Congress received some solid advice from widely respected budget experts at a recent Joint Economic Committee hearing on solving the federal debt crisis.
Alice Rivlin, a senior fellow at Brookings and a member of the Campaign to Fix the Debt Steering Committee, said her work on two high-profile panels on fiscal reform “convinced me that bipartisan problem-solving is possible when participants are willing to confront facts objectively, listen to each other, and seek common ground.”
She served as a member of the National Commission on Fiscal Responsibility and Reform (Simpson-Bowles) and as a co-chair of the Bipartisan Policy Center’s Debt Reduction Task Force (Rivlin-Domenici).
“Although detailed recommendations of the two groups differed,” Rivlin told the committee, “each involved three elements: (1) restraining discretionary spending; (2) reducing the growth of Medicare, Medicaid and stabilizing Social Security, and (3) comprehensive tax reform to cut spending in the tax code and raise additional revenue. Indeed, the arithmetic of the problems makes all three elements necessary.”
With Congress having already approved substantial restraint in discretionary spending, Rivlin said, “the task remaining is to find agreement on an acceptable set of entitlement and tax reforms.”
Former Sen. Judd Gregg, a member of The Concord Coalition’s Board of Directors and a Fix the Debt co-chair, said many studies from around the world draw a clear conclusion: Rising government debt will eventually hold back strong economic growth, with higher interest rates crowding out private investment.
Gregg also pointed to the “distinct likelihood that the financial markets themselves will at some point, sooner rather than later, look at our massive accumulation of debt and conclude that we will be unable to pay it back.” But reasonable deficit reduction, he said, “can actually strengthen the economy down the road.”
The committee also received testimony from Doug Holtz-Eakin, president of the American Action Forum, and Simon Johnson, a professor at the MIT Sloan School of Management.