Ben Bernanke testified before the Senate Budget Committee today. As is the usual practice, ranking Republican Jeff Sessions delivered an opening statement. It provided an excellent summary of the history that has brought us to the current budgetary crisis. It was a challenge to Barack Obama and the Democrats to come up with a credible budget plan, which for three years they have refused to do. And it was about as eloquent as you can be, talking about the federal budget. Here is Sessions’ statement, in its entirety:
Good morning, Chairman Bernanke, and thank you for joining us today. I am eager to hear your thoughts on our financial situation.
The Congressional Budget Office’s new outlook confirms that our deficit will top $1 trillion for the fourth straight year. And the deficits we face in the outyears, the next decade, are even more relentless and systemic.
In just three years, we have accumulated almost $5 trillion in new gross debt – during which time the total number of Americans working has decreased by 1.2 million. We have even fewer Americans working today than more than 11 years ago.
Federal spending, in real dollars, has increased 53 percent in ten years, while real wages for the average American have declined 7 percent.
The government is getting bigger and the middle class is getting smaller.
Yet some in Washington and Wall Street tell us we should delay needed reforms. So the problem I have, the concern I am wrestling with, is that even our financial experts are often very wrong as to the danger facing the American people and our economy.
For example, Secretary of the Treasury Geithner’s comments at Federal Reserve meetings in 2006 indicate that we cannot always be sure that those in positions of leadership see the problem clearly. As America verged on a massive housing meltdown Geithner, then President of the New York Federal Reserve, told his colleagues that “we just don’t see troubling signs yet of collateral damage, and we are not expecting much.” Two months later, he was announcing that “the fundamentals of the expansion going forward still look good.”
Janet Yellin, President of the San Francisco Reserve Bank was perhaps even more enthusiastic. When Chairman Greenspan left, she beamed: “It’s fitting for Chairman Greenspan to leave office with the economy in such solid shape. The situation you’re handing off to your successor is a lot like a tennis racquet with a gigantic sweet spot.”
In 2001, Chairman Greenspan testifying before this committee said that we were looking at more than a decade of surpluses and he wrestled with the question of what we would do after we have paid down our debt.
They were wrong. The minutes show you were also wrong during key periods.
Common sense tells us that more spending, more borrowing, and more debt make us weaker – not stronger. As the last financial crisis proves, the future is hard to predict. But while we can’t predict the day a debt crisis will erupt – or what unknown event might set it off – we do know we are on a collision course. The longer we wait to change that course, to develop a plan for a sensible financial future, the graver the danger becomes.
Yet Majority Leader Reid has closed the ship’s bridge and locked the wheel. He says the Democrat Senate will decline to offer a budget resolution for the third straight year. Not once has this occurred since the Congressional Budget Act was passed in 1974.
I am glad Chairman Conrad will be marking-up a budget in committee. But the mark-up will be a doomed exercise if your own majority leader decrees that the budget process will be shut down. Majority Leader Reid has effectively declared both a Senate Democrat budget – and the President’s budget – dead on arrival.
If they do not take on a different approach then the majority party is failing in the fundamental requirement of leadership. They have basically asked that their Senate leadership be taken away.
The President’s budget submission on Monday will also be a defining test. Either the President will rise to the occasion or he will again shirk his duties and accelerate our dangerous course. The choice is his.
I find it beyond imagining that the President, at this critical time in our nation’s economic life, will not lay out a serious budget plan for our future that will get us off this unsustainable debt path – a path to decline. But he did not even mention in his third State of the Union address the danger of our debt – what his Chairman of the Joint Chiefs, Admiral Mullen – called the greatest threat to our national security. Alice Rivlin, in Kiplingers magazine, was recently very critical of the President’s lack of leadership. Real change will not occur without the leadership of the President and he has not only not led, but has attacked those like the brilliant Congressman Paul Ryan, who has. We must hope the President’s official proposed budget will, at this late date, change our unsustainable debt course. Based on history, I am not optimistic.