Lawmakers spar over ‘fiscal state of the union’ amid debt limit stalemate
The House Budget Committee held a hearing examining the “fiscal state of the union” on Wednesday, as both sides remain far apart over how to avoid a national default later this year.
During the hearing, members took turns addressing a group of high school students between questions to a spate of experts on the witness panel.
“This is an important conversation, and we all, I think, agree this is a serious issue, and I don’t think it will impact anybody more than the young people that are sitting here in this hearing room,” House Budget Committee Chair Jodey Arrington (R-Texas) said.
While the students were only present for a fraction of the hearing, members referred to them throughout the hearing, as both sides sought to highlight the stakes in the ongoing fight over the nation’s debt limit and government spending to the public.
Although estimates vary, experts say Congress has anywhere between the start of summer and early fall to raise the nation’s borrowing limit, as the Treasury Department deployed what it describes as “extraordinary measures” to avert a default.
Congress last raised the debt ceiling, which caps how much money the Treasury can owe to cover the nation’s bills, in late 2021. But not without a grueling, high stakes fight that entangled both sides over the nation’s spending for months-long stretch.
And as the national debt hovers around the $31.4 trillion mark set by Congress more than a year ago, both parties find themselves with similar battle lines as a partisan clash over the debt limit brews.
During the hearing, Republicans sought to zero in on the $6.8 trillion budget request rolled out by the White House earlier this month, which includes boosts to discretionary funding for fiscal 2024 and outlines a slew of proposed tax hikes on the wealthy to bring more revenue over the next decade.
“It shows a complete disregard for the concept of fiscal responsibility, and instead, it doubles down on the same policies that supercharged generational inflation,” Rep. Rudy Yakym (R-Ind.) argued.
Yakym also asked witnesses about the negative economic implications of federal spending rising at a faster rate than GDP growth, as Republicans try to make the case for steep spending cuts and fiscal reforms amid the ongoing fight over the nation’s debt limit.
David Walker, an economics professor at Stanford University and one of the witnesses, in turn, argued there was an “interrelationship” between monetary policy, inflation and higher interest rates.
“We’ve got very loose monetary policies, now tightening up some, that we sold in excess inflation, excess inflation results in higher interest rates,” Walker argued.
Republicans also took aim at previous policies passed in the previous Democratic-led Congress, including the Inflation Reduction Act, which passed last year without GOP support. But witnesses offered differing takes on the impact the policy on the nation’s fiscal outlook.
Republicans made jabs at tax proposals in the bill, including a boost to IRS funding the Democrats say is aimed at targeting the wealthy and corporations. And during a line of questioning about by Rep. Drew Ferguson (R-Ga.), Scott Hodge, a senior policy advisor at the right-leaning Tax Foundation, argued the measure “violates all international standards of free trade.”
Mark Zandi, chief economist at Moody’s Analytics who also served as a witness at the hearing, however, argued the bill would prove “positive to long term economic growth” and is “largely paid for,” while citing figures from the Congressional Budget Office.
Both sides also traded jabs over former President Trump’s signature tax law, which Republicans sought to frame as a positive for economic growth, and Democrats went after for helping add to the nation’s deficits, while accusing the other party of approving tax cuts for the “very wealthy.”
The discourse comes as some Republicans have pushed to extend those cuts, while calling for no new tax increases on any Americans, and setting ambitious sights on balancing the budget in the next decade through significant fiscal reforms and cuts.
But Democrats have worked to poke holes in those goals in recent weeks, highlighting rifts seen among the conference in recent months over where funding in certain programs in areas like defense should fit in conversations to curb spending.
“An attempt to balance the budget without touching Social Security and Medicare defense spending, veterans mandatory spending and without increased revenues, would require eliminating every program, every service and every investment Americans count on,” Rep. Brendan Boyle (D-Pa.), top Democrat on the budget panel, said, citing analysis from the Congressional Budget Office (CBO).
Rep. Jimmy Panetta (D-Calif.) also said Congress shouldn’t be relying just on spending cuts to tackle the nation’s deficits, but he acknowledged there “are certain spending cuts that we can have to wasteful programs.”
Democrats also pressed witnesses about the consequences Americans could see if Congress fails to raise the debt limit this year, as the party has worked to dial up pressure on Republicans amid the debt ceiling impasse.
Addressing the high school students in the room, Rep. Jan Schakowsky (D-Ill.) said lawmakers have the constitutional duty “to pay our debts, to put it simply, to pay the bills,” before asking Zandi about what’s at stake later this year.
In response, the economist warned all Americans could face “financial hardship” if the debt limit is breached, arguing “the hits to the economy would be enormous.”
“My guess is that the Treasury is going to try to pay bondholders and they can technically do that through another payment system,” he said. “Then everybody else, Social Security recipients, SNAP recipients, rental assistance, military, everybody else, they will not be able to prioritize those payments.”
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