tv CBO Director Keith Hall Testifies on the Budget and Economic Outlook CSPAN February 6, 2017 8:00pm-10:09pm EST
outlook. i want to thank everyone for being here this morning. we're holding the hearing to discuss the congressional economic outlook, which gives us a ten-year projection of our spending, our national debt and how the economy is going to perform over the next decade. the report forms the corner stone of the work at the house budget committee and i want to thank everyone at the cbo for hard work in producing this report. i'd also like to welcome the cdo director, keith hall, director hall, i do appreciate you taking the t time to testify today and lookak forward to your insight we discuss this report. thei discussion we will have today is a serious one because we face enormous fiscal and economicwe challenges. deficits are rising again and
economic growth continues to be subpar and policies encourage moreic spending, more debt and moreor government. numbers we're reviewing today affect the ability for every o american to buy groceri, obtain a loan, start a small business a or get a good returnn the retirement plan. we know this to be the case because the report is t tellings of what would happen if we kept president obama's policies in pla place. without any changes to the currentt law, the deficit would raise from 587 billion in fiscal year 2016 to 1.4 trillion in fiscal year 2027 and during that same time period, the national debt will jump to $30 trillion. that's $93,000 for every
american and for a lot of folks, that's about what it costs to buy a home. this ever t increasing debt spil will hamper economic growth and consign thene country to a lowe standard of living. as a grandmother, i want my grandchildren to have every opportunity i that i did but on the current path owning a home and sending kids to college is becoming harder and harder. much isg this is spending for medicare, medicaidve and social security for the next decade. programs are going to fail our seniors who have worked hard and paid into them for their entire lives. to compound these problems, economic growth is set to average at a morbid 1.9%, well below, well below the historic
average of just over 3%. slow economic great hurts our countryer in multiple ways. it means less jobs and smaller paychecks and less financial security for those americans who haveur a job. andct more than 5 million americans are working part time because they can't g find a full-time job. we haveco people in industries o want to contribute to the economy but they are being let down by the o rules and regulations coming out of washingto washington. it's been the decline in the labor t work force participatio rate off those of prime working
age. i worked att this job for seven years and i'm a hard worker an have never tired -- never tried for any government assistance. i'm positive i'll a have job soon but i've been without a paycheck for months now and if i what to wait anymore, i'll have no money a for all 'tilties or support for me, my wife and 7-year-old. now it's pretty clear that chris isis exactly the type of work there makes our economy the best in the world and he is a good husband and b father who wants take care of his family. and it's on jury to give him thatat opportunity a. job is so much more than how we put gas in ourps car. it gives people a sense of purpose. it helps to build communities.
andd it can break sieblg ls of poverty and they know thest dignity of work. we can choose to get our fiscal house under control and get the economy growing again to work for men and women of the country and here at the house budget committee, that is exactly what we intend to do. director hall, thank you for look forward to your testimony to hold the federal government accountable, grow ourt economy and serve the american people and with that, a yield to my ranking member. >> thank you, dr. hall for appearing for us today to outline the economic and budget
outlook. we're a few years away from increased deficits and debt driven by the increased health care and retirement costs of an older population. your report outlines our circumstances as a new administration takes office. total deficits over ten years are essentially the same as you projected in august. you project this year's deficit to be lower than last year and is next year's to be lower still and as your report says the economy is currently on solid ground. that's a much better starting um arlyly to be point than president obama faced eight years ago. president obama inherited a s th country in freefall. the country was in the midst of the deepest recession in generations losing nearly 800,000 jobs per month. in its january 2009 outlook cbo was projecting a deficit of mors
than $1 trillion and the economy was projected to shrink by 2.2%g that turned out to be optimistic. in contrast president trump is inheriting a healthy economy. the economy has added 15.8 million private sector jobs ioea since 2010. the unemployment rate is less than half its 2009 peak, and the budget deficit has fallen by more than $800 billion, a nearly 2/3 reduction as a share of the economy.no this year's cbo report projects that the economy will grow at a 2.3% rate. job creation will also grow at a steady rate, and deficit will shrink over the next two years. what a difference eight years makes. president obamas economic agends is also paying dividends on many other fronts. tens of millions of americans now have the economic r economi security that comes with having health coverage and thereby being freed from fears of an accident or illness sending them into bankruptcy. the stock market has tripled in value. the auto industry has recovered from a near-death experience. manufacturing has added jobs foy
the first time since the 1990s. and wages have begun to grow ate a healthy pace.ca o the financial industry is better capitalized and more secure with stronger protections for consumers.re we've dramatically reduced our dependence on foreign oil and increased our production of p renewable energy.nd housing prices have largely recovered and millions of n homeowners are no longer underwater on their mortgages. i could go on and on and i c probably should because i know my colleagues on the other side of the aisle will present an alternative reality. i'm dealing in facts, and the fact is this congress and the e new trump administration are getting ready to take our country down a far different path. republican leadership is movinge to repeal the affordable care act with no plan to replace it. 32 million people will lose health coverage. premiums will double. and we will return to the days when insurance companies decide who lives and who dies.oe pleal house republicans are planning deep tax cuts and a rollback of financial protections. recent republican presidents have tried this approach. each time it resulted in skyrocketing deficits, a recession, and ultimately a financial crisis, the most blde recent of which brought our country to the brink of total collapse. i was briefed by paulson and bernanke in 2008. i know how close our nation camr
to having the lights go out. the american people cannot afford for us to make those same mistakes again. finally, i want to raise the issue of immigration. it's been heart-wrenching to see the immediate impact of the president's executive order yonn during the past week. it is discouraging that the first immigration action of this white house separated families,e vilified the innocent, and will fail to make our nation safer by every logical measure. that being said, i was a member of the gang of eight in 2013. four democrats and four republicans. we drafted comprehensive immigration reform legislation that we were confident had the bipartisan votes to pass the house.fianhe i the only thing missing was the political will of republican leadership to bring it to the floor. beyond addressing humanitarian and security needs, cbo has repeatedly told us that comprehensive immigration reform would mean a larger economy and a smaller budget deficit. it is my hope that my colleagues across the aisle will recognize these facts and enact the immigration reform we so desperately need. we can't solve the challenges we
face as a nation, whether it's immigration, health care, the ei economy, or passing a congressional budget without acknowledging what got us here and continuing on that path. to return to where we were and abandon all the progress we have made would be devastating not just for american families todae but for generations to come. with that director hall i look forward to your testimony. i yield back. >> thank you, mr. yarmouth. in the interests of time if any other members have opening to w statements i ask you to submit them for the record. i would like now to recognize the director of the cbo, dr. t keith hall.. mr. hall, thank you again for your time today and the committee has received your written statement and it will be made part of the formal hearingo record.e you have five minutes to deliver your opening remarks. >> chairman blank, ranking member yarmouth and the rest of the committee thank you, for inviting me to testify. i would discuss a few highlights
of our updated budget and d economic projections that were released last week. after my brief remarks i would be happy to take your questions. the economic forecast that underlies cbo's budget projections indicates that in haha.ri is gross domestic predict will expand at an average annual pace of 2.1% over the next two years. if current laws remain generallc unchanged. after rising last year at an annual rate of 1.8%.en we expect that growth to boost employment, virtually eliminate the remaining slack in the a economy and dropt unemployment rate to 4.4% by the fourth quarter of 2018. further ahead according to cbo's projections gdp election panned at an average annual rate of 1.9% over the second half of the coming decade.
that growth rate represents a significant slowdown from the average over the 1980s, 1990s, and early 2000s. mainly because of the slower growth projected for the nation's sly of labor, which largely results from ongoing retirement of baby boomers and the relative stability in the labor force participation rate among working women. as slack diminishes over the next two years we expect the rate of inflation to rise to the federal reserve's goal of 2% and to stay there on average.nt ha we also anticipate that the federal reserve will slowly raise the target for federal funds and that interest rates over the next few years will be significantly higher than they t are now. e cbo's current economic se projections differ from those they published in august 2016.ow the agency now expects gdp in
2016 to be modestly lower than it projected last summer. it also expects lower interest rates in the next five years but projects a higher rate of labor force participation throughout e the next decade than it projected in august. in fiscal year 2016 for the first time since 2009 the federal budget deficit increasen in relation to gdp. cbo projects that over the next ten years if current laws remain generally unchanged budget deficits would follow an upward trajectory.f the results are three main trends. h first strong growth in spending for retirement and health care a programs targeted to older people, especially social security and medicare. second, rise in interest payments on the government's debt. and third, modest growth and revenue collections. by the end of the period the accumulating deficits would drive up debt held by the public from its already high level. moreover, three decades from now if current laws remain in place, that debt would be nearly twice as hay relative to gdp as it is this year and would reach a higher percentage than any previously recorded. such high and rising debt would have serious negative consequences for the budget and the nation including an increased risk of a fiscal crisis. our estimate of the deficit for 2017 is lower than our august estimate primarily because we ro
now expect lower mandatory spending. the current projection of the cumulative deficit for the 2017 to 2026 period, however, is about the same as we published in august. i'm often asked specifically about our projections for medicaid and federal substance did for health insurance purchased through the marketplaces established by thef ow affordable care act. by cbo's estimates an average of 12 million people under the age of 65 will have health insurance in any given month in 2017 as a result of the expansion of medicaid under the aca. in addition cbo and the staff of the joint committee on taxation estimate this year 9 million people per month will receive subsidies for non-group coverage purchased through the marketplaces. an additional 1 million people ere projected to be covered by unsubsidized insurance purchasen through the marketplaces. we estimate that 27 million people under the age of 65 will be uninsured on average in 2017. cbo and jct currently estimate that in 2017 federal spending
for people made eligible by medicaid covered by the aca will be $70 billion and that net subsidies for coverage obtaineda through the marketplaces will be $45 billion. b for the entire ten-year period,d 2018 to 2027 if current laws remain in place those two types of costs would total $1.9 trillion. it is important to note that cbo's baseline is not intended d to be a forecast of what will happen. rather it's meant to provide a neutral benchmark that policy makers can use to assess the potential effects of policy decisions. cbo's budget and economic projections are predicated on the assumptions that the laws currently governing federal taxes and spending generally remain in place for the entire projection period. even if that occurred and thereh were no changes in those laws b before the end of the period it
would still not be possible to predict budgetary and economic outcomes precisely because many other factors run certain. our goal is to construct budget and economic projection that's fall in the middle of the distribution of possible outcomes given both the fiscal policy and body of current law and the availability of economic and other data. i'd now be happy to answer your questions. >> thank you, mr. hall. now we will begin the question and answer session. if i could ask the staff to bring up figure one for my first question. mr. hall, cbo's economic forecast has been trending sharply downward in the recent o years and roughly five years ago cbo was expecting real gdp growth to average around 3% over the ten-year budget horizon. close to that long-term average growth rate that we've seen here in the u.s. that figure has been dropping consistently. and in this latest forecast it's down to just 1.9%. so it seems that cbo is expecting that the u.s. economy will experience a protracted economic malaise for at least the next decade under current e ecies.
wo two questions i have for youn first of all, what are the reasons for cbo to keep ratcheting down its projections for the gdp growth? and secondly, how will this much lower expected growth path affect our federal budget? >> the look forward over the next ten years, we do expect the slack in the economy to be swe virtually eliminated over the next two years. so we're beyond what we think is the potential growth of gdp.mi and what's constraining the ea potential growth of gdp as we forecast is something like 1.8%, 1.9%. it's a combination of a more slowly growing labor force. a lot of that is aging 1. population as baby boomers retire. not all of it, however. and slower productivity growth.m
since the end of the recession productivity growth has only been .8%. less than 1% productivity growth.t we expect that will go up by the end of the period, something like 1.3%. but that's still lower than it has been in the past. so in fact, if you sort of take that labor force of growing .5%, productivity growing 1.3%, add inse together, that 1.3%, 1.9% is about our economic forecast. so the challenges are a slower growing labor force and slower growing productivity going forward. and again, we have this issue with baby boomers in particular that we've seen coming for a long time. it's just starting to get closer and closer now. >> how are you expecting what you're projecting up here to affect the federal budget? >> this is going to have an yoyi impact. this is going to make -- it's going to contribute probably toh the growth of the deficit going
forward. something like productivity, for example, which is part of what's at the heart here he has a w pretty significant impact on our budget forecast. if we get some increase for example in productivity we'll ha have a smaller growing deficit u but the problem is so big even that's not really going to solvr the problem. >> to the evened of that and couples with this sluggish on economy is the relentless rise p in our government spending and deficits. and your figures show that the tax revenues were already above the 50-year average as a percentage of gdp and are projected to keep growing and yet our spending keeps growing faster. if we tried to balance the budget just by raising taxes, how would a big tax increase --s how big would the tax increase be required to be in order to catch up?ev >> well, just to give you some idea, we've actually got a great
little figure 17, and it gives n you some idea of the side of the deficit relative to the size of things like revenues and discretionary spending and et cetera. we see the deficit in ten years is going to be about $1.4 trillion. it's about 5% of gdp. and total revenues are going to be about 18% of gdp in ten ev years. so it's a major chunk of revenues right now. it will be a pretty significant increase in revenues to get there. >> any idea of what% we'd have to increase taxes in order to be able to get there? >> we haven't done a scenario like that. >> but it's significant is what you're saying. >> it would be significant and it would probably also significantly change our economic forecast as well. so it makes it particularly complicated. >> so even for those who would cenissome combination of spending restraint and tax increases is it fair to say that getting control of spending is really indispensable in this equation to overcome those chronic deficits and debt? >> well, that seems to be the
picture. the growing deficit and the growing debt is so large it's hard to imagine just picking on either revenues or outlays and not picking on both things. and the broader you look the agg smaller the change you need. so if you restrict yourself to just smaller buckets, for example, just discretionary spending, you've really got to reduce discretionary spending. so that's clearly one of the features here we see. this is a really big hole to fill. >> so on the other side of that 23 we could achieve a more sor eall robust degree of economic growth, something closer to that historic average of just a little over 3%, how much would that help us? ho shrinking those deficits? >> i'll give you a little bit of an idea. we don't have gdp in here but we have a little scenario with productivity growth. for every 1/10 of a percentage point in productivity growth we see the deficit in ten years ntrinking by about $50 billion. so something like an increase in
productivity of half a percentage point would be pretty significant. and that's going to reduce the deficit by about a quarter of a billion.rc and that's out of a $1.4 trillion deficit.f so that makes a difference but even half a percentage point isn't enough to make -- to balance the budget essentially in ten years.al >> let me go to another topic. let's go to figure 2, please. one of the most troubling g aspects of the cbo's outlook iso the low rate of labor workforce participation. that rate now stands at 62.7%.th close to a 40-year low. and cbo expects this to continuh declining over this next decade, which is really disappointing.-y obviously the ongoing retirement and baby boomers generation plays a key role but cbo also states that government policies are exacerbating the trend. is it correct the labor force ix a key component of economic growth and how large a role does it play?di and second to that is what are r some of the policies that do by affect us and how do they create incentives for work? >> if you look at the long-run growth of the economy, long-run health of the economy, you can
look at two different things. you can look at labor force growth and you can look at productivity growth.or if you compare our growth we see over the next ten years to what we had in the 1990s when we had 3.3% gdp. the slowdown is about half thatn while workforce retirement is a source of that participation we also have lower labor force participation by every cohort in the united states. that's certainly one of the targets for raising -- having a supply side impact that raises potential gdp, is doing things to increase the labor force ou participation by working-age people. >> what kind of policies can we initiate to change this trajectory? >> certainly we've identified, we often do, we point out what amounts to implicit taxes on
work. there will be reduced benefits t when income goes up. the aca itself probably reduces labor force participation.in that's a drag as well. there are a number of things like that. w i don't want to get too specific about it. but just the sort of things that will get people back into the workforce are things that will help that labor force participation and help this potential gdp growth problem that we have. captions copyright national cable satellite corp. 2008 captioning performed by vitac
it's coming, would you like to yield one of your members. >> sure. >> all right. mr. jeffreys, from new york was here first so yield to him. >> mr. jeffreys, you're recognize for the five minutes. >> thank you chairman. i want to pursue that for a moment because i think the cow moon is working ever since the turn around that was engineered by the previous president eight years ago. isn't it in fact the case that when barack obama came into office, this country was in a mess in the danger of the total collapse? >> that's right. we were undergoing significant jobless and decline in gdp growth. >> stock market was a mess, correct? >> yes. >> automobile industry a mess, correct? banking industry a mess,
correct. >> yes. >> 401 ks a mess, correct? >> yes. >> housing market a mess, correct? >> yes. >> since 2010 this country gained more than 15 million private sector jobs, is that correct. >> that sounds right. now it's over 19,000, is that correct. ? >>. >> yes. >> the unemployment rate over 10%, right? >> yes. >> now it's under 5%, right? >> yes. >> the deficit are is reduced by over a trillion dollars, correct? >> that sounds right. >> the statement about getting the economy working again, i think, per hachgs is inaccurate as a snapshot of what occurred over the last eight years. it seems what we need to do is build upon a tremendous progress that has been made under the leadership of barack obama and keep this country moving forward. i would also note on this
question of whether we should cooperate, barack obama was able to lead an economic turn around without an ounce of cooperation from the other side. in terms of our situation, the economic will be sluggish. >> that's right. >> in part that's because of a decline in labor force participation, correct? >> that's correct. >>, now would the retirement
continue of baby boomers out of the labor work force exacerbate this problem in a way that will provide modest, if not sluggish economic growth moving forward? >>. >> this is a problem japan who had a booming economy in the 1980s is experiencing today, is that true. >> that's true. >> one of the reasons japan is experiencing the problem is because they have harsh policies and don't have the natural growth from their population that would lead to robust participation in the labor force, right? >> yes. >> there is a bill that i think was passed by the senate in but due to the politics of the
situation it did not go anywhere. i believe the cbo study that particular piece of legislation and concluded that over a 20-year e peds i didn't do, i think by $700 billion, is that rig right? >> sounds right. >> so it would have a positive impact, comprehensive immigration reform on our economic situation, correct? >> that's right, it's primarily through increased growth in the labor force so that's one of the primary constraints going forward is the growth in the labor force. >> one of the ways that we can deal with the labor force moving forward is to make sure that our immigration policies continue to welcome individuals who come to america, work hard, will contribute to the labor force since we aren't naturally able to produce the numbers that would result in increased economic productivity, is that a fair statement. >> it probably is, although, keep in mind we -- the effects
of any particular labor i'm dwrags policy can be complicated. we'd have to see what is being proposed but there is one constant in that it does affect the labor supply and the labor supply does help gdp growth. >> thank you. i yield back. >> gentlemen from oklahoma is recognized, mr. cole. >> thank you mad dam chairman and thank you mr. director for your testimony. always good to have you here. i want to focus in on this trend line in terms of the deficit just a little bit and if i may, we, as you know, think of the federal budget in two different pots, discretionary and mandatory spending. mandatory being primary social security, medicare, medicaid the classic quote unquote entitlement program. what's been the trend line on discretionary spending over the last few years? >> well, discretionary spending is looking like it's going to decline as a share of gdp and
been declining. while we look forward to the next ten years and see spending increase really significantly, discretionary spending is not and that's decline sglg as a chair of gdp and since '09 it's declined substantially in real terms as an amount. we're actually spending considerably less on the discretionary portion of the budget. and that's everything from defense to nasa to national institute of health and we were in '09 and '10, is that ekt kr. >> i believe that's correct, yes. >> give us the trend line, if you would, on mandatory spending. again, the classic entitlement program. what's that trend been in the last five or six years? where do you see it going over the next decade? >> well, mandatory spending continues to grow faster than gdp. quite a bit faster. even, you know, the revenues are growing as a share of gdp but mandatory spending is growing
faster. it's sort of a race that mandatory spending is winning and adding to the deficit going forward. >> and are there any significant propels out there on either side of the ail to change the direction or slow it down or manage it better? >> nothing comes to mind. one of the things i like to point out, we've just produced something called options for reducing the deficit so a nice thick volume with over 100 options and we give options on things you can look at for reducing the deficit and give you an idea how much of an impact those different options would have. >> when is the last time we had significant reform in social security? >> i think it's been awhile. there have been -- i'm not an expert in social security.
there are adjustments and benefits in things like that but they haven't affected the long run problem that we've seen coming for decades. it's still coming. >> i think the last time we made much progress in this area was very bipartisan with president regan and the house was democratic in that period, tip o'neil, howard baker. they came together, set up a commission and extended the life of social security fairly dramatic in the middle '80s. we haven't gone back and done too much since then. is that correct as you recall? >> that's correct. it would be 7-6 which we actually introduced. seven members chosen effectively by the president and the majority party, six by the minority but you have to have
nine votes to actually report something to congress. congress would have 60 days to vote up and down and i would invite my colleagues on both sides of the isle to look at that legislation. if you read the numbers which you so accurately and persuasively put out here, sooner or later you have to address mandatory spending. neither side in the last campaign did that in any meaningful way and neither side frankly in the house and senate has actually advanced legislation. we actually always write a budget that addresses this and i hope we do that again, madam chairman. my friend has the same concerns but i know i'm not using a question but i want to finish and i'll yield back. i just would invite my colleagues, we can score points against one another all day. we both have great arguments and great talking points. this is a problem we can solve.
it's a math problem. it's not as tough as medicare and medicaid. we literally can sit down and negotiate this through just as president regan and speaker o'neil did and howard maker. >> i would like to begin by echoing comments from representative cole because i think you're right. sometimes people ask what it's like to serve on the budget committee and often a great place for people that don't do math. i'm sure you know immigration is a major top piic last week.
there is a lot of evidence the order is unconstitutional and hurting national security overseas. secretary mattias and others made that clear, but it's also having a detriment impact on the community at home. the concern, after course, the trump administration is scaring away some of the very people we need to continue growing the economy as labor force shrinks. many of america's major corporations and businesses were founded by immigrants. for example, steve jobs, his father came from syria. apparently, more than half of the current crop of u.s.-based startups valued at $1 billion or more. more than half with an evaluation of $1 billion or more, collectively 44 companies are valued at $168 billion. they were started by immigrants. so $168 billion evaluation creating 33,440 jobs in the u.s.
market and immigrants in these companies make up more than 70% of key management or product development positions. so we've heard in the past week ceos from facebook, starbucks, goldman sachs and leaders in the business community who have stated this ban will hurt their ability to retract and obtain talent and may spur people or companies to discount the u.s. as a place to pursue business and investment opportunities. college and universities have also raised alarms including those in my district about the impact that this will have on students and faculty who hail from the seven countries targeted by the order. in 2016 international students in the u.s. colleges surpassed 1 million for the first time contributing more than $32 billion a year to our economy. $32 billion a year madam chair
would help with the budget deficit. that's the consumer spending we need because it creates jobs. so i want to speak briefly about the impact on our health care system because more than a quarter of the physician work force in the u.s. comes from other countries with more than 8400 doctors working in the u.s. from countries, syria and iran alone. now we want those talented doctors to be here saving american lives and helping our health care system at a time of physician shortage. america does not currently produce enough physicians to keep up with demand. we have a current deficit of over 8200 primary care doctors. so that deficit would literally double if the doctors from iran and syria were not here. so director hall, i know you can't speak directly to the effects as it was just released but based on the 2013 cbo report on immigration reform and other work cbo has done, can you talk in general terms about the
impact that such restrictive immigration policies might have on the growth of our economy? >> sure. one of the reasons we need to see specific propels is because the type of proposal that has different kinds f of effects. the evidence is for example, increased immigration of unskilled workers probably has an effect of lowering wages for lower skilled workers in the united states. however, when you go to the skilled workers. they in fact increase productivity because as you say, this are entrepreneurs who are immigrants so that has a different sort of side effect. >> right, if you look at the countries in the order like iran and syria, where they skilled or unskilled coming to the u.s.? >> i don't know off hand. >> disproportion anyti porgport entrepreneurs. >> so if you look at immigration
propels, it makes a difference if you broadly increase immigration and increase immigration, focused more on skilled workers with a different effect and unskilled workers. the fundamental supply is there. it's the other effects that depend upon exactly who is immigranting and the size needs to be significant. it's not clear that the executive order that at least from what i've seen, that's large enough to make us change our forecast. >> thank you, sir. >> the gentleman's time has expired. the gentleman from california is recognized for five minutes. >> thank you, madam chairman. there seems to be two dominant themes from my friends across the isle. one is that the obama economy is wonderful and second, we need more foreign immigration to compete for american jobs. you know, as to the first, i give the same advice i tried to offer them at our last meeting on obamacare.
every american has an up close and personal experience with the economy. they know what is going on in their own lives and any politician who tries to convince them otherwise, looks down right foolish. some people are doing very well in the obama economy. most people are not. most people are doing well in this economy. democrats would not have lost 67 house seats and 13 u.s. senate seats and 11 u.s. governors and more than 900 state legislative seats not to mention the presidency over the past four election cycles, word of unsolicited advise. with respect to foreign immigration, foreign immigration is unprecedented if my friends were correct this should be the golden age of the american economy. the impact has been very clear, badly depressed wages for working families and the lowest labor participation rate since jimmy carter. but that's not what i want to talk about. what i want to talk about is
what admiral mike mullin warned us in his professional military judgment, the greatest single threat to the national security and that was nation's debt issued about five years and $4 trillion of debt ago. you report that the debt held by the public this year is 77%. but actually our -- our total debt is well over 100% of our gross domestic product, is it not? >> we look at debt held by the public -- >> i know you do but i think that's highly deceptive. the difference is mainly because social security has it runs chronic deficits, we may back what we borrowed by going to the public for further borrowing. so what we've got in the overall debt number is in effect converting debt held by the public. isn't that what is going on? we're deceptively under stating the problem unless we change the
law, that gross debt is destined to become debt held by the public over the next few years, isn't that correct? >> well, it -- let me put it this way. the debt held by the public is going to grow significantly. >> it's already baked into the total debt, which simply converting the debt we owe to social security by borrowing from the public, that's already in those numbers as long as social security continues the chronic deficit, that's going to continue and require change in law, is it not? >> that would, yes. >> so we're already approaching uncharted territory for this nation and the question i have is that on our current trajectory, are we courting a sovereign debt crisis? >> we are. one of the difficulties is -- >> what does that crisis look like? >> well, as the debt continues to grow, interest rates, when they go back up to normal range, we'll have a major share of the budget paying off interest.
so that's going to be a real drain. >> so would that affect our ability to provide basic services? >> it will. it's going to reduce flexibility. >> would it impair our ability to respond to a military challenge on the magnitude that we faced after pearl harbor? >> absolutely. our ability to spend money. >> how would it affect our overall economy? >> well, part of what is going to happen is this a drag. this is an increase of interest rates on a federal borrowing. crowds out private borrowing. we have lower -- >> in other words, when the federal government bowrrows a dollar, it borrows it from the same capital market to make consumer purchases, for businesses to expand jobs of -- is that correct? >> that's correct. >> home buyers to buy new homes. >> that's correct. >> taxes are often suggested as an through current taxes or
burbur barrow it now and tax it later. >> we certainly sort of const t constantly remind you that however you do it, whether you raise taxes or spending, a lot of stuff depends how you pay for it. whether you let the deficit grow or not makes -- >> the deficit is just a future tax. it's all -- in other words, isn't the borrow, isn't the spending stupid? >> well, certainly spending is the biggest single problem going forward. >> thank you. >> the gentleman's time is expired. the gentle lady is recognized. >> thank you for being with us, director hall. my district in washington state has a northern border and is also home to -- i'm pretty sure
nearly every point of view on every issue most of the time but one key difference is immigration reform. we've heard from business community, farmers, faith-based community andtourism, law enfor asking for comprehensive immigration reform and i was one of the folks who led the bill that we enter introduced in the congress that the cbo said would have a significant impact in reducing the deficit about $700 billion in the second decade, i think you confirmed that was the correct number. >> that sounds right. >> but when we look at individual sectors and when i was elected talking far to farm they said we need two things and folks said we're not sure we can stay in business if we don't have immigration reform. if you look at a sector like agriculture, do you see lack of immigration reform as having a
negative impact on economic growth? >> we haven't looked at that sort of analysis. we'd have to do a little work to -- >> well, i can tell you that farmers definitely feel that way and it's incredibly important issue and the reckless executive order has not helped and has impacted many people's lives and has only continued to have a negative impact. before coming to congress, i was a businesswoman and entrepreneur and ran the department of revenue for the state of washington and since coming to congress, i've been frustrated with the budget and appropriations process with how they don't work. in particular, we seem to live off continuing resolutions and you would never run a business 30 or 60 days at a time and you definitely, it's no way to budget. it's probably the most expensive and least efficient and with sequestration, we end up looking at folks have been focused on cuts but not on return on investment, and i know that
sometimes spending money on importa important projects saves you money in the long run and we get a great return. i was wondering when you i was run derg when you look at your models and research sf education how does our lack of investment in our areas impact our future growth? >> i think the research is clear that generally frame investment does increase productivity and have impact on growth. the research is pretty incomplete in identifying the different kind of investment. it's difficult what the rate of return are on investments. it depend upons you pay for it. if you increase investment and reduce spending so you don't have net impact on spending that's a much more positive impact on the economy than if you let a deficit grow.
>> if we have a pothole in the ground we don't fix it, next time we have to replace the roadbed and spend a lot more because we did not make the investment early on. providing those investments because we don'ts have a no-- >> as federal investment that helps companies be more productive, move products around, encourage innovation, it does help. one of the issue it's a little like in my mind like cutting taxes, they both stimulate the economy and depend on how they worked they can affect long-term growth. the question a little is how
much. an investment federal investment is often a big delay. and there's some impact on interest rates. and that impact on interest rates does raise the cost of debt in the economy. so it's not clear for example, if you justin crease federal investment don't pay for, let the deficit grows, that douse in the have a net positive. >> has a negative impact. that's a role to decide what's giving us the best return, sees what's working and continuing resolution and se quest reslation ask not making the investments in the right way that need to be made. thank you. >> the lady's time expired.
>> thank you. it's interesting first i want to go back to my colleague mr. coal, that's not going to soft the issues of the day. the issue of the day is we have to get a budget and live with the bubdget. i have mentioned since day one that we don't have a complete record of financial information because we don't allow for all of our debts to be added up and we don't use the information we have to make decision when we don't look at the past decision we made as business guide for 30 years. a business guide that took over 60 failed business z and turned them around. you have to see where you're at before you can go forward. my frustration is with the
talking point. my district i can tell you the businesses, the individuals are concerned about tax regulation reform and obamacare reform. it's what we can do as far as put ago budget together and moving together. don't we have the revenue in the last few years? >> i'm not sure the record. they are above average right now. >> in my business world, when you have record revenues you are doing well except when you have record expenditures exceeding that. i heard you earlier say is our spending problem. would you agree? >> yes, that's major contributor to the deficit. >> we're not going to tax our
way out and put a budget together that's a starting point having a good solid budget that we live with. my concerns we are -- it's alarming that our interest and national debt is $27 billion in 2027 as numbers continue to grow -- the time is now to start looking at spending side. because if we sit back and say the last president was great, the president before that was great, when we don't do anything we'll be in a deeper whole in a next few years, would you agree with that is this. >> yes. the sooner we get to solving the debt problem, the sooner we start to address that, the less of a changes going to be. easier it's going to be to deal
with it. >> it's one of the reason why i introduce fiscal state of the station require the general come before the senate, joint sessions of -- i had hoped that new members would join as we refiled that bill. but do you agree that it would be a good starting point to have one controller general come before the house and senate and explain our growing deficits and our where the numberless aree occurring and what's going on so we have a starting point? >> absolutely. i hope we are providing some of that information to you, yes. >> that's what you are doing here today. the importance is as we continue to look at the number we have to realize the growth of our federal debt is another issue that concerns me. i heard my colleague earlier talk about this, i think the
federal government is projected to grow if we do nothing. >> that's right. >> these are issues my colleagues are both sides can talk about as ways to work together to come up with a solution and a budget. i have a another bill when we pass a budget we should follow a budget. we never follow them. members from this committee and others come to the bill -- ever going to make things work we have to come up with a budget and live with that budget and not break the budget. i'm hoping continue to work with the numbers. i appreciate the information. there's plenty of information in your report if they take time to red read them we are not going into a great derecollectioirect.
we have an anemic economy, to you agree with that? >> yes. >> our kol lesicolleagues on th side would do well to stop patting themselves for take crediting for voters putting them in the majority rather than cart graphers putting them -- every state particularly the state where the republicans hold majority and voters are not able to choose legislators rather legislators choose -- oppose to our side of the aisle. that is reflective of the
difference in the policy that result in how we govern. spare us the political advise. that having been said. i think it's important to note that mr. hall indicated the slack in the economy is adistributed to the labor force. attributed to the retirement of baby boomers and stability of women in the workforce; is that right? >> that's rights. we have -- we had more economic growth as a result and he closed that gap and it's holding. we are getting that faster growth. >> you did indicate the slack in the economy is attributed to those two things? >> yes, potential and long-term growth of the economy.
>> thank you. our former director talk under current cap, federal investment will be smaller relative than gdp than the last 50 years. just to maintain investment of the economy requires caps on appropriation. the caps on appropriation, wouldn't you agree, are a large part of what limits our ability to see growth in the economy? >> that's part of why it looks to be declining over the next ten years. >> but the budget act we continue to see cuts in dramatic cuts, was 4.5% of the gdp --
2.4% of gdp. it dropped from .5% -- finally investment for education in training programs dropped from 1% to .5% in 2013. do you agree that capping research infrastructure and education is im -- especially given the president's muslim ban out of our country and hurt our economy? >> i will say that increasing in federal investment is one of the
tools you have for increasing gdp growth because it dose increase productivity of labor going forward. >> wouldn't you say to responsible spending cuts and generating revenue is the mo responsible way to address deficits over a period of time. wouldn't you also say whether it when it comes to dealing with the -- when we threaten as a congress to potentially not pay our bills. >> however congress decides to address a deficit, it seems like that a strategy congress with take. >> thank you, very much. i yield back balance of my time.
>> thank you, madame chair. talk a little about federal investment or fraederal spendin. $3.4 trillion. to your numbers, the well we're above that and heading above that. well above 50-year average as well; is that correct? >> that's correct. >> the top 1% pay $543 billion in incomes taxes that's less than this year's deficit. >> that's right about right. >> i don't think we have a revenue problem. we are above the 50 year average
of 18.4% and moving hire than that. how would we do that, if we raise revenue. there is not enough money at the stop, is there? >> we have specific analysis of that. putting it in revenues makes it significant revenue increase. so spreading it out is a different strategy. >> you're servicing the debt $768 billion larger than the defense budget, what do you basising that on with regard to interest rates. the post war interest rate is way down 2.4%. how do you come one that calculations? >> interest rates are low. they are climing up we are at
lower range, we are 3% on the interest rates. that's a important point to be honest because we're at low interest rate relative to shift and in fact in interest rates go up more -- >> or back to their average. >> or back to their average. if they go 1% higher, we're talking about adding $1.6 trillion. that's one of the. >> the debt interest of $768 billion is based on the historically low interest rates. >> that's correct. >> let's talk about japan.
i'm not certain if you have same policy in the -- blame that policy. what you may be able to look at is credit expansion. we have a similar experience where we montized a lot of dibt. where we let the expansion go on monetary side. sf your experience or -- i don't want to ask your opinion or analysis that japan is suffering a debt lay, is that a danger for america and with debt spiral, e deflation and low growth. >> i don't know enough about japan's economy. we can follow up with japan -- >> is there a reason for these low growth rates. we created money.
we engaged in federal spending. so why the low growth rates? >> i don't know enough about japan to offer an opinion. >> i would suggest we have not hit 3% growth for 11 straight quarters the reason is that during the reagan robust recovery, even clinton recovery, where we had growth 5, 10%. our balance sheets do not look good, it's hard to grow out of it. >> one of the most remarkable things that's going on is 0.8%. that's been a major head win. >> one final point, when we fund federal investment, where does that money come from?
it comes from the private sector; is that correct? >> that's correct. >> thank you, madame chair. i'm listening to the discussion here, i believe people truly are sincere in their belief of the american foreign policy and we in congress responsible for enacting to help influence economic growth and there's two different views of it. the good things about the economy is that it either policy either works or it doesn't. it's not ideological, it's air math kal. the measure of their
effectiveness or lack of effectiveness is the performance of the economy. it's been referenced here in the waning days of the last bush administration a decision was made to enact tax cuts that dispro portionately benefitted higher wage earners, people who make a lot of money. the theory is trickle down, supply side, call it what you will, if they save one because of the tax policy that money will find it's way back and business investment and job growth. that's the theory. that's indisputable. that's what they say. just growth hearing the george w. bush was lowest level in the past 75 years. in the waning days the economy
went into severe contraction. in march of 2009, the stock market was at 5,600, we're losing 600,000 jobs a month. a auto industry was a disaster. the markets were falling apart. something had to be done. so new policies were put in place to allow those tax cuts for the very wealthy to expire and continue tax cuts for the middle class. because higher wages, higher take home pay, increases demand in the economy, ak gait demand creates growth. this result since 2010, in the past six years, we created in in economy almost 16 million
private sector jobs. the american economy used to make things and sell them to the world. now the things we used to make, they make and sell to us. as a consequence, 70% is consumption. how do you create demand. you put more money in the pockets of more americans as humanly possible. they are going to spend it, when they spend it there's growth. i think you're looking for silver lining if these different views of economic policy i think the one real clear silver lining is infrastructure spending. and there's talk about a trillion dollar bill a trillion dollar bill it does two things in the immediate sense it
creates jobs i think 43 for every $1 million for investment in the construction trade supply industry. but the second economic benefit you get is when you invest it unlaeshing resource in the private sectors. so your views on a trillion dollar investment in infrastructure publicly financed. this nation sent $110 billion rebuilding roads and buildings of afghanistan. this government spent $76 billion rebuilding roads and bridges of iraq both of which were deficit financialed and didn't create one american job. your views on --
>> you have ten segconds to answer this. i'm going to let him give a brief comment. if members would remember they need to leave time for the witness to answer the question, otherwise if you could do briefly, an answer, if there's more you would like to do, do it in writing. thank you. >> i have a basic principle, i think is over our work. whether you change spending or changes tax, how you pay for that makes a difference because the deficit has impact on things. if you increase but don't pay for it, increase the deficit, thae makes a different how you pay for things. that's something to consider always with what we're talking about. >> thank you, mr. hall.
m mr. -- >> thank you i'm happy to be on this committee. the american people are tired of partisan bickering when tit for tat. they want us to do like they do in their lively lives and roll up our sleeves and can solve this problem. they are tired of congress playing by a different set of rules. one of the rules they have to play by and live by is that they have to live within our means. and so we have to work together to solve this. i'm excited to be on this committee because i think it's a greatest threat to the future of our country. my commitment isn't to the republican party, or to the leadership, my commitment to the
three children that they will have a safe, strong and free america to live in. they will have a future to grow up in the shining city on the hill and this is the greatest threat to that future. so i'm grateful to be a part of the problem solving venture. i think there's spending issues and cuts to be made across the board but i'm concerned about the elephant in the room that was mentioned that mandatory spending in the programs are squeezing investments we need to make as a country if we're going to have a proserous country going forward. if we don't make the investment
and risk management tools for our farmers or the safety net we won't have the capacity to feed and clothe the american people. doctor hall, how much do we spend on the agriculture program within the federal budget. >> it's not a large percentage. >> a .25% so we have a safe abundant supply for the american people. we have cut billions of dollars in that program. whether or not transportation in making sure we meet transportation needs, or laboratory innovation for the world and continue to be on cutting edge of technology in this country or national defense, i'm concerned about the
lack of investment in these important air kreas because we squeezed the blood out of the turnip so to speak. >> it's hard to say on any of this. the growing deficit, the any of these numbers, they look bad. but we have been on the record to say they have been unsustainable. if you look out a lot of years. it's hard to say what's too much. focus on discretionary spending, one of the things i think is sobering fact, the net interest on debt will exceed discretionary spending in the
country. that will become bigger item than all the defense spending. that's part of the problem. >> quick response, of the risks, to balancing our budget and getting the arms around is this debt, which is greatest, interest rate, economic growth, entitlement and the run away costs there? >> it's hard to rank them. you can look at any of those or all of those to address the problem. >> here is last point, again, thank you for your time, we can't keep kicking the can down the road. we don't have any more runway. we don't need more analysis or accounts or budgetary expert. the problem is mandatory
spending. i look toward to getting after it it. madame chair, i yield back. >> mr. conner recognized for five minutes. >> i appreciate, congressman arrington, we may not agree on much, but -- i appreciate for following him. dr. hall, thank you for your service, not this role treasury, department and white house, i look forward to hearing your expertise. i respect the district with p apple, google -- 4.5 jobs for
every one job created. pastor and will tell you in our district not everyone who work aztecs w as teches -- in eastern kentucky, there was this model where 40 jobs recently created folks coal minors kids being training on apple phone, four month class, all have jobs, it was funded by the tech initiative that the administration worked on with congress and the economic center. my question for you, is how do we get tech jobs across the country. what are your thoughts on what this congress needs to do to
make that possible? >> it's a little hard for me to speak too specifically to that. i don't want to make specific recommendation. that's not what cbo does. in general terms, the long-run problems we talk a little about the labor force participation, getting labor force growth increase, we're working age people back in the labor force. productivity side of things, there's lot that government can consider to increase productivity whether looking at tax policy, trying to find a efishant way of finding taxes -- that's part of the recipe.
one of the difficult we have in being too specific, we don't understand productivity growth too well. it's hard for anybody to have too many solid recommendation on thousand achieve higher productivity because we don't know thach about it. >> would you say preparing them for the job has to be a component of it. >> yes, absolutely. >> the question i have is on social security without taking a particular view if we were to scrap the cap, how much revenue would that raise, and how much would it go toward solving structural deficit? >> we did that calculation, and that option for reducing the deficit volume that was one of the option we put in there, if
you look at that, we can follow up too, to give you idea how much of impact that would have. >> i appreciate that. >> we appreciate that balance of time. thank you. the gentleman from south carolina. >> i appreciate the thoughtful comment from my colleagues. from new york and from california. i want to boar down on what the other colleague from california was getting at, in the danger of sovereign crisis, it's danger that people riealize. you have identify the debt as n unsustainable. that we're on a path we cannot continue. what you would like to flush out is how this would be a near term event that would have
consequences with regard to economy, american standard of living. i think it's interesting -- i saw the mckency report and it shows we're 250% gdp global. in the wake of 2008 we saw $57 trillion increase in debt which is highly unusual because whether the report showed going back on 50 plus years, more than that, 1930, in the wake of financial crisis or economic slowdown, there was deleveraging that fold. what we seen is a reverse. a significant leverage in the wake of financial crisis. we live in the time like no other you can see the same numbers at the federal levels,
our debt to gdp number, the post world war high, so i was looking at numbers the other day, this is a interesting chart that suggestions how vulnerable we have and how a crisis could come sooner than people realize. there is from the fed, network disposable income percentage gdp it shows over the last 75 years we have been fairly constant an average of 500% net worth to disposable income. in the '90, we did it again in the housing crisis, prehousing crisis, went above 600% and we done it again now. what's interesting is what fold
tech bubble, and housing bubble, we're at that same percentage with regard to domestically and internationally. is there a greater level than we realize. and i pull the number on economic expansions, we are now living in the fourth long err economic egxpansion in the history. we have tech bubble, the average is 60 months ks we're a third past that which suggest another layer of vulnerable and final we live in 0% rate policy which is a policy we never lived in. i guess it was roosevelt treasury secretary that the time pushing on a string there was no more je more juice in terms of making
things happen. can you talk about -- this could creep up on us much sooner than people realize. >> part of the trouble this isn't research there no way to know how much debt is too much. >> i think the law -- also regression the means to r a reason. it's dangerous to talk about interest rate -- the reason you have regression to the mean is you go far on the or side. interest rates go up to give you the averages. i think the law of the numbers in averages works. >> this comparison we make 77% gdp in debt is high number. you go can up more you have
highest debt ratio since world war ii. it's above historical numbers. >> that was a case where we were fighting four survival as republic. -- >> the gentleman's time has expired. >> thank you, madame chairman. thank you director hall. i look forward to reading your publication. one thing we have not talked about yet during this hearing is tax expenditures and i think your reports shows that tax expenditures are on a path are larger than discretionary
spending in total. $1.5 trillion. is there any difference -- in terms of the impact on the budget, a dollar -- >> the effects is the same i. have you done analysis of what type of discretionary spending may be have a more positive or necessaryive impact on the budget as on the deficit as you would have -- for instance, the chair blt deductions versus mortgage deductions. >> that comes to my mind so much. our college at the joint committee are the once who done that work. they may have numbers for you.
>> last year this house renewed about $800 billion of tax exp d expenditures with no over set, is that correct. >> i don't remember the number, that could be correct. >> it was substantial. >> when we're talking about i hope you dealt with this in the new publication, when you're looking at over a trillion dollar wort of tax expenditures you are looking at impact on the deficit, something we don't spend enough time looking at in terms of which ones pay off for the taxpayers, most of the mortgage deduction benefits go to the wealthier taxpayers, isn't that correct? >> yes. one of the ways to improve firnt
efficiency of our taxes. reducing tax on capital investment is a great way to -- productivity. worrying about tax base. there are's offshoring behavior that reduces tax base. if they are are tax neutral would have impact on long-term growth without adding defer sit. >> we're going to have that debate later this year as house takes on tax debate. in your report, you project medicare spending per beneficiary to go up 4.3%
through 2027 which is 3% higher than it's been over the last five years. why such a dramatic increase? >> health care spending has been consistently growing faster than gdp. it's part of our forecast that will continue to per beneficialary growth will grow faster than gdp that's part of the growing deficit. >> that not part of the growth. >> right. >> i know there are a lot of facto factors involved. that could be totally -- that could be dramatic difference in your long-term forecast if growth rate per beneficiary said
at that growth that you're anticipating? >> that's correct. -- what sort of impact it has on the budget deficit. we can get back to you. >> another point you you make is the subsidy on the exchanges, assuming they are not repealed would double from this year to ten years and i'm curious as to whether that's predicated on doubling of the number of insurered a rise in the premiums so the subsidies keep pace under the law. is that reason they double in ten years or is it combination of both? >> combination of both.
the incries use of the increased use of the expansion, so i think they are both in there. >> turn to medicaid, this so you project this is on regular medicaid not expand medication, you project going from 3 $308 billion in 2016 to $600 billion in 2027. it's 5.5% a year growth. is that because you're projecting again rising costs per beneficiary or because you expect that many more people to be involved in the eligible for medicaid which reflect bad economy or would it be because
so many such a huge percentage of medicaid is more skilled nursing and you expect senior population to eat up a chunk of the budget? >> we can break that out for you. >> would it be on the skilled nursi nursing side? to say the population is going to grow indicates an economy that's going in the tank which don't comport with the rest of the forecast? >> right. we have -- we have modest growth. one of the things we do have, continuing trend in faster growth for high income folks so the distribution of income we have is that continuing to change that's trend going forward that's been there for a while, that may be the part of
it. >> medicaid expansion, you're project is that between now and 7 the number will go from 12 million to 17 million people. total expense of expand go to $170 million to -- i'm curious as to why that's such a huge increase -- that one i know. >> good. >> right now there are 31 states in d.c. that have expanded and that's 50% of the eligible people. we expect it to increase the number of states that adopt medication expansion that increase 70% of the total people who of all the the states. so it is going from state acceptance of that. >> okay. it's a good answer.
i wish we can see that. policy doesn't look like it's going that direction. in my state, we have arguely the most successful expansion in the country, we reduce more than 60%. we're 3% on insure, 81,000 people on expand medicaid and the projectings, not your project but if we ascend medication expansion we would lose a lot of jobs, tens of thousands of jobs, 44,000 jobs and $30 billion worth of economic activity over the next five years. does your data -- your analysis reflect that kind of potential loss in economic activity and
employment and other areas of the country or across the country. >> iemt n'm not sure we have th level of detail. so think that would be increase of labor supply that increase economic growth that would counter some of the affects. that level i done know offhand what we thought about that. >> thank you for your testimony. i yield back. >> the gentleman's time has expired. >> thank you, madame chair. good morning, dr. hall. thank you for being here. as freshman here and other members as well, we come through campaign where i know i have had many, many, conversations with people throughout my district and her concerns that they have
expressed. one of the tops things we heard is that people believe that kple is not working for them. as it should. they believe they are concerned that their kids, their grandkids will not have the same opportunities to live the american dream that we all have had. people are concerned about that. and they are concerned that we are asking future generations to pay the bill. isn't it true, dr. hall e that is what we're doing, if we cannot solve this problem here, we're transferring the problem to future generations? >> i think that's a fair statement. -- we have a generational we can give to you. that's one concern. >> people are concerned their
perception is that their elected leaders are not willing to make the tough decisions we are faced with. i'm hoping to change that. i'm pleased to be oen budget kp committee to solve some of the issues. this is not a partisan issues. these are issues we should be looking to find solution. it will take us to work across the aisle to move our country in the right direction. i hope this beginning of finding some of those solutions. i'm pennsylvania, a lot of entrepreneurs, small companies who have grown, and created jobs, and grown into large
companies that have created more and more jobs, and and the business owners i talked to today, believe it is more difficult as business owner myself and i have seen this as well i it is more difficult there's less incentive to invest additional capital into new technology to hire people because the -- they believe the regulatory environment hold businesses back. they believe the tax policy is no longer working for them. do you think we are seeing that kind of impact? >> um, i certainly think that potential area for improving the long-term growth. because that one of the two big challenges is productivity and things like -- some regulation
you need some regulation, eliminating some regulation, you hurt. tax policy can impact -- >> we talked about whether we could tax our way out or look at establishing the right environment to encourage capital voech investment and hire -- my question is how many impact that would have. so we were able to get to 3% or 4% annual growth. the numbers i'm looking at look worst, how much impact could we have if we created an environment for much stronger
economic growth? >> the problem is so big, you cannot do it with chieconomic growth, i think. >> can you give a difference how much that would make. >> 1.3% by the ten year. in 1990 it was 2% which was unusual. we're talking about in ten years, we're talking about having a deficit that's about $50 billion lower. deficit going from 1.4 to 1.9. that's an impact. >> thank you, my time expired.
>> i recognize -- >> thank you, dr. hall. you raise productivity, how much making 179 tax incentive for business investment or 100% -- have you factored as to how much that could improve productivity? >> i don't if we have done analysis on that. we have to -- i would have to see if we done an exercise on that. >> could you get back to us on that. >> sure. >> i was a member to the committee and i noticed that despite the general improvement in the economy in terms of employment that we still have not seen a decline in recipients under snap. i'm wondering if you factored in
and looked at that factor as well? >> it's part of the forecast. we think there's still slack in the economy. but the underlining forecast on snap does incorporate economic forecast. we have 1.5 short, that's significant slack left. >> i would add some of the comments of my colleagues, one of the things i heard, was that they have jobs. they couldn't find qualified people to fill the job this relies upon -- these are jobs that may have technical skills or some basic mechanical skills or training in robotics et
cetera, i'm thinking of one particular school, near my district, hudson valley community college, where the guy who runs has about 150 students in every year. every single student has a job. you can have 50 of his type center around the country and you would not need the need for employment for those type of jobs, any comment on that? >> two things come to mind our issue slowing growing labor force, working age people are not entering the labor force like they have in the past. we think a lot of that looks like it's coming back. that's something that's may be important in here. the second thing is the we have done a little work on is some
federal investment in education and training. we are coming out on a block about what we see at the evidence of what we see of education and training that going forward that may address that issue. >> i would be interesting to seeing that. i'm also seeing that publication you reference about 100 best way to reduce the deficit. what did you say the ten year growth in national growth is going to be? >> about 89% of gdp. >> if terms of amount of debt it's going to go from $19 trillion to. >> i think it's $30 trillion. >> over ten years. >> ten years. >> about 10, $11 trillion increase over ten years.
does it get frustrating to tell us that national debt going to be $30 trillion in ten years and no one teams to may attention? >> one of the things i notice everywhere when we put out the report, we talk to press and let them ask questions, one of the questions what knows about this report. the most notable thing is it's still has the same bunch punch line and it did a year ago. it's large and growing. that's continuing message, and can it's been that message for quite sometime. you need to set your hire on fire when you give that presentations may be they'll pay attention. >> thank you, very much. gentleman from ohio is
recognized. >> let me turn to direct spending or mandatory spending. when i was elected in 2010, the first call i got was from my 80-year-old mother to say alreaall right, son what are you going to do to make sure washington protects my social security benefits if they don't i'm coming live with you. the next was from my wife who says you better do what you're mother says. to me of the social security trust fund rain larges s surpluses. what is current cash flow
situation with social security? >> right now there are out lays exceed a fair amount. this year they'll -- the outlays will exceed revenues by about 5 of $55 billion. >> wow. how long do you think social security will last at that rate? >> right now we have our exhaustion date at 2030. >> okay. if social security continues to pay out more in benefits than it collects in taxes, what in your opinion will that mean for current beneficiaries if we don't take any action here? i can guess what that is. i can kind of put the two and two together but i'd like to hear from you on the record. >> our assumptions on this is
beneficiaries will still continue to get what they're promised. so even though unless congress acts, beneficiaries won't get their full outlays. we assume that that happens. if they didn't, in 2030, benefits would just have to be reduced by about 29% right away. >> all right. so is it true the longer congress waits to reform social security, the harder it is to implement the reforms without affecting current retirees? >> it is. >> okay. let me go back and talk a little bit about economic growth. in a 2015 study on repealing the affordable care act, the congressional budget office determined that repeal would increase gdp by about 0.7% on
average over the medium term. that's 2021 through 2025. mostly by repealing the provisions that are expected to reduce the supply of labor in the economy. so how would repealing the affordable care act affect the expected supply of labor in the economy? would it lead to an overall benefit for the economy in your view? >> repealing it would likely increase the supply of labor in the economy. not quite one percentage point. it actually would give a boost to gdp growth because of that increase in labor supply. our latest estimate was about 0.7% on gdp. >> okay. so if we were to repeal, it would increase the gdp by 0.7 and the expected supply of labor. tell me again what you think that would go to?
>> we think that the number of people who would increase their hours or reenter the labor force, that would increase by 0.8, 0.9% of the labor force. that would be the boost to the labor force. >> i'm asking you to do some mental math here. i know that. but at the current labor rate that we're experiencing that you got any idea how many millions of people that would be that would be back in the labor force? >> right. i don't offhand. i don't want to guess. >> can you take that as a question, please? >> we can do that pretty quickly. i just need somebody to look it up for me. >> i need a calculator too. thanks a lot. i appreciate you answering my questions. >> the gentleman yields back. i do want to reference the report that did come from cbo budgetary and economic effects of repealing the affordable care
act. and i will read a line from this. and in addition to the questioning by the gentleman from ohio. and the paragraph begins with the macroeconomic feedback effects of repealing the aca, would lower the federal deficits by $216 billion on the period from 2016 to 2025. so it would have a significant economic effect in lowering. the gentleman from georgia, mr. ferguson is recognized for five minutes. >> thank you, madam chairman, dr. hall. thank you for coming today. i guess one of the joys of being a freshman and going late in the game is i've gotten to hear a lot of the comments and learned an awful lot. a couple of questions for you. first of all, do you belief the rules set by congress that you have to follow for scoring the budget and the policy changes, do they allow us to accurately look into the future? just yes or no. >> i don't have an opinion on
that. we'll do whatever you like. >> i would suggest that we're $20 trillion in debt and let the answer stand for itself there. next, can you accurately talk about how the proposed reforms, tax reform policy, the rolling back of the regulatory caused possible trade policy changes, spending and defense and poverty initiatives simultaneously affect the budget? >> we would have to see a lot more specifics and do a lot more work. >> it just seems, you know, it's awfully tough for us to have an honest conversation if we don't accurately know where we're going with these numbers and how they're actually going to affect us. do you think that we should be using more dynamic scoring models based on predictive analytics, give your office and those around you more tools to accurately reflect what the policy changes are going to suggest? >> i think the policy right now is working well. the dynamic scoring we believe makes for a more accurate forecast. and it really makes a difference
on large pieces of legislation. and that's when we're required to use it. so that seems appropriate. we're going to continue to get better at it and quicker at it. but i think it does probably help improve the accuracy. >> as we sit around and we talk about this, the big challenge that we've got obviously is the mandatory spending. and i think we are going to have to be honest with ourselves and the american people about the promises that have been made in our ability to continue to keep those promises. we're going to have tough decisions to make. i kind of look at it when we talk about where we are in the budget process, are we going to have a budget that balances in ten years? are we going have one that balances in five years? is it one that is going to balance in 12 years? are we not going to vote for a balance because it ruins the political purity of a particular representative? i just get this sense until
we're willing to fundamentally address and honestly address the mandatory spending crisis that we're not doing anything more than rearranging the deck chairs on the titanic. that a fair statement? >> well, i want to be fair and say there are a lot of ways you can invest it. you don't just have to focus on mandatories. but the broader -- >> but dr. hall, you said earlier i think the question and i may be paraphrasing that all of the spending, the mandatory spending is going to outstrip all of the discretionary spending. >> yes, that's right. >> thank you. so it's coming. at some point, that's going to eat up every single resource that we've got. so we have to address that. you know, the other thing, and i'll close with this, you know, it's interesting. i kind of feel like we're a political version of thelma and louise right now. we've been just in this hearing, we've been talking about who has been the better driver for the last 50 miles, okay.
and now we're fussing about who is driving and the car is about to go over the cliff. and it doesn't matter who is right or who is wrong if we don't stop that cliff from going over the cliff. the american people expect us to stop this car from going over the cliff. and i think it's going to be a real challenge that we have as a congress and as an american people to have those very honest conversations that we've got to have. we've got to get better at scoring the budget. i believe we've got to get better at scoring the proposed changes. i think we've got to be able to strip the emotion and the politics out of our decision and use better analytics to make these tough decision. with that madam chairman, i yield back. >> the gentleman yields back. the gentleman from wisconsin is recognized for five minutes. >> thank you. i want to take up again a little bit looking into why the economy is doing so poorly. this 1.6% growth is kind of pathetic with all the new technology that is out there. labor participation rate is
62.7%. and i want to talk a little bit more about these entitlements. because in the last decade, means tested spending has gone up from about $670 billion to $740 billion. so more than doubled. when you look at so many of these programs, it's like they were designed by politicians who intentionally either wanted to keep people out of the labor force or not make it a lot of money. and i want you to comment a little bit on whether say if we did something about low-income housing, where we kind of give people almost free housing as long as you don't work, or the earned income tax credit where we punish people if they make more than $19,000 a year. do you think we could begin to lift these numbers up, lift up the gdp as well as lift up our tax collections if we would get rid of some of these programs and free people from the
incentives not to work? i mean, in my district, my employers again and again i feel, glen, it's tough competition out there to find workers. and the toughest competition i am getting is from the federal government that is paying people not to work for me. could you comment on what would happen if we scaled back some of these programs? >> oh, sure. obviously, we'd need some specifics to actually do a real score and do it carefully. and, of course, repealing some of these programs would have some other effects that you might want to consider. but we do a number of things that -- and we make a point of putting it out occasionally which are implicit taxes on working. that if people work more and earn more, they lose benefits. or if they begin to work, they lose benefits. that is part of -- part of our calculation when we look at something. we look and see what impact it has on the supply of labor, willingness of people to work.
and that's a consideration. >> could you easily come up with a hypothetical in which people say if they work and make another $10,000 lose $10,000 in benefits between their pell grants and their earned income tax credit and their food stamps and low-income housing? >> well, i mean, those are all reasonable versions of that. for example, we've been talking a little bit about the aca. that's part of the issue about the aca. the decline in the labor supply is an implicit tax on work when you lose your health benefits. >> it's not just a decline on the labor supply. i think a lot of these programs will encourage you to work, but not very hard. the earned income tax credit was clearly designed to discourage somebody from making more than $20,000 a year, right? that was what it was designed, appears what it was designed to do. there are various different cliffs in the affordable care act. i was in a different hearing
yesterday in which an accountant talked about people holding down their income to get the subs dies. so in other words, the affordable care act was designed by somebody who wanted to discourage americans from working hard, correct? >> well, i don't know that that was the reason for it. but certainly looking at the possible side effects of programs, what affects they may have on incentives is an important part of any public policy analysis, i think. >> we could do a both a great step towards reducing things on the spending side and getting a big increase on income collection if we pared back some of these programs and allowed people to work. when you run into people back in the district who have stories. sometimes you don't talk to these people, but you talk to their parents, you talk to their siblings, and they'll tell you, you know, my brother, my sister, my daughter, they're not working because of the benefits. you could make a big step
towards balancing the budget if we pared some of these things back? >> it would undoubtedly have an impact. i don't know that it would get us towards balancing the budget. because this is such a big problem. but that could have some significant impact if one looked at some of the programs and worried about the incentives. >> well, means tested spending, according to what i have here went up about $370 billion over the last ten years. i mean, that by itself would be almost halfway towards balancing our budget. and they turn around and look at the huge degree in which we discourage people from working. and all of the sudden you get that income tax coming in. i suppose you would just be afraid to take a ballpark estimate what would happen. >> that's right. and there is a one-time change and part of what we're looking for is the more permanent change. what happens to not just the labor supply, but the growth of the labor supply going forward. >> well, thanks for coming over here. it's enjoyable listening to you. >> the gentleman's time is expired. as we conclude today, i just
want to clip off a few things to help us recognize what a situation we are in this country right now and how desperate we are to change the current trajectory that we're on. so let me just clip off a few reminders. we'll gdp grew only by 1.6% last year, a five-year low, and half the long-term average growth rate in this u.s. since the recession ended in 2009, the economy has grown by an average of 2.1%, making this the weakest economic recovery of the modern era. the headline unemployment rate has declined sharply in the recent years and currently stands at 4.7%. that all sounds good. but the others a specifics of the labor market remain weak. the broader unemployment rate, which includes those working part-time because they can't
find full-time work and discourage workers who have stopped looking for work is 9.2%, nearly double the headline rate. the labor workforce participation rate which i continue to remind people in my district as they hear the low rate, that is only unemployment rate, that really is the rate that matters. 62.7%. that means of abled bodied worker, only 62% of them are actually employed in a full-time employment. close to a 40-year low, and cbo expects this rate to continue to decline in the future. cbo maintains that the affordable care act is contributing to this decline by reducing the overall labor supply in the economy. the average hourly earnings have increased by about 2.5% over the latest year. but that is well below the previous session level when earnings were growing by 4% a year.
real median household income is finally on its upswing. but at $56,500, still $900 or 1.6% below its previous session peak in 2007. so as we can see by all of these statistics and these numbers, this is affecting our economy. and more importantly, this is affecting the people of this country. so thank you, mr. hall, for appearing before us today. please be advised that members may submit written questions to be answered later in writing. those questions and answers will be made part of the formal hearing. any members who wish to submit questions or any extraneous materials for the record may do so within seven day, madam chairman, may i make just a brief comment in response to your comments? >> absolutely. >> listening to both sides and to director hall during his hearing, we heard very few ideas for stimulating growth in the economy or specifics about what we would cut or how we would fix
some of the mandatory spending programs. so i think if it would be possible maybe to have another session some time in the next few months to discuss the actual recommendations that are in the new publication from director hall. and then maybe get some other people in here who can talk about how we can actually grow the economy. because i'm not exactly sure we know how to do that. either side of us. >> point well taken. >> thank you. which that, the committee stands adjourned.