A group of bipartisan experts testified before the House Financial Services Committee on Tuesday warning that Congress must act to address the coming debt crisis.
The House held the first in a series of hearings on "Why Debt Matters," to identify solutions to a national debt that currently stands at $17.548 trillion, or roughly $55,000 per American.
Douglas Holtz-Eakin, president of the American Action Forum and former director of the Congressional Budget Office (CBO), cited the latest CBO projections in painting a dire picture for economic growth.
The report found that tax revenue would remain high over the next 10 years above 18 percent of GDP. However, the federal government will spend $48 trillion "maintaining spending levels over 1.6 percentage points above historical levels."
Meanwhile, mandatory spending will exceed 62 percent of the federal budget, and interest payments on the debt will double in the coming decade, to nearly 15 percent.
"While we can put our heads in the sand for a few years and talk about declining deficits, the demographic freight train caused by baby boomers is still coming," said David Cote, the chairman and CEO Honeywell, a Fortune 100 technology and manufacturing company.
"In 2025 we’ll be spending $1 trillion a year just in interest," he said. "So how do you put $1 trillion into perspective? If you had spent a million dollars a day since Jesus Christ was born, 2,013 years ago, you still would not have spent a trillion dollars, and that will be our annual interest bill. It’s unconscionable."
Cote said the problem is not just for those on Wall Street. Rising interest rates will affect home mortgages, and car loans. "Families will have fewer dollars," he said. "It’s a main street problem."
"Make no mistake: this debt crisis is a spending crisis," said Rep. Randy Hultgren (R., Ill.). "I have four children and I refuse to stand by while Congress sacrifices their future, and that of my constituents, because it didn’t address our spending addiction or place our entitlement system on a sustainable footing."
Ranking Member Maxine Waters (D., Calif.) said Republicans are using the debt as "an excuse to slash funding for important government programs."
After blaming the rising debt on the Bush tax cuts, the Iraq and Afghanistan wars, and the financial crisis, Waters said, "I really don’t want to dwell on that." She then shifted her focus to "stimulating the economy," as a means to fixing the debt crisis.
Since taking office in January 2009, the national debt has risen $6.931 trillion under President Barack Obama, according to the Treasury Department. In two terms under President George W. Bush the debt increased $4.899 trillion, from $5.728 trillion in January 2001 to $10.627 trillion when he left office.
A majority of the committee Democrats agreed with Jared Bernstein, the former White House economic adviser to Vice President Biden, who was the only witness to refuse to say that the nation is on an unsustainable path.
"This is only the case if policy makers fail to undertake further steps to put the debt on a sustainable path," he said. Bernstein predicted that the unemployment rate would never rise above 8 percent if the 2009 stimulus was adopted, and has said the over $800 billion law was not big enough.
During the hearing Bernstein also said he views the famous phrase from the Communist Manifesto—"From each according to his abilities, to each according to his needs"—"generally favorably," after questioning from Rep. Mick Mulvaney (R., S.C.).
Dr. Alice Rivlin, a senior fellow at the Brookings Institution, said that the debt should be back in the spotlight.
"A couple of years ago we all seemed obsessed by deficits and debt and now the issue has dropped from conversation," she said. "People sort of say, ‘Oh, didn’t we solve that?’"
"Well, no, actually we didn’t," Rivlin said.
Rivilin said the debt-to-GDP ratio is still much too high, and it is a "practical problem" that can only be fixed on a bipartisan basis. Cote agreed, saying, "We shouldn’t wait for a crisis to act on our long-term debt, we should start acting now."
Mulvaney is pessimistic that the debt will be pared back under President Obama.
"We’re not going to fix this," he said. "We have a leader in the White House who refuses to engage. Someone who doesn’t even—many members of this committee don’t even know who their White House liaison is. You’re not going to solve this problem without leadership."
"[The Democrats] are not going to convince us that Mr. Bernstein is right, we are not going to convince them Dr. Holtz-Eakin is right," Mulvaney said. "That takes leadership and the type of leadership traditionally in this country has come from the White House, whether it be Ronald Reagan or Bill Clinton, we’ve had a president who was willing to engage on the difficult issues to try and drive some sort of resolution to very, very complicated issues."
Chairman Jeb Hensarling (R., Texas) ended the hearing by noting that, according to the debt clock, the national debt had risen $385 million during the witnesses’ testimony.
"I wouldn’t take it personally," he said.