Top Moments from House Budget Committee’s Hearing on a 3% Deficit-to-GDP Framework

Top Moments from House Budget Committee's Hearing on a 3% Deficit-to-GDP Framework

Top Moments from House Budget Committee's Hearing on a 3% Deficit-to-GDP Framework

WASHINGTON, D.C.- Yesterday, House Budget Committee Chairman Jodey Arrington (R-Texas) held a hearing entitled, "The Best Metric to Reverse the Curse: A 3% Deficit-to-GDP Path to Fiscal Sustainability." The hearing examined the nation's unsustainable debt and the urgent need to adopt a 3% deficit-to-GDP framework-a clear, achievable target to put America on a path to balance.

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On Setting a Realistic Path to Stabilize Debt with 3% Deficit-to-GDP Framework

Maya MacGuineas, Committee for a Responsible Federal Budget: We all know the federal budget is on an unsustainable trajectory. There are too many scary numbers and facts to list. Right now, I'm pretty consumed with the fact that we spend more on interest than we do on national defense-also that we spend $6 per senior on every $1 we spend on children-and also that right now interest payments run about $7,300 per household on average...

The Committee for a Responsible Federal Budget is very supportive of the fiscal target effort because a 3% deficit target helps break the stalemate in a number of ways. First, we need to have budgets in order to reflect our values, lay out strategic plans, and resolve competing priorities. Given that our resources are not infinite, budgets need to have some form of restraint-something we currently don't have. So, picking a target is a necessary first step.

Second, there is no magic number. I admit 3% is higher than I would like in a perfect world but given our current abysmal fiscal situation-we are in a very deep hole-it strikes the sweet spot between what's desirable and what is possible. We need a metric aggressive enough to reassure markets and lenders, but realistic enough that lawmakers will not just throw in the towel or resort to gimmicky workarounds. So, given its balance between meaningful and doable, we believe the 3% appears to be the closest thing to a Goldilocks target that we have.

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On the "Single Biggest Reason" for Our Debt Trajectory

Rep. Blake Moore: But the single biggest reason we are in the debt situation that we are, Mr. Couchman, is because for the last 50 years, the makeup of our spending has flipped.

In 1965, over 70% of our budget was discretionary. We voted on it every year. That portion of the budget-that 70%-has not grown wildly out of control. It's grown at less than 3% over the course of those 50 years. Why? Because we vote on it every year.

What's grown was, in 1965, just that quarter of the budget on a few mandatory programs. It has now grown to an extremely high portion of the budget. It now constitutes over 77%. And within the next few years, 80% of our budget will not be voted on by Congress unless we make one change.

Would you like to explain a little bit more about the Comprehensive Congressional Budget Act?

Mr. Kurt Couchman, Americans for Prosperity: Absolutely. And the spending side is exactly as you described, and then the revenue side is entirely outside of the annual process as well. And you're absolutely right to point out that we need to be competitive internationally. We need to continually improve ourselves or we're going to fall behind.

But we don't do that except in leaps and bursts every eight or ten years. We should be doing it every single year.

And the Comprehensive Congressional Budget is an incredible piece of legislation that you have offered that would give every committee the opportunity to manage the programs it has jurisdiction over, much like the appropriators already do. And by the way, that would help the appropriations bills succeed on time every year because so many other people would have skin in the game-would have a stake in the success of the annual process.

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On Building Bipartisan Momentum for a 3% Target

Rep. Lloyd Smucker: But the real value here today, if we're able to do this, is that we could reach a point where, on a bipartisan basis, we advance something like this out of the Budget Committee. It may be the first time a bipartisan group of members of Congress put forward a resolution, all coming together and recognizing: "We do have a problem. We get it," as the chairman said. Both parties have contributed to it. We get it that all solutions have to be on the table.

If we could just come together and say, "We've got to somehow work through the differences we have in policy to begin to address this, to do what's right for the American people, to stabilize our economy, to avert a debt crisis that would hurt the poor we want to help." If we can make that statement as a committee on a bipartisan basis and then pass that on the House floor, I think that would be a huge first step...

If we stay together as a committee and recommend moving this to the floor, recommend that the House take this up, hopefully the Senate takes it up, and we as a body finally realize that when you're spending a trillion in debt-if you want to help people-think about that. That's a trillion dollars that could be going to other people. And consider the risk we're putting ourselves in as a country to be able to address the challenges we have, and the burden we're placing on future generations.

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On the Urgent Impacts of High Public Debt and the Need for Action

Jonathan Burks, Bipartisan Policy Center: Our growing debt puts upward pressure on interest rates, which in turn impact every corner of the economy. Elevated mortgage rates are putting homeownership out of reach for far too many Americans, while the increased cost of debt makes it harder for new housing development to be profitable, for child care centers to cover operating costs, and for new energy infrastructure or private health care investments to make financial sense.

As our debt grows, the risks compound. Net interest spending on the national debt now consumes nearly one-fifth of all tax revenue and represents the second-largest category of spending after Social Security. A rising stock of debt makes the budget more sensitive to interest rate shocks and increases the risks that our lenders could lose faith in the federal government's ability to repay our debt without high inflation.

We need to actively pursue solutions, which is why I commend the committee for its historic support for establishing a bipartisan fiscal commission. Building on the legacy of prior efforts like the Domenici-Rivlin Commission that we hosted at BPC, such a commission would be a substantial step in the right direction, bringing together bipartisan, bicameral negotiators to both engage the public and present Congress with an actionable plan to stabilize the debt.

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On Promoting Economic Growth with a 3% Deficit-to-GDP Target

Rep. Buddy Carter: If we reduce our deficit, our federal deficit, to 3% of GDP, it'll help stabilize our debt burden and ensure our debt growth won't outpace economic growth. But Mr. Couchman, I'm going to start with you. Why is the 3% deficit and GDP ratio a notable goal?

Mr. Kurt Couchman, Americans for Prosperity: Right now, the federal government is borrowing 6% of GDP every single year. This would cut that in half and it would make it below the growth rate of the economy, and so the debt burden would stabilize and then slowly decline. It's going to stabilize too high because that debt drag that we're getting from that high debt burden won't come down until we get it down below 70 or 80 percent, but it will avoid worse harm from it going further up.

Rep Buddy Carter: How would our current debt-to-GDP ratio change if this target was sustained?

Mr. Kurt Couchman: In figure one of my written testimony, I have some graphs that show this, the baseline debt projections. So in the CBO baseline, it goes up to dangerous, dangerous levels. With the 3% deficit-to-GDP target, it basically flattens out and then starts to decline, very similar to a path to structural primary balance. And of course, if we were to go to full balance, which is what the resolution that informed this hearing talks about once we've gotten to the 3% deficit target, then it would go down much faster and we'll be able to unleash more of economic growth.

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On the Unsustainability of the Current Fiscal Trajectory

Rep. Andrew Clyde: Now, as our national debt approaches $40 trillion, Washington is long overdue for fiscal discipline. This is no longer just irresponsible-it's dangerous, and it needs to end.

To put this in perspective, this year the federal government expects $5.6 trillion in revenue but plans to spend $7.4 trillion-a $1.8 trillion deficit. More than $1 trillion will go to interest payments alone, funding no services or investments. No private business could operate this way, yet this is our current fiscal path, and it would be much worse if we had not passed the One Big Beautiful Bill.

This trajectory is unsustainable. Global markets will not finance our deficits indefinitely. If confidence in our ability to repay erodes, we risk a sovereign debt crisis with serious negative consequences for pensions, banks, and federal programs.

That is why we need a clear fiscal benchmark to reassure bond markets. Treasury Secretary Scott Bessent, along with financial leaders like Ray Dalio and Warren Buffett, have supported limiting deficits to 3% of GDP to stabilize debt growth and restore credibility.