Feb.15th 2011 Senate Banking Committee Hearing with Rep. Mulvaney and Jacob Lew, Obama’s Budget Director

After President Obama released his new $3.7 Trillion budget on Monday Feb. 14th 2011 --- which forecasts deficits for 2011 at $1.6 trillion and $1.1 trillion for 2012 --- his budget director, Jacob Lew, gave testimony to the Senate Budget Committee on Tuesday Feb. 15th 2011. During the Senate Budget Committee hearing, Rep. Mick Mulvaney of South Carolina’s  5th district points out: “These numbers just aren’t realistic and it’s not a credible document.”  Rep. Mulvaney questioned the assumptions that the revenues and growth in the budget forecast were based on.  In short, as massive as the budget numbers are, it is still hiding the reality of its size and scope. It is important that you read the testimony...

 

Feb.15th 2011 Senate Banking Committee Hearing with Rep. Mulvaney and Jacob Lew, Obama’s Budget Director.

Rep Mick Mulvaney of South Carolina’s fifth district points out what many are starting to realize: These numbers just aren’t realistic.

Mulvaney alleges results oriented accounting and said that the President’s budget is “not a credible document.” Mulvaney says “two years ago he told us the deficit this year would only be $900 billion dollars in his budget. Last year he told us the deficit this year would be $1.3 trillion dollars. Yesterday he told us it was $1.6 [trillion]. Two years ago he told us that the projected that the budget deficit next year would be $557 [billion]. Last year he told us that number would be $829 [billion]. Now he is telling us the number is going to be $1.1 [trillion].” Mulvaney concluded that “we can’t believe the numbers.” In other words, fool me once — shame on you. Fool me twice — and our national debt doubles in ten years.

Additionally, Mulvaney contends, “If GDP growth is lower than expected by one percentage point, and if borrowing rates are one percentage point higher, the President’s deficits would increase by $1.7 trillion.”

In short, as massive as the budget numbers are, it’s still hiding the reality of its size and scope. Luckily, Mulvaney wasn’t having any of it and the result is a verbal beat down of White House Budget Director Jack Lew and the Obama administration.

 

Rep. Mick Mulvaney: Thank you Mr. Chairman. Mr. Lew, I’m also one of the folks who is new around here but I’ve played with budgets, I’ve written them, I’ve read them, and I can assure you sir that if you let me play around with the assumptions I can make you a budget that looks as good or as bad as I want it to...

OMB Director Jacob Lew: Mmm hmm.

Rep. Mick Mulvaney: ... um... looking at your assumptions regarding the revenues in the future and... you’ve assumed essentially that revenues will become about 19% of GDP in the next couple of years, and then steadily increase, over the course of your budget, peaking out at about 20%. This is the historical numbers, going back to the 1960s, and I suggest to you sir, or I would ask for, are you making an assumption that we’ve only seen once or twice in the last 40 years Jacob Lew: You know I... the revenue projections are based on a combination of current law and specific proposals, um... and it’s driven by what’s happing in the economy overall... Rep. Mick Mulvaney: but the truth of the matter, and I hate to cut you off but you realize that we’re under a tight... a tight time, here, is that you’re assuming numbers that are... you’re assuming the numbers will be average. Nineteen percent, nineteen percent, twenty percent... and we’ve only seen that sporadically, once, maybe twice, in the last forty years. You take a look at the GDP, ah... another one of your assumptions, Mr. Ryan mentioned it earlier, the Washington Post beat you up on it today, umm... you’re assuming rates of growth in the economy that dramatically exceed even what the CBO is assuming. Against that backdrop, you are also assuming interest rates dramatically lower than the CBO. I would suggest to you sir that to assume growth rates that are higher but interest rates that are lower is internally inconsistent and I draw your attention to the fact that you’ve a... you assume an interest rate on the ten-year treasury note of this year of three percent. Do you know what the ten-year traded at last week?

Jacob Lew: I did not check the T-bill rates last week.

Rep. Mick Mulvaney: 3.65 [percent]. And your assumption is that it will be three percent this year. The CBO, by the way, says that it will be 3.4 [percent]; they’re already too low. The CBO also testified that for every percentage point that they assume the interest rate is too low, its $1.3 trillion of additional debt over the course of the ten years. You’ve assumed revenues that are traditionally way higher than average, GDP that is higher than anybody else thinks, interest rates that are dramatically lower than anybody else thinks, and I put it to you sir, that that is the reason that this is not a credible document. And I go back, and I look at the past couple of budgets that the President has offered. Two years ago he told us the deficit this year would be $900 billion, in his budget. Last year he told us the deficit this year would be $1.3 trillion. Yesterday he told us it was $1.6 [trillion]. Two years ago he told us... he projected that the budget deficit next year would be $557 [billion]; last year he told us that number was going to be $829 [billion]; now he’s telling us the number’s going to be $1.1 [trillion]. I can’t believe the numbers; I can’t do it. And until we can get numbers that we can agree on are at least in the middle of the assumptions it’s going to be very difficult for us to focus on policy. Is it a question? No sir, it’s not. Am I beating up on you? Perhaps unfairly so. The point is this. We should be here talking about policy. We should be here talking about what the President wants to do to fix the country, and what we want to do to fix the country. I happen to be one of those Republicans who does not believe that the President doesn’t want the country to succeed...

Jacob Lew: Mmm hmm.

Rep. Mick Mulvaney: ... I believe that he does. We have to have a discussion about policy, and when you give us numbers that are simply not credible, it really prevents us from doing that. I expect...

Jacob Lew: Can I respond to this quickly?

Rep. Mick Mulvaney: Very briefly, I expect better out of you...

Jacob Lew: Yea...

Rep. Mick Mulvaney: ... I’ve already told... spoken with the chairman, I expect better from us, when you see our budget you’re not going to see unreasonable assumptions, but yes, you may...

Jacob Lew: The economics of... in this budget... reflect what is the middle... in terms of where the Federal Reserve Board looks at what the likely patterns of recovery are. So, there are mainstream assumptions...

Rep. Mick Mulvaney: Well you need to walk over to the CBO that their numbers are whacked out.

Jacob Lew: and there is... there is a conceptual difference between the CBO numbers and ours, where they believe the economy never gets back to the level of strength that it had before the recession. That hasn’t been the experience of past recessions, even financially-lead recessions, it’s taken longer, but we’ve gotten back. So there may be year-to-year disagreement, but we think we have very credible economic assumptions, and I’m happy, when we have more time, to go through them in some detail.

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