I would like to thank Vice Chairman Brady for calling this hearing on what is an important and timely subject. I would also like to thank my colleagues here on the committee and each of the panelists for coming today to share their insights and perspectives.
With the August 2nd debt limit deadline fast approaching, we stand at a crossroads on our fiscal path and economic future. If we do not restrain and permanently reform federal spending, we place our nation in grave danger.
Debt rating agencies and leading Wall Street institutions warn us that unless $4 trillion in cuts are made, with long-term sustainable fiscal policies to balance the budget, the U.S. will lose its AAA status within 90 days. As we all know, a downgrade will result in higher interest rates and downwardly spiraling financial performance as debt service costs rise. This is a scenario we literally cannot afford.
Unfortunately, the response by congressional leadership has been to propose largely illusory cuts in spending for a real dollar increase in the debt limit and yet another commission – encouraging Congress to further abdicate its constitutional responsibilities and not lead.
Although Mr. Boehner claims the first part of his two-part plan will initially cut $1.2 trillion in discretionary spending over ten years, CBO analysis reveals that it will result in only $710 billion in outlay reductions over this period – nearly 41% less than Mr. Boehner purports. This illusion of greater savings is achieved mainly by using the pre-Continuing Resolution baseline rather than the March 2011 baseline, which was the result of Mr. Boehner’s own much heralded negotiation.
Moreover, nearly 50% of the cuts are scheduled occur in the last three years of the 10-year projection, reducing the likelihood that they will happen at all – because under this plan, Congress cannot bind future legislators.
Only a balanced budget amendment to the Constitution can permanently reform spending in Washington. While statutory caps like Gramm Rudman Hollings and PAYGO were well intended, they lasted only a few brief years and failed to meaningfully change the tragically flawed system. Moreover, they did not prevent the crisis we are currently facing.
I look forward to listening to each of your testimonies on how we can deal with the spending problem we face.