WASHINGTON – House Budget Committee Chairman John Spratt made the following opening statement at the committee’s mark-up of the FY 2010 Budget Resolution.

President Bush has left President Obama a hard hand to play: an economy in crisis and a budget in deep deficit — in deficit this year alone by $1.752 trillion according to OMB. President Obama has responded with a budget that meets the challenge head-on. Today we mark up a budget reflecting his major priorities.

The President has recognized that we have not one but two deficits. The first is an economy running at 6.8%, or one trillion dollars below its potential. To move our economy closer to its capacity, the President has signed into law a package of stimulus measures, totaling $787 billion. Here’s what the Congressional Budget Office (CBO) says in its Analysis of the President’s Budget, issued a week ago: “…the adoption of the American Recovery and Reinvestment Act and very aggressive actions by the Federal Reserve and the Treasury will help end the recession this fall.” (CBO’s Preliminary Analysis of the President’s Budget, March 2009, page 19).

The President next turned to the budget. He has sent us a budget to cut the deficit by half by 2013, from $1.752 trillion this year to $533 billion in 2013, according to OMB estimates. It’s all but impossible to balance the budget when the economy is in recession, and for that matter, it’s also unadvisable. Much of what we do to make the economy better necessarily makes the deficit larger, at least for the short run.

But here’s the stark reality: the deficit that President Bush left behind will constitute a massive 12.3% of our Gross Domestic Product, at least two-thirds of which stems from tax and spending policies undertaken by the Bush Administration. Almost everyone would agree that this is an unsustainable deficit.

President Obama has responded with a budget that will pare the deficit down to 3% of GDP in 2013. His budget cuts the deficit by more than half in four years. The budget embodied in this mark uses CBO numbers and reduces the deficit to $586 billion in 2013, which is 3.5% of GDP, and roughly the rate of growth in the economy for that year.

The President’s budget is not so committed to deficit reduction that it overrides other needs. In fact, it takes on topics that earlier budgets have found too tough to tackle, like health care for the millions of Americans without insurance. On top of that, it puts defense spending on a more sustainable path, with an increase of 4%.

In spite of deficits, the President’s budget launches initiatives to make our economy more productive and our people more competitive: first, in education and in Pell Grants in particular; next, in health care for the millions uninsured; and finally, in alternative energies to reduce our dependence on foreign oil and the depletion of our environment. This mark upholds those priorities.

Critics will single out instances where additional revenue is raised in the President’s budget. But the bigger picture will show that this budget extends the middle-income tax cuts adopted in 2001 and 2003: the 10% bracket, the child tax credit, and marital penalty relief. It indexes the alternative minimum tax to keep it from burdening middle-income taxpayers for whom it was never intended. It also extends estate tax exemptions at the 2009 levels, and it indexes the exemptions for future years.

Our colleagues on the other side of the dais have complained about the President’s tax and spending policies. But let me read from the CBO’s non-partisan analysis of the President’s budget: “Proposed changes in tax policy would reduce revenues by an estimated $2.1 trillion (or 6.1 percent) over the next ten years.”

The President’s major initiatives--- those in health care, energy, education, and the environment---are all implemented via reserve funds, and I would stress, these funds are all deficit neutral.

The mark before you sounds all of these themes, and with a few exceptions, embraces the President’s budget. This is just the beginning, but a bold beginning for the 2010 five-year budget process.

This mark is in the form of a five-year budget, using CBO’s scoring and CBO’s estimate of the economy. OMB has projected its budget over ten years, but a five-year budget is not unusual. In fact, it’s the customary time-frame for budgeting. In recent years, four deficit-reduction plans been enacted, and all implemented less than 10-year budgets:
• Gramm-Rudman-Hollings, 1985-86
• Bush Budget Summit, 1990-91
• Clinton Budget, 1993
• Balanced Budget Act of 1997

The farther forecasts run into the future, the more tenuous they become. It is hard enough to project the economy ten months out, much less ten years. Five-year forecasts are, therefore, more realistic, and if the projected results do not pan out, more amenable to adjustment.

All projections rest on assumptions about the future, and the underlying assumptions can have a large impact on the bottom-line. For example:
• Will our military still be deployed in Iraq and Afghanistan ten years from now?
• When will the economy bounce back? Real estate and automotives are key sectors of our economy. When will they regain their potency?

To see how uncertain projections can be, look at CBO’s recent experience. Just since January, CBO’s estimate of the deficit is off by $400 billion for this year. Or look at the long-run, because small differences compound over time into big differences.

The congressional budget process is an annual process, and therefore it’s an iterative process. Since we revisit the budget every year, we can continually take steps to correct its course. For our part, I tell you we have our eye on the second five years, and as we approach 2015 and 2016, we will be making corrections to see that the deficit stays on a downward trajectory. But those corrections can be made better when our economy has emerged from recession.

The fiscal situation we face today stands in marked contrast to the fiscal situation the Bush Administration faced eight years ago. Under President Clinton, the budget was balanced in 1998 for the first time in nearly thirty years. From 1998 to 2001, some $400 billion in Treasury debt was paid off. The year before President Bush took office, the budget ran a surplus of $236 billion. But during eight years on his watch, budget deficits roared back, government debt all but doubled, and spending grew dramatically.

Instead of inheriting a surplus, President Obama inherited a record deficit, $1.752 trillion this year, according to OMB. At least $1.3 trillion is a carryover from the Bush Administration. On top of that, the economy is mired in the worst recession since the 1930s. When he took office in 2001, President Bush took control of a ten-year surplus projected by OMB at $5.6 trillion. We warned President Bush that though he was sitting on an island of surpluses, he was surrounded by a sea of red ink. We thought these surpluses should be used to pay off outstanding government debt. This would have increased net national saving, and rendered the Treasury more solvent to meet the claims of the baby boomers for Social Security and Medicare. President Bush told us we could have it all—guns, butter, and tax cuts too, and never mind the deficits. Eight years and $5 trillion dollars of debt later, the country is confronted with the worst deficits in our peace-time history.

The Chairman’s mark builds upon the support for education in the Recovery Act and supports the President’s proposals for further investments in educating Americans, from early childhood through post-secondary education and training. It accommodates the President’s proposal to further expand access to college for more people – only about 40 percent of Americans aged 25 to 34 have a college degree – by continuing to raise the maximum Pell grant award, paid for by spending cuts elsewhere in the budget. It also could support other assistance that will help more low-income high school graduates afford, attend, and complete college. Our budget also invests in educating our youth, starting with support for the President’s new initiatives in early childhood education through effective approaches to making sure all children learn and achieve in elementary and secondary school.

The mark reflects the President’s commitment to increase America's energy independence and energy security. It builds on significant funding and tax incentives in the Recovery Act by increasing our investments in renewable energy and energy efficiency. It also allows for legislation that will promote energy independence over the long term.

The Chairman’s mark puts the budget back on a fiscally sustainable path while advancing key priorities in health care, energy, and education. These are goals that the American people support, and I urge the Committee to adopt the resolution.