The Senate and House Committees on the Budget each held hearings on the Congressional Budget Office (CBO) report, “Budget and Economic Outlook: Fiscal Years 2013-2023” (see Memo, 2/8). The Senate hearing was on February 12, and the House hearing followed on February 13. CBO Director Douglas Elmendorf was the sole witness at both hearings. Senator Patty Murray (D-WA) opened the first hearing of the Senate Budget Committee in the 113th Congress and her first as committee chair by saying that she hoped the committee would tackle fiscal and economic challenges in a balanced way for the families they represent. The Senator said that, “budgets are about families across America whose lives will be impacted by decisions we make.” Senator Murray said that the committee owed it to those families to make their voices heard. Almost all members of the committee were in attendanceRanking Member Jeff Sessions (R-AL) took issue with what he called the Chair’s “intimation that Republicans are not concerned with the poor.” He said that the Republicans believe that “compassion and help for the poor amounts to more than borrowing more money.” The Senator also said, “smart reforms of welfare will help more Americans rise out of poverty. That is what I want to see, more Americans out of poverty.” Mr. Elmendorf summarized his agency’s report, saying that “the country continues to face very large budget and economic challenges.” CBO projects there would be a more significant increase in economic growth this year if not for the anticipated “fiscal tightening.” A major component of this fiscal tightening is implementing the sequester in March. Mr. Elmendorf said that the sequester represents six tenths of 1% of growth this year, which CBO estimates would represent 750,000 jobs by the fourth quarter of 2013. Chair Murray questioned Mr. Elmendorf about the sequester’s effect on the economy, asking if it would be “better to replace the sequester with targeted cuts phased in at the right time” for the economy. Mr. Elmendorf agreed that the same amount of deficit reduction, phased in over time, would be better for the economy. Senator Jeff Sessions (R-AL) questioned the CBO director about the overall trajectory of the deficit, claiming the government does not have a tax problem, but a spending problem. Senator Bernard Sanders (I-VT) delved into the source of the deficit in questioning Mr. Elmendorf. Senator Sanders asserted that part of the deficit is due to the expense of war, Medicare Part D not being paid for, and the Wall Street bail-out, and Mr. Elmendorf agreed. Mr. Elmendorf also agreed with the Senator that real unemployment is likely about 14%, not 7%. Senator Sanders concluded that the country is still in a major recession and that instead of cutting “services for children,” we should address our low level of revenue. “Before you cut a woman living in Vermont on $15,000 of Social Security income… you might want to cut loopholes for a millionaires with funds in the Cayman Islands,” said the Senator. Mr. Elmendorf concurred that tax loopholes are a legitimate issue for Congress to address, saying that CBO recently outlined some of those options. Senator Jeff Merkley (D-OR) also made a statement in support of closing loopholes rather than reducing spending in a fragile economy. Senator Michael Enzi (R-WY) argued that some tax loopholes keep the nation competitive and pointed to the gap between the dedicated revenue source for Social Security and the payments as a source of the nation’s financial woes. At the House Committee on the Budget, similar questions regarding job loss, trajectory of the deficit, and economic growth were asked. In his opening statement, Committee Chair Paul Ryan (R-WI) said the country is approaching danger to the debt crisis, and that spending needs to be controlled. Chair Ryan also said that the debt crisis is putting the nation’s social safety net at risk of unraveling. Ranking Member Chris Van Hollen (D-MD), said that the committee’s priorities should be expanding economic growth, job creation, expanding the middle class, and meeting commitments already made. Chair Ryan asserted that raising taxes is not sufficient to address the nation’s debt crisis, while Mr. Van Hollen said that the deficit must be addressed in a balanced way. Representatives Barbara Lee (D-CA) and Gwen Moore (D-WI) stated that fiscal policies such as the impending sequester and current expensive tax expenditures not only hurt those living in poverty but do not help them become part of the middle class. Ms. Moore expressed concern over spending on the mortgage interest tax deduction, saying that it is a regressive tax. Representative Kathy Castor (D-FL) asked if there are policies contributing to the current and projected high unemployment rate. Mr. Elmendorf said that fiscal tightening and lack of certainty are the largest factors in unemployment. In response to Representative John Campbell’s (R-CA) question about timing of dealing with the debt and about the size of current tax expenditures, Mr. Elmendorf said that sharp declines in spending would result in the economy contracting. In discussing tax expenditures, Mr. Elmendorf said that the third largest tax expenditure is the mortgage interest deduction. The Senate Committee on the Budget held a second hearing on February 13, “The Impact of Federal Budget Decisions on Families and Communities.” Witnesses included two people who benefit from government assistance. Chair Murray opened the hearing by saying the “highest priority of the committee should be broad-based economic growth,” and said she intended for the committee to put forth a pro-growth, pro-middle class budget resolution. In order to construct such a resolution, she said that the committee members “can’t limit [themselves] to charts and projections; we need to also hear from families who will be affected.” Chair Murray said that through her online platform, MyBudget, she has already received over 2,000 submissions from families across the country regarding their budget priorities (see Memo, 2/1). Ranking Member Jeff Sessions (R-AL) said that there are 83 welfare programs that cost $750 billion per year and that it is time to review whether or not they should be funded. Senator Sessions also said that the nation has a complex welfare system that penalizes people for being employed. The Senator shared his own experience of growing up in a 900 square foot house without central air and heating, and said he used Pell grants to pay for college. Tara Marks testified about the importance of the Supplemental Nutrition Assistance Program (SNAP) at a time when her income was so low she was unable to afford food for herself and her son. Ms. Marks returned to college using Stafford loans after getting a divorce and gaining sole custody of her eight-month old baby. She is “thankful these programs were available so I could focus on getting us out of poverty,” said Ms. Marks. Patrick Murray, a retired Marine, testified on how the government benefits he received allowed him to access quality medical care, return to school, and participate in the workforce. Mr. Murray was deployed to Iraq, where he was wounded; his leg was amputated, preventing him from returning to his profession as a firefighter. Instead, he received job training through the Department of Veterans Affairs and went to college via the 9/11 GI bill, opportunities Mr. Marks said that he would not have otherwise had. “These tools,” said Mr. Marks, are a “benefit not only to an individual veteran but to the country as a whole.”Bob Greenstein of the Center on Budget and Policy Priorities testified on the importance of protecting safety-net programs for low income households. He said that one in seven Americans would be poor, but instead are lifted above the poverty line because of the safety net. Currently, 90% of benefits are distributed either to people who are unable to work because they are elderly or have disabilities, or to people who are working. Gary Alexander, Secretary of the Pennsylvania Department of Public Welfare, said that the state’s welfare programs are “a system that traps parents and children” and need reform. Mr. Alexander described what he called a “welfare cliff,” the income point at which a household’s efforts to increase employment income would cause them to lose benefits, lowering their combined household income from wages and benefits. Mr. Marks said that the Pennsylvania welfare programs represent 43% of the state budget and that these funds could be used for other state activities. Mr. Alexander said fraud is being committed by a significant number of recipients of his state’s welfare programs. When questioned on this by Senator Debbie Stabenow (D-MI), Mr. Greenstein said that nationally, the fraud rate of people who should not receive benefits and overpayment of benefits is a combined 3%, one fifth of the nation’s tax error rate. During questioning, Mr. Alexander also said that increased monitoring of the program by a federal agency was necessary, claiming there is currently little monitoring by federal officials. Robert Woodson of the Center for Neighborhood Enterprise testified that he believes many government programs serving the poor are not effective. He referred to one shelter program as “bunks for drunks.” Mr. Woodson emphasized that we “can’t equate how much we spend on the poor with how much we help the poor.”The House and Senate Budget Committees will continue preparations for crafting FY14 budget resolutions after Congressional returns from its recess. Chair Murray said that she intends for her committee to hold another hearing the week of February 25. The Senate may act on a budget resolution as early as the first half of March. The President’s budget request to Congress, required to be submitted on the first Monday of February, is still not complete, and is expected in March. Click here to view the Senate Budget Committee CBO testimony. Click here to view the House Budget Committee CBO testimony. Click here to view the Senate Budget Committee Impacts testimony.