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[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

                        
 
               THE NEED FOR THE BALANCED BUDGET AMENDMENT

=======================================================================

                                HEARING

                               before the
                       COMMITTEE ON THE JUDICIARY
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

                             JULY 27, 2017

                               __________

                           Serial No. 115-42

                               __________

         Printed for the use of the Committee on the Judiciary
         
         
         
         
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]         

         

        Available via the World Wide Web: http://www.govinfo.gov
        
        
        
        
                            _________ 

                U.S. GOVERNMENT PUBLISHING OFFICE
                   
 31-630                 WASHINGTON : 2018             
        

                       COMMITTEE ON THE JUDICIARY

                   BOB GOODLATTE, Virginia, Chairman

F. JAMES SENSENBRENNER, Jr.,         JOHN CONYERS, Jr., Michigan
    Wisconsin                        JERROLD NADLER, New York
LAMAR SMITH, Texas                   ZOE LOFGREN, California
STEVE CHABOT, Ohio                   SHEILA JACKSON LEE, Texas
DARRELL E. ISSA, California          STEVE COHEN, Tennessee
STEVE KING, Iowa                     HENRY C. ``HANK'' JOHNSON, Jr., 
TRENT FRANKS, Arizona                    Georgia
LOUIE GOHMERT, Texas                 THEODORE E. DEUTCH, Florida
JIM JORDAN, Ohio                     LUIS V. GUTIERREZ, Illinois
TED POE, Texas                       KAREN BASS, California
JASON CHAFFETZ, Utah                 CEDRIC L. RICHMOND, Louisiana
TOM MARINO, Pennsylvania             HAKEEM S. JEFFRIES, New York
TREY GOWDY, South Carolina           DAVID CICILLINE, Rhode Island
RAUL LABRADOR, Idaho                 ERIC SWALWELL, California
BLAKE FARENTHOLD, Texas              TED LIEU, California
DOUG COLLINS, Georgia                JAMIE RASKIN, Maryland
RON DeSANTIS, Florida                PRAMILA JAYAPAL, Washington
KEN BUCK, Colorado                   BRAD SCHNEIDER, Illinois
JOHN RATCLIFFE, Texas
MARTHA ROBY, Alabama
MATT GAETZ, Florida
MIKE JOHNSON, Louisiana
ANDY BIGGS, Arizona

          Shelley Husband, Chief of Staff and General Counsel
       Perry Apelbaum, Minority Staff Director and Chief Counsel
       
       
                            C O N T E N T S

                              ----------                              

                             JULY 27, 2017
                           OPENING STATEMENTS

                                                                   Page
The Honorable Bob Goodlatte, Virginia, Chairman, Committee on the 
  Judiciary......................................................     1
The Honorable John Conyers, Jr., Michigan, Ranking Member, 
  Committee on the Judiciary.....................................     3

                               WITNESSES

The Honorable John Ratcliffe, 4th District of Texas, U.S. House 
  of Representatives
    Oral Statement...............................................     5
The Honorable Bobby Scott, 3rd District of Virginia, U.S. House 
  of Representatives
    Oral Statement...............................................     6
The Honorable Vern Buchanan, 16th District of Florida, U.S. House 
  of Representatives
    Oral Statement...............................................     8
The Honorable Steve Stivers, 15th District of Ohio, U.S. House of 
  Representatives
    Oral Statement...............................................     9
The Honorable Justin Amash, 3rd District of Michigan, U.S. House 
  of Representatives
    Oral Statement...............................................    11
The Honorable Barry Loudermilk, 11th District of Georgia, U.S. 
  House of Representatives
    Oral Statement...............................................    13
The Honorable Stephanie Murphy, 7th District of Florida, U.S. 
  House of Representatives
    Oral Statement...............................................    15
Douglas Holtz-Eakin, President, American Action Forum
    Oral Statement...............................................    17
Alan S. Blinder, Gordon S. Rentschler Memorial Professor, 
  Economics and Public Affairs, Princeton University
    Oral Statement...............................................    19
David M. Primo, Ani and Mark Gabrellian Professor, Political 
  Science and Business Administration, University of Rochester
    Oral Statement...............................................    21
Nick Dranias, President and Executive Producer, Compact for 
  America Educational Foundation, Compact Administrator, Compact 
  for a Balanced Budget
    Oral Statement...............................................    22

               THE NEED FOR THE BALANCED BUDGET AMENDMENT

                              ----------                              

                        THURSDAY, JULY 27, 2017

                        House of Representatives

                       Committee on the Judiciary

                             Washington, DC

    The committee met, pursuant to call, at 10:13 a.m., in Room 
2141, Longworth House Office Building, Hon. Bob Goodlatte 
[chairman of the committee] presiding.
    Present: Representatives Goodlatte, Chabot, King, Franks, 
Poe, Labrador, Collins, Buck, Ratcliffe, Johnson of Louisiana, 
Biggs, Rutherford, Handel, Conyers, Nadler, Lofgren, Richmond, 
Lieu, and Schneider.
    Staff Present: Shelley Husband, Staff Director; Branden 
Ritchie, Deputy Staff Director; Zach Somers, Parliamentarian 
and General Counsel; Paul Taylor, Chief Counsel, Subcommittee 
on the Constitution and Civil Justice; James Park, Minority 
Chief Counsel, Subcommittee on the Constitution; David 
Greengrass, Minority Counsel; Matthew Morgan, Minority 
Professional Staff Member; and Veronica Eligan, Minority 
Professional Staff Member.
    Chairman Goodlatte. Good morning. The Judiciary Committee 
will come to order. And without objection, the chair is 
authorized to declare recesses of the committee at any time.
    We welcome everyone to this morning's hearing on the need 
for the balanced budget amendment. I'll begin by recognizing 
myself for an opening statement.
    On March 2, 1995, a pivotal day in the history of our 
country, the United States Senate failed by one vote to send a 
balanced budget constitutional amendment to the States for 
ratification. The amendment had passed the House by the 
required two-thirds majority, and the Senate vote was the last 
legislative hurdle before ratification by the States. If 
Congress had listened to the American people and sent that 
amendment to the States for ratification, we would not be 
facing the fiscal crisis we are today. Rather, balancing the 
Federal budget would have been the norm instead of the 
exception over the past 20 years, and we would have nothing 
like the annual deficits and skyrocketing debt we currently 
face.
    In 1995, when the balanced budget amendment came within one 
vote of passing, the gross Federal debt stood at $4.9 trillion. 
Today, it stands at over 19.5 trillion. The Federal debt held 
by the public is rising as well and is increasing rapidly as a 
percentage of the country's economic output. Unlike the past, 
when the debt spiked to pay for wars of finite duration and 
then was reduced gradually after hostilities ended, more 
recently, the debt has risen as a result of having to pay for 
entitlement programs that are of indefinite duration and 
difficult to reduce over time. As the nonpartisan Congressional 
Budget Office has observed, such high and rising debt will have 
serious negative consequences: interest rates will increase 
considerably, productivity and wages will be lower, and high 
debt increases the risk of a financial crisis.
    What is particularly troubling is that the debts we are 
incurring will burden multiple future generations. Indeed, a 
few years ago, a cross-national study found that the United 
States ranked worst among 29 advanced countries in the degree 
to which it imposes unfair debt burdens on future generations. 
It's time for Congress to stop saddling future generations with 
the burden of crushing debts to pay for current spending. We 
should not pass on to our children and grandchildren the bleak 
fiscal future that our unsustainable spending is creating.
    The only way to ensure that Congress acts with fiscal 
restraint over the long term is to pass a balanced budget 
amendment. Experience has proven time and again that Congress 
cannot, for any significant length of time, reign in excessive 
spending. Annual deficits and the resulting debt continue to 
grow due to political pressures that the Constitution structure 
no longer serves to restrain.
    In order for Congress to be able to consistently make the 
tough decisions necessary to sustain fiscal responsibility, 
Congress must have the external pressure of a balanced budget 
requirement to force it to do so. The Framers of the 
Constitution were familiar with the need for Constitutional 
restrictions on deficit spending.
    When the Constitution was ratified, it was the State's that 
had exhibited out-of-control fiscal mismanagement by issuing 
bills of credit to effectively print money to pay for projects 
and service debt. As a result of that lack of fiscal 
discipline, Article I, section 10 of the Constitution 
specifically deprived States of the power to issue bills of 
credit. Over 200 years later, it is the Federal Government that 
has proven its inability to adopt sound fiscal policies. And 
thus, it is now time to adopt a Constitutional restraint on 
Federal fiscal management.
    Several versions of the balanced budget amendment have been 
introduced to this Congress, including two I introduced to this 
Congress, as I have every Congress for the last decade.
    H.J. Res. 2 is nearly identical to text that passed the 
House in 1995 and failed in the Senate by one vote. It requires 
that total annual outlays not exceed total annual receipts. It 
also requires a true majority of each chamber to pass tax 
increases and a three-fifths majority to raise the debt limit.
    H.J. Res. 1, which I also introduced, goes further. In 
addition to the provisions of H.J. Res. 2, it requires a three-
fifths majority to raise taxes and imposes an annual cap on 
Federal spending.
    While my preference is to pass the stronger version of the 
balanced budget amendment, the two-thirds majority requirement 
for passing a constitutional amendment demands that we achieve 
bipartisan support for any approach. Our extraordinary fiscal 
crisis demands an extraordinary solution. We must rise above 
partisanship and join together to send a balanced budget 
amendment to the States for ratification.
    We are at a crossroads. We can make the tough choices to 
control spending and pave the way for a return to surpluses and 
paying down the national debt, or we can continue further down 
the road of chronic deficits, leaving our children and 
grandchildren with crippling debt that is not of their own 
making. The choice is ours, and the stakes are high.
    I look forward to hearing from our distinguished panel of 
witnesses today about this important issue. But first, we want 
to hear from the ranking member of the committee, the gentleman 
from Michigan, Mr. Conyers.
    Mr. Conyers. Thank you very much, Chairman Goodlatte. Top 
of the morning to all of our colleagues that are gathered here 
to share their perceptions of this amending the Constitution to 
require a balanced budget. Great to see you. I look forward to 
hearing your views on this matter.
    For me personally, I've long been reluctant to amend the 
Constitution to require a balanced budget, because such an 
amendment could have a devastating consequence for millions of 
Americans. Simple as that for me. Most importantly, such an 
amendment would gut our most important social safety net 
programs, like Social Security and Medicare that are funded by 
trust funds. So I know you are going to help me see things 
maybe a little bit differently, and I look forward to your 
interpretations.
    Therefore, critical programs such as Social Security, 
Medicare, and military and civil service pensions, all of which 
depend on drawing upon savings accumulated and trust funds, 
would be prevented from paying current and future benefits.
    Way back in the 104th Congress, the Republican chairman of 
this committee, I remember him well, Henry Hyde, recognized 
that Congress would not be able to balance the budget without 
using retiree funds in the Social Security Trust Fund. Here is 
how he explained it: If you exclude receipts from the revenue 
that are received by the Social Security system from computing 
the total revenues of the government, if you take it out of the 
equation and then the cuts that are necessary to reach a 
balanced budget become draconian. They become 22 to 30 percent. 
And you know that we cannot and will not cut programs that we 
want to subsist and continue by 22 to 30 percent. You have to 
compute Social Security receipts in determining the income of 
this government so that the cuts you make to balance the budget 
are livable and not impossible. That is our former colleague 
and chairman, Henry Hyde.
    I think he was right then, and I think there is much truth 
in his statement that makes it correct now.
    A balanced budget amendment could be used to loot our 
Nation's savings funded by money taken out of every American's 
paycheck to pay for other things and to balance the budget, 
instead of being used to pay the benefits that Americans have 
earned. It would, in effect, breach the trust embodied by the 
Social Security Trust Fund.
    Additionally, a balanced budget amendment would undermine 
the Federal Government's ability to respond to a national 
crisis. Although most amendment proposals contain some sort of 
emergency exception to the prohibition of deficit spending, 
they nevertheless also require a supermajority vote in both 
houses of Congress to override the balanced budget mandate. As 
a result, Congress may be unable to act in time to respond to a 
crisis like a war or a hurricane, a flood, or a plain old-
fashioned financial meltdown.
    Finally, a balanced budget amendment would force the 
Federal courts to determine inherently political issues, 
upending the principle of separation of powers and generating 
massive litigation.
    As the late judge and conservative constitutional scholar 
Robert Bork explained: Scores of hundreds of suits might be 
filed in Federal district courts around the country. The 
confusion, not to mention the burden on the court system, would 
be enormous. Nothing would be settled. Moreover, until one or 
more such actions finally reach the Supreme Court, nor is it at 
all clear that what could be done if the court found that the 
amendment had been violated 5 years earlier.
    Now, it's not all the time that I agree with Judge Bork. We 
should heed his warning in this instance about the potential 
for endless litigation in courts over budget policy.
    To satisfy the dictates of the Constitution's balanced 
budget amendment as envisioned by these proposals, these courts 
would need to decide complex economic policy issues that I 
think are left better for the elected and politically 
accountable branches to determine. So for those reasons, I 
oppose the concept of a Constitutional balanced budget 
amendment.
    And so I look forward to hearing from my colleagues on the 
Members' panel, as well as from all of today's witnesses, on 
these critical issues. And I thank the chairman.
    Chairman Goodlatte. Well, thank you, Mr. Conyers.
    And let me now introduce our first panel of witnesses.
    Our first witness is the Honorable John Ratcliffe.
    Mr. Ratcliffe is a member of the Judiciary Committee and 
represents the Fourth District of Texas. Our second witness is 
the Honorable Bobby Scott. Mr. Scott has previously been a 
member of this committee, and he represents the Third District 
of Virginia. Our third witness is the Honorable Vern Buchanan. 
Mr. Buchanan represents the 16th District of Florida. Our 
fourth witness is the Honorable Steve Stivers. Mr. Stivers 
represents the 15th District of Ohio. Our fifth witness is the 
Honorable Justin Amash. Mr. Amash represents the Third District 
of Michigan. Our sixth witness is the Honorable Barry 
Loudermilk, and Mr. Loudermilk represents the 11th District of 
Georgia. And our seventh and last, but certainly not least, 
witness is the Honorable Stephanie Murphy. And Mrs. Murphy 
represents the Seventh District of Florida.
    Welcome to all of you. Thank you for agreeing to 
participate today. We look forward to your testimony. Your 
written statement will be entered into the record in its 
entirety. And as you know, we ask that you summarize your 
testimony in 5 minutes. And we have timing lights in front of 
you on the table that you all know how to operate.
    And, Mr. Ratcliffe, we will start with you. Welcome.

   STATEMENT OF THE HON. JOHN RATCLIFFE, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF TEXAS

    Mr. Ratcliffe. Chairman Goodlatte, Ranking Member Conyers, 
and my fellow members on the House Judiciary Committee, good 
morning, and thank you for giving me the opportunity to speak 
on the importance of amending the Constitution to require the 
Federal Government to balance its budget.
    The issue of balancing the budget is about more than just 
dollars and cents. It is about more than making sure Federal 
spending doesn't exceed revenues. It is about accountability to 
the people who elected us and about restoring the trust that we 
have broken with the American people. Sure, we talk a lot about 
what needs to be done. We do that with passionate speeches and 
with carefully crafted cliches that make for good sound bites.
    But speaking candidly to you today as my colleagues, I 
would ask, if we are going to just continue to promise results 
only to then later just deliver excuses, or can we instead 
agree to finally take on the tough choices that are necessary 
to preserve freedom and opportunity for future generations to 
allow every American to go as high and as far as their own hard 
work, determination, and ability will carry them.
    Mr. Chairman, the importance of these fundamental questions 
are what compelled me to introduce what I think is the toughest 
balanced budget amendment in Congress. It is tough, but 
governing isn't easy. It is not supposed to be. Making tough 
decisions after careful deliberation, explaining those 
decisions with clarity and transparency to our constituents, I 
think that is what we all signed up for.
    The debate regarding the balanced budget amendment is 
certainly nothing new. But the history of that debate is 
perhaps the most compelling argument that I can offer you 
regarding the imperative necessity of passing a balanced budget 
amendment.
    Mr. Chairman, as you mentioned in your opening statement, 
Congress had the chance to do exactly that in 1995 when a 
balanced budget amendment passed the House only to then fall a 
single vote short over in the Senate. At that time, the Federal 
debt was just $4.6 trillion. But without a balanced budget, 
what followed over the last two decades has been yearly waves 
of Federal deficits from Congresses and Presidents of both 
parties. And the American people have had to watch the Federal 
debt rise at an alarming and obscene rate, now quadrupling to 
almost $20 trillion.
    Now, critics and opponents of a balanced budget amendment 
will argue that the real cause of these fiscal imbalances is 
just a lack of political will, not something that can be cured 
by amending the process. It very well may be right with respect 
to the political will part. But can any of us honestly look 
into the eyes of the American people and tell them that we 
expect that to change without a constitutional constraint 
strong enough to stop legislators from being fiscally 
irresponsible? I can't and I won't.
    The 700,000 Texans that I am grateful to represent didn't 
elect me to posture or message. They elected me to act and to 
lead on the toughest issues facing our country and impacting 
our children's future. I think all of our constituents want 
action and leadership on this issue. They are so tired of 
hearing us talk a good game, but when it comes time to taking 
action, watching us consistently fall short of the expectations 
that we have set. It is no wonder that Congress has such a low 
approval rating. We consistently overpromise and underdeliver.
    So, Mr. Chairman, the opportunity and the choice to finally 
change this narrative is really now ours. A balanced budget 
amendment will restore fiscal sanity, it will provide certainty 
to our national finances, it will save future generations from 
having to pay off the excesses of today. But most of all, a 
balanced budget amendment will restore the American people's 
trust in the Federal Government.
    It is my hope and prayer, Mr. Chairman, that this is the 
Congress that will be remembered for being on the right side of 
history on this issue. Thank you again for giving me the 
opportunity to testify today.
    Chairman Goodlatte. Thank you, Mr. Ratcliffe.
    Welcome, Mr. Scott.

STATEMENT OF THE HON. BOBBY SCOTT, A REPRESENTATIVE IN CONGRESS 
                   FROM THE STATE OF VIRGINIA

    Mr. Scott. Thank you, Mr. Chairman, Ranking Member Conyers, 
and thank you for the opportunity to return to the Judiciary 
Committee hearing room. I spent many great days here, and I 
appreciate the opportunity to return, and also the opportunity 
to discuss my concerns with the idea of adding a so-called 
balanced budget amendment to our Constitution.
    Reducing our deficit and balancing our budget are goals 
that every Member here supports. But I worry that we often get 
distracted by the title of these resolutions without paying 
serious consideration about whether the specific provisions of 
the proposal will actually help balance the budget. If we are 
ever going to balance the budget, the fact is we are going to 
require members to cast some tough votes. Many of these votes 
will be career-ending votes, and a constitutional amendment 
will not change that reality.
    One of the first consequential votes I cast in this body 
was in 1993 on the Clinton budget. It--not one Republican voted 
for it. Vice President Gore had to break the tie in the--in the 
Senate. We will remember 53 Members, in addition to Marjorie 
Margolies-Mezvinsky, lost their seats in the next election by 
passing a budget that created, in 8 years, over 20 million 
jobs, tripled--more than tripled the Dow Jones Industrial 
Average. And by 2001, as a result of that budget, the CBO 
projected surpluses large enough over the next decade to 
totally pay off the debt held by the public by 2008. But 53--54 
Members of the House lost their seats as a direct result of 
that vote.
    Now, notwithstanding the title, the fact is that most of 
the proposed balanced budget amendments would actually make it 
impossible to ever pass a strict deficit reduction plan similar 
to the 1993 Clinton budget. One proposal requires a three-
fifths majority in both houses to enact a revenue increase. 
Sometimes revenue increases, or tax increases, are necessary to 
reduce the deficit. But a supermajority will make such 
necessary revenue increases more difficult and obviously more 
difficult to balance the budget.
    Now, there may be policy reasons that you want to avoid tax 
increases. But suggesting that that would help balance the 
budget is just simply absurd.
    Now, no tough budget gets three-fifths of a vote. If you 
look back over the years, over the last decade of fiscally 
responsible budgets, we haven't had many of them, none of them 
get close to three-fifths. But let me tell you what can three-
fifths of a vote: The fiscal cliff deal. $3.9 trillion in tax 
cuts passed. It got not only--it got three-fifths. And 
incredibly, most of the no votes were no because the tax cuts 
weren't big enough. The deficit wasn't big enough.
    Now, the proponents of these amendments say--they will 
argue that their proposals include a 5-year window from the 
time of ratification for a glide path to give Congress an 
opportunity to get its act together so that when the provisions 
kick in, we will be close to balanced. But there is nothing in 
any of these proposals that require Congress to make any of 
this kind of progress. And while passing a balanced budget 
amendment might give Members of Congress the idea that they can 
prance around like they have done something, all you have done 
is just delayed the situation for 5 years. At some point, you 
are going to have to cast those tough votes.
    So under almost all of the proposals, a three-fifths vote 
would be required to pass any credible budget. You are not 
going to pass a budget--you are not going to balance it 
overnight. If you have a really severe deficit reduction plan, 
the first year is going to be out of balance, so you need 
three-fifths. Now, the question is does the three-fifths vote 
make it more likely or less likely that you are going to do 
something fiscally responsible? Like I said, these are career-
ending votes that you are going to have to cast if you want to 
get this budget in balance.
    But there is nothing--we talk about constraint. There is 
nothing in any of these amendments that limits at all the 
deficit you can run up once you get to three-fifths. You get 
three-fifths, no limit at all. You are talking about a 
Christmas tree and presents for everybody. That is what would 
happen when you start buying up the votes necessary to get 
there.
    Now, the ranking member talked about litigation. There is 
going to be litigation over in some of the--there is a limit on 
what you can--what you can spend based on a percentage of GDP 
or economic output. There is going to be litigation over what 
is the GDP in a given year and what was the output. Another 
question would be on the share of economic output, which--
whether or not you want that to happen when there is an 
economic distress or a national emergency. And another would 
actually jeopardize spending in a trust fund. If you have 
collected money one year and want to spend it the next, that 
might get you out of balance. And what happens to Social 
Security and Medicare?
    The three-fifths vote on a debt ceiling would only 
institutionalize a dysfunctional system that we have got now. 
And that is a bad----
    But finally, Mr. Chairman, rather than focus on the title, 
let's talk about the actual provisions. We had a hearing a 
couple of years ago when the Governor was bragging about his 
constitutional provisions of a balanced budget. Unfortunately, 
he had to acknowledge that not one of the proposals--none of 
the provisions in the proposed constitutional amendment--in his 
constitutional amendment were in any of the resolutions. No 
three-fifths requirement to pass the budget, no two-thirds or 
three-fifths to raise revenue, no three-fifths to borrow money. 
He was discussing the title but not the actual provisions of 
the bill.
    We shouldn't be distracted by titles, Mr. Chairman. The so-
called budget--balanced budget amendment would actually 
encumber the route to a balanced budget.
    And as I said, Mr. Chairman, if you are going to balance 
the budget, people are going to lose their seats. Nothing in 
these provisions is going to change that reality, because 
this--these provisions would actually make it more likely that 
we would go into more debt and not that we would go in a 
fiscally responsible way.
    Thank you, Mr. Chairman. And I appreciate the opportunity 
to be with you today.
    Chairman Goodlatte. Thank you, Mr. Scott.
    Mr. Buchanan, welcome.

   STATEMENT OF THE HON. VERN BUCHANAN, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mr. Buchanan. Well, thank you, Mr. Chairman Goodlatte, 
thanks for this opportunity, and Ranking Member Conyers, and 
fellow members. You know, everybody--and I want to first say I 
want to thank you, Mr. Chairman, for your leadership on this 
issue. I have been here 10 years, and you have been in the 
forefront of this.
    But everybody has a reason why they ran for Congress. I ran 
10 years ago. And my biggest issue was I was concerned about 
deficit spending. At that point, we spent--$130 billion was the 
deficit in that particular year. We have gone from, in 10 
years, from 8.6 billion to $20 billion almost in terms of 
deficit spending.
    You know, there was a lot to be made about the stimulus of 
$800 million. And people asked me about that. But, you know--
and it was somewhat controversial, but it got done. We have had 
a $10 trillion stimulus in the last 10 years. Someone asked me, 
Why isn't anybody talking or looking at that? So think about 
that. We have so much outrage on the 800 million. If you look 
in the last 10 years, and there is plenty of blame to go 
around, we have had a $10 trillion stimulus. We have created 
more debt in the last 10 years since the beginning of our 
country.
    So someone says let's just state the facts. The CBO is 
saying the next 10 years we are going to add another 10 
trillion. So at what point do we not understand that we have 
got to deal with this?
    If you look at the--in terms of balancing the budget in the 
last 50 or 60 years, we balanced it five times. And that was 
primarily under the Clinton administration. I think it is five 
or six times. So just the facts. We are clearly bankrupting our 
children. Our generation, for some of us in here, might be 
fine, but for our children and grandchildren, they are going to 
have a bankrupt situation.
    I would just say to Mr. Conyers, in terms of--I was born in 
Detroit. Grew up in the Detroit area. You know, in Inkster. And 
Detroit was the most--one of the most prosperous cities in 
America. It was the fourth largest, and it went bankrupt. So it 
can happen, so----
    I would just also just mention that, when we look at the 
debt in terms of the interest, historically, it is 4 to 5 
percent. Four to 5 percent on 20 trillion, you are good at 
math, is a trillion a year. We only take in 3.3 trillion. So at 
what point, if the interest rates get there--now, 
unfortunately/fortunately, the Feds can't raise the interest 
rate. But I can tell you, seniors in my area in Florida, all 
over Florida, that were counting on their retirement in terms 
of CDs, in terms of a bond portfolio they might have, they are 
getting 1 or less percent. They are eating into their 
principal. So we are hurting a lot of our seniors, because the 
Feds can't really raise the rate. They can raise it. If they 
raise it one point, it is 200 billion. That is the fact.
    And we are talking about looking at interest rates down the 
road. You are talking about $800 billion in the next 10 years 
per year. So the fact that we don't deal with this is a big 
issue.
    The other thing I would just tell you, after 2008, October 
2008, 49 out of 50 Governors have a balanced budget amendment. 
Florida had to make those tough choices. They cut the budget 
for the next 3 or 4 years. And people complained a little bit, 
and then we got back on track, because we are one of the top-
rated States now in the country. But it is a big issue. We 
can't continue to ignore it.
    I think also, as I mentioned a little bit earlier today, my 
bill in terms of a balanced budget amendment--in the first week 
I was here in Congress, I introduced a balanced budget 
amendment, and I have done it every year. We can talk about a 
lot of these other issues. But the biggest issue I think that 
all of us have to come to the realization with is what are we 
going to do about outlandish spending? Because at some point, 
it is not a matter ``if,'' it is a matter of ``when'' it ends 
badly. There is no question about it. I have been a business 
guy for a lot of years. Leverage makes some sense in the right 
scenario, as long as things are going up, but at some point it 
ends badly.
    I mean, if we thought October 2008 was bad, we are going to 
have the same impact, but maybe a much bigger collapse. And 
what--to me, that is just completely unacceptable. So we are 
leaving this--we are going to leave this country in a bankrupt 
state for our children and grandchildren. We need a 
constitutional balanced budget now. It should be the most 
important thing we are talking about. We have got a lot of good 
ideas up here. We need to find a way we can all come together, 
we all have a different amendment, and get this in place, 
because I have no confidence in the Congress, Democrats and 
Republicans, of doing anything on this issue short of a 
Constitutional balanced budget amendment. And we need to act 
now.
    Thank you for the opportunity.
    Chairman Goodlatte. Thank you, Mr. Buchanan.
    Mr. Stivers, welcome.

   STATEMENT OF THE HON. STEVE STIVERS, A REPRESENTATIVE IN 
                CONGRESS FROM THE STATE OF OHIO

    Mr. Stivers. Thank you, Chairman Goodlatte and Ranking 
Member Conyers. Thanks for holding this hearing. And thank you, 
Mr. Chairman, for your leadership on the balanced budget 
amendment.
    You know, you appropriately mentioned that, in 1995, we 
came so close to a balanced budget. And in the 20 years since, 
not much has changed, except that we keep spending more than we 
bring in. And, you know, what unites all these great folks 
today that have worked so hard to try to put forward a movement 
toward a balanced budget is, you know, their belief, and my 
belief, that if we spend more than we bring in over time, the 
system will collapse. And so it is--we have to act.
    And the ranking member talked about what might happen with 
a balanced budget amendment, some draconian cuts. Actually, I 
believe the true draconian option is to do nothing.
    A recent CBO report talked about what would happen under 
the current law with the old-age survivors insurance of Social 
Security. By 2030, it will be exhausted. In 2031, the cuts will 
be about 31 percent. We have never seen cuts like that. Other 
mandatory programs, Medicare hospital insurance will be 
exhausted by 2028. And you will see draconian cuts there as 
well.
    This--my dad used to tell me, we can do this the easy way 
or the hard way. And that is the truth here too. We can do this 
the easy way, which is us deciding to come together.
    My proposal for a balanced budget amendment is a bipartisan 
amendment, Mr. Conyers, that it--it does not require a 
supermajority to raise taxes. It does not require a 
supermajority on cap spending. It simply requires us to do 
things. Because I haven't been here a long time. I have been 
here 6 years. But I have been here long enough to learn that 
the only things that happen in Congress are the things that 
have to happen. We need to make balancing our budget something 
that has to happen. And if we don't, millions of Americans will 
see draconian cuts as a result.
    I think the gentleman from Florida very accurately talked 
about what could happen with interest rates. Interest rates are 
at an artificial low. Our servicing costs on our debt is tiny 
now, yet it is already more than we spend in veterans' 
benefits. And if interest rates were to normalize back to 
normal, 4 to 5 percent rates, you know, we would be spending 
about 30 percent of everything we bring in just to service the 
debt. And that doesn't account for anything else. We have to do 
something, and we have to do something now.
    And I would plead to all of you that we--I believe we have 
to do it in a bipartisan way. You know, would I like a limit on 
how much we could spend as part of our GDP? Yeah, I would like 
that. I didn't put it in my balanced budget amendment because I 
know we need to compromise. I know it has to be bipartisan. To 
get to the numbers we need, we need Republicans and Democrats 
to come together to do this and control our own fate, because 
if we don't, our fate will be controlled for us by other 
people, by our creditors around the world. And we all saw what 
happened to Greece, we all saw what happened to Portugal. We 
all know how bad that situation could be. I don't want to let 
that happen to the citizens of the United States of America and 
to the people who depend on our government to do the things 
that it needs to do to help and--to defend our country.
    And, you know, one of the greatest threats--I have been a 
military guy for 32 years. One of the greatest threats to our 
national security, as Admiral Mullen said almost 5 years ago, 
is that our national debt risks our national security. And we 
all know that. In our own lives, when you owe people money, you 
are at their mercy. And that is why we need to live within our 
means and start to pay down our national debt.
    I want to thank my cosponsor, Henry Cuellar, for our 
balanced budget amendment, H. Res. 110. Mr. Conyers, I hope you 
will look at it. It doesn't require many of the things that you 
talked about. I know we as Republicans and Democrats have to 
come together to solve this problem. And I am willing to give 
up on some of the things that I might like in a balanced budget 
amendment and simply require it.
    I think my--the gentleman from Florida explained it. Forty-
nine States, everybody but Vermont, has a balanced budget 
requirement in their State constitution. And since 2008, 
countries like Germany, Austria, Poland have added a balanced 
budget amendment to their constitution as countries because the 
financial crisis demanded that they do it. And I am not talking 
about our financial crisis in 2008. I am talking about what 
happened in Europe in 2007 and 2008.
    So there is a way forward. It is a bipartisan way forward. 
I hope we can all work to make that happen, because the 
alternative is grim for millions of Americans. And I hope we 
don't do this the hard way. But the problem will be solved one 
way or the other. I hope we take the reigns, provide 
leadership, and lead the country on a better path of a balanced 
budget.
    Thank you for the opportunity to be here. I appreciate all 
the very passionate advocates that are here today to talk about 
the future of our country. Thank you, and I appreciate it.
    I yield back the balance of my time.
    Chairman Goodlatte. Thank you, Mr. Stivers.
    Mr. Amash, welcome.

    STATEMENT OF THE HON. JUSTIN AMASH, A REPRESENTATIVE IN 
              CONGRESS FROM THE STATE OF MICHIGAN

    Mr. Amash. Thank you, Chairman Goodlatte, Ranking Member 
Conyers, and members of the committee, for the opportunity to 
be here. I have enjoyed working with you over the years, and I 
hope this is another opportunity to find common ground.
    The Federal Government's budget problems are no secret. But 
hearing that the U.S. national debt will soon exceed $20 
trillion still shocks the conscience. We have had persistent 
deficits for most of the last half century, forcing future 
generations to pay the price of past and current government 
spending. And there is no sign of change under current 
policies. This high-debt burden is already undermining economic 
growth, crowding out other budget priorities through escalating 
interest payments, and risking a debt crisis with dire economic 
and fiscal consequences.
    If we continue down this path, we will go bankrupt. We all 
recognize the need for change, but we are faced with the 
difficulty of prioritizing responsibly without knowing that our 
work will ultimately pay off. For while this majority may be 
willing to work to build consensus, forge compromises, and take 
tough votes, we can have no assurance that future majorities 
will follow suit. That is why I support a well-crafted balanced 
budget amendment.
    A balanced budget amendment is a binding commitment to be 
responsible, set priorities, avoid a debt crisis, and lighten 
the growing burden of indebtedness. But not all BBAs are equal. 
We should always be cautious about amending the Constitution. 
And a BBA, in particular, must be carefully drafted.
    First, it must be simple, concise, and general. Most of the 
Constitution establishes broad principles, leaving the details 
to be filled in by Congress through legislative enactments. 
Second, it should be narrowly tailored. It should not impose 
substantive policy, such as requiring a supermajority to raise 
taxes or eliminating spending to a percentage of GDP.
    A BBA should require overall spending and revenue to 
balance. That is it. And keeping it focused is not only good 
policy but also good politics. Ratifying a constitutional 
amendment requires the support of two-thirds of both houses of 
Congress and 38 State legislatures. It must be bipartisan to 
succeed. To obtain bipartisan support, it must be workable.
    In the State of Michigan, the Constitution mandates that 
the budget balance every year. Accomplishing this requires 
multiple revenue-estimating conferences. It also requires the 
Michigan legislature to conduct quarterly budget meetings to 
adjust programs as those spending and revenue estimates change. 
This structure creates too much uncertainty.
    In addition, we need flexibility to address emergencies. A 
BBA should include a safety valve that is tight enough to avoid 
abuse but loose enough to be useable.
    Finally, a reasonable path to balance is vital. Many of the 
reforms that bend the cost curve start with small savings that 
become meaningful only over time. Avoiding a shock to the 
system and instead setting upon a gradual path to balance also 
will help build trust and grow confidence in the new budget 
rule.
    I would like to briefly discuss my balance budget proposal, 
H.J. Res. 15, which meets these standards I have mentioned and 
has garnered substantial bipartisan support over the last few 
Congresses. I call H.J. Res. 15 the Business Cycle balanced 
budget amendment, or BCBBA, because it requires balance over 
the business cycle instead of every year. The spending limit is 
based on the rolling average of revenue from the three prior 
years. Because averaging softens revenue fluctuations and 
avoids the need for shifting estimates, policies would stay 
predictable.
    Under the BCBBA, Congress could choose any level of 
government spending and revenue. Lower taxes with a smaller 
government providing fewer services would be possible, as would 
be a larger government providing more services with higher 
taxes. The only option taken off the table would be perpetual 
deficits.
    Fiscal policy would be countercyclical. When a recession 
hits, spending would still be based on the prerecession boom 
years. This mechanism would allow for temporary deficits. But 
as the economy recovers, the spending limit would begin to 
incorporate the lower recession year revenues, producing small 
surpluses in good years. Setting spending this way would 
provide the predictability and stability I have highlighted and 
allow Congress to focus on structural balance and long-term 
prioritization instead of on constant tinkering to meet 
immediate desires.
    Deficits from recessions and emergencies would be offset by 
surpluses in economic upturns. Based on conversations with 
Republicans and Democrats, I chose two-thirds, the normal 
constitutional supermajority, as the necessary support for 
emergency spending.
    And finally, the BCBBA allows a full decade to reach 
balance after ratification, because setting national priorities 
and realizing savings takes time. Phasing out deficits faster 
would still be an option, but a smoother transition period 
might be worth taking a little longer.
    We need to balance our budget and end the downward spiral 
into debt. I am convinced that it will take a binding rule, a 
constitutional amendment to accomplish it. And congressional 
support already exists for the right proposal.
    We can come together to confront the challenges facing our 
great Nation. But to do so, we need the confidence that our 
return to fiscal responsibility and sustainability will endure. 
That is why I support a well-crafted balanced budget amendment. 
And I urge the Judiciary Committee to continue these hearings 
and ultimately to bring such an amendment to the floor.
    Thank you again for having me here today. I look forward to 
working with you on this important issue.
    Chairman Goodlatte. Thank you, Mr. Amash.
    Mr. Loudermilk, welcome.

  STATEMENT OF THE HON. BARRY LOUDERMILK, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF GEORGIA

    Mr. Loudermilk. Thank you, Mr. Chairman, Ranking Member 
Conyers. I appreciate you inviting me to this hearing and, more 
importantly, Mr. Chairman, your interest and the committee's 
interest in this critically important topic to America.
    I serve on the Financial Services Committee. And during our 
committee hearings, the chairman displays a constant reminder 
of American's looming crisis. On the monitor in front of the 
committee room, the U.S. debt clock is constantly running at an 
alarming pace. Our debt is increasing. As I was a sitting in 
the committee hearing yesterday, I was looking at the debt 
clock as it was racing toward $20 trillion at a pace of over 
$10,000 every second. Most Americans have a hard time grasping 
just how huge a $20 trillion debt really is.
    When I was running for Congress just 3 years ago, that debt 
was only at $17 trillion. But, in fact, most of us in this room 
probably don't even have a good idea or have a hard time 
putting in perspective how massive $20 trillion actually is. So 
I would like to put it in perspective using something I think 
everyone can relate to.
    Our modern calendar is based upon the traditionally 
observed birth date of Jesus. Regardless of religious 
affiliation, if you know what the current date is, especially 
the current year, you have a general idea of when Jesus was 
born. Using this common reference point, I calculated how much 
money you would have to save over this time period just to pay 
off our national debt. The results were astounding.
    If you were to start in a savings account with $17,000 
starting at the moment of Jesus's birth and deposited $17,000 
every minute, that is every 60 seconds consistently till this 
moment today, you still wouldn't have enough money to pay off 
our national debt. That is $17,000 every 60 seconds for over 
2,017 years. That should alarm everyone.
    Not only is this--the principal on debt overwhelming, but 
the interest on that debt is increasing exponentially. We must 
address this crisis immediately or we will be overcome by the 
interest that soon will be one of the single largest 
expenditures in our budget. This is why Defense Secretary James 
Mattis stated in his confirmation hearing that our national 
debt is the biggest threat to our national security.
    Since I have been in Congress, and for the past several 
years, Congress has attempted to address our debt and deficit 
through long-term budgeting. This year, as we have done in the 
past, we will bring to the floor a budget proposal that 
attempts to balance our budget within a 10-year window. Our 
Fiscal Year 2018 Budget addresses the fact that we cannot close 
the fiscal gap in 1 year or even 5 years. It requires a long-
term approach to balance the Federal revenues with Federal 
spending.
    Unfortunately, we have been proposing this same course of 
action year after year, but we never get any closer to actually 
balancing the budget. If history repeats itself, as it tends to 
do on Capitol Hill, I expect that next year we will once again 
be discussing a budget that balances within 10 years. Not 9 
years, not 8 years.
    If we are serious about securing the Nation for future 
generations, we must take bold but measured actions to reign in 
Federal spending before rising interest rates drive it out of 
control.
    In fiscal year 2010, Congress passed a budget that would 
balance by the year 2020. However, 8 fiscal years later, we are 
not any closer to actually balancing our budget. In fact, as I 
have already stated, this year's budget proposes balancing by 
the year 2028.
    In the entitlement-dependent culture of modern America, it 
will be increasingly difficult to secure the votes needed to 
cut spending at the levels needed to put us on the path of 
fiscal responsibility. That is why it is imperative that we 
pass a balanced budget amendment to force us to make difficult 
decisions.
    My balanced budget amendment, H.J. Res. 29, is built upon 
the premise that Congress can balance the budget within a 10-
year window without major disruption of critical government 
services. My balanced budget amendment would take effect in the 
10th fiscal year after ratification. This would force Congress 
to implement gradual cuts over time and reform costly 
government programs. It will also allow Federal agencies, State 
governments, and the Nation as a whole adequate time to adjust 
to the leaner and more effective Federal Government.
    With a clear and constitutionally mandated path for a 
fiscally sound government, we must also ensure future debt is 
only used for times of war or other national emergencies. H.J. 
Res. 29 forces fiscal responsibility by limiting spending to 18 
percent of the previous year's GDP. However, with a two-thirds 
vote, Congress may exceed the 18 percent limit for one calendar 
year.
    To ensure that the burden of fiscal irresponsibility of 
future Congresses is not solely placed on the backs of American 
taxpayers, H.J. Res. 29 requires the vote of two-thirds of 
Congress to enact any new tax or increase the rate of any 
existing tax.
    Now is the time for Congress to take bold measures to avoid 
a pending fiscal catastrophe and stabilize our national economy 
for future generations. Prior to the financial crisis, our 
national debt was approximately 60 percent of GDP. Today, our 
debt has grown to over 104 percent of GDP. We must put 
ourselves on a path forward, but a sustainable path to fiscal 
solvency. H.J. Res 29 uses a proven concept that Congress can 
balance the Federal budget in 10 years and then forces us to 
follow through with that plan.
    Mr. Chairman, doing what is right isn't easy and it is 
often not popular, but it is always right. Again, I thank you 
for giving me time to present this bill at the committee, and I 
appreciate your interest.
    Chairman Goodlatte. Thank you, Mr. Loudermilk.
    Mrs. Murphy, welcome.

  STATEMENT OF THE HON. STEPHANIE MURPHY, A REPRESENTATIVE IN 
               CONGRESS FROM THE STATE OF FLORIDA

    Mrs. Murphy. Chairman Goodlatte, Ranking Member Conyers, 
and members of the Judiciary Committee, thank you for inviting 
me to testify.
    Last month, I introduced a balanced budget amendment which 
has been endorsed by the Blue Dog Coalition. Like other BBAs, 
my bill generally prohibits the Federal Government from 
spending more than it receives in a fiscal year, though 
prohibition would take effect 5 years after ratification to 
allow for a smooth transition period.
    Unlike some other BBAs, my bill does not dictate how 
Federal policymakers should bring receipts and outlays into 
balance. Lawmakers on both parties must take a long look at 
both the revenue and the spending side of the ledger.
    In terms of spending, policymakers should scrutinize both 
domestic and defense spending, both discretionary and mandatory 
spending. There is no way to achieve budget balance unless a 
problem is examined in a holistic manner.
    By bill does, however, contain provisions to protect Social 
Security and Medicare benefits that seniors have earned through 
a lifetime of hard work. We simply cannot break these promises 
to the American people.
    Moreover, unlike some other BBAs, my bill recognizes that 
there are times when running of deficit is necessary or 
sensible, like when we are engaged in military conflict or 
mired in an economic slump. Therefore, the bill authorizes an 
exception to the balanced budget requirement when Congress 
declares war, when GDP does not grow for two consecutive 
quarters, or when unemployment exceeds 7 percent for 2 straight 
months. Additionally, a supermajority of the House and Senate 
may vote to authorize outlays to exceed receipts.
    In short, the goal is not to make annual deficits 
impossible. Instead, the objective is to make it harder for 
policymakers to sacrifice the long-term stability of our 
economy or to compromise our children's future for the sake of 
short-term gain. If the Federal Government is going to spend 
more than it receives, that decision should be taken in a 
deliberate and bipartisan fashion and not merely because it is 
politically expedient.
    My broader goal in filing this bill is to spur an honest 
conversation in Congress, in my Central Florida district, and 
around the country about the consequences for our economy and 
for our national security of piling deficit upon deficit. This 
conversation, if it is to lead to real action, must be 
bipartisan.
    To generalize, the Republican party skillfully talks the 
talk on this issue, but rarely walks the walk when in power. 
Meanwhile, the last time our country ran budget surpluses was 
when a Democrat sat in the White House. Yet today, some Members 
of my party no longer bother even to talk the talk, with some 
going so far as to suggest that we can run large deficits in 
perpetuity without consequence. If this sounds too good to be 
true, that is because it is.
    The problem is clear. In 45 of the last 50 years, the 
Federal Government spent more than it received. As a result, 
debt held by the public now exceeds $14 trillion, which is 77 
percent of GDP, the highest percentage since 1950.
    CBO projects that the debt-to-GDP ratio will reach an 
unprecedented level in the coming decades. According to CBO, 
this will have serious negative consequences for the Nation. 
Federal spending to pay interest on the debt will increase 
making it harder to fund investments in healthcare, education, 
transportation, housing, and homeland security. Every dollar 
spent to pay interest is a dollar less spent to empower the 
American people. Indeed, CBO projects that, within a decade, 
the government will spend more on interest than it spends on 
all domestic discretionary programs combined.
    The large and growing debt makes us less safe. Recently, 
about two dozen former defense, foreign policy, and economic 
leaders from both parties expressed a view that our long-term 
debt is the single greatest threat to our national security. 
That--they noted that putting our debt on a sustainable course 
over the long term will lead to higher levels of economic 
growth, continued availability of resources to invest in our 
defense and our future, and a sustained leadership role in the 
United States--for the United States in the world. We should 
heed the warnings of economists and national security 
professionals before we reach the point of no return.
    It is clear our country must change course. Smart policies 
that generate growth will enable us to reduce deficits and 
debt. This will require bipartisan leadership, both parties 
working together to adopt a sensible budget resolution, to pass 
annual appropriation bills in a timely manner, and to avoid 
dangerous brinksmanship on the debt ceiling. We still have the 
time to act. The question is, do we possess the will to act?
    Thank you.
    Chairman Goodlatte. Thank you, Ms. Murphy.
    I want to thank all the members of this panel. This has 
been excellent testimony on the part of many Members of 
Congress, some differing perspectives, but all of your 
testimony is welcomed here today as we attempt to address this 
serious, serious problem of our country's growing debt.
    It is not our custom to ask questions of Member panels, so 
we are going to thank you and excuse you. But we would like to 
work with all of you moving forward as we address this issue.
    Thank you.
    Chairman Goodlatte. We welcome our distinguished second 
panel of witnesses. And if you would all please rise, I will 
begin by swearing you in.
    Do you and each of you swear that the testimony that you 
are about to give shall be the truth, the whole truth, and 
nothing but the truth, so help you God?
    Thank you.
    Let the record reflect that all the witnesses answered in 
the affirmative.
    I will now introduce our second panel.
    Our first witness is Douglas Holtz-Eakin. Mr. Holtz-Eakin 
is the president of the American Action Forum. Our second 
witness is Professor Alan Blinder. Mr. Blinder is an economics 
and public affairs professor from Princeton University. Our 
third witness is Professor David Primo. Mr. Primo is a 
political science and business administration professor from 
the University of Rochester. And our fourth and final witness 
is Mr. Nick Dranias. Mr. Dranias is the president and executive 
director of the Compact for a Balanced Budget.
    Welcome to all of you. We--as you have noted from our 
earlier panel, your entire written statement will be entered 
into the record. And we ask that you summarize your testimony 
in 5 minutes. And we have a timing light in front of you on the 
table. When the light turns to yellow, you have 1 minute to 
conclude your testimony. When it turns red, we wish you to sum 
up quickly.
    Mr. Holtz-Eakin, welcome back to this committee. You have 
been here a number of times before.

 TESTIMONY OF DOUGLAS HOLTZ-EAKIN, PRESIDENT, AMERICAN ACTION 
     FORUM; ALAN S. BLINDER, GORDON S. RENTSCHLER MEMORIAL 
PROFESSOR, ECONOMICS AND PUBLIC AFFAIRS, PRINCETON UNIVERSITY; 
 DAVID M. PRIMO, ANI AND MARK GABRELLIAN PROFESSOR, ASSOCIATE 
   PROFESSOR, POLITICAL SCIENCE AND BUSINESS ADMINISTRATION, 
   UNIVERSITY OF ROCHESTER; AND NICK DRANIAS, PRESIDENT AND 
EXECUTIVE DIRECTOR, COMPACT FOR AMERICA EDUCATIONAL FOUNDATION, 
      COMPACT ADMINISTRATOR, COMPACT FOR A BALANCED BUDGET

                TESTIMONY OF DOUGLAS HOLTZ-EAKIN

    Mr. Holtz-Eakin. Chairman Goodlatte, Ranking Member 
Conyers, and members of the Judiciary Committee, thank you for 
the privilege of being here today. Let me briefly make four 
points, and then I look forward to answering your questions.
    First, the U.S. has a large and growing deficit and debt 
problem. Second, left unchecked, the consequences of that will 
range from bad to disastrous. Third, traditional approaches to 
dealing with deficits and rising debt have failed. And as a 
result, it would be wise for Congress to consider adopting a 
fiscal rule. And the balanced budget amendment is a 
particularly desirable example of such a fiscal rule. Let me 
elaborate.
    I won't belabor the numbers. Each year, the Congressional 
Budget Office puts out the Long-Term Budget Outlook. It shows a 
sustained divergence between projected spending and projected 
revenues, rising debt relative to GDP, and in the absolute, and 
an increasing fraction of the budget consumed by interest 
payments. This outlook has been essentially unchanged since I 
ran the CBO in 2003. All that has differed is we have changed 
the dates on the lower axis. It is exactly the same picture.
    The consequences of this are significant. It is bad that 
interest increasingly consumes larger fractions of the budget. 
In the next 10 years, interest is projected to rise to be the 
second largest program of the Federal Government, larger than 
everything but Social Security. Worse, that sustained high 
deficit and debt is crowding out productive investments in the 
private sector, hurting the growth of productivity and the rise 
in the standard of living. And, indeed, there is evidence that 
the U.S. has entered the zone of debt relative to the GDP that 
comes with a growth penalty. And we may be experiencing slower 
consistent growth as a result.
    And then in the disastrous scenario, left unchecked, the 
U.S. will inevitably go into a sovereign debt crisis. The debt 
spiral is unsustainable, and it will rise. If that happens, 
households in America will experience a sharp rise in interest 
rates. Their personal finances will end up in disarray. If we 
saw 1,000 basis point rise in interest rates overnight, say if 
the Treasury is going from 3 to 13, you would see the cost of a 
$250,000 mortgage jump from about $1,200 a month to almost 
$3,000 a month. A $20,000 car loan, the servicing of that would 
rise from about $440 a month to $540 a month.
    And that is just the beginning, because inevitably, the 
Members of Congress would have to respond to that crisis by 
sharp increases in taxes and sharp cuts in annual 
appropriations for spending in order to satisfy credit markets, 
and the repercussions will be even more severe than the initial 
impacts.
    We have seen over time a variety of efforts by the Congress 
to deal with budgetary problems. Whether they are PAYGO rules 
or the most recently, the Budget Control Act, they share the 
characteristic that it is too easy for Congress to renege. And 
inevitably, Congress has reneged on those attempts to constrain 
itself. And that has led me to conclude that the only way for 
this to get solved is to impose a fiscal rule that governs the 
Congress that it cannot easily circumvent.
    Other countries have tried such fiscal rules. There is some 
examples in my testimony of the Netherlands and Sweden imposing 
constitutional-like rules to govern their Congress. This 
appears to be the mechanism necessary to get the U.S. to avoid 
the disastrous consequences of the trajectory that we are on. 
And so it seems to me that one--one should consider the fiscal 
rule. There are a variety of potential options, one of which 
might be a debt-to-GDP target or something like that.
    But I think the balanced budget amendment is a particularly 
desirable rule because it is simple and transparent. People 
have to understand the rule in order to politically support it. 
I don't think they will support a complicated debt-to-GDP kind 
of formulation. There is a direct link between the actions of 
the Congress and the outcome of the rule. You can raise taxes, 
lower taxes, raise spending, lower spending, balance the 
budget. And those linkages are important. And there are ways 
that you can deal with emergencies. And most balanced budget 
amendments come with contingencies to deal with wartime or 
other emergencies.
    And lastly, I think the concern over sharp, abrupt 
balancing what is clearly a nonsustainable budget outlook is 
overstated. If you were to pass out of the Congress a balanced 
budget amendment, it would take years for the States to ratify 
it. Those years would provide a trajectory glide path to 
balance, and I think the adjustment would be a lot smoother 
than most people fear.
    And so I appreciate the chance to be here to talk about the 
economics of this approach today, and I look forward to your 
questions.
    Chairman Goodlatte. Thank you, Mr. Holtz-Eakin.
    Professor Blinder, welcome.

                  STATEMENT OF ALAN S. BLINDER

    Mr. Blinder. Thank you, Mr. Chairman, Ranking Member 
Conyers, and members of the committee, for this opportunity to 
testify here today on why, in my view, we should not enact a 
balanced budget amendment to the U.S. Constitution. There are 
so many reasons that I can't touch on all of them in 5 minutes, 
so I will just make five points very quickly. Doug had four; I 
was his teacher once, so I will get five.
    First, a balanced budget is the wrong long-term goal for a 
growing economy, which I haven't heard mentioned before. If the 
U.S. economy didn't grow from year to year, then balancing the 
budget might be a sensible long-term goal for this Congress, 
but every year there are more Americans and higher GDP per 
capita, so, as a matter of pure logic, the analogy to a 
balanced budget for an economy that is growing is for the debt 
to grow at the same rate as nominal GDP, which is what Doug 
just mentioned. These days, by the way, that would mean a 
deficit in the range of 3 percent of GDP.
    Second, balancing the budget every year would put fiscal 
policy in a straight jacket that would, among other things, 
deepen recessions.
    As you know, the budget naturally moves in the direction of 
deficit whenever the economy sags because receipts decline and 
expenditures rise. These automatic stabilizers, as they are 
called, make recessions milder by boosting spending when the 
economy is weak. And, by the way, it is private spending that 
gets boosted.
    To force the budget to remain balanced during a recession, 
Congress would have to either raise taxes or reduce spending, 
as has been mentioned already today. That would siphon off 
demand just at the time when the government should be putting 
demand back in to shorten the recession. So versions that, for 
example, balance the budget over the cycle, as I just heard 
from one of the Congressmen previously, are much, much better 
than versions that balance it every year.
    Third, there are--and here is why where I think I differ 
from Doug--I know I differ--there are better ways to impose 
fiscal discipline than a balanced budget amendment. One real-
world example is very familiar to members of this committee and 
to every Member of Congress and was just mentioned; that was 
the Pay-As-You-Go requirement that began under the first 
President Bush in, I think it was, the 1990 budget agreement. 
That was a smart innovation that subsequently helped President 
Clinton balance the budget by fiscal year 1997 and then to 
produce a string of surpluses following that.
    Shortly after that string of surpluses, however, Congress 
discarded the PAYGO requirement, and the deficit exploded. That 
doesn't look like a coincidence to me. It looks like--it is not 
literally but it is closer to a controlled experiment than to a 
coincidence. PAYGO came on; the deficit shrank. PAYGO came off; 
the deficit exploded.
    Congress can easily--well, maybe not easily. Congress has 
the power to go back to the good old days when we paid 
attention to PAYGO.
    Fourth, a balanced budget amendment invites gimmicks and 
bad policy to work around the strictures of the amendment. I 
can't go into detail, but such gimmicks are likely to give rise 
to court cases in which judges are called upon to decide 
whether the balanced budget amendment has been violated or not 
violated, thereby, in effect, making judges the arbiters of 
economic policy. And I don't think that is any better an idea 
than making economists the arbiters of judicial issues.
    Fifth, a balanced budget amendment that imposes a higher 
bar for raising spending than for cutting taxes--and, as you 
have just heard, some of them do and some of them don't--such a 
version of the BBA would create biases and distortions.
    So, for example, if the Constitution--I think this is an 
important example--if the Constitution makes it easier to cut 
taxes than to raise spending, Congress may decide to pursue its 
goals through tax expenditures rather than through direct 
appropriations, which it does too much anyway. That is almost 
always a bad idea because appropriated funds get far better 
congressional oversight and much more monitoring and 
enforcement by the executive branch than tax expenditures do, 
which just go on and have almost no enforcement.
    Finally, it is worth pausing to consider the 20-percent-of-
GDP spending limit that is in section 2 of H.J. Res. 1. We have 
crossed that line many times in the past, in fact, in 26 of the 
last 40 fiscal years, including all 8 Reagan years, but we 
typically haven't passed it by much. The average over that 
period was 20\1/2\ percent. So if you are worrying about 
limiting Federal spending to about 20 percent of GDP, roughly, 
I think you can stop worrying because the political system we 
have had for four decades basically does that.
    Thank you very much for your attention.
    Mr. King [presiding]. The gentleman's time has expired, and 
we appreciate his testimony.
    The chair would now recognize Professor Primo.

                  STATEMENT OF DAVID M. PRIMO

    Mr. Primo. Mr. Chairman, Ranking Members Conyers, and 
members of the committee, thank you for inviting me here to 
discuss the need for a constitutional amendment to help rescue 
the Federal Government's finances.
    My three-part message today is this:
    First, the United States faces fiscal pressures that 
threaten our economy, and it is a serious mistake to let 
relatively low deficits today lull us into a sense of 
complacency about the future.
    Second, the short-run focus on politics combined with 
Congress' institutional prerogatives make it difficult for 
legislators to implement durable reforms to address these 
fiscal threats.
    Third, a constitutional amendment, if well-designed, will 
provide the foundation for Congress to enact credible and 
sustainable fiscal policies.
    So, first, do we even have a debt and deficit problem 
still? One Washington observer commented recently, quote, 
``Anxiety about the Federal deficit seems to be fading 
everywhere--in Congress, among voters, and on the 2016 campaign 
trial,'' end quote.
    Well, today's deficits may seem manageable, but within a 
decade they will again exceed $1 trillion if we continue on our 
current trajectory. These deficits will be piled on top of a 
national debt that has more than doubled in the past decade, 
and it is only going to get worse. The debt is projected to hit 
150 percent of GDP by 2047 and an unimaginable 250 percent of 
the Nation's economic output by 2091. The current path is 
simply unsustainable and threatens the well-being of Americans, 
especially those in future generations, who will bear the brunt 
of the economic pain and lower economic growth caused by our 
inaction today.
    While analysts disagree about how much debt is too much 
debt for the health of the economy, researchers at the 
International Monetary Fund have found that a nation is 
especially vulnerable when its debt grows faster than its 
economy. That is us, that is this country, if we do not take 
action.
    So it is clear that, to get on a stable fiscal path and 
stay there, Congress needs to act quickly and credibly. So why 
hasn't it? And this takes me to my second point: Congress is 
its own worst enemy when it comes to long-term fiscal 
management. Congressional reelection motivations make it 
tempting for lawmakers to leave difficult decisions about 
programs like Medicare for tomorrow. But waiting until there is 
the political will to act typically means waiting until a 
crisis occurs.
    Now, even if these political hurdles are overcome, Congress 
faces still another obstacle, specifically Article I, section 5 
of the Constitution, which reads, in part, ``Each House may 
determine the rules of its proceedings.'' This single line 
constitutes a major obstacle for legislators attempting to 
enforce budget rules. More generally, Congress, unlike a 
corporation, cannot write a contract that binds future Members. 
This is true both with respect to substantive reforms, such as 
changes to entitlements, and process reforms, such as changes 
to budget rules. As we saw with budget reforms like PAYGO, what 
Congress does today a future Congress can undo tomorrow.
    And my third and final point proposes a solution to this 
quandary: a well-designed constitutional amendment that places 
permanent, truly enforceable limits on Congress' ability to tax 
and spend. Such an amendment will create an environment under 
which the question for Members is no longer whether to fix the 
Nation's fiscal problems but, rather, how to do so.
    Now, the promise of a constitutional amendment as an 
enforcement mechanism binding Congress lies in its durability, 
but this durability is also a peril. Bad rules can be locked in 
just as easily as good rules can be. And that is why we must 
pay careful attention to rule design.
    For instance, the amendment should account for economic ups 
and downs by setting spending targets or limits based on a 
multiyear period or long-term economic performance. The 
amendment should be flexible enough to account for major 
disruptions like war and, at the same time, should be precise 
enough to avoid end runs around its provisions. Concerns about 
U.S. Supreme Court involvement in enforcing the amendment could 
be addressed by limiting remedies and clarifying which parties 
have standing.
    The one thing we don't want to do is reject the entire 
enterprise of constitutional budget rules, as some skeptics do, 
based on critiques of specific proposals.
    In closing, an amendment to the U.S. Constitution is a 
serious step for the country and one fraught with political and 
procedural challenges. But we are much less likely to achieve 
credible, sustainable budget changes otherwise. While successes 
in budgeting do occur on occasion, these successes have 
typically been short-lived. A well-designed constitutional 
budget rule will make agreements durable, reduce political 
uncertainty, and ensure that future generations are protected 
from a fiscal crisis.
    Thank you again for inviting me to testify. I welcome your 
questions.
    Mr. King. The gentleman's time has concluded precisely with 
the conclusion of his testimony. Excellent.
    The chair would now recognize Mr. Dranias.

                   STATEMENT OF NICK DRANIAS

    Mr. Dranias. Thank you.
    Mr. Chairman, Ranking Member Conyers, members of the 
committee, I am here to make one fundamental point, and that 
is: A balanced budget amendment is a civil rights issue. We 
cannot protect the voices and the right to representation of 
future generations if we leave a limitless credit card in the 
hands of the Federal Government.
    The Federal Government is a radical outlier, in that it has 
no limit whatsoever, constitutionally, on its credit card, on 
its borrowing capacity. And that creates a huge potential for 
abuse of shifting bad policy decisions and the bill--taxation 
without representation--to future generations.
    I am here before you today because a civil rights issue 
like this should unite everyone--it should not be decided on 
the basis of any partisan divide--and as a representative of 
the Compact for a Balanced Budget Commission, the first 
interstate agency formed to partner with Congress, representing 
five States who have agreed solemnly in a compact to ratify a 
specific balanced budget amendment.
    There is finally the opportunity to get this job done, 
because H.C.R. 73 was filed today. It is being prime sponsored 
by Representative Luke Messer, and, unlike any other proposal 
before you, it only requires simple majorities to pass.
    It does require yielding some leadership to the States, but 
that is entirely consistent with the constitutional design. 
Because we have talked about a well-crafted amendment and a 
well-crafted constitution, and fundamentally it is about checks 
and balances, separations of power, and finding a way to ensure 
that, structurally, incentives exist that no one's rights are 
abused. That is precisely what this balanced budget amendment 
and the Compact for a Balanced Budget is about.
    It is a well-crafted amendment because it strikes at the 
core problem. The core problem is not budgetary symmetry. The 
core problem is not really even budgetary processes. The core 
problem is limitless borrowing capacity.
    In 1798, Thomas Jefferson said, if he had one amendment to 
restore the Constitution to its first principles, it would be 
removing the capacity to borrow from the Federal Government. 
Now, that is a little radical; it goes a lot farther than is 
necessary. But he was striking at a recognition that, with 
limitless borrowing capacity in the hands of any debtor, any 
human being, let alone an elected official, it is a structural 
incentive to create fiscal abuse, particularly if you are 
sending the bill to the next generation.
    Now, I am here to urge you today to recognize that many of 
the concerns expressed by Representative Conyers, by Professor 
Blinder, and others on, some would say, the other side of the 
ideological spectrum from me are legitimate in many respects. 
It is not the right way to go about fiscal responsibility, to 
have some fixed demand for a balanced budget all the time.
    But they are wrong in assuming that you can safely place 
limitless borrowing capacity in the hands of Congress and just 
hope for PAYGO to arise simultaneously. There is a reason why 
PAYGO failed. There is a reason why it went on and it went off. 
It is because the pressure to spend beyond our means is 
unstoppable over time when you have limitless borrowing 
capacity and you can send the bill to future generations.
    So, in conclusion, I just wanted to emphasize--I would be 
happy to take a lot of questions on this--the balanced budget 
amendment that has been already drafted, that five States--
Alaska, Arizona, Georgia, Mississippi, and North Dakota--have 
agreed to ratify if and when it is proposed, is designed very 
carefully to address every concern that has been ever raised 
about past balanced budget amendments. Those concerns are 
addressed reasonably. And it is critically important to 
emphasize that it does what every good constitutional reform 
should do, which is check and balance power.
    And with that said, I hope that this civil rights issue of 
protecting future generations from being saddled with our 
policy choices and taxes for decisions on spending they never 
had a chance to influence will be protected and that we will 
come to view a balanced budget amendment as akin to the same 
sorts of amendments we have approved in the past to represent 
folks that have been excluded from the political process.
    Thank you very much.
    Mr. King. I thank the gentleman for his testimony.
    That concludes the testimony of the witnesses. We will now 
proceed under the 5-minute rule with questions. And I am going 
to honor the queue that we have and recognize Mr. Franks first 
for his 5 minutes.
    Mr. Franks of Arizona.
    Mr. Franks. Well, thank you, Mr. Chairman.
    Mr. Chairman, someone once said that great societies 
finally come when old men plant trees under whose shade they 
will never sit. And I am convinced that statesmanship and 
everything that we are about here today is ultimately about 
coming generations. We have it pretty good right now, in many 
ways, but some of the trajectories and some of the directions 
that we are going I think do, in fact, threaten our children's 
future.
    And, Mr. Dranias, I was especially moved by your analysis 
that the balanced budget amendment is a civil rights issue, 
because I could not agree with you more. With all the arguments 
that say, you know, we want to make sure that we are able to 
spend to help people, do we not realize that bankruptcy will 
preclude all of that? And I think that we do face a potential 
sovereign debt crisis in the near future. And I am kind of 
giving a little speech here because I think what you are doing 
here is vitally important.
    In all candor, Mr. Chairman, I have signed on to the 
Compact for America balanced budget amendment approach just 
recently because I looked it over carefully and I believe it to 
be the most comprehensive, competent, well-considered approach 
I have ever seen since I have been in Congress and have been 
fighting for a balanced budget amendment for a long time. And I 
certainly want to express my thanks to Mr. Goodlatte for his 
commitment to this issue for so long.
    I guess what it comes down to, Mr. Dranias, is that 
sometimes people need to understand not only the implications 
of continuing on the road that we are on but how the best 
approach would be to ameliorate the problem.
    And so what I would like to do is to ask you, first, two 
questions. One, what is your prediction in terms of the 
likelihood of having a sovereign debt crisis? And, two, what 
will it really mean to this country if that should occur?
    Mr. Dranias. Mr. Chairman, Representative Franks, if I may, 
the Compact has a sunset date of April 12, 2021, because 5 
years ago when our team of experts were engaged in drafting the 
amendment and the approach and we looked at the exponential 
growth in the national debt and we looked at Third World 
countries and how their debt trajectories went, it became very 
clear to us that 8 to 10 years out, which now is April 12, 
2021, was when perhaps the only real option, from a policy 
perspective, might be some form of default.
    And so you have asked when is the crisis coming. Our 
judgment, as embodied in the sunset in the Compact, where it 
self-repeals April 12, 2021, is it is coming soon. And it is 
coming soon because the level of debt is simply unsustainable. 
We are now beyond 100 percent of the GDP, where Greece was 7 
years ago, if you count all of the debt.
    And, by the way, we don't believe in just counting the 
publicly held debt. The debt that is being held in the Social 
Security Trust Fund counts too, unless we are planning to 
default on it.
    And so the reality is it is coming; it is coming fast. And 
that is why something like H.C.R. 73, which only requires 
simply majorities, and yielding some leadership to the States 
is what we need to do.
    Mr. Franks. Well, I have also been struck by the Compact 
for America balanced budget amendment approach because I think, 
first of all, that it is in line with some of Mr. Holtz-Eakin's 
concerns, and I think that it actually is very parallel. And I 
also believe, in all deference, that it vitiates most of 
Professor Blinder's arguments and that it deals with them in a 
forthright way.
    I also am convinced that your approach is especially unique 
in that it does not conflict with other balanced budget 
amendments. In other words, if this Congress should ever find a 
way to get that two-thirds necessary for a balanced budget 
amendment, some of which has been expressed here today, the 
different versions, there is no conflict in what you are doing.
    So I guess I would just ask Mr. Dranias, with the time that 
I have left here, if you would just give us the quick overview 
of what your amendment does.
    Mr. Dranias. Mr. Chairman, Representative Franks, I would 
be happy to.
    First, the amendment fixes the debt capacity, the credit 
card limit, of the Federal Government at 105 percent of what is 
outstanding when it is ratified. So if we had $20 trillion in 
debt outstanding on ratification, the credit card limit, so to 
speak, of the Federal Government would be $21 trillion.
    Now, that would be a permanent, nominal limit. You could 
pay it down, borrow it back, do what Keynes said we would do, 
which is pay it down in good times, borrow it in bad times, not 
do what we actually do, which is borrow all the time, right?
    And the other key component of this amendment--and there 
are a couple more beyond--is that any further flexibility in 
this fixed debt limit is not held by the debtor who has the 
spending problem. Any additional debt capacity that Congress 
may obtain has to be obtained by a referendum to the States, 
reinstating the States into a position of oversight on Federal 
debt policy, like they had before the 17th Amendment when they 
controlled the Senate. And the States would have to approve, 
with simple majorities--not an impossible threshold--26 State 
legislatures would have to approve an increase in that debt 
limit.
    Now, we don't imagine that that would be utilized all that 
often, because $21 trillion, if we ratified it today, is a lot 
of debt capacity. If Congress just got the hang of, you know, 
not borrowing so much, paying it down in good times, living 
within its means, the opportunities to go to the States, hat in 
hand, should be few and far between.
    But the critical structural component is you can't have, 
with all due respect, the debtor in charge of deciding what his 
credit card limit is. There has to be outside oversight. This 
is a check and a balance. It is more important than any words 
on parchment. You could have the most wonderful words on 
parchment and if you control the words, you are not going to 
control the problem.
    Mr. Franks. Mr. Chairman, I know my time has expired, so 
let me thank the chairman.
    And let me thank you, Mr. Dranias, on behalf of my 
children. I hope you succeed--and all their contemporaries--and 
I will do everything I can to help.
    Thank you, Mr. Chairman.
    Mr. King. The gentleman's time has expired.
    The chair now would recognize the ranking member of the 
full committee, Mr. Conyers from Detroit.
    Mr. Conyers. Thank you, Mr. Chairman. I appreciate the 
varied testimony here.
    Before I begin, could I ask unanimous consent to submit for 
the record on behalf of Congressman Scott--who made a brilliant 
statement and led us in a good discussion. But he has a survey 
by the National Conference of State Legislatures that he would 
like to put in the record.
    Mr. King. Hearing no objections, so ordered, Mr. Conyers.
    This information is available at the committee and can be 
accessed online at: https://docs.house.gov/meetings/JU/JU00/
20170727/106327/HHRG-115-JU00-20170727-SD002.pdf.
    Mr. Conyers. Thank you very much.
    Mr. Conyers. Professor Blinder, your testimony attracted 
three questions from me. The first was, how could a balanced 
budget amendment devastate Social Security or Medicare?
    And my second question was asking you to explain why 
automatic stabilizers are important and how a balanced budget 
might negatively affect it.
    And the last part of my discussion would be, would a court 
have to decide budget policy questions if someone alleges a 
violation of a balanced budget amendment?
    Why don't you see where our discussion leads us on those 
three considerations, sir. Thank you.
    Mr. Blinder. Okay. Thank you, sir. I will do my best, 
though the third one that you pose is a really hard question.
    First, exempting pieces of the budget, whether it be taxes, 
Social Security, Medicare, defense, whatever is the favorite of 
the particular Members of Congress that want to exempt that, 
shrinks the base to which either tax raising or expenditure 
cutting would be necessary to get the budget from an unbalanced 
situation to a balanced situation.
    Every member of this committee has lived through a process 
in recent years where the nondefense discretionary part of the 
budget is just getting squeezed and squeezed and squeezed and 
squeezed. That is a likely candidate, by the way, for the 
residual. But my point is there will be a residual and it will 
just be tougher on what is left, rather than leaving that to 
congressional decisions when the issue is extant.
    The automatic stabilizers are very important, and their 
importance is much underestimated. On the fiscal side, given 
the realities of Congress, fiscal stabilization comes almost 
100 percent and sometimes more than 100 percent from the 
automatic stabilizers, not from discretionary policy. Monetary 
policy is entirely different. The people of the Federal Reserve 
are engaged in discretionary monetary policy to fight 
recessions whenever they look imminent or are upon us; don't 
have to rely on automaticity. But the Congress relies on 
automaticity.
    So what does that mean? It means that the income tax, the 
payroll tax, and just about every other tax you can think of, 
the receipts from those taxes shrink automatically as the 
economy shrinks. Nobody has to legislate anything. Unemployment 
benefits, TANF, food--I am not supposed to call it ``food 
stamps''' anymore--SNAP, and a whole variety of other programs, 
their spending rises automatically, again, without Congress 
having to do that.
    The automaticity is important, I mentioned, because of the 
problems in the wheels of Congress but also because of the 
speed. Even if the wheels of Congress turned perfectly, nobody 
can react instantly, even before the data. You don't have to 
have the data, because the economy is just shrinking, and the 
automatic stabilizers go to work automatically. So it is 
extremely important, and short-circuiting them is a potential 
catastrophe--complete catastrophe.
    On the ``who will enforce it,'' you know, I almost like to 
throw the question back to the Judiciary Committee. This is 
really a big problem. When Congress is not obeying the law, who 
enforces it? Generally what happens is somebody either has or 
claims standing to sue and brings a suit or something like 
that. How that might play out is going to be completely 
dependant on circumstances, and, frankly, I haven't the 
foggiest, but don't want to go there. I think it is a bad idea 
to go there.
    Mr. Conyers. Just in the few seconds left, what would 
happen to Social Security or Medicare facing a balanced budget 
amendment?
    Mr. Blinder. That is going to be up to Congress. Social 
Security and Medicare are, in a large sense, on autopilot. They 
are entitlements, basically. And it would be up to the Congress 
in a particular year, say, when it had to balance the budget 
and it was unbalanced, does it pass legislation cutting Social 
Security benefits or cutting Medicare benefits or raising the 
taxes that finance those. It will be one of those horrible 
questions that Congress has to face if we had a requirement for 
an annually balanced budget.
    Mr. Conyers. Okay.
    Thank you very much, Mr. Chairman.
    Mr. King. I thank the gentleman from Michigan.
    The chair would now recognize the gentleman from Arizona, 
Mr. Biggs.
    Mr. Biggs. Thank you, Mr. Chairman. And I appreciate each 
of the participants being here on the panel today and also our 
colleagues who testified earlier. And I really appreciate this, 
because I do think this is one of--it is perhaps, quite 
frankly, the most fundamental and basic problem we face, and it 
is a threat that is really existential. And so I am glad we are 
having this discussion today. I hope we continue to have this 
on a more regular basis until we can start bringing this 
problem under control.
    We have talked in the previous panel a lot about the fact 
that 49 States have some version of a balanced budget 
requirement constitutionally. Arizona has one. And I had the 
privilege of working on numerous Arizona budgets, and I want to 
just relate how Arizona's balanced budget amendment works. It 
simply basically says, if you have a deficit at the 
commencement of the new fiscal year, you must either raise 
revenue or reduce spending. That is really it.
    But then we have some additional constraints. It takes a 
supermajority to raise revenue in Arizona. And you will never 
get--at least not in my experience, and that was 14 years--you 
will never get a supermajority to raise revenue. But what you 
will get is something you will have to do, and you will have to 
reduce spending and try to bring your budget into balance that 
way. A lot of people didn't like that, but I am pleased to say, 
at least when I left, we had finally achieved a balanced 
budget. And that is including years of difficulty following the 
2008 real estate bubble bursting in Arizona.
    I raise that to you because we heard in the previous 
panel--I can't remember how many testified, about eight people. 
Virtually each one of them has kind of their own version of how 
this should work. Chairman Goodlatte has his version of how 
this should work. There are others that have how that should 
work. And in the Article V States movement, there are 
additional. And I would say I have probably read at least two 
dozen different balanced budget amendments over the last few 
years.
    I support a balanced budget amendment. The question is what 
that amendment does and what it looks like. I don't support all 
balanced budget amendments, but there are some out there that I 
can support.
    And so I think we all agree--at least--I just want to--when 
I was in college my freshman year, in macroeconomics we were 
taught about guns and butter--this was a long time ago--guns 
and butter. You can't have guns and butter, right? But we 
continued to do that in the United States. And if a balanced 
budget amendment doesn't address that fundamental problem, you 
will never succeed in whatever you do with regard to balancing 
your budget. And that requires political will.
    Now, two other things. I think if you repealed the 16th and 
17th Amendment, a balanced budget amendment would probably 
become not unnecessary, to be honest with you, because all of a 
sudden the States would be fully engaged and active in what 
happens here at the Federal level instead of being recipients 
of all the mandates that we give.
    So I am giving that little diatribe--I didn't meant to run 
on with my little diatribe too much, but I just needed to point 
that out.
    Now, I want to talk briefly about Mr. Dranias, because he 
and I have known each other a long time, and we have debated 
this thing for 10 years, at least, back and forth. And I will 
say that I find his approach to be one of the most ingenious in 
attempting to try to resolve some of the issues that I think 
exist in a States-initiated Article V process.
    But, nonetheless, I still think that there are 
constitutional issues with that approach as well. I think that 
Article I, section 10 would require the Congress to approve an 
interstate compact. I know that is debatable, but I am pretty 
firm in my conviction there because that would be a problem.
    So I would just say, you know, because I am out of time 
already--which is funny how that happens to a politician; you 
just run right out. But I would commend Mr. Dranias because I 
think his is the most assiduous at trying to control and direct 
an Article V States-initiated procedure to a unique end.
    I am not satisfied--and Mr. Dranias knows this. I have 
written about him in my book, even, and we have discussed this 
at length. But I appreciate all the approaches, because this 
issue--and I will just close how I began--is an existential 
threat to this Nation. Nothing else will ultimately matter 
unless we bring this under control. And so I encourage the 
chairman and all of us to get on the train and do this as 
quickly as possible and work out this assiduously.
    And, with that, my time has expired. Thank you, Mr. 
Chairman.
    Mr. King. The gentleman returns his time.
    And the chair would now recognize the gentleman from New 
York, Mr. Nadler.
    Mr. Nadler. Thank you, Mr. Chairman.
    Let me start off by saying that it is hard for me to 
imagine a more pernicious proposal than the balanced budget 
amendment.
    In 1905, in the Lochner case, Oliver Wendell Holmes, 
dissenting, said, ``The 14th Amendment does not enact Mr. 
Herbert Spencer's Social Statics.'' That is to say, the 14th 
Amendment does not enact a particular view of economics. And I 
believe it is fundamentally wrong to bind future generations 
and future Congresses to a particular economic doctrine--
balanced budget or any other doctrine--that may be popular 
today.
    The Constitution should provide procedures for government 
and should protect individual rights but should not lock in 
policies, especially economic policies. Whatever one may think 
of the debt or how to reduce it or the proper level of 
government expenditures as a percentage of GDP, those kinds of 
policies should be enacted as legislation, which can be 
modified, amended, or repealed by future majorities, not 
enshrined in the Constitution to bind future generations to the 
opinions of this generation. That is fundamentally undemocratic 
and tyrannical.
    If you thought I was reading a quote, I was. It is a quote 
from myself at a prior hearing on this topic.
    Let me go further and say that we are told that States have 
balanced budget amendments. Indeed, they do. But States have 
capital budgets. If they borrow in the capital budget, they 
must balance the operating or expense budget. To say that a 
budget that does not distinguish between operating and capital, 
a combined budget as we have, must be balanced is to say we 
should never borrow money, which is an insane view. We should 
borrow money to make investments. Any corporation, any State 
borrows money to build a bridge, to make an investment and earn 
a return on capital.
    I would also observe that someone said we should limit the 
debt to 20 percent--or the expenditures to 20 percent. Why 20? 
Maybe it should be 24 or 16. That should be determined by a 
majority of the day. If we had enacted this kind of amendment 
before we adopted Social Security, we would have said 14 
percent, and you never would have had the ability to enact 
Social Security. And maybe we want to make other changes in the 
future.
    Mr. Dranias' proposal is particularly--I was about to say 
``insane,'' but I will be more kind--ridiculous, because he 
would inshrine in the Constitution a limit on debt, let's say 
$20 trillion, which, as inflation goes up, means a constantly 
lower debt ceiling every year, which means that you would have 
a tighter and tighter budget every year, no matter what the 
popular will and no matter what the economics may dictate.
    Now, if you had said that the debt should not be more than 
a percentage of the economy, I would still disagree with you, 
because that should be determined annually by Congress, but at 
least that wouldn't lock you into a constantly declining and a 
constantly declining budget.
    These are some of the basic problems. A balanced budget 
amendment enshrines a particular economic view and binds future 
generations, a particular economic view that precludes 
investment--that may very well preclude investment, preclude 
economic gains. And, again, any particular thing you write into 
the Constitution, a 20-percent limit, why is that sacred? 
Because we believe it in this generation and not our children, 
we should bind them. It is fundamentally wrong for a 
constitution.
    Let me ask Professor Blinder--oh, let me also point out 
that we did achieve a balanced budget during President 
Clinton's term, and what stopped the balanced budget were the 
Bush tax cuts. That was an economic decision. The country 
determined, or the Congress, the Republican Congress, 
determined that it is more important to have tax cuts than to 
have a balanced budget.
    Remember that Alan Greenspan testified at one of the 
hearings that we had to enact the tax cuts because, otherwise, 
we would pay off the entire national debt in 10 years, and that 
would be a bad thing for various reasons. So we know how to 
do--well, he did testify to that.
    And we know how to achieve balanced budgets. We know how to 
achieve paying off the national debt if we wanted to. But those 
are political decisions that each generation should make for 
itself. And the fundamental flaw in the constitutional 
amendment, besides tying our hands from economic crisis, tying 
our hands from any decisions, is it ties the future hands.
    What if, for example, a future generation determined that 
they wanted to make medical care a Federal responsibility 
entirely? Might not increase spending, but it would mean that 
the spending would now be in the Federal budget, not in terms 
of insurance budgets. Now, maybe that is a good idea, maybe it 
is a terrible idea, but how can we determine that our 
grandchildren or our children should be precluded 
constitutionally from making such a decision if they want to?
    We can't foresee future economics; we can't foresee future 
possibilities. And to bind our children and grandchildren to a 
particular economic view and, even worse, to a particular 
figure in an economic view is extremely pernicious and would, I 
think, destroy economic growth in the country over the long 
term.
    My time has run out before I have time for questions 
because I feel so strongly on this. I yield back.
    Mr. King. I thank the gentleman from New York, who has 
returned his time.
    And the chair would now recognize Mr. Johnson from 
Louisiana for his 5 minutes.
    Mr. Johnson of Louisiana. Thank you, Mr. Chairman. Sorry I 
missed some of the testimony. I have had other things down the 
hall.
    Mr. Holtz-Eakin, you testified before this committee almost 
2 years ago on the same topic, and in your testimony then you 
wrote that, quote, ``the Federal Government faces enormous 
budgetary difficulties, largely due to long-term pension, 
health, and other spending promises, coupled with recent 
programmatic expansions,'' unquote.
    So you may have addressed this already, and if you have 
spoken to it, I apologize for missing it. But here we are 2 
years later, and some of those programmatic expansions have 
continued even more so. I assume you still feel that statement 
is true? Or would you elaborate on that further, about the 
overall concern?
    Mr. Holtz-Eakin. Nothing has changed fundamentally. I mean, 
we have an unsustainable budget outlook, largely because of the 
projected growth in the mandatory spending programs. And those 
are programs which have not been touched in any significant 
way.
    Mr. Johnson of Louisiana. You may have addressed this as 
well, but when we talk about modifying the mandatory spending 
programs, there are often scare tactics that are employed by 
the opposition of that, certain special interests, and they are 
trying to prevent necessary changes from being made.
    When I do townhalls back home in Louisiana, I see the 
result of that, because people are just alarmed. They feel 
like, you know, the government is going to end their lives, 
and, you know, they hold up signs that we want people to die 
and all that.
    What is the simplest approach to explaining that? What I do 
is I put the U.S. debt clock up on the screen at my townhall 
and I make them watch that number, which increases $10,000 per 
second, you know. When you are just talking to the average 
citizen, not to professors and academics, what is the best way 
that you explain the crisis, in your own words?
    Mr. Holtz-Eakin. So it is clear that we are on a trajectory 
for a sovereign debt crisis and the only question is when, not 
if. You can look at Greece, Portugal as examples of the 
consequences of that, and people understand that.
    But, to me, the most important point to be made is no one 
wants to change Social Security, for example, for green 
eyeshades reasons. When I look at Social Security, I see a 
program that, under current law, is kept solvent--the actuaries 
can certify it--because we are promising to cut benefits about 
30 percent across the board in less that two decades. It is a 
disgraceful way to run a pension program.
    This is the United States of America. We should have a 
sustainable social safety net. And so, yes, we should modify 
Social Security, take care of the red ink in the Federal 
budget, but also give people a safety net that is going to be 
durable.
    Medicare is even worse. Payments in, plus the premiums 
saved by seniors--the gap between that and spending, it is 
about $300 billion a year and rising. It is responsible for a 
third of all the Federal debt outstanding, and we have seniors 
not receiving the best possible medical outcomes. So that is 
not a program you want to enshrine forever and say, ``Don't 
touch it.'' You want to fix it. We should have much better 
programs.
    And I think if people understood that, they would be less 
resistant to structural changes in the safety net. And we need 
to make those changes from a financial point of view.
    Mr. Johnson of Louisiana. I guess this might be a question 
for any or all of you, but I saw a CBO study, and this may have 
been covered this morning as well, but it said that--I think it 
said that entitlement spending will eclipse GDP in 2030. So it 
is not 100 years down the road; it is right around the corner 
in relative terms. Does that estimate----
    Mr. Holtz-Eakin. I don't think that is right. The spending 
per se is not going to eclipse GDP.
    I think the most striking thing about this conversation, to 
me, is this is a conversation that used to be called the long-
term budget outlook in 2003 when we published it; it is now the 
budget outlook. It is here in the next 10 years. Within 8 
years, we will run a trillion-dollar deficit. Of that, 60 
percent will be interest on previous borrowing. We are 
perilously close to borrowing just to pay off the credit card. 
That is an unsustainable trajectory.
    And so, whether we want to or not, we have to do something 
different. And if Congress is unable to do it of its own 
volition, I am here today beaten into the position that we 
ought to constrain it somewhat.
    Mr. Johnson of Louisiana. Thank you.
    I will yield back, Mr. Chair. Thank you.
    Mr. King. The gentleman returns his time.
    The chair would now recognize the gentlelady from Texas, 
Ms. Jackson Lee.
    Ms. Jackson Lee. Mr. Chairman, thank you so very much. And 
thank you and the chairman of full committee for giving this 
moment of discourse. And I thank the ranking member for his 
thoughtful presentation.
    I think those of us who are sitting at least in the four 
seats on this side of the aisle have been through this before, 
I might say, over and over and over again.
    And I do appreciate all of the witnesses who have come to 
express views. And there is one, I think, general theme that 
none of us would disagree with, is that we want the Nation to 
be fiscally sound. I can't imagine that any of us would 
disagree with that. And we would want to be creative, to a 
certain extent, in that fiscal solvency.
    But let me lay the premise--and, Professor Blinder--excuse 
me. Is it Blender or----
    Mr. Blinder. Blinder.
    Ms. Jackson Lee. It is Blinder. Let me pose questions to 
you, without ignoring my friends to your left or your right, 
because I come with a different perspective, or a perspective 
that all is not well in the 50 States. So for there to be a 
restraint on the Federal Government's ability to be the 
umbrella in rainy day, it is a difficult posture to be in. And 
as I listened to the testimony of some, they have indicated 
that we can do a contingency here, we can refine it here. All I 
know is that, when the States call, they expect for you to 
come.
    The other thing is that the States have not been too 
effective with their balancing budget responsibilities. Take, 
for example, the political collapse--and I do not want to 
reflect negatively on my friends in Illinois, but my colleagues 
tell me it is a complete collapse. There is a definitive fight 
between the Governor and the legislature. They have a 
requirement for a balanced budget. I don't know if they have 
ever balanced it, but they are in an outright fight. And I find 
that to be an enormously difficult posture to put us in.
    So I want to raise these questions, Doctor. We have already 
asked the question about Social Security and Medicare, but 
today is the 52nd commemoration of Medicare and Medicaid. 
Obviously, we are in a big fight in the Senate on its very weak 
and ineffective attempt to undermine the Affordable Care Act 
because they cannot find a substitute. In the course of that, 
they are threatening millions of losing their insurance.
    That is a place where the Federal Government had to step 
in. We would have been very happy for all 50 States to say: We 
are okay. We have provided health insurance for those with 
chronic illnesses, preexisting conditions, and families. And we 
would have put a stop sign in Washington and said, it is done.
    So I would like you to speak to those issues. I do believe 
that a balanced budget is anti-democratic, but I would like to 
speak to the issues of an economic downturn, contingencies that 
are beyond our imagination, and the ineffectiveness of many 
States in their balanced budget. I think the gentleman from New 
York talked about the capital budgets.
    And so, yes, be fiscally responsible. I am interested in 
Pay-As-You-Go. I think, however, it would have to not be 
political, and that is the problem with Pay-As-You-Go. It is a 
``gotcha'' sometimes, the party that is in, rather than a 
balance, even though I was here for the 1997 balanced budget, 
and the only thing that we needed to fix after that was the 
Medicare issue with doctors, called the doctor fix, but we did 
get in CHIPS and we balanced the budget. And I guess we were 
able to do so, as you indicated, because we were getting the 
benefit of the Pay-As-You-Go, but then we created surpluses as 
well.
    So would you answer those questions about contingency, 
responsibilities for the least of those, and that our friends 
in the States have their challenges too, and why would we, in 
essence, strap ourselves down to not be able to respond to 
these major issues?
    Mr. Blinder. I will. Thank you, Congresswoman.
    First, let me start with the point that Congressman Nadler 
made a moment ago, rephrased slightly differently. The States 
do not balance their budgets on Federal definitions. So it is 
just a false analogy. If it was true, there wouldn't be any 
State debt out there. And I come from New Jersey, and I can 
tell you there is State debt.
    Ms. Jackson Lee. And I come from Texas, and there is.
    Mr. Blinder. There is State debt. And all the States have 
debt. So they do not balance by Federal definitions.
    Ms. Jackson Lee. But that is a representation, and you 
are--both of us--all three of us are debunking that. But go 
ahead. I yield.
    Mr. Blinder. It is a fact.
    The second thing is to your point about the automatic 
stabilizers. Because of the versions of balanced budget 
amendments that almost all of them labor on, the States are 
often automatic destabilizers in a recession. Their revenues 
fall off. They have this balanced budget requirement, excluding 
capital expenditures, for the operating budget. They have to 
cut the operating budget or raise taxes--exactly the wrong 
thing.
    Part of what we rely on the Federal Government to do--
part--is to offset these pernicious effects of procyclical 
State and local government budgets. That is a part. That is not 
the biggest part, but it is a part. We don't want to take that 
away.
    Thirdly, for a variety of reasons, of which I will mention 
one, when it comes to the need to raise revenue, the Federal 
Government has much greater taxing powers than the States. Now, 
that is not in the Constitution. There is nothing in the 
Constitution that says the Federal Government can raise a lot 
of money and the States can't. It is because of mobility.
    If Texas--let's take New York instead. It is less fanciful. 
If New York State would double its personal income tax rate, 
people would move to New Jersey and Massachusetts and Texas and 
Florida and all over the place. There is much less mobility--
and the same goes for businesses, by the way, even more. There 
is much less mobility for businesses and for people across 
national lines. Not that many people are going to flee to 
Monaco. Some will, but not many.
    And so the States are strongly constrained in their ability 
to raise tax revenue. Again, I know. New Jersey has pushed it 
out to the limit----
    Mr. King. If the gentleman can conclude his thought, the 
time has long passed, please.
    Ms. Jackson Lee. Can he finish his thought?
    You can finish, Professor.
    Mr. Blinder. No, I was basically finished.
    Ms. Jackson Lee. Okay.
    Mr. Chairman, I am yielding back, but I do want to put on 
the record and maybe get a response in writing, is that our 
economy is at $22 trillion. It is a growing economy. And so I 
would like to hear from all of the speakers on the effect of a 
balanced budget on the growing economy. Why not utilize that 
growth to be fiscally responsible and invest in the American 
people?
    I yield back. I would like that answer from all of those. I 
yield back.
    Mr. King. The gentlelady's time has expired.
    And the chair now recognizes the freshest member of this 
committee, the gentlewoman from Georgia, Mrs. Handel.
    Mrs. Handel. Thank you, Mr. Chairman.
    And thank you to all of our witnesses today.
    We heard earlier about a number of balanced budget 
amendment proposals, and, interestingly, several of them have 
fairly broad, bipartisan support. So that says to me that there 
is really a growing realization that the crushing debt that we 
are facing is unsustainable and, frankly, irresponsible and 
that some type of a balanced budget amendment is necessary.
    We just heard one case for why a State budget is not 
analogous to a Federal budget and not an appropriate reference 
point. I would like to hear from you, Professor Primo, if you 
have a different perspective or if it is the same perspective 
on that.
    Mr. Primo. Without a doubt, the States are different than 
the Federal Government. The Federal Government can mint money; 
the States can't. And we do hear the argument, well, the States 
carry debt, so obviously they are not balancing their budgets. 
But if I had to pick right now, would I rather have the fiscal 
responsibility we see at the State level writ large--there are 
exceptions--or the fiscal responsibility we have at the Federal 
level, I would pick the States every day.
    And so, just because the States aren't perfect, just 
because balanced budget rules may not capture all spending, it 
doesn't mean that we can't learn from the fact that the States 
do, year in and year out, have to be much closer to balance 
than the Federal Government does.
    And the research I have done shows that States that have 
the strictest balanced budget rules spend less, they have lower 
deficits, they are more fiscally responsible.
    Mrs. Handel. Yes. And to the credit of the Georgia State 
legislature--and we have one member with us, Legislator 
Rakestraw--I have seen that in practice.
    Let me ask you one more question before I move to another 
witness. We also heard earlier that there is a sense that 
perhaps a balanced budget amendment would enshrine a particular 
economic policy into the Constitution and put it as a burden 
onto further Congresses, et cetera. Share with me your 
perspective on that, if you think that is the case or not the 
case and why.
    Mr. Primo. I am really glad you asked that because, as 
Representative Nadler was making that point, I said to myself, 
wait, what we are doing now as a country, what the Congress is 
doing now in letting debt continue to go up year in and year 
out, that is imposing on future generations.
    Saying that you have to live by the realities of the 
marketplace, the realities of if you carry too much debt you 
are going to default, that is not imposing an economic view, 
that is imposing economic reality, whereas saying we are going 
to run up debt, we are not going to worry about it because we 
can deal with it tomorrow, which is what this Congress has been 
doing for decades, that, to me, is imposing on a future 
generation.
    Mrs. Handel. Exactly. Thank you. And I talk about this 
often with my sister, who is the mother to my beautiful nieces, 
12 and 13, and I worry about that significantly.
    I want to move to Mr. Dranias. We obviously have talked 
about a number of balanced budget management approaches, and 
there is any number of ways to come at this. And we have seen, 
frankly, a real difficulty in trying to move it forward. The 
closest we have come, 1995, where we got it passed on the House 
side but failed on the Senate side by one vote.
    Given that difficulty and the different approaches, could 
you walk us through--and we have about a minute, 40--walk us 
through how the steps to doing the Compact, what that entails 
and if that is really a realistic approach? Is it doable, I 
guess--doable?
    Mr. Dranias. I would be happy to, Mr. Chairman, Madam 
Representative.
    The Compact involved two overarching components. One is a 
congressional resolution activating it, which is H.C.R. 73, 
filed today by Representative Luke Messer. That only requires 
simple majorities. It is a concurrent resolution. We have a 
good argument against filibuster we can talk about off line. 
Okay? If that passes, we are done on the Congress side.
    On the State side, we need to get 38 States, the number 
needed for ratification to agree to the Compact. We have 5 in; 
we need to get 33 more. We have a pretty heavy lift to get it 
done before 2021, but hopefully the critical mass will be 
provided by H.C.R. 73.
    Mrs. Handel. Okay. Thank you very much.
    And let me just also thank Representative Rakestraw for 
being with us today. I appreciate your being here and your 
leadership on this issue.
    Mr. Chairman, I yield back the balance of my time.
    Mr. King. The gentlelady returns her time.
    The chair now would recognize himself for his 5 minutes.
    And I would reflect that, when I arrived here in this 
Congress, I was elected in 2002, and we had a balanced budget. 
We had balanced it for several years in a row, as some of the 
witnesses have testified today. I expected to arrive here in 
this Congress and continue with a budget that was balanced by 
the will and the majority of the House and the Senate.
    And the first budget that I encountered way over-blew our 
spending. And I went to the chairman of the Budget Committee, 
who is a good friend to this day, and I said, where is our 
balanced budget? And he said, it is impossible to balance the 
budget. Our financial centers have been hit on September 11, 
2001. We are at war. We had to stand up TSA. We have all kinds 
of security expenses all across this country to protect 
ourselves from the scope of an enemy at that time which was 
unknown.
    It was frustrating to me, and I said, I am going to go out 
and write my own balanced budget. I am going to have a balanced 
budget that I get to vote on the floor of the House. I didn't 
have the skill set at that time in the first weeks of my term 
here to rewrite the entire budget of the United States 
Government.
    I worked on that. I joined the Republican Study Committee 
immediately. I went on the steering committee so that I could 
have more of a voice on the agenda of that Study Committee, and 
I pounded on the table and said, we have to bring a balanced 
budget. I did that every year for 5 years.
    And, finally, the chairman of the Republican Study 
Committee, Tom Price, now Secretary of HHS, brought a balanced 
budget to that table at the Study Committee. And I said, what 
got into you? He said, well, we have been listening to you, 
King. Well, it is was a surprise to me that that was the case.
    But that budget balanced in 10 years, from the Republican 
Study Committee. The next year, we brought it down to 9, then 
8, then 7. I am not actually sure what has happened with this 
now by the time we got down to 5 or so.
    That is how hard it is to bring a county that is in a 
crisis from a war into a place where we are today, where, now, 
somebody testified that the anxiety is diminishing about 
balancing the budget because, politically, we seem to have 
accepted the idea that we are going to have to cut some taxes 
and spend some money and look for a stimulation in this 
economy.
    Well, I am at this place where I want to see a balanced 
budget, and I will vote for the one that is most likely to get 
us to balance this as strongly as we can. But I was very 
interested in the testimony about looking at a span of time and 
balancing this budget within economic cycles as opposed to a 
fiscal year. I think that is a thought that we haven't debated 
very much in this committee over the years, and that is one 
that hopefully is front and center.
    But I also wanted to turn to Mr. Holtz-Eakin and ask him a 
question about something I didn't hear brought up, and that is 
that, of the different ways that we can get to balance--raise 
taxes, cut spending--I am, of course, in favor of cutting the 
spending--but what about the component of printing money on 
this and injecting more money into the currency? How does that 
fit into the equation as you see it, Mr. Holtz-Eakin?
    Mr. Holtz-Eakin. It is an option that one could basically 
monetize the deficit, and over time, that will lead to higher 
inflation, inevitably. The real value of the debt will decline. 
The nominal dollars will be there. I don't think there is 
anyone who has looked at economic history in the U.S. or across 
the globe that would argue this is a good approach to dealing 
with fiscal problems.
    The best approach to dealing with fiscal problems is better 
fiscal policy, and I think the fundamental issue that the 
Federal Government has is it doesn't have a fiscal policy. 
There's a budget resolution in the House sometimes. There's a 
budget resolution in the Senate sometimes. They agree on one, 
occasionally. But there is no single thing that the President, 
the House, and the Senate agree on that adds up spending and 
revenues in a coherent way, and that is what is needed.
    Mr. King. Again, let me take you to another place. Fast-
forward to the economic crisis when this all comes to a head, 
which some of you have testified about and some of the members 
have, to that crisis. Now, the political scenario in the House 
and the Senate and across the Nation is feeling this crunch. 
And if we hit a collapse that would be a global bankruptcy 
situation, and Greece has been mentioned here, but--there are a 
number of countries in the world that could bail Greece out, 
but there is nobody that can bail out America.
    So what does--since no one can bail us out, does that 
create a global Great Depression far worse than the 1930s or 
the 1980s, that I feel like? And then is printing money to 
service that debt become such a high temptation that that is 
how we do that or we create this economic chain letter?
    Mr. Holtz-Eakin. In that moment, there will be global 
repercussions. The U.S. treasuries are the foundation of the 
global financial system. Their liquidity will be impaired 
badly, which means you won't be able to buy or sell them. And 
chaos will prevail.
    There will be no good responses if we get to that moment, 
whether it is trying to print money, raise taxes, slash 
spending across the board. Those will all be bad outcomes. We 
shouldn't even run the experiment. We should fix it in advance.
    Mr. King. I would just quickly ask Professor Primo if he 
would respond also to that.
    Mr. Primo. Mr. Chairman, the--you know, these situations 
that you described, printing--monetizing the debt and so on, 
you know, it is conceivable they could occur under a balanced 
budget amendment, if it didn't specifically prevent that. But 
it is far more likely to occur if we don't take action and we 
let a crisis emerge. And this is sort of one of the things that 
economists, like, call creeping risks, that the economy is not 
going to implode tomorrow. It is not going to implode the day 
after tomorrow. But it is consistently getting worse a little 
bit every day, every year. And, you know, there is no, you 
know, announcement that we are going to have an economic crisis 
tomorrow. And that is--that is the risk, because we don't know 
exactly when it is going to occur. And so to deal with it now 
is going to make us much better off.
    Mr. King. But you don't believe that we can go on in 
perpetuity the way we are going?
    Mr. Primo. It is simply unsustainable. And that is--sort of 
one of the issues is, very quickly, that, you know, people will 
say, oh, but, you know, you are going to make these cuts or 
those cuts. You are going to hurt people. But the reality is 
not doing anything. That is what is going to jeopardize future 
generations.
    Mr. King. Great. Thank you, Professor Primo.
    My time has expired. And the chair will now recognize the 
gentleman from Colorado, Mr. Buck.
    Mr. Buck. Thank you, Mr. Chairman.
    Professor Blinder, you probably don't remember me. I took 
your class almost 40 years ago, and I intended to be an 
economics major. And after doing poorly in your class, I 
changed to politics, and here I am in Congress. So I----
    Mr. Blinder. I apologize.
    Mr. Buck. Oh, no. It wasn't your fault. You are a world-
renowned economist. And I have a huge amount of respect for 
you. And I very much appreciate you helping me make a career 
decision early in my life.
    There is a young man who is interning for me, who is seated 
behind you on your right, and he is also a--Jonathan Feld, he 
is also a student of yours, much more recently than 40 years 
ago. But I really appreciate you. I have followed your career 
in public service as well as a professor.
    Professor Blinder, the only problem I have is that--I think 
you are absolutely right on the economics. If we followed 
PAYGO, we would be much better off than where we are right now. 
And if we did other things in Congress that were responsible, 
we would be much better off than where we are right now. But I 
feel like you are outside your wheelhouse in the political 
reality of this particular subject.
    Congress cannot act responsibly. The pressures, the 
incentives on Congress are to get reelected. That is what most 
Members' priority is when they are here. And to get reelected, 
we need to keep taxes low and benefits high. And the problem--
nobody is going to say, well, I am voting for you because you 
gave me less. And so the--the only way to create some sort of 
accountability in Congress is with an outside force.
    And by the way, one of your former students just wrote a 
book called Drain the Swamp. I won't tell you which student it 
was. But if you ever want to see my views of what the political 
reality is here, I highly recommend it to you.
    I think the only professor that has read it is Robbie 
George at Princeton. But I--I would love to get your feedback 
on--they tried PAYGO in 2009, 2010. It was a complete disaster. 
We tried Gramm-Rudman-Hollings. It was a success for a couple 
of years and then a failure.
    We have tried to implement different ideas, restrictions on 
our abilities, and it doesn't work. Unless we have a baseball 
bat over our head, we are not going to, as a Congress, act 
within our bounds. And I would love to get your thoughts on 
that.
    And I would also love to get a picture with you afterwards, 
so----
    Mr. Blinder. We both put on a few years since you were a 
Princeton undergraduate, I think.
    Thank you.
    Let me disagree with you a little. First, a preface. Gramm-
Rudman-Hollings failed because it targeted the budget deficit, 
which is, as we call--say in the trade, an endogenous variable. 
It is the outcome of what happens when you get all the spending 
and you get all the taxes. Congress can't control that any more 
than King Canute could control the tides.
    PAYGO was different. PAYGO said if you bring forth a bill 
for more spending, cut taxes, you need pay-fors for it. 
Congress can control that, and it did control that.
    Mr. Buck. Can I interrupt you?
    So the way we controlled it was to say we are going to sell 
oil from the strategic petroleum reserve, and we bought that 
oil for an average of $87 a barrel, we are selling it for an 
average of $42 a barrel. In view of Congress, that is a profit, 
and we are going to give ourselves credit for that and spend 
this extra money. By the way, that same barrel of oil was sold 
three times for three different bills.
    Congress is fundamentally dishonest. It is a fraud, and we 
have to--and I am not suggesting that balanced budget amendment 
is the answer, because Puerto Rico had a balanced budget 
amendment, and they found ways around that to the point of 
bankruptcy. But we have to find some way of creating an honest 
system where we actually move forward responsibly.
    Mr. Blinder. I agree with that. When this Congress reenacts 
PAYGO, which I hope it will before a budget-busting tax cut, 
for example, which is what happened to it in the early Bush 
administration, it would be wonderful if the new PAYGO rule 
excluded asset sales. You could do that. In normal accounting, 
that would be considered phony accounting. So you are--to the 
specific point, you are absolutely right. But that can be 
remedied.
    Now, your general point. Is this the magic bullet that is 
going to solve everything? No. You are 100 percent right. 
Congress will do what it will do. But this helps.
    PAYGO--there is a natural tendency for revenues to grow 
year after year, because the economy gets bigger and prices go 
up, and mundane things like that just bring revenue into the 
Federal Treasury. That is the secret sauce of PAYGO. If you can 
control the rest so that any act of Congress has to be--
balanced budget at the margin, that is that act, not the whole 
budget, but that act is balanced budget, PAYGO will take you in 
the direction you want to go. It did for 5, 6 years. I believe 
it can work again, and it would be a great thing if somehow 
this talk about a balanced budget amendment, which by the way 
goes back--I think I first testified this in the 1980s. I 
didn't--I didn't check to see if that is----
    Mr. Buck. Probably the 1880s, to be honest.
    Mr. Blinder. Well, I am not that--I am old, but I am not 
that old. But somebody did, probably, then.
    But if somehow that could get turned in the direction of 
reinstating PAYGO, I think that would be terrific.
    Mr. Buck. And I am out of my the time. I appreciate your 
thoughts very much. And I can spend hours with each of you 
talking about this, because it is my passion as it is so many 
others' passion here.
    Thank you.
    Chairman Goodlatte [presiding]. The gentleman's time has 
expired.
    The chair will now recognize the gentleman from Florida, 
Mr. Rutherford, for his 5 minutes.
    Mr. Rutherford. Thank you, Mr. Chairman. Panel, thank you 
for being here this afternoon.
    And in--you know, there is an old saying that vision 
without action is just daydreaming. But action without vision 
is chaos. Sometimes I think lacking that long-term vision we 
tend to see some chaotic reactions within Congress as was just 
talked about. Our attempt at Gramm-Rudman, debt ceilings that 
have changed over 100 times since their implementation. But 
that is, I think, the strategy and the reason that I would be 
interested in a balanced budget amendment, because it creates 
that vision. And--at least where we are going. Not necessarily 
how--exactly how we are getting to get there, but where are we 
going.
    And, Mr. Dranias, you were cut off by time when--you were 
explaining some of the elements of your compact. And I would 
like to hear the rest of that at this time.
    Mr. Dranias. Mr. Chairman, Mr. Representative, I really 
appreciate that opportunity.
    As we said, there is a fixed debt limit in nominal terms, 
but there is flexibility. With a referendum to the States, you 
can increase that fixed debt limit. So if it did become too 
small from the perspective of an outside, oversight committee 
of sorts, then you could always--you could lift it with that 
consensus. But the key thing is avoiding the conflict of 
interest of the debtor deciding his own debt limit.
    Now, the next couple of features are really great. As you 
know, with the current debt limit, you get into the midnight 
hour threat of impoundments all the time. And everyone panics, 
and one side or the other folds. We have built into this 
amendment a requirement that the President put on his tables, 
any impoundments that he is considering when we get to 98 
percent of the debt limit. And so you will have at least a 
couple of months to discuss specific impoundments. And not only 
that, but to avoid Presidential abuses, we give Congress the 
ability to do a simple majority override by concurrent 
resolution with impoundments of their own in equal or greater 
amounts. So this brings the two parties together with specific 
items to discuss before panicking with the debt limit coming, 
right? So that is an innovation.
    And then the other thing we do, and I say this with respect 
to Congressman Justin Amash, is we do address the tax issue. 
The reality is debt is taxes. Tax policy is inherent in 
addressing debt, because somebody is going to pay it 
eventually, and it is going to be through taxes.
    And the other thing is there is a bias in favor of spending 
whenever you have debt in a system, because it is easier to 
borrow and spend than it is to tax and spend, right? So you 
have to balance that disincentive with some sort of tax limit 
policy.
    The policy we came up with we believe is bipartisan, and it 
is this: The first part, I think some folks on the left won't 
like, and that is two-thirds of each house of Congress for any 
increase in income or other taxes. But then we add an 
exception, which I think can bring common ground to anyone of 
goodwill, and that is we preserve simple majorities for 
anything that eliminates tax loopholes, we preserve simple 
majorities for replacing the income tax with an end-user 
consumption tax, and we don't touch tariffs, impose duties. So 
we preserve the current simple majority rule on the revenue 
side for the areas of taxation which most economists say cause 
the least damage. It keeps revenues on the table, but it makes 
sure we don't destroy the growth we need to keep fiscal 
responsibility going.
    So that is the amendment, Mr. Chairman, Representative.
    Mr. Rutherford. Thank you very much. I really appreciate 
hearing the rest of that.
    Mr. Primo, that--the big problem in the Federal budget 
stems from healthcare costs right now, and it is getting worse 
by the day. Until we fix those costs, we really can't control 
our spending.
    I would like to ask you, it was suggested earlier that a 
budget--a balanced budget amendment would put at risk Medicaid-
Medicare. Is that necessarily the case?
    Mr. Primo. In some senses, that gets the logic backwards. 
Medicare, Medicaid, Social Security all are already under 
threat. And a balanced budget amendment is intended to make 
sure that those programs are dealt with before we reach a 
crisis, and I think this is a recurring theme in this hearing 
and a recurring theme on the issue of entitlements, which are 
these, frankly, scare tactics that are used, that the world is 
going to come to an end. The Federal Government has to--has to 
roughly balance its budget. And that is simply not true because 
the alternative is far, far worse.
    Mr. Rutherford. Thank you very much. I appreciate you 
highlighting that fact.
    Mr. Chairman, I yield back.
    Chairman Goodlatte. Thank you, Mr. Rutherford.
    I want to follow up on the questions of the gentleman from 
Florida. As you have mostly, not all of you, but mostly 
testified, and as you heard from the panel of Members of 
Congress before you, most of them, and as you heard from me in 
my opening statement, I think the debt situation is an 
increasingly dire situation that--I don't know when it will 
become a dramatic problem, but I think it is a serious problem 
right now when you look at the impact, for example, of the 
government's policy of keeping interest rates low. Yes, that 
has other benefits in terms of investment and so on, but it 
also has the very powerful benefit of keeping the amount of 
interest that the government has to pay on its debt exceedingly 
low, and yet it penalizes those people who have saved all their 
lives and had the expectation that they could have some income 
from their savings. Now they have to take a greater risk to get 
any kind of return on their savings or just live off the 
savings, because what you get from a bank deposit, which was 
supposed to be the safe place to put your money, is no money to 
live on. So we are seeing consequences of this already right 
now.
    Now, I want to know what other solutions there are besides 
the kind of discipline that we impose upon--the States have 
imposed upon themselves and that they have imposed upon local 
governments and economic realities impose upon businesses and 
families. There are lots of different ways to do a balanced 
budget amendment, but--and there are lots of ways to try to 
solve this problem without doing a balanced budget amendment. 
But I think I will start with Professor Blinder and then ask 
the others of you.
    You mentioned the use of PAYGO as a discipline. It 
certainly is workable when Congress does it. But Congress very 
easily decides not to do it when it is not attractive 
politically to do it. So I am just wondering what we missed in 
terms of different things done in the past that could be a 
substitute for the discipline of simply the law saying, as 
virtually every State has said it should say for themselves, 
you are not exempt from the laws of economics. The Federal 
Government is different than the States, no question about 
that, and its impact on the economy in terms of how it raises 
money and spends money is different. But we are not exempt from 
the ultimate consequences of it.
    Do you care to respond to that?
    Mr. Blinder. Well, what you said at the end is 100 percent 
true. We are not exempt from the ultimate consequences.
    Let me say a couple of--one word about interest rates and 
then about PAYGO. The Federal Reserve is--you are talking about 
the government is keeping interest rates low. It is the Federal 
Reserve you meant.
    The Federal Reserve is actually trying to push interest 
rates up now. It has nudged the short end up about 100--yeah, 
about 100 basis points.
    Chairman Goodlatte. One-tenth of 1 percent.
    Mr. Blinder. One percentage point.
    Chairman Goodlatte. One percentage----
    Mr. Blinder. But over a period of time. It is going very 
slowly which, by the way, it should.
    But anyway----
    Chairman Goodlatte. I am not trying to get into fiscal 
policy. I am just observing that I think one of the unspoken 
reasons why interest rates have been kept low is because of the 
dramatic impact that it will have on the Federal budget if they 
allow them to go back to historic levels.
    Mr. Blinder. Having once been vice chairman of the Federal 
Reserve, I think I can say, with very little doubt, that that 
is not what is motivating the Federal Reserve's decision on 
interest rates.
    But the point I wanted to make, Mr. Chairman, was that 
while the Fed is doing that, it has been frustrated that the 
long-term bond rate of the United States Treasury won't go up. 
It would actually like that to go up. Not to the stratosphere. 
But it has been trying to push it up, and the market will not 
go up.
    What that is telling you is that the markets don't believe 
these dire scenarios, that the markets are eager to scoop up 
U.S. Treasury debt at extremely low prices. So I was--you know, 
I was going to say I would like--I would make a bet against 
some of these doomsday scenarios. But the market is making 
trillions and trillions of dollars of bets every single day.
    On the PAYGO, the point that you made and Congressman Buck 
made and others have made, that it is pretty tough to 
discipline Congress, I mean, you are 100 percent right, and you 
know it better than I do. Some things work better than others. 
The PAYGO worked quite well. The Gramm-Rudman-Hollings did not 
work. The PAYGO worked quite well until the Congress decided, 
at President Bush's urging, that cutting taxes was more 
important than PAYGO. I think that was a mistake.
    I would like to see the Congress go back. And maybe there 
are--and, again, you will know better than I--ways you can 
toughen the discipline of the rule. I give you an example. The 
so-called Byrd rule in the Senate has held for a long time, and 
Senators obey it. They could rescind it, just like Members of 
the House could rescind rules of the House. They haven't. I am 
not sure what the secret sauce of that was, but that is worth 
thinking about.
    Chairman Goodlatte. I don't want to--that is an entirely 
different subject that is one that I am also passionate about, 
but I am going to stick to this one.
    Let me turn to Mr. Holtz-Eakin and get his thoughts on 
that.
    Mr. Holtz-Eakin. Let me say a word about PAYGO and not be 
quite as enthusiastic as my professor and former colleague.
    In the spirit of reunions, 33 years ago, we wrote a paper 
together, Public Opinion and the Balance Budget. So here we sit 
today.
    Here is the thing. PAYGO keeps you from making things 
worse. So PAYGO, if it works perfectly and Congress disciplines 
themselves, means that we get to keep what we have got.
    The CBO budget outlook is the answer to the question, What 
do you have if you put it on auto pilot and you don't do 
anything? And the answer is disaster. So PAYGO is just not 
strong enough in 2017. It may have been great in 1995. It is 
not going to work now. You need asking stronger, and you need 
to change course. I think that is the crucial fact.
    And we are just in a different era than--were in the 1990s. 
The fundamental issues are in mandatory spending, not 
discretionary. We do not want to have another dot-com bubble 
that generates revenue flowing into the Federal Treasury. That 
was a bad outcome, it turns out. We are not going get a peace 
dividends from the fall of the Soviet Union. We are in a bunch 
more dangerous world. Mandatory spending is a bigger chunk of 
the budget, two-thirds. And the baby boom is now retiring. It 
is not 15 years before their retirement.
    So the Congress is going to have to face this particular 
budget outlook with different remedies than the ones in the 
past, because the problems are bigger, they are more immediate, 
and they are harder.
    Chairman Goodlatte. Professor Primo.
    Mr. Primo. If we don't enact a balanced budget amendment or 
something--some sort of constitutional budget rule, I could 
imagine that periodically there will be bursts of political 
courage in Congress where we will see some measure of fiscal 
responsibility, and then something will happen. The rules will 
be ignored. There will be an economic downturn. Some event will 
occur that we will say, ah, wait, wait, wait. We have to some 
exceptions. We have to change things. And then the rules will 
kind of disappear. We saw it with Gramm-Rudman-Hollings. We 
have seen it with PAYGO.
    And that is the alternative. It is just sort of lurch from 
reform to reform without any sustained effort to actually make 
the budget workable in the long run. I mean, that is why you 
need constitutional budget reform, because in the absence, we 
are going to see what we have seen for the last 40 years, 
little blips of success, but overall, market failure.
    Chairman Goodlatte. Mr. Dranias.
    Mr. Dranias. Mr. Chairman, members of the committee, I am 
all for PAYGO. I just recognize what Representative Buck 
recognizes, which is if you don't make it a constitutional rule 
in some fashion, it is not going to stick. And at the core of 
the balanced budget amendment in H.C.R. 73 is a version of 
PAYGO. It says you can't spend more at any point in time than 
what taxes bring in, unencumbered proceeds, and authorized 
debt. So PAYGO is fine. It is the political mechanism of 
enforcement that is the problem. And let me leave you with this 
analogy.
    Chairman Goodlatte. Let me disagree, because I think Mr. 
Holtz-Eakin makes a good point that PAYGO is fine as far as it 
goes, but it doesn't go anywhere near as far as it needs to, 
because most of our spending is on automatic pilot that doesn't 
get addressed by that, because we don't address that. It just 
happens, and we have to come up with the funds for it. And most 
likely our solution most of the time--I don't vote for the most 
liberal budgets. I always vote for the most conservative ones. 
But they never get 218 votes. Never. Every single year I vote 
for the tightest budget offered, and it never gets 218 votes in 
the House and never even considered in the Senate.
    Mr. Nadler. Will the gentleman yield?
    Chairman Goodlatte. Yes, I will yield.
    Mr. Nadler. Let me ask professor--professor--Mr. Holtz-
Eakin. You said a moment ago that the growth in the budget is 
all in the mandatory spending entitlement programs. That is the 
way the basic growth is. And that is what is going to produce 
real problems.
    Okay. Do I gather from that that you would anticipate that 
a balanced budget amendment would force major reductions in 
those programs, in Social Security and Medicare, in the 
mandatory programs, and that that is one of the reasons we want 
it?
    Mr. Holtz-Eakin. I actually don't know what Congress would 
do. I know----
    Mr. Nadler. No. If we pass the balanced budget amendment, 
wouldn't that----
    Mr. Holtz-Eakin. It would have to balance. I don't know how 
Congress would choose to balance. I don't. And so I don't have 
a forecast of that type. It would force the Congress for the 
first time to come to terms with making mandatory spending, 
discretionary spending, and revenues add up. There is no 
mechanism that does that.
    Mr. Nadler. But if--I understand. But if, as you said, the 
growth and the problem is largely in the mandatory spending----
    Mr. Holtz-Eakin. Yes.
    Mr. Nadler [continuing]. Then you would have to change that 
curve. You have to reduce the mandatory spending because it 
just isn't enough in other places to do it, if what you said is 
correct. Is that not a logical conclusion?
    Mr. Holtz-Eakin. I believe that is right and what you 
should do. I also believe you should address those programs 
because they are not very good programs.
    Mr. Nadler. That is a different question.
    Thank you. I yield back.
    Chairman Goodlatte. Thank you.
    And to continue with you, Mr. Dranias, I am very interested 
in what you are doing, because it is one of a number of 
different approaches that are being taken from the outside to 
try to influence this, because I think it reflects that there 
is increasing concern. Twenty-eight or 29 States have called 
for a constitutional convention on a balanced budget. Some want 
a broader constitutional convention.
    But what is your perspective on that? Is that going to 
continue to grow, that the discipline for this, that the 
Congress won't provide with things like PAYGO is going to come 
from the outside if we don't pass a balanced budget amendment?
    Mr. Dranias. Mr. Chairman, I think it will continue to 
grow. And I think you should welcome it. Members should----
    Chairman Goodlatte. I do welcome it, as a matter of fact.
    Mr. Dranias [continuing]. Welcome it.
    But what is great about H.C.R. 73, which activates the 
compact for a balanced budget is you can have an opportunity to 
partner right now, and it only takes simple majorities. And 
there is a good argument against filibuster. So--and, by the 
way, it is synergistic with all the other movements, because 
what the other movements have is a movement to a convention. 
They don't have an amendment.
    In the compact is an amendment that five States have agreed 
to ratify. And so at least you've got a starting point for a 
conversation and all those other efforts.
    And, frankly, Mr. Chairman, if I may say, the reason why 
all these other statutory or semi-statutory limits don't work 
is our current system is something like this. It is like you 
had the right to buy a steak dinner at the next table's cost at 
Ruth's Chris, only it is the next table 10 years from now. I 
mean, who is not going to have a steak dinner every single day? 
Who is not going to invite their vegan friends and their 
service animals? It is never going to end. And that is why 
unlimited borrowing capacity is such a threat to our fiscal 
responsibility. The incentives to use it are overwhelming for 
human beings, period.
    Mr. Buck. Will the gentleman yield?
    Chairman Goodlatte. Yeah, I would be happy to yield.
    Mr. Buck. I want to just clarify one thing from Mr. 
Nadler's question to Mr. Holtz-Eakin.
    You said, at least I heard, I thought, that we need to 
reduce mandatory spending. I think what we need to do, and I am 
asking you if agree with me, is that we need to reduce the 
deficit caused by mandatory spending. If we were to fix Social 
Security, if we were to raise the retirement age, if we were to 
raise the cap on FICA, if we were to means test, if we were to 
do various things and Social Security were sustainable for a 
long period of time, we wouldn't need to reduce the benefits of 
Social Security. What I think you are talking about is the 
deficit caused by the Social Security fund right now.
    Mr. Holtz-Eakin. Yes, you would want to reduce the deficit 
that is produced by the social safety net. And to do that you 
don't need to have absolute cuts. You need to slow the growth 
rate going forward so that you can bring it into alignment with 
the revenues, which are also growing.
    Mr. Buck. And we can discuss----
    Mr. Nadler. Will the gentleman yield? Will the gentleman 
yield?
    I just----
    Mr. Buck. I don't think it is my time to yield.
    Chairman Goodlatte. It is my time to yield, but I will be 
happy to yield to.
    Mr. Nadler. Thank you.
    I just want to say that what the gentleman just mentioned, 
raising the retirement age of Social Security and various other 
things, are, in fact, benefit reductions. Maybe they are good 
ideas or not. But raising the retirement age of Social 
Security, which, of course, cuts the increasing cost of Social 
Security, is, in fact, a benefit reduction.
    Chairman Goodlatte. I will reclaim my time. And I don't 
want to have a debate here, because we have the witnesses. But 
I will say that minor tweak--I think the point is that minor 
tweaks on a regular basis of that system could keep it 
actuarially sound. And that is not true of some of our other 
entitlement programs that are--Medicare, for example. I think 
the first year it was in operation, 1966, it cost $1.2 billion 
to serve 18 million people, mostly senior citizens. This year, 
we are going to serve about 56 million people, about three 
times as many people, and it is going to cost 500 times as much 
money, at close to $600 billion. That is an unsustainable 
trajectory. It is got to be reformed. But we will how--to do 
that, we will discuss another day.
    This has been an excellent presentation. I appreciate all 
of your testimony, and we will move forward on this issue.
    Thank you again. I want to thank every member of the 
committee for their participation today, and the hearing is 
adjourned.
    Oh, I am going to reconvene. Without objection, all members 
will have 5 legislative days to submit additional written 
questions for the witnesses or additional materials for the 
record.
    And now the hearing is adjourned.
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