionable restraint. It reminds me of something I read years ago in Stanford University where they took a marshmallow and they set it in front of 600 four-year-olds one at a time, and they gave them these instructions. They watched them through a blind-sided window panel. They said, "Don't eat the marshmallow." And out of 600, only 200 of the four-year-olds were able to withstand the instant gratification desire to eat the marshmallow. So if the kid licked it, they're out. They didn't pass the test. If they nibbled on it, thought nobody's looking, they're out. Of the 200 who didn't give in to the instant gratification, they wanted to see where they were at 15 years later at Stanford University, 1965 study, and they found that those 200 young adults who at four years of age decided to obey the instructions, they were 200 points higher on their SAT scores. They wrote a book about it called Emotional Intelligence because what was so outstanding to them was there was no correlation between those 200 among the 600 control group about their IQ. Had nothing to do with their IQ. It had to do with their ability to perceive a brighter future if they could restrain themselves in the moment. So how do you convince people to not eat the marshmallow of increased government spending? What we're talking about in this moment is simply just a restraint. We're talking about flat budgeting. The concept of can everybody on both sides of the aisle agree, let's just hold steady for some of this and just have some flat budgeting. Now, I'd go further because I think in order to get to a balanced budget, we all know with $2 trillion annual deficits that we are at a place where waste, fraud, and abuse, I just am not convinced it was like it was when the guy I worked for 20 years ago, Tom Coburn, Jodey Arrington, it was a time 10, 15 years ago where waste, fraud, and abuse could get us there. I think we're past that now. I think we have to get serious about amputation of some programs that we all know are wasteful. That's the truth. But what we're talking about at least gets us into actionable items that could reset this problem. So $1 trillion total gross national debt in 1981. Every year we overspend. It took us 200 years as a nation to get to what we got to in 1981, total gross national debt. Every year we overspend that because we have a $2 trillion deficit. This thing is cascading on us. How do we, Maya, how do we convince the average person that hyperinflation is your future? You need to care more about what's going to happen to you and your industry. How do we get people to understand that is our future? I think it is hyperinflation. What you're experiencing now with rising costs because as Tom McClintock eloquently always reminds us, when the government spends a dollar, you are going to pay for it, either through the tax that they're going to tax you for now or the hidden tax of inflation, the devaluation of the currency, you're paying for this. And be, don't be a marshmallow eater. Think long-term and how every time that we're not all of us wanting to get government spending under control, it's costing you and your industry. I'll land the plane and give you a chance to answer it. But to the ag producer, 10 years ago you were paying $2 for T-posts, now they're $4 plus. $60 for a roll of barbed wire, now it's twice that. What happens in another 10 years if in that industry it's twice that again? Maya, how do we convince the average person to care about the spending?

That is the biggest question. I do think that this discussion about affordability opens the door right now. We had huge inflation just a few years ago and people are very aware of the pain that that can create. And I think there's a way to work that into the discussion going forward. I think trust is hard. Everybody's in their own ecosystem. But I think strange bedfellows and bipartisan agreement saying this fiscal situation is dangerous for us right now is critically important. So if people can come together and say this is a problem, we disagree on the solution, but this is a problem, maybe voters will believe more. I think that China probably doesn't eat the marshmallow. I do think that there is geopolitical risk and competitiveness about delaying gratification, and we've seen that with tensions around the world, being willing to do what you need to to strengthen your country is critically important. So as these risks pop up, that may be effective too.

Briefly, the American people get it. That's why they're so mad at Congress right now, because they get it, they want you to get it, they want you to do something about it, but Congress isn't. So until that changes, they're going to stay mad.

The gentleman's time's expired. Now we will yield to the gentlelady from Vermont, Ms. Balint.

Thank you, Mr. Chair. Before I get into my remarks, I just have to say, I walked in here and thought I was stepping back into the 1970s. The marshmallow test has been debunked over and over and over again. So I wish we would stop using it because it is more connected to socioeconomic status, cognitive ability, environmental factors. It is not about innate self-control and it's not a predictor of later life achievement or outcome. So can we please just put to bed the damn marshmallow test? That being said, Mr. Chair, it's surprising that we're holding a hearing on the ballooning deficit because it is my colleagues across the aisle who control the House, they control the Senate, they control the White House. They increased the deficit by trillions of dollars while at the same time gutting programs for food and healthcare. We all know that the deficit is unsustainable. We know that spending is outpacing our revenue. That is true. I do not think the answer is gutting programs like Medicare and Social Security. We have this mess because of choices that were made earlier in Trump's second term. While Americans can't afford healthcare or rent or now gas, we sit here today shaking our hands, wondering how did we get in this situation? How did this possibly happen? Your budget bill created so much of this problem. So let's like get back into reality here. Mr. Bernstein, how much would it cost to extend the ACA tax credits for one year?

Think about $27 billion.

$27 billion. And I believe, if I'm not mistaken, the president is asking for a $200 billion supplemental for his illegal war in Iran. So you're telling me that we could extend this healthcare coverage for Americans for a mere $27 billion?

Well, I should also add that according to Center for Strategic and International Studies, thus far the prosecution of the war has cost about that much, about 25, 27.

That's exactly right, between $1 and $2 billion a day. So we sat in this committee last summer talking about how we couldn't possibly, we couldn't possibly make sure that rural hospitals had money through Medicaid. We couldn't possibly find a way as we reached careened towards the end of the year and millions of Americans were going to lose their healthcare, we couldn't possibly find that money to extend ACA tax credits for a year. And yet we seem to have an endless supply of money to wage war in the Middle East, something that Americans overwhelmingly do not want. Mr. Bernstein, let's talk also about the deficit. Am I correct that the so-called One Big Beautiful Bill Act increased the deficit by $5 trillion?

Yeah, I think that's actually close to the most recent estimates from Maya's group, which includes interest payments. The CBO put that expenditure at 3.4 billion. That does not include interest payments.

And although I know that my colleagues disagree with our framings on this, would you say that most of the benefits of the Republicans' tax cuts, most of the revenues, most of the benefits go to the wealthiest in this country? They hate it when we talk about that. But would you say that's a fair characterization?

Yeah, that is a fair characterization. The analysis of the distribution of the tax cuts shows that they largely favor those at the top of the scale, and the higher up you go, the more favorable they get.

And would you say that the tax policies in the One Big Beautiful Bill also raises revenue to help decrease the deficit?

No. I mean, the budgetary costs we just mentioned are net, so they net out revenues and outlays, and they come up with, again, CBO 3.4 trillion, other estimates that add in interest payments closer to four or north of four trillion over 10 years.

So look, we are asking Americans right now to pay more in gas, to pay more in groceries, they can't afford housing. We're asking them to go without health insurance. We're asking them to turn the other way while we cut people off from food assistance. And people rely on things like Social Security and Medicare just to get by. And yet somehow we never look at the revenue side of things. And Americans are angry, and rightly so, and people at the wealthiest position in this country, people at the very top are not paying their fair share. And yes, I'm angry, and I hate that we spend time in here talking about marshmallows. Thank you. I yield back.

Gentlewoman yields. The gentleman from Georgia is recognized, Mr. Clyde.

Thank you, Mr. Chairman, for holding this important hearing. First, let me correct the record of the ranking member's clearly false diatribe filled with inaccuracies and a personal attack on our highly esteemed and highly capable and very hard-working OMB Director Russ Vought.

Would the gentleman yield? What was the attack? I'm just pointing out he hasn't...

No, I will not yield. The one big beautiful bill, the Working Families Tax Cut Act, was mischaracterized as forcing people off healthcare. Well, when you cloak illegal aliens as the people being removed, I think Americans approve because we are protecting taxpayer funds, which should go to citizens and not illegal aliens. Now, as our national debt approaches $40 trillion, Washington is long overdue for fiscal discipline. This is no longer just irresponsible, it's dangerous, and it needs to end. To put this in perspective, this year the federal government expects 5.6 trillion in revenue but plans to spend 7.4 trillion, a $1.8 trillion deficit. More than one trillion will go to interest payments alone, funding no services or investments. No private business could operate this way, yet this is our fiscal path, our current fiscal path. And it would be much worse if we had not passed the one big beautiful bill. This trajectory is unsustainable. Global markets will not finance US deficits indefinitely. If confidence in our ability to repay erodes, we risk a sovereign debt crisis with serious negative consequences for pensions, banks, and federal programs. That is why we need a clear fiscal benchmark to reassure bond markets. Treasury Secretary Scott Bessent, along with financial leaders like Ray Dalio and Warren Buffett, have supported limiting deficits to 3 percent of GDP to stabilize debt growth and restore credibility. While ultimately our country would benefit from a balanced budget amendment to the Constitution, which the House voted on last week and every Democrat in this committee opposed, the 3 percent debt-to-GDP ratio would be a good start to achieving a balanced budget in the future. The American people elected President Trump to restore trust in government and rein in waste, fraud, and abuse. The recently enacted one big beautiful bill, Working Family Tax Cuts Act, includes meaningful deficit reduction measures by rooting out waste, fraud, and abuse in mandatory spending programs, saving billions over the next decade. However, as we have seen with the Somali fraud scandal in Minnesota, there is still much more waste, fraud, and abuse that congressional Republicans need to repeal in the federal budget that can help achieve the 3 percent debt-to-GDP ratio. Mr. Couchman, every Democrat on the Budget Committee and every Democrat except one in the Democrat caucus voted against a balanced budget amendment to the Constitution on the House floor last week. Given that states like my home state of Georgia are required to balance their budgets, what justification is there for Congress refusing to impose the same discipline on itself?

Congress should have a balanced budget requirement. It is normal in countries around the world. Virtually every country in Europe has a balanced budget requirement. All of the states except for Vermont has a balanced budget requirement. Most are constitutional, some are statutory, some are both. And they've usually gotten them after a period of debt crisis, and that's been part of getting out of them. Hopefully the federal government and Congress can have one before we get to the crisis.

Thank you. I agree with that. Mr. Burks, what are the consequences of a sovereign debt crisis on federal programs, the financial markets, and hardworking families' bottom line?

Certainly. Thank you for the question. Obviously, if we are in a debt crisis and unable to finance additional spending, we will have immediate and painful benefit cuts for programs that we all recognize are valuable, whether that be Social Security or Medicare. And we're on track for those trust funds to be exhausted in the near term. And so Congress is going to have to take action in order to ensure that there is not a debt crisis and that there are not unwanted cuts to those programs.

Thank you. Ms. MacGuineas, can you describe how the one big beautiful bill act slowed the growth in Medicaid spending due to efforts to root out waste, fraud, and abuse, and what additional measures of waste, fraud, and abuse can Congress focus on in another reconciliation package, which I am a great proponent of, that will continue to slow the growth of federal spending and bend it towards our 3 percent debt-to-GDP ratio goal?

Sure. So the savings that were in the one big beautiful bill on the Medicaid side were important because there were a lot of efforts to change the way there were abuses to the system through provider taxes, people who shouldn't have been collecting benefits. These were sensible changes overall. Medicaid's still growing, is going to be growing faster than the economy, faster than inflation. But they needed to happen. This was a gimmick, one of the main areas of savings was a gimmick where states were able to levy taxes on the providers of healthcare, reap some of those benefits, and then have a bigger match from the federal government. This is a kind of change that didn't actually affect the program. However, overall, the one big beautiful bill added to deficits quite significantly. And I also, I really want to focus on waste, fraud, and abuse without ignoring the fact that we can't make changes without looking at the bigger parts of the budget. There are overpayments, there are inefficiencies, there are abuses of the system, but we're first going to have to look at where some of the biggest inefficiencies are, which I think DOGE didn't successfully do. We need to look in the healthcare arena, the defense procurement arena. We need to go after where those dollars are. And even then, I want to be really clear, we will not fix this problem unless we look at the revenues and the spending portion of the budget. There's no free lunch here to be had. Our government should be as efficient as possible, but we can't pretend we can do it all with waste, fraud, and abuse.

Well, thank you for that, and I yield back.

Gentleman yields. Gentlewoman from California is recognized, Ms. Chu.

Before I begin, I'd like to give Mr. Boyle a chance to respond to the falsehood that was just said.

Well, thank I thank Ms. Chu. And just to be clear, if there is anything that was false in what I said in my opening statement that Mr. Vought wants to correct the record, we're still waiting 15 months later. He can have the courage to sit here and testify. But I did want to quickly just ask a question that hasn't come out so far in in this hearing, though in your testimony, Mr. Bernstein, you referenced the Liz Truss moment. I'm reminded of the old joke when asked, sir, how did you go bankrupt? He replied, well, slowly, and then all of a sudden. Do you want to just talk a little bit more about what exactly a debt crisis would look like, how we would know that it's upon us?

Yeah, it's an important question, one that I think's pretty unexplored here. I think that's an area where we need to do a lot more work. The Liz Truss moment is what happened when creditors who buy debt from the United Kingdom, UK debt, were deeply spooked by a seriously fiscally reckless budget proposed by the Truss administration, and there was a sudden stop to that credit flow. And of course, interest rates shot through the roof, and that's a clear example of a debt crisis, call it a sudden stop. That's quite unlikely, as I also say in my testimony, I think that's quite unlikely to happen here. We have large, fluid debt markets, we have the reserve currency. I worry actually more about a slow burn in this regard. And I have a figure in there showing the interest rate called the term premium, which is the risk that our creditors are asking for when they lend to us. It's still low in historical terms, but it's creeping up.

Thank you. I do want to yield back to Ms. Chu.

I would like to reclaim my time because I actually had a lot to ask, but yeah, I think the time has gone. So, Dr. Bernstein, I want to start with what I think is one of the most dangerous and persistent lies we've heard from Donald Trump and Republicans, that immigrants are somehow a drain on our economy and our federal budget. They're using this lie to justify despicable violence, authoritarianism, and complete disregard for the rule of law. In fact, I would say this scapegoating of immigrants is as essential to Trump's power grab. But the facts tell a different story. Over the past three decades, immigrants, both documented and undocumented, have contributed trillions more in taxes than they've received in benefits. And in fact, economists have found that without their contributions, our national debt would be dramatically higher, potentially approaching double its current share of GDP. And in fact, in my district in LA County, undocumented immigrants alone generate over $250 billion in economic output and support more than one million jobs each year. So while immigrants contribute enormously to our economy, it's Donald Trump and Republicans' policies that are wreaking havoc on our economy. Their signature legislation, the big ugly bill, skyrocketed the deficit by $4.7 trillion. And the nonpartisan CBO confirmed that Trump administration's executive actions on immigration alone will actually increase the deficit by $500 billion over the next decade. So, Dr. Bernstein, if we are serious about reducing the deficit, can you explain how creating a strong and growing workforce including immigrants is important and what happens when policies move us in the opposite direction?

I think that's actually pretty easy to explain when you consider the fact that income taxes account for about 50 percent of our revenue to the to the Treasury and payroll taxes add about another 35 percent. Well, what do immigrants do when they're in the workforce? They contribute income and especially payroll taxes. So the numbers that you cited, which are precisely accurate from the CBO, are simply underscoring the point that especially since immigrants tend to be younger than the age of the workforce, they tend to work and they contribute through both of those channels, income and payroll taxes.

Thank you. And Dr. Bernstein, it's clear that immigrants provide so much value to our communities, to our economies, and to the success of our nation. No amount of lies or scapegoating can change that. Here we are in week six where hardworking TSA workers are not being paid, but it's just because Republicans refuse to rein in even one ounce of things that ICE is doing to terrorize these immigrants. And also, I would like to say, I was interested in what you said about reducing deficits is necessary and desirable, but it's easy to do so in a way that does far more harm than good. And I wish we had time for you to expand upon that, but I appreciate...

Chair will allow another 60 seconds.

Oh, could you could you please?

I'm glad you asked me that because I actually would love to see this committee have a follow-up panel to this one, which explains how we get to where we want to get to. It's one thing to say we should get to 3 percent, we all agree with some version of that, but how we get there is critical. And as I argued, I you know, as I argued in my testimony, there are ways to do this that would do far more harm than good by cutting programs that economically vulnerable people depend on. And unfortunately, we've already seen some of that in the big budget bill, and and I think it would be a really serious mistake to continue down that path.

Thank you. I yield back.

Gentlewoman yields. The gentleman from Wisconsin, Mr. Grothman, is recognized.

Thank you. Obviously things are out of control. We all know that. The problem is that Congress has a hard time finding anything to spend less on. And I'm going to kind of throw that open to you. Well, first of all, I'll take one thing. We have seen all the cheating happening in Minnesota. We know it's probably happening in California, New York, all around the country. Part of the problem is that you can allow unlimited cheating in Minnesota and the it doesn't really affect the Minnesota budget because so many of these programs are all federal, you know, daycare, food stamps, that type of thing that our forefathers would be amazed if Congress was involved in. I'll ask you really quick yes or no, should we require a state match of at least 20 or 30 percent on the all of these programs? Mr. Burks, we'll go right down the line.

There's value in having obviously the folks who are responsible for administering a program to have some responsibility for funding it as well.

Skin in the game matters.

We don't take policy positions, but it would create the right incentive.

I'd need to learn more about it. I'm just not really as schooled as I need to be in that in that question.

Could you say a little bit more about it? Well, there was a lot of cheating going on in Minnesota, right? When you have programs like food stamps and the federal government pays for 100 percent.

Yeah, no, I see your point. Yeah.

You know what I mean? Do you think it'd be a good idea?

Yeah. Can I make one point on this, sir, very quickly? What if I told you you could collect $6 for every $1 in enforcement in terms of cheating, in terms of fraud and abuse? That would be closing the tax gap by funding enforcement in the IRS. For every dollar of enforcement, you collect back $6 of evaded taxes. I'm just surprised that hasn't come up in our tax fraud and abuse discussion.

Well, next question. I, you know, I obviously, like all people, have my personal opinions of what we can do. And still kind of people talk about lessening the deficit in the abstract, but not in the particular. We started off this session by spending another $24 billion a year on Social Security, largely for government employees. Maybe a good idea, but it was another $24 billion in the midst of this fiscal crisis this Congress had to spend more money on. When I look at things, I look at, I still don't think we've gone after all the number of employees underworking the DOGE has identified. I don't think that we're doing a good job on the Department of Defense as far as we keep building stuff that in a modern war is going to be obsolete, but it doesn't seem to phase our Armed Services Committee. I'm going to have my own little subcommittee later this afternoon on mental health coverage, which I'm not sure doesn't make things worse rather than better. But could I ask you, the four of you, of your favorite one or two things you'd like to see Congress cut? We'll start out with, maybe it's unfair to hit Mr. Burks right away, but you're on the left here.

I guess I would start by looking carefully at whether or not the programs like Social Security and Medicare are appropriately means-tested.

Okay.

I wouldn't call this a favorite area, but federal healthcare spending is the largest share of the budget. Only 11 percent of it passed through appropriations.

What specifically would you do?

Means-testing is a good option, although health policy analysts across the political spectrum have estimated that about one-third of healthcare dollars don't provide measurable benefits for beneficiaries. So there's incredible opportunities for better efficiency and better healthcare.

Okay, next.

Site-neutral in Medicare, no-upcoding in Medicare. There are a lot of ways to change, make some changes that wouldn't affect beneficiaries. Great place to start. I would extend the discretionary spending caps that we have.

Anything in particular, though? It's good to say we ought to cut discretionary spending. Which discretionary spending do you think we're doing that's unnecessary?

So what I would do for defense is sort of what you were saying, but there are so many inefficiencies there. As we're going to have to spend more in defense in a lot of areas, I would start with a shift where it's a dollar-for-dollar shift in terms of procurement and the huge healthcare defense entitlements. And then finally, I would raise the retirement age for younger workers. We know that life expectancy is much, much longer, and I'm really worried about the fact that Social Security is going to become insolvent in less than seven years and we continue to do nothing.

I would add a lot more specific drugs to the formulary where Medicare negotiates lower drug prices. That's proved to be a successful program, but there's only something like 25, 30 drugs on that list.

Okay, I'm going to cut you off since I'm almost out of time. When they say means-test, what you're saying is if you keep working or if say you have a lot of money in a 401(k), we should penalize you by taking away benefits, just so you understand what the long-term effect of that will be. But thank you very much.

The gentleman yields. The gentleman from Kentucky, Mr. McGarvey, is recognized.

Thank you, Mr. Chairman. Thank you all for being here. Thank you for this hearing. This is something I think is really, really important, having a balanced budget, attacking the country's debt problem and the country's deficit spending problem. But I came to Congress after spending 10 years in the state legislature in the state of Kentucky. So I think it's a little bit amusing today that we are sitting here talking about, oh my goodness, how do we balance a budget, when most states in the country right now are balancing their budgets in state legislatures. And look, again, coming from Kentucky, that is not to say that the Kentucky budget is perfect, but it is balanced, and usually only with occasional gimmicks. And so I think we need to be having this conversation here, having it at earnest. But one of the things that also I have to point out is that we are having this hearing and on one side we are continuing to hear about the need for a balanced budget, the need to attack the deficit, to attack debt. There's agreement on this side. But in this committee less than a year ago, a bill was rammed through dubbed the One Big Beautiful Bill, which adds $4.7 trillion to the deficit of this country. What did they do also in that bill? The largest cuts to Medicaid, the largest cuts to SNAP. And see, here's the thing you learn when you do budgets, whether it's in state legislatures or whether it's here in the United States Congress. When you pull one lever, something else happens. When you cut Medicaid and people don't have access to healthcare, don't have access to prevention, then it's going to actually end up costing us more when people show up in emergency rooms. It is the old saying, an ounce of prevention is worth a pound of cure. So they are driving up the deficit with the tax policy and they are cutting the programs that are going to actually result in costing us more money down the line. So I want to look at a little bit of these policies that we've done and then talk about how we get out of them and how we move towards a balanced budget where we are attacking the country's debt and the country's deficit. Ms. MacGuineas, you said it. I mean, two stats that stand out to you. We're spending right now more on debt than defense and we are spending $6 on every senior and $1 on every child. So Dr. Bernstein, I'm starting with you. Look back to the 2017 tax cuts, the Trump tax cuts from when he was first president. Did those tax cuts pay for themselves through new investment and economic growth like the administration promised they would?

No, not even close.

That's right. They did not even come close to paying for themselves. And this is not a guess. We know this because we've lived through it and we've seen it. Now let's look at the One Big Beautiful Bill, which is basically the first tax cuts on steroids because now they're made permanent. Every credible analyst I have seen across the board, nonpartisan CBO, Yale, Wharton School, Democrat, Republican, have all said that this bill adds trillions to our deficit, cannot pay for itself. And I say this, I take no joy in this. I would love to have the growth necessary in this country to pay for that type of bill. But it does not look like it is going to happen and has never happened in our country before. Do you expect the One Big Beautiful Bill to pay for itself? And how much faster would our economy have to grow for that to happen?

An implausible growth rate. I mean, the bill will not pay for itself, and I suspect all of my fellow panelists would agree with that. And this has become, I think, even less of a partisan claim. It's just so evident at this point that you deficit-finance bills of this magnitude, they don't pay for themselves. It's not even close.

No. And then other things happen too, right? You know, things that you can't predict, like in after the 2017 bill, we had a pandemic. Now, of course, we are seeing what's happened with the President's war of choice in Iran, where he has gone into Iran, he has invaded. Somehow they're surprised that doing this causes the cost of oil to go up. I'm not sure how that's a surprise. But you've got a fifth of global LNG, a third of crude, fertilizer, helium, sulfur, all trapped in the Strait of Hormuz right now. The energy and commodities market is experiencing shockwaves. We've seen these shockwaves before from the energy markets. What do they mean for economies? And if this war drags on, should we be worried about stagflation like we were in the '70s?

Yeah, I think the answer is yes. And I think we've already seen some evidence of a potentially creeping stagflation. Let me give you one calculation we did last week that I think you'll find instructive. The cumulative cost of the increase in gas prices to consumers this year will be more than their expected increase in their tax refunds. So one of the selling points of the budget bill was that it'll have larger tax refunds, which it would because of withholding changes. The increase in gas prices has eaten that up.

Thank you. And in my remaining time, Mr. Chairman, I'm just going to say very quickly, they have added $4.7 trillion to the deficit. They have started a war. They've already asked for $200 billion additional in spending money for that war. And they claim to be going after the debt and the deficit. That is not how you do it. Thank you, Mr. Chairman. I yield back.

The Chair just wants to clarify that the CBO used a 1.8 percent growth rate to make any type of deficit predictions on the One Big Beautiful Bill. So we now have data that shows there's stronger growth than that. So we can't continue to say all these numbers that are based on an assumption that has now not been true. Now, if we have a growth rate less than 1 percent going for the next little while, we've got to talk about that, right? But let's just make it very clear, that's what the assumption was. CBO has confirmed numerous times to me personally, but many in this room, and they will talk to anybody here. They have to make an assumption. They made an assumption, then they have to put those numbers out there. That doesn't necessarily mean that's reality. And I now yield to the gentleman from North Carolina, Mr. McDowell.

Well, thank you, Mr. Chairman. And I just, someone earlier said something about there's not a lot of young people up here. I would disagree with that. But I do want to speak directly to the young people that are here because it is important that we take a posture of fiscal responsibility because our parents' generation ruined it. And so I feel, you know, it's very ironic that one of my colleagues who's part of the generation that spent so recklessly would lecture us on what it means to be fiscally responsible. I find that just incredible that he would say that. But I do want to, there was a lot said here, but I want to point out that when the other side of the aisle starts talking about math surrounding criminal illegal aliens that are here and what they pay and what they don't pay, that doesn't really matter because the reality is the buckets that they are taking from are a pie. You cannot insert more pieces of a pie into a pie and think you're going to have the same size piece for everyone. And so it's got nothing to do with the math. It has everything to do with the fact that they are taking from American citizens that actually need the services that they need. And so that's the whole point that we're trying to make here. Mr. Couchman, from your testimony, what would you say is the single biggest effect that a budget default has on individuals and on business owners? From your testimony, what would you say is the single biggest effect that a budget default has on individuals and on business owners?

For individuals and business owners, part of it is a potential shutdown of the credit system, higher interest rates, higher inflation, potentially hyperinflation. But it's beyond that. We could have security crises. We have more than 200,000 American troops throughout the world right now, and we could pull many of them home to save a buck. And you could have a discussion about grand strategy, but doing it suddenly could present some really serious challenges. And I was at a bipartisan expert discussion yesterday and Chatham House rules, so I can't say who, but one of them talked about how presidential systems are more prone to failure than parliamentary systems. We have a presidential system, of course, and I would be very concerned about the potential if we were to get into a debt crisis of eroding some of the democratic norms that we embrace.

Ms. MacGuineas, on the international stage, we've seen the 3 percent deficit-to-GDP goal widely accepted. What countries have successfully implemented this model?

So as we saw in the European Union, it was their target and it worked for a while and then it didn't work, which is kind of the story of almost every budget aspiration that there is, which is Congress puts in place rules, it limits its behavior until they figure out how to get around it. The only way these rules work is if you all want to stick to them. So they're really there to help people do what they want to do, but they won't force behaviors.

Mr. Couchman, I guess back to you, the question is, given how much larger our economy is compared to countries in Europe, is the 3 percent what we should be striving for to achieve? Is it sustainable?

It would be sustainable as long as we continue, as long as we were to offset emergency costs. If we just add them to the credit card, then it's a different story. The resolution that is the subject of the hearing today talks about going to a 3 percent deficit-to-GDP target first and then on towards full balance, which is ideally the thing to do.

So 12 of my colleagues, my Democrat colleagues on this committee, were here when they last had the majority in 2022 and they passed the so-called Inflation Reduction Act, which, you know, I think is just mystifying to me that they would title it that. It's like, you know, a better example of what you should name that bill would be if there were a bill that raised the deficit by a trillion dollars and we decided to name it the Lowering the Deficit Act. Because this may have been the single most damaging piece of legislation with a 10-year cost of an estimated $1 trillion for green new scams. And so in your opinion, yes or no, did the IRA ease inflation on rural communities?

It did not.

Did it ease inflation on the working class?

It did not.

And did it ease inflation on families that were trying to get a leg up?

No, sir.

Did it raise inflation on working families across the country?

Not necessarily, because inflation is a compound of fiscal policy and what the Federal Reserve does along with that.

So I've got to close here, but I want all of my constituents to grasp the severity of the national debt and where it could actually lead us, so that they know exactly which members of Congress in this committee took a stand to reduce spending and which of my colleagues wrote trillion-dollar checks that our nation cannot cash. And with that, Mr. Chairman, I'll yield back.

Gentleman yields. The gentlewoman from Ohio, Ms. Kaptur, is recognized for five minutes.

Thank you, Mr. Chairman. I'd like to begin first with thanking the witnesses for being here today. But I have a homework assignment for you, and my first question is whether you will be willing to do it on one page, each of you. And you don't have to answer the question yet. But I'm going to ask each of you if you can provide on one page an autopsy on the current national debt and ask each of you what past spending comprises the debt that we inherit that is nearly $40 trillion at this point, according to the debt clock on Wall Street. Okay. So I have an answer to that, but I'm going to give it publicly. But I just want to say from the way I look at the current budgets and the status quo in our country, if you earn less than $15,000 a year, you're going to experience about a $1,500 tax increase and spending increase because of inflation, and life becomes more difficult for you. If you earn over a million dollars in our country, you're going to get about a $13,000 boost in the way that the tax laws work. So I'm looking at distribution across our country and watching the people in the district that I live in and what they're facing in higher prices and so forth. So every penny matters. Now, in terms of where the debt comes from, let's go back and look at history. Okay. In the way I look at it, about 40 percent, and this is where I want you to correct me if I'm wrong, I'm going to let you go home, think about it, and I don't know what the deadline is, Mr. Chairman, for submission to the record, but about 40 percent of it is due to the tax cuts that came during the Reagan, Bush one and two, and Trump administrations. It amounts to about 40 percent of the total debt, about $15.4 trillion. I want you to prove me right or wrong on that. If we go back and look at wars, which is another category of major debt, the Afghan and Iraqi wars cost us $8 trillion or more when you add the interest to the debt. So that's about 20 percent of the total debt accumulation. Now, currently, President Trump has said his undeclared war, he never came to Congress, he never asked for money, he's already said he wants $200 billion more. I estimate he's spent at this point, I'm on the Defense Committee, close to $40 billion, and he says he wants $200 billion more. All right. So if we put all that together, just the war debt, that's about 20 percent of the total. Then the pandemic sadly came, and that added about $4 trillion to the debt. And then because of what happened with the wars, with the recessions, the Great Recession of 2009 was about $3 trillion plus interest. So that's about another 20 percent of the total debt. And then finally, interest on the debt, which of course grows every day, $7 trillion and more. That's about 20 percent roughly. So those are my numbers. Prove me right or wrong. I don't know if each of you are willing to go back and calculate that, but I will start with Mr. Bernstein. Are you willing to prove me right or wrong in my calculations?

Sure.

Okay. On one page. That's all I want. I don't want 59 pages. I don't want all this. Just the broad, you know, where did we get the debt? Because unless we understand what the disease came from, we can't cure it. And what about, I'm sorry, I have to have the proper name here, Ms. MacGuineas?

Yeah. Sure.

Are you willing to do that?

Of course.

Wonderful. Okay. Now, who's next? Mr. Couchman?

Thank you. Many people have already done this. My comparative advantage is focusing on how to fix the system so you can make better decisions going forward.

Yes. All right. And Mr. Burks?

Would be happy to respond for the record. I would note there's a conceptual difficulty with respect to because all federal spending is sort of financed out of the out of the general revenue, it's somewhat difficult to attribute any particular piece of debt to any particular piece of spending, but happy to respond in writing.

Yes. Well, you're the geniuses for the country. So we have to figure this out and we have to go forward in a much more, the only president in my service in Congress that submitted a balanced budget to Congress was President Bill Clinton. And I thought when we moved into the new century and new millennium, I thought now we're really going to get this done. And then war broke loose again. Yes, Mr. Bernstein, you had a comment?

Yeah, in a recent piece by Bobby Kogan and myself that we wrote for the Center for American Progress, we pointed out that if the Clinton tax structure was still in place today, even with all the spending that occurred, we would be on a sustainable budget path.

Wow. Yes, Ms. MacGuineas?

Just to add also, but it's on both sides of the budget, that if the spending levels were still in place that we had before, our debt would actually be paid off.

Wow. Okay. Anyone else wish to come? I just, this is the kind of helpful exchange. The situation is so serious and every American wants to help. But I think in order to relieve this debt is going to take real commitment and bipartisan cooperation. We have to get to that point for the country. I haven't seen it. I've tried. I served on the Budget Committee before, I'm serving now. I don't have to do this. I have other committees I have to worry about. But one of my other concerns is who owns the debt. And I'm also going to ask you on the back of that page, in less than half a page, talk to us about the increasing ownership of our debt by foreign interests and the amount of interest that we have to pay on that and the strategic challenges that subjects this country to. Can any of you attempt that?

Yeah, but now you've now it's two pages.

Well, page and a half, page and the same page, just go on the back. Thank you very much. Mr. Chair, is my time expired?

Exactly.

Mr. Chair, is my time expired?

That's a great point that I don't think gets shared enough. All of the attention comes on the appropriations budget and it's a dwindling portion of the overall. People back home are floored, and I got several slides on this that I show up to every meeting that I conduct back home and I explain to folks that we have 77 percent of the budget that we don't vote on. It's on autopilot. It's on mandatory spending. And we're not being responsible to we're not being responsible by doing if we were to just force to vote on the entirety of the budget, and I would even concede in a in an entire cycle, so a two-year term even. It doesn't even have to be every year, I would prefer it to be every year, but if we voted on all items of the budget, we could keep it from growing in all those specific areas from growing 12, 15 percent. And in that case, we wouldn't need a Fiscal Commission Act to get our one moment since 1984 was the last time we made any changes to the largest spending items that we have, we wouldn't need that that opportunity to do a Fiscal Commission Act. I'm very supportive of a Fiscal Commission Act, I think it's probably the only catalyst that will get us to get some of this under control, but this would give us an opportunity to regularly reform to you mentioned we should consider the age for for someone under 30, they shouldn't expect to be able to get Social Security Medicare at the same exact age that my dad gets it. But guess what, we don't ever vote on it. If we did this bill, we would actually vote on these things and we could make regular reform to these programs and keep the spending under check. And you know, we wouldn't have a balanced budget next year if we did this this type of deal, but this is what would keep it from massively every single budget item under the autopilot situation from growing wildly out of control. Mr. Burks, I desperately wanted to ask you about healthcare spending, it's 20 percent of our economy, as you get more questions, please consider to to jump in, it is it's the key aspect of it. Any quick thoughts on some of the healthcare aspects?

If I can just add one one thing in response to the point about the current process doesn't give you an opportunity to vote every year. Obviously the budget resolution is an imperfect vehicle, it is more binding on the appropriations side than it is on the

Yes, time has expired. Thank you. I'll yield a few minutes for myself and we'll get back on this. So much to cover here. I really appreciate the expert witnesses here to talk about. Ms. MacGuineas, you and I get a chance to connect on numerous elements. We've talked about this and you've actually talked at nauseam about the 3 percent deficit, so I am not going to bother you with entertaining another question on that. I think we've established there was one point that's made, Mr. Bernstein mentioned, I'd love a follow-up to see how we're going to get there. So that's exactly the point, and I don't want to speak for the actual chair, I'm just the pretend chair for a moment. But that's the whole point, is we want to set a North Star. And Congress is going to go through their the next decade, the Congress is going to go through whatever we go through as political seasons change and this and that. We want to set a North Star so we can find a way to get there. And so I appreciate that commentary. There is one quick point that I want to make, though. And it comes from a very sincere place, is that if you look at what took place from pre-2017 to post-2017 with FDII, a super let's get down into the weeds, foreign-derived intangible income. Before 2017, companies were there was enormous amount of inversion going on. Companies were sending their revenue to tax domiciles overseas because there was a 13 percent rate in Ireland. So what did the U.S. do? We made our tax rate on FDII comparative. We made it competitive with other OECD countries and what took place then? Companies repatriated their money. So post-2017, we got more revenue from corporations saying, hey, if there's a comparative tax rate, I'm going to take that and I want to put it in the U.S. every day of the week. But if there's a 3 or 4 percent difference, I might just establish this in Ireland. So we get more revenue when we have a lower tax rate. People aren't putting it in foreign tax domiciles. So we have to be willing to accept that. And I don't see enough from my Democrat colleagues on an understanding of that. Maybe more privately they are, but then it's always this blast, blast, blast of everything's causing deficits. Well, no, we're raising revenues actually when we make taxes competitive. And that's important part to make and I'm very passionate about it, as you can tell, it's important to recognize. But the single biggest reason we are in the debt situation that we are in, Mr. Couchman, is because for the last 50 years, the makeup of our spending has flipped. In 1965, over 70 percent of our budget was discretionary. We voted on it every year. That portion of the budget, that 70 percent of the budget, has not grown wildly out of control. It's grown at less than 3 percent over the course of those 50 years. Why? Because we vote on it every year. What's grown was in 1965, just that quarter of the budget on a few mandatory programs has now grown to extremely high portion of the budget. It now constitutes over 77 percent. And within the next few years, 80 percent of our budget will not be voted on by Congress unless we make one change. And would you like to explain a little bit more about the Comprehensive Congressional Budget Act?

Absolutely. And the spending side is exactly as you described. And then the revenue side is entirely outside of the annual process as well. And you're absolutely right to point out that we need to be competitive internationally and we need to continually improve ourselves or we're going to fall behind. But we don't do that except in leaps and bursts every eight or 10 years. We should be doing it every single year. And the Comprehensive Congressional Budget is an incredible piece of legislation that you have offered that would give every committee the opportunity to manage the programs it has jurisdiction over, much like the appropriators already do. And by the way, that would help the appropriations bills succeed on time every year because so many other people would have skin in the game, would have a stake in the success of the annual process.

If I can just add one one thing in response to the point about the the current process doesn't give you an opportunity to vote every year. Obviously, the the budget resolution is an imperfect vehicle, it is more binding on the appropriations side than it is on the mandatory side in as much as the appropriators have to produce a new bill each year and therefore are bound by their structures. But it is an opportunity and I would urge the committee to as I noted in my testimony, get back to that regular annual adoption of a budget resolution that really does try to address all the aspects of of both spending and revenue.

Thank you. And the gentleman yields and the gentlewoman from Washington, Ms. Jayapal is recognized.

Thank you, Mr. Chairman. I think it's interesting that my colleagues on the other side of the aisle are so vocal about fiscal sustainability and reducing the deficit when their policies do the exact opposite. With a price tag of $4.7 trillion, the Republican Big Bad Betrayal Bill is expected to make up 20 percent of the next decade's deficit. And instead of addressing the rising cost of living, their Big Bad Betrayal Bill cut $1.8 trillion from Medicaid, SNAP, student loan programs, and other health programs, all to pay for tax cuts for the wealthiest Americans. Meanwhile, the affordability crisis across the country is only getting worse. The average price of gas has risen by nearly a dollar per gallon in the last month, and we've all seen how expensive groceries are at the store. But instead of focusing on lowering costs, Trump is now demanding $200 billion from Congress for an unconstitutional, unauthorized, illegal war in Iran, on top of the billions of taxpayer dollars that have already been spent on the war. Dr. Bernstein, thank you for being here and welcome back. Republicans are now talking about a second Big Bad Betrayal Bill that could fund their illegal war in Iran and lawless ICE and CBP agents. Can you elaborate on how Republicans paid for the $4.7 trillion in tax breaks for the wealthiest individuals and corporations, and do you expect do you have expectations on how they'll pay for this second bill that they're proposing?

So the numbers you're citing are the deficit increases that are scored on this bill, so they look at the revenues and the outlays and so that that's deficit financed, that's financed by borrowing. And I'm I'm certainly the follow-up would also be financed by more borrowing.

And when you look at, you know, how we reduce the deficit, what I hear from my colleagues on the other side is it's always by cutting the very things that Americans depend on for their lives and livelihoods like healthcare, Social Security, but there is another way, right? There are two sides of a deficit and I want to ask you about the revenue side of things. What did taxes on the wealthiest used to be in this country?

Well, marginal rates were a lot higher than they are now and there was a period when they were 90 percent going back to Ronald Reagan and then they were cut. Corporate rates were 35 percent, now they're one now they're 21 and those disproportionately fall on capital income, so that's another example. So the rates both marginal and effective have been very significantly lowered.

By which?

Well, if you're talking marginal rates by you know, 60 percentage points.

Right. And the Biden administration tried to make the wealthy pay their fair share, you were part of that administration. Can you talk a little bit about what you did at that time?

Yeah, I mean, we proposed a budget that had $3 trillion of deficit reduction. Part of that was by the way spending cuts. We had hundreds of billions in spending cuts including lower drug prices, lower tax subsidies on oil and gas, lower tax subsidies for some real estate loopholes, and hundreds of billion the other side talked a lot about waste fraud and abuse, which of course we all want to stamp out, but closing the tax gap by allowing the IRS to enforce the law and that's blocking tax evasion. And then we had significant tax increases at the very top of the scale, no increases under $400,000 of adjusted gross income, including a a tax that applied to unrealized gains over $100 million.

Most of those things have been rolled back unfortunately, but we can do this again. Yesterday, Ranking Member Boyle, Senator Warren, and I reintroduced our Ultra-Millionaire Tax Act, which simply asks household with a net worth of over $50 million to pay two cents on every dollar over $50 million and three cents on every dollar over a billion in wealth. This would bring in approximately $6.2 trillion in revenue over 10 years without raising taxes on 99.85 percent of American households. Can you walk us through the impact that a tax on the wealthiest households like the one that we're proposing, there are other proposals as well, would have on the deficit?

Well, if you're talking about numbers in the you know, six trillion, that that sounds like it would it would very much help us get back onto the more sustainable path that we've been talking about throughout the hearing, much you know, probably not unlike the target that we've been talking about today. So that's you know, when you think about the $4.7 trillion tax cut on deficit financed tax cut from the big budget bill, obviously now you're talking about clawing more than that back.

I just wish we could really focus on what a fairer, more equitable tax code could look like where the wealthiest do pay what they owe, their fair share, and we can still look at cutting. I mean, the Pentagon has never passed an audit, the only federal agency that's never passed an audit, there is waste fraud and abuse, but we have to look in the right places. I thank you, Mr. Bernstein, I yield back.

Thank you to Representative Jayapal, now I'd like to recognize Mr. Roy for five minutes.

Thank you, Chairman. I thank Chairman Arrington for holding this hearing, I thank the witnesses. You know, there's a lot we could get into, I don't want to repeat what a number of my colleagues have already said. I do want to pick up I think on what my friend from California, Mr. McClintock noted and and just make sure that there's agreement here across the board. We talk about 10-year budget windows, we talk about these numbers, and at the end of the day, each Congress every time we come in, you know, we end up assuming things in the out years and they never materialize to the benefit of taxpayer. They never or to the benefit of a budget that's responsible. The reason I bring that up is is what matters to me is what we do this year. And can I pose a question that's going to be fairly obvious, but I think it matters a lot and I'm going to state something real quick. Mr. Couchman, if I remember correctly, you testified in front of the Judiciary Committee on a committee I chair, the Subcommittee on the Constitution on the Balanced Budget Amendment. And one of the things that we talked about, I think you concluded, you said, which future will Congress choose? Is the way you you concluded that hearing. And and my point would be when the majority of both parties rejected, for example, Chairman Arrington's common sense entitlement reform to fix the Social Security windfall elimination program and instead chose a much more expensive version, we blew the lid off of the budget. Why? For political expediency. We did the same thing with respect to burn pits. Rather than adopting a responsible approach to figure out how to manage a terrible crisis for veterans that were suffering from the consequences of of what they had to deal with in serving our country, we adopted a basically $600 billion new entitlement, if my numbers are correct from memory. It was a massive new entitlement. My point is just this for every witness, Republican invited or Democrat. Debates aside about the tax policies and whether we should have lower or higher marginal rates and what that does for income and economic growth. A robust debate worth having. True or false, right now our country is on a path to absolute fiscal train wreck and bankruptcy on the back of the mandatory spending that we have put on autopilot and refused to amend or change and have not substantively amended or changed in any meaningful way, particularly the biggest drivers, Medicare, Social Security, and increasingly veterans benefits and things like what we did and created just five years ago with the burn pit fund. True or false? Let's go down the line.

I think it's fair to say.

True.

True.

Not quite true. So the spirit of what you're saying is is correct, but it's not a train wreck, in fact, it's almost even worse, it's a slow burn, it's a train that doesn't function the way it used to. As I said earlier before you came in, I don't see us having a Liz Truss moment where our creditors just stop lending to us, I see this as much more as a slow deterioration.

Okay. But I think that's arguing on the margins of of something that that I think is critically important for us to recognize as a Congress. Congress appears to me to be uniquely incapable of addressing this problem. And I think the question I would ask of you all is what needs to change? This has been the literal same question for my adult life and yet we have failed completely to address it. Last year, we had a robust debate, my colleagues on the other side of the aisle say tax policies blowing the lid off deficits and criticize us for making reforms to Medicaid and to SNAP and to other programs. I might be willing to say we could have done some more aggressive things and figured out tax policy, right? We tried to constrain some of it here on this side, Senate made some permanent, we had to manage that across the two chambers. And we were trying to do a lot of difficult decisions to hold the line to constrain out of control you know growth projections and so forth. But it was a battle trying to balance all of that and to beg for crumbs of reforms. So my question for each one of you as 30 seconds left is what it is. What has to change? Give one single thing you think needs to change to force Congress and force our government to deal with the train wreck or slow burn or mixture thereof that is coming, Social Security, Medicare, everything, bankrupt, interest, 10 years of debt that we're going to refinance, I mean 10 trillion of debt that we're going to refinance in the next year, sir.

I think it comes down to a question of political will and the willingness to compromise across the aisle. The one time in our lifetimes, most of our lifetimes when we've achieved balance was the result of a difficult politically difficult compromise in a very otherwise divided Congress where, you know, president had been impeached and yet they were able to work on fiscal policy on a bipartisan basis and adopt a series of of very difficult political decisions that resulted in fiscal constraint. So I think it's compromise.

Congress must modernize its institutions so that the incredible talent that is in this body can address the problems facing the American people with better incentives and opportunities.

I think you have to put in a default so that you've got to pick a target, a fiscal target, then you can put in annual targets, and then you need to put in a default where if you don't achieve it, some of these will happen automatically. I think we're starting to lose faith in politicians' abilities to make the choices, so we need to kind of outsource some of the harder choices if you are unable to.

I fear that Congress won't change until there's a massive spike in interest rates.

Thank you, Mr. Chairman. Thanks for witnesses.

Thank you to Mr. Roy. Now recognize Ms. Omar for five minutes.

Thank you. I understand that the goal of this hearing is to find ways to stabilize the debt. But fiscal responsibility means nothing if it only applies to children, to workers, to poor families, but never to war and tax cuts for the wealthy and the well-connected. Republicans are talking about hard fiscal choices that our country must make while the Trump administration wages war of choice, burning through billions of dollars every single day and now is asking Congress for more billions. Let's be honest with the American people. When it comes to war, there's always money. There's always money for weapons, there's always money for military contractors. But when children need food, when families need healthcare, or when a veteran comes home needing support, suddenly we are told there is not enough. We are told that we do not have enough resources to invest in better schools with more teachers or safer communities or more housing. This is a conservative estimate, but so far we've spent over $40 billion and counting that we have spent on the war in Iraq. We could have instead built over 91,000 units of affordable housing, fed over three million families on SNAP, and provided free pre-K for almost two million kids for a full year. Instead, Republicans seem prepared to pay more for military spending, rewarding warmongering and reckless administration for starting conflicts across the globe. But this is not just about one supplemental request. Congress has already passed an $840 billion Pentagon budget. Republicans then added another $156 billion through reconciliation. Now, the Pentagon wants over $200 billion on top of that supplement. And Trump himself wants the Department of so-called War's budget to increase by $600 billion this year. We are racing towards an almost $2 trillion military budget if you count for the emergency spending. Because emergency spending is never temporary for the Pentagon. The audacity to tell the American families to accept austerity as we race towards record-breaking military spending is outrageous and insulting. And many of the same people demanding deficit reduction refuse to apply that standard to the military. Pentagon spending has to be on the table, especially for a Pentagon that has failed audit after audit every single year, billions of dollars unaccounted for. Working families are tired of being told their government can't afford to bomb another country but cannot afford to feed its children. I am tired too. I've lived through war. I know it is not a game. It is never one-time cost. It cannot be reduced to a soundbite by politicians who have no regard for the cost of human life when it comes to warfare. War is not paid for a dollar alone. It is paid in the lives of young Americans who we send to fight this war. It is paid for by the women and children that are killed in their homes or in their schools. It is paid for in displacement, in trauma, in generations of people who will never recover. So if we are going to talk about hard choices, let's talk about the hardest one, which is this institution's addiction to endless wars and its refusal to subject the Pentagon to the same scrutiny it demands of everything else. I have one question for the panel, maybe we can go down the list. Do you all think it is time to put the Pentagon spending on the table if we are thinking about stabilizing debt in this country?

Yes.

I don't think we should make national security decisions based on the budget, but I think we should recognize the budget, I think the Defense Department should absolutely be on the table, I think there's savings to be had and if we spend more, I...

Do you all think it is time to put the Pentagon spending on the table if we are thinking about stabilizing debt in this country?

Yes.

I don't think we should make national security decisions based on the budget, but I think we should recognize the budget. I think the Defense Department should absolutely be on the table. I think there's savings to be had and if we spend more, I think we need to offset those costs.

Thank you.

Defense is part of the budget, it should be in the budget, and then you all should decide how to proceed.

Thank you.

As noted, obviously we don't want to make national security decisions based on the budget, but it is an element of spending and all parts of spending and revenue should be part of the conversation and part of the budgeting process.

Well, I appreciate you all. I don't think there is a national security concern when we are constantly starting a war and spending the lives of our precious children and the dollars that taxpayers pay for that could be going to creating a better future for every American here in the United States. Thank you and I yield back.

Thank you to Representative Omar. Now I'd like to recognize Mr. Huizenga, who is waived on, not a member of Budget Committee, but very glad he's here. He's been an absolute leader in these fiscal issues, a prime sponsor of one of the bills that we're or the bill that we're talking about here, one of the prime sponsors of the bill we're talking about here as well as an advocate for the fiscal commission. So we appreciate you being here. Recognize you for five minutes.

Well, I appreciate my friend from Pennsylvania and Chairman Arrington allowing me to join today. This is near and dear to my heart and it's good to see many of you again. I know it's also a near and dear to your hearts as we go through this. I'll just note, and I know she left, our colleague from Minnesota was talking about defense spending and the argument was domestic spending is getting squeezed out by defense spending. Well, defense spending is getting squeezed out, it's true. Domestic spending is getting squeezed out, that is also true. But what is squeezing that spending out is not one or the other, it's interest on the debt. And interest on the debt is now larger than our defense spending and it's larger than our domestic spending. So when we have when we have this discussion, we have to understand that this is not an either-or. This is all of the system that we deal with and by the way, we vote on a fairly small portion of all of our federal spending is getting squeezed out because of past decisions and the interest that we have on that. And I know Mr. Arrington in particular when he started the what's now become the Bipartisan Fiscal Forum, we were called ourselves the 30 by 30 at the time, it was 30 Republicans, 30 Democrats, and we couldn't come up with anything more creative. We weren't that more any more creative than 30 by 30. But there is it's been great to see a number of folks that have come together. The resolution H. Res. 981 calling for this three percent is something that my name may be on it as is Scott Peters, but we have our entire BFF steering committee on it and others and appreciate the witnesses here today. And I'll just note that today in The Hill, an op-ed written by myself and Mr. Peters is has been published regarding this. So Ms. MacGuineas, I want to start with you. You noted the wide public-private sector policy consensus on this three percent seems right, left, and center have kind of come to some of these conclusions that we need to deal with this. How can Congress use this topic to reconfigure the debate around debt crisis?

I mean, if you think about this hearing today, there really hasn't been very much disagreement about needing a target and this target as making sense. Where the disagreement has been, it's when members have started to talk about this policy or this policy or this priority or this value. And that's the discussion we should have. Hopefully we can even tone it down and acknowledge that it's okay to have different opinions and all of these things. But if you all are forced to kind of put forward priorities that meet one single target and then look at the tradeoffs, which is what budgeting is about, I think we start to have the real discussion about how we craft our budgets going forward. I do think it would be really effective if we were required to put forth how to achieve that looking at all those different priorities and values.

Appreciate that. Mr. Burks, near the end of your testimony, you discussed the risk our debt crisis poses to interest rates and the economy. I talked a little bit about that federal spending equation. What signal would passing a three percent resolution give to the markets or more importantly to Americans saving for retirement and seeking affordability?

Yeah, I think it's a very important signal that Congress recognizes the problem and is moving towards building the political consensus necessary to actually address it. You know, there is always a challenge in the markets that they're forward-looking and as has been noted repeatedly, there are limits to what any one Congress can do to bind a future Congress. But if the Congress adopts a fiscal plan that recognizes that long-term we need to consolidate, that is a positive signal that should lower interest rates and improve affordability.

All right. Mr. Couchman, in last less than a minute here, your testimony makes the case that three percent target only matters if Congress builds a process around it and you talk you talk about your own grassroots movement with your organization. I'm afraid that we still have colleagues that aren't quite convinced that we need to even start a process like that. But how can grassroots, our constituents back home, use this fiscal target policy goal to get members of Congress more engaged?

That is a great question. I mean, part of it is that the American people are seeing the effects of Washington's dysfunction right now through inflation, higher interest rates. I mean, we've got colleagues that are talking to people at the doors all the time, calling people, doing events, and we're hearing directly from people all throughout the country. We have a great state chapter in Michigan.

And I've heard from them.

I'm sure you have. Which is great. I was just up in Lansing a few weeks ago talking about bringing these things to the states as well. And that's an important part of this conversation is that a lot of state legislatures could benefit from some of the things that we've been talking about as well. And so as some of those state legislators become members of Congress, then they can bring those lessons. Kansas is learning right now the benefits of preventing government shutdowns, they just adopted it last year. And so we're spreading the news all throughout the country about better ways of doing these things and making legislators more effective. And yeah, it's a grassroots movement and it's a real pleasure and an honor to be part of.

And I know I'm eating into the generosity of the chairman here as a guest to the committee, but I was one of those state legislators that had to live under a constitutional requirement for a state balanced budget every year. And there is nothing harder than a reverse appropriation vote to take because you've overshot and then you now have to reel it back in. And while I was one of the original co-founders of the Balanced Budget Amendment Caucus here when I got here in 2010, that's clearly a bridge that's too far for us right now. I just hope and pray that we're able to take a smaller step like this. And I deeply appreciate the opportunity to be with you today and I yield back.

Again, thanks Mr. Huizenga for being here and for your leadership. And I think this was a great discussion and I do think that there was so much agreement. We're going to disagree on how we get here and I think Ms. MacGuineas, you summarized it really well. Like if we would if we would together set this as a target, then we're going to have a vigorous debate about how we get there. We understand you're going to have to have economic growth, you're probably have to have revenue, and you're going to have to have spending cuts or we have to put together. And none of us are going to get exactly what we want in that, but we have to understand that this is so important that we have to come together and compromise. So thank you for those comments. I'd like to recognize the chairman. Thank you again for putting this together, but recognize you for a few.

Yeah. Well, first, a few things. My first comment is have noticed how good it looks, Chairman Arrington, to have a Pennsylvanian in this chair. And I want to say, and I know that as Chairman Arrington referenced, for the last three years and three months since he became chair and I became ranking member, we both said, if you remember, Jody, in that first hearing, there are certain committees around here that are known for the food fights and the nonsense. This isn't going to be one of them. That we're going to, of course, disagree on certain things, but we're going to do it in a respectful and civil way. And while we've had our policy disagreements and that's fair enough and go toe-to-toe on those, for the last three years and three months, I feel good about the fact, and I think every single one of our committee members agrees, that we have upheld those standards. And it takes both sides. In that spirit, in the spirit of bipartisanship, Lloyd, I want to offer you my complete and total endorsement to be my successor as ranking member. I think you would do an absolutely excellent job. My final point on this, in addition to again thanking the witnesses, really all four outstanding and from different perspectives, certainly, but really high quality, both the written testimony and the oral testimony as well. What whenever people would talk about deficit and debt 15 years ago, because I was first in the state legislature then, I always said, and actually there's something you wrote, Mr. Bernstein, that I identified with in your testimony, 15 years ago, 18 years ago, I was in the category of, look, this is going to be a challenge, boy, those projections in the 2030s really concern me, we're going to have to deal with that at some point, but this is not the most immediate concern. Frankly, I think in 2011, 2012, federal government pivoted too quickly to concerns about the deficit rather than relying on those instead addressing the slow growth. My opinion has changed as the evidence has changed. We're not talking about deficits and debt that we had 15 years ago and 20 years ago. We're talking about a situation, and these are rough numbers off the top of my head, we have a GDP of about $32 trillion and a national debt now $39 trillion and it's growing with some rather worrying projections looking ahead, not 15, 20, 25 years away, but now within the 10-year window. So while we disagree on what exactly caused this problem and why we're here, we all agree that we're in the same boat now. And coming up with a truly bipartisan solution moving forward, I think is the only way to go. Happy to yield back.

Thank you, Chairman. Just let that sink in a little bit. Y'all did a great job of keeping this productive and civil, and that's something that the ranking member and I have taken great pride in trying to create a dynamic where we have real conversation and real debate. It's hard to resist again. I'm guilty of it, making some points that are generally legitimate, but taken in the whole, fail to meet the moment in terms of what needs to be said. The bigger point, which is Republicans and Democrats have contributed to a math problem now that if we don't address it and reverse it, we will be the first generation in the history of this country to not only hand the country worse than we found it, but potentially create, whether it's a slow burn or a stark cliff, we will rob them of the experience of the freedom and opportunities that we've had. That just motivates me every day. It just is the air I breathe now. And it's really what's motivated me, that and just learning more about why it's breaking down and where the dysfunctions are, but it's what's motivated me to say, I don't care who's offended in this conversation. This is not a partisan issue for me. I have philosophical differences with my colleagues, my Democrat colleagues, on what's driving this and where I would put the preponderance of my effort in reforms on spending. But man, Dr. Bernstein, I have heard Republicans say it's a spending problem, stupid, like you heard today, and then when we had all-Republican opportunity in an all-Republican exercise called reconciliation that none of us knew about before we got here, and now we have this opportunity to unlock every spending cut and every entitlement reform that our little hearts desire, and guess what? We weren't able to do enough to meet the moment either. Democrats say we're going to create spending programs, entitlement programs, social services programs, but we'll pay for it with raising taxes, but they never raise taxes enough. And we say we're going to cut the taxes, but don't worry because we're spending hawks, we're going to offset with spending. It just doesn't happen. Like at some point, I think we all should just take the not a pledge to cut this or cut that, but a pledge of being honest with ourselves and with the American people. Then let's pick that target. I'm agnostic, quite frankly, as long as it's realistic. And when we pick a target that gives us progress, then we can hold each other accountable. And I would say even if the Democrats were in total control, if they were to advance the plan that they were elected to advance by the voters and they were doing that in a way that continued to put us on that glide slope, then I would at least give credit that they did it responsibly. And I think that's what I hope for one day in this building and on this committee. Bill Huizenga is a great American. He's dedicated a lot of time to this and his leadership has mattered and he has done the hard things that you have to do, which is roll up your sleeves and work with the other side, put some of the ideological difference aside and risk saying we got to put everything on the table. If you don't say that, nobody comes to your party except for your own party, and that's not clearly going to solve it. So grateful for your time, grateful for the good work that you all do, grateful for my ranking member and his commitment to making this a constructive conversation. And with that, I yield.

Thank you. And recognize the ranking member for comments.

And coming up with a truly bipartisan solution moving forward, I think is the only way to go. I yield back.

Thank you, Mr. Boyle. I would like to submit into the record statements from the Cato Institute, Peterson Solutions Fund, the Fiscal Lab, Concord Action, and Ray Dalio. Without objection, so ordered. So thanks to each of the witnesses for being here today. Please be advised that members may submit written questions to be answered later in writing. These questions and your answers will be made part of the formal hearing record. Any members who wish to submit questions for the record may do so within seven days. So again, thanks to each of the witnesses. Great conversation. And with that, the committee stands adjourned.