Table Of ContentS. HRG. 110–162. Vol. I
CONCURRENT RESOLUTION ON THE
BUDGET FOR FISCAL YEAR 2008
HEARINGS
BEFORETHE
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
January 11, 2007—THE LONG-TERM BUDGET OUTLOOK
January 18, 2007—THE LONG-TERM ECONOMIC AND BUDGET
CHALLENGES
January 23, 2007—THE GROWING TAX GAP AND STRATEGIES FOR
REDUCING IT
January 25, 2007—THE CBO BUDGET AND ECONOMIC OUTLOOK
January 30, 2007—DEFINING OUR LONG-TERM FISCAL CHALLENGES
January 31, 2007—EXPLORING SOLUTIONS TO OUR LONG-TERM
FISCAL CHALLENGES
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Volume I of II
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S. HRG. 110–162, Vol. I
CONCURRENT RESOLUTION ON THE
BUDGET FOR FISCAL YEAR 2008
HEARINGS
BEFORETHE
COMMITTEE ON THE BUDGET
UNITED STATES SENATE
ONE HUNDRED TENTH CONGRESS
FIRST SESSION
January 11, 2007—THE LONG-TERM BUDGET OUTLOOK
January 18, 2007—THE LONG-TERM ECONOMIC AND BUDGET
CHALLENGES
January 23, 2007—THE GROWING TAX GAP AND STRATEGIES FOR
REDUCING IT
January 25, 2007—THE CBO BUDGET AND ECONOMIC OUTLOOK
January 30, 2007—DEFINING OUR LONG-TERM FISCAL CHALLENGES
January 31, 2007—EXPLORING SOLUTIONS TO OUR LONG-TERM
FISCAL CHALLENGES
(
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COMMITTEE ON THE BUDGET
KENT CONRAD, North Dakota, Chairman
PATTY MURRAY, Washington JUDD GREGG, New Hampshire
RON WYDEN, Oregon PETE V. DOMENICI, New Mexico
RUSSELL D. FEINGOLD, Wisconsin CHARLES E. GRASSLEY, Iowa
ROBERT C. BYRD, West Virginia WAYNE ALLARD, Colorado
BILL NELSON, Florida MICHAEL ENZI, Wyoming
DEBBIE STABENOW, Michigan JEFF SESSIONS, Alabama
ROBERT MENENDEZ, New Jersey JIM BUNNING, Kentucky
FRANK R. LAUTENBERG, New Jersey MIKE CRAPO, Idaho
BENJAMIN L. CARDIN, Maryland JOHN ENSIGN, Neveda
BERNARD SANDERS, Vermont JOHN CORNYN, Texas
SHELDON WHITEHOUSE, Rhode Island LINDSEY O. GRAHAM, South Carolina
MARY ANN NAYLOR, Majority Staff Director
SCOTT B. GUDES, Minority Staff Director
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C O N T E N T S
HEARINGS
Page
January 11, 2007—The Long-term Budget Outlook ............................................. 1
January 18, 2007—Long-term Economic and Budget Challenges ....................... 79
January 23, 2007—The Growing Tax Gap and Strategies for Reducing It ........ 131
January 25, 2007—The CBO Budget and Economic Outlook .............................. 209
January 30, 2007—Defining Our Long-term Fiscal Challenges .......................... 257
January 31, 2007—Exploring Solution to Our Long-term Fiscal Challenges..... 337
STATEMENTS BY COMMITTEE MEMBERS
Chairman Conrad.......................................................................1, 79, 131, 209, 257,337
Ranking Member Gregg............................................................9, 91, 138, 217, 264, 415
Senator Grassley ...................................................................................................... 69
Senator Allard .......................................................................................................... 127
WITNESSES
Bernanke, Ben S., Hon.; Chairman, Board of Governors of the Federal Re-
serve System.........................................................................................................93, 98
Bixby, Robert L.; Executive Director, The Concord Coalition..........................347, 351
Brostek, Michael; Director of Tax Issues, Government Accountability Of-
fice......................................................................................................................150, 153
Butler, Stuart M., Dr.; Vice President for Domestic and Economic Policy
Studies, The Heritage Foundation..................................................................401, 404
Furman, Jason, Dr.; Director, The Hamilton Project at the The Brookings
Institute.............................................................................................................388, 392
Greenstein, Robert; Founder and Executive Director, Center on Budgt and
Policy Priorities.................................................................................................266, 271
McIntyre, Robert S.; Director, Citizens for Tax Justice....................................140, 143
Minarik, Joseph J., Dr.; Sr. Vice President and Director of Research, Com-
mittee for Economic Development...................................................................377, 381
Orszag, Peter R., Dr.; Director, Congressional Budget Office..........................218, 222
Reischauer, Robert D., Dr.; President Urban Institute....................................284, 287
Satagaj, John; Sm. Business Legislative Counsel, Small Business Tax
Comliance & Fairness Coalition......................................................................177, 180
Steuerle, Eugene, Dr.; Senior Fellow, Urban Institute.....................................296, 299
Walker, David M., Hon.; Comptroller General of the United State.....................12, 23
QUESTIONS AND ANSWERS
Questions and Answers.................................................................72, 128, 206, 253, 433
ADDITIONAL MATERIALS AND CHARTS SUBMITTED
Testimony, charts, and graphics submitted .......................................................... 64
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HEARING ON: LONG-TERM BUDGET OUTLOOK
THURSDAY, JANUARY 11, 2007
U.S. SENATE,
COMMITTEE ON THE BUDGET,
Washington, DC.
The committee met, pursuant to notice, at 10:34 a.m., in room
SD–608, Dirksen Senate Office Building, Hon. Judd Gregg, chair-
man of the committee, presiding.
Present: Senators Gregg, Domenici, Grassley, Allard, Graham,
Conrad, Murray, Cardin, Sanders, and Whitehouse.
Staff present: Scott Gudes, Majority Staff Director and Mary
Naylor, Staff Director for the Minority.
Chairman GREGG. Let me call this hearing to order, which is—
I am sure some people are saying, what is he doing that for, he is
not in charge any more? They are saying, what is he doing that
for?
Due to the vagaries of the Senate’s arcane rules, I technically am
still chairman, I guess. But that is obviously a technical point. I
look forward to working with Chairman Conrad. We have had a
very good, strong relationship. I very much appreciate his and his
staff’s extraordinarily cooperative and positive approach during my
tenure as chairman. I intend, and our staff intends, to take the
exact same approach and really use his example as our template
as to how we will proceed.
So at this time I will yield to Senator Conrad as chairman and
relinquish my chairmanship, even if it is only technical.
OPENING STATEMENT OF SENATOR KENT CONRAD
Senator CONRAD [presiding]. I thank my colleague. I thank Sen-
ator Gregg very much for the way he has conducted this committee.
Senator Gregg has been an exemplary chairman. He has conducted
this committee professionally and with good humor and with fair-
ness. He gives us all a good example of how committees should be
chaired in the U.S. Senate.
He has also graced this committee with outstanding staff. We
have had just a very good, very positive working relationship on
this committee and we intend to continue it.
Senator Gregg and I have had lengthy discussions about the
enormous fiscal challenges facing the country and our desire that
we enter into a process to be able to address those issues and to
do it this year. Obviously, whether or not that goes forward is at
a higher pay grade than ours. It involves the President of the
United States. It involves the leadership of both the House and the
Senate. But I think it is fair to say that we are prepared to work
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in good faith to try to find solutions to these vexing long-term
issues that, I believe, fundamentally threaten the long-term eco-
nomic security of the country if they are not addressed.
Senator Gregg has repeatedly demonstrated that he is serious
about this. So I very much look forward to the opportunity to work
with him and others of our colleagues to try to address these
issues.
I also want to take this moment to thank and welcome the new
members of this committee. I see Senator Whitehouse is here. We
are delighted to have you.
Sheldon, let me just say to you that when I started on this com-
mittee that is where I was.
Chairman GREGG. No, you were behind the screen.
Senator CONRAD. I was behind the screen.
I also want to welcome Senator Ben Cardin of Maryland, who
served on the Ways and Means Committee and is deeply knowl-
edgeable. We are delighted to have him as a member. Senator
Sanders of Vermont as well.
I also should indicate that Senator Lautenberg, the former dis-
tinguished ranking member of this committee, has agreed to tem-
porarily serve in Senator Johnson’s spot pending Senator Johnson’s
recovery.
Let me say that all of our colleagues are hoping and praying for
Senator Johnson’s full and swift recovery. We have been delighted
by the reports of recent days of Senator Johnson’s progress and we
eagerly await his return. But we so thank Senator Lautenberg for
his willingness, as a former ranking member of this committee, to
come back to temporarily serve in Senator Johnson’s slot.
With that, I want to commend you, Mr. Walker. You are the
head of the General Accounting Office. You could sit in your office
and issue reports and nobody could fault you for that. But really
these circumstances demand more and you are giving more. I want
to publicly thank you. We do not have to agree on every single
thing, every statement you have made. I have had a number of
members of the press closely quizzing me in the last 24 hours, do
I agree with this Walker statement, that Walker statement. That
is not the point. I agree with the overall message that you are at-
tempting to deliver to the Nation they we are on an unsustainable
course and it has simply got to be changed.
Before I go further I want to again thank Senator Gregg for his
assistance in organizing this hearing, because we could not have
proceeded without him as he is still chairman of this committee in
a formal sense. Again, I deeply appreciate the way he has cooper-
ated so we could have this hearing.
Since 2001, the Nation has undergone a dramatic budget deterio-
ration. We all know the pattern; record deficits. But more impor-
tantly, the debt is going up more rapidly than the size of the defi-
cits. This is a point that I think is too often lost. Last year the def-
icit was $248 billion, but the debt increased by $546 billion. I think
this is a point that has too often been lost.
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We are facing a wall of debt. At the end of 2001 the gross debt
of the country was $5.82 trillion. At the end of 2006 that had
mushroomed to $8.5 trillion. And if we continue on the President’s
course we will have the debt soar to $11.6 trillion by 2011.
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