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THE FEDERAL GOVERNMENT ON AUTOPILOT: 

MANDATORY SPENDING AND THE 

ENTITLEMENT CRISIS 

HEARING 

BEFORE THE

EXECUTIVE OVERREACH TASK FORCE 

OF THE

COMMITTEE ON THE JUDICIARY 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FOURTEENTH CONGRESS 

SECOND SESSION 

JULY 6, 2016 

Serial No. 114–81 

Printed for the use of the Committee on the Judiciary 

( 

Available via the World Wide Web: http://judiciary.house.gov 
(II) 

COMMITTEE ON THE JUDICIARY 

BOB GOODLATTE, Virginia, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

LAMAR S. SMITH, Texas 

STEVE CHABOT, Ohio 

DARRELL E. ISSA, California 

J. RANDY FORBES, Virginia 

STEVE KING, Iowa 

TRENT FRANKS, Arizona 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TOM MARINO, Pennsylvania 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

BLAKE FARENTHOLD, Texas 

DOUG COLLINS, Georgia 

RON DeSANTIS, Florida 

MIMI WALTERS, California 

KEN BUCK, Colorado 

JOHN RATCLIFFE, Texas 

DAVE TROTT, Michigan 

MIKE BISHOP, Michigan 

JOHN CONYERS, JR., Michigan 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

STEVE COHEN, Tennessee 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

PEDRO R. PIERLUISI, Puerto Rico 

JUDY CHU, California 

TED DEUTCH, Florida 

LUIS V. GUTIERREZ, Illinois 

KAREN BASS, California 

CEDRIC RICHMOND, Louisiana 

SUZAN DelBENE, Washington 

HAKEEM JEFFRIES, New York 

DAVID N. CICILLINE, Rhode Island 

SCOTT PETERS, California 

SHELLEY HUSBAND, Chief of Staff & General Counsel 

PERRY APELBAUM, Minority Staff Director & Chief Counsel 

EXECUTIVE OVERREACH TASK FORCE

STEVE KING, Iowa, Chairman 

F. JAMES SENSENBRENNER, JR., 

Wisconsin 

DARRELL E. ISSA, California 

LOUIE GOHMERT, Texas 

JIM JORDAN, Ohio 

TED POE, Texas 

JASON CHAFFETZ, Utah 

TREY GOWDY, South Carolina 

RAU ́ L LABRADOR, Idaho 

RON DeSANTIS, Florida 

KEN BUCK, Colorado 

MIKE BISHOP, Michigan 

STEVE COHEN, Tennessee 

JERROLD NADLER, New York 

ZOE LOFGREN, California 

SHEILA JACKSON LEE, Texas 

HENRY C. ‘‘HANK’’ JOHNSON, JR., 

Georgia 

JUDY CHU, California 

TED DEUTCH, Florida 

CEDRIC RICHMOND, Louisiana 

SCOTT PETERS, California 

PAUL B. TAYLOR, Chief Counsel 

JAMES J. PARK, Minority Counsel 
(III) 

C O N T E N T S 

JULY 6, 2016 

Page 

OPENING STATEMENTS 

The Honorable Steve King, a Representative in Congress from the State 

of Iowa, and Chairman, Executive Overreach Task Force ............................... 1 

The Honorable Steve Cohen, a Representative in Congress from the State 

of Tennessee, and Ranking Member, Executive Overreach Task Force .......... 2 

The Honorable Bob Goodlatte, a Representative in Congress from the State 

of Virginia, and Chairman, Committee on the Judiciary ................................. 4 

The Honorable John Conyers, Jr., a Representative in Congress from the 

State of Michigan, and Ranking Member, Committee on the Judiciary ......... 5 

WITNESSES 

C. Eugene Steuerle, Richard B. Fisher Chair & Institute Fellow, The Urban 

Institute 

Oral Testimony ..................................................................................................... 7 

Prepared Statement ............................................................................................. 10 

Scott Lilly, Senior Fellow, Center for American Progress 

Oral Testimony ..................................................................................................... 20 

Prepared Statement ............................................................................................. 22 

Nicholas Eberstadt, Henry Wendt Chair in Political Economy, American Enterprise Institute 

Oral Testimony ..................................................................................................... 30 

Prepared Statement ............................................................................................. 32 

(1) 

THE FEDERAL GOVERNMENT ON AUTOPILOT: 

MANDATORY SPENDING AND THE ENTITLEMENT CRISIS 

WEDNESDAY, JULY 6, 2016 

HOUSE OF REPRESENTATIVES

EXECUTIVE OVERREACH TASK FORCE

COMMITTEE ON THE JUDICIARY

Washington, DC. 

The Task Force met, pursuant to call, at 1 p.m., in Room 210, 

Cannon House Office Building, the Honorable Steve King (Chairman of the Task Force) presiding. 

Present: Representatives King, Goodlatte, Gohmert, Labrador, 

DeSantis, Buck, Bishop, Cohen, Conyers, and Lofgren. 

Staff Present: (Majority) Paul Taylor, Chief Counsel; Tricia 

White, Clerk; Zachary Somers, Parliamentarian & General Counsel, Committee on the Judiciary; (Minority) James J. Park, Minority Counsel; Veronica Eligan, Professional Staff Member. 

Mr. KING. The Executive Overreach Task Force will come to 

order, and without objection, the Chair is authorized to declare recesses of the Task Force at any time. And I will recognize myself 

for an opening statement. 

Today’s hearing of the Task Force on Executive Overreach will 

focus on mandatory spending at the Federal level, and the resulting entitlement crisis. Federal spending is characterized, excuse 

me, categorized as either discretionary or mandatory spending. 

Under discretionary spending, the President and Congress decide 

each year which programs to fund, and how much. To do so, they 

are supposed to enact 12 appropriations bills that fund the defense 

budget, and a wide range of domestic programs. Some programs 

are continued, some programs are created, and some programs, less 

often, are ended. 

But under mandatory spending, the President and Congress create programs, mostly so-called entitlement programs, that continue 

automatically from year to year. That is unless Congress enacts 

laws in later years to change them. 

These entitlements have increasingly dominated Federal spending, and they grow automatically forever, by annually providing 

more generous benefits to more eligible people. As Urban Institute 

scholar Eugene Steuerle has written, ‘‘to top it off,’’ and this is a 

quote, ‘‘to top it off, these automatic growth rates, particularly in 
2 

retirement and health programs, were sometimes set at levels 

above the growth rate, in people’s private incomes and the economy 

itself. Eventually, the prospect of new and growing future deficits 

arises even in the absence of any new congressional action.’’ 

This trend is accelerating as ever more years of taxpayer support 

are required as people live longer, and as there has come to be 

fewer taxpayers relative to the beneficiaries, as birthrates have 

fallen. 

As Mr. Steuerle has summarized, ‘‘Where policymakers of the 

past could achieve budget balance simply by enacting few or no increases in discretionary spending for a while, or in a few cases, 

mainly after war, cutting discretionary spending, such a strategy 

would prove futile in today’s fiscal context. 

‘‘Now the reverse is true. Built-in growth in spending will exceed 

the growth in revenue forever, or until the economy collapses. 

Eventually, with revenues completely allotted to finance fast-growing entitlements, Congress will have to finance any dollar of discretionary spending by borrowing, often from abroad.’’ 

Recent experience in advanced economies indicates that countries 

with debt above 80 percent of gross domestic product and persistent deficits are vulnerable to doubts by lenders, which lead to 

higher interest rates, which in turn make our fiscal situation much 

worse by requiring us to devote an even larger share of Federal 

revenues to paying for the interest on our debt. 

That is an unsustainable situation. Mandatory entitlements continue to grow larger with the volume of current beneficiaries, making the debt burden larger and larger as our future generations 

grow smaller and smaller. 

As researchers at the Urban Institute have concluded, ‘‘If current 

trends for younger generations are not reversed, within a few decades they may become more dependent than older generations of 

Americans today, especially in retirement, upon safety net programs less capable of providing basic support.’’ 

I look forward to hearing from all our witnesses today, and discussing ways in which we might step away from the abyss that has 

been growing steadily at our feet for decades. That abyss cannot 

grow forever without opening under the feet of future generations, 

and swallowing their futures and opportunities. 

I would conclude my statement, and now recognize the Ranking 

Member from Tennessee for his opening statement, Mr. Cohen. 

Mr. COHEN. Thank you, Mr. King, and I welcome the witnesses. 

It has been clear, since the first hearing of this Task Force, that 

my colleagues in the majority have attempted to turn into constitutional issues what are essentially policy disputes between the parties. 

Indeed, at the first hearing, one of the majority witnesses suggested the Constitution may require Congress to cut funding for 

Social Security, Medicare and Medicaid. So it is not surprising that 

today’s hearing about mandatory spending and the so-called ‘‘entitlement crisis,’’ is really about making the argument to cut Social 

Security, Medicare and Medicaid, three of the most important and 

most politically popular entitlement programs, which conservatives 

are denied the votes or political support to undermine outright. 
3 

These three programs constitute a majority of all Federal spending, and by far the largest portion of mandatory spending. And so 

when we talk about mandatory spending, we are talking about 

these programs. And if there is a problem with the finances of 

these programs, I would submit you can raise the cap on Social Security and Medicaid to get sufficient funding, not to take away 

from the people who need these programs, perfectly within Congress’ constitutional powers to constitute power of the purse to pass 

mandatory spending measures that avoid the annual appropriations process. 

Doing so as a policy choice, one which Congress may be free to 

revisit on its merits, but not one that is unconstitutional. And the 

prior Congresses that enacted Social Security, Medicare and Medicaid made the right choice in making funding mandatory for those 

programs. 

In the 81 years since President Roosevelt, Franklin Roosevelt, 

signed the Social Security Act into law, Social Security has remained one of the Nation’s most successful and effective programs, 

one that provides a basis for retirement for our seniors, and social 

insurance for workers who have become disabled, or for their survivors in the event of their deaths. 

According to the Center for Budget and Policy Priorities, 60 million Americans, or more than 1 in 6, received Social Security benefits in June of 2015. And without Social Security, almost half of 

Americans age 65 and older would be living well below the poverty 

line. Thanks to Social Security, less than 10 percent currently do. 

Social Security is a particularly important source of income for 

members of minority groups, who are disproportionally likely to 

have low incomes and less ability to save for retirement. For instance, 46 percent of African-Americans age 65 and older relied on 

Social Security for 90 percent or more of their income, compared 

to 35 percent of Whites. 

This disparate impact shows that regardless of the intent—and 

I know there is no intent on the part of the people that proposed 

this—it is de facto racial in nature, and discriminatory. 

According to the Center for Medicare and Medicaid Services, 

Medicare provided health insurance and other benefits to 54 million Americans in 2014, and the average monthly enrollment for 

Medicaid in the Children’s Health Insurance Program was 64 million in 2014, including 29 and a half million children. 

Other programs that mandatory spending provisions include 

SNAP, the Nation’s foremost anti-hunger program, which in 2015 

helped 43 million low-income Americans afford food, including the 

15 million children who are food-insecure and living below the poverty line. That is one in five children in the richest country on 

earth. 

These programs represent our Nation’s most basic commitment 

to supporting our elders, and of protecting our most vulnerable fellow citizens. And mandatory spending programs are vital to ensuring the poor, the sick and the elderly are not sentenced to a life 

of desperation and constant insecurity over essential life necessities 

like food and healthcare. 

While we are spending limited time and resources on a budgetary policy dispute, calling it a constitutional issue, we should 
4 

really be addressing programs, pressing programs, that have been 

ignored, like reinvigorating the Voting Rights Act, criminal justice 

reform, and stopping the scourge of gun violence. These are issues 

that need addressing that are important. 

And I would submit again, this past week we lost a great hero 

in Eli Wiesel, a great man on the face of the earth, and he talked 

about the fact that if you are dealing with an issue—and he was 

talking about, I guess, physical violence, but he said, ‘‘If you do not 

take a position, if you do not take a stand, you stand with the oppressor, and not with the victim. And neutrality does not work, because neutrality benefits only the oppressor and not the victim.’’ 

In these situations where you are taking funding from people 

who are poor, and otherwise would not have the money and the 

means to have food or healthcare, and particularly to AfricanAmericans who grew up, many of them, in either a pre-Brown, a 

Jim Crow world, or just the beginning of the change, which was not 

enough to give them the opportunities for access to moneys or to 

jobs that could give them good retirements, you are talking about 

discriminating against the vulnerable, and you are taking the role 

of helping the oppressor. 

That is something we should never do, and that is why I am 

pleased to be a Member of Congress and fight for those people that 

need to be represented, and suggest that we, instead of looking at 

these issues, we should be looking at raising the cap, and having 

those that can afford pay a little more to take care of those who 

cannot. 

I thank our witnesses for their testimony, and I look forward to 

the rest of the hearing. I yield back the balance of my time. 

Mr. KING. I thank the Ranking Member from Tennessee for his 

opening statement, and now recognize the Chairman of the full 

Committee, Mr. Goodlatte from Virginia, for his opening statement. 

Mr. GOODLATTE. Thank you, Chairman King, for convening this 

sixth hearing of the Task Force on Executive Overreach, this one 

focusing on the mandatory Federal spending that risks stripping 

current and future generations of so many of the opportunities previous generations enjoyed. 

Federal spending as a percent of gross domestic product, broken 

down by category, shows that entitlement spending has grown the 

fastest, and now consumes the largest percentage of our GDP. In 

the past, U.S. public debt as a percentage of gross domestic product 

generally rose as a result of having to conduct wars of a limited 

duration. When those wars were over, the debt was gradually paid 

off. 

More recently, however, public debt has risen as a result not of 

wars, but of having to pay for entitlement programs that are of indefinite duration, and difficult to reduce over time. Total discretionary spending as a percentage of our economy has gone down. 

Defense spending as a percentage of our economy has gone down. 

Other non-defense discretionary spending has also gone down. 

What is increasingly going up is total mandatory spending as a 

percentage of our economy, such that mandatory spending now 

dominates the Federal budget. Making matters even worse, the 

deficit spending it causes will lead to ballooning interest payments 
5 

in the years to come, as interest rates reach normal, that is, higher 

levels. 

By 2026, it is predicted that so much of the Federal budget will 

be devoted to mandatory entitlement spending that just a sliver of 

incoming annual revenue will be left to pay for everything the Federal Government does other than mandatory entitlement spending, 

such as paying for national defense, our Federal courts, Federal policing, natural disasters, basic research and everything else. 

Federal tax rates are already steeply progressive, and the pool of 

people in the labor market from whom taxes can be drawn is 

shrinking as fewer and fewer people report even looking for work. 

At the same time, older generations receive more in public benefits 

than they pay in taxes. And so future generations will have to pay 

much more in taxes to cover both the public benefits costs to themselves, and the costs incurred by all who came before them. 

As fewer younger people must pay more to support the benefits 

for larger older generations, younger people are less able to afford 

children of their own, and so are having fewer children. And the 

situation worsens going forward in a perverse ripple effect. 

Indeed, a 2013 cross-national study looked at measures such as 

public debt per child, the ratio of childhood to elderly poverty, and 

the skew toward older generations in social spending. The study 

found that the United States ranked worst, dead last, among 29 

advanced countries in the degree to which it imposes disproportionately large burdens on future generations. 

As University of Virginia philosophy professor Loren Lomasky 

has written, theorists have devoted considerable attention to injustices committed across lines of race and gender. Far less attended 

are concerns of intergenerational fairness. That omission is serious. 

Measures that have done very well by baby boomers are much less 

generous to their children, and worse still for their grandchildren. 

The single greatest unsolved problem of justice in the developed 

world today is transgenerational plunder. That is grossly unfair to 

our young Americans, and to the wellbeing of our pluralistic society 

as a whole. 

I believe the only way to ensure Congress acts with fiscal restraint over the long term is to pass a balanced budget amendment 

to the Constitution. Back in 1995, when a balanced budget amendment came within one vote of passing, the gross Federal debt stood 

at $4.9 trillion. Today, it stands at over $19 trillion. This experience has proven time and again that Congress cannot, for any significant length of time, rein in excessive spending, but two-thirds 

of each house of Congress has yet to come to really appreciate that 

history and this looming fiscal crisis. I look forward to hearing from 

all of our witnesses today, and examining solutions for bringing our 

fiscal house in order. Thank you, Mr. Chairman. I yield back. 

Mr. KING. I thank the Chairman for his opening statement, and 

I now recognize the Ranking Member of the full Committee, the 

venerable gentleman from Detroit, Mr. Conyers. 

Mr. CONYERS. Thank you very much, Chairman King. And I too 

join in particularly welcoming Scott Lilly, as well as Mr. Steuerle 

and Mr. Eberstadt. Members of the Committee, this is a continuation of a decades-old line of attack by conservatives on America’s 

longstanding commitments to aid the elderly and the poor, and I 
6 

am not sympathetic with that point of view, and it is a legitimate 

one that even rational people can hold or claim is an important 

consideration. 

Now, there are a couple things that we want to keep in mind before the testimony of our witnesses comes forward. The first is that 

mandatory spending and stopping the entitlement crisis are really 

intended to slash programs such as Social Security, Medicare, and 

even parts of Medicaid. These are the programs that comprise the 

great majority of mandatory spending in the Federal budget. 

According to the Congressional Budget Office, Medicare and 

Medicaid alone made up 40 percent of all mandatory spending in 

the last fiscal year. And Social Security, Medicare and the Federal 

share of Medicaid, the largest mandatory spending programs, comprised a little bit over 50 percent of all Federal spending. The 

budget deficit and the future solvency of the trusts that fund Social 

Security and Medicare are important issues in this discussion that 

merit close consideration. 

But instead of putting forth a proposal that would help raise revenue, there are friends of mine on this Committee, in the majority, 

who propose to fund all these and other social safety net programs 

through the annual appropriations process, a process that often becomes mired in partisan division. 

And so while they may protest that they would leave Social Security and Medicare alone, keep in mind that other important social 

safety net programs, such as food stamps, better known as SNAP, 

Temporary Assistance for Needy Families, better known as TANF, 

only account for 10 percent of the mandatory spending. So if the 

majority’s plan for reducing the Federal deficit relies on cuts alone, 

you cannot do so simply by cutting funding for these important social safety net programs through the appropriations process. It cannot be done. 

Subjecting Social Security, Medicare and Medicaid recipients to 

an annual appropriations process threatens to harm the basic economic well-being of seniors and working people in need. And if you 

do not believe me, hold a hearing in your congressional district, 

and let people know what you have in mind, and I think I can fairly easily predict what the result would be. 

According to the Center on Budget and Policy Priorities, without 

any government income assistance, from safety net programs like 

Social Security, the Nation’s poverty rate would almost have doubled in the year 2014. And so I am comparing some of these figures 

with what my colleague from Tennessee, Mr. Cohen, has already 

promoted with great skill, and so I will cut this very short. 

Imagine the harm it would do to the most vulnerable members 

of our society if the funding for these programs were held hostage 

to yearly budget negotiations, or benefits were withheld because of 

a government shutdown, which, as we know, has occurred before. 

Unfortunately, this scenario is entirely possible, maybe even probable. 

And so lastly, mandatory spending provisions are not a historical 

accident, where Congress gave away too much power to the executive. Rather, they more nobly reflect the Congress’ commitment to 

the American people; to care for the elderly after a lifetime of considerably hard work, and to aid the working poor. Mandatory 
7 

spending for programs like Social Security and Medicare is simply 

based on the need to ensure stability in these and other vital programs, so that the most vulnerable in our society can be assured 

of minimum income standards to meet their basic human needs. 

And so proposing to subject these programs to an annual appropriations process cannot be a very humane or charitable strategy. 

It may be accidental or inadvertent to denigrate the working poor 

and the elderly as undeservers, undeserving takers, something 

which I would love to discuss further. But I welcome the witnesses, 

I thank the Chairman, and I look forward to the discussion today. 

Thank you, Mr. King. 

Mr. KING. Resisting the temptation to engage in debate, I thank 

the gentleman from Michigan. Without objection, other Members’ 

opening statements will be made a part of the record. 

And let me now introduce our witnesses. Our first witness is Eugene Steuerle, Institute fellow and Richard B. Fisher Chair at the 

Urban Institute; our second witness is Mr. Scott Lilly, senior fellow 

at the Center for American Progress; and our third witness is Nicholas Eberstadt, the Henry Wendt scholar in political economy at 

the American Enterprise Institute. 

We welcome you all here today, and look forward to your testimony. Each of the witnesses’ written statements will be entered 

into the record in its entirety. I ask that each witness summarize 

his testimony in 5 minutes or less. To help you stay within that 

timeframe, there is a light in front of you. The light will switch 

from green to yellow, indicating you have 1 minute to conclude 

your testimony. When the light turns red, it indicates the witness’ 

5 minutes have expired, and we appreciate you just working to that 

direction. 

Before I recognize the witnesses, it is the tradition of the Task 

Force that they be sworn in. So, to the witnesses, please stand to 

be sworn. Raise your right hand. 

Do you solemnly swear that the testimony that you are about to 

give will be the truth, the whole truth, and nothing but the truth, 

so help you God? You may be seated. Let the record reflect that the 

witnesses have all answered in the affirmative. 

And now I recognize our first witness, Mr. Steuerle, for his 5 

minutes of testimony. Please turn on the microphone, Mr. Steuerle. 

TESTIMONY OF C. EUGENE STEUERLE, RICHARD B. FISHER 

CHAIR & INSTITUTE FELLOW, THE URBAN INSTITUTE 

Mr. STEUERLE. Mr. Chairman, Mr. Cohen, Members of the Task 

Force, thank you for the opportunity to testify before you today. 

The views expressed are my own, and should not be attributed to 

the Urban Institute, its trustees or funders. 

Let me begin by noting that we live at a time of extraordinary 

possibility, but you would not believe it by looking at the headlines. 

We have never been so rich, despite going through a recent Great 

Recession, and even though many needs remain unaddressed, and 

many do not share in that growth. 

Yet partly because we are ruled over by dead men, and yes, they 

were men, we stand with our backs to an ocean of possibilities that 

lay at our feet. I try to show this by two means. First, a decline 

in what I call fiscal democracy—that is, the discretion left to cur-
8 

rent voters and policy makers to determine how government should 

evolve. This index, which is shown on the screen above you, measures how much of our current revenues are pre-committed to programs that require no vote by Congress, or in technical terms, to 

mandatory spending programs. 

This index, I should point out, is politically neutral. Fiscal democracy is reduced both through increases in mandatory spending, 

and reductions in taxes. By this measure, in 2009, for the first time 

in U.S. history, every dollar of revenue was pre-committed before 

the new Congress walked through the doors of the Capitol. 

The second piece of evidence, which I will elaborate on more in 

my testimony, comes from simply comparing two budgets. First, a 

traditional budget, such as prevailed over most of this Nation’s history, where spending is largely discretionary, and second, a modern 

budget, where growth in spending and tax subsidies are committed 

to rise automatically faster than revenues. 

Congress and the President end up in a never-ending game of 

whack-a-mole, or should I say, whack-some-dough. No wonder 

there are still budget problems after deficit-reducing actions in 

1982, 1983, 1984, 1987, 1990, 1993, 1997, 2005, 2011, 2013, 2015, 

among others. 

Consider the consequences. It is not just the economic problems 

of rising debt, and the inability to respond adequately to the next 

recession; and the people who will be hurt in that recession or the 

next emergency. 

It is also the political requirement imposed upon you, as legislators, to renege on promises to the public for both spending increases and low taxes, and in facing their wrath in the elections. 

Yet through the inability to work together, both parties lose their 

agendas, getting government that is both fat and ineffective at 

meeting public needs. 

For example, out of a scheduled increase of close to $12,000 annually per household in additional spending and tax subsidies by 

2026, almost nothing goes to programs that encourage the development of earnings, wealth, human and social capital. And kids get 

essentially nothing, nothing. 

Restoring democracy requires nothing more or less than restoring 

greater discretion to the budget. That is easy to say economically, 

it is hard to say politically. Democrats must be willing to limit the 

share of spending that grows automatically. 

And Republicans must do likewise for tax subsidies, while agreeing to collect enough revenues to pay our bills. And both the President and Congress need to be held responsible for all changes in 

the budget, whether newly-enacted or passively allowed to continue. Restoring discretion does not simply mean paring program 

growth, or raising taxes, but opening the door to modernizing programs to better meet public needs, including, as I elaborate again 

in my testimony, on providing greater opportunity for all. 

I am not naive about the difficulty of reversing a multidecade decline in fiscal democracy. Yet until we restore greater discretion to 

the budget, the frustration and anger exhibited and shown to political parties by the public here and around the developed world will 

continue, deriving in no small part from a budget process that has 
9 

shifted national debates from what we can do to what we cannot 

do. That is, from letting dead men rule. Thank you. 

[The prepared statement of Mr. Steuerle follows:] 
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Mr. KING. Thank you, Mr. Steuerle. The Chair now recognizes 

Mr. Lilly for his testimony. Mr. Lilly? 

TESTIMONY OF SCOTT LILLY, SENIOR FELLOW, 

CENTER FOR AMERICAN PROGRESS 

Mr. LILLY. Thank you, Mr. Chairman, Ranking Member Cohen, 

Chairman Conyers. I think it is striking that the three of us largely 

agree on one essential element here, and that is that the Federal 

debt, the growth of Federal spending, is driven entirely by entitlements. 

I think it is important to go beyond that, and look at the entitlements that are driving the debt. And those entitlements are Social 

Security, Medicare, and Medicaid. Those, if you look at real per 

capita growth of Federal spending over the last 30 years, those 

three programs by themselves accounted for more than 100 percent 

of the growth. In other words, the rest of the government shrank. 

So all of the vitriol about the bureaucracy being out of control, 

about the growth of the Federal Government, so forth and so on, 

is basically false. The government as we think of it—the 15 departments and all of the independent agencies—has actually shrunk in 

size if you measure it by real per capita spending. 

What has changed is the amount of money that we send out to 

individuals across the country. And that has gotten very expensive, 

because we have—in the past, we had about half a million people 

a year reaching retirement age. Today we have a million and a half 

people a year reaching retirement age, and so it is a lot more expensive to take care of. 

Where I think I may disagree with my colleagues, at least to 

some extent, is what do we do about that problem? CBO estimates 

that Federal expenditures are going to rise from 19 or 20 percent 

of GDP, which they have been historically, to around 24 percent of 

GDP, as the progression of retirement increases. I think that is a 

reality that we all have to, regardless of our views of entitlement 

programs or the benefits of them, we need to face that reality. I 

do not think this country is ready to do the things that some people 

advocate, particularly the placement of Social Security benefits 

under the appropriations process. 

The average monthly benefit under Social Security for a retired 

worker is $1,350. More than $350 of that amount goes to out-ofpocket medical expenses. So if you believe that somebody can live 

well on less than a thousand dollars a year for all other expenses 

other than medical care, than this proposal works fine. If you think 

that that is not enough, and the vast majority of Americans, according to polling, think that it is not enough, then you have to 

come up with some combination of entitlement reform and tax increases. I think a large portion of it is going to have to come from 

tax increases, because I do not think either the elderly are willing 

to live on less, nor are their children willing to pay more for their 

retirement costs. 

As a result, this country would have to increase revenues substantially, but it is not out of the line. In fact, we would still be 

one of the lowest-taxed Nations in the world if we paid the cost of 

those retirement benefits. So I would like to expand on that in the 

question period, but I think we need to understand the problem, 
21 

and I think this hearing is a good thing for helping people understand what the problem is. But we also have to think about the 

consequences of various alternatives of dealing with it. 

[The prepared statement of Mr. Lilly follows:] 
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Mr. KING. Thank you for your testimony, Mr. Lilly, and the 

Chair now recognizes Mr. Eberstadt for his testimony. 

TESTIMONY OF NICHOLAS EBERSTADT, HENRY WENDT CHAIR 

IN POLITICAL ECONOMY, AMERICAN ENTERPRISE INSTITUTE 

Mr. EBERSTADT. Mr. Chairman, distinguished Members, co-panelists and guests, it is an honor to be here today. May I ask you 

to put up my first slide, please? 

[Slide shown.] 

Mr. EBERSTADT. Over the past half-century, American politics, 

American governance and the American way of life itself have been 

transformed by the growth of public expenditures on social entitlement programs. In just—— 

Mr. KING. Mr. Eberstadt, could you move the microphone a little 

closer? Thank you. 

Mr. EBERSTADT. In just two generations, the government of the 

United States has effectively become an entitlements machine. As 

a day-to-day operation, the U.S. government devotes more attention and resources to the public transfer of money, goods and services to individual citizens than to any other purpose, and the Federal Government more to these ends than to all other purposes 

combined. Over these same years, entitlement transfers have become a major component of the family budget of the average American household, and our dependence on these government transfers 

continues to rise. 

The first law of social policy is that government programs come 

not only with intended consequences, but with unintended ones as 

well. Fifty years into our great social experiment of expansion of 

entitlement programs, there is ample evidence to indicate that the 

unintended consequences of this reconfiguration have been major, 

and adverse. Why do we not go on to that? Until about 1965, the 

accepted purpose of the Federal Government, in keeping with its 

constitutional charge, was governing. 

The Federal Government spending patterns reflected that mandate. The overwhelming share of Federal expenditures was allocated to defending the republic against its enemies foreign and domestic, and some limited public services and infrastructural investments. 

In fiscal year 1965, according to OMB, Federal entitlement programs expended about 28 percent of the Federal Government’s 

total outlays. By FY 2015, entitlement programs reportedly accounted for fully 72 percent of Federal Government total expenditures. 

Thus in a very real sense, American governance has literally 

been turned upside down by entitlements, within our lifetimes. A 

half-century of extraordinary expansion of entitlement outlays has 

completely inverted the priority, structure and functions of the 

Federal administration, as these had been understood by all previous generations of Americans. May I ask for the next slide, 

please? 

[Slide shown.] 

Mr. EBERSTADT. And the one after that. 

[Slide shown.] 
31 

*Note: Supplemental material submitted with this statement is not printed in this hearing 

record but is on file with the Task Force, and can also be accessed at: 

http://docs.house.gov/Committee/Calendar/ByEvent.aspx?EventID=105155 

Mr. EBERSTADT. The explosive growth of entitlement outlays was 

accompanied by a corresponding surge in the number of Americans 

who had routinely applied for and accept government benefits. Despite episodic attempts to limit the growth of the welfare state, or 

occasional assurances that the era of big government was over, the 

pool of entitlement beneficiaries apparently has grown continuously. 

Can we go to the next one, please? 

[Slide shown.] 

Mr. EBERSTADT. This may be a little bit difficult to see. Between 

1983 and 2012, the percentage of Americans participating in entitlement programs jumped by nearly 20 percentage points. Less 

than one-fifth of that 20 percentage-point jump can be attributed 

to increased reliance on the two old age programs—Medicare and 

Social Security. 

Overwhelmingly, the growth in claimants has stemmed from an 

extraordinary rise in means-tested entitlements. All told, more 

than 35 percent of Americans were taking home at least some benefit from a means-tested program by 2012, nearly twice the share 

in 1983. 

America today is almost certainly the richest society in history, 

at any time, and it is also certainly more prosperous and productive now than it was three decades ago. Yet paradoxically, our government behaves as if Americans have never been more needy. 

Until and unless some sort of forcing financial crisis suddenly restricts the resources available to it, continued growth of the entitlement state looks very likely in the years immediately ahead. And 

at this writing, I myself see no such forcing crisis on the horizon. 

If that prognosis is correct, we may expect the inadvertent consequences, to which I detail in my prepared statement the rise of 

our entitlement state, to become still more acute in the coming 

years. Thank you very much. 

[The prepared statement of Mr. Eberstadt follows:]* 
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Mr. KING. Thank you, Mr. Eberstadt, for your testimony, and all 

the witnesses. I now recognize myself for 5 minutes. And I would 

turn first to you, Mr. Eberstadt, and ask if you could expand a little bit on a point that is in your written testimony regarding male 

flight from work. What is this social dynamic that is brought about, 

I think by your assertion at least, because of the entitlement programs? 

Mr. EBERSTADT. Well, for over the postwar period, from 1948, 

when we started to collect detailed monthly employment statistics, 

to the present, we have seen a dramatic decrease in the proportion 

of prime age males—that is the Labor Department’s designation of 

men 25 to 54 years of age—who are either working or unemployed 

and seeking work, which is to say, in the labor force. 

We have seen a growing proportion of men who are neither working, nor looking for work. Most recent estimates by the Labor Department are that almost 12 percent of men in this prime group 

are neither working nor looking for work. When I was a kid, back 

in 1965, the corresponding figure was about 3 percent, about a 

quarter of that. 

Exactly why there has been this tremendous flight from work is 

I think a very important and complex question. But certainly this 

has coincided with the rise of various entitlement availability programs. That does not prove causation. Correlation does not prove 

causation. But certainly the rise of these programs has helped to 

facilitate and to finance this exit from the labor force. 

Mr. KING. Mr. Eberstadt, would you agree that it looks like there 

is an incentive in the entitlement programs, though, that discourage work, and that is a component in the data that you have seen? 

Mr. EBERSTADT. This is one of the unintended consequences of 

social policy to which I mentioned, yes. 

Mr. KING. I want to pose a question off of that. And that is, and 

I have watched different places around the world as, it looks like 

a group of people loses its work ethic over time. And some of it has 

to do with the welfare programs, some of it is just loss of opportunity, subtle and not producing in the economy. Can you think of 

any examples where that work ethic that has been intergenerationally diminished has been reconstituted again back to the 

former work ethic? 

Mr. EBERSTADT. I think this has happened historically on a number of occasions. If we look at the history of Victorian England, for 

example, I think we saw a reinvigoration of work ethic at various 

points and times. It has usually been associated in other societies, 

like in England or Britain, with a religious revival. I do not think 

that government is a very effective instrument for engineering religious revivals, and I hope government does not try to do that. 

Mr. KING. So probably the Protestant work ethic would be some 

of that, and I recognize that. For now, I think you, and I turn to 

Mr. Steuerle. And one of the things that you mentioned was that 

we have never been so rich. I would assert we are the richest country in the history of the world, and yet we cannot sustain ourselves 

in real time, even when we are not in a national security crisis 

mode. Can you enlighten us as to what happens if we continue 

down this path? Where is the cliff, and what does it look like? 
47 

Mr. STEUERLE. I am not sure where the cliff is. I do know that 

the increasing debt that we have as an economy decreases our ability to react to different issues. I mentioned in my testimony and 

elsewhere that our ability to react to the next recession, or the next 

emergency, is much less. Even if we do not actually fall off the cliff, 

we are still very tentative in doing other things. 

I would also point out, and I pointed this out through all sorts 

of examples—I can give you more—the extraordinary extent to 

which the growth in government is scheduled for things that, generally speaking, I do not think either party thinks is best. 

So it may be Republicans do not want to have so much growth, 

and it may be Democrats would rather the growth go toward children, but the compromise is not there. I mentioned we are spending nothing additional on children, on programs for what I call 

human and social capital development. We are not spending wisely. 

And I think all of this is really a budget for a declining economy. 

Mr. KING. Thank you, and then, Mr. Lilly, in your vision into the 

future, if we continue down this path with this debt load we have, 

or we adjust it with tax increases to make some accommodations 

to that, is there a limit to what we can sustain? Can we always 

raise taxes to get it back to I think something resembling balance? 

Or is there a cliff for us? Is our borrowing capacity getting limited, 

and if so is it a percentage of GDP? How do you envision this thing 

getting out of hand, because I know you are concerned about it? 

Mr. LILLY. I mean, we are at 85 percent or 80 percent of—our 

debt is 80 to 85 percent of GDP. I think that is way too high. I 

want to see a fiscal policy that brings that debt back down to below 

50 percent. In 1974, we were at 24 percent. I mean, that is a reasonable goal. 

We have an unusual situation because of demography and the 

huge number of people that were born after World War II. And I 

think we have to recognize that, and we have to recognize that we 

are going to have to raise more taxes in order to pay for it. But 

that still leaves us at the very low end of industrialized countries 

in terms of taxes. There are countries that have been growing 

much faster than we have, that have tax as a percentage of GDP 

that is nearly twice the level that we have. 

Mr. KING. Would putting a much higher percentage of our people 

to work, would be part of your solution? 

Mr. LILLY. Absolutely, absolutely. I would like to say, though, if 

I could, I think it is a great disservice to say that welfare payments 

to working-age men has anything to do with this entitlement program. That is a tiny, tiny share of entitlement spending. 

Mr. KING. We will give you the last word on that, Mr. Lilly. And 

now I yield back the balance of my time, and recognize the gentleman from Tennessee, the Ranking Member, for his questioning. 

Mr. COHEN. Thank you, Mr. King. I find this terribly disturbing 

that we are even talking about it. And I appreciate, Mr. Steuerle, 

your statement—you understood and made clear that it is both incomes as well as spending, and it could go either way. You are interested in a neutral area. 

So you agree that if we raise the cap on Social Security, which 

is 1,185, and raise it considerably, we could bring revenues that 
48 

would take care of this problem or take care of it to some extent. 

Is that not correct? 

Mr. STEUERLE. I have to give sort of a qualified answer. Yes, as 

part of a compromise, I would actually agree to an increase in this 

cap, partly because it has been lowered through—has not kept up 

with real growth in wages. However, I have real concern with raising taxes to put more money into these programs, mainly for people 

like me. I cannot go into all the details—— 

Mr. COHEN. No, it is not for people like you, particularly. When 

you come to the understanding that African-Americans age 65 and 

older got 90 percent of their income from Social Security, that 46 

percent of African-Americans got 90 percent of their income, and 

think about who they are. You start drawing Social Security when 

you are 66. 

That means that people get into Social Security who were born 

in 1950, and give or take let us say people live to be 90. There is 

outgrowth, but you are talking 1950 back to 1926. Think about all 

those people in the South, African-Americans, born between 1926 

and 1950. What chance do they have to get enough money to take 

care of themselves without Social Security? They had no chance. 

Mr. STEUERLE. Part of my Social Security compromise is actually 

to raise benefits for these people. But the average person retiring 

on Social Security now retires for 12 more years than he or she did 

in 1940. That does have an implication for the issue that Mr. King 

raised about the percent of the population that works. But I agree 

with you, I would spend more money on those particular people on 

Social Security, but as part of a compromise. It does not mean I 

still would not try to get this system into balance. 

Mr. COHEN. Yeah, well, you cannot balance things on people born 

between 1926 and 1950. Particularly in the South, and it was not 

that much better in the North. Opportunity was not there for African-Americans. Opportunity was not there for White people in Appalachia, either. People have not had opportunity, and this has 

been a society of haves and have-nots for a long time. It has just 

gotten to be more haves, or wealthier haves. The Trumps, and all 

that multi-billionaire world. Yeah, they want things cut, and they 

do not want to pay on the 1,185 and more. But you got so many 

people out here, they cannot deal with it. 

Mr. , you talk about it great in the ivory tower. What would you 

do about somebody that is born in the South, an African-American 

in 1940? What chance do they have to have enough funds? Were 

they deprived of some religious valuation that made them not want 

to work? Or could they not work because their government worked 

against them, and allowed discrimination and Jim Crow laws, that 

put them in the back of the line, and did not give them jobs? What 

would you do for those people? 

Mr. EBERSTADT. I was born in 1955, sir, I did not have any—— 

Mr. COHEN. You do not look African-American, you do not look 

like the South. You did not have Jim Crow, you did not have barriers put before you from the time you were born. And these are 

the people you are trying to cut. What opportunities do they have? 

Speechless. Mr. Lilly, tell me—— 

Mr. EBERSTADT. Sir, I am not speechless. Were you—— 
49 

Mr. COHEN. What would this Social Security cap be if it kept up 

with inflation? Do you have any idea? 

Mr. LILLY. I think it has been adjusted, you know, relatively rapidly to deal with inflation. I do not think it is that much out of line 

with that. 

Mr. COHEN. It is 1185 in 2016, right? 

Mr. LILLY. Yeah, and it was—— 

Mr. COHEN. 117 before that? 

Mr. LILLY. Yeah. But less than 10 years ago, it was below 100. 

So it has gone up at pretty close to the rate of inflation, and it may 

even be indexed, I think. 

Mr. EBERSTADT. The percent of wages subject to the cap has been 

lowered mainly because of the increasing inequality in wages in the 

economy, and also because there are certain self-employed people 

who are excluded from the tax. However, Mr. Lilly is right, it has 

kept up with inflation. 

Mr. COHEN. Well, it might not have been set at the right place 

when it started, so it may be the wrong criteria to look at to see 

whether—— 

Mr. LILLY. What I would say is the problem with respect to Social Security is relatively small. And there are reasonably small adjustments that could be made to take Social Security and make it 

solvent over a period of time at current benefit levels. The real 

problem is Medicare. And as I tried to point out in my testimony, 

it is not just your Medicare check, but how much you have to pay 

in out-of-pocket expenses. And if your out-of-pocket expenses eat up 

most of your Medicare, you do not have enough to stay alive on. 

And that is the problem we face. 

And there is no reason that we cannot raise the general revenues 

to pay for Medicare. That is the way we pay for them now, and we 

could pay for more of it if we would simply make the tax adjustment, and avoid some, as you point out, terribly painful choices 

that we would have as a society. 

Mr. COHEN. Thank you. 

Mr. KING. The gentleman from Tennessee yields back. The Chair 

now recognizes the gentleman from Idaho, Mr. Labrador. 

Mr. LABRADOR. Thank you, Mr. Chairman. And, Mr. Eberstadt, 

I had a couple of comments, but before I say anything, did you 

want to respond to that question that was just asked to you, that 

they were trying to put you in a situation that I thought was a little bit unfair? 

Mr. EBERSTADT. Thank you very much for giving me an opportunity, and I will try to answer your question. Of course we have 

a long history of racial discrimination. It goes back to President 

Obama’s description of original sin in the United States. It is our 

original sin. 

There is no way to rewind history, as I tried to indicate. What 

we can do is we can try to have a social safety net that deals efficiently and in a targeted way with the people who have the greatest need in our society. I think that is part of what Mr. Steuerle 

was trying to say as well. 

As for the greater question of whether the benefits which I was 

mainly talking about, the means-tested benefits, have an effect 

upon the quality of citizenship, and also upon the likelihood of peo-
50 

ple’s participation in the economy in the future in growing wealth, 

I think that is something that we also have to keep a careful eye 

on, because there are unintended consequences in all social policies. 

Mr. LABRADOR. Thank you, and there definitely are unintended 

consequences. In fact, if you look at the areas of the country that 

are suffering the most from poverty are the places where, for the 

most part, the people complain the loudest about it are representing them. 

So I would be very careful. I would look at the history of what 

these unintended consequences have been. And you find the largest 

gaps in wages, you find the largest poverty pockets, in some of 

these areas where so many people come here and they like to lecture others on how much they care about those people. But really 

what is happening in those communities is that they are finding 

themselves further and further in poverty and in need. I am 

pleased that we are examining here the mandatory spending that 

is bankrupting this country. 

Ever since I first sought election to Congress was to cut back on 

the gross amount of spending authorized by this body each and 

every year. In order to sustain the fiscal solvency of this country, 

we need across-the-board cuts in spending, both mandatory and 

discretionary. Nothing should be off the table. It strikes me in the 

past 6 years, I have not truly been given the opportunity to vote 

against these measures, and not really been given the opportunity 

to vote against any mandatory spending provisions. 

This is not so much executive overreach as it is a bloated bureaucracy that continues to grow fat and spend money while Congress does nothing. I am encouraged by this hearing today, and I 

look forward to working with other Members on proposals and bills 

that return the spending authority to Congress to decide more regularly what is appropriate mandatory spending, and what is simply 

wasteful 

Mr. Steuerle, what sections of the Federal budget are the largest 

contributors to mandatory spending? 

Mr. STEUERLE. So, in a lot of my writing I distinguish between 

mandatory spending without built-in growth rates, and those with 

built-in growth rates. The ones that have the built-in growth rates 

are mainly the retirement and the health programs—and by the 

way, the health programs include the tax subsidy for health as 

well—and things like the mortgage interest deduction. 

So I include the tax subsidies in my examples of those that grow 

automatically. For instance, people in my generation have about 

twice the housing, or the value of housing, as my parents’ generation. Congress automatically let that subsidy grow or double, without voting that that was the best way to spend the money, when 

I think we could have done a lot better for low-income people, people who do not have housing. The same thing happens within the 

retirement and health arena. 

Can I just give one statistic that I think might help think about 

this? Thinking about the future as opposed just to current levels: 

for a typical couple today, Social Security and Medicare provide 

lifetime value benefits of about a million dollars. Right now, that 

is about two-thirds Social Security, about a third Medicare. That 
51 

is a million dollars. You might wonder how you get there; it is basically about $50,000 for a couple, average couple, for about 20 years. 

For a typical couple, they are on these benefits—that is the longerliving of the two for close to 3 decades. 

Now, for millennials, that million-dollar figure—and that is the 

value needed in a savings account, if it is discounted would grow 

to about $2 million. 

Suppose we thought about that growth, that automatic growth from a million to $2 million, and said, ‘‘Is this the best way to support millennials?’’ Well, we add to their student debt, we let their 

childcare, I am sorry, the child credit decline in value, the tax credit. We do not give them wage support if they are low-income. We 

do not provide them first-time home buyers’ subsidies. 

I think there is a lot of ways of transferring this money gradually 

over time to better provide work incentives, to better provide support that would produce upward mobility, than simply saying that 

all of the growth in government for you, you millennials, whom we 

are neglecting already, is going to go to you when you retire. But 

before then, we are going to forget you. 

Mr. LABRADOR. Well thank you, Mr. Chairman, I have run out 

of time. So I yield back my time. 

Mr. KING. The gentleman from Idaho yields back. The Chair will 

now recognize their Ranking Member of the full Committee, Mr. 

Conyers. 

Mr. CONYERS. Thank you, Chairman King. This has been very interesting. I would like to ask you all about the economic reality of 

income inequality in America, the wealthiest country on the planet. 

And let me start with the senior fellow for the Center for American Progress. But I will come to all of you here. It is my understanding, shocking that one in five children in this country live in 

poverty, but that on a larger basis of private wealth, the top 1 percent of possessors of private wealth have a greater income than the 

other 90 percent of the citizens put together. Have you heard of 

that, mister senior fellow? 

Mr. LILLY. Mr. Chairman, I think that is one of the great tragedies in our society today. It is also a problem that we have around 

the world. I think a lot of the divisiveness in American politics 

today centers around the fact that people feel disinherited. The 

working class feels that there is no way out. They do not see a way 

out for their kids, and guess what, we are finding out it is really 

bad for business, it is bad for the direction—I think the American 

Chamber of Commerce is absolutely apoplectic right now at the direction that this country is going. 

And I think they have to looking the mirror to some extent and 

think about why there is this division, why is this extremism showing itself in American politics. A country that does not grow together and does not prosper together is not going to be a strong 

country, and I think we are beginning to see only the beginning of 

the downside of this terrible division in the way we are growing. 

Mr. CONYERS. And you know, this is not even taking into consideration the rather great improvement in the differences of income 

inequality because of collective bargaining, which has only recently 

come into our system in which people—we have such a thing as a 

minimum wage, and we have some progressives now arguing that 
52 

a $15 minimum wage should be the bottom of the income level, 

which leaves more conservative people that come before the Congress apoplectic, that we would pay somebody a minimum of $15 

an hour. Would you begin our discussion on that, Scott Lilly? 

Mr. LILLY. Well, you know, I think there are a number of things 

that you can do to reduce income inequality from a policy side. I 

would say this topic that we are dealing with right now in terms 

of Social Security benefits and Medicare and so forth, is a huge factor. 

In 1959, 30 percent of elderly people in the United States lived 

in poverty. Today it is 9 percent, the lowest of any age group. If 

we were to turn back and put Social Security payments as subject 

to annual appropriations, we would be headed back to that 30 percent and we would greatly exacerbate what is already a huge problem in this country. 

Mr. CONYERS. Why do your two panelists on either side of you 

not agree with that comment? 

Mr. STEUERLE. So I have never advocated putting Social Security 

on annual appropriations; I have suggested that whether Social Security or anything else, that we need to figure out where we want 

the growth in government to go. So think out 35 years from now. 

Even at our low economic growth rate, the economy doubles in size, 

revenues probably double. 

How do we want to spend that money best? I would argue that 

it is time now to promote the types of things that you are talking 

about, Mr. Conyers—which is on the opportunity front—to touch 

the things that I think Mr. King is also talking about—which is 

promoting more earnings and promoting more labor supply, and 

trying to figure out how we could allocate it. 

My calculations are that in the direct support budget—that is, 

take out the public goods—we spend about $35,000 a household 

right now. Suppose in another 35 years that doubles to $70,000. 

Now maybe it takes 40 years to get there with Republicans, and 

maybe it takes 30 years to get there with Democrats. It is still 

growing, as long as we can promote economic growth. 

I want to think about how we can really allocate that growth 

best to the things that promote mobility, earnings growth, wealth— 

and wealth inequality, by the way, is much worse than income inequality. But I do not think our current social programs are doing 

a good job of getting us there. And even if you disagree with that 

statement, I think we can all agree they could do a better job. 

Mr. CONYERS. Thank you so much. Could I just ask if our other 

panelist, Mr. Eberstadt, did you have a view different from the— 

well there are two different views. Where do you come down on this 

discussion? 

Mr. EBERSTADT. I think Mr. Lilly is absolutely right in emphasizing the importance and the future of unfunded liabilities for the 

healthcare programs. I think Mr. Steuerle is exactly right in emphasizing the importance of more rapid economic growth. If we 

have more rapid economic growth, we have got more options for everything. In terms of the question of the poverty rate, this may be 

a little bit arcane for our current discussion, but I think that the 

poverty rate is actually a very poor measure of poverty in the 
53 

United States because it looks—in my view, it looks at the wrong 

end of the telescope. 

We should be looking at people’s purchasing power and people’s 

spending power. And if we did that, poor people would still be poor, 

but they are not going to be rich. But we would have a much better 

understanding of how to target our resources to the truly needy. 

Mr. CONYERS. Well, I thank you all for your interest. This is a 

conversation that, Chairman King, we could have another hearing 

on. And I congratulate you on picking this subject to bring these 

three experts before us on. 

Mr. KING. Thank you, Mr. Conyers, for your engagement. And 

the gentleman from Michigan has yielded back the balance of his 

time. Chair will now recognize the other gentleman from Michigan, 

Mr. Bishop. 

Mr. BISHOP. Thank you Mr. Chair, and thank you for this hearing; I think it is a fantastic opportunity to discuss an issue that 

is so very important to this country and the citizens of this country 

and really one of the reasons—primary reasons why I decided to 

run for Congress was to address this issue, and not just for me, but 

for future generations. 

I have got three young kids, and it occurs to me that if someone 

does not step in very quickly, this will get out of control. And my 

dad used to tell my sisters and me that if we ever found ourself 

in a hole, the first thing you do is stop digging. And this country, 

this government, at so many levels, has not done that one essential 

thing, stop digging. 

We continue to dig ourself in deeper. It is not rocket science, we 

just spend more than we have, and we continue to bury ourself in 

big government and programs that have failed over the years. And 

I think there is an institutional reflex to go to back to exactly 

where we started and to build from there, and we have not reassessed our priorities over the years. And I think that, coming from 

state government a few years back when I served there, I think 

state government is a great incubator for ideas on this subject. 

And, for example, the State of Michigan was in a financial death 

spiral. We were being steered right into the ground. I read the title 

of the hearing today, ‘‘The Federal Government is on Autopilot,’’ 

that is exactly what was happening in Michigan and it was being 

driven right into the ground. 

And changes had to be made, and were made. And about 2010, 

a completely new group of leaders came in with a new idea and a 

mandate to get things done, and Michigan has really turned 

around, in every category, because of that leadership. And you look 

at the other Midwest States, like Ohio, Indiana, Wisconsin, all 

have made dramatic turnarounds because of decisions that were 

made—tough decisions to address really difficult structural problems with the State. And then you look at Illinois, that has not 

made the decisions at all, and they continue to drive themself into 

the ground. 

So I raise this as a bigger issue. Government continues to grow 

at just phenomenal rates because we have not been able to do the 

very thing that we are sent here to do, which is to control our 

spending and get this place under control. I worry about my kids, 

and I worry about the future of this country because of that very 
54 

reason. I wonder, Mr. Eberstadt, can you tell me anything—are 

there reforms that we can implement or consider that would restore the role of Congress, and rationally matching programs with 

the ability to pay for them? 

Mr. EBERSTADT. Sir, I think that is a pretty big order. I think 

that is a pretty tall order. We have had two generations of very, 

very strong momentum in developing the Federal Government as 

an entitlements engine. And it did not happen by accident; it happened because there is a great demand for this on the part of voters in both parties. It is bipartisan. 

I guess I would think that maybe the impetus for real change 

has to come from the grassroots. I think it has to come from the 

voters. As long as voters say we would like to limit everybody’s entitlements but our own, have a collective failure here. 

Mr. BISHOP. That is a good point, and one that I was trying to 

make earlier with regard to the states, because that grassroots momentum started in Michigan, my home State, and that is really 

what turned things around, and really was the mandate for members of government to go back and do the right thing. Mr. Steuerle, 

if government stays on this path, can you reflect on what this 

means for my kids, for millennials? 

Mr. STEUERLE. I already gave the example of what we promised 

for millennials, which is a hard time until they retire, and then 

they retire. Now that path is, by the way, not sustainable, but that 

is what currently scheduled in the budget, that is, to say, where 

we are providing all the growth in government. Now scheduled for 

about $12,000 more per household, nothing goes for children, and 

there is actually not very much for working families either. 

I keep trying to emphasize in my testimony that I am really trying to figure out a way to get through what I consider sometimes 

called a classic prisoner’s dilemma between the two parties, where 

if either one leads too much by themselves, they lose. And they lose 

because we the voters punish them. Because you are in a position 

now where you are actually required with the budget so out of balance, to take things back for the public. Either to cut spending or 

to raise taxes. Take either side. And the public does not like that. 

An example of how this played out—I will not go to the current 

election—I will go to the past election, when President Obama ran 

against Governor Romney. They both accused each other of cutting 

back on Medicare, and they were both right on wanting to. So 

President Obama accused Governor Romney of cutting back on 

Medicare because he tended to favor—spoke somewhat in favor of 

a proposal—by Representative Paul Ryan, which was not fully delineated, but it was basically to convert the system a bit more toward a voucher system. Which, by the way, we have for 

Obamacare. 

Meanwhile, the Governor Romney accused President Obama of 

cutting back on Medicare because in truth, that is partly how he 

distributed some money in paying for health reform from older people to younger people. He would not say that, but that is what happened. 

They were both right; the system is out of control, but you could 

see how when you over-promise, it leads to this political dynamic 

where both parties basically accuse the other of cutting back on 
55 

some untenable promise. We all know Medicare is out of balance, 

we know it cannot be sustained. And yet as long as we are in a 

situation where either party can blame the other when trying to reform it—and because there will be less, yes, there is less relative 

to an unsustainable promise—we are in this box. 

And so that box then, getting back to your question, this ties us 

in these knots. For instance I did a recent study that says of all 

the growth in spending, another one scheduled the next 10 year— 

the majority of it goes for healthcare. 

So for poor people and workers—Mr. Conyers cares a great deal 

about poor people, and also Mr. Cohen. So we are going to give 

them $400,000 a year surgeons, but we will be darned if we are 

going to give them wage subsidies or help for their children when 

they raise them. It is like a crazy box that we are all trapped in. 

And so a lot of what I am trying to do is create a process where 

there can be a compromise between both parties about how to get 

out of this box or this classic—as I say, it is sometimes called a 

‘‘prisoner’s’’ dilemma where if you lead by yourself, as a party you 

lose. 

Mr. BISHOP. Thank you sir. Mr. Chair, I yield back. 

Mr. KING. The gentleman from Michigan returns his time. And 

Chair would now recognize the gentlelady from California for 5 

minutes. 

Ms. LOFGREN. Thank you Mr. Chairman. I think this is a good 

hearing, and with a serious testimony, and I appreciate all of the 

witnesses. Mr. Lilly, we knew you for so many years here when you 

worked on the Hill, and we thank you for your service here. And 

now that you are outside, I am wondering, I thought I saw that— 

well, let me ask you. What percentage of the mandatory spending 

on entitlement programs is for other than Medicare, Social Security, or Medicaid? What is the percent? Do you know that? 

Mr. LILLY. Medicare, Medicaid, and Social Security are about 73 

percent of total entitlements. But then you have military retirement, which is not in there, you have civil service retirement, and 

you have veteran’s benefits, which make up another close to 10 percent. I mean I think there is kind of an ugly part of this discussion, 

which is people use the word entitlement with some racial implications. I think that is true. I mean I know a lot of people do not, 

but there are some people that do. 

The truth is very, very little of the entitlement budget is actually 

going to minority groups that some people would like to undercut 

the whole—there may be a lot of State money that goes there, but 

I think there is an innuendo there that drives it. And the truth is, 

contrary to what Mr. Labrador said, the people that get the most 

from Social Security, and the people that are most dependent are 

rural White voters in Republican districts. And I am somewhat 

amazed at the willingness of the majority party to keep going down 

this road, because I think it is absolute dynamite if they get to the 

end of it. I think the whole purpose here is to get only partway 

down the road. 

Ms. LOFGREN. At home, people, you know, the veterans and others talk about it as an earned benefits program, not an entitlement 

program. I suppose we could argue about that. But as I was thinking about those benefits that people have paid into, either with 
56 

their service in the military or through paying into Social Security, 

what would happen if those were subject to annual appropriations? 

And I remember the government shutdown we had here; it was 

a very depressing time on—here in the capital and in the country. 

And one of the things that was important was that Medicare recipients and Social Security recipients did not have their benefits cut 

off. You know, we are not the most functional institution right now. 

If we had another government shutdown, and we had annual appropriations for these earned benefit programs, would they just 

simply be cut off? 

Mr. LILLY. It would depend on how understanding the Budget 

Committee was and what kind of allocation they gave the Appropriations Committee. But you are certainly setting up a big fight 

between law enforcement and national security and grandma’s 

check. And I think she may keep part of her check, but I think she 

would be quick vulnerable if we set up that scenario. 

Ms. LOFGREN. You know, just a final comment. I hope that there 

is general agreement—and I have heard that from both sides of the 

aisle—that we need to be doing more for the young people of this 

country. I very much feel that that is true. But I am also mindful 

that these Social Security programs, number one, the large number 

of survivors’ benefits are children of people who have died, and that 

is an essential safety net for that group. 

But that also, at least where I come from, if grandma is in poverty, it is not grandma’s problem by herself. I mean the whole family is going to have to scramble together. So to think that there is 

just an old person versus her daughter and her grandchildren is 

not correct, because the whole family is in this together. And if 

grandma is without any resources, everybody else in the family is 

going to have to come up with a way to keep grandma safe, sound, 

housed, fed, and the like. At least that is the way it is in where 

I come from. 

Mr. LILLY. The caps that we have put on Medicaid will inevitably, if adopted, result in lots of old people being taken out of 

nursing homes and put on their children’s doorsteps, which would 

have—we would go back to the way we used to deal with old age 

30 or 40 years ago, and it would be catastrophic for families, for 

the future—the ability to educate and send kids to college. It is a 

direction nobody in this country wants to go, and it is foolish to 

talk about it as a real plausible route. 

Ms. LOFGREN. I see my time has expired. Mr. Chairman, I yield 

back. 

Mr. KING. I thank the gentlelady from California for yielding 

back her time. And the Chair now recognize the gentleman from 

Texas, Mr. Gohmert. 

Mr. GOHMERT. Well, I feel like I just listened to one of the biggest reasons we are in trouble. Mr. Lilly, your statements that 

often entitlement is used with racial implications. Normally when 

I hear entitlements, most of the people I know understand the majority of people are elderly White people. And so I realize there is 

a component around this town, to deal with issues in this town, 

that want to put everything in racial perspective, but that is one 

of them that is. And maybe some of your friends do, but I do not 

know any of mine that do. 
57 

Mr. LILLY. Could I respond to that? 

Mr. GOHMERT. I am responding to you, so no, you do not get a 

so rebuttal. If majority party goes down that road, they are not 

going to like where they are going. If we do not go down the road 

to get to fiscal responsibility, you are going to get through your life 

okay. And the wake you leave behind is going to be devastating 

and people will curse your name for future generations. We have 

got to go down a road of fiscal responsibility. So what I would like 

to do is talk about some possible solutions. 

For one thing, the way Congress has been structured after Watergate, when the Democrats took over the majority, there were a 

number of things that were put into play. The Committee structure, the way it has ended up, you have Subcommittees putting together budgets that include different public assistance measures 

for the same groups. 

And so, if you see one area where you think this is a bit duplicative, maybe we should cut this because I feel sure we have got 

other programs. Once you light into that, you are called a racist, 

you are called a—you know, you hate elderly people, you hate 

young people, it is just all about trying to divide us when we are 

trying to get to a place of responsibility before the system just collapses. 

And my friend Dan Webster, former Speaker of the House in 

Florida, said he took on one aspect, and that was the aspect of how 

many Federal programs have we created that take people to and 

from appointments. And he said he is pretty sure he has found 

them all, but they are all through different appropriations, through 

different Subcommittees, and he believes 82 is how many there are. 

There may be a few more, but he thinks he has found most of 

them. 

If you were to try to take out one of those 82 programs in one 

of those Subcommittee budgets, you would be accused of being racist, hating the elderly, hating veterans, hating this that or the 

other, when actually it seems to me if we got all of those different 

methods of public assistance—whatever it is, every form of public 

assistance in one Committee or one Subcommittee, then we could 

say no we do not need 82. 

Most of them have 20 seat vans that sit idly by, and when they 

are used apparently usually average of like three people taking a 

trip somewhere. So if we got down to one, then we could make 

some real progress, we could help the same number of people without all of the massive waste. Now Cleta Mitchell made a suggestion 

before our Judiciary Committee, or I guess this Committee—she 

said let the authorizing Committee be the appropriating Committee, which is an interesting thought because we have hundreds 

of millions, maybe billions of dollars, that—I guess it is billions— 

that are being appropriated even though the Authorizing Committee has not authorized them. And so, anyway, I do not have a 

lot of time when you only get 5 minutes. 

Also, another thing that was set up after Watergate was the 

automatic increase in every Federal department’s budget, and we 

have got to do away with that, so that when we try to slow the rate 

of growth, then we are not vilified for making draconian cuts, that 
58 

a real cut would be a cut, and a real increase is an increase. But 

I have been pushing that bill ever since I have been here. 

We have gotten through a couple of Republican Houses, but not 

through the Senate. But there is no charity, individual, company, 

partnership, nothing that has an automatic increase every year, 

and until we stop that and force people to be in government to be 

as responsible as people across America have to be, we are not 

going to fix our problems. And I yield back. 

Mr. KING. I thank the gentleman from Texas. And the Chair 

would now recognize the gentleman from Colorado, Mr. Buck. 

Mr. BUCK. I was just having fun over here listening to Mr. 

Gohmert. Mr. Gohmert, do you need more time? 

Mr. GOHMERT. No. 

Mr. BUCK. You said you only had 5 minutes, you were going to 

run out of time. 

Mr. GOHMERT. That is right. 

Mr. BUCK. All right. I have one sort of simple straightforward 

question, and I am directed to Mr. Eberstadt to start with. There 

are more than a dozen versions of a balanced budget amendment 

running around Congress right now. What would the effect of a 

balanced budget amendment be on this particular area? 

Mr. EBERSTADT. Mr. Buck, I am really out of my depth, I confess, 

on balanced budget amendments. I have followed various entitlement programs and spending and dependency and labor market, 

but I have got to guess that the other two experts here will know 

a lot more about that particular area than I will. 

Mr. BUCK. Okay. I do not want to mispronounce your name. 

Mr. STEUERLE. It is just Steuerle. I grew up in the South, I slur 

over the letters, so. Just Steuerle. 

Mr. BUCK. Okay. You want to take a shot at that? 

Mr. STEUERLE. I do think the issue here is a constitutional issue, 

but I have to say constitutional with a small ‘‘c,’’ because I think 

it is actually crucial. My fear is in watching, say, votes in California, or votes in Britain—I worry that we cannot design a constitutional amendment well to deal with how you organize fiscal 

policy. 

So yes, I think that a budget should be basically balanced over 

an economic cycle, or as Mr. Lilly says, even more than balanced 

in the near term to get the debt to GDP ratio down. But I fear trying to write a precise rule for how to do it, because there is always 

something that comes up. An emergency, a war. So you can put exceptions in. But you put something in a constitution, and it is very 

hard to adjust. 

I think at the end of the day you have got to come up with rules 

on how the House, the Senate, and, if you want to, the President 

when submitting budgets—that, as I say, with a small ‘‘c’’—can 

tend to have the constitutional constraint that the old balanced 

budget rule, which was not in the Constitution, provided. But I just 

fear we cannot write a formal constitutional amendment that is 

going to actually work. That we would ever word it right. And I 

fear the classic California problem of how some of things work 

when you get into that type of game. 

Mr. BUCK. And what is the alternative? 
59 

Mr. STEUERLE. So I have quite a number of suggestions in various writings that I have made. Among them, I think that there are 

ways to hold Congress and the President more responsible for 

keeping a budget balanced over a cycle. You could tell the President this does not constrain him, but I think in the public it would. 

You could say we the Congress only accept a budget that is balanced over 10 years, or balanced in some reasonable way over the 

10 years. I want to be careful because whether you do real or inflationary. 

Mr. BUCK. But you know what happens then—— 

Mr. STEUERLE. And all these issues that are hard to define precisely. 

Mr. BUCK. This Congress would blame it on the next one that it 

was not balanced 10 years from now. That is the game. 

Mr. STEUERLE. But the last two Presidents have submitted substantial increases in the debt in their initial years and said, well, 

later on I will get around to dealing with it. At least a rule like 

that would hold them responsible for telling the public, ‘‘Oh by the 

way, I am going to increase spending for Medicare Part D, or I am 

going to increase spending for the recession, but here is how I am 

going to pay for it at least seven or 8 years down the road.’’ 

They start off not doing it, and then they say after they double 

the debt, they say, ‘‘And now I am going to worry about maybe cutting it back.’’ There are other rules that I do not have time to go 

through it, that I suggest I think Congress could adopt that would 

be much stricter. 

But the main thing that I emphasize as I state in my testimony, 

there are all sorts of ways of writing budget rules is I think we 

have to restore discretion. So we could require some entitlements, 

by the way, like food stamps, to be actually reauthorized. So that 

it is really not an entitlement the same way. 

I think Mr. Lilly is more of an expert on this than I am. It is 

not an entitlement the same way as the ones that have automatic 

growth. Because it does not grow automatically, and it has got to 

be reauthorized. You could require more reauthorization for every 

program. Also, I think every program should be in a budget. Health 

programs, Social Security, it should be in a budget. 

Now, for instance, I would protect the inflation increases for current elderly, so nobody is cutting back on benefits. But target the 

growth, the automatic growth. For instance, I get about 7 or 8 more 

years of retirement relative to when the system was first established. That is worth about, for my wife and me, about $300,000 

more. 

Did anybody really intend for me to get a $300,000 increase in 

Social Security benefits, just by having more years in retirement? 

I do not think so. Stuff like that should have to be voted on and 

reauthorized. So by restoring discretion to the budget, we create a 

process where there would then be a gap between revenues and 

spending, which the parties could fight over whether to have tax 

cuts or spending increases. That was the tradition throughout almost all of our history. 

And by the way, you know, consider all the political arguments 

about why people in Congress cannot compromise. When there is 

discretion, you have got to vote for a tax cut or a spending increase 
60 

because a budget building up surplus would create huge problems. 

When spending grows faster than revenues, now you have got to 

compromise. Saying, ‘‘Who wants to step up first and tell the public 

what they are not going to get? Who is going to step up first and 

tell them what tax increases you really want, or what spending 

cuts you really want,’’ puts them in a horrible box, is easier to compromise when you have got more money to spend. 

It is hard to compromise when all the contracts have already 

been signed for infinity for how that money is going to be spent. 

Mr. BUCK. Thank you, Mr. Chair. 

Mr. STEUERLE. So there is a lot of rules like that I think we 

could develop. 

Mr. BUCK. I have got to yield back. 

Mr. KING. The gentleman from Colorado yields back. This concludes today’s hearing, and thanks to all our witnesses for your testimony and your participation. 

Without objection, all Members will have 5 legislative days to 

submit additional written questions for the record, or additional 

materials for the record. I thank the witnesses, and I thank the 

members in audience. This hearing is adjourned. 

[Whereupon, at 2:36 p.m., the Task Force was adjourned.] 

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