▶ 0:16:36The hearing will come to order. Welcome everyone to the budget committee's hearing on the fiscal state of the nation. I cannot think of a more important conversation on Capitol Hill than this. And so we are uh honored by your presence and appreciate your insights. Uh today we will hear from a panel of witnesses and uh if I might briefly introduce them. We've got Dr.
▶ 0:17:05Joshua Raw, senior fellow at Stanford University's Hoover Institution. He leads Hoover's fiscal policy initiative. He previously served on the White House Council of Economic Adviserss from 2019 to 2020. Uh was also a member or is also a member of the Congressional Budget Offic's panel of economic adviserss. So, Mr. Joshua, we appreciate you being here. Dr.
▶ 0:17:30Paul Winfrey, uh my friend and uh current CEO of the Economic Policy Innovation Center or EPIC. He previously served in the White House as deputy assistant to the president for domestic policy, deputy director of the domestic policy council and director of budget policy during President Trump's first term. Are you can can any one person really do all three of those jobs? Paul, uh, that's embarrassing. Um, uh, or or very impressive.
▶ 0:18:01Uh, Dr. Winfrey served as the director of economic policy studies at the Heritage Foundation. And uh uh Dr. Winfrey, we're we appreciate you being here today. Mr. Don Schneider, deputy head of the US policy at Piper Sandler. He previous previously served as the chief economist at the great most powerful committee in Congress. Uh Mr. Ranking member, the House Ways and Means Committee. Would you agree with that? At least can we start there? It's a tie with budget.
▶ 0:18:32Um, yeah. Well, that's Wow, how did I miss that? I it's um Yes, it's a close close tie with budget. And uh he's also an economist or former economist for our budget committee and uh we appreciate your service uh to the country and to Congress and our fellow members over the years. Uh Mr. Michael Lindon, senior policy fellow at the Washington Center for Equitable Growth. Mr.
▶ 0:18:59Lynon previously served in the Biden administration and on the staff of the Senate Budget Committee. So, we appreciate your service to our country and uh we know you all miss the budget committee just uh dearly and um we uh are are ready to just get started and I'll make a few opening comments. I'm going to yield uh myself such time as I may consume.
▶ 0:19:26Um, as I stated before, I can't think of a more important topic, uh, a more important conversation or more important context to the most consequential legislative opportunity and lawmaking mechanism of budget reconciliation uh, which is ongoing.
▶ 0:19:52uh than than the fiscal state of the nation than the facts and figures and forecast of the nation's fiscal health. The fiscal state of the nation by uh any measure is in a dire state and condition and is rapidly in decline. I don't think that's up for debate.
▶ 0:20:15I think the question is how much longer do we have to allow this unsustainable fiscal trajectory to persist without some intervention? Uh both parties I will say from the outset as I'm fond of saying actually uh over the over the years as budget chairman both parties have contributed to this.
▶ 0:20:40you know, um my Democrat colleagues will grow the government and increase spending and they will uh they will make statements of paying for it through uh taxes or as we say other people's money and it never works out quite like they plan.
▶ 0:20:58Of course, Republicans in their own way leave the deficits growing because we think somehow we can grow out of a world war levels of debt and deficits. But I I don't believe I believe we crossed the Rubicon on growing out of this uh a good while ago.
▶ 0:21:18But it's okay because Republicans have the heavy mantle of reigning in the spending, the runaway unbridled spending that's driving the debt. So fear not, fellow Americans. Republicans will simply offset uh their cost for defense and for tax cuts with with spending reductions. Well, that hasn't worked out either over the years if we're honest.
▶ 0:21:46I hope this is a committee where we just we may have philosophies. We may have different policy positions as a result of those varying philosophies. But I hope we can call the balls and strikes as they are and uh because I don't think it serves anyone, especially the American people, if we don't set the table in a way that reflects the harsh reality of of not just the fiscal state of the nation,
▶ 0:22:16but maybe more importantly uh the fiscal or the state or condition of Congress because at the end of the day, I think we know what's going to what needs to happen in this moment. Republicans have to rise uh to this generational opportunity to not just do what we've done and probably could do in our sleep, which is cut taxes, which and extend tax cuts, which I think is critical because growth is part of the solution.
▶ 0:22:46I think we have to make an investment in the first and most important job of the federal government, which is defense and all things national security. But we must, and it is an imperative, we must course correct and we must bend the curve on the automatic unchecked mandatory spending and and the spending from entitlements, health care, welfare, and and all the others that are going to drive
▶ 0:23:16this country off a fiscal cliff. And so in this moment, I don't think we're lacking for clarity on solutions, although u I welcome those suggestions. I think what we're lacking in Washington all around maybe among others like common sense and common decency is courage. Courage to do what is necessary.
▶ 0:23:44courage to do what every generation of American leaders have done when facing such an epic crisis that could in fact irreparably uh damaged.
▶ 0:24:03um not just the economy, not just uh crowding out our ability to fund our national priorities like defense, leaving us weaker and more vulnerable to the risks around the globe, but to actually undermine the reserve currency status, our global leadership, and most importantly, as a father of three children, and I believe my Democrat colleagues feel the same way, robbing our children of the American
▶ 0:24:34promise and the American dream and the land of um and America as the dominant global influence. That's what's at stake. That's why we asked you all to come here.
▶ 0:24:48That's why we have to have this um as we prepare for the 26 budget cycle, but also and probably most importantly for Republicans who are meeting out this uh reconciliation bill and trying to collectively meet this moment with something that will that will put our nation on uh track to restore
▶ 0:25:18fiscal health and unleash prosperity and have our best and brightest days ahead of us. So, thank you for being here. Honored to be a part of this committee. Uh honored to serve alongside my colleagues on both sides of the aisle. And with that, I will ask my ranking member for his opening remarks before we get to the Well, thank you uh Mr. Chairman.
▶ 0:25:42As you know, I always uh appreciate the uh the spirit in which you uh conduct yourself and in these hearings um and the intellectual honesty that you have even if uh we don't totally agree on on a number of the specifics and come from different philosophies, you have to your credit said many times um uh about both parties uh contributing to the uh the national debt.
▶ 0:26:07I think I'll I'll take issue as uh as far as what percentage of the blame lies where. Uh but nonetheless, I always appreciate uh the good bipartisan spirit you operate in. It's one of the reasons why you and I were able to work together on a piece of legislation that became uh signed into law uh last year to help the Congressional Budget Office serve Congress and the American people better.
▶ 0:26:31Now, as for this hearing, when I was told by my staff that there was going to be a hearing on the fiscal state of the nation, I have to admit I made a prediction that was wrong. I said, "Surely the Republicans will cancel that hearing because the last thing they want to talk about is what it has only taken Donald Trump 3 months to do to this fiscal state of this nation." Just think back to only three months ago.
▶ 0:27:01We had by no means a perfect economy, but we had an economy that was growing and had been growing for four straight years. We had inflation down to the low twos, down almost exactly at target level, which would enable and was projected would enable the Fed to cut interest rates this year three times. All of that progress and things headed in the right direction.
▶ 0:27:27Every economist, liberal, conservative, moderate, predicting continued growth as far as the eye could see. 3 months later, what do we have now? Decline. A 0.3% contraction. It is projected next quarter, the quarter we are in now, will even be worse. Which means that would hit the textbook definition of a recession. And prices, what did last week's report show?
▶ 0:27:53All that progress we made over several years getting back to the 2% target gone. Prices jumped to about three and a half%. And that's before the full impact of the tariffs have taken effect. Markets down, prices up, growth down, and projected to get even worse. One person did that, the president of the United States. There have been multiple recessions in the last 25 years. three previous ones.
▶ 0:28:232001, which was prompted by the 9/11 terrorist attacks. 2008, the Great Recession, which was prompted by the collapse of the real estate bubble. And 2020, of course, which was prompted by the COVID pandemic. This is the first recession, I believe, in my lifetime entirely created by the policies of one president. So, what can we, the first article of the constitution, do about it?
▶ 0:28:51We are after all a co-equal branch Nothing. We have a few Senate Republicans who are willing to vote against the tariffs. Otherwise, we hear crickets from House Republican leadership. Do we really think our nation's founders would have been comfortable with giving unilateral tariff power to one executive?
▶ 0:29:16Of course It is time for Congress to finally on a bipartisan basis have a few of our Republican friends join with us on the Democratic side of the aisle and say enough with Donald Trump's price increases. The American people literally can't afford it. Our economy can't afford it. Yet, we don't see any action whatsoever in this regard.
▶ 0:29:41Instead, we see a reconciliation plan that is promising to provide up to $7 trillion of tax cuts, almost all of which will be financed. We hear a lot about deficit debt. This bill will make things far worse.
▶ 0:30:00In fact, one very smart, notdemocratic source that I talked to that follows the bond markets believes there is not sufficient demand in the international markets to buy all of the debt that we will soon be flooding onto those markets if the Republican reconciliation plan passes.
▶ 0:30:20It is true there are some in the House approach who have advocated the biggest Medicaid cuts in American history, the biggest cuts to new nutrition assistance in American history, cuts to student loan programs, and much more. I vigorously disagree with those cuts. I disagree with it on principle and on philosophy. But I will say at least there's an effort by some on the House Republican side to at least pay for some of their tax cuts.
▶ 0:30:49I don't think that's the approach though uh that we will by and large see. Instead, what we see is something called the current policy baseline. Now, this is terrible inside baseball speak. Um but let me very briefly explain what current policy baseline is. It is a fraud.
▶ 0:31:09Imagine I ate a brownie And because I ate a brownie yesterday, the brownie that I eat today will cost me zero calories. And the brownie that I eat tomorrow zero calories for the rest of my life caloriefree brownies. Why? Because I'll have deemed well, it's the current policy baseline. I had a brownie yesterday. Give me a break. We think we have a debt problem now.
▶ 0:31:38Can you imagine if current policy baseline becomes the new norm around here? I predict both sides will use it. It will be just as Mark these words and save this. It will be just as disingenuous regardless if he uses it to pretend that something costs zero dollars and zero calories when we know it just ain't so. So with that, I'll yield back, Mr. Chairman, and I will make a final plea.
▶ 0:32:04Let us stop the pain being inflicted on American families now before it's too late. Let's have Congress reassert its powers as it relates to tariffs and trade. I yield back. I thank the gentleman from Pennsylvania. Um, and in the interest of time, if other members have opening statements, I ask that you submit them for the record. We will hold the record open to the end of the day to accommodate those members who may not yet have had time to prepare written statements.
▶ 0:32:32Again, we thank our witnesses for being here today. Committees 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. Dr. Raw, uh, you may begin. It's raw, not Ralph. Ralph. Okay. Okay. They they even gave me a phonetic raw uh in here. So, Dr. Ralph, Dr. Ralph, that's how it looks like it would uh would sound. Uh, so Dr. Ralph, you're going to start off. We got five minutes.
▶ 0:33:02And thank you for being here. ington, ranking member Bole, members of the committee, thank you for the opportunity to testify today. Interest payments on our national debt now surpass the entire defense budget. Deficits are approaching $2 trillion per year on $5 trillion of revenue. This path threatens our long-term prosperity and national security. I'm going to make four points. Additional details are included in my written testimony.
▶ 0:33:31First point, rising interest payments on the national debt are consuming ever larger shares of government revenue. Using the CBO's figures, I calculate that 18 cents of every dollar of federal revenue in 2024 went out the door to pay interest. That is scheduled to rise to 22 cents in 10 years, putting extraordinary pressure on the rest of the budget. It's likely to be much worse.
▶ 0:33:55The CBO projects that the 10-year Treasury yield will settle down gently at 3.8% in 10 years time. It's around 4.3% today. But if bond holders don't like our fiscal trajectory or the Fed has to fight inflation, interest rates could be much higher. Markets already think they will be. The current forward rate for 10-year treasuries exceeds the CBO's projection by more than one percentage point.
▶ 0:34:21So what happens if real interest rates on the federal debt rise very gradually over the next decade, ending just one percentage point higher than the CBO projects? In that case, interest payments would consume 29% of revenue in 2035, 10 years from now. And if you wall off the revenues from Social Security, from the Social Security payroll tax, interest would devour 40% of the remaining revenues in 10 years.
▶ 0:34:48In this scenario, the average rate of interest in the federal debt lands at just 4.6%. Still well below the 9.2% high reached 1982. So let's go a little further. Suppose that the interest rates continue to rise through 2055. Again, gradually just by one percentage point per decade, still well short of the historical high. Well, in that case, 96 cents of every dollar of non-social security revenue will be needed to pay interest.
▶ 0:35:14In this debt spiral, there's almost no money at all to pay for national security or any social programs. Not good. Second point, a failure to act now will harm economic growth and prosperity. High government borrowing competes with private investment and drives up interest rates in the whole economy. That spells pain for households and businesses. Economist estimates of the sensitivity of interest rates to rising government debt are almost all higher than the CBOS's.
▶ 0:35:43Plus, yields on bonds might react nonlinearly to unprecedented levels of interest expenses. Markets will not wait until we literally cannot meet interest payments. They adjust in real time their expectations of future debt and deficits. A debt spiral could follow. Third point, higher tax rates are not the answer. Raising marginal tax rates discourages work, savings, and investment. That means lower growth and fewer new businesses and jobs.
▶ 0:36:09Rapid growth in the first Trump administration before the pandemic led to more wage growth for the bottom of the income distribution than for those at the top. Conversely, slower growth leaves everyday Americans behind. My research shows that when governments impose high tax burdens, you get lower than expected revenue growth. For example, when California raised tax rates in 2013, taxpayer responses eroded 60% of the potential revenue gains just within the first two years.
▶ 0:36:35And over 90% of that loss was from the reduction in economic activity of high earners who stayed in the state, not of the people who left, making these lessons directly applicable to the federal government. So what about the expiration of the TCJA and other proposed tax cuts? Extending the law's cuts without maintaining base broadening provisions like the salt cap would significantly increase deficits, but letting the law expire or offsetting its effects through other tax hikes would stifle investment and consumption.
▶ 0:37:07To address this, I urge Congress to make permanent the progrowth provisions such as the rate reductions and full expensing of capital while extending or implementing only temporarily, say two years, cuts that will add to deficits while doing little to grow the economy. Fourth, and finally, failing to include significant spending cuts in this year's reconciliation bill would be a grave error. Our problem is not a lack of revenue.
▶ 0:37:33Our problem is that federal spending falls well short of revenue and is expected to grow even faster. Let's revisit the interest scenarios. If you don't cut any spending and if real interest rates increase over the CBO projections by just one percentage point per decade, interest payments would surpass non-social security revenues by 2050. This is truly playing with fire. Congress has plenty of opportunities to cut spending that only benefits small groups of special interests.
▶ 0:37:59In my testimony, I provide some examples of bird rule eligible cuts, including eliminating the Medicaid provider tax scam, implementing sight neutral payments for outpatient Medicare, improved cost sharing rules and supplemental Medicare plans, and for civilian workers, raising retirement contributions to just 4.4%. Achieving a sustainable federal budget will require far more cuts, but these would be a great start, saving nearly $1 trillion over the next decade.
▶ 0:38:27To conclude, there isn't much time left for action. We can't keep running deficits of 6% of GDP without major economic repercussions happening very soon. And just want to end by saying if your colleagues are concerned about the political risks of cutting spending, they should also consider the far greater political consequences that they will suffer in a debt crisis if they fail to act. Thank you for your time and I look forward to your questions. As a good Southern Baptist, it's really hard for me.
▶ 0:38:57I want my colleagues to know not to say amen and hallelujah throughout this hearing, but I will I will try to show restraint. Dr. Winfrey, you have five minutes. I think Josh's testimony was pretty raw. That's why your you know staff, you know, had had his name in there is is raw. Um, thanks. It's R. It's uh Chairman Arrington, um, Ranking Member Bole, members of the committee, thanks for having me testify today. I want to underscore one core message.
▶ 0:39:25America's fiscal position is now so fragile that unless Congress acts decisively, we will collide with a self-inflicted debt spiral well within most of our careers and certainly within lifetimes. We stand at a point when debt is as high as it typically is during times of war. As the chairman mentioned in his opening statement, gross debt is already 123% of GDP. To provide some perspective, during the peak of World War II, it was only 118% of GDP.
▶ 0:39:53From 2020 to 2023, 76% of all new federal spending was borrowed and another 14% was printed by the Federal Reserve. This period marks the heaviest reliance on debt and money creation since the Civil War. Treasury's quarterly borrowing has doubled in four years. In the first quarter of 2021, Treasury raised 400 billion in marketable debt. In the first quarter of 2025, it expects to have to raise 815 billion. These facts reveal a government living well beyond its means.
▶ 0:40:23We are betting that rates will remain low and global demand for treasuries will remain high. My research measures the nation's fiscal space or the room that we have to borrow before markets lose confidence. In 2017, we had a debt capacity roughly equal to 70 75% of the economy. By 2024, that cushion had shrunk to about 60%. If current law persists, fiscal space will begin eroding permanently by 2020 2029. And this erosion will accelerate by 20 240.
▶ 0:40:50At that point, higher rates feed directly into higher deficits, contributing to even higher rates and triggering a debt spiral, which is what Josh was talking about. CBO's own baseline shows that net net interest nearly triples from $952 billion by this September to $2.9 trillion per year by 2045. Levels this high will crowd out both public and private sector investment. History offers no painless off-ramp once a country is trapped in that loop.
▶ 0:41:19Markets ultimately impose sudden and severe discipline and the United States is not immune to this. Some argue that we can tolerate much higher debt levels. For instance, Japan's debt is currently 200% of the economy. That ignores three realities. First, our entitlement structure is much more expansionary. Medicaid alone has grown faster than the economy in 45 of the 59 years since it was created. and CBO says that it will grow faster than the economy in 25 over the next 30 years. Second, our global role is larger.
▶ 0:41:49The dollar's reserve currency status lets us borrow cheaply. However, if we erode confidence, interest rates will spike long before we reach these high doubt levels. Third, our savings rate is far lower and much more of our debt is financed by foreign investors. This is because US treasuries are the leading safe asset, making our debt attractive and allowing us to borrow more public and private borrowing. Eroding debt capacity threatens programs that Congress most wants to protect. When interest rates devour every new tax dollar, the vulnerable are the ones at risk.
▶ 0:42:19But just restoring our fiscal space that the US had in 2017 requires us closing the primary deficit by $140 billion per year, $1.4 trillion over the next 10 years. There are three guiding principles that I think can help get us there. First, Congress needs to make sure that the economy is growing faster than the debt. They can help this along by extending bonus depreciation and full R&D expensing, avoiding scheduled tax hikes on pass through businesses, and streamlining permitting.
▶ 0:42:47Second, Congress should slow autopilot spending by focusing on federal programs that structurally uh outpace GDP for Medicaid. That means reducing inequitable financing that favors able-bodied childless adults, closing financing loopholes like the provider tax and state directed payments, and requiring work for healthy working age adults. Third, Congress should send a credible signal to the debt markets by adopting clear debt and deficit targets to help guide your actions.
▶ 0:43:14Acting now allows measured reforms that preserve growth, protect the most vulnerable, and keep America's potential as the issuer of the world's safest assets. We have had more significant challenges, and we have prevailed in the past. During World War II, we borrowed heavily, but we also set the stage for post-war prosperity by reducing spending, selling surplus assets, and fostering private sector investment. We can do that again, but we must acknowledge that unlimited borrowing cap is not a sound strategy.
▶ 0:43:44Thank you, and I look forward to your Thank you, Dr. Winfrey. Uh, we now yield five minutes to Mr. Schneider. Chairman Arrington, ranking member Bole, members of the budget committee, thank you for the opportunity to testify on the fiscal state of the nation. It's an honor to be before this committee, albeit in a different capacity as I once sat on the other side as a dis then for chairman uh Paul Ryan. In my current role, I'm the deputy head of US policy at Piper Sandler, an investment bank.
▶ 0:44:11My job is to conduct macroeconomic research and help our clients, institutional investors, to navigate how US policy affects markets. It's important to note that I'm here representing my own personal views and the comments I expressed today and my written testimony do not reflect the views of my employer. The current fiscal footing of the US is dramatically out of step with our economic circumstances. Last year the deficit was 6.4% of GDP and the primary deficit which excludes interest cost was 3.3% of GDP.
▶ 0:44:40This is unprecedented given the US was neither in recession nor at war. If we look back at history in similar economic circumstances in which the unemployment rate is low, we would normally be running a deficit of just a half a percent of GDP or a primary surplus of 1.1% of GDP. This means the primary deficit is now 4.4% of GDP larger than it has been in similar economic circumstances. To put that in context, it is roughly the size of all social security spending.
▶ 0:45:08Over the next decade, total non-interest spending will be 2% of GDP over its longr run historical average. This will keep deficits structurally high. At the same time, interest costs are at their highest level in the postw World War II era at 3.2% of GDP and will rise to 4% of GDP by the end of the decade. As for revenues, even assuming the 2017 reforms are fully extended, revenues will match their historical average of roughly 17.2% of GDP over the next decade. In short, revenues are normal.
▶ 0:45:37while spending levels are unusually high. Therefore, in order to address the unsustainable fis fiscal outlook, this committee's attention should be focused predominantly on mandatory spending. Now, as someone who routinely speaks with institutional investors to field their questions on the US policy outlook, I can offer some recommendations that reflect the perspective I've gained. One, it's not just what decisions are made, it matters how they are made. Avoid legislating by crisis.
▶ 0:46:04When Fitch downgraded the US credit rating in August 2023, they cited two key factors. Expected fiscal deterioration and an erosion of governance. While the former was widely expected, the latter is relatively new. They said, quote, "The repeated debt limit political standoffs and lastminute resolutions have eroded confidence in fiscal management. In addition, the government lacks a medium-term fiscal framework unlike most peers and has a complex budgeting process." End quote.
▶ 0:46:31Two, market sentiment can shift quick can shift quickly and once perceptions have changed, it is tough to restore confidence. To protect against negative shifts in market sentiment, policymakers should minimize uncertainty and conserve fiscal space. Three, investors are not fooled by baseline games, manipulating budget windows, or phony offsets.
▶ 0:46:52When discerning the deficit impact of a bill, investors will boil changes down into their all-in impact on Treasury issuance this year, the next year, and in the future. An offset that scores well, but does not actually change Treasury issuance will not fool investors. Second, investors do not fixate on 10-year totals, so early sunsets are taken with a grain of salt. Third, adjusting baselines to achieve a different score will not change investor perceptions about whatever the policy change may be.
▶ 0:47:22In this fiscal context, when it comes to the TCJA, investors would be concerned if a current policy baseline is used to argue a policy change has no cost and therefore no fiscal restraint whatsoever is needed. In other words, it cannot be an excuse to not cut spending or not seek other deficit reduction. Four, demonstrate credibility on fiscal restraint. There is no better time than the present to cut spending or pursue deficit reduction.
▶ 0:47:48The spending cuts being contemplated in the House reconciliation bill are 1.5 trillion over a decade and amount to only 0.4% of GDP. The deficit is 6.4% of GDP. If Republicans cannot accomplish cuts on this scale now, what does it say about the ability of Congress to ever control spending and make difficult choices? It is easy to keep kicking the can down the road, but now is the time to demonstrate credibility to markets.
▶ 0:48:15Having said all that, given the scale of our fiscal challenges, no single party will be able to solve our budget problems alone. In order for solutions to be truly durable, it is important to ultimately pursue bipartisan reforms to entitlement programs and ensure their solveny for generations. Lastly, focus on growth, but balance fiscal objectives. Good tax policy is necessary to foster economic growth and robust economic growth is necessary if we're going to solve our fiscal challenges.
▶ 0:48:42However, good tax policy does not mean lower taxes by any means necessary. Resources are scarce and policymakers should maintain a tax reform mindset when deciding which policies to prioritize. This means pursuing growth, neutrality, and simplicity while balancing fiscal object objectives. Use this opportunity and framework to improve on the TCJA. Thank you, Mr. Snyder. We will now um yield five minutes to Mr. Lyndon for his opening comments.
▶ 0:49:13Chairman, um ranking member, members of the committee, thank you so much for my opportunity to be here today. Uh today, I'm going to make three points. First, the main culprit responsible for our weakened fiscal position is actually the series of repeated large tax cuts that primarily benefited wealthy individuals and corporations. Put simply, over the last 25 years, Congress has spent many trillions of dollars on unpaid for tax breaks.
▶ 0:49:39And that is actually the main reason why our debt is on an upward trajectory rather than falling. Second, if you're interested in efficiency and cost savings, this Congress is looking in the wrong place. The federal tax code is rife with loopholes, special subsidies, and giveaways that primarily benefit the wealthy and giant corporations with little or no discernable benefit to the public or to the economy.
▶ 0:50:03And finally, third, cutting Medicaid, cutting food assistance, raising costs of everyday goods, all to partially offset yet another round of massive tax cuts for the wealthy is both economically and fiscally reckless, as well as being morally indefensible. To begin with, the primary, if not sole, reason why current projections have the debt rising in perpetuity instead of falling is because of tax cuts.
▶ 0:50:29If not for the series of tax reductions enacted in 2001 and 2003, renewed in 2010 and 2012, and then added to in 2017, the debt as a percent of GDP today would be falling, not rising. We always knew that costs were in fact going to rise for social security and healthcare as my parents' generation entered retirement.
▶ 0:50:52And yet, even with those expected costs, the fiscal situation was projected to be stable and improving before all of those tax cuts were enacted. And as it happens, since 2000, spending on Social Security, Medicare, and Medicaid has grown more slowly than expected, not more quickly than expected. Despite this, our fiscal situation has in fact deteriorated as everybody has has testified.
▶ 0:51:18But that's because we are while we are spending less today than expected on those programs, we are generating far less revenue than was expected because of all the tax cuts. Making matters worse, a disproportionate share of those tax cuts have gone to very high income households. Across all of the tax cuts enacted since 2001, close to half of the total benefit has gone to the richest 5% of Americans.
▶ 0:51:44For a household in the richest 1%, their combined tax cut is roughly 45 times larger than any tax cut for a family in the middle. So that's why I find it so surprising that this Congress is seriously considering enacting yet another round of very expensive tax cuts that disproportionately benefit the wealthy. The first thing you should do if you want to get out of the hole that the previous rounds of tax cuts have created is stop digging.
▶ 0:52:11Instead, this Congress has passed a budget framework that would allow you to spend as much as 5.5 or 7 trillion dollars on tax breaks for the wealthy. And it's hard, frankly, to take seriously anyone who claims to care about the fiscal state of the nation while pushing a budget that would continue the pattern of reckless tax cuts for the rich that put us here in the first place.
▶ 0:52:32It's simply wrong to blame our fiscal challenges on the everyday Americans who rely on Medicaid or food assistance for basic survival needs instead of on the expensive tax cuts that have gone overwhelmingly to the rich and corporations. Instead of cutting programs that deliver real benefits to people uh like Medicaid does and are already those programs are already fairly lean, you should be focusing on the area of the federal budget that really is bloated with wasteful costs and counterproductive incentives for the wealthy and corporations and that's the tax code.
▶ 0:53:02Consider the 40% reduction in this corporate tax rate for in 2017 that has cost you $1 trillion already and is projected to cost many trillions of dollars more. Did corporations raise wages or create jobs or lower prices? They did not. They enriched their shareholders and their executives. That is a waste of a trillion dollars.
▶ 0:53:22Those are quick to scrutinize the choices of a poor family who gets $6 a day in food assistance never seem to get around to asking whether a giant corporation is doing what they promised to do with their tax break or whether they even needed it in the first place. The truth is that far too many Americans are struggling to make ends meet while those at the top continue to get richer and richer. And that's why most Americans agree that we should be investing more, not less, in supporting the most vulnerable among us.
▶ 0:53:52But right now, this Congress is crafting a budget that would do exactly the opposite. It would take health care away from literally tens of millions of people, and it would mean more hungry children. And at the same time that you're asking struggling families to make do with less, you want to to bestow another tax giveaway for the ultra wealthy. 70% of the benefits of your budget framework go to the richest 5% while 40% of Americans would end up paying more. And it would do all of this while making the deficit worse.
▶ 0:54:22That is a terrible policy mix. And it's no surprise that the American people strongly oppose it. It is perfectly reasonable to be concerned about the fiscal state of the nation. I am I appreciate this this budget committee's uh attention to it. If you believe that it is a crisis that requires urgent action, why are you not willing to give up even a penny of tax cuts for corporations and billionaires instead of cutting Medicaid or food stamps?
▶ 0:54:47What is not reasonable and is totally backwards is asking millions of struggling families to pay more while the rich in corporations pay less. I thank the gentleman for his testimony and uh we're going to now proceed to the Q&A portion of the uh hearing and I want to yield myself five minutes. Let me start.
▶ 0:55:12I wasn't prepared to do this but I think I need to set the record straight from some of the things that uh Mr. Lyndon said that I uh firmly disagree with and I think the facts would demonstrate uh uh that that in fact I'm I'm correct. Also set the record straight from some of the things my ranking member said. Let's talk about the tax cuts real quickly.
▶ 0:55:33Um the projected growth annual average GDP rate of 1.8% 8% by CBO is I think it's probably too rosy considering this the the the policies of the last four years and the spending when the Democrats had the opportunity for reconciliation um when we had a trillion unspent in CO there was another two trillion trillions altogether 8.5 trillion that's not including the 5 trillion in additional interest uh rate payments
▶ 0:56:03net interest costs that tripled under the president altogether we the uh inflation uh just completely ran away and was at 40-year highs. There was a cost of living crisis on the American people. Um contrasting that with the tax cuts, we had record corporate revenue. We had 6 million people lifted out of poverty.
▶ 0:56:29Um, you had wages increase by u amounts we haven't seen or or increases in over 20 years. Uh, the average family income grew by about $5,000. We had record investment, record repatriation. All boats rose on the tide of prosperity that was unleashed in part by progrowth tax policies.
▶ 0:56:53Um, I don't think my Democrat colleagues want to uh obstruct uh a successful extension of of the tax policies that gave us uh such um tremendous benefit. By the way, um the 10% or rather the bottom 10% wages grew nearly twice as fast as the top 10% and real wealth for the bottom 50% of households rose three times faster than the top 1%.
▶ 0:57:22And in fact, the top 1% share of taxes increased. Our tax code became more um uh progressive. In fact, we have the most progressive tax code I think among any uh developed country. Uh so I think it would be a huge mistake to raise on average $2,000 on every American by not extending the tax cuts. I think it would be a mistake to double the standard uh to cut the standard deduction in half.
▶ 0:57:51I think it would be a mistake to cut the child tax credit in half. I I think it would be a mistake to have 26 million small businesses not get uh a lesser tax burden relative to corporations and the 20% deduction that would in fact spur growth investment job creation and and and on and on.
▶ 0:58:13So I my argument is simply we need to recognize there are real costs associated um with tax policy that not all tax provisions are created equally in terms of their dynamic feedback. Uh and I think the bigger point is we need to grow debt to GDP as the metric of the fiscal health.
▶ 0:58:36We need to grow, but more than that, we need to rein in the spending that's driving us into a fiscal ditch that we may not uh ever get out of uh altogether. Now, the prices are down uh to some of the comments made by my ranking member. Job growth is strong. Core GDP is up.
▶ 0:58:58There were some challenges to GDP in the transition and I think admittedly so uh to getting to a fair and reciprocal trade dynamic which I think is critical for the long-term health of our economy. But um mortgage rates are down. Uh mortgage rates today in the last few months are down such that someone paying their mortgage over the life of the mortgage would save $32,000.
▶ 0:59:25So, um, we have a stronger economy in just a few months, namely because we've sent the signal that we're going to stop the crazy runaway spending and that progrowth policies starting with about $200 billion worth to date in just a few months, 100 days of lower regulatory burden on our small businesses, the the the job creation engine of this country.
▶ 0:59:51So, in my last seconds, I'm going to get to the topic of at hand, but I just feel like we have to keep everything down the middle here in terms of the reality of what we're experiencing. That doesn't change the fact that we're on an unsustainable trajectory. Mr.
▶ 1:00:06Winfrey, you talk about the fiscal space and you talk about how much time as we erode, I think the words are and I have them somewhere, but we're seeing the erosion of that space before we have a cliff effect, some sovereign debt crisis.
▶ 1:00:23Um, I think it was Paul Ryan that said it's either termites on the front porch, that's the sort of steady decline over years, sustained dependence, etc., etc., or the bear at the front door, which is the Greasel-like sovereign debt crisis. If you would, and I'm sorry I've gone over time. Would you describe how much space you think very quickly we have? And I hope at some point we'll move on from there.
▶ 1:00:47Somebody will describe what happens if we don't get our house in order and if we don't intervene in this uh historic moment. And when I say we, I mean Republicans at this point. Mhm. At some point it's going to be Democrats and Republicans at this point. What happens if Republicans don't do that uh that main thing to address the runaway spending? That's a great question. So I think that based on my own research that we have about 60% of GDP left in remaining fiscal space.
▶ 1:01:18So that's about in marketable debt terms about $18 trillion. Now that's not nothing. That's a pretty significant amount of fiscal space. The issue becomes is that if Congress continues to allow spending to be out of control and we were to have some crisis event like a another natural disaster like the pandemic or a war or a major recession, we're going to eat up that fiscal space very quickly.
▶ 1:01:46And to get to, you know, the former chairman Paul Ryan's, you know, hypothesis about what would happen, uh, I think that it's much more likely today than it was even 10 years ago that we're going to have a Greek-like crisis event than just a slow growth event because of the situation that we're in in the rate at which we are deteriorating fiscal space. I yield five minutes uh to the ranking member. Uh before I I be before I begin my remarks, uh I would like to submit two things for the record.
▶ 1:02:15The first is I have breaking news for us out this morning. A letter from the Congressional Budget Office uh dated today, May 7th. The new CBO analysis shows that several policies Republicans are considering for slashing Medicaid would lose to millions of people losing health insurance coverage. Without objection, just a brief uh description. The CBO analysis concludes that per capita caps for Medicaid expansion would result in 1 and a.5 million more uninsured people by 2034.
▶ 1:02:45It also shows the CBO confirms blocking provider taxes could lead to 3.9 million Americans to also lose coverage. Without objection, so ordered. Thank you, Mr. Chair. And then the second one is um a letter congressional uh CBO sent to me and to ranking member Palone.
▶ 1:03:08We have uh proclaimed loudly here that in the House Republican uh reconciliation instructions is an $880 billion target for cuts. The CBO confirms that by definition that would have to include the bulk of that would have to come uh from Medicaid assuming you're not touching Medicare. So I submit that as well. Without objection. So ordered. Thank you.
▶ 1:03:34Now let me just be clear to uh to continue the debate that um that the chair uh mentioned in in his remark. It's not my figures that showed the economy contracted last quarter. It's the Department of Labor figures which last time I checked ultimately report to the president of the United States, Donald Trump.
▶ 1:03:56It is government figures that show contrary to what anyone was projecting three months ago, this economy contracted by 0.3% in the first quarter. It is also the government's own figures showing that prices jumped dramatically from the low 2% range to 3 and a.5%. Those aren't my figures. Again, those are let's call the balls and strikes as they are, not as we wish them to be.
▶ 1:04:23Furthermore, the Yale Budget Lab, which does tremendous work, they have released a projection showing the average American family will lose $4,900 from President Trump's price increases. That is one hell of a tax increase on the average American family. Mr.
▶ 1:04:44Lyndon, can you talk um I know you're not with the Yale Budget Lab, but can you talk about who is actually paying the uh brunt of these dramatic price increases and what that will continue to do to our economy? Yeah, absolutely. And I'll just emphasize um you don't need to look at government statistics necessarily to know that things are not going well in the economy. Consumer confidence is way down.
▶ 1:05:08Um I I think at at uh and also CEO level surveys show a record low confidence uh the likes of which we haven't ever seen before and the survey goes back decades. CEOs and also small businesses have reported uh that they are seeing uh they are concerned about the direction of the economy. That is all flashing red uh signs and we really should be very concerned about that.
▶ 1:05:32Um, and you're absolutely right, uh, Congressman, the the ultimately these acrosstheboard tariffs are taxes on imported goods that Americans pay, uh, fundamentally they pay those taxes. Now, you can uh talk about the purpose of the tariffs all you want, but at the end of the day, when you're asking regular everyday people to pay more at the grocery store and for uh everyday goods in order to help finance a tax cut that is going to corporations, many of whom are shipping jobs overseas.
▶ 1:06:02I think most people would say that is a bad use of tariffs. That is a bad use of asking people to cut back while the wealthy and corporations get another tax break. It is a remarkable continuation of 40 years of Republican trickle down economics. Big tax cuts that mostly go to the top 1% and part of the revenue lost revenue is made up for tariffs that are mostly paid by average households. That's exactly right. That's exactly right.
▶ 1:06:28And I do want to emphasize there is literally no We've tried tax cuts for rich people. We've done it over and over again for many years. There is no evidence whatsoever that it ever trickles down to anybody else. In fact, we have evidence from the 2017 tax law that just that passed that corporations that received a tax cut did not raise wages for their workers for the bottom 90% of their of their workers. They did raise wages for their executives. That's true. So, there was a wage increase for corporate executives. There were more share buybacks.
▶ 1:06:59There was no price reductions. There were no more job created jobs created. They did raise wages for their executives. So, if you want to call that an economic success, I suppose you can. Let me uh in the time I have remaining, let me actually pivot to an area where we actually might have uh some agreement here, especially consider Mr. Schneider's remarks and and yours, Mr. Lindon, and perhaps from some others. Current policy baseline. You heard my remarks uh about it in in my opening statement.
▶ 1:07:28Um can you please uh address that? Sure. Um, and I attempted to explain it with the brownie analogy, but if you would like to uh elaborate on that and just what it is, which is a total and complete fraud. Absolutely. And and this is an area where I I want to associate myself with my colleagues comments and with the chairman's comments um and actually give some praise.
▶ 1:07:51Obviously, I had a lot of criticism for this this budget resolution, but this body, the the House, passed a budget resolution that accepted the simple fact that extending and creating new tax cuts over the next 10 years will indeed cost trillions of dollars of of of money and that will increase the deficit. You did not use a current policy baseline gimmick. You did not um you did not uh uh take that easy path to pretend that those costs aren't there. I want to praise you all for voting for a budget resolution that was clear and honest.
▶ 1:08:21Five half trillion, sorry, four and a half trillion dollars of tax cuts do cost money. And I think I want to associate myself with with uh with Mr. Schneider that the the markets will understand that common common sense Americans will understand that it it costs money. And now you can decide you want to pay for that. Uh you could uh scale some of those back, but they definitely cost money and they will increase the deficit. Thank you. Yeah, yel back. I now recognize uh the gentleman from South Carolina, Mr.
▶ 1:08:50Ralph Norman, for 5 minutes. Thank you, Mr. Chairman. Want to thank you all for for appearing and uh Dr. Ry, thank you for your hard work on what you've done with putting verifiable numbers up. Um you know, it's just a overall disagreement with with my friends on the left. They think tax money is theirs.
▶ 1:09:09When you look at what the Doge Commission has found in waste and fraud and abuse, which would have never happened the last four years or particularly under the Obama administration, uh, this president has found last week the Treasury went live with an automatic payment verification. They found 334 million in improper payments had missing codes uh, and and no type verification at all.
▶ 1:09:33Uh, the Center for Medicare Medicaid Services uh, found that 2.2 two million in genetic testing to patients who confirm they never received the test. The list goes on and on. Dr. Renfrey, you mentioned that um the uh the between the 2020 and 2023 76% of new federal spending with issuance of bonds. The other 14% was basically printing money.
▶ 1:10:00Um, walk me through when this if we don't follow through on the minimal amount that we that the House voted on with Republican support only sent to the to the Senate uh with the 1.5 trillion minimum cut, two trillion uh aspirational goal. Walk me through what happens uh when we hit the wall with debt if we fail to deliver on anything that we promise American people. Thank you very much. Good question.
▶ 1:10:29Um, first of all, let me just commend this committee on having actual discussions about trade-offs. I mean, this gets back to the current policy versus current law baseline discussion, but there's been a lot of hard work done by this committee over the past year that has really set you all apart from uh you know, and I I say this with great pain as a former senior staffer on the Senate budget committee uh from the Senate um where you know, they they're just they're just behind they're behind the eightball.
▶ 1:10:59I think that the it's it's hard to predict what will actually happen, but but looking at other examples from other countries that have hit similar walls, one thing that we know will happen with a flood of debt is that if demand for debt goes up but the or excuse me, the supply of debt goes up but the demand for debt doesn't follow it, then ultimately the price of debt will have to go up because Treasury will have to h have to offer higher prices or higher interest rates
▶ 1:11:29to get people to borrow our debt. What that will do is it will uh inspire investors to invest in treasuries because they're getting a high price or a high interest rate for that which will crowd out private sector borrowing. And so what we will see is investment in the public sector activities.
▶ 1:11:47All of the things that you know I I you know even the things that that folks uh can agree that the federal government should be doing that will become much harder while at the same time you know the price of mortgages the price of credit cards uh the the price of a car payment all of these things will become much more expensive because all of the all of the investors cash will be flowing into into the federal government to pay to pay our debt service.
▶ 1:12:11And that's unsustainable because it triggers this cycling effect where the interest rates just keep getting higher and higher and higher because the debt service costs keep growing. And what effect on the interest rate that we're paying on the debt, which is now more than our military budget of 890 billion dollars, approaching that when that goes up, what's what what signal is that going to send to the bond markets and to uh to those who are buying trying to buy our debt and to the manufacturing that we're trying to get back in this country.
▶ 1:12:40What message will that send? I think that the average interest rate that the federal government pays right now on debt is around 3 and a half% something like uh if the interest rate goes up by 1 percentage point, it will increase costs that the federal government has to bear by about 3.3 trillion over a 10-year period. So more than $300 billion a year. And so, you know, if we're talking about a world in which those interest costs are five, six, 7%, the debt service costs will will explode.
▶ 1:13:11And and again, that makes it harder for everybody to borrow, even folks who are, you know, trying to open up a small business in the private sector. It's going to be a dead stop, a dead stop for the economy. And if we don't do it now with reconciliation, I don't know when we are. Uh I hope we will take the challenges even with particularly with Medicaid. It's not cuts, it's rearranging an inequity that should been should have been done years ago. If you're illegal, you should not get a check from the federal government. If you don't work, if you're healthy, you should not get a check to the federal government.
▶ 1:13:41And that's what that's where we're facing now. And we've got a barrage of negative criticism from the media. We've got to stand tall and have the courage to do it. Thank all of you for coming. I thank the gentleman from South Carolina. And now recognize my friend from Texas, Mr. Lloyd Dog. Well, thank you, Mr. Chairman. Our soaring national debt uh represents the number one threat to our nation according to Speaker Johnson and it is a time time bomb according to the Senate Republican leader. You've just told us this morning, Mr.
▶ 1:14:11Chairman, that it is a dire we're in a dire state rapidly in decline. And so what is the Republican answer to this situation? Well, there appears to be some division about how to respond to it. And the division uh is over the highly misnamed big beautiful bill. And the question is not whether to contain the debt, but by how many trillions of dollars to make it worse.
▶ 1:14:35The Republicans are determined to increase the size of our national debt by trillions of dollars. They're not saying how we reduce it. They're saying how we expand it. And the the budget that came out of this committee is designed to do just that. Also, Elon Musk and Trump's other billionaire buddies can get more tax breaks. Of course, we've already had this very year a tax cut because the president's top trade adviser, Mr.
▶ 1:15:04Navaro, and his official White House spokesperson has told us that tariffs are really a tax cut. And while this is total nonsense, I've yet to hear one Republican dispute it. Unfortunately, they're in a cult that the role of Republican Congress members is mainly to parrot whatever nonsense comes out of the White House.
▶ 1:15:25And I'm sure that the tax breaks coming from this big, beautiful bill will do just as little to help most working families as the alleged Trump tariff tax cut has done for them. Unfortunately, Republicans seem to have been denying themselves any free will. They're locked in bondage to an autocrat who has boasted that he is the king of debt. And indeed, he is.
▶ 1:15:48And as Trump's tariffs wreck our economy and imperil so many small businesses, a number of which, if he maintains his current policy, will fail this year in my area and across the country. The cost of this debt financing will soar.
▶ 1:16:03Uh the testimony we've heard this morning from the Republican witnesses is correct that we are already over $1 trillion in interest payments and we're headed toward $2 trillion particularly given the cost of interest going interest rates going up as a result of Trump's failed economic policies. We're faced with choosing between fiscal responsibility and more tax breaks for billionaires. And Republicans always go with the billionaires.
▶ 1:16:32They have an insatiable drive for more tax breaks. Their insistence as well on protecting tax cheats has already cost us billions of dollars. And this all instead of our doing what is necessary to contain the debt that we already have. Imagine that this committee actually sent an instruction to the Ways and Means Committee on which I and the chairman serve to raise the debt by$4.5 trillion dollars.
▶ 1:16:59That's the instruction and the guidance in response to all the expressions of grave concerns that are occurring here. And as for Trump and Musk Doge, it's been little more than a charade to create the illusion that their attacks on federal initiatives they don't agree with are going to help pay for tax benefits for the ultra rich.
▶ 1:17:21Doge has failed to identify one single case, one case of fraud that it would submit for prosecution, as they should if they found any fraud. And while it certainly wrecked a number of valuable programs, it is yet to generate genuine savings. Indeed, there are some analysts who say it will ultimately cost more because of Musk slash and burn approach than it saved, if it saved anything.
▶ 1:17:46If this Congress wanted to put Social Security and Medicare and other vital investments on a sound financial footing, uh Mr. Lynon, what action do you think we should take? Um, thank you for that question. Look, the the bottom line is that we have been cutting taxes uh mostly for wealthy people and corporations for the last 25 years and it is the primary reason that we have a deficit uh projected debt to increase. I want to repeat what I said earlier.
▶ 1:18:15If we hadn't done those tax cuts, even with the increases in costs associated with the retirement of the baby boom generation, we would be on a stable and declining debt trajectory right now. So, if we want to shore up those the finances of those programs and make good on our commitments to America's seniors, people with disabilities, America's veterans, we the first thing we should do is stop cutting taxes for rich people and corporations. It's it is baffling to me. But they always claim that those tax breaks will pay for themselves, although the evidence clear they don't.
▶ 1:18:45This time it will. I'm sure has never has before, but I guess this time it maybe it will. I I don't think that's going to happen. And then what you end up with is a few years later we have another hearing like this where we complain about why the debt is so large and nobody ever talks about the fact that we've been spending trillions of dollars every year on tax breaks that go mainly to the wealthy and If you want to reduce the federal deficit and you want if you say it is a major crisis and it's a it's a concern, a number one concern, the top concern, uh maybe
▶ 1:19:15don't do a budget that increases the deficit by giving tax breaks to wealthy people and corporations. Thank you. Thank you, Mr. I thank the gentleman from Texas and now yield five minutes to our friend from California, Mr. McClintto. Uh thank you, Mr. Chairman. For four years, I unsuccessfully warned my Democratic colleagues that you cannot spin the economy. Every person knows exactly how the economy is doing their own lives, and any politician who tries to tell them otherwise just looks foolish.
▶ 1:19:46The Democrats tax, spend, regulate, and waste policies led to a four-year decline in real wages. And no matter how they tried to spin it otherwise, people knew better. Now, that same warning applies to our side of the aisle. The only economic indicator that matters is how Americans answer this simple question next year. Are you better off today than you were two years ago? We can't answer that question for them.
▶ 1:20:12All we can do is put in place the policies that will produce a noticeable improvement in their quality of life. And I think we will. Uh Doge has revealed the staggering amount of sheer theft of public resources going on just below the surface of our government bureaucracies. And this has to stop. The sooner we can stop the thieves, shut down the scams and recover the hundreds of billions of dollars of taxpayer money with recisions, the better.
▶ 1:20:40The Biden socialists impose nearly two trillion dollars of regulatory burdens on the economy, driving up costs and suppressing productivity. Those have to be rolled back. And they are. By opposing extension of TCJA, the Democrats are advocating the largest tax increase in American history. That will take another $1500 a year in annual taxes from a family that earns just $75,000 a year. Republicans have to stop them.
▶ 1:21:10And while we enact additional tax and spending cuts, and that's what the reconciliation battle is all about. For four years, the Democrats facilitated and encouraged the largest illegal mass migration in history, gleefully admitting 8.5 million unvetted and impoverished illegal aliens into our country, costing American taxpayers 160 billion dollars a year to support, and flooding the labor with cheap illegal uh flooding the labor market with cheap illegal labor,
▶ 1:21:40which suppressed family wages. This is all coming to a screeching halt. And then finally, we have the trade situation. And we need to be very clear on this. Tariffs hurt the economy of whatever country imposes them. There's no way around that. Their only justification is to leverage trading partners to lower their trade barriers, benefiting both countries. I hope and pray that this is the direction the president's heading.
▶ 1:22:06If he isn't, it will be one of the most tragic acts of self- sabotage in recorded history. But if he is, then we could see within a few months the beginning of a new age of global free trade and the explosive economic growth that that can produce. A few weeks ago, I told him the sooner we could start getting recision bills and bilateral free trade agreements, the better. And he said he wanted to send us a lot of both.
▶ 1:22:31spending restraint and frugality, $2 trillion of regulatory liberation, tax relief to give families breathing room again, an end to illegal immigration, its enormous cost to taxpayers and working families, and a new era of global free trade. These are the policies that we have to have in place by summertime. If we're successful, then within a year, I think we could see uh the greatest economic expansion in recorded history. Republicans uh won't need to spend the economy. every family will be feeling it.
▶ 1:23:01And that's what I think the Democrats fear most. Now, Dr. Winfrey, the Democrat witness told us that the source of all of our fiscal uh distress were the Trump tax cuts. But three figures seem to put the lie to that claim, 46, 64, and 94. In the last 10 years, we've seen a 46% increase of inflation and population combined. We've seen a 64% increase in revenues after the Trump tax cuts.
▶ 1:23:30So revenues far exceeded inflation and population growth combined. The problems isn't the problem. The third figure 94% that was in the increase in spending in the same period and the Democrats are telling us just do more of that. What is what are your thoughts? We've had different tax systems since the end of the Second World War. Right. So in 40 years ago 55 excuse me the top 20 uh percent of income earners paid 55% of all federal taxes.
▶ 1:23:58In 2020 it was about 80 uh that top 20% paid about 84% of all taxes. So the tax code has become more progressive over time. At the same time the top rate has has decreased significantly since the end of the the world war where it was in the 70s in the 1950s. Uh it's much it's much lower uh today across the board.
▶ 1:24:19Um, and despite those different tax systems, we've raised about the same amount of revenue, about 16 to 20% of GDP, depending on how much the economy is growing. And that's because it's impossible to design a revenue collection system that grows revenue on an annual basis faster than the economy can grow. At the same time, there are spending programs and in including Medicaid, I mean, I mentioned it in my testimony that have grown 45 uh grown faster than GDP in 45 of the last 59 years.
▶ 1:24:49That's the problem, right? We have these structural uh inequities within this within the spending system that are that are that are pushing spending growth higher and higher and higher every year. And at the same time, it's it's impossible to design a revenue collection system that grows faster than the economy. So, so in four words, it's the spending stupid.
▶ 1:25:11I I thank the gentleman for uh unparalleled clarity and and uh can and succinctness. And now ask that our friend from California, our other friend from California, Mr. Scott Peters, uh take over for Q&A for five minutes. I won't tell them you have friends from California, Mr. Chairman.
▶ 1:25:34Um, so I mean I kind of laugh about this big the the the big ominous tax increases that Republicans fear and warn of, but it's what they wrote into their bill in 2017. They wrote these tax increases into their bill that um not all of them would go back up, but some of them would go back up because they knew it costs money to do these tax these tax decreases.
▶ 1:26:01they were they weren't playing by the rules of the Senate where uh they had some sort of current policy baseline pretense that it didn't cost money to give up revenue. And I I want to just say um it's not the Democrats who fashioned this tax increase that's in law today. It was the Republicans who did it in 2017. Um the corporate rate, I understand, will stay at uh is the the the reduction is permanent. I always thought 35% was too high.
▶ 1:26:29All Dave Camp ever asked for in the Ways and Means Committee was 25%. It went to 21%. I think that's about $400 billion a year. Um extra revenue that we lost. Um but the individual rate would go I now under the Republicans plan would go from 37 up to 39 a.5%. Um um I'd ask the the gentleman um Dr. Rush, Dr. Ralph, I'm sorry.
▶ 1:26:58Um, in your testimony you say letting the law expire, offsetting its effects through other tax hikes would stifle investment in consumption. Do you believe that the if the marginal tax rate went from 37 to 39% the top rate that that would stifle investment in consumption? Yes, I do.
▶ 1:27:19Um, and that uh belief comes from my research on what happened when California raised its top marginal tax rate on high earners uh by 3 percentage points. And it's not, as I mentioned in my uh remarks, it's not so much the uh people who are leaving California that are driving these economic effects, but the people who are staying in the evolution of their taxable income. But do you have modeling on that particular number? 30 39% that's going to stifle investment.
▶ 1:27:49I have modeling on the research that I mentioned. And what was the top rate in the 1950s when Paul when Mr. Winfrey said uh there's so much growth? It was 90%, wasn't it? With a with a with a very narrow tax base that had so many deductions that it the average tax rate was was was similar. You know, I just want to respond. It seems to me No, I I'll just I only get five minutes. So, I would just say it seems to me a little bit um ridiculous that that we should object to what Republicans wrote would happen.
▶ 1:28:17a 2 and a half% slide. And I think also the pain that people will feel, the millionaires will feel from paying 39% and a half uh rather than 37. Uh you also have to consider the fact that Republicans aren't going to make these cuts, folks. They're not going to do it. Um you know, we're talking about um not we're not talking about making $2 trillion of cuts to the annual deficit here. And the Senate, I think, literally talks about less than $10 billion of cuts.
▶ 1:28:46They are not going to make the cuts that you gentlemen say we need to do. And the other thing I think we should keep in mind is if they made those cuts, they wouldn't be applying them to reducing the annual deficit. Every year we're now borrowing $2 trillion just to pay our expenses. No household or small business would do that. But that's what we're doing. And that's why the debt goes from 36 to 38 to 40 to 42.
▶ 1:29:12And we, no one in this room is doing anything about that annual borrowing. It is not the spending. It is the borrowing, stupid. It's the borrowing. And um the the the the comment that um Mr. Schneider made about normal spending.
▶ 1:29:29We had testimony in here before that yes 17% is the historical uh some some what you said some about that was the historical amount of we take in but because of demographics what we have to pay for is a lot more expensive and at the end of the day we are either this is just common sense which is what Republicans like to talk about we're either going to have to raise taxes and probably on rich people or that cost is going to fall to our children and our grandchildren. It's going to be the middle class.
▶ 1:29:58And the pain, I think, of paying a little bit extra taxes by people who can afford it has to be offset by what we're going to see in terms of inflation. How much more difficult it is going to be when all that uh debt is competing for private investment to start a business or to buy a house. Those rates are going to stay low. Um and uh what this going to do to job creation here. So, um I think we need to get real here. I I I do want to say I congratulate the chairman. I think he honestly is committed to this.
▶ 1:30:26Um he does not want to play games with uh current policy baseline. He wants real cuts. But even he will not be able to lead these Republicans to make the cuts you say we need. And that gap we need to close. And I yield back. I had hoped that my friend from California had more faith in in me. Um but we're sure going to push our conference like our country's future dependent on it.
▶ 1:30:53I thank the gentleman for his comments and now recognize my colleague from the great state of Texas, Mr. Chip Roy, for five minutes. I thank the chairman. I appreciate his leadership on this issue. I thank him for holding this hearing and I thank for the witnesses for uh appearing. Mr. Lynon, uh would you agree that we should, for example, uh you mentioned subsidizing uh folks through the tax policy earlier in your testimony? Do you think we should end the subsidies that are in the inflation reduction act that go to 90% of which go to billion dollar corporations?
▶ 1:31:22I think we should end subsidies that don't pay off for the American people. Right. So, do you think we should end those subsidies? Those subsidies create thousands of jobs. Well, that's that's your So, your point is you're fine subsidizing billion-dollar corporations that take away the ability for the American people to be able to compete and have affordable energy and that subsidize the Chinese to put solar panels on the Hill Country and put battery plants in the Hill Country, which are destroying our water supply.
▶ 1:31:45and you're fine doing that, but then you want to come here and lecture us on how we're subsidizing the rich, but we're subsidizing billion-dollar corporations with leftist policies under the Inflation Reduction Act. Mr. Winfrey, let me ask you a question. The chart behind me here shows uh what we're arguing about in the reconciliation bills. Here's where we are in our total debt. Here's where we're going to be in total debt from 2024 to 2034 over the 10 years.
▶ 1:32:10this bottom line here, you got you've got the baseline, current law, and then you've got where we are in the House budget, which is roughly the same because we are striving for deficit neutrality in the House budget. Here's what we deal with here. If you deal with the fact that we get savings or if the interest goes up, my point is just this. Even with the House budget, which my Democratic colleagues decry, are we or are we not still sitting at $56 trillion of debt in a decade? We are.
▶ 1:32:38Is that any way for this country to be able to survive if we're going to be barreling towards 56 trillion dollars of debt? No. Are we arguing essentially over crumbs on both sides of the aisle right now? Yes. Right now, how much is our interest per year? A trillion dollars. About a trillion dollars. Is it going to go up massively if we're refinancing our debt at 5% historic rates instead of the current CBO projection of three and a half%. It could triple.
▶ 1:33:05So right now, the Congress of the United States, both sides of the aisle, is gagging overnats on the other side of the aisle, sitting here and lecturing us on tax policy, telling us what's going to happen if we change the top marginal rate. If we let the top marginal rate snap back into place from 37 to 39.6 under CBO's projections, what is that? About 375 billion over 10 years, 350 billion over 10 years. Sure. So 35 billion a year. Maybe we should do it, maybe we shouldn't.
▶ 1:33:33whatever it's crumbs compared to the trajectory of the country. Is that true? Right. And what is driving the trajectory of the debt in this country? Is it the fact that a decade ago we had about $3.5 trillion of spending? 3.6 trillion in spending. And today is the spending is what about 7 trillion? Spending has has grown tremendously. Has it roughly doubled in the last decade? Yes. And and what is one of the primary drivers of that? Uh inflation. Yes. Inflation is a big part of it has been but a huge chunk of it are the policies that we're choosing.
▶ 1:34:03Correct. That That's right. And the policies also drove the inflation. Correct. And is Medicaid a key part of that issue? Yes, Medicaid's a a major part of the issue. Has Medicaid gone from 400 billion in 2019 to over 600 billion in 2025? Yes. Is it projected to be over a trillion by the 2030s? It is. Is that something that is funded by any tax or is that straight up out of our entire general revenue? It's out of Treasury general revenue unlike Medicare or Social Security. Correct. That's right.
▶ 1:34:32Are we not through Medicaid currently subsidizing the able-bodied massively more than we are the vulnerable for whom Medicaid was actually designed to serve? We are. Are we doing that at a 90% federal level instead of a 50 to 70% level that we currently do for the vulnerable? That is the able-bodied get 90% 90 cents on the dollar. the vulnerable population, the poor, the people who hurt, the people for whom Medicaid was created, they get 50 to 70 cents on the dollar. Is that correct? That's right.
▶ 1:34:59For every dollar that states spend, they get $9 for the able-bodied and for every dollar they spend on the vulnerable, they get a $133. Is there also not a provider tax that is applied that is then essentially money laundered through where federal dollars go to then pay those people back that are taxed in states like California and then those states openly brag about money laundering that federal money to give money to people and put it in their general budget and to give money to say illegal aliens. The provider tax is a is a is a major scam as former President Joe Biden called it. Correct.
▶ 1:35:29Can we fix this country if we do not fix the 30% of the current total economy that is directed towards our uh health care system? We cannot. Can we possibly balance the budget if we do not address the fact that Medicaid is bankrupting us through our uh spending that we've increased over the last decade and that it's exploding due precisely to Obamacare expansion where the able-bodied are getting subsidized at 90 cents on the dollar compared to the vulnerable population.
▶ 1:35:55Is it possible to balance the budget and get our fiscal health back if we don't responsibly address that? It all comes back to the healthcare entitlements and the one that we've seen grow the most over the last four years, $1.2 trillion over a 10-year period is Medicaid. Thank you, sir. I yield back. I thank the gentleman from Texas and and recognize uh our colleague and friend Jimmy Petta from California for 5 minutes. Thank Thank you, Mr. Chairman. I appreciate that. And Mr. Roy, I appreciate what you had to say about the debt and deficit.
▶ 1:36:24Uh however, I'm sure when it comes to Medicaid, I think there are plenty of Republicans who will have a lot to say in your discussions coming up here. Mr. Chairman, I I appreciate today's hearing. Uh obviously, I think it is an important topic that you that I that many of us have been outspoken upon in regards to basically placing our country on firmer fiscal footing.
▶ 1:36:46That is why I'm concerned with the majority's reconciliation bill that there are estimates that are out there uh legitimate estimates that would that it would add up to 6.9 trillion to the debt. And as many of you have noted in your testimony, our fiscal situation is already unstable. The national debt is at a staggering 36.2 trillion and we're already running a 1.3 trillion deficit just this fiscal year.
▶ 1:37:15The payments that we ma that we make annually on interest to the debt are $1 trillion a year. It outstrips spending on defense, as we heard earlier today, education, and Medicaid. We are having to pay down our old debts rather than investing in the future of this country.
▶ 1:37:32Now, the 2.8 8 to 6.9 trillion of debt that the majority proposes in the reconciliation bill could drive up interest rates as well and make everything from the cost of home ownership to the cost of businesses more expensive. A budget lab at Yale calculated that the deficit increase caused by the unpaid extension of the TCJA could increase the cost of the average mortgage by $600 to $1,240 a year.
▶ 1:38:00the use of the baseline funding that ranking member Bole talked about. It is dangerous not just this time but in the future and not just by the Republican side but it could be very dangerous by the Democratic side as well as ranking uh member Bole talked about. The trajectory has only gotten more grim since this administration has taken over. Just last week, the Treasury increased its borrowing estimate for the next quarter by 317%.
▶ 1:38:28As my good friend Scott Peter said, it's the borrowing stupid. They now expect to issue 514 billion in net marketable debt from April through June. And while it's true that the debt can be more manageable with strong growth, this administration is inflicting the very policies that will kneecap growth. Our communities are reeling from the self-inflicted economic disaster that is the tariff policy from this administration.
▶ 1:38:55The stock market has fallen since inauguration and the latest reports now show that GDP is going to by.2%. Instead of saving money, DOA's chainsaw approach has crippled the agencies that support education, medical research, and small businesses. The chaos and uncertainty could cost our taxpayers 135 billion. This is not the time for a reconciliation bill that would add as much to deficits as all the borrowing for CO.
▶ 1:39:22We need to write this ship, not sink it with this debt inflating reconciliation bill, no matter how big that will add to our debt and deficit. Now, the figures underpinning the budget that this committee passed rested on the assumption that the economy would grow by 2.6% over the next decade. However, the most recent GDP report showed a 2% decrease as I mentioned in economic output.
▶ 1:39:52The CBO estimated estimated a 1.8% growth in GDP output over the next 10 years. Mr. Lynen, given these figures, is 2.6% economic growth realistic? Probably not. Why not? Probably not. uh certainly not with the economic policies that have been uh enacted so far and that are planned to be enacted. And I do think it's important to zoom out for a moment and remember what we're talking about here.
▶ 1:40:20We are talking about a budget that would take health care away from uh up to 10 million people as the CBO confirmed this morning uh to finance tax cuts for people at the top. Uh former member uh the member uh from Texas just you know called it crumbs. It's not crumbs to the person who is trying to make their way in the world and has relies on Medicaid to feed their family to keep health of you know to take their kids to the doctor.
▶ 1:40:46And we also talked about the going from 37% to 39%. It was only 300 or 400 billion over 10 years. Well, that's more than your budget that this budget is proposing to cut from food stamps. So maybe instead of taking food out of the mouths of hungry children, you could ask millionaires to pay 2% more on their income above $700,000.
▶ 1:41:11That's not crumbs uh to those to those families who are relying on food stamps and Medicaid to make ends meet. Understood. Thank you, Mr. Lynon. Gentlemen, thank you as well for being here today. Mr. Chairman, thank you very much. I yield back. I thank the gentleman u from California and now yield to my friend vice chairman of the committee uh from Pennsylvania, Mr. Lloyd Smucker. Thank you, Mr. Chairman. I'd like to thank each of the witnesses uh for being here.
▶ 1:41:39Um, you know, we have a lot of conversation um back and forth between the parties on uh on this topic and uh I'm always encouraged to hear that uh each side recognizes that we really do have a problem. Uh or at least they say so as well. Um that we know that uh the debt today or the interest is a tr trillion dollars going to go to two trillion. I heard um Mr.
▶ 1:42:08Do mentioned that fact. Um, and then it sort of breaks down there. We can't have a real discussion around how we're going to resolve this. And that's really really disappointing. And now I I'll give credit to a few members uh on the other side, Mr. Panetta and Mr.
▶ 1:42:26Peters who voted for uh I think it was just the two of them who voted for a um debt commission a fiscal commission that I think is absolutely critical to to have the kind of conversation with the American people about exactly where we stand. So I I do applaud them for that. But I want to I want to mention I want to go to something that Mr. Peters had just said when he was in the discussion with you Mr. Ralph.
▶ 1:42:50He he asked the question whether increasing taxes affects economic activity essentially that was the question and the answer is certainly yes otherwise let's just make the tax on the top earners 100%. If it doesn't impact economic activity well we all know that's that would be completely unworkable economic activity could stop.
▶ 1:43:14So the point I'm making is there is an optimum tax rate that uh drives a strong economy that encourages investment and growth but then it also uh pays for the core functions of government that the American people um expect from their from their government.
▶ 1:43:36And I would I would say that Americans probably or or so maybe they aren't but should be if they really understand what we're facing willing to ensure that the two match that our revenues and what Americans expect from the government from the government match. But I can tell you this, when I talk to people in my district, they sort of as a hunch understand that the government has grown way out of control.
▶ 1:44:06It's why they like what DOJ is doing, by the way. Uh where we literally are finding that there's much more waste, even fraud, like people ripping off the American taxpayer. Uh and people have always suspected that would be the case. They also think the federal government is bloated. We're spending far too much. That's I think the point I want to make here. Um and either Mr. Winfrey, Mr. Row, you could answer this.
▶ 1:44:30My understanding is that revenues generally throughout our history have been roughly 17 18% of GDP. Does that sound right or at least throughout the last 50 years? 30 years. Last 30 years. And how much has spending increased during that time? Spending averages 21.1% of GDP over the last 30 years. And it and it's currently 23.7%. So so cup two and a half 2.6% of GDP higher.
▶ 1:44:57And so that that that just goes to show you know all the all these claims that oh the problem is that we don't have enough revenue. That's that's not correct. The problem is that spending is increased. Yeah. So it's clearly if you'll see it on the graph and uh Mr. Royy's graph was great, but if you graph uh revenue even after the tax cuts and jobs act is essentially 17 18% of the economy and spending is doing this and so when I talk to people in my district they clearly understand that we do have a spending problem.
▶ 1:45:27Then I want to make one additional point. Um, Democrats talk about the Republican tax bill as a tax cut for the rich, but this isn't quite true, right? uh if we allow tax cuts, the the tax uh cuts to expire at the end of 2025, we will see a tax increase for almost every American, certainly at every tax bracket.
▶ 1:45:55And we'd see a tax increase for every uh small business that are really the lifeblood of our community. They're reinvesting back into their companies, employees, their communities. Um, and in fact, the tax increase would be at a higher percentage for middle-income Americans and lowincome Americans than than than the top rate. Am I correct on that? No, that's incorrect.
▶ 1:46:20The average tax cut for people at the very top was uh so the average tax cut for somebody into.1% is roughly $300,000 a year. The average as a percentage of their tax as a percentage of their income, it's about 3% of their income. Whereas somebody uh in the bottom 40 well in the bottom 20% the average was basically zero almost they got almost nothing. Somebody in the middle maybe got 1% but as you uh as you correctly interpret correctly said many people in the middle got nothing. Some people actually ended up paying more.
▶ 1:46:50It's not true that the uh the tax increase would be much uh more significant for people. Sorry Mr. Do you agree with that? So in in general there was about a 1%age increase in after tax income across the board. It depends how you account for corporate income taxes. I have the distribution table from the TCJA in front of me. If you look at it, um the actual share of federal taxes paid by people earning over $1 million was 19.3% before the TCJ and it was 19.8% thereafter.
▶ 1:47:18That means people at the lower end of the spectrum got a tax cut that was disproportionately large relative to the amount they paid which is smaller. Those are the charts I've seen as well. Mr. London, their income, this is my time. This is my time. You asked about the share of income and the share of taxes paid and the share chairman order. Listen, we're going to let the uh vice chairman uh control the time. If he directs a question to you, we'll give you ample time to answer it.
▶ 1:47:48So, and which I did in in this time as well. I do not have for the record, but I'll be glad to share it with the committee later. I've seen charts that showing that disproportionately we we provide a greater benefit to in middle inome Americans and certainly those at the lower end of the scale.
▶ 1:48:04And the point I want to make with it is is this Democrats by not supporting the extension of the tax cuts are increasing taxes at a higher percentage rate on middle-income Americans and lowincome Americans and on every small business across the country. I think it's important that that be said. I wish we could get together and have real discussions because we have a serious problem uh going forward. We have to get to the point of being able to do that. Thank you, Mr. Chairman.
▶ 1:48:31I I will be generous with our Democrats on time as well to uh five minutes to our colleague uh Bonnie Coleman from New Jersey. Thank you, sir. It's Watson Coleman. I worked very hard for I was blessed to be born with the first Watson and I worked hard to get the second name Coleman. Well, I'll I'll bless you right now with a restatement. Miss Bonnie Watson, you can also bless me by taking the clock back to Fi. Thank you. I will give you uh uh all the time you need if you want to make your Yes, sir.
▶ 1:49:01Um thank you very much for holding this hearing. You know the the title of this hearing is uh the fiscal state of the nation. And as I have been observing and and reading and learning, I think that the state of our fiscal state is one of chaos, uncertainty and um surely moving uh to fail all of those either domestically or internationally as it relates to this country.
▶ 1:49:29I want to associate myself with uh ranking member Bole's remarks on um three months of this economic uh chaos and what the Yale report says and what the CBO says.
▶ 1:49:42I because I believe that uh we are hearing inaccurate flouting of a budget of a state of being for this country that doesn't exist and I think that uh Doge has a big part in having us misunderstand where we are. Bo doge was supposed to cut efficiency and effect and and create greater effectiveness.
▶ 1:50:08Doge presented that it was going to save $165 billion. Though the House Committee on the Budget through the Partnership for Public Service, which is a nonpartisan nonprofit organization, estimates that these actions will cost, not save, but cost 1335 billion this fiscal year slashspending on federal aid by dismantling US aid to only a subsection within
▶ 1:50:38the State Department, cutting contracts primarily with and and a food assistance not saving this country and not becoming more efficient in what we do, but negatively impacting those who need us most.
▶ 1:50:55Laid off over 200,000 federal workers with another 75,000 who've accepted deferred resignations, including over 11,000 IRS employees during tax season and seeks to lay off more. These cuts to IRS will significantly increase the deficit.
▶ 1:51:16For example, the Yale Budget Lab in estimates that laying off 22,000 IRS employees will cost the government $8.5 billion in loss revenue in 2026 alone and nearly 200 billion billion over the decade because they won't have the resources to challenge those submissions or even to go after those who fail to even submit anything.
▶ 1:51:44So, let me say that it concerns me greatly when my colleagues refer to Doge as anything positive, including with their little little boys calling the big boss the big balls, which is another suggestion of there being totally inadequate in this space. I want to talk a little bit about Medicaid.
▶ 1:52:06One of the reasons I guess Medicaid increases in cost is because live longer, more in nursing homes, more children, more folks financially qualify because we have taken money out of the revenue stream by giving such generous uh tax breaks to the very very very wealthy individuals and corporations.
▶ 1:52:28And we propose to do so again and act like this has zero impact as if that brownie we ate yesterday when we we again eat it tomorrow doesn't give us additional calories. So I want to talk to you Mr.
▶ 1:52:46London London I am very concerned about taking a hatchet so to speak to those most vulnerable in our communities.
▶ 1:53:00Number one, tell me, do you think that the lack of generosity in building the economy at large for the uh lower class and middle class uh the work that Biden was trying to do with the infrastructure programs and creating jobs? Do you think that has anything to do with the fact that more people were eligible and in need of Medicaid?
▶ 1:53:27I think, you know, if we look at Medicaid, Medicaid is an incredibly successful program in many respects. We spend less on Medicaid per patient than we do through Medicare or through private insurance. We are spending $5 trillion less on health care spending in the federal government than was expected 10 years ago. It's an incredibly successful program that 80 million Americans rely on and covers most long-term care in this country and nearly half of all births in this country.
▶ 1:53:57This is a program that does not we should not be cutting to pay for tax breaks. I grew up hearing um being a pennywise and pound foolish and I think of cutting programs for SNAP and for Medicaid and things of that nature have a cost huge at the other end that we're not talking about. Absolutely right.
▶ 1:54:19And so I wonder is there someone is there someplace where I can get that those facts on at the end of the day how does the cutting proposed in this budget and it's here result in the quantitative negative impact on our economy. What we do know is that jobs and growth come from everyday Americans. They come from customers.
▶ 1:54:48They come from people being able to have what they need to make ends meet. So when you cut food stamps and you cut Medicaid and you cut public education and you cut h housing assistance, what you're doing is you are undermining the source of our economic prosperity. Thank you. Thank you. Um Mr. Chairman, I want to thank you very very very much for this additional time. You bet. I just have one last comment. I didn't realize until I was writing it down. Okay, the trickle down. The first four letters are trick.
▶ 1:55:18And I think that what we're seeing now is a proposal of trickle down 2025. And that really what this means is that we're trying to trick everyday Americans into believing that the Republican proposals are positive for their well-being, and they are not. I yield back. Thank you so much, Mr. I think the gentle lady from New Jersey now recognize Mr. Blake Moore uh of Utah for five minutes. Thank you, Chairman.
▶ 1:55:49Uh thank you to the panel for being here. Um I'm on had the benefit to be on this committee for uh I'm in my third term for all three terms and um we're going to constantly have these these debates.
▶ 1:56:05I I can't I can't sum it up better than the way that um our chairman summed it up at the first in articulating why we create deficits under Democrat rule and why we create or or Democrat majorities and why we create deficits under Republican majorities. It's persisted since Calvin Culage. We've grown our debt. To me, it boils down to one thing. And I'll ask Mr. Schneider a question, but it boils down to one thing.
▶ 1:56:35And this is something that when I explain to my town hall recipients or the town hall attendees that we as members of Congress, I'm on the budget committee, I'm on the Ways and Means Committee, uh, you know, been that that that we don't vote as members of Congress on an annual basis for more than 60% and I would actually argue that's probably closer to 72% %
▶ 1:57:06of our budget. We only vote on a narrow narrow tiny portion of our overall budget. And that is why we're in the situation that we're in. I can talk about how we weren't prepared for 2008 when baby boomers started to retire and rightfully take their retirement um benefits that they've been paying into with regards to Medicare and Social Security and how that has overwhelmed our system.
▶ 1:57:31I could talk about the growth of virtually any welfare program or programs like Medicaid that have grown significantly over the course well beyond u the economy the size of the economy well beyond inflation. Um I can talk about all that stuff but the but the it boils down to one thing is we don't vote on any of this. It gets voted on maybe once it gets enacted and it gets put on autopilot.
▶ 1:57:59Um, and my constituents are just floored when they hear that I only vote on maybe less than 25% of of the budget each year. And to counter that, of that 25%, which is mostly just the appropriations process, that's largely grown at inflation over the course of 50 years. It's because we vote on it. It's because we have to do the hard work.
▶ 1:58:25It's because the appropriations committee has to actually do the hard work of deciding what to cut, what to continue on, what to reform. We could do that with every single program, but we just have this defunct system in Washington that doesn't allow us to vote on our major programs. Mr. Schneider, Mr. Schneider, any anything to add to this?
▶ 1:58:47Can we seriously address our debt our debt crisis if we do not change the process to allow us to make reforms to I'm going to call them autopilot type programs? Um yeah, thank you for the question. Uh it was noted in the actual credit downgrade uh from Fitch in 2023, one of the key factors besides the fact that there's generally a lack of will to address these problems, we have a complicated budget process.
▶ 1:59:12So I think it's absolutely the case that if we had a simpler process, you had actually more programs up for review every single year that we would be forced to have the conversations about these these policies and actually steer them in a way that reduce the national debt. Let me put you on the spot. Have you ever heard of the comprehensive congressional budget act? Yes, you have. I'm thrilled. Americans for Prosperity came to our office uh a few years ago proposed this idea. Um we've introduced it.
▶ 1:59:40We introduced it in the 118th Congress and hope to be able to do it again. Um, this is, in my opinion, the only thing outside of the debt commission that we were able to get done in this committee last year. This is the only catalyst that I would see that we can get after. Otherwise, we're just going to keep talking about this. We're just going to keep arguing. And Democrats are going to argue that we need to tax more um to cover our spending.
▶ 2:00:05And Republicans are going to need to argue that we need to cut more spending and keep taxes in a competitive progrowth approach, but we need to reduce taxes and reduce spending. And both scenarios are going to when you have a trillion and almost $2 trillion of of of servicing of the debt.
▶ 2:00:22I we're we're going to this is going to continue to to grow on well after this reconciliation bill, well after the next Democrat reconciliation bill, the the comprehensive congressional budget act is going to force members of Congress to vote on the entirety of the budget. It's as simple as that. And it is the most basic thing that my constituents would would would would assume we were doing, but it's clearly what we're not doing. And when we do vote on things on an annual basis, my goodness, I will take it. Let's vote on everything at least once a term.
▶ 2:00:51So, every two years, we're going to vote on everything um and and get us the opportunity to make substantive reforms to the Medicaid program, make substantive reforms to Social Security, Medicare, veterans programs. These things need to modernize. And if we actually had a catalyst that would force us to do that, we could do it. So, um I encourage the committee to say take a serious look. It's a bipartisan piece of legislation. It's called the Comprehensive Congressional Budget Act, and it would force us to do it.
▶ 2:01:18And um I do not see another option besides hopefully the debt commission, which would be a one-time thing. But in order to sustain that so we don't grow wildly out of control, we've got to get it to where we're voting on this stuff and then we can actually be responsible um legislators because we can do that and we have shown that we can keep programs that we vote on within that smaller growth rate. I yield back. Thank you, Mr. Moore.
▶ 2:01:43Um now I recognize representative from Vermont, Becca Thank you, Mr. Chair. Uh, so we're a 100 days, a little over 100 days into this presidency and you got what you wanted, folks on the other side of the aisle. You wanted complete control of the government. You got the House, you got the Senate, you got the White House. So, whatever is happening right now is at feet.
▶ 2:02:11And so, what is the fiscal state of the nation right now? It's not great. It's not great. American people know it. 37% only 37% of Americans pled by Ipsos and Reuters last week have confidence in Trump's economic policy. 37%. That was supposed to be his strength. Okay. Trump's tariffs have taken a blowtorrch to our bank accounts.
▶ 2:02:40We've got increased cost on raw materials. We've got decreased manufacturing. Consumers are preparing to spend more. And why are they preparing to spend more? Why are they preparing for shortages? Because Trump is literally telling them, "Prepare to spend more. Prepare for sacrifice.
▶ 2:02:58Prepare for empty shelves." The S&P 500, one measure of consumer confidence, has shed $6.5 trillion in market value since February because of Trump's self-inflicted wound, this asinine trade policy and trade war with some of our strongest trading partners.
▶ 2:03:24And when you look at what he's doing in terms of cutting programs that would actually help my small businesses, I'm looking at the manufacturing extension programs that would actually provide support to small manufacturers. They're being cut. The on again, offagain tariff regime is rocking my small businesses.
▶ 2:03:47I encourage my colleagues to get out of your bubble and go and talk to your small businesses because what they're saying is we can't deal with this unpredictability. We can't deal with the fact that there is no steadiness, that we don't know where we're going to get our supplies. They plan. We talk a lot in here about businesses needing stability and the ability to plan. You can't plan when you don't know what's going to be happening with the the tariffs.
▶ 2:04:13I was on the phone a the owner of a company the other day. She said, "One day it's one thing, the next day it's another thing. I don't know how I'm going to source these materials." So, you wanted full control. You've got full control. You own this. Trump told us that tariffs would it would be this beautiful golden age. We were going to have uh American jobs coming back. was going to be a golden age for American labor.
▶ 2:04:43That's not happening right now. We actually could be doing things that would help American workers and helping our economy. And Mr. Lynon, that's what I want to talk about today. What could we do be doing right now? That's a great question. It's exactly the right question. And I think it's notable that the president is asking everyday Americans to make sacrifices, prepare for shortages, pay more at the store. um just make do with less.
▶ 2:05:11Uh notable that small businesses have to carry these burdens while at the same time pushing a budget that would give a tax break to the biggest corporations in America and the most wealthy people in America. It's notable who he is asking to sacrifice. That's right. Right. You got to tighten your belts everyday Americans, but not wealthy people, not corporations. They get more. And that is the the opposite of what we should be doing.
▶ 2:05:37Growth and prosperity come from everyday Americans going about their lives, creating jobs, being customers, being uh productive members of society. And they need basic things like healthcare and food and housing. And they need support for small businesses and manufacturing directly and not through uh a a hope that the tax cuts for a giant multinational corporation will eventually trickle down to them. And so we are doing the opposite.
▶ 2:06:05We are asking right now, we are asking everyday Americans who are struggling, who are saying very clearly, we need help. We want lower costs. We're asking them, you should pay more so that rich people and corporations can pay less. That is literally the the budget plan that is before Congress right now. That's right. And I don't know if you saw this. There's a Rolling Stone article the other day talking with people in the Trump administration talking to aids about what they're doing right now to weather this. They're stockpiling toilet paper.
▶ 2:06:34They are stockpiling their own materials. They know what's coming, but they want the rest of people, the rest Americans to be okay while they are stockpiling supplies. And so the economy is rigged for regular people. The American people know it. I wish that my Republican colleagues would stop acting like Americans are stupid and they don't see what's going on. This is not working for them. I yield back.
▶ 2:07:05Thank you. The lady yields. Um I now recognize myself for five minutes to uh go through some remarks. Um I I have in my notes that I was going to thank the chairman, but I guess I'll thank myself for being here, Chairman. And uh but uh this is important. Uh I know I it's we should be talking about this is in a serious manner because this obviously is important for our country. I think when most people think about the fiscal health of our nation, uh whether you're Republican or Democrat, uh you understand that there's not in good shape. as we've talked about already during this hearing.
▶ 2:07:34Uh and it's been that way for a long period of time. Uh there's some fundamental tenants we can all agree on that our national debt of 36.2 trillion is out of control. That our government should live within its means just like families and small businesses have to there's waste, fraud, and abuse uh that's in our federal government that should be rooted out. And that American families and our economy benefit from low taxes.
▶ 2:07:59You know, as a as a fiscal conservative, I believe we can tackle our spending problems and provide tax relief for everyday Americans, entrepreneurs, and businesses. And we can do it responsibly in a manner that encourages growth in our economy. I know there's been a lot of discussion back and forth about uh who got the best benefit out of tax cuts that came out of 2017 and who would be hurt the worst moving forward.
▶ 2:08:23I can say this in in my home state of Kansas, uh there will be an average of $2,200 tax increase for the average can uh if if uh we don't extend the the uh the Trump the Trump tax cuts moving forward. Um on our spending front, I mean, we're borrowing $70,000 every second. Uh that's not sustainable. We're responsible. Uh we can't fix all the Washington spending overnight.
▶ 2:08:49Uh but Congress has an opportunity now to tackle this growing problem and to address the bloated spending. And I believe now is the time to focus on bending the spending curve. Uh raising taxes is not a way to address growing deficits. As talked about earlier, uh we've seen a pretty consistent 17 to 18% of of tax revenue of of GDP comes in as tax revenue.
▶ 2:09:11uh regardless of where the the actual is from my standpoint, I'd rather have a growing economy and having tax policy that helps support that growing economy. So GDP becomes bigger. So that 17 to 18% is also a bigger amount of tax revenue uh that comes in for us. Um we can't we can't raise taxes enough to uh encourage that economic growth uh and and expect that we get more tax revenue.
▶ 2:09:39uh squeezing more money will actually have the reverse effect out of that. And that's why it's so critical that we focus on progrowth, pro- family, proworker policies uh that were established in the 2017 tax cuts and jobs act. And I just as we talk about u what the impact could be. I just want to go through a couple of the provisions that will expire this year. I mean we uh as part of that TCJA passed in 2017, the child tax credit was doubled. uh we increased the standard deduction.
▶ 2:10:10So now instead of 27% of the people having to itemize, it's down to seven or eight% of the people are having to itemize because they get that advantage of the higher uh standard deduction and lower rates across the board for everybody. Um and these aren't provisions that just affect millionaires and billionaires, but it affects uh everybody affects everyday ordinary day canons. like uh one of my constituents, Kaylee, who was as a single mom in 2019, had more money to buy clothes and food for her daughter.
▶ 2:10:39Uh thanks to TCJA, we can't continue to spend more than that comes into tax revenue. Um our fiscal challenges don't come from people being able to keep more of the money. It comes from this excess spending. Um revenue from the Treasury has been up more than 50% since we passed TCJA, but spending's far outpaced it, growing at 70%. Uh Dr. Winfrey, um what I think is sometimes hard for folks to grasp is that there's an inverse relationship between taxes and revenue.
▶ 2:11:09Uh when we passed TCGA, rates were lowered, but because we had such stood strong economic growth in the economy, we saw higher wages and and more investment. Uh how does growth in the economy affect our our fiscal trajectory? There are two things that happened when TCJA was enacted. The first thing that happened is that the rates on investment went down. So you saw you saw more investment because the market responded. The second thing that you saw is that because more people had more money in their pockets, aggregate demand went up.
▶ 2:11:37That also drove drove growth and that's one of the reasons why we saw higher revenue numbers come out come out after the enactment of the TCJA. Yeah. Well, thank you. Um Dr. Al, can we tax our way to economic prosperity in a country? Well, absolutely not.
▶ 2:11:53And you know, one of the one of the big challenges I think uh that that is faced by um members of this committee and anybody trying to do tax policy is that pretty much all of the numbers that are being put forward by the scoring agencies CBO and JCT in my view are underestimating the effect that taxes have on on on growth and on economic activity and uh and that's a that's a major major challenge. All the private estimates as well are, in my view, uh, based on insufficient economic response parameters.
▶ 2:12:23Uh, and uh, and that doesn't mean you don't have to cut spending. You do. It doesn't mean they don't that the tax cuts don't cost anything. They do, but they don't cost as much as they're being scored. Well, thank you. And I think it's pretty clear that as we talked through today, uh when we focus on and Republicans are focusing on how can we accomplish more than one thing with the reconciliation deal, uh we've got to address our national debt and we've got to make sure that the Americans we represent aren't stuck with a massive tax hike while we're continuing to grow a tax revenue.
▶ 2:12:51And uh I want to thank you all panelists for being here and I appreciate the opportunity that uh you give to talk about some of these issues that are really being faced in the real world. And uh with that, I'll finish up my remarks and I will recognize Representative Job Hall from Washington. Thank you so much, Mr. Chairman. Um I I we're talking about the state of the economy and I think we have to focus on the fact that under the Trump administration, the state of the economy is this.
▶ 2:13:17Uh our economy has shrunk by.3% in the first quarter under Trump. And in the last quarter under Biden, we had a 2.4% growth in the economy. President Trump promised to lower costs on day one. I don't know if everyone remembers, but he's going to tackle inflation day one, lower prices for Americans. Instead, he has presided over a 100 days of destruction of our economy.
▶ 2:13:43One of the quickest slides in our economy that we have seen in recent history. Sweeping indiscriminate tariffs that have raised prices on Americans. Slashing of critical programs from healthcare to education. Why? All so that we can set up a $7 trillion tax break for the wealthiest Americans. And I just want to correct the record about the 2017 TCJA because I just heard some stats.
▶ 2:14:11Let me tell you that the tax cut, the 2017 Republican tax scam cost $1.9 trillion to Americans. The average tax cut for the top 1% was $60,300 compared with $660 for the middle 20% of households.
▶ 2:14:32And in fact, the tax cut for the wealthiest 1% was greater than the entire household after tax income of a typical household in the middle 20%. So what is this? Yachts for billionaires and breadcrumbs for the American people. I think we have to be clear about what the numbers say and I want to go to you uh Mr.
▶ 2:14:55Lyndon about this because Republicans now want to extend the 2017 TCGA tax scam and facilitate what I think would be the largest transfer of wealth from working Americans to the wealthiest CEOs and individuals by slashing critical benefits and programs like Medicaid and SNAP and and uh housing um so that they can effectuate that transfer. If the tax package is made permanent, what will the effect be on the richest Americans? And I have a bunch of questions for you, so keep your answers.
▶ 2:15:25The average tax cut for somebody at the top.1% is roughly $300,000 a year. $300,000. And what would the effect be on working and poor Americans? Uh, as you as you noted, uh, in the middle and the bottom, the tax cuts are less than 1% of their income. And I should also note that there's about 40 million Americans who make less than $200,000 who received either no tax cut from the TCGA who or who actually paid more under who actually paid more. If you could choose, Mr.
▶ 2:15:54London, what policy provides greater benefit to the American people in the economy? A permanent tax break to billionaires or permanently extending, say, the child tax credit which cut child poverty in half when it was temporarily expanded in 2021. the larger child tax credit is than that would that would generate enormous benefit for a big group of Americans rather than for the wealthiest few. I want to talk about education, the slashing of Head Start.
▶ 2:16:24This is a program that provides early education for our most vulnerable kids. I've got a constituent, her name is Ashley Leightton. She spoke at a event I had recently. She's got twin boys in Early Head Start. And she said, this is a quote from her. Head Start has been a lifeline for my family, not just in education, but support in every facet of our lives. And she talked about how having Head Start actually allowed her to go back to school, finish a degree, and become financially self-sufficient.
▶ 2:16:54Um, that's what investments in early education do. They help people who are struggling get their footing, and then that helps our entire society. In fact, a study by the National Bureau of Economic Research suggests that every dollar that the federal government invests in programs that benefit children yields $10 in societal returns. So, let's talk about child care.
▶ 2:17:16Unaffordable everywhere in the country, including in Washington state, where the monthly cost of full-time childare is about 1750, 1,750 bucks for an infant per month. Um, and now Republicans are always talking about being pro- family. So, what would the GOP's proposed cuts to federal child care investments like Head Start do to families? I mean, it would be absolutely devastating to uh everyday Americans and in a very real way. I have three kids myself.
▶ 2:17:45Just thinking about what it would mean if I didn't have access to affordable quality child care when they were young. And I do want to make the point that every economic study, if you look across the spectrum, the economic benefits from investing in early childhood education and early childhood far outweigh any minor benefits that even the most skewed studies have shown for tax breaks for billionaires.
▶ 2:18:06So if we really care about investing in making the economy work better, we would be putting money into low and middle inome families with children, not giving it to billionaires and corporations. This is such an important point. my time is over. And I had questions on defense spending because they keep talking about taking away, you know, dealing with waste, fraud, and abuse. And yet they want to increase the Pentagon budget to over a trillion dollars. And that is the only federal agency that has never passed an audit.
▶ 2:18:34We've had Republicans up here uh under the last Trump administration that agreed with us that there's waste, fraud, and abuse in the Defense Department, but Republicans are proposing just expanding uh spending on the Pentagon over a trillion dollars. Meanwhile, they're cutting all of these essential programs. Mr. Chairman has returned. I got an extra minute. So generous to only my classmates like Miss Jipal. I appreciate your comments.
▶ 2:19:01Uh we're going to transition to the next uh uh colleague of ours. Thank you for your uh your participation and Mr. Clyde from uh the great state of Georgia. Five minutes, sir. Thank you, Mr. Chairman, and to our witnesses. Uh this hearing makes one thing abundantly clear. The fiscal state of our nation is definitely out of control. The United States fiscal future is spir spiraling under a ballooning national debt fueled by Washington's chronic overspending.
▶ 2:19:30Our gross federal debt stands now at 36.8 trillion, 121% of our GDP, and is projected by the Congressional Budget Office to reach nearly $60 trillion by 2035 if this country actually makes it financially to 2035. Um, so we need to address this crisis now. Uh, to put that into perspective, imagine the United States as a medium to small business. Let's call it Swamp Incor Incorporated.
▶ 2:19:59Right now, Swamp Incorporated carries more than $36 million in debt. This year, it expects to bring in $5 million in revenue, but plans to spend $7 million, running a $2 million deficit, and nearly $1 million of that $7 million in spending goes just to interest payments. Money that provides no new services, no investment, no return, just the cost of prior borrowing. Year after year, Swamp Incorporated adds to its debt just to keep its doors open.
▶ 2:20:29If you were a banker, would you lend more money to that company? If this were a real business, no bank would keep lending, and no investor would buy its bonds. They could not handle the risk. Yet, this is how our federal government is operating today unless we change course. Americans will face severe consequences in the very near future. Despite claims to the contrary, our debt crisis primarily stems primarily from unchecked spending by Congress, not a lack of revenue.
▶ 2:20:58In fact, revenues are already above historic averages. And without serious spending reform, we face two damaging options. Print more money, which fueled the Biden Harris inflation surge, or borrow more, which raises interest rates and slows growth. Alarmingly, over the next decade, and again, if we make it that far, um we'll spend another 14 trillion just to service that debt. Money that delivers no public benefit.
▶ 2:21:24In just four years of the Biden Harris administration, interest payments have surged by $600 billion, 170% increase, as Treasury yields climbed to almost 5% under the Biden under President Biden, the highest since before the Great Recession. This trajectory is unsustainable. global global markets will not finance US deficits indefinitely.
▶ 2:21:46And when confidence in our ability to repay fades, we w we risk a true sovereign debt crisis, collapsed pensions, failing banks, and shuttered federal programs. Thankfully, President Trump's fiscal year 2026 budget offers a path forward. It proposes a almost 23% cut in non-defense discretionary spending. That's a $163 billion reduction from FY25 levels.
▶ 2:22:09As a member of both the House Budget and the Appropriations Committees, I plan to support this plan and I'm committed to restoring fiscal sanity so future generations aren't crushed with more debt by Washington's reckless spending. So, Dr. Ralph, Dr. Winfrey, and Mr. Snyder, would you agree that the national debt is driven primarily by outofcrol spending? Yes. Yes. Okay. No.
▶ 2:22:35So, what you're saying is Congress has an opium addiction in that they are addicted to OPM, that's other people's money, um, tax dollars. Dr. Winfrey, Medicaid was designed with as a safety net for our most vulnerable populations. That's lowincome folks uh, with children, pregnant women, the elderly, and individuals with disabilities.
▶ 2:22:57Yet, in recent years, we've seen a rapid expansion of Medicaid to include millions of able-bodied working age adults with without dependents who don't work. Do you believe this expansion is straining the program and diverting resources away from those who it was originally intended to serve? Yes, it is significantly diverting resources away from those who are it is intended to serve. And it's it it all comes back to the financing nature of the program.
▶ 2:23:23States get nine federal dollars for every one state dollar that they spend on the expansion population. This is the able-bodied childless adults and $1.33 for every dollar that they spend on the vulnerable population. These are pregnant moms, kids, the disabled. Thank you, Mr. Schneider. In 2023, the US credit rating was downgraded by Fitch during the Biden administration due to concerns about our fiscal trajectory. You mentioned that, I believe, in your in your statement.
▶ 2:23:51What does that say about investors confidence in our country's ability to repay its debt? Uh the benefit for the US is that other markets aren't uh nearly as good. So there's not as many places for the money to go. But people are investors are generally very concerned that we continually choose a fiscal outlook of basically 7% of GDP deficits uh in perpetuity. Uh so I think the way that will ultimately manifest is as we issue more debt, you will see rising term premium investors demanding more compensation to buy US debt.
▶ 2:24:21That means higher interest rates that crowds out private investment and that means slower growth. So what you're saying in investors are not fooled. No, not at all. All right. Thank you, Dr. Winfrey. What are the economic implications if investors lose confidence in our ability to service the national debt? It will become incredibly difficult to borrow uh in the private sector and in the public sector. And interest rates will go up. So it'll become much more difficult to start a small business. It'll be much more difficult to afford credit card payments.
▶ 2:24:51It'll be much more difficult to afford a new house or a car. Do you believe there's still time to change course and avoid these uh cataclysmic economic consequences? I do. But it requires a balanced approach where we increase the the level of growth in the economy. So, we grow the economy as much as we can while we bring down the spending trajectory of the programs that consistently grow more than GDP. That'll have to be the last question. We've amened over time. Thank you, Mr. Coll. And I yield back, Mr. Chairman.
▶ 2:25:21Thank you. That's very generous of you, Mr. Clyde. Um, we uh now recognize uh Miss Judy Chu from California for five minutes of questions. Thank you, Mr. Lyndon. Elon Musk has said that he seeks to cut $2 trillion from the federal budget.
▶ 2:25:38But CBO found that in order to balance the budget in 10 years without touching Medicare, Social Security spending on defense and veterans while extending the Trump tax scam, it will require that all other mandatory and discretionary spending be slashed by 100%. all other programs including homeland security, education, public health, research and development would be eliminated. Um well, one of those programs, Medicaid.
▶ 2:26:09Every single member of this committee represents constituents who rely on Medicaid to survive. Yet still, Republicans are preparing to cut as much as $880 billion for from that program. and all that to give the money directly to the wealthiest people in this country in the form of a massive tax giveaway. These cuts will have dire impacts on Medicaid and especially its homebased care and it affects people like my constituent Bailey.
▶ 2:26:40Medicaid enables people like Bailey to receive inhome assistance to care for her daughter who lives with a rare genetic disorder. In fact, without Medicaid homebased care, Bailey's daughter might instead be in impatient long-term care, which would actually cost the government far more money. We know that homebased care is a far cheaper alternative. So, Bailey is anxious and fearful about the future of her family.
▶ 2:27:10So, Mr. Lyndon, you highlighted the importance of maintaining federal investments in public health. Can you elaborate on the economic impact of divesting from Medicaid, homebased health services that provide patients and the government with the most coste effective care? And what is the impact on the fiscal state of the nation if Republicans use Medicaid cuts to give tax cuts to the ultra wealthy? Thank you for that question.
▶ 2:27:34Uh what we are really talking about here is shifting the burden away from very wealthy people and corporations onto everyday families who have uh real challenges in their family budgets like paying for long-term care or caring for an elderly parent or a family member with disabilities. And I do want to really emphasize here that uh Medicaid it covers 80 million people. Uh it is it is a program that is extremely lean already. And you don't have to take my word for it.
▶ 2:28:03There is a reason why 80% of Americans, including a majority of Republicans, oppose cuts to Medicaid. It is not a program that uh wastes money on people who uh who don't need it. It is a very well well-run program. Doesn't mean there's not efficiencies to be had here, but we are not I have not seen one proposal to take any of the cuts and put it back into the program to make it better for people. No. Instead, those cuts are going to pay for tax cuts for billionaires.
▶ 2:28:30So that really puts the lie to the notion that all the all the rep uh the this Congress wants to do is is make the program better for people. It's not. 10 million people losing their health insurance is not making that better for anybody. Yes. Uh Mr. Lindam, I want to talk about how much these cuts will actually cost us.
▶ 2:28:48Uh, for instance, after claiming to have saved $160 billion of government fraud, waste, and abuse, Elon Musk and his so-called Doge efforts will end up costing taxpayers $135 billion this fiscal year alone, according to the analysis from the Partnership for Public Service, a nonpartisan research and advocacy group. So, despite what they claim, uh, President Trump and his lawyers loyalists are not making America greater, they're making America sicker.
▶ 2:29:18The Trump administration is proposing to slash the National Institutes of Health or NIH under the guise of cutting administrative costs. But Democrats know the truth. Less funding for NIH means less funding for medical breakthroughs and more Americans suffering and dying from illness. One NIH researcher in my district, Dr.
▶ 2:29:41Arcio Okano is a researcher at the city of hope which treats cancer patients and the he was shocked when the administration cancelled his research into a cure for diabetes which affects 38 million Americans. Mr. Lindon, what is the impact of letting more Americans die from preventable diseases on the fiscal state of this nation?
▶ 2:30:06uh you know the obvious the the economic impact is obvious and I don't think anybody here would disagree that uh one of the best investments this federal government any government can make is into scientific and healthcare research. It pays enormous dividends. Every study has shown that. But putting just to that to one side, putting aside dollars and cents, it's it's morally reprehensible. What are we doing? We're cutting funding for diabetes research and cancer research because the argument is we don't have enough money. But at the same time, this Congress is going to spend even more money on tax breaks for billionaires.
▶ 2:30:36The reason we feel strapped, the reason we feel like there's not enough money to go around to fund diabetes research and cancer research and veterans benefits is because we keep giving that money to wealthy people and corporations over and over again and then saying few years later, "Oh, we don't have enough money to spend on these things anymore." And I guarantee you if this Congress passes another tax cut for rich people in a few years, we'll be here and we'll having the same conversation where some people will be saying, "We simply can't afford to make sure that kids don't
▶ 2:31:06go hungry. We simply can't afford that kids get a good education. There's not enough money to go around." Well, there would be if we simply asked wealthy people and corporations to pay their fair share. Thank you. I yield back. I thank the gentle lady and now yield five minutes to my friend, Mr. Addison McDow from North Carolina. Thank you, Mr. Chairman. The fiscal state of our nation doesn't just require a budget correction. It demands a course correction.
▶ 2:31:35Some of my friends across the aisle may not want to hear that. They'd rather keep marching down the path laid in the final days of the Biden presidency, blindfolded, earmuffed, and in full denial. Republicans were sent here with a mandate to change course, to restore sanity, and to finally put America first. To fix the problem, we must come clean about the problem.
▶ 2:32:02We are now more than $36.2 trillion in debt. This year alone, we will spend over $1 trillion just on interest. That's more than we spend on our entire national defense, our veterans, and our border security. This is obviously unsustainable and frankly, it is immoral.
▶ 2:32:23It is a betrayal of every working American parent planning for their future and every child counting on the adults in the room to act like it. This problem is decades in the making. Most recently, it's been something much worse. a deliberate misuse of taxpayer dollars to push to push ideological agendas to grow government control and to silence traditional American values.
▶ 2:32:52Under Biden, the government added $6.7 trillion in new deficits in just three years. And what do we have to show for it? Are homes more affordable? Are interest rates lower? Are families better off? We all know the answer to those questions. No, how no matter how much mental gymnastics you want to play and it is why we are course correcting and working to enact the President Donald Trump's agenda. Getting America back on track is not rocket science.
▶ 2:33:22It is common sense. Make the Trump tax cuts permanent. Slash red tape. Unleash American energy. Secure our borders. And keep the American dream alive for generations to come. This is why we are here. It is the agenda of common sense. When it comes to eliminating waste, there's lowhanging fruit that we should all be able to agree on.
▶ 2:33:46Tax dollars that my constituents are sending to Washington should not go to things like radical environmental justice programs, NOS, programs to promote DEI among bird watchers, the Green New Scam, I'm sorry, the Green New Deal, trans surgeries for prisoners, a Sesame Street show in Iraq, and girl-c centered climate action in Brazil.
▶ 2:34:12I don't even know what that It is time that we realign federal spending with American priorities and put American working families over bureaucrats. The fiscal state of our nation demands attention and I thank the chairman of this committee for his leadership on these issues. Now I I don't have much time left. So as I ask my questions, let's please keep them to yes or no. Is Donald Trump the president of the United States? Mr. Lynon?
▶ 2:34:42Yes. All right. Well, now that we've established you can do that, uh, at at the current rate, do you believe we'll be able to sustain our debt for another 10 years without crowding out so many important programs that my constituents rely on? Not sure. I totally It's a yes or no. Yes or no. Can we continue to spend what we do and it be a sustainable thing for our country if you raise enough revenue to pay for it? It's a yes or no question. So, yes.
▶ 2:35:10Do you believe that the American middle class should face the largest tax hike in history to pay for woke government Good thing they're not. It's a yes or no. No. Thank you. In your opening statement, you blame tax cuts for increasing uh the government's debt. Uh do you believe that irresponsible government spending bears any responsibility on the debt? Yes.
▶ 2:35:38And so it's your testimony today that if we let the Trump tax cuts expire for the mechanic or the teacher in my district who makes $50,000 a year, will their taxes go up? It actually depends. Some for some of them, it's a yes or no. It is not. It is a yes or no. When they go to file their taxes, are they going to have to pay more or less? Yes or no? It actually does depend on their circumstances because the tax cuts that were passed in 2017.
▶ 2:36:08I'm sorry, you asked me a question. I'm going to answer. It is simple. If we cut the if we if the Trump tax cuts expire, y for someone making $50,000 a year, do their taxes go up or down? It depends. It It does not. It does. It does. And actually, if you ask any of these folks, they will tell you there were people making $50,000 or less who did not get a tax cut under 2017 tax law. In fact, some of them paid more.
▶ 2:36:33I will tell you I will tell you sir, if it sounds to me, it sounds to me. No, sir. It sounds to me like you want to you want to hurt job creators so much that the people you claim you want to defend and help. No, sir. This is my time. Order, order, order here. Look, we're going to give you ample time. I I promise you this isn't we're not trying to muzzle anybody's responses to express themselves.
▶ 2:37:01The the members on both sides control the time. Okay. Absolutely. You're our guest here. Let these guys absolutely right. Thank you, Congressman. It sounds to me like you want to tax job creators so much that they are forced into firing middle class Americans you claim to want to help and so they won't be paying taxes at all because they will be unemployed. Chairman, I yield back. Um, that's fine. That With all due respect, do you have a comment? No, no, no.
▶ 2:37:30That that's totally fine. Okay. I'm going to yield now five minutes to my colleague, Mr. Tonko from New York. Thank you, Mr. Chair. Uh, well, we started this hearing today talking about courage and courage to get our nation on track and restore its fiscal health. Well, Mr. Chair, I do in fact find it courageous to hold a hearing like this under the pretense of fiscal responsibility, especially while Mr.
▶ 2:37:54Trump subjects us to his reckless tariff policies and rams through the most fiscally irresponsible bill in American history. Families in my district and across this country are indeed hurting. And the solution offered by my Republican colleagues is to decimate Medicaid, gut SNAP, and take a wrecking ball to the inflation reduction act. Why? So we can give $7 trillion in tax cuts to billionaires and add more than 14 trillion in new debt over the next decade. Talk about a self-inflicted death spiral.
▶ 2:38:24You don't fix a cost of living crisis by punishing the people already bearing the brunt. People like Darlene in my district, a 66-year-old caring for her do adult son with autism who lives on $1,400 a month and depends on food pantries to get by. She tells me that every week the food pantry lines grow longer. her and her neighbors waiting for just a single bar bag of produce or people like Melissa, a mother from Roderdam.
▶ 2:38:50After losing her job, Melissa received $23 a month in SNAP benefits. That's just three quarters a day. Melissa then took a lower paying job to put food on the table for her children. Ened up ended up losing both SNAP and her children's free school meals. Their message is painfully clear. Programs like SNAP aren't being abused.
▶ 2:39:10are being intentionally underfunded and cutting it now as families face sky-high food prices would be devastating not just for folks like Darlene and Melissa but for local grocerers, farmers, and entire communities. Mr. Lyndon, can you speak to the real world impact of these proposals? Will cutting access to food for our most vulnerable unleash prosperity for all Americans? No.
▶ 2:39:32Um I I know we've had this we've we've had a debate about this, but the American people understand and have seen the experience of when we cut taxes for people at the top, it does not trickle down to everybody else. Uh in fact, there is no relationship, zero relationship between the top tax rate and economic growth. There is no evidence that cutting taxes for rich people has ever created more broad-based prosperity for everybody else. It does create more growth for people at the top. That is true. And what you do see is an increase in income inequality.
▶ 2:40:01And you do see more aggregation of wealth and income at the top, but that does not create more growth or prosperity or more breathing room for people and down the income spectrum. Well, I agree. The trickle down has time and time again just failed to uh happen. And Mr. Lindon, can you tell us about the impact of SNAP on the food economy as a whole and how cuts like this would impact already rising food prices? Yeah, absolutely.
▶ 2:40:25It's um you know the average tax the average uh food benefit of SNAP for a family is is $6 a day for the average uh recipient. Um that doesn't sound like that much, but it is an absolute lifeline between being able to afford basic uh nutrition me nutritional meals for you and your family and not being able to afford that.
▶ 2:40:46uh it's it's unconscionable that we are considering cutting those benefits rather than say for example asking the wealthiest Americans to pay 2% more on their income above a certain threat above $700,000. Uh it's unconscionable that we're asking people to make do with less uh who are struggling already when we have a corporate system that is currently delivering a trillion dollar tax cut to the largest corporations in America. Well, now I have the tremendous honor to also serve on the Energy and Commerce Committee.
▶ 2:41:15At some point, we will be marking up this committee's instructions to cut 880 billion as the floor in federal spending over the next 10 years. And as we all know by now, the nonpartisan Congressional Budget Office confirmed that if we don't touch Medicare, this would require deep and devastating cuts to Medicaid. Um, the biggest in American history. In fact, Mr. Lynon, will slashing Medicaid by 880 billion to pay for tax cuts to the rich positively impact our long-term fiscal and economic outlook?
▶ 2:41:46No. You're taking $1 out of Medicaid and spending $2 on tax breaks for billionaires at the same or wealthy people at the same time. So, in the end, you end up with less money and people who are struggling end up with a lot less. So, obviously, that's not going to help the long-term fiscal future. Well, thank you. And Mr. Lyndon CBO also confirms that immigration is a well-known reliable driver for economic growth and labor force expansion.
▶ 2:42:10The House Judiciary Committee marked up a bill aimed at spending up to 110 billion of taxpayer dollars to fasttrack uh Trump's anti-immigrant mass deportation policies. Mr. Lynon, how do these kinds of policies impact the American economy? And wouldn't it be more fiscally responsible to reform the immigration system in a way that expands legal pathways and boosts the workforce instead of pouring billions into enforcement only deterrence policies?
▶ 2:42:35I always find it um frustrating to talk about uh tax policy and and and whether we want to focus on on Americans in part because the 2017 tax law had a giant corporate tax break with a huge chunk of that going to foreign shareholders. foreign shareholders got a major benefit from the corporate uh from the corporate tax cut that this Congress wants to just continue.
▶ 2:42:57If we really want to focus tax policy on Americans and keeping money here in the United States, we would reform the corporate system so that corporations don't deliver benefits to foreign shareholders or shift jobs overseas. With that, I very much thank you and yield back, Mr. Chair. Thank you, Mr. Tonko. I recognize uh the pride of Oklahoma, Mr. Josh Keane for five minutes. Thank you, Mr. Chairman.
▶ 2:43:21Uh, sincerely, I I'm going to say this to the chairman of this committee, to friend from West Texas, uh, I am grateful uh, to serve on a committee with someone that is in their heart of hearts so passionate about this and creating the space even with all the push back that you've been receiving this past year. Um it's like Paul Rivere, the British are coming and uh you're so passionate riding the horse to say that bankruptcy is coming.
▶ 2:43:47So I just want you to know um how grateful I am that you've continued to lean in and uh man, it's just if everyone in this body would just speak truth from their heart, it would be a gamecher. There is truth to be found, you know, on both sides of this. There's people that operate in hypocrisy on both sides of the aisle. And you know, I dropped the mic on what Chip Roy said. You all knew, you know, how do you argue with what Chip was saying earlier?
▶ 2:44:17I appreciate Jimmy Petta. You know, in his response, I'm not saying I'm not trying to imply Jimmy agreed with everything that Chip said, but we all know everybody is guilty. I want to share something. I I hope some of you on the panel um to the Democrat witness, I hope this Do you like Thomas Jefferson? Is Thomas Jefferson a fan? Are you a fan of him? Um, yeah, absolutely. Okay, so let me give you a a part of a a letter he wrote. He's in public life and he's really resting. He really was kind of didn't even want these comments to go public.
▶ 2:44:46He even said that in this letter and he said, "Private fortunes are destroyed by extravagance." And the tendency is for all human governments a departure from principle in one instance till the bulk of society is reduced to dot dot dot suffering. Then begins indeed the bellum omnium in omnia. What he calls the abusive state of man and the forehorse of this frightful team is public debt.
▶ 2:45:14Taxation follows that and in its train is wretchedness and oppression. Thomas Jefferson talked about public waste draining private fortunes. Was he trying to protect the wealthy elite? We Thomas Jefferson was saying there's always a tendency for human governments to want to piler money taken from the people. It's why up until 1913, we actually had parody and true equality in our tax code.
▶ 2:45:44We operated 200 years of governance with that nice little provision up until 1913, the 16th amendment, where that word was removed so we could put in these graduated tax brackets, now seven different graduated tax brackets. And again to Chip Royy's point, even if even if 36% moves to, you know, two points upward, it's only 35 billion and we are arguing over that when we have a $2 trillion chasm.
▶ 2:46:10The greater conversation that has to happen here is if we don't get serious about reducing spending, bringing true fairness, not the gospel of envy in the code, then we're headed towards a collapse. People hear these convers why should you care? I remember a few years ago, whether it be sitting in a semi-truck or on a dozer, an expert, why should I care? Even with training and mentorship under under Tom Coburn, so busy trying to make a business. Why should I care? Well, I'll tell you why you should care.
▶ 2:46:41Because interest rates, who can afford a home? Now, in 2017, this this governing body was paying $250 billion at 1% interest rate on the debt. And now we're at 4.3%. And we're paying almost a trillion dollars, similar debt load, but interest is kicking our tail.
▶ 2:47:03It's why you could have borrowed money uh on a 30-year mortgage and and reduced it a few years ago to a 15-year mortgage as I had a friend do and afford the same home and you just cut the years you're paying on that interest rate in half. This all ties together because what the government the culture of debt is wealth is ruining financial under underpinning for families across this country. Why should you care? because your private fortunes are being destroyed by government government extravagance.
▶ 2:47:33The and so I'm going to go to you Paul Winfrey. You said something earlier in your testimony today about Greek like future. We are headed in 10 years where our $36 trillion gross national debt turns into 60 trillion 59. We are headed in 10 years to where instead of it being two trillion, we're headed towards $3 trillion annual deficits.
▶ 2:47:56That same 10 year 10-year time period says the the insolveny for social security and Medicare is upon us. You say we're running out of fiscal space. The four horse of this frightful team is public debt. Taxation follows that in this train is wretchedness and oppression. Greeks when they hit a sovereign debt crisis did a 50% tax burden on individuals and corporations and it led to a 100,000 bankruptcies.
▶ 2:48:20Would you please tell us why we should really care about the pain that is ahead if we don't get serious about rectifying outlays and spending? We're at a period right now where we are eroding fiscal space pretty quickly. If we don't do something about that, then the markets will demand a correction and when the markets demand a correction, just like you said what happened in Greece, it it the the correction will be large. Um to speak to Jefferson just for two two seconds. Um you're exactly right.
▶ 2:48:50Uh Thomas Jefferson believed that all public debt should be retired every 20 years. All public debt. Alexander Hamilton thought, you know, he was a bit more expansionary. He thought that all public debt should be retired every 35 years. Right? But we're not in the position right now where we're even talking about retiring public debt. We're just talking about bringing down the deficits that allows us to continue to grow fiscal space. That's what we're talking about right now.
▶ 2:49:17I thank the gentleman from Oklahoma and recognize Mr. Gabe Amo from Rhode Island for five minutes. Thank you, Chair Arrington, uh for holding today's hearing uh on the fiscal state of the nation. My Republican friends assert that our nation is in poor fiscal health, but refuse across this Congress to look into the mirror to see the real problem.
▶ 2:49:42Republicans are the ones pursuing a reckless plan that adds $14 trillion to the national debt. So I'm reminded of the budget resolution markup 3 months ago and it is clear that it is not fiscal responsibility to slash Medicaid by $880 billion and cut SNAP by $230 billion to shovel tax breaks into the pockets of the wealthiest the wealthiest in our country.
▶ 2:50:11Medicaid delivers healthcare to a third of America and SNAP helps feed one in five Americans. But this is what uh our Republican colleagues are tripping over themselves to cut actively right now sitting in rooms deciding how to do this. No messaging is going to cover up this scheme. Republicans claim they don't want to rip away healthcare from vulnerable Americans.
▶ 2:50:34Yet, the Congressional Budget Office has confirmed that the only way to find $880 billion in spending cuts is to cut Medicaid to the bone. The only way this will hurt children, people with disabilities, seniors, new moms, and workingclass families, underscoring working families struggling to make ends meet. If you really want to protect Medicaid, I encourage my Republican colleagues to sign on to ranking member Bole's discharge petition.
▶ 2:51:00Let's prevent harmful unnecessary cuts to Medicaid and SNAP. That is on the line. People are depending on us. And so I would ask you, Mr. Lyndon, can you uh share briefly, as you have uh throughout this hearing, how slashing Medicaid by at least $880 billion, just to give tax breaks to the rich would impact our long-term fiscal and economic outlook? That's the right question.
▶ 2:51:29And the answer is if you take a dollar away from Medicaid and spend two on tax breaks for the rich, you end up worse off than you'd started. And that's what's going on here. The problem in our fiscal outlook, I know there's disagreement about this, but the facts are very clear. 25 years ago, we knew that costs were going to go up on Social Security, Medicare, and Medicaid as more Americans retired and entered retirement. That's exactly what happened. But actually costs have gone up more slowly than expected.
▶ 2:51:59So we're actually spending less on those programs than was expected. But the reason that our fiscal situation is so much worse is because we are cutting taxes so much over those same 25 years. I'll repeat again what I said in the beginning. If we had simply not done those tax cuts, debt today, even with the spending increases that have happened, it's true they have gone up on retirement and healthcare because of the retirement of the baby boom generation. Even with that debt would be declining as a share of GDP, not increasing.
▶ 2:52:27So there is no value in cutting Medicaid for our fiscal purposes. And there's no value to the human beings who are receiving Medicaid. They need it to uh just make their way in the world. It's it's callous to put the burden of fiscal retrenchment on a family who relies on Medicaid or food stamps when we could just as easily and in fact much more easily ask the largest corporations in America just to pay a little bit more in taxes. And the to your point this is not just numbers.
▶ 2:52:56These are people people across this country our constituents all of ours who are depending on us. And so I don't know why uh my Republican colleagues are laser focused and convinced that we have to hurt vulnerable Americans to offset tax breaks for the richest 1%. This does not have to be our reality and there is time to act.
▶ 2:53:18And so as we look at the situation we're in, again, when we talk about the long-term fiscal health, we're talking about a Republican plan to add $14 trillion to the national debt when we know that the people being impacted are not nameless. They are people that matter to us. And that's fiscal insanity to me. And so, Mr.
▶ 2:53:43Lyndon, I know you recently testified about uh the importance of investing uh in programs for low-income Americans from both a moral uh and an economic perspective. Uh can you talk a little bit about um how those cuts uh beyond just the numbers will have impacts beyond those programs specifically?
▶ 2:54:04Yeah, think about a community u where people um they they shop in their local uh markets, they visit their local doctors, the rural hospital, a rural maybe it's a rural community that has a hospital that relies on Medicaid. You cut these programs and what ends up happening is yes, the individual families are harmed. People can't afford food. They can't afford healthcare. They can't take their kids to the doctor. But the community around them is also harmed because now that market is not receiving a customer.
▶ 2:54:33Now that rural hospital has to close and people around there have to drive much further to visit the hospital. And for what? So that there are wealthy people who have a slightly larger take-home pay at the end of the year. Uh so that a corporation uh gets an extra tax break. That is not fiscal responsibility by any definition of the word. My time is expired, but I want to end with this point. America first does not mean we put hardworking people last. And with that, I yield back.
▶ 2:55:03I thank the gentleman from Rhode Island and I yield five minutes to the former speaker of the house in North Carolina, Mr. Tim Moore. Thank you, Mr. Chairman, and I want to thank all the witnesses for your testimony today and very thoughtful questions by by all members of this committee. Uh there's been a lot of good conversation today about the unsustainable national debt and the unbelievable amount we're spending right now on interest.
▶ 2:55:28as has been said by several folks, we're paying more in interest on the debt than we are to in fire the to fund the entire uh military, which is just hard to believe. Uh we actually had a little experience in my old job that the chairman referenced when when uh we took the majority after 140 years of not being in the majority in our state. Uh we inherited a state that was in debt to the federal government that had record unemployment. Uh that had runaway costs whether it was uh the state share of Medicaid, you name it, all these things.
▶ 2:55:58And we made some significant reforms. Uh one, we reduced taxes. Two, we cut regulations. We And three, more people went back to work. Uh when it came to the Medicaid budget, the we reformed it from fee for service to outcomebased determinants and as a result got cost certainty in place. And guess what? actually allowed more people more people to be covered and for better coverage to exist for those folks.
▶ 2:56:22And what I've seen for as I've arrived in Washington is for decades and decades and decades is the the inability for whatever reason to get a handle on just absolutely runaway spending and and a fear of making meaningful reforms that reforms that frankly many of which should be bipartisan.
▶ 2:56:42that that that all four witnesses there and every single one of us in here frankly ought to to be able to agree upon and and and what I see with all due respect from my friends from the other side of the from from the Democratic side of the aisle is that any notion of trying to improve efficiencies and Medicaid is immediately attacked as being some sort of cut. Well, it's it's not. I if you can find ways to reduce inherent waste and fraud and abuse, why not do that? And we know there are states in the country that that are doing that.
▶ 2:57:12I think in fact California, I don't know if any members from California here right now, but California goes beyond covering health care and I think is actually covering like housing and other things that that were never intended to be a part of Medicaid. And so these are these are expenses that have run it up. And what's happened is it's made the care for those who truly need it unavailable.
▶ 2:57:34You look for I mean Medicaid was designed for folks who were who were impoverished and unable and and because of circumstances because of disability or a dependent child or other conditions unable to pro provide for their healthcare. And now we see a time where you have you have folks who are wanting to push for coverage for illegal immigrants who aren't supposed to be here, want to push for coverage for folks who are able-bodied and and aren't asking for just simple safeguards in place to make sure that folks qualify.
▶ 2:58:02And so I I you I think I think some of the answers should be easy and frankly should be bipartisan. And I gota I gotta compliment Chairman Arrington. I mean these are some of the common sense reforms that are being talked about that at the end of the day will allow those who need access to health care to have it and to have it better than they do under the current system.
▶ 2:58:21And and I think we all ought to agree that that it's it's ridiculous the amount of debt, the amount of our tax dollars that could be used to provide services or whatever else are being are going toward interest. It's it's just it's unsustainable. The numbers don't work. And I just I I do I do have a question for Mr. Schneider. I'll just simply say and and I appreciate your testimony.
▶ 2:58:45I I really all all all the testimony, but if we fail to take action immediately on the deficit spending, how is a soaring national debt uh going to impact investment in other areas such as infrastructure, education, health care, which was just referenced, as well as Yes. From a market perspective, I think what investors are looking for is demonstrating credibility, any ability to solve the problem to change the trajectory of deficits. So last year the deficit was 6.4% 4% of GDP.
▶ 2:59:16If you just extended the tax cuts and did no other savings whatsoever, by the end of Trump's term, there would be about seven and a half percent of GDP. So, they want to see markets would like to see some commitment um to lowering the deficits and the actual ability of Republicans to to cut spending. So, in the event that you do see increases in interest rates, concerned in the market about the trajectory of the debt and deficits, it's going to crowd out private investment. Um that's going to make it harder to to buy a house. It's harder to to conduct business.
▶ 2:59:45It will reduce economic growth. I have a few seconds left, but the question would take longer to ask than that. So, in respect to the committee, Mr. Chairman, I yield the balance. Thank you. I thank the gentleman and recognize Mr. Garvey, Morgan Garvey from the Commonwealth of Kentucky for 5 minutes. Thank you, Mr. Chairman. Appreciate that. And uh appreciate Representative Moore talking about the state legislature. You know, I've been in Washington a few years now, but I spent 10 years in the state senate in Kentucky, and I'm I'm a state legislator at heart.
▶ 3:00:15State legislators can't run deficits. They have to pass balanced budgets. It's not just Mr. Moore. It's 13 of my Republican colleagues on this committee served in their state government. So, I know they understand what responsible budgeting looks like, even if they're now pretending to suffer from budgetary amnesia. Because this is the most unbalanced budget in American history.
▶ 3:00:40It runs up the deficit, the debt, and takes a chainsaw to basic services for kids and seniors. If you don't believe me, listen to Republican Representative Thomas Massie. He's at least willing to stand up and admit this budget adds hundreds of billions of dollars to the deficit every year. This is not partisan. This is math. In the revenue column, you have $7 trillion in tax cuts.
▶ 3:01:09In the spending column, you've only got $1.5 trillion in spending cuts. So, you're reducing your revenue by $7 trillion, but you're only reducing your spending by $1.5 trillion. Even my kindergartenner knows those numbers don't add up. So, I'm going to ask you a series of yes or no questions as well, Mr. Lenny. Yes or no? Will this budget add to our deficit? Yes. Okay.
▶ 3:01:37Will it add trillions of dollars to the debt? Yes. All right. So, I don't ever want to hear anybody who voted for this budget ever again complain about the debt or the deficits. And what's it for? It's for a massive tax cut for Donald Trump's billionaire donors. But who will it hurt? kids, seniors, veterans, people working every day just to get by.
▶ 3:02:07And here's how. See, the Republicans instructed the Energy and Commerce Committee to cut $880 billion in spending. But when you look at the Energy and Commerce Committee, they oversee energy, they oversee commerce, but they oversee Medicaid and Medicare. If you take out everything else they spend money on, their mandatory spending, uh, that's about 150 135 billion dollars in eligible spending. $880 billion in cuts. You take out Medicaid and Medicare, you only have 135 billion you can cut. They zero that out.
▶ 3:02:37You still have about $700 billion in cuts to Medicaid. They swear they're not touching Medicare. So that only leaves Medicaid. Now, I know we've heard waste, fraud, and abuse, and Medicaid. You know what? I agree. Let's get rid of it. Get rid of all of it. I will help you. Every dollar we get rid of that is wasted or is fraudulent and Medicaid can go to someone who needs it.
▶ 3:03:05So, now that we've gotten rid of the waste, fraud, and abuse, where are you going to come up with the other hundreds of billions of dollars in cuts? There's only one option. It is taking health care away from people who use Medicaid. People like the 30 million children, the 8 million disabled Americans, the 7 million seniors, even 10% of our veterans participate in the program. It's going to hurt people like my constituent, June.
▶ 3:03:35June is a 10-year-old. She's a 10-year-old with quadripollegic cerebral palsy, the most serious form of the disease. She's wheelbear wheelchair bound. She's epileptic. She has visual and hearing impairments. She requires 247 care. I met June and her mom Meg at a Medicaid town hall in my district just last month. Medicaid provides June with a therapist for PT, for OT, for speech therapy.
▶ 3:04:05It allows her to live at home and get care at home from not just trained professionals, but from a mother who loves her and is the only person who can make her smile, right? She's medically fragile. She had three surgeries last week. Her mother's worked four jobs, but nobody can afford care like this. She's covered by Medicaid now.
▶ 3:04:33Now it's on the chopping block and Republicans refuse to craft a sensible budget, but state legislators still have to. So if these cuts go through, a state like mine is going to be devastated. It'll blow a massive hole in Kucky's budget, leaving people like June without insurance. She's just a kid. She likes her brothers when they're silly. She likes her dog. She likes YouTube and chaperone just like my daughter does.
▶ 3:05:04and she deserves better than this budget. I yield back. I thank the gentleman and recognize uh my friend from the great state of Texas, Mr. Brandon Gil. Thank you, Mr. Chairman, and and thank you for your uh leadership for fiscal discipline in the House and through this entire reconciliation process.
▶ 3:05:26It really has been uh Um, it's a little entertaining to hear my colleagues on the other side of the aisle talk about fiscal discipline whenever they've never seen a foreign country they don't want to shower American tax dollars with. They've never seen an illegal alien that they don't want to give amnesty and welfare to. They've never seen a left-wing organization that they don't want to launder our tax dollars to.
▶ 3:05:53The only area they can ever agree on cutting is whenever the goal is to tear down our military. And now all of the sudden they are the fiscal hawks of the house. It's really really rich. Um but I'd like to to talk about something else here. Um again, thank you Chairman Arrington. Uh Mr. Winfrey, thank you for for being here and for taking the time and and for your advice uh throughout this process.
▶ 3:06:20Um, but I'd like to ask you about repealing the inflation reduction act. Do you think that that's a an efficient way to cut government spending? I do. Yes. Could you tell us a little bit about how much we might be able to save and and where some of those uh areas are? Uh, some estimates put the IRA subsidies in the ballpark of 7 to800 billion over 10 years. Got it. And and how might this give us perhaps the flexibility uh to help pass President Trump's agenda through reconciliation?
▶ 3:06:50Well, rather than targeted subsidies to businesses, it would allow uh the tax cuts to to be even lower than they otherwise would be. So, you're not picking winners and losers. You're rather allowing people to do what they want with their own money. Right. That's right. And we've seen the the Biden administration launder billions of dollars through uh EV charging stations and other kinds of uh green energy scams um even after they've been proven to be wildly ineffective. We spent billions of dollars.
▶ 3:07:18Uh come to find out years later they had built a single charger. Um and yet the Biden administration continued to pour more and more money into EV charging stations. We spent 521 million in August of 2024 and 635 million in January. Uh following that, this is this is a ridiculous use of taxpayer monies. Um, do you think that that we should continue any of these programs? You know, I wouldn't.
▶ 3:07:49Um, but uh but but that again that's because I don't think that the government should be picking winners and losers with these subsidy programs. I think that we should trust people with their own resources. Got it. Do you think that they've been uh effective at lowering energy costs or emissions? Uh, no. It it seems to me like they haven't been very effective at all in doing that. They haven't been been effective in in doing what they were intended to do like building EV charging stations. Got it. And we've heard a lot of talk recently about potential recision packages coming from the White House.
▶ 3:08:19Could you talk to us a little bit about the importance of a recision package? Sure. Recisions have been used throughout US history and they're I mean they're incredibly important to the budget process in part because it allows Congress to be involved with the re the government reorganization process, right?
▶ 3:08:35So, um, there are things that get appropriated over time and then Congress ends up collecting new information and the president uh is often able to do the things that Congress requires them to do at lower cost and uh and the extra money should be should be clawed back, right? I I completely agree.
▶ 3:08:54The recision package that's being contemplated now, of course, would defund parts of USAID, which I think the the American people have been begging for, and to finally get rid of funding uh for Marxist news organizations like NPR and PBS, which is something we've been talking about uh for a very, very long time. I want to end with this question to you. Um we we saw a a recent budget proposal from the president. Would you explain to us sort of some of your thoughts on that? um what what what you like to see in that budget.
▶ 3:09:25Well, just like the House Budget Committee, I think what the president is doing is he's laying out a he's laying out his set of trade-offs that he's making. And that's the exact right conversation that needs to be had um with the executive branch and within Congress. And that's I think everybody on this panel wants to encourage more discussion over what some of these trade-offs are. Um my own views are probably more aligned with where the president's budget is than than where some of my other colleagues on the panel might be.
▶ 3:09:54Um just because you know having been President Trump's budget director, having served in the administration in several capacities, I've seen the bloat especially on the domestic discretionary um that can get clawed back and that Doge is finding. Um but but ultimately the the president's budget is meant to kickstart this process and you all should engage and I would encourage you to do so. Thank you very much. And with that, Mr. Chairman, I yield back.
▶ 3:10:19I thank the gentleman and recognize the gentle lady, uh Miss Stacy Plask from the Virgin Islands for 5 minutes. Thank you very much, Mr. Chair. Um and thank you to the witnesses that are here with us this afternoon. Um I've heard so many buzzwords this morning. uh government accountability, fiscal responsibility. One that I thought was really interesting was structural inequities and then tying that to Medicaid funding. That was a very good one.
▶ 3:10:49Um but when we talk about what are these inequities and what are fiscal uh the thing that I really recognize the most is that this committee is charged with a budget. And most of us would think that our ideal budget would be to either reduce the debt or at least level it out. But that's not what we're doing.
▶ 3:11:14We are going to raise the debt uh by the budget that we have proposed here today. We're going to raise it because what we need to do is ensure that tax cuts become permanent for individuals who probably don't need tax cuts.
▶ 3:11:31We're going to do that and try and justify some of the cuts that we're going to do and ensure that those individuals that we are making those cuts on, the people that are most affected by that are the working class, working Americans, the real Americans, not that minuscule uh set of individuals who are going to get the benefit of this budget proposal that we had.
▶ 3:11:57We are proposing 230 billion in cuts to food assistance programs, 330 billion in cuts to student aid, which means that as many of us had been taught that education was the key to uh having prosperity in America, that education is the roadway for one to be able to grow your family, to create stability.
▶ 3:12:23But we're going to cut that out for so many Americans because we think they should pull themselves up by their bootstraps. They should figure it out on their own. Um, we're going to have whether it's a 300 billion or an 880 billion cut to Medicaid, which is going to affect 80 million Americans. That's not fiscally responsible. Do you know why that's not fiscally responsible?
▶ 3:12:50Because the outgrowth of not taking care of those individuals is going to be uncompensated care at hospitals, which is going to cause many of the hospitals in rural America and other places to have to close. It's going to mean that doctors are not going to get paid. It's going to mean that many of our veterans are not going to get the support that they need. It means that the growing population of elders are not going to get the support that they need in senior citizens homes as well. That's not fiscal responsibility.
▶ 3:13:21You know, you heard the phrase waste not whatn not. We all talk about that. Well, in 2017 when we did the last tax cut, 40% of the reduction in the tax rate for where there was a 40% reduction in tax rate to corporations under President Trump and the Republican controlled Congress at that time. That has already cost us $1 trillion.
▶ 3:13:47That's a fact that that has cost us $1 trillion. It didn't raise workers wages or create new jobs. It did not do that because those individuals took that money and they pocketed for themselves. They may have invested into their company or research and development, but it did not raise the most thing that causes productivity in this country, and that's American workers.
▶ 3:14:14You know, I was in Europe in January when this president was inaugurated and they couldn't understand why we were concerned about our economy because we had the largest GDP growth in the world. In the world. Uh America's growth and prosperity is not from the rich. It's not from giving them a tax cut. It's from everyday Americans.
▶ 3:14:35It's from the woman in the Virgin Islands who works hard every day but still doesn't have enough money but is at least has the the understanding that her children when they go to school are going to have breakfast and lunch that she doesn't have to put out money for that because she's living on third her whole family is living on $30,000 a year. That's what's happening in my district and you're going to strip that away.
▶ 3:15:00That mother also goes to a food pantry to have her lunch every day because she doesn't have what it takes to make ends meet. And she's working. She's working. It's why individuals, our growth is from individuals like construction workers who I know my uh Papa Stevens every evening would come in, sit in his chair after the construction site, and we weren't allowed to touch him for at least two minutes while he tried to pull himself together.
▶ 3:15:30It's from people like my dad, a police officer in New York, who I can recall cutting out newspaper and putting it in the bottom of his shoes in the winter because he had to go out on his beat and work double shifts to be able to send money back to other people back home. Those are what American growth comes from. Not from the um giving money to the to wealthy, not raising the debt by $4 trillion is what we're going to do. But this Congress is going to do that.
▶ 3:16:00This Congress is going to do that because you know what another saying is that we have in in the Virgin Islands. When you find an ass, ride it. And that's what the president is doing with this Congress right now. He's writing us. I yield back. I thank the gentle lady. And now yield to my friend from Minnesota, Ilhan Omar for five. No, no, I'm not going to yield to you right now, Miss Omar.
▶ 3:16:25I'm going to have to go to my Republican colleague who snuck in on me uh so we can have a fair and balanced uh presentation of uh he can sneak back in after I speak. Do you are you saying he he has your proxy to speak on your behalf or no? No. Um there was a hell no in that tone uh that but uh anyway. Okay, Mr. Tudsman, I apologize. The floor is yours.
▶ 3:16:54understand the great gentleman from the Hooser State. I'm way down here. Way down here on your left, Mr. Chairman. So, I'm glad you're in the chairman's seat to the right. Uh, you know, I've got to just comment and respond to the gentle lady's uh comments regarding the debt increase. How else would we keep the promises to Social Security retirees? How else would we keep the promises to Medicare recipients? Um, we could raise taxes through the roof. uh we could kill the economy.
▶ 3:17:24Um you know what? I don't like voting for debt in debt sealing increases. I hate it. But the fact that we're doing the responsible thing in this case is uh should actually be applauded by the gentle lady from uh the other side of the aisle. So I guess that's um a point I know she's she's left now, but um raising the debt uh we're being blamed for raising the debt. At the same time, we want to be able to of course take uh continue all of the the benefits to Americans that the government has promised them.
▶ 3:17:55Um thank you gentlemen for being here and um Mr. Winfrey, thank you for some of your comments lately regarding even your experience on military spending and that's why I think there's another difference between the other side of the aisle and ours. We're willing to look at the uh the spending of what we think is important on military spending.
▶ 3:18:14Would you be willing just to share for the record just real quickly your experience uh back in I think 2018 roughly when uh the there there was an ask for more uh increasing in spending on military. Yeah. So when I was the director of budget policy in the White House um we were trying to figure out what the administration's position was going to be ahead of the negotiation that became the bipartisan budget act of 2018.
▶ 3:18:39And I called up my counterpart, the Deputy Secretary of Defense, and I said, "How much money does the Defense Department need?" Open-ended question. And he said, "I have no idea." And I said, "Well, okay. If we roll back the sequester, then the base defense spending for that year would be about billion." And he said, "Yeah, we could probably spend that." And I said, "Could you spend 620?" And he said, "No, we could not spend 620." And I said, 'Could you spend $610 billion?
▶ 3:19:08And he said, 'We could probably find enough things to spend $610 billion on anyway. And we convinced the president that the that the frugal approach that year would be to to go with the $63 billion. Well, fast forward a few weeks.
▶ 3:19:23The budget had already been printed and uh the Secretary of Defense at the time, uh uh Secretary Mattis, uh had um dinner um with some folks from the defense industry where they convinced him that what we really needed that year was $643 billion. And he came in and talked to President Trump. And President Trump said, "No, no, no. The decision's already been made. I'm going to stick with 603." And that year, Congress appropriated, I think, $624 billion in defense spend based defense spending.
▶ 3:19:54And uh you know, it it it it taught me a a an an important lesson. And that is is that the folks who are benefiting, who are getting rich, regardless of what they're getting rich from in the outside, are ultimately always going to lobby the federal government for more money. Yeah. No, thank you for sharing that because I think that's important for for both sides of the aisle to realize is that it it the problem is on both sides.
▶ 3:20:17Keep people keep asking for more and more from the taxpayer of the United States and uh and now we've crossed I believe a trillion dollars is the is the budget uh number for our defense and we're also paying a trillion dollars in debt service as well. I want to talk a little bit about that u quickly. um how how does the uh how does interest rates play into all of this? And uh Dr. Ra, I had uh you uh a comment or question here for you.
▶ 3:20:44What does history tell us when we look at the impacts of rising interest rates on the country's fiscal health? Thank you for the question, Representative Stsman. Um uh we are seeing in the United States a rise of interest payments in the budget and taking over revenues uh that is really unprecedented in our history. We can look at other countries that have had fiscal crisis.
▶ 3:21:06Uh and um some of those numbers I presented in my testimony today um the amount of revenues that are eaten up by interest currently 18% scheduled under CBO optimistic assumptions to go up to 22%. But those are way too optimistic. So more likely we're going to see 29% of the budget and 40% of non-social security revenues being eaten up by interest in 10 years. And you can look at other countries that have experienced fiscal crisis and we have we have crossed the boundary.
▶ 3:21:33I mean really uh most other countries that have surpassed uh say roughly 15% of revenue uh level they go into fiscal crisis pretty quickly. We are enjoying our exorbitant privilege the fact that the rest of the world likes to buy the dollar that treasury bonds have been a safe haven. Uh that is looking very fragile and so what we learn from history and from other countries is that if we don't stop uh the borrowing and we don't stop interest from taking over our budget markets are not going to play along anymore.
▶ 3:22:02interest rates are going to spike. It's going to be a debt spiral and consumers and businesses are going to feel it. I think that's something I just want to emphasize. It's not just something that matters maybe people in this room. This is going to hurt your constituents. A debt crisis will hurt every American. So, thank you, Mr. Chairman. I yield back. I thank the gentleman and now yield five minutes uh to Miss Ilhan Omar from Minnesota. Thanks, Chairman.
▶ 3:22:28Um, every year we have this hearing where Republicans uh warn us about the dangers of spending while trying to avoid the revenue part of the equation. Uh, we are told that spending is the only problem, but apparently none of these concerns apply when it comes to the Pentagon and paying off military President Trump's budget request in the Congressional Republicans reconciliation bill would bring military spending to a new all-time high
▶ 3:22:58of $1 trillion. And they are doing this while proposing a 23% cut to non-defense uh discretionary spending in the budget proposal. This means slashing education, healthcare, nutrition assistant across the board with both Trump's budget and the reconciliation bill. Mr. Lyndon, is there any presence for giving a the a department that has never passed a full audit a blank check of this size?
▶ 3:23:28Uh this would be the largest defense budget uh in nominal terms. Yes. And in history, do you think it makes any fiscal sense to increase military spending by this magnitude uh and in such an unchecked manner?
▶ 3:23:43I think that in a environment where uh we are being told that we don't have enough money to make sure that uh every American has basic health care or that poor families have to give up their $6 a day in food benefits or that there's not enough money to spend on cancer research or on you know uh housing vouchers which are things that uh the president proposed eliminating.
▶ 3:24:06Uh it's very hard to understand why we can spend we do have money to spend on tax breaks for rich people and corporations and there's always more money to spend uh on defense but there's not enough to go around for you know an every you know an American who's just struggling to get by. Yeah. Thank you. It doesn't really make any sense to me as well. And Mr. Mr. Winfrey, I I think you mentioned a little bit earlier um that when you were at the White House in the first Trump presidency that you were able to convince the president uh to not spend so much on defense.
▶ 3:24:36Uh why why do you think there is just this interest right now to get us to this trillion dollar um uh spend on on the Pentagon? I'm no defense expert, so I'm probably the wrong person to ask. Um, but I I don't think that what the Pentagon is dealing with right now is a is a money issue. Some of it is a management issue. And I'm sure that they're trying to correct for what they see as problems with the management over at the Pentagon right now with the leadership change.
▶ 3:25:04Would you still advocate for us not spending a trillion dollars? Oh, I listen, I I would cut the vast majority of the federal budget, including I think that there's a lot to look at in the Pentagon. I actually think that, you know, one of the the budget process reforms for reform ideas that people have talked about in the past is a zerobased budgeting, a bottomup budgeting and literally asking, you know, what are we spending money on and is it worth it?
▶ 3:25:30Uh I've I mean as as a former legislator, I know everybody talked about this like that that is kind of what we normally do, right? Because we are required to balance the budget so we start over. But I am particularly interested in in this conversation about the defense budget. And I would start this at the Pentagon. I think the Pentagon is a great place. I'm wondering because I'm I'm assuming that you and I are not on the same side of the aisle. Um I'm I'm wondering if if you and I can agree on the fact that the defense budget should be looked at.
▶ 3:26:00Why is there never really an agreement on on both sides to do so? What what do you think is the obstacle there? I think that there, like I said, I think that there are a lot of forces from the outside who benefit from more government spending, right? And that that's in the Pentagon's budget. It's also in the domestic budget. I bet I bet this will surprise you. The number one the highest paid healthc care insurance CEO in the country is a Medicaid managed care provider.
▶ 3:26:29The highest paid healthcare insurance CEO in the country. 100% of his revenue comes from the federal government. 88% of his beneficiaries are Medicaid recipients. I I personally I don't think people should be getting rich off of providing for national defense and I also don't think that people should be getting rich off of the welfare. Yeah. I mean I I I I would agree.
▶ 3:26:50Um I I once remember my my son when he was in in sixth grade, he was really upset about the number of administrators that were in the school. um and the fact that they got paid three times, four times more than his teachers cuz he inquired uh and and I remember proposing uh legislation to level that out uh to to make sure that that wasn't existing.
▶ 3:27:16do think it is important for us to have these conversations because if you are serious about fiscal responsibility and taking care of the American people with our tax dollars, uh then we have to be serious about where the money is is being spent and and where it's going and and the fact that we, you know, have 800 um military bases across the the world um where our next adversary has one.
▶ 3:27:45Uh it makes no sense to me because we continue to spend money uh on that. We continue to uh have our sons and daughters uh live abroad for many years away from their their lives, the the opportunities that they could have for no no reason while you and I pay for it. Uh and so these are I think really interesting conversations and I'm glad we're having them. Thank you. Thank you.
▶ 3:28:12I think the gentle lady and my she would indulge me for a comment about defense spending. My last words to Secretary Hegsth uh was we have to root out the waste at the Pentagon.
▶ 3:28:28uh we are not intellectually honest as Republicans who uh need help in restoring the mantle of fiscal responsibility uh by actually falling through when when when we have the opportunity like with reconciliation and and I agree with you and I'm I'm and I would say chairman I think thank thank you for uh saying that I I you know if if you I'm sure you you visit our military bases and and you have conversations with generals
▶ 3:28:58uh in in command um across the United States and and abroad. Every single conversation I've had with them is that we continue to manufacture weapons that they don't need that are sitting in stockpiles. So there there is a lot of conversations that we could have about the actual waste and there is a reason why the Pentagon has never passed a single audit and we should join forces. Amen.
▶ 3:29:27To make sure that they do that before we give them a single dime. And every time I agree with you, I do it at my political peril. Me too. I say I say uh we should not discriminate where there is waste of course and and where the sacred treasure of your constituents and mine are are not being uh well spent for the mission of providing the common defense or the public good for that matter and I know you're committed to that. I appreciate your comments.
▶ 3:29:55Um I just got two or three uh primary opponents for that uh side comment but let me know if you need help. Oh, help help me less, Miss Omar. If if we get the Pentagon audited, I will I will work to make sure you win your primary. I don't know about the general, but I'll get you through your We definitely have common ground there. Uh Mr. Chuck Edwards from the uh great state of North Carolina, you just bring us on home with five minutes. Yeah. Thank Thank you, Mr. Chair. To all of our guests, thank you for being with us this this afternoon.
▶ 3:30:25You know, I I keep hearing this issue about uh tax cuts being uh just just totally misrepresented. And I feel like I need to correct a couple of things that I heard from my colleague way on the other side of the aisle uh before I ask my question. The uh TCJA reduced f this is the truth.
▶ 3:30:50The TCGA reduced federal tax rates for households across every income level while increasing the share of taxes paid by the top 1%. That's the fact. Uh and as many times as I hear that being contradicted. They can't change the the the fact.
▶ 3:31:11And I believe it's as important that we spend as much time talking about the truth as they spend trying to uh deceive the American public. The percentage decrease in effective tax rates was about 5% for the highest income group and 16% for half of the Americans whose income is below the median.
▶ 3:31:36essentially meaning highincome Americans paid a larger share of all taxes post TCJA than pre-TCJA and middle and lowincome Americans paid a smaller share than before the TCJA. And I would encourage those folks that continue to contradict that to actually go and look at the numbers and not necessarily count on the headlines uh to get their news.
▶ 3:32:04So, thank you for allowing me to share that, Mr. Chair. Uh, Dr. Ra, interest cost as a share of federal revenue show that the federal government is diverting nearly a fifth of all federal resources every year, or about 18% to repay the interest on our debt the government owes after years of spending outside of our means.
▶ 3:32:28You estimate this share may rise to as high as 40% by 2035 and nearly 82% by 20 54 depending on the interest rates. Based on your analysis, even modest increases in interest rates could dramatically worsen our fiscal outlook.
▶ 3:32:49Can you explain just how sensitive the federal budget is to interest rate changes and what this means for our future policym flexibility? Absolutely. Thank you for the for the question, Congressman Edwards. Um, well, it's it's highly sensitive and I think what's also pretty disturbing to me is that the uh baseline assumptions under which the CBO is doing its projections are uh are ones where the 10-year Treasury yield in 10 years would be only 3.8%.
▶ 3:33:188% it's 4.3% now they're they're predicting that rates are going to decline and this is this is inconsistent with the signals that we get from markets forward rates 10 years out have rates uh higher more than a percentage point higher above above 5%. So um highly sensitive and if we don't cut spending it's going to be much worse.
▶ 3:33:37The bottom line is we've got to cut the spending to avoid interest payments from consuming the federal what what risks persist uh if our deficits continue to go on and high debt uh poses to inflation and monetary policy and independence. What does that really look like to Americans?
▶ 3:34:01Well, I think that, you know, the the the major challenge is going to be that uh if markets, international markets, uh lose confidence in the United States as a country that's going to repay its debt with nondvalued dollars and they're going to charge us very high premiums. They're going to charge higher interest rates for our borrowing. Now, that does not only affect the federal government. That affects everybody because all interest rates in the market in the United States market are basically linked to the rates that the federal government pays.
▶ 3:34:29So, it's going to mean higher consumer rates, higher rates for uh uh for auto loans, higher rates for mortgages, higher rates for entrepreneurs who are starting businesses. Uh that is going to be and and it's going to be sharp and people are going to feel the pain. You know, the uh it's quite it's it's very plausible that uh the um Democrats lost the uh uh presidential election in 2024 because of an increase in uh in inflation that then required increase in interest rates to to combat that.
▶ 3:34:56And uh everybody should be worried about uh paying a political price if the same thing uh happens again. And on the fiscal trajectory we're on, if we don't cut spending, I I fear that that that could happen soon once again. And so right now the average mortgage rate is what? Uh I think just ballpark six and a half six and 3/4%. And uh presumably were our debt to continue to uh increase at the rates that uh we just referenced, what could that mortgage rate become, do you think?
▶ 3:35:27Oh, well, I mean, first of all, I mean, for every for every uh percentage point higher in the in the federal government rate, you're going to you're going to see most of that passed on through uh to to mortgage rates. So, we'd be looking at 10 to 15% mortgage rates just like we had in the 1970s. This is not unprecedented. We had this in the 1970s, the early 1980s. uh and it's a revisit of that scenario which today given the much much higher levels of debt would uh would would would really uh really tank the economy in a very very very serious way.
▶ 3:35:55And so what I think I just heard you say is if we don't get our fiscal house in order, the impact to the American family, folks living back in the mountains of western North Carolina, uh or any any place in Texas, all all across America, interest rates are going to at least double, perhaps triple on their credit cards, on their mortgages, on their car payments, on everything.
▶ 3:36:25uh where we have to b borrow a dollar. Is that is that the me the message to the American people? That is correct. If if if we don't do something about it now, we are headed down that path and uh time's running out. All right. Thank you very much, Mr. Chair. I see my time is over. So, I thank the gentleman from from North Carolina. Uh just when you thought you were done, I'm going to hold you hostage for just a few more closing comments. I I'll ask if Miss Omar wants to say a few words.
▶ 3:36:51So, so with the in the absence of the ranking member, uh, you know, to be fair on time, but um, look, I think everybody has a sense in spirit that this last election was historic.
▶ 3:37:10we're and and that our nation is at a an inflection point and that for Republicans at this juncture, although I think in the long run, especially for some of the larger entitlements that are insolvent essentially and and and and that if not addressed will um
▶ 3:37:40will put our seniors in uh a an untenable situation uh automatically without any intervention. I think there are opportunities for bipartisan uh reforms to fix the solveny and and and and ensure a sustainable safety net for seniors going forward.
▶ 3:38:02In this moment, Republicans have what my Democrat colleagues had just a few years ago, uh, this unilateral tool called budget and a generational opportunity to write the ship, the fiscal ship of this country before it hits the sand and implodes. And in almost every scenario, including Mr.
▶ 3:38:32Lyndon, the Democrat witness, whatever you think about how we got there or whatever strategies for getting out of it. It's and it's catastrophic if that cliff should uh effect effect should occur. We can't let it happen. And so my prayer and my rallying cry for my Republican colleagues is to step up to the plate.
▶ 3:39:01Live up to your principles and the values you espouse with respect to living within means. the deficits that are now two trillion and will double in just 10 years, adding 20 plus trillion dollars on top of the World War levels of indebtedness we have today, those deficits are attacks on our So while I'm game for progrowth policies that
▶ 3:39:31will reignite growth because our economic strength is our power base for our global leadership, no doubt. And we have to course correct on policies over the last four years, economic policies and unbridled spending that have failed to strengthen uh our economic future. But I am not game. I am not game.
▶ 3:40:02I will It's my Alamo. I will die on this hill of not adding a tax burden on the backs of our children such that we aren't willing to pay. That was George Washington's admonishment in his farewell address. I heard about Thomas Jefferson.
▶ 3:40:21Now, nobody quoted my favorite James Madison, "A public debt is a public curse." If we don't reverse that curse, we will be the first generation, like it or not, Republican or Democrat, to hand the country worse than we f found it.
▶ 3:40:38and and and to not demonstrate the courage and the sacrificial leadership that every uh exerted in their moment of crisis. I don't know how much time we have. I mean, we had Ray Dalio in here saying it's just a few years and America's going to have an economic heart attack.
▶ 3:41:01So, I uh I'm not going to relent until the ink is to make good on the president's call on my Republican colleagues and myself. Put our nation on a path to balance. I am going to fulfill that vision of our Treasury Secretary. Stabilize the debt. bring the deficit to GDP down to 3 to 3 1/2%.
▶ 3:41:32But do you know what that is, Mr. Lynon? Do you know what that would cost us in terms of cuts? A lot more than what we have on the table today. Let me be clear. Like 7 trillion, not the one and a half to two trillion. So, let's put things in perspective and let's be intellectually honest about the s this situation to balance the budget over the 10-year window which required three or four trillion when I was a freshman in 17 and 18 now requires 10 trillion
▶ 3:42:02in spending reduction about 15 trillion overall. Holy smokes. This means that whatever we do, and I believe we did the right and responsible thing to to frame up the fiscal guard rails and the budget targets so that they offset, we didn't play budgetary and accounting gimmicks.
▶ 3:42:28We said with revenue from growth and two trillion in spending reductions, which I think we have much more in savings from wasteful and unnecessary spending in the people's government, but if we do those things, not only will we not add to the deficit, we'll bring the debt to GDP and deficit to GDP down for once in my lifetime.
▶ 3:42:53and then we would have to rinse and repeat because we're not getting out of this debt hole with one reconciliation bill. But be clear, if we don't seize this moment, rise to this occasion, and channel our inner Thomas Jefferson and James Madison and George Washington and and the greatest generation who took real bullets to ensure that this experiment in democracy
▶ 3:43:23self-governance persisted. If we don't then um then we we we have consigned our kids really to to an economy that will be u an utter failure to produce the opportunities that this country has from its birth.
▶ 3:43:44And it will also produce the kind of uh uh it will it will it will position us to fail to influence the world and there will be values and there will be interests that are contrary to America's and our allies interests that will that will win the day. So here we are on the precipice of who's going to own the 21st century.
▶ 3:44:13I mean, in terms of dominant influence, I don't think there's a more generous country in all the world, regardless of our disagreements. I don't think there's a more benevolent country. I don't think there's a country that strives for greater human ideals and rights than America. But it's all hanging out there. It's all dangling over the precipice of of what something we actually have control over. And Republicans have total control over this.
▶ 3:44:42I won't go through the list of things, but I heard uh Mr. McCarthy say, "How are you going to reform Medicaid without cutting benefits?" We have a list of things. I mean, check the Medicaid roles twice a year instead of once a year, which is what we did before President Biden was president, and you save $ 160 billion. Start with program integrity. Don't let illegal immigrants receive the benefits of tax dollars in social services.
▶ 3:45:12I don't know if this is accurate, but one group says it's $150 billion. Okay, $9,000 per illegal immigrant. If that's true, then it's more than we spend on US citizens, our most vulnerable citizens on Medicaid. But regardless what the number of of it is, it's unconscionable that you have so many programs uh safety net programs that are not sustainable.
▶ 3:45:40And here we are allowing monies to be siphoned off not just for illegal immigrants, but for things other than serving these most vulnerable people. And I'm talking about payroll tax and uh or provider tax rather, provider tax and and other gimmicks. That's 600 billion. And the list keeps going on. A work requirement like we have in every other means tested welfare program 150 billion. I'm at a$ 1.5 trillion dollars just in the list I wrote down.
▶ 3:46:11And I believe we would actually strengthen the benefit and the sustainability. And maybe there's some uh u savings that we could plow into the most vulnerable to strengthen the benefit and improve the access. I'm open to that. But I I hope my colleagues don't get paralyzed with um political fear because that's what's gotten us to this point.
▶ 3:46:40I hope that the scare ti tactics don't um put them in a posture of inaction because we will fail. And as Ben Frank Franklin said at the constitutional convention, we will be a byword for generations to come. This is the chapter that's going to dictate that future and uh I think it's going to turn in this moment and I think we have the right president. I think he is totally committed to this in his heart of hearts.
▶ 3:47:10Um I think he has the political courage to do just about anything that he sets his mind to. And just like he is relentless and immovable in what he wants to do to address the trade deficit because he knows this is the last opportunity to course correct.
▶ 3:47:32I would suggest there are many members like myself who are just as immovable and just as committed on our budget deficits because of what it will cost this country if we don't do something. Thank you for indulging me for that long uh uh diet tribe.
▶ 3:47:51And if my colleague is still awake, I mean, if she could just if she's still uh lucid after that, I'm going to ask if she would just have the last word and then we're just so grateful for your time. We really every one of you, thank you for being here. Thank you, Mr. Chairman.
▶ 3:48:10Um it was it was really beautiful listening to um you you you talk about your um aspirations for for what is what you think is happening um which is a little bit out of touch with the reality of what is taking place.
▶ 3:48:32Um, you know, I would I would love for it to be true that we are not adding to the deficit um with the the proposals that you all have, but you are adding to the deficit. I would love for it to be true that um you know we we are going after uh folks who are on programs undocumented which people do not qualify for any program if they are not documented which is not the reality.
▶ 3:48:59Uh, and most people are in in these conversations on your side of the aisle, I think, think that you only qualify for anything if you are a citizen of this country. There are a lot of people who are in America with documentation, who are to be here, um, who work, who contribute, who are taxpayers themselves paying into programs.
▶ 3:49:26I was a a legal resident for 5 years before I became a citizen, paid into the system. And so obviously I deserve the same right as everyone else who paid into the system to be able to benefit from the system I am paying into. And and that is not the conversation that anyone on your side of the aisle is having.
▶ 3:49:46Because when you talk about undocumented folks, you to your supporters, what they hear is everyone that is not born in the United States. That is why they are looking at people who look like me and others and saying, "Maybe they should get deported." Because to them, if they don't look like you, chairman, they don't deserve to be in the United States. They don't deserve to be receiving any benefits.
▶ 3:50:16uh regardless of whether they pay into it or not. And the reality is that there are so many people in our country, as you've mentioned, who are vulnerable, who desperately need support in regards to health care, who need support in regards to housing, who need support in regards education. And those are the people that we are not having a conversation about.
▶ 3:50:43When you propose $880 billion dollar in cuts to Medicaid, you are not only going after people who shouldn't have access to the program, who already don't have access to the program, but you are going after our health care infrastructure.
▶ 3:51:02Because that level of cuts to any of our health care institutions, whether it is rural health care, whether it is urban health care, whether it is community healthcare centers, when you have that level of cuts, it means institutions are going to get shut down.
▶ 3:51:22So that means you and I even if we have private health care we might not be able to get the services that we need because that institution no exists. We have our trauma one respon health care centers in Minnesota saying we rely on Medicaid and Medicare 50% 60%.
▶ 3:51:49So, if that money is not coming, it means services are going to be disrupted. That means they're going to fire nurses. That means they're going to have to shut down some ambulances. That means they're going to have to shut down a couple of their wings. That means when I need care, god forbid, if something were to happen to me and I have to get flown in to Henipin Healthcare, that service will be delayed.
▶ 3:52:20So we are not we are not living in a country that is not interconnected with everybody that is in it with the services that it the the government provides. And so when we are having these conversations, we have to be serious. We have to be honest. We have to talk about what what these programs means because when when you rely on a president that truly doesn't know much of what he is talking about as much as everybody wants to believe.
▶ 3:52:49This is a president yesterday talking to the Canadian prime minister saying we subsidize your your country's economy. We don't subsidize their economy. We buy things from them. Buying cars from them, buying steel from them is not subsidizing them. It's things we need in order to produce the things we need.
▶ 3:53:17In Minnesota, we have $22 billion trade with Canada. So like this is you can't take him seriously. He started a trade war that is impacting every one of us in all of our different capacities.
▶ 3:53:36And and and and to say we we we trust and believe in him or there's anything historic about his election when every other president that's gotten elected has won with more percentage in advantage to to his opponent. It's it's as much as I respect you, it's it's silly.
▶ 3:53:58And I and I want as as colleagues, as people who are entrusted to to be leaders in Congress to have honest conversations and and be real about the state of our country, the state of our economy, where we're going, and the real pain that the American people are feeling as they try to afford their lives, and think about how we can actually support them. And I yield back.
▶ 3:54:25I thank the gentle lady and um appreciate the participation of everybody and uh especially our witnesses for being here. I've got to read this formal statement. Uh again, Dr. Ralph, Dr. Winfrey, Mr. Schneider, Mr. Lynon, uh we're grateful for your time and insight. Um please be advised the members uh may submit written questions to be answered later in writing.
▶ 3:54:52Those questions and your answers will be made part of the formal hearing record. Any member who wishes to submit questions for the record may do so within seven days. And with that, the committee, believe it or not, is finally