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UNSUSTAINABLE FEDERAL SPENDING 

AND THE DEBT LIMIT 

HEARING 

BEFORE THE

SUBCOMMITTEE ON OVERSIGHT 

AND INVESTIGATIONS 

OF THE

COMMITTEE ON FINANCIAL SERVICES 

U.S. HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

FEBRUARY 2, 2016 

Printed for the use of the Committee on Financial Services 

Serial No. 114–69 

( 

(II) 

HOUSE COMMITTEE ON FINANCIAL SERVICES 

JEB HENSARLING, Texas, Chairman 

PATRICK T. MCHENRY, North Carolina, 

Vice Chairman 

PETER T. KING, New York 

EDWARD R. ROYCE, California 

FRANK D. LUCAS, Oklahoma 

SCOTT GARRETT, New Jersey 

RANDY NEUGEBAUER, Texas 

STEVAN PEARCE, New Mexico 

BILL POSEY, Florida 

MICHAEL G. FITZPATRICK, Pennsylvania 

LYNN A. WESTMORELAND, Georgia 

BLAINE LUETKEMEYER, Missouri 

BILL HUIZENGA, Michigan 

SEAN P. DUFFY, Wisconsin 

ROBERT HURT, Virginia 

STEVE STIVERS, Ohio 

STEPHEN LEE FINCHER, Tennessee 

MARLIN A. STUTZMAN, Indiana 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

DENNIS A. ROSS, Florida 

ROBERT PITTENGER, North Carolina 

ANN WAGNER, Missouri 

ANDY BARR, Kentucky 

KEITH J. ROTHFUS, Pennsylvania 

LUKE MESSER, Indiana 

DAVID SCHWEIKERT, Arizona 

FRANK GUINTA, New Hampshire 

SCOTT TIPTON, Colorado 

ROGER WILLIAMS, Texas 

BRUCE POLIQUIN, Maine 

MIA LOVE, Utah 

FRENCH HILL, Arkansas 

TOM EMMER, Minnesota 

MAXINE WATERS, California, Ranking 

Member 

CAROLYN B. MALONEY, New York 

NYDIA M. VELA ́ ZQUEZ, New York 

BRAD SHERMAN, California 

GREGORY W. MEEKS, New York 

MICHAEL E. CAPUANO, Massachusetts 

RUBE ́ N HINOJOSA, Texas 

WM. LACY CLAY, Missouri 

STEPHEN F. LYNCH, Massachusetts 

DAVID SCOTT, Georgia 

AL GREEN, Texas 

EMANUEL CLEAVER, Missouri 

GWEN MOORE, Wisconsin 

KEITH ELLISON, Minnesota 

ED PERLMUTTER, Colorado 

JAMES A. HIMES, Connecticut 

JOHN C. CARNEY, JR., Delaware 

TERRI A. SEWELL, Alabama 

BILL FOSTER, Illinois 

DANIEL T. KILDEE, Michigan 

PATRICK MURPHY, Florida 

JOHN K. DELANEY, Maryland 

KYRSTEN SINEMA, Arizona 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

JUAN VARGAS, California 

SHANNON MCGAHN, Staff Director 

JAMES H. CLINGER, Chief Counsel 

(III) 

SUBCOMMITTEE ON OVERSIGHT AND INVESTIGATIONS

SEAN P. DUFFY, Wisconsin, Chairman 

MICHAEL G. FITZPATRICK, Pennsylvania, 

Vice Chairman 

PETER T. KING, New York 

PATRICK T. MCHENRY, North Carolina 

ROBERT HURT, Virginia 

STEPHEN LEE FINCHER, Tennessee 

MICK MULVANEY, South Carolina 

RANDY HULTGREN, Illinois 

ANN WAGNER, Missouri 

SCOTT TIPTON, Colorado 

BRUCE POLIQUIN, Maine 

FRENCH HILL, Arkansas 

AL GREEN, Texas, Ranking Member 

MICHAEL E. CAPUANO, Massachusetts 

EMANUEL CLEAVER, Missouri 

KEITH ELLISON, Minnesota 

JOHN K. DELANEY, Maryland 

JOYCE BEATTY, Ohio 

DENNY HECK, Washington 

KYRSTEN SINEMA, Arizona 

JUAN VARGAS, California 

(V) 

C O N T E N T S 

Page 

Hearing held on: 

February 2, 2016 .............................................................................................. 1 

Appendix: 

February 2, 2016 .............................................................................................. 39 

WITNESSES 

TUESDAY, FEBRUARY 2, 2016 

Boccia, Romina, Deputy Director, Thomas A. Roe Institute for Economic Policy Studies, and Grover M. Hermann Research Fellow, The Heritage Foundation .................................................................................................................... 15 

de Rugy, Veronique, Senior Research Fellow, Mercatus Center, George Mason 

University ............................................................................................................. 14 

McClintock, Hon. Tom, a Representative in Congress From the State of California ..................................................................................................................... 1 

Mitchell, Daniel J., Senior Fellow, the Cato Institute .......................................... 12 

Pocan, Hon. Mark, a Representative in Congress From the State of Wisconsin .................................................................................................................... 3 

Stone, Chad, Chief Economist, Center on Budget and Policy Priorities ............. 17 

APPENDIX 

Prepared statements: 

Boccia, Romina ................................................................................................. 40 

de Rugy, Veronique .......................................................................................... 51 

McClintock, Hon. Tom ...................................................................................... 57 

Mitchell, Daniel J. ............................................................................................ 59 

Pocan, Hon. Mark ............................................................................................. 66 

Stone, Chad ....................................................................................................... 68 

(1) 

UNSUSTAINABLE FEDERAL SPENDING 

AND THE DEBT LIMIT 

Tuesday, February 2, 2016 

U.S. HOUSE OF REPRESENTATIVES, SUBCOMMITTEE ON OVERSIGHT

AND INVESTIGATIONS, COMMITTEE ON FINANCIAL SERVICES, Washington, D.C. 

The subcommittee met, pursuant to notice, at 2:05 p.m., in room 

2128, Rayburn House Office Building, Hon. Sean P. Duffy [chairman of the subcommittee] presiding. 

Members present: Representatives Duffy, Fitzpatrick, Mulvaney, 

Hultgren, Wagner, Tipton, Poliquin, Hill; Green, Delaney, Beatty, 

Heck, and Sinema. 

Also present: Representative Schweikert. 

Chairman DUFFY. The Subcommittee on Oversight and Investigations is called to order. 

The subject of today’s hearing, as evidenced by the rapidly 

changing graphic on the screens around us, is, ‘‘Unsustainable Federal Spending and the Debt Limit.’’ 

We have a series of votes coming up, so we will proceed with our 

first panel of witnesses. Welcome to the Honorable Tom McClintock, who represents the 4th Congressional District in California. 

Next, we have the Honorable Mark Pocan, who represents one of 

the great States, if not the greatest State, Wisconsin, from the 2nd 

Congressional District. 

With that, Mr. McClintock, you are recognized for 5 minutes for 

your opening statement. 

STATEMENT OF THE HONORABLE TOM MCCLINTOCK, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA 

Mr. MCCLINTOCK. Thank you, Mr. Chairman. 

Our government’s good credit is vital to everything that we do 

here. And there are two ways to wreck that credit: by borrowing 

too much; or by failing to pay it back on time and in full. 

Congress alone has the constitutional power to tax, to borrow, 

and to spend. We regulate our borrowing through the debt limit. 

And when we need to increase it, we have a duty to review and 

revise the policies that are driving it. The United States now staggers under $19 trillion of debt, nearly 

half of it run up in the last 8 years. The interest on that debt is 

the fastest-growing component of the Federal budget. Within 5 

years, it will consume more than we now spend for our entire deVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00007 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
2 

fense establishment. That is why we dare not increase the debt 

without also correcting what is causing it. 

But that can often lead to temporary impasses. And when that 

happens, it is vital that credit markets maintain supreme confidence in the security of their loans, otherwise the interest rates 

that lenders charge us would quickly rise to account for the increased risk, and our precarious budget situation would rapidly 

spin out of control. 

The organic law that established the Treasury Department in 

1789 specifically says that it shall be the duty of the Secretary of 

the Treasury to digest and prepare plans for the improvement and 

management of the revenue and for the support of the public credit. 

‘‘Manage the revenue and support the public credit:’’ the GAO 

clearly spelled out what that means in answering the Senate Finance Committee in 1985: ‘‘Treasury is free to liquidate obligations 

in any order it finds will best serve the interests of the United 

States.’’ 

The Constitution commands that the public debt is not to be 

questioned, and this is the practical mechanism for it. Most State 

constitutions provide that first call on any revenues is to maintain 

and protect their sovereign credit. 

Now, that brings us to the fine point of the matter. In recent 

years, the Treasury Department has denied that it has either the 

ability or the authority to do so. Well, we now know from documents that were recently uncovered by this committee that this 

was a deliberate and calculated lie told to increase political pressure on Congress. We also know the Treasury Department was actually preparing contingency plans to prioritize debt at the same 

time the Treasury Secretary was publicly denying that he could. 

These documents also reveal that Federal Reserve officials were 

incredulous and appalled that the Administration would make such 

statements because they ran a severe risk of panicking credit markets. 

In 2001, I first introduced legislation to place an affirmative duty 

on the Treasury Department to provide first claim on any revenues 

for debt service. Ironically, the same Treasury Secretary who 

claimed he lacked legal authority opposed this bill that explicitly 

gave him that legal authority. 

In response to his untruthful claim that it wasn’t possible, we 

amended my bill in 2013 simply to allow the Treasury Secretary 

to borrow above the debt limit to guarantee that the debt would be 

paid in full and on time without having to prioritize. It passed the 

House in 2013, and again last year. 

Opponents argued that this put creditors, like China, ahead of 

paying troops in the field. Actually, most of our debt is owed to 

Americans, and without our credit we can’t pay our troops or anybody else. By protecting our credit first, we actually support and 

maintain our ability to pay for all of our other obligations. 

Now, the President said this was tantamount to a family saying 

it would make its house payment, but not its car payment. Both 

are bad, but let us continue this analogy. If the family is living on 

its credit cards, as we are as a Nation, it had better make the minimum payments on its credit card first or it won’t be able to pay 

3 

the rest of its bills. And when that family has to increase its credit 

limit because it is spending above its means, it had better have a 

serious conversation about what is driving that debt and what to 

do about it. 

Principled disputes over how the debt limit is addressed are 

going to happen from time to time. And just a few years ago, thenSenator Barack Obama vigorously opposed an increase in the debt 

limit sought by the Bush Administration. When these controversies 

erupt, as they inevitably do in a free society, it is imperative that 

credit markets are supremely confident that their loans to the 

United States are secure. 

Thank you. 

[The prepared statement of Representative McClintock can be 

found on page 57 of the appendix.] 

Chairman DUFFY. Thank you, Congressman McClintock. 

I would just note that votes have been called. There are 9 minutes on the clock. If this was in December, I would go to you, Mr. 

Pocan. But we have all realized that the new Speaker is calling 

votes after 15 minutes. 

So with that, if you two don’t mind coming back after votes, the 

subcommittee will stand in recess and will reconvene after this series of votes. 

[recess] 

Chairman DUFFY. The subcommittee will reconvene. 

Just to be clear, without objection, the witnesses’ written statements will be made a part of the record. And once the witnesses 

of the first panel have finished presenting their testimony, the 

chairman and the ranking member will each have 5 minutes to ask 

questions. 

So with that, we will now go to the gentleman from the great 

State of Wisconsin, Mr. Pocan, for 5 minutes. 

STATEMENT OF THE HONORABLE MARK POCAN, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF WISCONSIN 

Mr. POCAN. Great. Thank you very much, Mr. Chairman, Ranking Member Green, and members of the subcommittee. 

Mr. Chairman, I just want to start out by saying that I think we 

can find bipartisan consensus on what you said at the beginning, 

that Wisconsin is the greatest State. So I just want to put that out 

there as a— 

Chairman DUFFY. Hopefully, that is not where it ends. 

Mr. POCAN. Yes. Just official suck-up to start. 

Let me start with just a couple of things I want to put on your 

radar as we talk about this issue, and then let me address specifically the debt ceiling and the other issues that you are going to be 

talking about today. 

I think it is important that we should note the Federal deficit 

has declined under President Obama by two-thirds since he came 

into office, and that is extremely significant and part of what we 

are looking at. In fact, this year the CBO has predicted the Federal 

deficit will increase very slightly after 6 consecutive years of decline, and that is due to our actions, what we did in December with 

the omnibus bill. 

4 

Not only did we provide some marginal sequester relief, but we 

had loads of retroactive tax cuts. And of course, none of those tax 

cuts were paid for; I think the last estimate I saw was they will 

cost about $680 billion over the next 10 years. And as of October 

last year, as a percentage of the economy, the deficit is now down 

to 21⁄2 percent, which is below the average of the past half-century, 

and it is down about 9.8 percent since the President took office. 

I just put those out there because I think they are significant as 

we talk about the subjects that we are talking about. 

The second thing I just wanted to put out there for us to consider 

is the Simpson-Bowles Act that was out there, the proposal about 

how to try to provide relief—I know that I wasn’t around; this is 

only my second term. But previously, when they were trying to find 

a grand bargain here in Congress and that couldn’t happen, the 

Budget Control Act was put in place. 

And if you look at what was in the Simpson-Bowles Act that people have referred to often, we have already enacted 70 percent of 

the non-defense discretionary cuts that were proposed by that Act. 

And according to the Center for a Responsible Budget, we have already cut 30 percent more discretionary spending than was proposed to be done by 2020 by Simpson-Bowles. All of those are programs that are important in our districts. 

And yet, at the same time, we have enacted less than one-third 

of the proposed revenue changes that were also proposed by that. 

I just put that out there because as someone who has been a 

small-business owner for, this year it will be now 29 years, I look 

at that. A balance sheet is what we take in and what we put out. 

And I think that is significant because I don’t think a lot of people 

realize what we have done on the taking out, but not necessarily 

the putting back in side of things. 

Specifically to the debt ceiling, when I talk to people in my part 

of Wisconsin, I think it is no different than yours, Mr. Chairman, 

when I try to explain what the debt ceiling is about; it is essentially we have made a home mortgage, we have committed to that 

payment, and when we lift the debt ceiling, it is really whether or 

not we are going to put that in the mail. 

And I think if you look at it as that, where the responsibility 

really is is up front where we decide whether or not we are going 

to make that decision, to make that spending, which is that home 

mortgage, rather than trying to deal with a debt limit when we 

often are putting ourselves in a pretty bad place. 

As a small-business owner, I know what happens. Last time 

when we shut the government down, I did happen to be around for 

that. I saw what happened across the country when we lost billions 

of dollars out of the economy, when it affected small businesses and 

the decision-making they are going to make. It had a really negative effect. 

And we have to be very careful when we put that out there as 

a tool, because I think all too often it has very negative ramifications. Our entire economy can be really rattled if we don’t do the 

right thing. Millions of Americans could face delays in Social Security checks, veterans benefits, and other critical services. And it 

does put our country, I think, largely at risk. 

5 

In the minute remaining, let me just touch briefly on the debt 

prioritization that I think has been part of the conversation that 

you are having. 

In many ways, I feel that the average person out there would 

look at this as somewhat of a ridiculous conversation, different 

than how we talk about things maybe in the Beltway. We need to 

pay our bills on time, period, and they expect that out of us. And 

the problem is that we haven’t been doing that part of our jobs 

very well, so then this becomes a proposal that we need to look at. 

Fitch’s ratings agency has already indicated that delaying payments on other obligations while honoring interest and principal 

payments would trigger a credit rating review and possibly a credit 

rating downgrade. So by doing something like this, we actually risk 

not only the credit of the country, but also there are many people 

who are worthwhile people who would get payments, veterans, students, the elderly, and others, whom I think come into play. 

I have 6 seconds left, so I will yield back at this point, but I will 

be glad to take any questions, Mr. Chairman. 

[The prepared statement of Representative Pocan can be found 

on page 66 of the appendix.] 

Chairman DUFFY. Thank you, Congressman Pocan. 

The Chair now recognizes himself for 5 minutes for questions. 

I would just note that, giving my friend from Wisconsin a little bit of pushback, we have increased our debt by $8 trillion. And we 

pay $255 billion a year just to service that debt. And I know that 

you look for a lot of revenue to spend in a lot of different programs. 

That is a lot of money that could go to building roads and bridges 

and helping poor people, that you are actually spending on servicing the debt. So I think this is a real problem that has really negative consequences for our constituents. 

I would just also note that when we have looked at the Treasury’s internal and secretive analysis, they were looking at 

prioritizing principal, interest, Social Security, and veterans benefits, so those folks would have been taken care of first. 

But to you, Mr. McClintock. You have been working on this bill 

and have been a champion of it for a very long time. Are you surprised by the pushback that you are getting from the Administration and even from some folks across the aisle and then come to 

learn that they were doing exactly what you were talking about? 

Mr. MCCLINTOCK. Nothing surprises me about the mendacity of 

this Administration anymore. So I can’t say I was shocked, just 

shocked that there was a dissembling going on. 

But I will say this: Nobody advocates the Federal Government 

not paying any of its bills. That is not at issue here. Very bad 

things would happen if we were unable to pay any of those bills. 

That is not the issue here. It is not a question of taking out a mortgage and then not paying it, not putting the mortgage check in the 

mail, as my friend suggests. 

Here is the point. If you are paying your home mortgage with 

your credit card, and that is essentially what this country is doing 

at the moment, you darn well better be sure that you pay the credit card first, the minimum payment, or your credit gets cut off and 

you can’t pay your home mortgage or your car payment or the grocery bill, for that matter. That is what is at stake here. 

6 

And when credit markets begin to wonder if there is going to be 

a stalemate in Washington, the risk for making loans to the Federal Government goes up, the interest rates go up. And your point 

is spot on, our interest costs are already eating us alive, $255 billion this year just to rent the money we have already spent. We 

throw billion-dollar figures around here all the time without any 

reference point in the real world. 

Every billion dollars is about $8 from an average family’s taxes, 

which means that if you are an average family paying average 

taxes, about $2,000 of which you sent to the IRS this year did nothing more than rent the money we have already spent. That has to 

be brought under control. 

But the first thing we have to do is be sure that our interest 

rates don’t start to spiral because there is a perceived risk that the 

loans made to this government are not absolutely secure and 

sound. 

Chairman DUFFY. And I would just note that the $255 billion on 

the $19 trillion is at historic low interest rates. Without even borrowing any more money, it is going to go up just with the increase 

in rates that are on our horizon. So I think it is important that we 

note that. 

I can’t imagine in a family, as you just mentioned, Mr. McClintock, a mom and dad and a couple of kids having some tension 

about whether or not they can balance their budget. And if dad 

says, ‘‘Let us not balance ever,’’ and then mom says, ‘‘Listen, we 

have to be fiscally responsible,’’ it is going to create tension between the two of them. And if the two of them actually agree that 

they are never going to pay it, but give it to the kids, I am sure 

the kids are going to get a little upset at that, too, and go, hey; 

it is going to create a dialogue. And I think that is what has happened here. 

But the point really is, and per your legislation and what we 

found out within Treasury was, we are going to pay the principal 

and the interest. We want to make sure American sovereign debt 

is never in jeopardy. But there is going to be a larger conversation 

about how we spend. 

And maybe to you, Mr. Pocan. I know that when the vote came 

up on Mr. McClintock’s bill—I think my stats are right—almost 

every Democrat voted against it. And I hear your concern, I think 

you stated it well. But now knowing that Treasury was actually 

doing the very thing that Mr. McClintock was talking about, but 

saying something else publicly, I don’t know if those who voted 

against it feel a little bit misrepresented by the Administration? 

And maybe if you were in line with the President and his view on 

Mr. McClintock’s bill, maybe it would have been one of those bipartisan votes with 435 Members saying ‘‘aye’’ to Mr. McClintock’s 

proposal. 

Mr. POCAN. Yes, if I can, I think what I would offer is that I 

think the public looks at it differently. There is a reason why there 

is a 15 percent approval rating on Congress and they prefer traffic 

jams and zombies and head lice to us, right? They expect us to do 

our jobs. And we haven’t done our jobs doing the process the way 

we are supposed to. 

7 

Now, I am looking forward to this new day we are going to have 

in Congress. I know we are having a more thorough, regular-order 

process. But if we don’t do our basic jobs in getting a budget done, 

we can’t come to the Band-Aid solutions, which is what we are 

doing here, and that is what this proposal unfortunately is. 

So I think it comes down to the core of what we are supposed 

to do and what the public expects of us. And when we don’t do our 

jobs, then we need to expect the public to prefer the things they 

prefer over us. 

I guess that is my response, that we should really be dealing 

with what we need to deal with first and foremost, and these 

things are either side attractions or Band-Aids. 

Chairman DUFFY. Thank you. My time has expired. 

I now recognize the gentleman from Texas, Mr. Green, the ranking member of the subcommittee, for 5 minutes. 

Mr. GREEN. Thank you very much, Mr. Chairman. 

Of course, I thank my colleagues for being with us today. And 

I am grateful that you have given considerable thought to these 

questions. 

I will have an opening statement that I will deliver at a later 

time, but I do think it important to note that I don’t think you will 

find a Member of Congress who won’t agree that we should pay our 

debts. I don’t think you will find a Member of Congress who would 

say we should shut down the government. 

However, I do know that there are Members of Congress who 

contend that you can make partial payments, and by making a partial payment you somehow cause everything to go on and you don’t 

have a disruption in domestic markets and international markets. 

The witnesses who will be testifying after my colleagues will indicate some of the concerns that they have with reference to disruptions of markets in the event we make a partial payment of our 

debts, partial payment meaning just decide to pay the principal 

and interest, take care of the Treasuries, make sure the bonds are 

paid, and overlook things like Medicaid, Medicare, and Social Security. There is at least one witness who thinks that we should overlook Social Security, just pay the interest on the debt. 

So with that as the circumstance, Mr. Pocan, would you advocate 

in any way making a partial payment, meaning pay some parts of 

the debt, but not paying all of the debts? 

Mr. POCAN. I think that is what is really at the point that we 

are having a debate about, whether or not, if we did our jobs right 

in the first place, we don’t have to have this ancillary conversation 

later. And that is exactly, I think, what we are doing. 

When I went through just my experience in that October when 

we were shut down for 17 days, people were very upset that we 

weren’t doing our jobs. And it seemed like, I think there were 22 

demands that came during the 17 days. I remember one morning 

watching Darrell Issa on TV addressing a demand, and they said, 

oh, no, your demands have changed already, now it is a different 

demand. And we tried to keep up with the demands that were 

made. 

The bottom line is we just have to pay all of our bills. As you 

said, that is what the public expects of us, that is what we all want 

and need to do. But we have to be responsible and get that done. 

8 

And if we don’t get it done and we get to the point that we sometimes use the debt ceiling as an excuse, even though we have already made the expenditures, we have already done that and we 

can’t use the other to not drop that envelope in the mail after we 

have already signed up for the mortgage. So it is incumbent on us 

to get that done. 

Mr. GREEN. I think it is also important that we give some definition to the term, ‘‘raise the debt ceiling.’’ Because I think there is 

a nebulous notion in the minds of the public as to what this actually means. 

It really means to pay the bills you have already incurred, that 

you have agreed to pay. Pay the bills that are owed and properly 

due as opposed to some notion that we are now trying to extend 

credit beyond some unreasonable amount. We are talking about 

money owed to people, in many cases doctors who will help us with 

Medicare and Medicaid, or money owed to businesses, but we are 

talking about paying what is owed. 

That is what raising the debt ceiling means, that we are simply 

going to pay the debt that we already owe, in fact that Congress 

has agreed to pay. Is this a fair statement, Mr. Pocan? 

Mr. POCAN. No, absolutely. That is the part that—maybe it is because I am still new around here and I go back to Wisconsin a lot, 

but that is what I hear from people when I talk to them. I try to 

bring Washington to them. I figure that is my job. And when you 

try to explain something like this, around here we have all sorts 

of things that just aren’t ‘‘real people-speak.’’ We have inside-theBeltway conversations and this is one that is a classic. 

If you agree to a home mortgage, you have to pay it; you can’t 

decide not to because of something like we do with the debt ceiling. 

So that whole debate that we have is often to real people a very 

ridiculous debate that we wouldn’t pay that; you have already authorized the expenditure. And then to have to have a Band-Aid solution because we didn’t do our jobs to begin with is exactly what 

we are talking about. 

Mr. GREEN. And if you have third parties that we owe money to 

and they are, let us call them a part of the international community, and they see us bickering about paying debts that are already 

owed, does that have an adverse impact on them, do you think? 

Mr. POCAN. Yes, and it is not just us. It is the financial agencies 

that said that if we did that it would affect our credit rating, which 

would affect just about everything. I think it would have ripple effects throughout the economy, to businesses, to how we borrow, to 

everything else. So it does have real ramifications. 

And while sometimes I think that some enjoy the dance, the fight 

that we have around here, real people back in Wisconsin whom I 

talk to don’t. 

Mr. GREEN. I thank you very much. And I will yield back. My 

time is up. 

Chairman DUFFY. The gentleman yields back. 

That concludes the opening statements and the questions for our 

first panel. I want to thank Congressman McClintock and Congressman Pocan for their testimony and insight today. And I would 

just note the witnesses are now excused. 

We will now call our second panel as we make a transition here. 

9 

I want to welcome our second panel. Thank you for being here. 

What we are going to do is the Chair and the ranking member will 

make opening statements. We will then introduce and recognize 

each of you for your opening statements, and then we will go to 

questions. 

So with that, the Chair now recognizes himself for 5 minutes for 

an opening statement. 

Today’s hearing is about unsustainable Federal spending and the 

credibility and trustworthiness of the Obama Administration on 

issues surrounding the debt limit. The United States is $19 trillion 

in debt and growing at a rate of over $3 billion a day. The Federal Government spends $255 billion a year—$255 billion a year—just to service the interest on our debt. Spending at 

this rate is unsustainable and is the reason why so many of my colleagues and I actually ran for Congress. We cannot continue to tax 

and spend and borrow on the backs of our next generation. 

The statutory debt limit established by Congress is a critical tool 

to keep our national debt in check and to protect taxpayers from 

runaway borrowing. In 2011, Congress challenged President 

Obama to address our Nation’s debt by linking spending cuts to his 

request for a debt limit increase. 

As Americans and people all over the world watched this political 

fight play out, whether it was on the nightly news or on other networks, in 2011, 2013, and 2015, Administration officials repeatedly 

told the public that chaos would cripple the global economy if the 

debt limit wasn’t raised and that legislative proposals to reduce the 

impact of hitting the debt limit, such as prioritizing payments on 

the debt, should not be taken seriously. 

We heard from officials, like Treasury Secretary Lew, former 

Deputy Secretary Neal Wolin, and former Assistant Secretary of 

Legislative Affairs Alastair Fitzpayne, that it would be ‘‘unworkable’’ for Congress to require the Treasury Department to prioritize 

principal and interest payments on the debt, and that the Administration had never made a decision to prioritize debt payments in 

the event the debt ceiling deal was not reached. 

And as noted by the Financial Services Committee staff report, 

multiple Treasury officials, including Secretary Lew, have created 

the misleading impression that prioritizing principal and interest 

payments on the debt, such as which was suggested by key credit 

rating agencies, is not a serious option available to the Administration in the event the debt ceiling was not raised. 

However, as revealed in the committee staff report, internal 

records of the New York Fed show that the Administration has 

been preparing debt ceiling contingency plans and running socalled tabletop exercises since at least 2011 that take into account 

various payment prioritization scenarios, including the 

prioritization of Social Security, veterans benefits, and principal 

and interest payments over other government obligations. 

Moreover, these internal records reveal that the Administration 

in fact was planning to prioritize payments on the debt during the 

debt limit negotiations of 2013 in the event the debt ceiling was not 

raised. 

Rather than being forthright with the American people and assuring the financial markets and the holders of U.S. Treasury 

10 

notes that the U.S. Treasury notes would not be defaulted on and 

the United States would not default on its sovereign debt, the 

Obama Administration chose instead to mislead the public for the 

purpose of pressuring Congress to acquiesce to the Administration’s 

no-negotiation position on the debt ceiling. Basically, they were 

playing politics. 

The American people deserve and demand much better. Our Nation’s creditworthiness should not be hindered by the Administration’s lack of trustworthiness. 

I look forward to discussing the committee’s staff report today 

and exposing the truth behind the Administration’s misleading 

claims concerning its debt ceiling contingency plans. And I also 

look forward to having a frank discussion about the ever-increasing 

debt that the Federal Government is accruing and putting on the 

backs of our children and our grandchildren. And I am also looking 

forward to the testimony and feedback from our panel. 

With that, I conclude my remarks, and I recognize the gentleman 

from Texas, Mr. Green, the ranking member of the subcommittee, 

for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

I would like to thank these witnesses as well. And I would note 

that prioritizing debt, such as you pay P&I, principal and interest, 

is but another way to say ‘‘default.’’ It really is. 

It is a means by which we will honor obligations to some and default on obligations to others. And some of the witnesses on the Republican side have indicated that prioritizing and paying some debt 

is not preferable, that there are consequences. 

And in fact, one witness—I have read all of the testimony, but 

one witness, and I am going to take a stab at your name, is it Ms. 

‘‘de Rugy?’’ 

Ms. DE RUGY. Yes. 

Mr. GREEN. Okay. Ms. de Rugy—thank you—has indicated on 

page three of her testimony in the first full paragraph, to be sure, 

default should not be an option on the table. We will talk about 

that later. She also goes on to say that while Washington has difficult choices to make, defaulting on its debt obligations should not 

be part of the discussion about how to handle the debt limit or reduce long-term government spending. 

So why are we talking about prioritizing debt? What is this leading up to? Well, I think a better name for this hearing today would 

be, ‘‘How to mislead voters away from legislation and toward confrontation.’’ Because we are some 400-days-plus away from the debt 

ceiling, some 9,000-plus hours; there is plenty of time to deal with 

this debt ceiling without creating a crisis. 

There is no pending crisis now, no impending crisis. And because 

there is no impending crisis, we have somehow concluded that we 

need to now strategize on how we can prioritize the debt such that 

we can later on create a crisis. This crisis that we are creating gets 

in the way of legislation. 

The same witness, who is from George Mason University, has 

given the Majority an outline of what can be done to deal with the 

so-called debt ceiling and has indicated that there are several 

things that can be done and we should be pursuing the outline of 

what can be done. This is what some of your witnesses have indiVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00016 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
11 

cated, that there are things that we can do to eliminate the possibility of having a debt ceiling that creates a confrontation. 

So we should be engaged in legislation right now. We should be 

legislating Mr. McClintock’s bill. 

And finally this: The Majority has the control of both the House 

and the Senate. You indicated that if you could get control, you 

would do all of these things to deal with the debt ceiling, yet rather 

than deal with the legislative side of it, we are here today plotting 

a means by which we can have a partial default, and trying to convince the public that a partial default will in some way not be the 

equivalent of a default that would cause us to lose credit ratings, 

won’t cause investors to conclude that Treasuries are not the best 

investment for them. 

Just pay the principal and interest. And by the way, when you 

just pay the principal and interest, you will not be paying payments to small businesses and contractors and vendors, Medicare 

payments to doctors, Medicaid payments to doctors and health providers. We won’t be paying for the school lunch programs. We won’t 

be paying for the NIH grants that we have outstanding. We won’t 

be paying the salaries and benefits to Federal employees. We won’t 

be paying for tax refunds. 

By making a partial payment, we then eliminate all of these 

other things that we are obligated to pay. So I don’t think that this 

hearing is seriously about anything other than finding a clever way 

to default at some point in the future when the debt ceiling may 

become an issue because right now it has been suspended. 

And I take the debt ceiling seriously. I take debt seriously. I 

think we ought to cut and I think we ought to increase revenue so 

as to avoid having to have a debt crisis that will be something that 

we can manage, but for some reason, today we are going to look 

the other way and misdirect. 

I yield back. 

Chairman DUFFY. The gentleman yields back. 

We now welcome our second panel of witnesses. First, we go to 

Dr. Mitchell, a senior fellow at the Cato Institute who specializes 

in fiscal policy. 

Next, Dr. ‘‘de Rugy’’—do I have that right, or close enough? 

Ms. DE RUGY. Yes, close enough. 

Chairman DUFFY. Okay. There was much discussion on how we 

say your name, so if I am close, good. Dr. de Rugy is a senior research fellow at the Mercatus Center at George Mason University, 

and a nationally syndicated columnist. 

Next, Ms. ‘‘Boccia’’—is that right? 

Ms. BOCCIA. It is ‘‘Boccia,’’ but thank you. 

Chairman DUFFY. Okay. Ms. Boccia is the deputy director of the 

Thomas A. Roe Institute for Economics and Policy Studies, and a 

Grover M. Hermann research fellow at the Heritage Foundation. 

And finally, Dr. Stone is a chief economist at the Center on 

Budget and Policy Priorities, where he specializes in the economic 

analysis of budget and policy issues. 

To all of you, welcome. 

You see you have three lights at your desks: the green light 

means go; the yellow light means that you have one minute left; 

and the red light means your time is up. Your microphones are 

12 

sensitive, so you have to make sure you have them on when you 

speak, as a reminder. 

And so with that, Dr. Mitchell, you are recognized for 5 minutes 

for your opening statement. 

STATEMENT OF DANIEL J. MITCHELL, SENIOR FELLOW, THE 

CATO INSTITUTE 

Mr. MITCHELL. Thank you, Mr. Chairman, and members of the 

subcommittee. My name is Dan Mitchell, and I am a senior fellow 

at the Cato Institute. I appreciate the opportunity to summarize 

my testimony here. 

Our Nation faces very serious, long-run fiscal challenges thanks 

to changing demographics and poorly designed entitlement programs. All of you know that from various reports from CBO, OMB, 

GAO, and private forecasters. I would say all these estimates that 

we get tend to focus on the red ink, which I think is useful information, but I also think it is incomplete because what we should 

be focusing on is the underlying burden of government spending. 

The red ink is the symptom, and excessive government spending 

is the underlying problem. And that spending, whether it is financed by taxes, borrowing, or printing money, is what entails to 

a diversion of resources from the productive sector of the economy. 

It is also best to focus on government spending because projections of ever-larger levels of long-run debt are the result of everexpanding amounts of Federal spending, not inadequate tax receipts. 

If you look at the CBO numbers that just came out, it is very 

clear that tax revenues already are above their long-run average, 

and not only that, but they are going to continue to increase over 

time, not because of legislated tax increases, but simply because 

some parts of the Tax Code aren’t indexed to inflation, and also 

even low levels of economic growth will result in what is called real 

bracket creep over time. 

So when you are looking 1 decade, 2 decades, 3 decades down the 

road, Federal tax revenue will be growing as a share of the economy. The problem that we have with our long-run fiscal forecast is 

not on the revenue side of the equation. Revenues are growing, but 

the burden of government spending is growing even faster. 

And as I mentioned before, it is largely because of entitlement 

programs combined with changing demographics. A reasonablesized welfare state is possible when you have a traditional population pyramid. But because of aging population and falling birthrates, we are moving toward a population cylinder, and that is 

going to create very, very serious problems. Indeed, if you look at 

some of these forecasts, we are on a path to becoming a failed European-style welfare state. 

As a matter of fact, if you look at some of the long-run numbers, 

not only from our own agencies, but if you look at what the International Monetary Fund is projecting, the Organization for Economic Cooperation and Development, the Bank for International 

Settlements, they all show numbers that are actually worse than 

what you see in terms of the long-run forecasts for France, Italy, 

Greece, and places like that. 

13 

Now, I actually think those estimates are a little bit too pessimistic because they are basically premised on the notion that we 

have this big, built-in increase in government spending and tax 

revenues are growing only very slowly as a share of the economy 

and they assume compounding levels of government debt. 

We could actually solve that problem relatively simply by simply 

putting a cap on government spending. And so, even though these 

long-run forecasts show us with more long-run debt than France 

and Greece and Italy, I actually think our problem is much easier 

to solve because they are already at levels where the government 

is consuming more than half of the productive sector of the economy, and their tax burdens are at or above the revenue-maximizing 

level. That is a much, much harder problem to solve. 

We do have this long-run problem, so the question is, however 

you measure it, how do we solve it? Should the debt limit be an 

action-forcing event for fiscal reform? 

And my conclusion is yes, because it beats the alternative. And 

here is an example that I shared with the Senate Budget Committee a couple of years ago. Look at Greece today, a very deep recession, a completely miserable economic situation, incredibly high 

levels of unemployment, including 50 percent unemployment for 

young people. Why are they in this mess? Because they had a fiscal 

crisis. 

Imagine, though, if 15 or 20 or 25 years ago Greece had something akin to the debt limit, some action-forcing event. And let us 

say that some lawmakers 15 or 20 or 25 years ago threw sand in 

the gears, caused shutdowns, caused debt limit fights, whatever 

you want to call it, but imagine if all that had forced Greece to engage in reform. It might have caused a little bit of discomfort then, 

but it would have saved the Greek people from the much, much 

deeper levels of misery that they are suffering now. 

And I sort of view the whole debt limit fights or government 

shutdown fights, any of the fights that we are having now, sequester fights, they are basically an opportunity to save America from 

enduring that kind of suffering that the Greek people are dealing 

with. And so that is why a debt limit fight or some other fight 

would be necessary. 

Now there are, of course, arguments against this approach. One 

of the arguments is, and we saw this with the July 2015 GAO report, that, oh, if you have these debt limit fights, what is going to 

happen? You are going to have higher levels of interest on the debt. 

Again, that is peanuts compared to the long-term suffering that 

might occur. 

And the other argument is that you are going to have a default 

or you are not going to be able to pay interest on the debt. 

I will close with simply the point that in 2017, the next time we 

have a debt limit, CBO projects that revenues will be more than 

$3.5 trillion and they project that interest on the debt will be $308 

billion, more than 11 times as much revenue as would be needed. 

So prioritization, not desirable, but it would work. 

Thank you. 

[The prepared statement of Dr. Mitchell can be found on page 59 

of the appendix.] 

Chairman DUFFY. The gentleman yields back. 

14 

The Chair now recognizes Dr. de Rugy for 5 minutes. 

STATEMENT OF VERONIQUE DE RUGY, SENIOR RESEARCH 

FELLOW, MERCATUS CENTER, GEORGE MASON UNIVERSITY 

Ms. DE RUGY. Thank you, Mr. Chairman. 

Chairman Duffy, Ranking Member Green, and members of the 

subcommittee, thank you for the opportunity to testify before you 

today. My name is Veronique de Rugy, and I am a senior research 

fellow at the Mercatus Center. 

I would like to make three points today. First, since the debt 

limit showdown of 2011 and 2013, we have come a long way in understanding how the debt ceiling works and what are the options 

available for us the next time there is a crisis. 

Second, we still need to recognize that these fights that we are 

having over the debt ceiling are actually just a symptom of a much 

more problematic problem, and that is government’s overspending. 

It is because the government year after year spends more than it 

should, that it needs to constantly or regularly at least increase its 

borrowing authority. 

This state of affairs is not sustainable. And we need to address 

the explosion of spending on the programs that are the drivers of 

our future debt. 

Thankfully, we actually have a lot of policy solutions available, 

either institutional reform or entitlement reform, that have been 

proposed over the years. And we can implement them to actually 

create a check on government spending. 

So, let me start. During the last debt ceiling debate in 2011, my 

colleague Jason Fechner and I wrote a paper that explained that 

when the government reaches the debt ceiling, and then Treasury 

can no longer issue Federal debt, it would still have ways to stave 

off a regrettable default, by which I mean not paying interest on 

the debt and the principal. 

Using these techniques would give Congress time to reach an 

agreement about how to implement fundamental-type reform that 

would get us on a more sustainable fiscal path. 

At the time, we explained that, for instance, Treasury had several financial management options to continue paying the government’s obligation, including but not only prioritizing payments, liquidating some assets to pay government bills and using the Social 

Security Trust Fund to continue paying Social Security benefits. 

At the time, we were told that these were not acceptable or possible options. This is why yesterday I was really glad to read this 

committee’s report which actually shows that indeed Treasury has 

the ability to prioritize payment, including interest on the debt and 

principal and Social Security payments. And that even in 2013, the 

Federal Reserve of New York was actually running tabletop exercises to prepare for such contingencies. 

Now, it is important to note that we were never advocating any 

particular measure. More importantly, we often lamented that this 

path had to be pursued because of the irresponsibility of government. However, we noted that it was much more reasonable than 

defaulting on our debt or raising the debt ceiling without making 

any fundamental changes to the state of our finances. That is what 

Presidents and Congresses have done for decades. 

15 

The debt ceiling was raised 20 times since 1993 and the result 

is a growing government and a Federal debt that has ballooned 

from less than $5 trillion to $19 trillion. And deficits are also going 

up according to the recent Congressional Budget Office report. 

Over the coming decade, the size of the Federal deficit will double to reach a gap of almost 5 percent of GDP. CBO predicts that 

deficits will total $9.4 trillion over 10 years. That is up from $1.5 

trillion since its August report. And according to Treasury, unfunded liabilities average $75.5 trillion. 

As Will Rogers once said, ‘‘If you find yourself in a hole, stop 

digging.’’ The government, too, needs to stop digging. That is true 

now, but it also is going to be important the next time you have 

a debate about raising the debt ceiling. 

Real institutional reform as opposed to one-time cuts would 

change the trajectory of fiscal policy and put the United States on 

a more sustainable path. I believe we should adopt a constitutional 

amendment to limit spending, but there are reforms that could be 

implemented immediately, such as ending the abuse of the emergency spending label, adopting a strict cut-as-you-go system, or creating a BRAC-like commission for discretionary spending. 

Finally, Congress must have the courage to implement real entitlement reform to curtail spending on Medicare, Medicaid, the Affordable Care Act subsidy, and Social Security. Without reform 

today, vast tax increases will be needed to pay for unfunded promises made to a steadily growing cohort of seniors. 

Fortunately, many workable solutions are available to lawmakers, including adding a system of personal savings accounts to 

Social Security, liberalizing medical savings accounts and making 

the latter permanent to reduce health care costs by increasing competition between providers and making consumers more responsive. 

So thank you, and I am ready for your questions. 

[The prepared statement of Dr. de Rugy can be found on page 51 

of the appendix.] 

Chairman DUFFY. Thank you. 

The Chair now recognizes Ms. Boccia for 5 minutes. 

STATEMENT OF ROMINA BOCCIA, DEPUTY DIRECTOR, THOMAS A. ROE INSTITUTE FOR ECONOMIC POLICY STUDIES, AND 

GROVER M. HERMANN RESEARCH FELLOW, THE HERITAGE 

FOUNDATION 

Ms. BOCCIA. Chairman Duffy, Ranking Member Green, and 

members of the Subcommittee on Oversight and Investigations, 

thank you for having me here to testify today. 

My name is Romina Boccia, I am the Grover Hermann research 

fellow in Federal budgetary affairs, and deputy director at the Roe 

Institute in the Heritage Foundation. The views I express in this 

testimony are my own and should not be construed as representing 

any official position of the Heritage Foundation. 

The Nation is on a fiscal collision course. Absent presidential and 

congressional leadership through the regular budget process, the 

debt limit is a key action-forcing tool that drives the attention towards our Nation’s precarious fiscal state and enables lawmakers 

to leverage a potential crisis scenario for necessary and urgent policy reforms that might not otherwise come about. 

16 

Though the debt limit may be a blunt tool to motivate fiscal discipline, leveraging it to enact structural reforms that rein in growing spending and debt may very well prevent a much worse fiscal 

crisis. Contrast debt limit negotiations with an unexpected, sudden, 

and drastic fiscal crisis that would leave policymakers with few 

tools to respond in a predictable and gradual manner. 

The latest fiscal and economic projections by the Congressional 

Budget Office paint a very clear picture. Spending and debt are 

growing at an unsustainable pace, greatly increasing the risks of 

a sudden fiscal crisis during which investors would demand much 

higher interest rates to continue lending to the U.S. Government. 

Congress should prevent such a scenario by reforming those programs that drive the growth in spending and the debt before increasing the debt limit. 

Moreover, growing spending is driving debt to increasingly economically harmful levels. Projected deficits would push debt held 

by the public to 86 percent of GDP by the end of the decade, or 

about twice the historical average level. Several analysts and pundits argue that the debt limit is an archaic construct which serves 

no useful purpose. They argue that because Congress authorizes all 

spending, it does not make sense to have a separate limit on borrowing. 

I disagree. Ideally, congressional decisions to spend and borrow 

would be aligned. However, there are at least three reasons why 

the debt limit serves a useful purpose. First, the programs driving 

the majority of the growth in Federal spending were authorized 

many decades ago and they are now allowed to grow on autopilot 

with few congressional action-forcing deadlines to change those programs’ trajectories. 

Second, the public, as we know from polling, does not recognize 

that it is their most cherished entitlement programs that are driving the growth in spending and the debt and the debt limit can 

help elevate public understanding while at the same time providing 

important political cover for lawmakers who seek to reduce spending on those entitlements. 

Third, lawmakers only control some of the factors that drive the 

growth in the debt. And economic downturns or unanticipated increases in interest costs may mean that previously authorized 

spending should be reconsidered in light of factors outside of Congress’ control. The government should pay its bills, but it should 

also adjust commitments going forward. 

As the Federal Government approaches the debt limit, and absent congressional action to increase the limit, Treasury does not 

necessarily default on debt obligations. Treasury can reasonably be 

expected to prioritize principal and interest payments on the national debt, protecting the full faith and credit of the United States 

of America above all other spending. 

Sovereign debt default should never be a primary concern during 

a temporary debt limit impasse. Congress has voted in support of 

several bills that would allow Treasury to continue borrowing at 

the debt limit to meet debt service needs. 

In the event that insufficient cash levels became a concern to 

meet Federal debt obligations, Congress and the Administration 

could immediately act to remove at least this critical risk. MoreVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00022 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
17 

over, each year congressional budget committees and the Executive 

Branch should prepare a prioritized annual cash budget. This 

would be a prudent exercise to reveal to the public what Congress 

and the Executive Branch consider to be the most important national programs. 

It would also confront lawmakers and the public more directly 

with the important questions of whether the things the Federal 

Government is currently borrowing for are truly necessary. In the 

event of a debt limit impasse, this cash budget could serve as guidance for prioritization of payments at the debt limit. 

The debt limit provides an important action-forcing deadline to 

pursue the legislative steps necessary to rein in out-of-control entitlement spending. The debt limit also provides political leverage to 

pursue those reforms necessary to change the debt trajectory and 

restore economic growth to its full potential. 

Thank you. 

[The prepared statement of Ms. Boccia can be found on page 40 

of the appendix.] 

Chairman DUFFY. Thank you. 

And the Chair now recognizes Dr. Stone for 5 minutes. 

STATEMENT OF CHAD STONE, CHIEF ECONOMIST, CENTER ON 

BUDGET AND POLICY PRIORITIES 

Mr. STONE. Thank you. 

Chairman Duffy, Ranking Member Green, and members of the 

subcommittee, thank you for the opportunity to testify at today’s 

hearing. 

In my written testimony, I make two broad points. The first is 

the need to focus not just on spending, but also on revenues in addressing our long-term budget challenges. 

The second is to caution strongly against thinking that the statutory limit on Federal debt has a constructive role to play in addressing those challenges. 

Budget deficits result from an imbalance between spending and 

revenue, rising debt relative to the size of the economy results from 

persistent large deficits, not from too much spending, per se. Any 

plausible amount of spending to meet society’s needs is sustainable 

if there are sufficient revenues to avoid large deficits. 

CBO projects that under current tax and spending policies, rising 

debt will ultimately prove unsustainable. This poses a serious challenge to policymakers. At the same time, as I discuss in the first 

part of my testimony, there is not an immediate crisis. Policymakers, however, will have to make hard choices in setting a future course that is both fiscally responsible and realistic about the 

levels of spending and taxes appropriate to the country’s needs. 

These decisions need to be kept separate from the debt limit. 

As I discussed in the second part of my testimony, the debt limit 

encourages reckless brinkmanship that makes it harder to work 

out the compromises necessary to achieve a sustainable deficit reduction agreement. As former Federal Reserve Chairman Ben 

Bernanke says in his recent book, refusing to raise the debt limit 

takes the economic well-being of the country hostage. That ought 

to be unacceptable, no matter what underlying issue is being contested. 

18 

Here are some key points from my written testimony, that I will 

be happy to elaborate on later. On trends in government spending 

and debt, which I will always speak of relative to the size of the 

economy, i.e., as a share of GDP rather than in dollar terms, I have 

four charts in my testimony that help illustrate the following 

points. 

First, the financial crisis and the Great Recession were a major 

shock to the economy and the budget. But factors causing a surge 

in deficits and debt after 2008 were temporary revenue losses and 

spending increases due to the economic weakness and temporary 

tax cuts and spending increases to combat that weakness. 

Those policies have largely abated as the economy has been recovering. Stimulus programs have phased down and policymakers 

have enacted new deficit-reduction policies. 

Second, budget analysts have known for a long time that the 

aging of the population and rising health care costs are the drivers 

of long-term spending projections, not a problem of spending growing faster than the economy throughout the government. 

The Center on Budget and Policy Priorities finds, for example, 

that program, that is non-interest, spending outside of Social Security and Medicare, is running below its historical average as a percent of GDP and is projected to fall further in the future. 

Increasing generosity of benefits is not what is driving the increase in Social Security and Medicare spending. Rather, it is the 

rising share of the population eligible for benefits, and in Medicare 

rising health care costs, which affect public and private health care 

spending alike. 

Historical levels of spending and revenues are a poor guide to 

what is required to meet 21st Century national needs and be fiscally responsible. 

Third, and this is important, low-income programs are not a driver of long-term deficit projections. Specifically, outside of health 

care, Federal spending for low-income programs, including refundable tax credits, such as the earned income tax credit, are on track 

to fall below their 4-decade average of 2.1 percent of GDP in coming years—fall below. 

Fourth, long-run fiscal sustainability does not require balanced 

budgets. For example, even though there were deficits in almost 

every year between World War II and the early 1970s, debt grew 

much more slowly than the economy, so the debt-to-GDP ratio fell 

dramatically. 

Let me be brief about the debt limit. Setting a limit on debt is 

an ineffective means of controlling deficits. That is a direct quote 

from a 2010 CBO report. Debt subject to a statutory limit is a 

measure that has no economic or financial significance. CBO instead features debt held by the public, basically the sum of all past 

deficits minus surpluses, in its presentations because that public 

borrowing is what affects national saving and credit markets. 

The debt limit is not innocuous if it is used politically and raises 

concerns that the United States might actually do the unthinkable 

and default on its financial obligations. It is not innocuous. Debt 

prioritization measures, like the ones we are talking about, do not 

mitigate that problem, even if it proves feasible to pull out and pay 

interest and Social Security obligations. 

19 

By appearing to make a default legitimate and manageable, it 

would heighten the risk that one would actually occur. Failing to 

pay other obligations in a protracted showdown would be like sequestration on steroids and would be damaging to the United 

States credit rating. 

Thank you. 

[The prepared statement of Dr. Stone can be found on page 68 

of the appendix.] 

Chairman DUFFY. Thank you. 

The Chair now recognizes himself for 5 minutes. 

This is really a hearing about Treasury and Treasury’s, I would 

argue, dishonesty with this committee, this Congress, and with the 

American people. 

We had been talking about their need to prioritize debt payments 

or U.S. obligations. And they basically told the American people 

and us that this was unworkable when in fact they had a program 

in place to do just what we were talking about. And I would argue 

they were doing that for political reasons, to try to put the financial 

markets in turmoil over this spending fight that we are having. 

They have an obligation to be honest with this committee. And 

even now, the records that we have have come from the New York 

Fed. The Treasury has been less than compliant with this committee about their internal deliberations. And even when they send 

us documents, they try to thwart us by sending it in a format that 

we cannot print and we cannot search. This is not open and this 

is not transparent. 

I look to the ranking member. I would be delighted if we did not 

have to have any debates about spending because we had Barack 

Obama and my friends across the aisle who got it and said we have 

too much money going in current obligations and future obligations, we have to reform our budgets and our spending so there is 

no need to even talk about the debt limit. That would be beautiful, 

but that is not what is happening. 

We don’t get to buy-in. And the bottom line is, to get a bill done 

you need the House, the Senate, and the President. So we need 

these tools to actually reform the way that we spend to save us, 

Dr. Mitchell, from a Greece-like scenario right here in America. 

When financial crises happen, and maybe, Dr. Mitchell, to you, 

to Greece, were the millionaires in Greece the worst-hurt from 

their crisis, or was it the poorest among the Greece population who 

were hurt from their financial crisis? 

Mr. MITCHELL. If you look at the data in Greece, the unemployment rate, the actual, genuine spending cuts, not just spending 

cuts off a baseline, but the actual spending cuts that Greece has 

been forced to make, that was the thrust of my presentation. If you 

wait too long, if you keep kicking the can down the road, when the 

crisis eventually does occur it is much, much more serious. 

So that is why I think whatever short-term hiccup we have because we are fighting over a debt limit or something like that is 

a much easier and lower price to pay than the kinds of very negative consequences that the Greek people, especially low-income 

Greek people, have suffered as a result of the crisis. 

Chairman DUFFY. I would agree. The poorest community in a society, who rely on their government for help, are the ones who will 

20 

be hurt the worst if a crisis comes. So to tell those in need of government help, don’t worry, we are going to give you all that you 

want and even more than you want for 5, 10, 20 years, but then 

have a debt crisis and not be able to help them out, I think is disingenuous and dishonest. 

And frankly, talking about how this institution works, it is concerning for us that the other side doesn’t talk about restraining 

spending, they just talk about more programs, more offerings, and 

more spending as opposed to spending restraint. 

Chairman DUFFY. Dr. Stone, did you say that this debt limit situation and negotiation in the House was reckless? Was that your 

testimony? 

Mr. STONE. Risking default is reckless, yes. 

Chairman DUFFY. So is it fair to say that you are calling Barack 

Obama reckless in 2006 when he said, ‘‘The fact that we are here 

today to debate America’s debt limit is a sign of leadership failure; 

it is a sign that the U.S. Government can’t pay its own bills.’’ He 

was in favor of using the debt limit to adjust how America spends. 

Are you saying that Barack Obama is reckless? 

Mr. STONE. I am saying that over history the existence of the 

debt limit has caused politicians to make, in voting on it on both 

sides, to make statements like that, but we reached a new level 

when we were using it to threaten shutting down the government 

as opposed to— 

Chairman DUFFY. So you would agree with me that your statement is calling Barack Obama reckless when he was advocating for 

the same policies that we have advocated for in spending restraint, 

using the power of the purse of this institution? Yes? 

Mr. STONE. Demanding that the debt limit be raised as—look— 

Chairman DUFFY. Yes? 

Mr. STONE. Yes, for all politicians who have used the debt limit, 

but it is a careless statement. But in circumstances where it is not 

meant to lead to a shutdown of the government, it is less reckless. 

Chairman DUFFY. Ms. Boccia, and I only have a few seconds left, 

do you think it is appropriate that the Congress try to restrain 

spending by using all tools possible to get a consensus about getting us on a trajectory that is sustainable in regard to our spending 

and our debt? 

Ms. BOCCIA. I think it is very much appropriate. I think Congress must use all the tools in its arsenal to rein in growing spending and debt. And to those who say it is okay, we will just raise 

taxes, the problem we have is that spending is growing much faster 

than the economy. And in the long run, you cannot raise taxes faster than the economy is growing. It is going to be impossible, which 

is why the CBO says this scenario is unsustainable. 

And the debt limit, I think, is a critical tool to bring about reforms before a sudden fiscal crisis ties Congress’ hands. 

Chairman DUFFY. Thank you. 

My time has expired. 

The Chair now recognizes the gentlelady from Ohio, Mrs. Beatty, 

for 5 minutes. 

Mrs. BEATTY. Thank you, Mr. Chairman, and Ranking Member 

Green. 

21 

I am going to be very brief and just make a statement I would 

like to be entered into the record, and a question. And if appropriate, I would like to yield the balance of my time to the ranking 

member. 

My statement for the record is that in that this is a formal hearing, I would appreciate, as we say ‘‘chairman’’ and ‘‘Dr.’’ and ‘‘Mr.’’ 

that we make reference to the President of these United States as 

President Barack Obama in this hearing. That is just my personal 

statement. 

Secondly, my question is yesterday, the Majority released a press 

release in which I believe the chairman of this subcommittee was 

quoted as saying that President Barack Obama manufactured a crisis when talking about the consequences of raising the debt limit 

in 2011. 

Dr. Stone, do you believe that the President manufactured a crisis? 

Mr. STONE. I don’t. 

Mrs. BEATTY. Do you believe that failure to raise the debt limit 

is an actual crisis? 

Mr. STONE. Failing to raise the debt limit when it comes due, 

and when there are obligation to be paid, can create a crisis, yes. 

Mrs. BEATTY. Thank you. 

Mr. Chairman, I would like to yield the balance of my time to 

Ranking Member Green. 

Mr. GREEN. I thank the gentlelady. 

And let us start with this notion that you have to have the 

House and the Senate and the President to legislate. That didn’t 

stop us from voting more than 50 times to repeal the Affordable 

Care Act without the House and the Senate and the President. 

Legislate, you are in the Majority now. Do what the Majority 

should do and has a responsibility to do. Legislate! 

Pass Mr. McClintock’s bill. I know what it does. But then you 

will have legitimized that process. 

What you want to do is have the Administration legitimize a 

process that has severe consequences so that you can continue to 

blame Barack Obama. 

And I yield to myself the notion that I should say, ‘‘President 

Barack Obama.’’ And I am going to do that, but I had to do that 

for emphasis. 

This is what it is all about. You have witnesses on your side who 

have indicated that we should not default. Let us test this. If you 

think we should default on the debt, raise your hand. Let the 

record reflect that no one has raised a hand. They don’t think we 

should default. 

Now, Mr. Stone, prioritizing and paying P&I only, is that a form 

of default? 

Mr. STONE. We are not meeting all of our obligations. Under the 

Constitution, we have a debt limit and we have the requirement to 

meet all of our financial obligations. They are in conflict. 

Mr. GREEN. So that is a form of default, all right. 

Let me ask my other friends on the panel. What do you call paying P&I only, not taking care of Social Security, not taking care of 

military obligations, not taking care of Medicaid and Medicare? 

What do you call the failure to take care of those things? 

22 

And I will start with the lady that I called on earlier, Ms. de 

Rugy. 

Ms. DE RUGY. I call that scare tactics. 

Mr. GREEN. Let me ask you this— 

Ms. DE RUGY. In 2013 and 2011— 

Mr. GREEN. —if I may intercede, please, since I have the time. 

You call it scare tactics. Let me ask you this. You call default only 

if you don’t pay P&I. That is your definition of default, I see, because if you thought that failure to pay P&I is default, then you 

would have to conclude that you are defaulting on those obligations 

as well. You can’t conclude that only principal and interest is a 

part of our obligations. All of these other things are obligations, 

too. 

If you think that we only have an obligation to pay P&I, raise 

your hand. Nobody thinks that we only have an obligation to pay 

P&I. Let the record reflect that no one raised a hand. 

So this is really about trying to find a clever way to avoid making payments, have the Administration do it, not pass legislation 

to get it done. You have the Majority. Pass the legislation. Pass Mr. 

McClintock’s bill. Pass other legislation. 

You have been given five things that you can do short of creating 

a debt crisis, short of defaulting. Five things that Ms. de Rugy has 

indicated we can do, five, and they don’t require a default. Is that 

a correct statement, Ms. de Rugy? 

Ms. DE RUGY. I don’t— 

Mr. GREEN. Do any of these require default, the five things that 

you have given us? 

Ms. DE RUGY. These are like suggested fundamental reforms— 

Mr. GREEN. I understand. But do any of your suggestions require 

default? 

Ms. DE RUGY. —that Congress should agree on some of them. 

Mr. GREEN. So you are saying your suggestions will require default? 

Ms. DE RUGY. Default defined as paying interest on the debt? 

Mr. GREEN. Default defined as not paying obligations. 

Ms. DE RUGY. Absolutely not. 

Mr. GREEN. Okay. So you have these five things that your witness has said you can do. You can do these things. You are in the 

Majority. Behave like you are in the Majority, legislate, don’t try 

to create some sort of false, phony charade indicating that you are 

trying to prevent a debt ceiling crisis when in fact that is what you 

are going to do by prioritizing. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentleman from Illinois, Mr. 

Hultgren, for 5 minutes. 

Mr. HULTGREN. Thank you, Mr. Chairman. 

Thank you all for being here. This is a very important subject, 

as we see ticking behind your heads and on the sides here. This 

is a huge challenge that we need to address, and we need to face. 

And I really do want to thank the witnesses for appearing here 

today. 

I especially wanted to thank our previous panel. Congressman 

McClintock has shown incredible leadership on this issue. I am 

proud to be a cosponsor of the Default Prevention Act and was 

23 

pleased to see it passed last October. I hope we can continue to 

push on that. 

I have been more than frustrated with the Administration’s apparent desire to increase our debt, and their disinterest in having 

serious conversations about reducing long-term spending, such as 

making reforms to our entitlement programs that we all know need 

to be discussed. 

My first question I am going to address to Dr. Mitchell and 

maybe if somebody else wants to jump in as well. 

But as we learned from the committee’s report, the Administration is able to prioritize debt payments. In fact, they made plans 

to do so, but failed to share them with Congress and the American 

people. 

Given the fact that Treasury is capable of prioritizing debt payments over other obligations, wouldn’t it make sense for Congress 

to mandate that debt payments should be prioritized in the event 

the debt ceiling is reached, to ensure that America does not default 

on its sovereign debt? 

Mr. MITCHELL. Two things, sir. Presumably, legislation wouldn’t 

be needed because I am sure Treasury, if push came to shove, 

would prioritize because no Treasury Secretary would actually 

want to have default. And it is important to underscore that default, that paying P&I first doesn’t mean that you are ‘‘defaulting’’ 

on other obligations. It simply means that they are being postponed. 

Which brings up my second point. Plenty of State and local governments already do this. If States that are considered chronically 

mismanaged, like California, manage to prioritize at times when 

they run into their own fiscal challenges, I am sure that Treasury 

has all the expertise it would need to prioritize as well. 

Mr. HULTGREN. Can I ask you a question on this just to clarify? 

Because I think so much of our economy is confidence-driven. It is 

consumer confidence. And so it really goes back to, by doing something like this this, it is sending a message out there that you don’t 

have to worry, this is taken care of, we have the resources to pay 

for it. 

So although you might be right in saying we can do this, I just 

think it sends that clear message that we will do this, that we are 

going to make sure that we are going to protect the American people, that our credit is important, that we are going to pay our bills. 

So I want to just—and maybe— 

Mr. MITCHELL. I definitely think it would be good to pass the legislation, even though, in reality, I think Treasury would do the 

right thing anyhow. 

Mr. HULTGREN. So we could do it. But by passing it, it just kind 

of makes that very clear. And I think it adds to that consumer confidence. And we have seen these threats, we have seen people 

abuse it, quite honestly on both sides, to push things through 

quickly without having the proper discussion or debate. 

Dr. de Rugy, did you have any thoughts on that? 

Ms. DE RUGY. No. I agree. But I also think a lot of the time it 

is like a false debate, because it is implied that all that the government can do or Treasury can do at a time of reaching the debt ceiling is pay P&I. And what we have seen time and again is actually 

24 

there is enough revenue not only to pay P&I, but also to pay other 

obligations. 

We have also seen, because it has been written up by GAO and 

it has been fact checked many times during the 2011 debate, that 

actually they could pay Social Security. And this is what I meant 

by scare tactics. 

So the idea that all we could do is P&I is usually, actually, a 

false debate. Of course, if we reached a point where P&I is so big 

because we have let the government grow so far, then we have bigger problems. 

Mr. HULTGREN. Let me flip it around really quick. There is, I 

guess, agreement that there is flexibility already there. There is 

ability and some misinformation, I think, of what the Treasury can 

do and can’t do. 

I guess to flip the question around, is there any valid reason for 

not supporting legislation instructing the Administration to 

prioritize payments to avoid defaulting on the Nation’s sovereign 

debt? Wouldn’t it be irresponsible not to do this in the event that 

the debt ceiling were reached? 

Ms. DE RUGY. I guess no, it would actually end the debate. 

Mr. HULTGREN. Yes? 

Mr. STONE. I don’t think you would end the debate. Yes, Treasury has the ability to manage various things for a short period of 

time once the limit is formally reached. And yes, you could meet 

some of the obligations by paying principal and interest, but in a 

protracted shutdown, in a protracted situation, you would be not 

meeting other obligations and that doesn’t inspire confidence when 

the rest of the world and creditors see people not getting paid. 

Mr. HULTGREN. My time has pretty much expired. 

Did you have one last thing to say? 

Ms. BOCCIA. I think it will be tremendously helpful to have congressional guidance to give investors confidence. I also would urge 

Congress to mandate that the Executive Branch put together a 

prioritized cash budget to show exactly how a prioritized budget 

would work in the event of a debt limit impasse. 

Mr. HULTGREN. Yes, I think that is a good idea. 

My time has expired. I yield back. Thanks, Mr. Chairman. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentleman from Washington, Mr. 

Heck, for 5 minutes. 

Mr. HECK. Thank you, Mr. Chairman. 

I would like to begin my questions with a statement. I find all 

of this to be a bit surreal. And I will stipulate that is no doubt, in 

no small part, due to being raised in a household where mom and 

dad said, pay your bills. 

I have to say that this whole idea of blowing through the debt 

ceiling and prioritizing or defaulting or however you want to characterize it absolutely reminds me of a couple getting in an argument about how high their credit card bill has become, and somebody says, well, this is easy, tear up the bill, as opposed to the 

credit card. And that is, in effect, what is being suggested here 

today by many people. 

But not by everybody. In fact, I want to acknowledge that both 

Dr. de Rugy and Ms. Boccia had what I would characterize as the 

25 

intellectual honesty to actually come out and say we need to cut 

Social Security in order to bring spending into line. And I think 

that is intellectually honest and I do commend you for it. 

Dr. Mitchell, I heard you say that we needed to reduce spending, 

we needed to reduce entitlements. Are you ready to throw in with 

your colleagues that that includes Social Security and that the way 

to control spending going forward, it is your position, includes cutting Social Security benefits? 

Mr. MITCHELL. If you look at the just-released CBO report, we 

could balance the budget by 2026 if we simply limit the growth of 

spending to 2.5 percent a year. The problem, of course, is on the 

baseline, spending is projected to grow more than 4 percent a year. 

So we are not talking about cutting necessarily, although there are 

plenty of programs and departments that should be cut, we are 

talking about limiting the aggregate growth of spending that is 

paid within that limit. 

Mr. HECK. So it is pain-free? 

Mr. MITCHELL. No, it is not pain-free at all. The interest groups 

would squeal if all of a sudden they were put on a diet, but that 

is exactly what things like a debt limit theoretically would do, force 

debate. 

Mr. HECK. Reclaiming my time, Dr. de Rugy and Ms. Boccia, 

thank you for your intellectual honesty. 

Dr. Stone, it seems to me that we are talking about this in kind 

of a hypothetical construct about what would happen, what could 

happen. And as it turns out, it seems to me this doesn’t have to 

be a discussion about a hypothetical. 

I am reminded of a government that is unable to pay its bills 

right now. It does in fact have enough money to pay the interest 

to its bondholders, but not enough to pay all of its obligations, and 

that is Puerto Rico. 

I am trying to figure out what is the fundamental distinction between what is being proposed here, namely blowing through the 

debt limit and ‘‘prioritizing’’ and rendering ourselves Puerto Rico II. 

Is there any meaningful distinction between what they are having 

to go through? And does that make us seem as though we would 

be defaulting on our debt if we wanted to be like Puerto Rico? 

Mr. STONE. Actually, there is a distinction. And in talking about 

Puerto Rico, and talking about Greece, that is not who we should 

be talking about when we are talking about the United States situation. We should be talking about Japan, which has a debt to GDP 

ratio of 200 percent and has no trouble borrowing. 

The question is, how do financial markets react? Yes, down the 

road when U.S. debt to GDP is 400 percent, maybe we will have 

a financial crisis. 

Mr. HECK. But my point, I think, Dr. Stone, is there isn’t anybody who would look at Puerto Rico and say they are not on the 

verge of defaulting. 

Mr. STONE. That is right. 

Mr. HECK. And if we were to do what is proposed here today, we 

would be defaulting. 

Mr. STONE. But we would be defaulting in the sense of not paying obligations because we were honoring a debt ceiling that we imVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00031 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
26 

posed on ourselves. That is why the family analogy doesn’t make 

any sense. 

Families can set a credit card limit, and if the kid gets sick and 

they need to spend more they can raise it. It is not the credit card 

company cutting off families. 

Mr. HECK. Back to the credit card analogy, before my time expires, there has been a fairly cavalier use of the term ‘‘dishonesty’’ 

here today, which I want to take exception to, because I think it 

speaks to character. There can be issues of lack of consistency and 

the like. 

But I guess it is in the eye of the beholder, because the truth of 

the matter is that this institution is governed by a PAYGO rule, 

which means that you can’t increase spending or cut taxes without 

providing for it. 

But in fact, in the last several months we have increased the projected debt accumulation by over $1.5 trillion in the next 10 years 

because of decisions that this institution made to both cut taxes 

and increase spending. 

So I guess that could be characterized as dishonest in light of the 

arguments being advanced today. But I would prefer to render it 

less personal and just suggest it is not, frankly, terribly consistent, 

Mr. Chairman. 

And with that, I yield back the balance of my time. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentlelady from Missouri, Mrs. 

Wagner, for 5 minutes. 

Mrs. WAGNER. Thank you, Mr. Chairman. 

And thank you to our esteemed panel for coming before this subcommittee to discuss this important issue of our Nation’s debt, 

which now stands at an outrageous $19 trillion. 

For Congress, the debt ceiling should be an important and necessary tool to look back on our spending policies in order to find 

ways to cut this massive Federal Government. Instead, this Administration has used the debt ceiling as simply a blank check and a 

political attack vehicle. 

The American people are tired of the dysfunction in Washington 

and tired of their elected officials and leaders failing to get things 

done, and cutting our out-of-control and irresponsible debt is something the American people want done. 

In 2013, when I and a number of my House colleagues had the 

privilege of going to the White House to negotiate in very good 

faith with the President on the debt ceiling, he decided to use the 

opportunity to lecture and pontificate, not negotiate. And I was 

there. 

He used dramatic rhetoric such as not wanting to, ‘‘negotiate 

with a gun pointed at their heads,’’ and used the press then to 

paint House Republicans as unwilling to talk and address the peoples’ concern about our fiscally, as you all have stated, 

unsustainable and, I think as a mother of three, immoral debt. 

Now with these new revelations, and frankly, that is what we 

are here to discuss, Mr. Chairman, these revelations produced by 

this committee, it is clear that the Administration manufactured 

and hyped up the crisis in order to prevent, I think, Republicans 

27 

and Congress, who are committed to slashing our debt, from enacting smart and responsible fiscal policy. 

Knowing now that the Administration was capable of prioritizing 

debt payments and actually running tabletop exercises after reaching the debt limit, do you find the Administration’s statements to 

the contrary disingenuous, Ms. de Rugy? 

Ms. DE RUGY. It is politics, so I guess I am not surprised. 

Mrs. WAGNER. I think it is politics, too. So you do believe that 

the Administration had political motivations for making these misleading statements? 

Ms. DE RUGY. I think the document makes it pretty clear. But 

one other thing that is also important is to actually not lose sight 

of why we are talking about prioritization, right? Why do you want 

to prioritize payments? So all of you can actually find a way out 

of the debt mess, especially the explosion going forward that we are 

talking about. 

So it is not just like not paying some of our obligations just for 

the sake of not paying some of our obligations. The ideas is a productive process that will lead to fundamental reform, an agreement 

among you to actually lead to a compromise to finding a way out 

of, honestly, putting a gigantic burden on our children. 

Mrs. WAGNER. I agree. 

And Ms. Boccia, shouldn’t the public and Congress have the right 

to know that the Administration has made these ‘‘contingency’’ 

plans? 

Ms. BOCCIA. I think that the debt limit presents a game of chicken in which it is in the Executive Branch’s interest not to reveal 

key information, like this committee just revealed yesterday, in 

order to leverage this to force Congress into just raising the debt 

limit, which Congress has complied with numerous times. 

I am very concerned that in fact we do not have a debt limit at 

this point. We have a debt limit suspension. There is no limit on 

borrowing. 

Mrs. WAGNER. It is a blank check. 

Ms. BOCCIA. That is right. 

Mrs. WAGNER. And it is outrageous and it is immoral as far as 

I am concerned. 

Ms. Boccia, I hope I am pronouncing that correctly, did the Administration’s choice to, I believe, play politics by withholding information about the Administration’s ability to make payments on the 

debt create unnecessary uncertainty in the markets? 

Ms. BOCCIA. Because Congress hasn’t been able to give guidance 

to the Administration on how to act at the debt limit, the Administration does have the leverage to refuse to pay our debt obligations. 

And putting that risk out there to use as political leverage, I think 

is very dangerous, because it reduces investor confidence. 

However, we had numerous rating agencies, in particularly 

Moody’s and Fitch, say they did expect the Treasury to honor its 

obligations to the United States’ debt holders. 

Mrs. WAGNER. And quickly in my time that is left, Dr. Mitchell, 

oftentimes we see yields on short-term Treasuries spike during 

these debt ceiling negotiations, which increases the cost of borrowing for the Federal Government. Is it possible that Treasury’s 

28 

decision to withhold information on making debt prioritization payments end up costing the government more money? 

Mr. MITCHELL. If you look at the GAO report from July 2015, 

they estimate that tens of millions of dollars of additional interests 

costs resulted from the Administration’s lack of forthcomingness, 

honesty. 

Mrs. WAGNER. Tens of millions of dollars because this Administration told me, and I was there, this President said he wouldn’t 

negotiate when we had a gun to their heads, and he cost this country and the taxpayers and the people tens of millions of dollars. 

I thank you. 

I yield back. And I appreciate your indulgence. 

Chairman DUFFY. The gentlelady yields back time she does not 

have. 

[laughter] 

The Chair now recognizes the gentleman from Colorado, Mr. Tipton, for 5 minutes. 

Mr. TIPTON. Thank you, Mr. Chairman. 

And I thank our panel for taking the time to be here. 

Ms. Boccia, you just mentioned a game of chicken that the Administration was playing. Did that impact our markets? 

Ms. BOCCIA. If we look at the GAO report, then yes. If investors 

have no confidence that the Administration will do what is right 

and what is in the best interests of the United States, which would 

be to prioritize interest and principal on the debt during a debt 

limit impasse, then investors may demand higher interest rates or 

refuse to buy bonds during certain periods if they are not sure that 

they will be repaid. 

Mr. TIPTON. So that did hurt the United States. Do you find it 

irresponsible of Secretary Lew to have made comments to Congress 

that we simply cannot pay the interest, pay the principal and the 

interest, be able to service portions of the debt, while at the same 

time they were making plans to do that very thing? Do they hold 

some culpability in roiling those markets? 

Ms. BOCCIA. I am glad to hear that the Treasury was responsible 

enough to make contingency plans, even though they indicated otherwise to the public. I would like for government to be honest, both 

to Congress and to the American public. It doesn’t always happen 

for political reasons. 

Mr. TIPTON. So that probably ties back to Dr. Stone’s comments 

that candidate Obama rather than President Obama was being 

reckless when he had talked about the debt ceiling and then was 

concurrently reckless as President of the United States by instructing his Treasury Secretary to not be forthcoming with the American people. Is that accurate? 

Mr. STONE. I didn’t say the second. 

Mr. TIPTON. But it is accurate. 

Mr. STONE. No, it is not accurate. It is one thing when politicians 

are grandstanding over the debt limit. I am not defending the 

Treasury on whether they hid information or not. I am not commenting on that. 

But the Treasury was very forthcoming about all of the steps it 

was going to take after you hit the debt limit to try to arrange payments and things, to try to prevent a default. 

29 

Mr. TIPTON. I think we can probably dispute that from that report that they were holding that back. 

But you know, we were raising hands here. Who on the panel 

thinks that we can continue as a Nation to spend more than we 

take in? Let the record show no one thinks that we can continue 

to spend more than we are taking in as a country. 

When we were looking at—Dr. Stone thinks we can spend more 

than we take in. 

Mr. STONE. We can’t spend a lot more than we take in. But in 

dollar terms, if we stabilize the debt— 

Mr. TIPTON. How well did that work out for Greece, Dr. Stone? 

Mr. STONE. Greece is a completely different example. 

Mr. TIPTON. It’s a completely different example? 

Mr. STONE. Greece cannot borrow in its own currency. Greece 

cannot— 

Mr. TIPTON. No, I think we have probably—Ms. Boccia, you had 

mentioned in your testimony that in the 2015 International Monetary Fund working paper, they concluded that a high level of public 

debt accompanied with consistent growth in that debt is a problem. 

Why is that going to be a continuing problem? Dr. Stone doesn’t 

seem to think so. 

Ms. BOCCIA. We are seeing increasing evidence from economists 

across a wide range of spectrum, even those set out to counter the 

notion that high public debt hurts economic growth, they are not 

able to refute that. 

High public debt does hurt growth, but I think one of the main 

reasons for that is because it is fueled by greater spending. We 

don’t have a tax problem. Taxes are at their historical level and rising above. What we have is a spending problem. 

I think Congress also needs to play its part. And the congressional budget takes many steps in the right direction, but Congress 

still has not put forth implementing legislation to truly balance the 

budget. 

Mr. TIPTON. And I appreciate both your and Dr. de Rugy’s comments of the hand-in-glove, of spending versus the debt that we 

have. We need to be able to address both of those. 

But Dr. Mitchell, could you maybe tell us what signals we are 

sending to the market by continually increasing the debt ceiling 

without engaging in actually having fiscal discipline? What are we 

telling the markets? 

Mr. MITCHELL. It is ultimately a matter of trust whether or not 

investors will get paid back. And as Dr. Stone mentioned, Japan 

is still borrowing at 200 percent of GDP. We are borrowing right 

now at very low rates of interest, so we are trusted. As a matter 

of fact, you could maybe make an argument that we are too trusted, that markets are too trusting of government. Because if you go 

back 10 years, Greece was borrowing at very low rates. 

Mr. TIPTON. Just to get in, before we run out of time here, as 

someone who is wanting to be paid back, when you are seeing .07 

percent GDP growth in this country, are you starting to get a little 

concerned that you are going to be paid back? 

Mr. MITCHELL. I am very concerned that with a long-term future 

of government growing faster than the private sector, we are on a 

path to becoming Greece if we don’t engage in structural reform. 

30 

Mr. TIPTON. Thank you, sir. 

I yield back. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentleman from Maine, Mr. 

Poliquin, for 5 minutes. 

Mr. POLIQUIN. Thank you, Mr. Chairman; I appreciate it very 

much. 

And thank you all for being here today. 

Before I entered Congress a year ago, I was the State treasurer 

in Maine and a small-business owner. I still am a small-business 

owner. And one of the things that we learned, those of us who are 

business owners is: number one, live within your means; and number two, be very, very careful with debt. 

Now, I will tell you, one of the things that we learned, Mr. Chairman, back in Maine when I was State treasurer, we actually had 

a debt clock that was unwinding. I come in here every hearing and 

I look at that $19 trillion continuing to spool up and it makes me 

sick to my stomach. It makes me sick to my stomach because there 

aren’t enough people, frankly, on the other side of the aisle who 

have the guts to deal with this. They talk about it, but all they 

want is bigger government, more spending, and more debt, which 

results in higher taxes. And they, of course, want more regulations 

and higher energy costs, and that kills jobs. 

And it kills jobs, that is important, because if our folks don’t 

have jobs, then they don’t pay taxes, they are more dependent on 

the government, and we don’t have the cash flow to meet our obligations. 

Now, the reason we were able to unwind our debt clock in Maine 

during 2011, 2012 is because we attacked a fundamental issue 

dealing with the debt, which is our unfunded pension liability, public pension fund. We looked it in the eye, we were serious about it, 

we engaged all stakeholders and we reduced 41 percent of that 

pension debt, which caused the debt clock to unwind. 

Now, we have the same problem here, Mr. Chairman. We have 

a $15 trillion unfunded defined benefit pension plan called Social 

Security. Now, we all know in this room and the folks who are listening, two-thirds of our budget is on autopilot in four programs: 

Medicare; Medicaid; Social Security; and interest on the debt, 

which isn’t a program, but it continues to grow. 

When are we going to have a serious conversation with the kids 

in this country, 25- and 30-year-old folks to say, if you want these 

programs that are growing a lot faster than our tax revenues, we 

need to make some changes? We know what to do; it is simple 

math. 

Now, I am not talking about our seniors, Mr. Chairman, who 

have paid into these programs their whole lives and are depending 

on these programs. No change for them. But we have millennials, 

and there are a lot of them, a lot more than the baby boomers, and 

we can fix this. 

So that is one of the reasons, Mr. Chairman, why I support, and 

I know you do, too, and those on this side of the aisle do, a balanced budget amendment of the Constitution. My second day here, 

when I was still trying to find out where the men’s room was. I cosponsored that bill. I think it would be the greatest institutional 

31 

tool that Washington could have. Force Washington to live within 

its means so we can start paying down our debt. 

Now, Mr. Chairman, when we have Mr. Lew coming in here, the 

Secretary of the Treasury, telling us, well, the debt is no big deal, 

it is only 3, 4 percent of the GDP, we have talked about it today, 

you have, Mr. Chairman, thank you, the interest payments on that 

debt are now twice what we spend on veterans’ benefits in a year. 

They are projected to exceed what we spend to defend our country 

in 8 years. It is a big deal. 

Now, I would say also, Mr. Chairman, that 4 years ago the annual budget deficit was $1.3 trillion, and it is now $440 billion. We 

have a long way to go, but it has been cut in two-thirds, not because some folks don’t want to spend more, but because Republicans are trying to be fiscally disciplined and have spending caps 

in place. 

So my question to you, Mr. Mitchell, is—you have been around 

this town a lot longer than I have—do you think we have enough 

people in Congress who have the guts to address our spending 

problem, who will allow us to start whittling away at that $19 trillion debt that is chewing up our budget and putting a yoke around 

our kids’ necks, that they are going to be saddled with, that creates 

a tremendous dark cloud above our economy and kills jobs and kills 

the kids of our future? What do you think? 

Mr. MITCHELL. Normally, I am a pessimist, but for 5 years in a 

row the House has voted for a budget resolution that is based on 

the assumption of some genuine and serious reform to slow the 

growth of entitlement spending. 

And the Senate even did something sort of like that last year. So 

I think there is a recognition, to some degree, that there is a very 

serious problem. 

Obviously, those moves in Congress couldn’t go anywhere because of opposition from the White House. But maybe, just maybe, 

within a couple of years we will be able to take a serious step in 

terms of preventing America from become Greece. 

Mr. MITCHELL. Thank you very much, Mr. Mitchell. 

Dr. Stone, what do you think? Do you think we have enough people in Congress on both sides of the aisle? I know we do on this 

side. Do you think we have enough on the Democrats’ side who are 

fiscally disciplined and conservative enough to start getting their 

act together and start living within our means? What do you think, 

sir? 

Mr. STONE. I think that in 2011 when we had the debt ceiling 

crisis and we had a commission, we had a super committee in Congress to try to make decisions. It was a bipartisan failure to come 

up with a permanent solution. It is hard choices. It takes— 

Mr. POLIQUIN. We don’t need a commission, Mr. Stone, to make 

a decision, but we know what to do. 

Mr. STONE. No, no, no, no, no. 

Mr. POLIQUIN. This is all about politics and simple math. 

Mr. STONE. No, I am not talking about a commission. I was talking about a committee of Congress, a super committee. 

Chairman DUFFY. The gentleman’s time has expired. 

Mr. Stone, the gentleman’s time has expired. 

32 

Mr. POLIQUIN. Thank you very much, Mr. Chairman. I yield back 

my time which I don’t have. 

Chairman DUFFY. Thank you, you do not have any. 

The Chair now recognizes the gentleman from Arkansas, Mr. 

Hill, for 5 minutes. 

Mr. HILL. Thank you, Mr. Chairman. 

And I thank the panel for being with us. It’s good to see my old 

friend, Dan Mitchell. 

I am reminded by listening to this discussion, and from my 

friend Mr. Heck, as a 30-year banker and business guy, of the 

woman who comes into the bank branch and says, ‘‘I can’t be overdrawn in my account.’’ And the bank manager says, ‘‘But you are.’’ 

And she says, ‘‘I can’t be; I still have checks.’’ 

No laughter, oh well. Banking jokes just don’t go over like they 

used to. 

[laughter] 

Thank you. Thank you to the gentleman from South Carolina. 

As a former Treasury official, it really saddens me to read comments from the New York Fed which say that the Treasury’s position is crazy, counterproductive, and is adding risk to the system. 

And that my friend, former Treasury official, now a Governor of the 

Federal Reserve System, Jay Powell, says that Treasury is politicizing important fiscal policy. 

I think we should all be shocked by that, Democrats and Republicans, because there is no room for that in the proper governance 

of our country. And it goes absolutely against everything Hamilton 

put in place back in his report on the public debt, 1790. 

I am interested in some quick responses and then I have a couple 

of questions. Does everybody here—and I am interested because I 

have kind of gotten a couple of different feelings—support the fact 

that we have a debt limit and it comes up and we debate it? Just 

raise your hands if you support the existing debt limit statute, effectively. Okay, three yes and one no. 

And do you all support Congressman McClintock’s bill that we 

passed in the House last year? If you would raise your hands on 

that? 

Ms. BOCCIA. I am not sure that I am legally allowed to do this. 

Ms. DE RUGY. I was going to say, I support the policy. 

Mr. HILL. Well, his bill was this issue of being able to, while we 

are negotiating a debt limit crisis, be able to continue to issue securities to pay the interest and keep payments current. 

Do you support a Greenspan-type commission which was used in 

1983 to tackle something like Medicare? Is that an idea? Or do you 

think, as my friend from Maine says, it should be specifically the 

burden of the Congress? Or do you like the idea of an independent 

commission that gives Congress a BRAC, up-or-down vote type approach? 

Ms. DE RUGY. That is different. 

Mr. HILL. You may comment on that, if you like. 

Dr. Mitchell, would you like to comment on that? 

Ms. DE RUGY. I can comment on this. The 1983 commission was 

different from a BRAC commission. And the result led to increasing 

taxes and a lot of other problems that we are facing right now. 

Mr. HILL. Dan, any comment? 

33 

Mr. MITCHELL. As Dr. de Rugy said, the 1983 Social Security 

commission did lead to some significant tax increases. It did not 

lead to the kind of long-run structural reform that I think would 

have been a better approach. 

I do like the idea of doing anything, including commissions, that 

will at least help to inform the debate. But I am just not overly 

happy with the results we got from that one. 

Mr. HILL. Yes. I go home, and whenever I am in town hall meetings, people are so fixated on the trillion dollars, a third of the 

budget that we vote on and debate on here in the appropriations 

process. And it is just a disproportionate amount of things. 

I think Members of Congress here, when they are at home and 

we never hear from our constituents in a detailed, thoughtful way 

about the two-thirds of the budget that I think has been the anchor 

of our conversations today, that I agree have a big demographic, 

structural component to them. 

Dr. Stone, you talked about general thoughts about levels of debt 

to GDP. You are a classic economist on the one hand and on the 

other hand in your overview of that. But in the Reinhart/Rogoff papers that were delivered to NBER and all that back in 2008, 2009, 

they had specific views on debt to GDP levels for the long run. 

And I would be interested in each of your views on what you 

think that band is of where we need to move debt to GDP to have 

the national debt return to being a national blessing, and thus not 

be excessive. 

Dr. Mitchell? 

Mr. MITCHELL. As I mentioned before, Japan has government 

debt 200 percent of GDP. They can still borrow. Argentina would 

probably be in default if they tried to go to 50 percent of GDP. So 

it really depends on the underlying conditions in the country, 

which is why I think the most important thing to focus on is capping the growth of government spending relative to the economy. 

The Swiss debt brake does that; it has been very, very successful. 

Hong Kong, Article 107 of their basic law, the goal isn’t to balance 

the budget per se, it is to make sure government doesn’t grow faster than the private sector. 

If we could have a rule like that where you address the underlying disease of too much government, then the symptom of red ink 

disappears. So I want to deal with the underlying problem. We deal 

with the underlying problem and the symptom of borrowing goes 

away. 

Mr. HILL. Thank you, Mr. Chairman. 

Chairman DUFFY. The gentleman’s time has expired. 

The Chair now recognizes the ranking member of the subcommittee, the gentleman from Texas, Mr. Green, for 5 minutes. 

Mr. GREEN. Thank you, Mr. Chairman. 

And I would like to simply reiterate that my friends are in the 

Majority. To continue to blame the Democrats makes little sense to 

your voting public. They expect you to produce legislation. You 

want a constitutional amendment? You are in the Majority. You 

want to pass a bill that allows prioritization? You are in the Majority. You can do it. Believe me, trust me, you are in the Majority; 

you don’t have to depend on Democrats to get it done. 

34 

I think in the spirit of compromise that would be the better thing 

to do, but you are not willing to compromise. Therein lies the problem. If you want to do it, pass McClintock, pass it through the Senate, send it to the President, let us see if he will sign it. If he does 

not, then you go back through regular order and you produce something that we can all agree on to the extent that you have a Majority in the House, a Majority in the Senate, and a President to sign 

it. 

But don’t behave like you are in the Minority and it is the mean 

old Democrats who won’t let you pass legislation. It never stopped 

you from passing a repeal of the Affordable Care Act more than 50 

times, more than 50 times, and there are still other repeals of it 

pending. You have repealed it consistently, okay? Then act like you 

are in the Majority and pass your legislation. 

Let us go to Mr. Stone. 

Mr. Stone, there was a comment made about Greece and you did 

not have an opportunity to finish. There was a comparison being 

made. Would you kindly finish your commentary? 

Mr. STONE. As I was saying, and Dr. Mitchell agrees, Japan is 

able to borrow with a debt ratio of 200 percent of GDP. And that 

is because Japan, the United States, and the U.K. borrow in their 

own currencies and have flexible exchange rates. That allows them 

to adjust. 

Now, nobody here, including me, thinks that the current GDP 

projections are ultimately sustainable. We are discussing whether 

the debt limit is a worthwhile tool to try to discipline our spending. 

Mr. GREEN. Exactly. 

Mr. STONE. And I strongly disagree with the idea that the debt 

limit has much to do with it or the prioritization. The prioritization 

makes sure that certain bills get paid and maybe some bondholders 

are happy with that, but there are a lot of bills that don’t get paid 

and that doesn’t make us look like a very fiscally responsible country and it makes it look like it is okay to not pay those bills in a 

protracted debt negotiation. 

Mr. GREEN. I appreciate your indicating that this is not an effective tool because of the consequences associated with a possible 

shutdown. And that causes me to harken back to 2011 and what 

Moody’s did when they downgraded us and we didn’t have the 

shutdown. We were downgraded. And I think that Moody’s gave us 

a negative and S&P put us on a credit watch. 

So our opinions count, but the opinions of the agencies that rate 

us count as well. And while we may pay P&I, it will cause a good 

deal of consternation in international markets as to whether or not 

we are going to pay all of our bills and eventually not pay P&I. 

Why put ourselves in that position? Why don’t we legislate now, 

given that we have more than 400 days to do what Ms. de Rugy 

says, pass her recommendations if you would like to? 

Don’t expect me to vote for all of the things that you would support. But if we can reach some sort of compromise, I think we can 

get this done. The problem is that there are people who don’t want 

to compromise; they want us to support anything and everything 

and leave behind a good many people who are going to suffer as 

a result of the crisis that we will manufacture. 

35 

To this end, it is my belief, Mr. Chairman, that Social Security 

is important to people who are receiving it. And I think we can sustain it. We can support it without it being a detriment to the economy. We have to work together and work out a compromise on Social Security. But we are not doing that. 

Rather than do that with Social Security as well as with Medicare, we are trying to find a clever way to create a debt crisis so 

that we can have the Administration prioritize. 

If you want a prioritizing to take place, pass the legislation, get 

it done. You are the Majority, it is your job to get it done. Don’t 

whine and cry about how the Democrats won’t support us and are 

there enough people here willing to do it. Yes, there are enough 

people willing to do it if you have the Majority and you use it properly. 

I yield back. 

Chairman DUFFY. The gentleman yields back. 

The Chair now recognizes the gentleman from South Carolina, 

Mr. Mulvaney, for 5 minutes. 

Mr. MULVANEY. Mr. Stone, in your report you cite a GAO report 

which says, regarding the debt ceiling crisis in 2011, ‘‘When the 

Treasury was close to breaching the debt limit, investors reported 

taking the unprecedented action of systematically avoiding certain 

Treasury securities. That cost from the Treasury from, roughly, $38 

million to more than $70 million in higher interest costs, amounting to, in essence, nothing more than a waste of taxpayers’ money.’’ 

I take it that was because of the uncertainty in the markets. 

That is why interest rates go up, or that is one of the reasons that 

they do. 

If the Treasury had information at that time that could have 

calmed the markets by letting the markets know that we would 

have paid principal and interest, do you think they should have revealed it? 

Let me put it this way, if they had revealed it, would it have 

calmed the markets? 

Mr. STONE. It may have calmed the markets, but it wouldn’t 

have—it may have partially calmed the markets because— 

Mr. MULVANEY. Do you think that the guys and gals who were 

thinking about buying Treasuries were worried about whether or 

not the national parks were going to be open? Or do you think they 

were worried about getting their money back if they bought Treasuries? 

Mr. STONE. They were worried about getting their money back. 

Mr. MULVANEY. And if the Treasury had information that would 

have assured them they would have gotten their money back, we 

might have saved that $38 million to $70 million, might we not? 

Mr. STONE. We might not have seen that shifting away from certain securities, given the timing of it. 

Mr. MULVANEY. You mention in your testimony in another place, 

your written testimony, it says that the debt ceiling, ‘‘plays no constructive role in enforcing budget discipline; rather, it encourages 

reckless brinkmanship.’’ You have mentioned that a couple of times 

in your testimony. 

Would you be surprised that according to AEI, in 1979 the debt 

ceiling debate was used in order to leverage and require the PresiVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00041 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
36 

dent to present balanced budgets in the next following years, which 

he did? In 1980, the debt ceiling debate was used to reform import 

tariffs. In 1985, the debt ceiling was used to reform cigarette taxes 

and the alternative minimum tax. 

And there are several folks who were here in the 1990s who will 

swear to you that the debt ceiling discussion during the 1990s led 

directly to the balanced budgets later that decade. 

So do you still stand by your testimony that it is never used in 

order to reach compromise that speaks to fiscal matters? 

Mr. STONE. No, I didn’t say it was never used to reach compromise, although— 

Mr. MULVANEY. It says it plays no constructive role. Did it play 

a constructive role in 1979, 1980, 1985, and the 1990s? 

Mr. STONE. As a bargaining chip, I don’t view that. I view the 

risks much too high relative to any— 

Mr. MULVANEY. That is not what you said. You said it plays no 

constructive role. But you would have to admit that in those circumstances, which I found in 3 minutes on the Internet, they were 

used for constructive purposes. 

Mr. STONE. I will use a dramatic analogy. If you play Russian 

roulette and you pull a blank— 

Mr. MULVANEY. Okay. So your testimony is hyperbole then and 

not really— 

Mr. STONE. No, no. 

Mr. MULVANEY. Okay, all right, that is fine. 

Last issue, default. Let us define default because it used to mean 

not paying interest on our debt or paying our principal on our debt. 

In fact, if you go back and you watch Secretary Lew’s testimony, 

I have been doing this now since 2011, as has Mr. Duffy, we were 

on Joint Economic together, it used to be that we wouldn’t be able 

to pay our financial obligations, we wouldn’t be able to pay principal and interest. That changed and now the Administration uses 

the same terminology you use, which is we wouldn’t be able to pay 

our obligations, making the equivalent that all payments are the 

same. 

So let us explore that a little bit. By the way, do we have a contractual obligation to pay back the debt? When we sell a Treasury 

to Mr. Duffy, are we making a legal promise to pay him back? 

Dr. Stone? 

Mr. STONE. Is the principal going to be repaid? Yes. 

Mr. MULVANEY. Yes, it is a legally enforceable promise to pay, 

right? 

Mr. STONE. Yes. 

Mr. MULVANEY. Let’s see, last year, a couple of years ago, we 

spent $3 million on a NASA study on how Congress works. Does 

that rise to the same level of obligation, in your mind, as the promise to pay Mr. Duffy back the money with which he has bought a 

Treasury? 

Mr. STONE. We have obligations to honor all of our—we are required under the Constitution to honor all of our obligations. There 

is a conflict. 

Mr. MULVANEY. Okay. I am trying to drill down into that, Dr. 

Stone, because we are using the English language. It may be different at Swarthmore than it was at Georgetown, but I am just tryVerDate Nov 24 2008 18:38 Mar 08, 2017 Jkt 023564 PO 00000 Frm 00042 Fmt 6633 Sfmt 6633 K:\DOCS\23564.TXT TERI
37 

ing to figure out where we are. Is the obligation that we pay, for 

lack of a better word, NASA $3 million to study Congress—by the 

way, I could get a lot more fun on a list. We spent a couple hundred thousand dollars on studying the effect of cocaine on the sex 

habits of Japanese quail. If you would rather me use that example, 

I could, but let us stay with NASA for a second. 

Does the obligation that we have to pay NASA to study us rise 

to the same level legally as the obligation to pay Mr. Duffy back 

the money he lent us by buying a Treasury? 

Mr. STONE. I think you are not asking legally, you are asking in 

a sense of— 

Mr. MULVANEY. Well, pick one. Pick a legal sense, pick a political 

sense, are they of the same import, in your mind? 

Mr. STONE. Would the harm of not paying our financial obligations compare with a tiny amount of a study? No. 

Mr. MULVANEY. Okay. 

Mr. STONE. But for doctors, for hospitals— 

Mr. MULVANEY. And in principle, we are not breaking new 

ground here, Dr. Stone. I think everybody admits that some of the 

obligations of the Federal Government are more important than 

others. It is not going against some liberal/progressive orthodoxy to 

say it is more important to pay the debt than it is to pay to study 

quails having sex. That shouldn’t be outrageous. If it is, we have 

a lot bigger issue to deal with. 

So I think you see what I am getting at, which is we are going 

to prioritize at some point. We do all the time. We admit to ourselves that the debt is more important than paying to study Congress or paying to study quails having sex. And that is all that we 

are asking to do in the prioritization bill. 

Mr. STONE. You prioritize when you pass a budget and pass laws 

for appropriations. 

Mr. MULVANEY. Can NASA sue us? 

Mr. STONE. And when the bills come due, you pay them. 

Mr. MULVANEY. Can NASA sue us to get the money? Mr. Duffy 

can sue us to get the money, can NASA sue us to get the money? 

We all know the answer to that. 

I wish we had more time to do this. This is the third or fourth 

time you and I have done this the last couple of years. I always 

enjoy your participation. 

Mr. STONE. It was fun. 

[laughter] 

Mr. MULVANEY. I look forward to having you back. Thanks, Dr. 

Stone. 

Chairman DUFFY. The gentleman yields back. Thank you for 

your common-sense questions. 

38 

The Chair notes that some Members may have additional questions for this panel, which they may wish to submit in writing. 

Without objection, the hearing record will remain open for 5 legislative days for Members to submit written questions to these witnesses and to place their responses in the record. Also, without objection, Members will have 5 legislative days to submit extraneous 

materials to the Chair for inclusion in the record. 

I appreciate your time and your insight into today’s hearing. 

And so without objection, this hearing is now adjourned. 

[Whereupon, at 4:28 p.m., the hearing was adjourned.] 

(39) 

A P P E N D I X 

February 2, 2016 

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