Stress Test on Feds
by Kevin Boland
Issue 133 - June 10, 2009

We’ve heard a lot from the Obama Administration lately about “stress tests” for banks.

What would happen if we gave the federal government a “stress test” of its own? And what is the likely impact of the binge of new spending, taxing and borrowing upon which Washington has embarked since January 2009?

After consulting with the Republican staff of the Joint Economic Committee, House Republican Leader John Boehner (R-OH) announced the results of his own mock “stress test” on the federal government. As Boehner explained:

Last week, the Administration released the results of a ‘stress test’ for our nation’s financial institutions. After the Medicare and Social Security trustees released their ominous report earlier this week and Vice President Biden attempted to spin the Democrats’ massive ‘stimulus’ bill yesterday, I wondered: How would the federal government fare if we applied a stress test to it?

Could the federal government pass a “stress test” if we gave it one? And does anyone really think the budget recently passed by Congress, which features sharp increases in spending, taxing, and borrowing, will result in less “stress?” Consider these facts :

• Gross Domestic Product (GDP) was down 6.1 percent last quarter.
• Unemployment has reached 8.9 percent, with about 2.5 million jobs lost this year alone.
• Last month, when the government usually runs a huge surplus because of Tax Day, Washington ran a $21 billion deficit.
• The national debt has reached unthinkable levels. We’ve racked up more debt this year than the past 200-plus combined.
• The federal budget deficit will be nearly $2 trillion this year, piling even more debt onto our kids and grandkids.
• Medicare and Social Security are on the brink of bankruptcy. When will Washington get serious about entitlement reform?

In Boehner’s words:

Instead of heeding these warning signs, Washington keeps making decisions that put us in further jeopardy. By spending too much, taxing too much, and borrowing too much, they ensure future generations will inherit an even more severe crisis. Instead of working together to put Americans back to work and rebuild their savings, Washington Democrats keep digging the hole deeper.

U.S. House Budget Committee Republicans, led by Rep. Paul Ryan (R-WI), did a similar and more comprehensive “stress test” analysis of the federal government back in March; it can be seen here.

Leader Boehner also credited the Illinois Policy Institute, a state-based think tank, with advancing the idea of conducting a “stress test” on the federal government’s books. The Institute’s own “stress test” analysis, released recently, can be seen here.

Leader Boehner and House Republicans have proposed a better solution: a budget alternative developed by Rep. Ryan that reigns in government spending by freezing non-defense and non-veterans benefits for five years, offers real tax relief to American families and small businesses, and reforms Medicare and Medicaid to make them sustainable.

Kevin Boland works for Minority Leader John Boehner