Back to General Resources

The Default on America Act – Senate Budget Hearing

Senate Committee on the Budget

The Default on America Act: Blackmail, Brinkmanship, and Billionaire Backroom Deals

Thursday, May 4, 2023

Topline

  • Democrats asked panelists what the consequences would be if the debt ceiling is not raised.
  • Republicans voiced concerns that raising the debt ceiling will hurt the American economy and that the Inflation Reduction Act (IRA) is hurting the economy due to electric vehicle (EV) incentives.

Witnesses

  • Mark Zandi, Chief Economist, Moody’s Analytics
  • Fred Krupp, President, Environmental Defense Fund
  • Abigail Ross Hopper, President and CEO, Solar Energy Industries Association
  • Brian Riedl, Senior Fellow, Manhattan Institute
  • Jason J. Fichtner, VP and Chief Economist, Bipartisan Policy Center

Opening Statements

Chairman Sheldon Whitehouse (D-R.I.)

In his opening statement, Whitehouse discussed the reckless legislation by the House Republicans, the Limit, Save, Grow Act. He noted that without a sustainable economic trajectory and raising the debt limit, the Department of Defense, veterans’ programs, and health care for 21 million people would be at risk. Whitehouse blamed Speaker McCarthy and House Republican extremists for creating this bill in backrooms and not holding a hearing on such significant legislation. He closed by stating that the debt limit must be raised immediately.

Ranking Member Chuck Grassley (R-Iowa)

In his opening statement, Grassley noted that if Democrats really wanted to help Americans, they would get rid of awful energy policies. He noted that Republicans are taking the right approach and that they care for working Americans. He noted that Democrats waited too long to ask Biden to negotiate the debt limit. He closed by noting that debt is a bipartisan issue.

Testimony

Dr. Mark Zandi, Chief Economist, Moody’s Analytics

In his testimony, Zandi discussed his calculations of when Treasury will run out of money, which he predicts is June 8, 2023. He noted that recession risks are uncomfortably high and that a recession will occur within the next 12-18 months. Zandi briefly discussed how if the proposed bill passes, there will be significant job loss in 2024 and predicted that the unemployment rate would go up to 5% from today’s 3.5%. He encouraged Congress to pass legislation that will increase the debt limit and then pass legislation to fund the government for FY24.

Mr. Fred Krupp, President, Environmental Defense Fund

In his testimony, Krupp discussed how the passage of this bill would threaten the US economy, public health, and the future of clean energy. He noted that we need strong pollution standards from the EPA for robust results and that the Methane Emission Reduction Program (MERP) would be a devastating loss if this bill passes. Krupp mentioned that reducing methane levels is the fastest and most costeffective way to immediately slow climate warming, which he noted was of importance.

Ms. Abigail Ross Hopper, President and CEO, Solar Energy Industries Association

In her testimony, Hopper discussed the impact the IRA has had across the country. She noted that the IRA must remain in its current form. Hopper briefly discussed that any threat to the IRA is a threat to the jobs it has created and will continue to create. She applauded the accomplishments of the IRA and noted how it is an engine for job creation in all renewable energy sectors.

Mr. Brian Riedl, Senior Fellow, Manhattan Institute

In his testimony, Riedl discussed the unsustainability of the current debt path and noted that it requires immediate attention. He noted that the debt limit will ultimately need to be raised and that the long-term projections for our nation’s debt are even worse than what it is today. He noted that Social Security and Medicare are the main factors that add to our deficit. Riedl closed by saying that the effects on Americans and the economy would be devastating if the debt ceiling is not raised on time.

Dr. Jason J. Fichtner, VP and Chief Economist, Bipartisan Policy Center

In his testimony, Fichtner discussed the need for bipartisan cooperation. He noted that Congress must raise the debt ceiling and that the nation’s debt is on an unsustainable trajectory. Fichtner briefly discussed the fiscal specifics of US debt, and specifically pointed out that the US spent $1.2 trillion on Social Security benefits in the last year alone. He closed by saying that the US fiscal problem is real, and action is urgent.

Question & Answer

Clean Energy & Fossil Fuels

Whitehouse alleged that if this bill passes that the US solar industry will crash. Hopper agreed with this statement and noted that it would be devastating to individuals who received jobs through the industry.

Whitehouse continued to ask how concerning it was that most of the Republican bill’s text was regarding fossil fuel companies and handouts to them directly. Krupp stated that if true and the bill passed, there would be a tremendous increase in pollution and would continue to waste valuable methane gas.

Sen. John Kennedy (R-La.) asked if electric vehicles (EV) are so great, why does the government have to pay people to use them. Hopper noted that like other things, the government uses this monetary incentive to introduce people to a new idea that is also helpful to the environment.

Budgeting for Programs

Sen. Ben Ray Lujan (D-N.M.) asked if programs that primarily help low-income, middle-class, and child development, such as the Head Start Program, be impacted by proposed budget cuts. Zandi said the bill would cut funds from Head Start.

Sen. Alex Padilla (D-Calif.) asked Zandi what would happen to Social Security and Medicare if the government defaults. Zandi said the effects would be devastating and individuals would not receive their checks on time. However, he did note that the money would eventually get to individuals.

Sen. Rick Scott (R-Fla.) asked Fichtner when he thinks the limit of US debt is. Fichtner noted that though this has been a problem for years, the limit will happen in 2033 since that is when the Social Security retirement fund is depleted.

Job Market and Inflation

Sen. Chris Van Hollen (D-Md.) asked if fiscal policy is currently driving inflation. Zandi noted that it is not fiscal policy but the effects of the fallout over the pandemic. Sen. Van Hollen also asked which bill, President Biden’s proposal or the House Republicans’ bill, would cause more job loss. Zandi noted that both would result in some job loss, however, the House Republicans’ bill would be more detrimental.

Sen. Debbie Stabenow (D-Mich.) asked how the environment for small business owners would change in the event of a debt default. Zandi noted that small businesses are already under threat in the current state of the economy, and that without raising the debt ceiling, their struggles will only be exaggerated.

For more information on this meeting, please click here.

For an archive of past SIFMA hearing coverage, please click here.