GOP launches hearings on national debt

The House Financial Services Committee is launching a series of hearings to explore the $17.5 trillion national debt, starting with a Tuesday meeting to discuss "Why Debt Matters."

"As federal deficits and debt have soared in recent decades, the risks posed by rising and excessive debt shifted suddenly to the foreground of the political debate, leading to the creation of the President's Fiscal Commission (Simpson-Bowles) and culminating in the passage of the Budget Control Act of 2011," committee staff said in a note last week.

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"The recent sovereign debt crises experienced by Greece and other highly indebted European countries should serve as a warning to other nations — including the U.S. — about the consequences of a nation spending money it does not have."

The staff note said Greece shows that debt is not an abstract event, and that it makes it harder to borrow money, disrupts the economy and can lead to drastic tax hikes or spending cuts. But it also noted that as annual budget deficits have fallen in the last few years, many believe the crisis has receded.

Still, the staff note warned that Congress needs to keep its focus on the longer-term.

"While the short-term budget outlook has improved temporarily from where it stood in 2009 and 2010, the U.S. still faces a long-term fiscal picture that experts from across the political spectrum agree is bleak," it said. "There is also broad consensus that failing to deal with that crisis will leave future generations of Americans with less freedom and opportunity, and result in current generations of Americans living less prosperous lives."

The committee's Tuesday hearing will feature testimony from two former Congressional Budget Office (CBO) directors, Douglas Holtz-Eakin and Alice Rivlin.

Last month, the CBO said the annual budget deficit would fall to just under $500 billion in fiscal year 2015, down from deficits as high as $1 trillion in the first few years of the Obama administration. However, the budget office said those annual deficits would start rising again after 2015, and are projected to top $1 trillion again by 2022.

As of this week, the accumulated national debt was $17.55 trillion. Of that, $12.5 trillion is publicly held debt, which means publicly held debt is about 73 percent of total U.S. gross domestic product.

Another $5 trillion is debt the government owes to various federal agencies, or "intragovernment debt." This debt can accumulate when the government borrows excess money from Social Security or other programs that generate a surplus, and represents what the government owes those programs due to that borrowing.

While some have said this debt could be canceled because it's money the government owes itself, others have said it represents a possible cut to Social Security or other benefits if the government were unable to pay the funds back to these programs.