Romney and Manchin Testify at House Budget Committee Hearing on the Fiscal Stability Act
WASHINGTON—U.S. Senators Mitt Romney (R-UT) and Joe Manchin (D-WV) testified at the House Budget Committee’s hearing today examining the need for a fiscal commission and reviewing the Fiscal Stability Act, a bipartisan solution to strengthen America’s fiscal health and stabilize our nation’s finances for future generations, which the senators introduced earlier this month. The legislation would create a bipartisan, bicameral fiscal commission tasked with finding legislative solutions to stabilize and decrease our national debt, which now exceeds $33.6 trillion—more than double what it was just 10 years ago. A one pager of the legislation isavailable here. Full text of the legislation can be found here.
A transcript of Senator Romney’s testimony and remarks during questioning can be found below and video can be found here.
Senator Romney’s Opening Statement:
Let me underscore what Senator Manchin has said about the urgency of us addressing our shortfall, our fiscal crisis. I’m going to start with three reasons that this is something we need to do and do now. One relates to interest, and I’m going to get there by showing you as a percentage of the economy what’s happened to defense spending—which is the solid line—and domestic discretionary spending—which is the yellow line—and where the CBO projects them to go over time.
As you’ll note, our spending on discretionary items has come down both for the military—as a percentage of the GDP—and for discretionary domestic spending. But because of baby boomers, what’s going to happen on Medicare and Social Security is a very different pattern. Social Security is the orange line there, and Medicare is the blue line.
This first dotted line is current 2023. The dotted line over here is 2030, which would be six years from now, the end of the next group of senators’ term. So as you’ll see, the pretty dramatic increase and you’ll also note that we haven’t yet layered on interest. If we now turn to adding the interest line, here is the interest line—the red line is interest. As of 2030, only six years from now, interest expense for the federal government will exceed either defense spending or domestic discretionary spending. That’s where we’re headed. So we’re going to have to do massively awful things either in defense or domestic spending. This is a huge increase. That’s one reason we need to move soon.
So unless we fix the fiscal calamity, we’re no longer going to be able to have a military leadership in the world, and we would have major consequences for our safety and our national security. There’s a second reason. Our mounting debt is placing us in the same hazardous character category as Greece and Italy. This shows government debt, gross debt. And by the by the way, debt held by the public, as a percentage of GDP out through 2028. Ours is the red line. Here’s Greece, Italy, Portugal, Ireland, Spain. Notice they’re all getting better. We’re the one getting worse. And we are now in a category as of 2028, where we’re going to have more debt as a percentage of our GDP than Italy. And remember what Greece and Italy and the others went through? This is the trajectory we’re on, unless we take action soon. Simpson-Bowles told us about this crisis, but it’s already here and our legislation has a built in path to avoid some of the challenges that were associated with the Simpson-Bowles failure to actually reach a conclusion. Let me just mention what they are.
First of all, four corners appoint the members of this commission. Three will be elected members, and then one will be an expert, but the expert will not be voting. Only members will be voting on the commission’s recommendations.The objective of the commission is to stabilize debt as a share of the GDP. It doesn’t talk about any particular program. It just says let’s get our debt as a percentage of the GDP at a stable level. And finally, all spending is being considered and everything is on the table. We don’t say, “this program has to be added, that program…” No, everything is on the table. And finally, if there’s a bipartisan consensus—if we have Republicans and Democrats on this Commission that vote together on a bipartisan basis to proceed, then there is a privileged process to take the legislation to the floor and to vote on it in the House and the Senate.
In the Senate, by the way, the  vote rule would apply. So it’s the same numbers required in order for it to become law. And of course, the president would then be given the opportunity to sign it. If we don’t fix this mess that our country is in, why, it’s hard for me to imagine a circumstance where America is able to continue to lead the world. If we’re spending more on interest than we’re spending on defense, then how in the world are we going to keep up with China, which is already spending a lot more on procurement than we are today. So this is a decision we have. We’re either going to be known as a generation that took on tough challenges and solved them or one that didn’t.
We all lived in the shadow of the Greatest Generation. If we don’t fix this problem, we’re going to be known as the “worst generation.” Our children, our grandchildren are depending on us to take action, and everything’s on the table. And I’ll just mention one thing, and that is when Bill Clinton was president, he looked to see what Republicans and Democrats could do together. Each came together and found an equal amount of tax increases, revenue increases, and spending cuts and got a deal done and got us on track and actually got a balanced budget. This is something we can do, but only if we do it on a bipartisan basis. Thank you, Mr. Chairman and Ranking Member.
During his opening statement, Senator Manchin said the following, in part:
“Years of fiscal irresponsibility have brought us to the crisis we face today, which is more than $33.75 trillion dollars of national debt. We must reverse this catastrophic financial demise of our own making before it is too late. This is why Senator Romney and I – along with Senators Sinema, Young, Hickenlooper, Lummis, Warner, Cornyn, Tillis, and Shaheen – introduced the Fiscal Stability Act. We here in Congress have an obligation to get our finances in order so our children have the same shot at the American Dream that we did,” Senator Manchin said.
Chairman Arrington: I thank both senators…I’m inspired by your words and your courageous leadership. And I hope we can get this done. I really do…
Rep. Ferguson: We’ve had discussions about where should we be making investments—is it in our people? …Is it in our systems? Is it in defense? You cannot invest in anything if you are broke…I go back and I look at the one thing that’s a common thread through every single person that has pledged to run for Congress and has been elected. And we’ve all said we want to be fiscally responsible. What’s standing in the way of us? It is a horrible budget process. It is a process where there are 50 acceptable pathways to failure and about one or two acceptable pathways to success…So, Senator Romney, I’ll start with you on this. Talk to us a little bit about process reform and how important it is to put a process in place that rewards early success and punishes…late failure so that Congress is incentivized to do the right thing.
Romney: I’m not going to disagree with you…I agree with you that we need to have a budget process which follows the law and finding teeth to make sure that that budget process is followed is going to be a challenge which this commission can take on, among other things. I would note that I don’t think process is sufficient, it’s necessary, but not sufficient. And I say that because increasingly people have found we can make things mandatory [spending]. Both chambers have said, “hey, we can put this outside the budget. We can put it as a mandatory spending item.” And now almost 70% of our federal spending is mandatory…So if we had a perfect budget process, we may do a better job taking out some waste and abuse and excess in our spending, although you saw that as a percentage of the GDP, domestic spending and defense spending is actually going down.
Our challenge is we have baby boomers, a lot of us, and we’re just recognizing that that presents a real fiscal challenge for us. And we’re going to have to deal not just with the process of dealing with our budget, but also dealing with the non-budget, if you will, the non-discretionary items of our spending as well.
Ranking Member Boyle: And thank you, senators, for being here…I very much admire both of your careers in public service…I have good news and bad news. The good news is we have time. Social Security trust fund will become insolvent in either 2033 or 2034, depending on if you use the CBO figures or the Social Security Trustee figures. So, we have about a decade. Medicare trust funds become insolvent a little bit before that. So, the good news is we have time. The bad news is we have time. And given the way human nature is, given the way Congress tends to act, just basically based on deadlines, time in this regard is not our friend…
I just want to give you the opportunity to respond to something my predecessor, the [former] chairman of this committee, John Yarmuth…He said, “While some of the other members of this committee might take issue with my evaluation, I believe the process illuminated one fairly obvious but unavoidable truth. The problem is not the process, it’s the people.” In other words, if members of Congress are not willing to muster the determination and courage to take on our fiscal challenges, even the best ideas will never be implemented. So I’d open up to the both of you to either agree or disagree or in any way react to what Chairman Yarmuth said.
Romney: Yeah, just a couple of comments. One…I don’t know a single Republican or a single Democrat who thinks we ought to cut Social Security or reduce the funding for Social Security. They may exist out there, I just haven’t met them. So, there is there is zero interest on the part of either side of the aisle to cut Social Security or cut [existing] Social Security benefits. Both of the leading contenders for 2024, former President Trump, current President Biden, have both said we’re not going to touch Social Security. And Joe [Manchin] and I fully agree and my guess is every member of this committee would fully agree.
The question is, well, how about for people in their twenties and thirties? What does it look like at that point? How long will they live? What should the tax be? What part of income should it be? Should we lift the cap, as a Senator Manchin has indicated? So, all those things are on the table for discussion. One thing that’s not on the table is the idea that we’re going to cut benefits. That would simply be unacceptable. It’s not realistic.
I do agree that we have to the people, the people that have been elected, to solve these problems. Your quote about that is absolutely right. And what we found is that over time, we’ve come closest to dealing with this challenge, our taxing, spending, fiscal challenge when there’s been a bipartisan effort. Joe [Manchin] and I just worked together on a bipartisan effort, an infrastructure bill, where equal number of Republicans and Democrats worked together across the divide, if you will, and got something done. So, a bipartisan effort is what I think the Huizenga bill proposes. What we’re proposing—they’re very similar pieces of legislation—is saying, “hey, let’s create a bipartisan effort of elected officials to work together to see if they can come up with something that passes muster on both sides of the aisle. And if it does, let’s vote on it, up or down.” Because I do think that the urgency today, I mean, I didn’t underscore this urgency, but I spent my life in the private sector, in the financial sector.
It’s going to get hard to sell U.S. debt and we might want to lower interest rates, you know, say, “okay, we’re over the tough times, inflation has been dealt with us, let’s bring in interest rates down.” The Fed’s not going to be able to control interest rates if people don’t want to buy our treasuries. Interest rates are going to start going up all by themselves. And you can have a spiral where interest rates go higher, our deficit gets larger, we need to issue more treasuries. We have to raise interest rates higher. We can find ourselves in a Latin America-type circumstance. So, sometime during the next few years, we can have failed Treasury auctions. Interest rates going up. This is the reality.
I recognize the Social Security Trust fund runs out. Medicare trust fund runs out down the road. We have time on those. But the urgency of a potentially failed Treasury auction, rapidly rising interest rates, and not being able to keep up militarily, that’s with us right now…
Arrington: People are counting on us to lead and make sacrifices and make tough decisions. And we may be the only generation that fails to do that. The American spirit, the American way of putting the interest of the country before our political interest, that’s really what this boils down to. Can this commission help facilitate that courage and getting to those decisions? I think we’ve got to give everything a shot. What’s happening now doesn’t seem to be working…We’ve got to sound the alarm because we’ve been sleepwalking off the fiscal cliff and we’re numb to the trillions of dollars and the young people, they’re especially numb to it because to date we’ve had the reserve currency. We still have it today. But when the dominoes start falling, it’s hard to put all the pieces together again, right? So at a minimum, at a minimum, this commission can sound the alarm and have a national campaign to tell the American people and generations of Americans what’s going to happen if they don’t put pressure on us to have the political will to do the right thing for them.
Romney: We’re going to sell our treasuries as long as we’re the reserve currency of the world. A famous person in a wonderful book once said, “in terms of going bankrupt, first, you go slowly and then you go suddenly.” And so, this is something we’re going to have to deal with at some point. I hope it’s not real soon. But we have to deal with and we need to be responsible enough. And we were elected to deal with the challenges we face. This is clearly one of them. Thank you, Mr. Chairman.