Senate Budget Committee Chairman Mike Enzi is under pressure to achieve nothing less than balance by 2025. GOP is warned: '$5.5 trillion to get us to balance in 10 years'

Senate Budget Committee Republicans got a taste of things to come Wednesday as witnesses warned it will take $5.5 trillion in deficit reduction to bring the government into balance in a decade and the GOP can’t afford to take its eye off economic growth.

“It will be about $5.5 trillion to get us to balance in 10 years,” Maya MacGuineas, president of the Committee for a Responsible Federal Budget told the panel. “Just to put that in perspective that’s eight times the size of the [2012] fiscal cliff deal and it’s 65 times the size of the [2013] Ryan Murray deal which you recall we didn’t stick to for very long.”


MacGuineas’ testimony was the clearest measure yet of the scope of the job ahead for Republicans next week when they are slated to mark up their fiscal 2016 spending and tax plans in the House and Senate. Both Senate Chairman Mike Enzi (R-Wyo.) and his House counterpart, Rep. Tom Price (R-Ga.) are under pressure to achieve nothing less than balance by 2025. But that’s a huge undertaking given the splits in the party over defense spending and the GOP’s reluctance still to include new revenues.

MacGuineas appeared to be gently pushing the committee toward smaller, though still very ambitious, deficit-reduction targets to stabilize the level of debt or bring it down as a percentage of the economy. And a second witness, Mark Blyth of the Watson Institute for International Studies at Brown University, warned that Republicans must learn from the experience in Europe where he said too much austerity worsened budget problems by stifling growth.

“The more they tightened, the more debt they got because the underlying GDP got smaller,” Blyth said. “And the same constant stock of debt got bigger rather than smaller.”

Republican senators waxed nostalgic for the 1990s, when the GOP also controlled Congress and achieved welfare reform and a balanced budget with a Democratic president, Bill Clinton.

MacGuineas and Blyth reminded them that the task was made easier then by a combination of events: major tax and spending deals prior to the Republican takeover of Congress, a younger population and what proved to be a booming economy.

“You don’t really have a spending problem. You have a revenue problem,” Blyth said. And that’s exacerbated, he added, by the fact that so much of the U.S. tax code is so geared to income and lacks the more stable value-added tax base of other nations.

“The United States’ tax revenues are particularly susceptible to the economic cycle,” Blyth told the senators. “What that means is that in the late 1990s, global interest rates fell. A lot of countries did well in that period, not just the United States. And because of that, money was cheaper and that opened a lot of bubbles first in tech stocks and then it went into mortgages and the housing market. And when we have these bubbles, revenues go up but they are unsustainable revenues because the base rate of revenue collection is so low.”

For all the grimness there were some touches of humor, as in this exchange between the Scottish-born Blyth and Sen. Angus King, the Maine independent on the Budget panel.

“I bet you never figured you’d come from Dundee and have to listen to a guy named Angus talk about economics,” King told the witness.

“Well, the Scots do secretly run everything, senator,” Blyth said. “We just don’t want them to know it.”

“I’m sorry you let that out of the bag,” King said, laughing.