Domestic Entitlement Programs

February 17, 2005

Chairman Nussle, Ranking Member Spratt, and Members of the Budget Committee:

I consider myself fortunate to address the members of the House Budget Committee.
Along with the Appropriations Committee, this committee has the toughest but most important
job in Congress this year. Our nation faces a budget crisis that will soon be of historic
proportions. Something must be done — and the buck stops here. As a citizen, a scholar, and a
former Congressional staffer, I am honored to have the opportunity to provide some humble
advice to you who must make momentous decisions.

The budget problem has two dimensions. First, the short-term deficit is too high. This
year the deficit is expected to be around $427 billion according to the Office of Management and
Budget (OMB). Adding the costs of the war in Iraq would push the deficit still higher. If
Congress extends the tax cuts, enacts a reasonable adjustment of the Alternative Minimum Tax,
and allows domestic discretionary spending to increase in proportion to population growth and
inflation, the deficit will average more than $500 billion over the next decade. Some observers
take comfort from the fact that deficits associated with the recessions of the mid-1970s, the early
1980s, and the early 1990s were higher as a percentage of Gross Domestic Product than the
current deficit. However, in all these cases Congress and the president took very strong action to
reduce the deficits, both by cutting spending and by increasing taxes. But so far in this new
century, neither Congress nor the president has taken serious action to reduce the near-term
deficits. Worse, the current deficit could be considered more threatening than the former deficits
because we are now on the cusp of baby boom retirement, an unfolding event that will place
huge strains on federal finances in the decades ahead.

The lack of action on the deficit is perplexing for those of us who played a role in the
Republican assault on the deficit after capturing the House and the Senate in the elections of
1994. As Bill Thomas of California, now the Chairman of the Ways and Means Committee said,
“We can no longer tolerate mere promises of fiscal restraint. To do so would saddle our children,
and children’s children, with uncontrollable and runaway deficits” (Congressional Record,
1995). How can it be that in 1995 Republicans believed deficits to be the governmental version
of the apocalypse and now many Republicans can muster little more than a yawn when the
deficit figures are recited?

View full testimony — (PDF – 53KB)