Both the House and Senate held hearings on the President’s FY12 budget proposal during the week of February 14 with a similar level of criticism expressed by members in both chambers.
At the House hearing on February 15, House Committee on the Budget Chair Paul Ryan (R-WI) said the President has disappointed Congress by presenting a budget that will raise taxes and does not follow the recommendations of the National Commission on Fiscal Responsibility and Reform on deeply cutting domestic discretionary spending.
White House Office of Management and Budget Director Jack Lew described the President’s plan to continue the nation’s recovery from severe economic recession and put the country on a path to fiscal sustainability. The President’s proposed freeze of non-security domestic discretionary spending at FY10 levels for the next five years will yield significant savings over the next decade. The President’s budget, said Mr. Lew, will bring this spending to the “lowest level as a share of the economy since Dwight Eisenhower was in office.” He said that in addition to cutting non-security domestic discretionary spending, the President’s budget ends the growth of security spending and pays for a two year extension of Medicare, among other cost saving measures.
The Senate Committee on the Budget held two hearings, the first on February 15 with OMB Director Lew as the sole witness. Budget Committee Chair Kent Conrad (D-ND) praised Mr. Lew for prior his work at OMB, which he said left the then-incoming Bush administration with a balanced budget.
Senator Conrad commended the President for taking modest steps for addressing the deficit including saving $400 billion dollars through freezing non-security discretionary spending, identifying offsets for the “doctor fix,” and paying for Pell Grants. The proposal, said Senator Conrad, does not do enough to address the fiscal challenges the country will face in the future. Reducing spending for only a small percentage of the budget is not sufficient without reforming the country’s system of revenue.
Senator Conrad stated that it is critical for Senators to remember that revenue, not just spending, is a critical component of the budget process and of measures to reducing the national debt. Revenue, said the Senator, is at the lowest percent of GDP in 60 years. “Without being serious [about revenues], we aren’t going to solve the problem,” said Senator Conrad.
Mr. Lew testified before the Senate on aspects of the President’s budget proposal similar to those he described in the House hearing earlier in the day. Ranking Member Jeff Sessions (R-AL) criticized the President’s plan as not aggressively reducing spending or addressing solutions for significant reductions to the national debt.
At the second Senate hearing on February 17, Treasury Secretary Timothy Geithner testified on the policies included in the President’s budget that would lead towards reducing the national debt. Senator Conrad again praised the President’s budget proposal, saying it would “make substantial progress in bringing down the deficit.”
Senator Conrad also again discussed the importance of both spending and revenue in any budget, saying that in addition to curtailing spending, the President’s budget makes necessary revenue reforms. “The current state of the tax code is simply indefensible,” said Senator Conrad. He cited the President’s proposal to reform the mortgage interest deduction as a proposal that would “better target [federal tax spending] to those who need it.”
Senator Conrad criticized, however, the lack of significant tax reform and the revenue increases included in the President’s budget. On the few occasions when the federal budget has been balanced over the last several decades, revenues have been between 19.6% and 26% of GDP, higher than the Republican proposal of an 18% of GDP benchmark.
Secretary Geithner fielded questions from multiple Senators about the effects of freezing non-security discretionary spending and entitlements. Freezing non-security domestic discretionary spending at FY10 levels for five years as the President’s budget proposes, said the Secretary, will help in reducing the deficit. The Secretary pointed to other long term savings that will impact the deficit including the Affordable Care Act.
Senator Bernard Sanders (D-VT) criticized colleagues who are now loudly expressing concerns over the national debt but who voted for spending over the last decade. Senator Sanders pointed out that spending on war, Wall Street bailouts and tax breaks for wealthy households were not of concern to many Senators during the last Presidential administration. These expenditures, Senator Sanders said, have contributed to the U.S. having the most unequal distributions of household income in the whole world. He also defended Social Security benefits, pointing out that they do not contribute to the deficit.