Transcript: Q&A w/ Rep. Rob Woodall on the CBO’s 2014 budget & economic outlook

Partial transcript of Q&A with Rep. Rob Woodall (R-Georgia) on the Congressional Budget Office’s (CBO) 2014 federal budget and economic outlook. The House Budget Committee hearing was held on Feb. 5, 2014:

Rep. Rob Woodall (R-Georgia):
…I agree with your answers to all of [Rep. Pocan’s] questions about stimulates short-term growth. And of course, we’ve done a lot of that. We did a trillion dollar stimulus package in the first year of the President’s administration. We did a trillion dollar health care bill. And as I look at all of that effort that was supposed to produce short-term results, what I see from your report is that it virtually doubled the public debt held by the public. So we were so committed to short-term stimulus, that we borrowed more as a percentage of GDP in about five years that we have in the history of the nation combined. And we can argue about whether that was a good idea or a bad idea, but we did that in an effort to create short-term growth.

When in your projections do we return that debt back to historically normal levels? Presumably, if we’re going to do these things to stimulate short-term growth, you have to pay the piper sometime. When in your projections do we end up returning the debt to historically normal levels?

Douglas Elmendorf, Director of the Congressional Budget Office:
So, debt does not return to historically traditional share of GDP at any point in the next 10 years or, as we showed in our long-term outlook last fall, any point in the decades beyond that.

Rep. Rob Woodall (R-Georgia):
Again, I agree with what you said to Mr. Pocan that we can do things in the short-term to stimulate economic growth. But presumptively that’s good for the economy. What you’re saying is that the things that we did so exacerbated our debt not just in the 10-year window but in even your longest term windows we never return debt to historically normal levels. It is always at this abnormally high and perhaps dangerous level?

Douglas Elmendorf, Director of the Congressional Budget Office:
So, let me add a bit of interpretation to this. First thing to realize is that a large share of the increase in deficits and debt in the past half dozen years was not a thing that any of you did deliberately. It was the automatic stabilizers in the federal budget and we’ve quantified those the best we can in this outlook.

So the biggest thing, I think, that raised deficits and debt was not the deliberate actions, it was just in the weak economy tax revenues fall by a lot, spending rises to some extent automatically. So a large share of the increase in debt would have happened if Congress had taken no actions.

Additionally, Congress took some actions that by our estimates substantially strengthened the economy and added output and added jobs during that period. But you’re right if that debt – the extra debt is never paid down, then for all of its good in the short-term, it becomes a drag on the economy in the longer term.

Rep. Rob Woodall (R-Georgia):
I regretted that when you and Mr. Van Hollen were having your discussions earlier we talked about balanced budgets in the ’90s and early 2000’s because what I think of as a cash flow surplus during those years but the truth was Congress was borrowing from the Social Security trust fund, the money that was supposed to be dedicated elsewhere, so it’s hard to call that spending balanced. I don’t want to take issue with that.

What I want to take issue with is the suggestion that tax rates were higher and that that led to some prosperity. When I look at your 10-year window, I see income tax receipts as a percentage of GDP rising to about 9.4%. And as I look back historically in the decade upon decade upon decade that your report covers, I can only find one year in the history of our nation that income tax revenues were higher than they are projected to be in this 10-year window.

So we’re going to have historically high income tax collections but to say again, you’re saying that debt is not going to return to normal levels and in fact, debt’s going to continue to rise nominally?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congressman. I would just add that there’s been some shifts, as you know, in the distribution of taxes over time so certain tax – corporate income tax – has collected less in revenue in some periods and more in others. And you’re right, individual income taxes are the part that we see rising most substantially over the next decade.

Rep. Rob Woodall (R-Georgia):
…You opened your statement saying that deficits have declined sharply and will decline more. Folks back home in my district are going to hear you when you say that and they trust you when you say that. And of course, that’s absolutely factually accurate. What’s not said is they’re declining to a level that is still higher than the historically highest level that they have ever been before this administration…

Douglas Elmendorf, Director of the Congressional Budget Office:
May I just say that we tend to focus on budgets components relative to the size of the economy as a percentage of the GDP, particularly doing comparisons over a long time periods when prices and the populations and the real size of the economy have changed a lot. So the deficits that we see for this year and next year are actually at or below the historical average share of GDP looking back over the last 40 years. What is outside of the historical average over the last 40 years is debt over the share of GDP, and I took pains to emphasize that point in my opening remarks as well.


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