Yarmuth Opening Statement at CBO Baseline Hearing
Washington, D.C. – Kentucky Congressman John Yarmuth, Ranking Member of the House Budget Committee, gave the following opening statement at today’s hearing on the new CBO baseline. Remarks as prepared are below:
Thank you, Mr. Chairman. And welcome, Director Hall. Thank you for appearing before us once again.
This year’s economic and budget outlook offers a contrasting story. CBO presents us with an optimistic short-term economic forecast – one that you note is more optimistic than that of the Federal Reserve and most private forecasters – along with a very disturbing longer-term budget forecast that shows the deficit reaching $1 trillion two or three years earlier than in your previous estimates.
The two, of course, are not unrelated. Congress has provided a large jolt of economic stimulus with tax and spending bills this winter. We would be better off if the other side had been as willing to support economic stimulus nine years ago – when it was urgently needed -- as they are today. But we are where we are and those bills are giving the economy some juice today. But they are also increasing our current and long-term deficits.
The tax bill focused its benefits on the wealthy and corporations. The Treasury Secretary and many congressional Republicans kept insisting that the bill would pay for itself. No credible source has ever agreed. And your report confirms the obvious. The tax bill doesn’t pay for itself. Indeed, its economic feedback doesn’t even quite pay for the additional interest spending needed to finance it. The numbers in your report indicate that, if we hadn’t passed the tax bill, the deficit outlook for 2018-27 would have actually improved since your June estimate. Instead, it’s $1.6 trillion worse.
We are getting some economic boost from the tax bill. And while that will be welcome, it will also be short-lived. The boost is very front-loaded. Indeed, your report indicates that the tax bill will actually reduce our economic growth rate beginning in 2025.
I also worry that the benefits, as short as they may be, will not be broadly shared. That they will primarily help those who are already doing well at the expense of everyone else – just like the tax cuts themselves.
I think it’s important to point out that this picture assumes we will not have a recession for a decade, that the Fed will be able to raise rates just enough to keep the economy from overheating over the next four years, then drop them just enough from 2022 to 2026 to engineer a soft-landing. I hope you’re right about that. But I don’t think we can count on having the current expansion last nearly twice as long as the longest previous one in our history. And a recession would surely mean a weaker economy and larger deficits than you forecast.
That’s a reality Congressional Republicans and President Trump are pretending we don’t live in. They have succeeded in making the deficit worse, and they are now trying to use the deficit as an excuse to make massive cut programs vital to American families, including Medicare, Medicaid and Social Security. The balanced budget amendment we are debating on the floor today would force those cuts. It won’t pass. But I think we can count on our colleagues to keep trying.
After all, it’s what we’ve seen for decades. It happens every time a Republican President replaces a Democratic one in the White House. Ronald Reagan cut taxes, sent deficits skyrocketing, and unsuccessfully sought to slash the safety net. The second President Bush cut taxes, turned record surpluses into record deficits, and unsuccessfully sought to cut Social Security. Even President Nixon inherited a surplus that immediately disappeared. It’s no surprise that we see the deficit soaring again now that Republicans have taken full control over the federal budget.
Some things never change. The only thing Republicans in Washington like better than complaining about deficits and debt is increasing deficits and debt. It’s part of a three-step process that we’ve seen time and time again. First, they cut taxes, primarily for the wealthy. Second, they shed crocodile tears and raise the alarm about the rising deficits that they just worsened. Third, they insist that the deficit is purely a spending problem and push for extreme cuts in programs that are vital to American families.
I suspect we’ll hear at least some of my colleagues pursue steps two and three today. But, before we get to that, Director Hall, I look forward to hearing your testimony.