–Democracy Tested by Impending Debt Doom
By Denny Gulino
CAPITOL HILL (MaceNews) – “The outlook is dire and will have consequences,” Douglas Holtz-Eakin told the House Financial Services Committee, one of many warnings heard Thursday about the nation’s unsustainable burden of debt and interest payments..
Holtz-Eakin, president of the American Action Forum, was one of four of Washington’s acknowledged top budget and debt experts to tell the committee in great detail what “unsustainable” means for the future.
They told of a slowly approaching catastrophe, governmental debt so large that it squeezes the life out of economic activity and sends hungry people into the street. Their common observation was that the threat has not been widely recognized for what it is, never registering as such with the American public at large.
One committee member, Steve Pearce from New Mexico, said he thinks Americans will never get the message about a coming debt crisis because all they hear from Congress are “esoteric platitudes.”
Another observed that in his four years on Capitol Hill, this was the first hearing on the debt threat he has come across.
Still another, Rep. Jim Himes of Connecticut, said he’s tired of hearing members of Congress declare in pious tones the growth of debt to be one of the nation’s biggest problems “while doing everything they can to make it worse.”
“I’m a pessimist on this. I’ve given up,” he said.” Eventually, he continued, a debt crisis will be forced on the Congress and markets will likely react very violently. When or how violently the four witnesses couldn’t say.
As population growth slows and productivity growth stalls, the potential for economic growth and the ability of the American economy to service the national debt steadily diminishes. So far, Himes said, markets don’t focus on the prospect that at some point the debt service burden will become impossible to meet.
Several committee members pointed out that such has been the fate of many smaller economies in the recent past, from Greece to Zimbabwe. In contrast, “everyone in the world loves to lend America money,” said Maine Republican Rep. Bruce Poliquin.
As has often been pointed out, the luxury of having the dollar as the reserve currency other countries need to pay for commodities also serves to insulate – for now, at least – the U.S. from any toxic effects of massive and essentially uncontrolled borrowing.
The mood was somber around the edges, particularly so since the hearing was the second last swan song for Chairman Jeb Hensarling, who’s choosing to leave Congress, and of some committee members, whose constituents made their departure decisions for them.
The subject of the hearing, the threat to the country’s future from effects of today’s and tomorrow’s trillions of dollars of debt, did nothing to dispel the atmosphere of gloom.
Only a small fraction of the committee’s members, about one fifth or around 15, showed up. A few members of the House, having lost their elections, have found other things to do rather than answer the call to complete the Lame Duck session of Congress by coming back to Washington for a final couple days of work.
On the wall, a permanent fixture of the committee room, a debt clock with a screen showing the blur of numbers on the right side representing the growth of the debt second by second. On the left side the numbers were stable, showing $21.9 trillion in debt at the moment.
In a couple of years, the Congressional Budget Office has warned repeatedly, the annual mismatch of spending and taxes will add a trillion dollars and more to the national debt every single year.
Ninety percent of the increase in the debt in the next 10 years will be generated by Medicare and Social Security if nothing is done, the witnesses agreed.
However rather than focus on the specifics of ways to recalibrate transfer programs, raise taxes and cut spending much of the committee questions were typical efforts to blame the other party for adding to the debt and to mock the other party’s observations about it.
Throughout an air of resignation seemed to prevail, acknowledging Congress for whatever reason cannot come to grips with the arithmetic certainty of fiscal disaster.
It was observed more than once that democracy itself is being tested as to its ability to reconcile popular appetites for spending and lower taxes with reality.
Republicans consistently saw the latest tax cut as a boon to the economy and not a major generator of debt imbalances and Democrats saw it as a gift to corporations and the rich, ultimately at the expense of everyone else.
Yet, as the hearing wore on, there seemed to emerge more of a consensus, to be obliquely acknowledged if not explicitly articulated, that both parties are failing the country when it comes to budget responsibility. Hensarling said it will take a bipartisan effort “to save us from national bankruptcy.”
Optimists were not to be heard from and absent from the discussion was any expressed hope that Congress will, in fact, be able to address the debt quandary any time soon – not until it is forced to when the next Great Depression strikes.
“I don’t know what to say,” Holtz-Eakin exhaled, given that in 15 years of appearances before Congress he’s been repeating the same urgent warnings for 15 years, without any resulting evidences of fiscal responsibility. He was director of the Congressional Budget Office from 2003 to 2005.
Reform of Medicare, growing 8% a year, and Social Security and other so-called entitlement programs are crucial, he said, acknowledging that it’s an understatement to say “these changes will be very difficult.”
Despite all the public spending on health care, the U.S. remains the only developed country that doesn’t provide universal health support for children, another of the witnesses pointed out, while the average life expectancy declines.
“I do not believe the American public understands the scale of the problem that faces them,” Holtz-Eakin said, nor does he believe Americans have been given the whole truth.
Another witness echoed Holtz Eakin, saying Americans don’t see the “$1.3 trillion avalanche” of additional deficits that will be arriving in the next decade. Tax cuts and other revenue actions are subtracting $400 billion a year from government revenues for the next 10 years, he said.
Early on, as the hearing got underway, delayed an hour by votes on the House floor, Hensarling acknowledged that looking back on his 16 years on Capitol Hill, “I have no greater regret than my inability to convince more of my friends and more of my colleagues of the peril of an unaddressed national debt.”
Hensarling warned of what happens when a country’s debt gets out of control, showing his committee a series of slides, of padlocked factories, and people who lost everything in debt crises in other countries, like Greece.
Hensarling says he’ll consider his hearing a success if “every single member” realizes debt is a looming crisis.. “One day history will judge us,” he said.
Incoming chair Maxine Waters amplified on the theme, but with added zingers aimed at Republicans, about how companies she said have failed to use their tax cut windfalls in a productive way. When she takes over, she said, “This committee will reject reckless policies.”
At the end of the hearing, Hensarling said he, a “very conservative Republican,” was handing over the committee, to a “very liberal Democrat” with whom he has disagreed on virtually everything.
However, “In the 16 years I’ve been on this committee the gentlelady from California,” he said, “has been a leader and she has commanded respect and she has commanded people’s attention.”
He continued, “She has always negotiated in good faith. She has been thoughtful on the issues and most importantly to me, her word has always been good.” That a woman, and a woman who is black has been able to succeed, he said, “is a testament to her tenacity and drive.”
The comments were recognized with committee applause. Waters replied, “I am a bit overwhelmed” by the comments. “You have managed this committee with great dignity and you have managed it in a very fair fashion,” she said. Earlier in the day the Democratic Caucus confirmed Waters as the committee’s incoming chair.
The entire hearing, telecast by C-Span, can be retrieved from the cable channel’s archives. The prepared testimonies of the four witnesses are available at: https://financialservices.house.gov/calendar/eventsingle.aspx?EventID=404081.
Aside from Holtz-Eakin the witnesses were Jared Bernstein, senior fellow, Center on Budget and Policy Priorities; Brian Riedl, Manhattan Institute and Maya MacGuineas, president, Committee for a Responsible Federal Budget.