Rep. John M. Spratt Jr. Holds a Hearing On Responding to a Weakened Economy

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Rep. John M. Spratt Jr. Holds a Hearing On Responding to a Weakened Economy

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HOUSE COMMITTEE ON THE BUDGET HOLDS A HEARING ON RESPONDING TO A WEAKENED ECONOMY

SEPTEMBER 9, 2008

SPEAKERS: REP. JOHN M. SPRATT JR., D-S.C. CHAIRMAN REP. DENNIS MOORE, D-KAN. REP. ROSA DELAURO, D-CONN. REP. CHET EDWARDS, D-TEXAS REP. BRIAN BAIRD, D-WASH. REP. JIM COOPER, D-TENN. REP. TOM ALLEN, D-MAINE REP. ALLYSON Y. SCHWARTZ, D-PA. REP. MARCY KAPTUR, D-OHIO REP. XAVIER BECERRA, D-CALIF. REP. LLOYD DOGGETT, D-TEXAS REP. EARL BLUMENAUER, D-ORE. REP. MARION BERRY, D-ARK. REP. ALLEN BOYD, D-FLA. REP. JIM MCGOVERN, D-MASS. REP. ROBERT E. ANDREWS, D-N.J. REP. ROBERT C. SCOTT, D-VA. REP. BOB ETHERIDGE, D-N.C. REP. DARLENE HOOLEY, D-ORE. REP. TIMOTHY H. BISHOP, D-N.Y. REP. GWEN MOORE, D-WIS. REP. NIKI TSONGAS, D-MASS.

REP. PAUL D. RYAN, R-WIS. RANKING MEMBER REP. JO BONNER, R-ALA. REP. SCOTT GARRETT, R-N.J. REP. J. GRESHAM BARRETT, R-S.C. REP. MARIO DIAZ-BALART, R-FLA. REP. JEB HENSARLING, R-TEXAS REP. DAN LUNGREN, R-CALIF. REP. PATRICK T. MCHENRY, R-N.C. REP. CONNIE MACK, R-FLA. REP. K. MICHAEL CONAWAY, R-TEXAS REP. MIKE SIMPSON, R-IDAHO REP. JOHN CAMPBELL, R-CALIF. REP. PAT TIBERI, R-OHIO REP. JON PORTER, R-NEV. REP. RODNEY ALEXANDER, R-LA. REP. ADRIAN SMITH, R-NEB.

WITNESSES: FORMER TREASURY SECRETARY LAWRENCE SUMMERS

ALLEN SINAI, CHIEF GLOBAL ECONOMIST, STRATEGIST AND PRESIDENT, DECISION ECONOMICS

DAVID KREUTZER, SENIOR POLICY ANALYST, ENERGY ECONOMICS AND CLIMATE CHANGE, CENTER FOR DATA ANALYSIS, HERITAGE FOUNDATION

[*] SPRATT: This afternoon -- beg your pardon -- welcome to the Budget Committee and today's hearing on our weakening economy and what productive steps we can take to avoid a full-fledged recession and pump up near-term growth.

We're pleased to have a panel that includes Dr. Larry Summers, the former secretary of the treasury and currently Charles Eliot University Professor at Harvard; Allen Sinai, president, chief economist at Decision Economics; and finally, David Kreutzer, senior policy analyst at the Heritage Foundation.

Today, CBS has released its update, despite the consensus forecast, shows a dim outlook on the economy and the budget. On Friday, we will receive the latest jobs data that show unemployment at a five-year high, 6.1 percent. And over the weekend, concerns about the housing and financial markets caused the government to take radical steps to control Fannie Mae and Freddie Mac, secretary (inaudible) affirms that buy (ph) three-quarters of all new mortgage loans made in this country.

Nearly seven months ago, in response to clouds gathering on the economy's horizon, Congress passed, and the president signed, a $152 billion stimulus package with tax rebate for households and businesses. Our personal consumption and economic growth appear to have picked up as a result.

The ticker tape of economic distress signals continues to play out, suggesting that, helpful as it may have been, this stimulus may also have been not enough. The worst thing, that housing and jobs, inflation, the prospect that net exports may not bail us out if the economies of our trading partners continue to slow down, the shoes that keep dropping in the financial sector keep concerning us.

While the economic statisticians give us one measure of the economy, we need to keep in mind that the most important measure is Main Street America, where the measure is clear - Americans are hurting economically in many different ways. And that's why we called this hearing, to consider what else, if anything, the federal government can do and how we can balance short-term assistance with fiscal responsibility.

Boosts to the economy and putting the budget back on track are closely linked. As OMB director Jim Nussle himself noted today, the hike in the deficit from '07 to '08 is due primarily to a weakening economy. The short-term costs of the bipartisan stimulus bill, which we passed to keep the economy from getting any worse, this and increased defense spending claim almost all the difference. We'd like today to get a sense from our witnesses of how much more of an economic storm we have to weather, what are the most effective steps we can take to boost the economy, raise consumer confidence, and to give relief to millions of hard-working Americans who continue to s...

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