Transcript: Q&A w/ Sen. Ron Johnson (R-Wisconsin) on the CBO’s 2014-2024 budget & economic outlook

Partial transcript of Q&A with Sen. Ron Johnson (R-Wisconsin) on the Congressional Budget Office’s (CBO) 2014-2024 federal budget and economic outlook. The Senate Budget Committee hearing was held on Feb. 11, 2014:

Sen. Ron Johnson (R-Wisconsin):
…To start off with, there are a number of things I agree with you in your opening comments. You said there were – really want to drive for opportunity growth, I think we pretty well established that in the testimony that the Affordable Care Act is going to decrease economic growth by shrinking our labor force.

I also agree we need to address our long-term fiscal challenge. I disagree with the way you characterized certainly what folks like me want to do in terms of the debt ceiling. It’s not about demanding a ransom. It’s about trying to instill from the increase the debt burden on our children and grandchildren. I think most Americans would expect us to at least enact some reforms in long-term programs, you know, instill some additional fiscal discipline.

So let me start off there, Director Elmendorf, if we stop deficit spending today – and I realize that’s kind of a long shot – if we stop deficit spending today other than maybe some short-term cash flow problems there would be no reason whatsoever to increase the debt ceiling, correct?

Douglas Elmendorf, Director of the Congressional Budget Office:
Well, Senator, as you know, the unified budget deficit does not capture all the forces that lead to an increase in the debt subject to lift.

Sen. Ron Johnson (R-Wisconsin):
There could be some cash flow issues. There could – I got that. But in general, in terms of how much, how dramatically we have to increase the debt ceiling, by and large the reason we have to increase the debt ceiling is because we continue to deficit spend, correct?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right, Senator.

Sen. Ron Johnson (R-Wisconsin):
Okay. I’ve got a chart up here because I think as a problem solver myself, the first step to solving a problem is to admit that you have one. And when I hear people say that Social Security is solvent to the year 2033, I challenge that assumption. And the next step you have to probably define it, and I would continue to argue that we don’t have a 10-year budget window problem; we have a 30-year demographic problem. And these are – what we’ve done with your CBO estimate is everything you do is basically a percentage of GDP or most of what you do, which certainly I found…in talking to my constituents, they don’t quite – that doesn’t do it for them in terms of understanding the problems. So, what we’ve attempted to do – and I would certainly like your input. I want to make sure that we’re getting this right. But off of the latest CBO projections, we’ve taken those percentages of GDP and put numbers to them, and this is what we’ve come up with over the next 30 years. In other words, deficit spending of $8 trillion in the first decade, $31 trillion in the second decade, $88 trillion in the third decade for a whopping total of $127 trillion.

And I want to first focus on Social Security because I appreciated during our December budget conference committee hearing when I was just kind of going through the practicality or the reality of the fact that yes, Social Security trust fund holds right now $2.4 trillion of government bonds, but the Treasury has that offsetting liability which nets to $0. And your CBO projections of basically deficit spending in the Social Security trust fund, in other words the amount of benefits we’re going to pay out that exceed the payroll tax, it’s about $15 trillion. Is that largely correct?

Douglas Elmendorf, Director of the Congressional Budget Office:
We’ve not done the calculation in dollar terms as you have, Senator, but it certainly would be a large number and I will defer to your calculation.

Sen. Ron Johnson (R-Wisconsin):
Well, I’ll tell you what. It seems you were being very cooperative with Sen. Kaine in terms of providing those types of calculations…I would really like CBO to start converting these percentage of GDP and do provide long-term GDP figures in dollars…convert all of the rest of your alternative scenarios baselines in dollars, that would be extremely helpful.

Douglas Elmendorf, Director of the Congressional Budget Office:
So, as you know, Senator, we focus on shares of GDP because we think that nominal dollars have less and less meaning as one goes further and further out. We project that GDP over the coming decade will be more than $200 trillion in aggregate. So we find that these sorts of numbers without the context of the size of the economy around them have the potential to be…[interrupted]

Sen. Ron Johnson (R-Wisconsin):
But you – but it’s all relative. So you publish the dollar amount of the size of the economy. So in 30 years, the size of the economy according to your numbers would be $64.8 trillion. So off of that, the percentage of GDP, what we’re coming up with is the cumulative deficits over that time period would be $127 trillion. Our debt at that point based on those projection by the way would be – I got – about $128 trillion divided by $64.8 trillion economy, it would 197% debt held by the public as a percentage of GDP. Those are really scary numbers.

Let me put this further into context and then I’ll be done. To put that number into context…currently the net private asset base in America – all assets held by businesses, large and small, and households – is about $96 trillion. So in the next 30 years, which by the way my little baby is 30 years old and that went by like that, so the relevant time frame the baby boom generation retiring – all these benefits we’ve promised but not made adequate provisions to pay for – that long-term fiscal challenge that Madam Chair talked about us addressing, the only way we’re going to address that is if we admit we’ve got a problem, we start properly defining it, and put it in the terms that American people understand. Percentage of GDP is not a term or a way of presenting this that the American people understand. I think they’ll start getting that if we start talking in these terms about the real danger facing this nation. We just might have an opportunity to in a bipartisan fashion get everything on the table and start working toward real solutions, so we stop mortgaging our children’s future.

###

Learn More:

Leave a Reply

Your email address will not be published.