Anybody who has ever had to try to get something fixed in a record held by a federal agency knows what a frustrating process that can be. Uncooperative bureaucrats can make life miserable, callers can be transferred from one faceless department to another, and endless forms and reviews can make purgatory look like a better place.
But take heart because sometimes congressmen run into similar obstacles when questioning high-ranking government witnesses.
Take, for example, the following exchange earlier today between Rep. Jeb Hensarling, R-TX, and Federal Reserve Chairman Ben Bernanke, concerning the national debt:
Hensarling: “As you well know, Chairman Spratt, Ranking Member Ryan, myself, serve on the President’s Fiscal Responsibility Commission. You testified at our first meeting.
“At our second meeting we received testimony from Dr. Carmen Reinhart at the University of Maryland who presented I believe the most exhaustive study of debt crisis that I am aware of, covering 44 nations over 200 years. She has come across with the conclusion to her study that when nations have a debt to GDP ratio of 90 percent they will actually lose economic growth.
“Her study says, I believe, that the average was 1 percentage point, so if your economic growth was averaging 3 percent it would fall by one-third to 2 percent. I think her study also showed that in the US, in our nation’s history, we actually have received negative economic growth at those points where debt to GDP has reached 90 percent.
“By a back of the envelope calculation gross debt in the US to GDP is now 89 percent. I know debt held by public is closer to 60 percent. My question is are you familiar with the professor’s study, are you familiar with her conclusions, and do you agree or disagree?”
Bernanke: “I am familiar with her study, and I would say her book with Ken Rogoff on debt crisis and financial crisis is an extraordinary piece of work that includes analyses of, as you say dozens of crisis. On this particular issue, I agree with the general point that as debt increases, interest rates increase, that tends to make loans more costly, tax rates go up.”
Hensarling: “I’m sorry since time is limited, specifically gross debt to GDP of 90 percent where we are essentially at that tipping point now, do you believe the US is at a tipping point with respect to its debt?”
Bernanke: “I don’t think there is anything magic about 90 percent; however, I do think that if we were to go out, as say as the CBO’s alternative scenario projects, then debt and interest payments are going to get explosive in 10-15 years, and so I believe that we are in a situation where we need to be paying very close attention to our fiscal sustainability.”
Hensarling: “In your testimony you speak about the European leaders, in your written testimony that European leaders “have put in place a number of strong measures countries under stress have committed to address their fiscal problems.” I think it was yesterday, perhaps the day before, the new Prime Minister of the UK said the state of Britain’s finances were “even worse than we thought” and warned of “painful and unavoidable cuts.”
“Germany’s Chancellor Merkel was quoted as saying Germany faces “serious difficult times.” They announced a rather sizable group of spending cuts to deal with their spending crisis, which she said were “necessary for the future of our country.” When I look at Germany’s deficit to GDP ratio, the UK’s deficit to GDP ratio it seems to be comparable to our own.
“When I look at their debt to GDP ratio in Germany and the UK, again it appears to be comparable to our own in dealing with gross debt. I’m just curious, do you appear to be complimenting the European leaders for taking strong stands, yet do you see similar strong stands being taken by this particular Congress to reign in the debt?”
Bernanke: “Countries have a different amount of fiscal capacity if you will. Countries like Greece, which are clearly being shut out from the market because of their debt and deficit ratios, need immediate and sharp changes in their position. The United States, as I said in my remarks, is favored in that we are a safe haven currency, we are a large diversified economy, and we have a long record of paying our debts and paying our interest.
“So we have a little more breathing space, but potentially, I don’t know exactly how much we have. What I’m trying to say, and I don’t disagree with you, is that we need a program for returning our trajectory of fiscal policy to a sustainable amount.”
Hensarling: “Chairman Bernanke, my seconds are ticking away, I thought I heard you testify before that not only is it important to the long term sustainability that we have a program to deal with our debt, but it’s actually important to economic growth today to send a signal that we have a plan in place. Did I understand you correctly? Is it important to have a plan in place today?”
Bernanke: “You did. A plan in place today will help keep interest rates down and help growth be stronger in the near term.”
Hensarling: “Thank you, Chairman.”
