Senate Hearing Pushes EU Dictatorship for U.S., Too

February 14, 2010 (LPAC)—According to witnesses and Senators speaking at two hearings held by the Senate Budget Committee last week, the European Union's budget and deficit standards should be imposed on the United States as well. The mechanism pushed for this, is to either get the Senate to reverse itself and vote up the Gregg-Conrad bill for an unconstitutional deficit commission to usurp Congress's power, or else to do it through the austerity commission which President Obama has promised to create by executive order.

The drive for the EU standard was explicit at the second hearing, held on Feb. 11, on the topic of "Setting and Meeting an Appropriate Target for Fiscal Sustainability." The point was to try to establish a debt-to-GDP ratio to be used by the austerity commission to enforce brutal spending and entitlement cuts. Everyone agreed that a 60% debt-to-GDP ratio would be the best, along with a 3% deficit-to-GDP ratio—exactly the EU ratios.

(Currently, according to committee chairman Kent Conrad, the public debt is now a bit over 60% of GDP, but the Congressional Budget Office (CBO) projects it to rise to 88% by 2020. The deficit is now at 10% of GDP.)

In her statement to the committee, Alice Rivlin, a former Federal Reserve Vice-chairwoman who now co-chairs the Bipartisan Policy Center's Debt Reduction Task Force, noted that the 60% figure has been approved by both the EU and the International Monetary Fund (IMF). Rivlin also said the 60% figure has been adopted by a number of commissions, including the Peterson-Pew Commission. Likewise, Maya MacGuineas, of the Committee for a Responsible Federal Budget, said that global markets are more likely to embrace a plan with credibility, and she stated in her prepared statement that the 60% threshold has become an international standard, adopted by the EU under the Maastricht Treaty, and also by the IMF.

The third witness, Rudolph Penner, a former CBO director and co-chair of the Committee on the Fiscal Future of the United States, agreed on the 60% figure, and said that a higher ratio "raises the risk of a total meltdown in the market for our bonds," and he warned, "If people want to see what could happen next, they should look to Ireland and Greece." This raises the question, Penner said, "Who would bail us out? The IMF? What would the American people think about having our policies dictated by a lender?" The way to avoid this, he suggested, is a choose a target even lower than 60%.

As with the Tuesday hearing, Medicare was a big target, with general agreement that the "sacred cows" of Medicare and Social Security must be slashed if the targets are to be met. Rivlin pushed for a Medicare Commission, and she predicted that, "in the end, we're going to have to worry about rationing, but I don't think we're going to get there for a couple of decades, probably." MacGuineas likewise, said that comparative effectiveness studies are important, but you have to use them to limit what health care will be paid for. "And I think one of the things, like Alice said, rationing doesn't have to happen immediately, but we can't make it a bad word."