and you quoted, i believe, rogoff and reinhart -- >> reinhart and reinhart. >> the otherses -- [inaudible] >> um, a financial crisis takes longer term. i think that has a little bit of a misconception to most here. they think financial crisis means a bank crisis. but really it means a debt financial crisis. in other words, people at the time this bubble burst were saving nothing in the united states. we were actually showing, we were drawing down our savings which is really unprecedented in our history. so individuals had great personal debt. the government is now running for the third consecutive year trillion dollar debts, and we've taken over huge mortgage problems and liabilities from banks and assumed that on the public sector. so it's a simple thing. you either default on your debt which has an immediate, short-term, painful ramification, or you somehow carry the debt over a longer period of time and try to pay it off and reduce it. and the problem is that when you do that, it's a depressant on the economy. money's being spent not to consume, buy or purchase, but money's being consu

. >> let me say with respect to the reinhart study when they're talking about financial crisis they are talking about not only the circumstances of individual states but also damage to financial institutions including private sector institutions. when you have that kind of dramatic break to the financial markets and damage to the balance sheets of major lending institutions that has an effect on credit going forward. what they found is when you have an explosion of credit as we did before this downturn it in part fueled by federal reserve policy, interest rates kept abnormally low for extended period, fiscal policy, very loose fiscal policy under congress and the administration running massive deficits even then. that combination coupled with lack of regulation of derivatives and explosion of a ig did enormous damage to the financial structures both private and public and exploded debt both public and private and the result is you have got financial institutions with impaired balance sheets which mean they can't extend credit in the same way they normally would and that is what they fin

i have great respect for the rogoff, reinhart analysis. it is an important one, but i think you draw the the distinction for us. your analysis and most of our discussion around the public that. the public debt is 62% gdp, but we've had a number of reference is here to the gross debt, which obviously includes trust funds and so forth. where there's a very different impact because of the full faith credited the united states in printing and so forth. help us understand how that distinction might play out in our deliberations, particularly with the back to the impact on interest rates. i think the public debt is far more impact on interest rates in on the economic judgments, does it not? maybe you can educate us a little on the distinction between them. >> yes, senator. cbo focuses on debt held by the public because we think that is a better measure of the impact of federal borrowing on financial markets today didn't gross debt. of course, any snapshot of what the government does at a point in time will be. complete without looking at where t

herman reinhart and dr. vincent langhart, found in their research, "real per-capita gdp growth rates are significantly lower during the decade following severe financial crisis. in the 10-year window following a severe financial crisis, unemployment rates are significantly higher than in the decade that preceded the crisis. the decade of relative prosperity prior to the fall was importantly fuelled by an expansion in credit and rising leverage that spends about 10 years. it is followed by a link the period of retrenchment that most often only begins after the crisis and lasts almost as long as the credit surge. in other words, we could see a time of low growth and relatively high unemployment for some time because we are recovering from a severe financial crisis, the most severe since the great depression. if we look at private sector job growth, we see it has improved dramatically from where we were in the recession. january 2009, the economy lost more than 800,000 private sector jobs in one month. private

a good body of research done by a couple of economists, carman carmen reinhart and row tkpwo*l tkpwof said if you get a percentage of g.d.p., sustain that, in this country when you lose economic growth, it costs about a million jobs. these high sustained chronic levels of debt to g.d.p., the ratios that we're at and continue to be at today continue to make it more difficult, i think, for our economy to create jobs. that coupled, as i said, with all the new requirements we're imposing on businesses. i just want to mention a couple of things in wrapping up here when i talk about those requirements because in most cases the forgotten 15 that's been passed by the house of representatives do focus on some areas that are costing a lot of money in our economy for our job creators. again, these are 15 bills passed by the house of representatives, all with bipartisan support. none of which have been taken up and acted on here in the united states senate. it seems to me at least we ought to at least have votes on these things. these are things american businesses are telling us they need to get

one was a 2008 study by common reinhart who have come before us in congress and met with a number of us as a part of an expanded gang of six to talk about their research and how they came up with their conclusions. once the country's debt burden -- 90% of the economy, you have a significant downturn in economic growth. they say it is about a 1%-2% drop in gdp. that would it leave us 20% smaller than we would otherwise be. if we do not get our debt to gdp ratio, which is now add 100%, equal the sign of our whole economy, we will continue to create 1 million fewer jobs annually. the pressure of the annual deficit and debt does have an impact short-term in our economy. that needs to be a acknowledged as well as the longer-term generational issues that it represents. let's be clear. we have a primarily a long-term spending problem. that is the number-one issue. it is not a revenue problem. even if we kept the current tax rates in place, meaning that taxes would not go up one year from now or one month from now, revenues are still expected to rebound above the historical average of 18% ba