Sen. Kent Conrad Holds a Hearing On the Congressional Budget Office's Budget and Economic Outlook

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Sen. Kent Conrad Holds a Hearing On the Congressional Budget Office's Budget and Economic Outlook

U.S. SENATE BUDGET COMMITTEE HOLDS A HEARING ON THE CONGRESSIONAL BUDGET OFFICE'S BUDGET AND ECONOMIC OUTLOOK

JANUARY 24, 2008

SPEAKERS: SEN. KENT CONRAD, D-N.D. CHAIRMAN SEN. PATTY MURRAY, D-WASH. SEN. RON WYDEN, D-ORE. SEN. RUSS FEINGOLD, D-WIS. SEN. ROBERT C. BYRD, D-W.VA. SEN. BILL NELSON, D-FLA. SEN. DEBBIE STABENOW, D-MICH. SEN. ROBERT MENENDEZ, D-N.J. SEN. FRANK R. LAUTENBERG, D-N.J. SEN. BENJAMIN L. CARDIN, D-MD. SEN. SHELDON WHITEHOUSE, D-R.I.

SEN. BERNARD SANDERS, I-VT.

SEN. JUDD GREGG, R-N.H. RANKING MEMBER SEN. PETE V. DOMENICI, R-N.M. SEN. CHARLES E. GRASSLEY, R-IOWA SEN. WAYNE ALLARD, R-COLO. SEN. MICHAEL B. ENZI, R-WYO. SEN. JEFF SESSIONS, R-ALA. SEN. JIM BUNNING, R-KY. SEN. MICHAEL D. CRAPO, R-IDAHO SEN. JOHN ENSIGN, R-NEV. SEN. JOHN CORNYN, R-TEXAS SEN. LINDSEY GRAHAM, R-S.C.

WITNESSES: PETER ORSZAG, DIRECTOR, CONGRESSIONAL BUDGET OFFICE

[*] CONRAD: (OFF-MIKE) your being here and your service as the director of the Congressional Budget Office.

I know you've already had a chance to testify over on the House side and, also, in the Finance Committee on the stimulus package. So you've been very busy to start the new year. But we welcome you to the Senate Budget Committee, as well.

Let me just go through, quickly, a couple of slides to put in perspective circumstances we find ourselves in. We have had substantial deterioration in the budget picture. You can see, last year, we had a deficit of about $163 billion. This year, when we take the CBO baseline and we add back more spending that's not in the CBO baseline and the effects of the proposed stimulus package, we see a deficit this year approaching $380 billion.

But that tells just one part of the story. We also see the debt going up substantially more than the deficit. And as I travel around, I find enormous confusion among the public about the difference between the deficit and the debt. The biggest difference between these figures, of course, is the Social Security Trust Fund money that is being used to pay regular operating expenses of the federal government.

That's money that will have to be paid back, but it does not show in the deficit calculation. It's nearly $200 billion. But it is all added to the debt.

Let's go to the next slide, if we can. We look at the CBO deficit estimate and we put with that the president's policies, that is, the extension of the tax cuts and additional war costs, and we see that by 2018, we would face a deficit of nearly $600 billion.

If we can go to the next slide. All of this leaves us with a picture of ever escalating debt. The debt, gross debt of the United States was $5.8 trillion at the end of 2001. At the end of 2009, which will be the last year that the president's budget will have been operational, we anticipate now the debt, gross debt of the United States will be $10.3 trillion, and we're headed, by 2013, for a gross debt of over $13 trillion.

Let's go to the next slide, if we can. And if we look at an even more extended picture, according to CBO, the federal debt absolutely soars on the long-term budget scenario going out to 2058. This is a result largely of the retirement of the baby boom generation and the pressure on Medicare and Social Security.

And I hope that we will have a chance to have some discussion today about the absolute need to face up to these long-term imbalances, these shortfalls in the entitlements, and the disconnect between revenue and expenditure, at least proposed expenditure.

I'd like, also, just to put in perspective economic conditions that we face, the housing slump. We see that the sales of new family homes has fallen dramatically. We continue to see fallout from the sub-prime crisis and the other credit markets. We have seen certainly serious effects in the financial markets.

This is a ...

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