Transcript: Super Committee Co-Chair Sen. Patty Murray’s Q&A on previous debt proposals

Joint Select Committee on Deficit Reduction Hearing: Overview of Previous Debt Proposals on Nov. 1, 2011

Transcript of Committee Co-Chair Sen. Patty Murray’s (D-WA) Question and Answer Session: 

Sen. Patty Murray (D-WA), Co-Chair of the Joint Select Committee on Deficit Reduction. IMAGE SOURCE: DeficitReduction.gov

Sen. Patty Murray (D-WA): 

“Thank you very much. And again, thank you to all for your wise counsel on a very serious challenge.

“It seems both of your prospective proposals would achieve deficit reduction of at least $4 trillion over the next 10 years through the use of a balanced approach framework that includes reductions in spending and increases in revenue. So let me just ask all of you – maybe by show of hands – do all of you believe that to get a balanced program that addresses the fiscal crisis, do we need both spending cuts including entitlement reform and revenue increases? Show of hands?

[All four panelists raised their hands.]

“Okay. Well, let me start then with Sen. Simpson, Ms. Rivlin, maybe both you could answer for your sides. Tell us why a balanced approach that includes both reductions in spending and increases in revenue was proposed by your committees?”

 

Former Sen. Alan Simpson (R-WY):

“Well, we know you can’t cut spending your way out of this. You can’t tax your way out of it. If you get into some of the rates that would happen if you’re doing taxes or whatever it is – it can’t be. We tire of the phrase tax increase when we’re digging around in a $1 trillion $100 billion stack of stuff called ‘tax expenditures,’ which really affect about 5% of the American people.  The little guys never heard half of them. And we said let’s take those, let’s take those. And when you take one of those out, to call that a tax increase is a terminological inexactitude. It’d be called a lie, in other words. That’s where that is. You can’t – this is a fake to say that you get rid of a tax expenditure and that it’s a tax increase. So we said we’re not going to get into that business of tax increase so that Grover [Norquist] won’t have a stroke over the shock, we’re just going to go around Grover and let Grover rant. Because I’ll tell you one thing: if he and the AARP – if we are enthrall to those two groups, we haven’t got a prayer and neither have you.”

 

Sen. Patty Murray: 

“Dr. Rivlin?”

 

Dr. Alice Rivlin:

“I agree. We were attacking expenditures in the tax code, and they are almost identical with expenditures that are called ‘spending.’ There’s another reason, however, why you need a balanced approach, and that, I think, is the demographics. This government is going to have to absorb a doubling of the number of people over 65 in the next couple of decades. That’s an awful lot of people. That isn’t changing the role of government – that’s absorbing a lot more people, which we can’t do unless we have some more revenue. We must bend the curb on health care. We must fix Social Security. But we can’t do it in such a drastic way that we can absorb all of those people without some more revenue.”

 

Sen. Patty Murray: 

“Yes, Sen. Domenici?”

 

Former Sen. Pete Domenici (R-NM): 

“Might I just say, I think you all know – at least you, Madame Chairman, and a couple of other senators up there have known me for a long time. I didn’t come on to this committee trying to get anything. I didn’t have any preconceived percentages that we used to work on. I said let’s start over. And the truth of the matter is even when you fix Medicare in any reasonable way and bend the curve so that over 20 years you really get some savings, the deficit is still too big unless you decide to fill that gap with something. In other words, you don’t have a viable budget versus the economic situation. So you have to look at the only thing that’s left because you’ve done the others, and we did it that way.”

 

Sen. Patty Murray: 

“Very much appreciate that response, Senator.

“Mr. Bowles, let me ask you in the guiding principles and values that were established by your commission to guide in the development of your recommendations, you state that “Growth is essential to restoring fiscal strength and balance, and deficit reduction must not disrupt the fragile economic recovery.” CBO and many economists agree that the rate of economic growth and the recovery projected for the remainder of this year and through 2012 was considerably stronger when your commission put out its recommendations than it is today. So I wanted to ask you if you believe, first of all, that the commission was successful in adhering to those economic principles but also whether given the weaker projections for today, whether we should be doing more now for economic growth and reducing unemployment?”

 

Erskine Bowles: 

“First of all, it was the number one founding principle in our commission that we didn’t want to do anything that we’d consider to be overtly stupid. We felt that it would be overtly stupid to do anything to disrupt what is clearly a very fragile economy and, in fact, a very fragile economic recovery.

“Therefore, if you look at the cuts that we made in 2011 and 2012, you’ll see that those cuts are quite small. However, we thought it was very important for us to get spending down and so we did make significant cuts in spending in 2013. Those spending cuts do get us back to 2008 levels or pre-crisis levels of spending.

“When we came forward with that provision lots of people thought that we were being too conservative. They said the recovery is real, that if you look at things like back in December – as you asked about – there was an increase in factory production; existing home sales were going up; retail sales were going up; it looked like banks were starting to lend to small businesses; unemployment was starting to come down; and investor sentiment were strong. And therefore people said at that point in the time the recovery is real.

“We, on the other hand, felt while the recovery may be real, it was very, very fragile. The reason we thought it was fragile – and I think it’s been proven to be right over time – is we were very concerned about demand. Demand comes from three basic sources. You know, consumer is still two-thirds of GDP. In our cases, we looked at consumer debt, household debt was still at about 120% of household income. It was about $13 trillion outstanding. Over half of it was at floating rates. If you think that a rise in food prices and gas prices took a bite out of consumer demand, you wait until interest rates go up. So we didn’t see the consumer, who had suffered a decline in their home value and a loss of income, driving the economic recovery.

“Second leg of growth would come from business. It’s a fact that small businesses can’t grow and can’t create jobs without capital, and banks simply weren’t lending to small businesses. So we didn’t see that the small business community would be able to lead us out of the recovery. With big businesses with plenty of capital, their capital was basically on strike because they didn’t have confidence in the direction the country was going or didn’t know which country the country was going in. Lastly, it’s really hard to see business really lead us out of the recovery when the construction industry is really on its backside.

“The third level of economic growth would come from government. We didn’t foresee an additional big stimulus package coming out of Washington to add growth to the economy. If you look at what state and local governments were doing, they were actually cutting spending and laying people off trying to balance their budget. So we didn’t see where the growth would come to drive the economic recovery.

“Myself, I believe we’re in a structural contraction which will lead to a prolonged period of relatively slow growth and relatively high unemployment.”

 

Sen. Patty Murray:

“Dr. Rivlin, your plan also address the concern of accelerating our recovery and phasing in some kind of deficit reduction. I think you also were worried about the demand. Can you talk to us about what you did in your proposal?”

 

Dr. Alice Rivlin:

“Yes, we were very worried about inadequate demand. So we not only phased in the deficit reduction slowly but we called for a one-year both sides – employer and employee – payroll tax holiday on the grounds that that was needed to stimulate demand upfront before we could safely phase into the deficit reduction that we were calling for. That was at a time when the economy was somewhat stronger. It seems to us even more necessary now.”

 

Sen. Patty Murray:

“Did you have anything besides the payroll tax to stimulate jobs in your plan?”

 

Dr. Alice Rivlin:

“No. We put that in as a kind of symbol of how concerned we were. A full year of payroll tax holiday for employer and employee is, I think, $650 billion. That’s a lot. Now you could do it different ways, but we put it in to symbolize the fact that we were really worried about inadequate demand.”

 

Sen. Pete Domenici:

“Madame Chairman, I might comment on that. Frankly, I was very surprised in looking at the group of people that were on this debt reduction group. When it came to this issue, they were as worried as on any issue I’ve seen because they were really fearful that the economy was not going to recover. Frankly, we don’t know what will make it recover, but Alice has appropriately told you how we came about what we did and it is a lot of money. I guess some of us said it might have been a much better thing to have two years ago than whatever we tried to bring jobs. It just might be a better way to than anything we did. So we said let’s suggest it.”

 

Sen. Patty Murray: 

“Okay. Appreciate that very much. My time has expired. So thank you very much.”

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2 Comments on “Transcript: Super Committee Co-Chair Sen. Patty Murray’s Q&A on previous debt proposals

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