compensation would translate to job growth. so all else being equal, would a higher minimum wage, say a $10 minimum wage, be a policy that would make it more likely to increase employment numbers, to put more americans back to work? >> right. the difference is there are two sides of the ledger when it comes to the minimum wage. on the one hand, it's an extra cost, but on the one hand it's also an extra benefit in terms of higher productivity, retention, motivation, all of those factors. and the empirical work finds that those two factors roughly balance out and as a result there isn't a significant adverse effect on employment. in contrast, paying extra for health insurance is really just a cost to accompany, and it's not, you know, everything else being equal of any benefit to the work sore it doesn't have that corresponding other side. >> okay. in that same piece that you

wrote for "slate," you stated that while supporting the minimum wage absent other policy changes, you would prefer other policies because they tend to be more progressive, paid for disproportionately through taxes on the wealthy, on upper-income individuals rather than through higher prices that might be passed along to consumers. in a piece on the minimum wage for "the new york times" this march, former cea chair christina roamer made a similar point stating it might be the case that, quote, businesses pass along some of the cost of a higher minimum wage to consumers through higher prices. often the customers paying those prices including some of the diners at mcdonald's or the shoppers at walmart have very low family incomes. thus, this price effect may harm

the very people whom a minimum wage is supposed to help. is it, in fact, likely in your opinion that consumers would foot the cost of a higher minimum wage? >> i think it's a relatively small portion of the cost for those businesses. i think the minimum wage adjusted for inflation is today the same value it was in 1950. hasn't gone up in 63 years. so i think there's certainly scope for an increase. i think that would complement policies like an expanded earned income tax credit. >> okay. i see my time's expired. i understand you to be acknowledged that some of this would be passed on to consumers? >> no, actually -- i apologize, but i think it actually is part of a strengthening of the economy to put more purchasing power in the hands of families. i think that would help the economy overall and help consumers more broadly. >> i wish we had more time to

talk about that. thank you, mr. chairman. >> i can feel it coming on, senator. chairman, thank you for being here today. obviously we're encouraged by certain parts of the economy. still disappointed by many parts of it. looking for bipartisan solutions on how we improve the economy, grow jobs, bridge the inequality between middle class and wall street. i very much appreciate you being here today. look forward to hopefully having you back after the next report is released after the beginning of the year, february, march, whatever that time frame is. chairman, thanks for being here today.

talk about the influence of money on elections. it from "washington journal," this is 35 minutes. >> host: on wednesday on the "washington journal" we take a look at the recent magazine we a article. it's part of the spotlight on magazine series. today we want to go online to the atlantic web. to the wire service to look at thes piece. mp, "does more campaign money actually buy more votes: an investigation." let's answer the question -- does it? guest: there is a correlation, which i suspect will not surprise a lot of people. we took a look at the house .aces in 2012

we found there was a correlation. between the amount of money that was spent and the vote total by which the person won. host: there are these charts with blue dots and red lines. can you explain this first one? it shows the trend and all of the data. explain what happened here, what you are looking at. is.st: it is two ax one is the margin of victory in the race, the number of votes the winner had compared to the amount they spent per vote. one of the measures you can use is comparing the total su m of spending and dividing by the number of votes and that gives you a cost per vote. winning congress members spent

$9.84 for each vote that they got. , theces became closer votes became more costly. they spent more money per vote in closer races. host: what if the vote cost less? guest: this is just a correlation. there are a lot of correlations to go and face here. if you spent less money, you were less likely to win. the next set of graphs shows a correlation between the extent to which you outspent your opponent and your margin of victory. we found there is a correlation there. in races where the person won by 20% is points or less, that was amplified. the more you outspent your

opponent, the more likely you were to win. host: what if you were an incumbent? guest: for the most part, the incumbent usually win. at the races in which the incumbent did not win, in which the challenger was able to win the race. those challengers almost always out raise the incumbent. we looked at what was raised in the case of the incumbents. we thought that might be a better measure of energy and the amount of work the candidates put into the race. so again, there is the correlation. were in aheyhost: what if you tight race? guest: the same effect. i don't mean to sound like a broken record here, but the relationship was between more money and more big threes, more

money, more votes. which is sort of what we assume and what we wanted to do is look and see if there actually existed this correlation. that we take for granted. and their raise. it is not necessarily as strong as people assume, but it exists. it is worth saying -- go ahead. host: what does all of it means then caller? here is the data. yes, more campaign cash will get you more votes, but having the data that proves that, what do you think it means? --st: i think it means that a very good question. there are different meanings people can take. means, yes, the conventional wisdom that there is a relationship between how much money campaigns have, and the margin of victory. say, yes, ittists is the case. it exists. it was demonstrated in 2012. even in the presidential year

when turnout is higher and there would seem to be more instability in what is happening, it would seem to exist. but it does not taken to affect things like outside standing. for example, the aide at the center for responsive politics uses is sec filing --fec filings. it does not include super packs or any of the external expenditures that go into a political campaign. and there are a whole slew of other factors at play in any particular race. if the candidate has some terrible gaffe, a scandal, none of that stuff is accounted for in the calculation. this is purely what the campaign raised versus the vote totals. host: let's talk a little bit about outside spending and the election result of the off year election, 2013. --n secrets categorizes it i 314 spinning. liberal, $2.3erg, million for 2014.

.homas steyer also the liberal michael bloomberg lost a lot of races he dumped a lot of money into. guest: it is categorically the case that money can't buy it elections. i know what i just said about there being a correlation and the amount used spent and the ability to win the race, it exists, i know it sounds contradictory. but there are multiple factors that come into play. bloomberg and other big spenders who come into a race usually have to do so it depends on what kind of race it is, but they have to do so without coordinating with the campaign. by law, that is the standard. that means it may be a doubling of efforts. it may mean that the strategy that is employed is not as did. a lot of the political campaigns are won -- run by political

parties are folks that have been a lot of campaigns in the past. my personal experience, it has been the case that those that are wealthy and want to run a political campaign, -- there are various factors that come into play and it may mean they are less experienced at doing political campaigns. and that may affect the outcome. i do not know it is the case here. the case of tom steyer, the day we did an analysis was a day politico had a report about how much you spent in the race in virginia. this is something his people have and will spend a lot more time analyzing. it took a quick look at the data and where they targeted and, frankly, there was not a big shift in those locations compared to some of the other places in the states. was suspending effective? obviously terry mcauliffe won by a very small margin and in cases like that a lot of little things can make a difference. difference ina

virginia? it is very hard to say given the variables. host: what is the best way -- it doesn't matter how you spend your money, and if so, what is the best way to spend your money? are asking me to tread in a very tricky territory among people who run political campaigns. the past run political campaigns, work on the field, the actual doorknocking and canvassing. so i am a little partial to the field as something being affected in political races but it only makes a small difference. there was a lot of hullabaloo earlier this year -- the mayor's race in new york city during the democratic primary, did not send a lot of direct mail which is usually one of the tactics candidates use because it allowed them to target very specific people, even target for specific demographic and locations. but bill de blasio did not do that. but he was alsoromping in his race.

had a lot of tv ads. but the short answer is it depends on the race. the longer answer -- a lot of ways are good but i personally think field is great. host: a viewer tweets in on that -- said field operations only account for a few percentage points. guest: that's right. in general. it is sort of a rule of thumb. one of the interesting things about political races is it is not usually campaigns themselves that want to go back and do a lot of analysis about what actually works and actually didn't. usually when a candidate wins, the day after -- great, the campaign is over so let's not worry about another two or three years. the little girl parties and a lot of -- of time on this and academics. where is it that -- best spent question mark it depends on the race. if it is a local race, for example, you may spend more time on the field because you have a small area to cover and you can make more of an effect. a statewide race like a ballot proposition on california and

the tv ads may be best because you can reach a lot of people and you know you are going to stay in the geographic area. i live in new york city. i think a lot of people here saw ads over the course of the past month for the new jersey governor's race, which they have thepend that money because local tv news area covers new york city. but it is a waste of money. i don't need to see an ad for chris christie. i can vote for him so there is no point showing it to me. it is a waste of money but you don't have a choice. it sounds like a hedge, but it depends on the situation. host: another tweet from a viewer who wants to know doesn't matter when you spend your money. end or thel at the start of the race? guest: it is a good question. we do not look at that. this, again, has different schools of thought. but in general you want to do a closer to election day because people are paying attention. peopleing here, the watching the show, pay closer attention to politics than most

people do. most people pay attention to politics around election day and don't spend a lot of time before him. it is a question of whether or not you do a tv ad two months before and send the mail -- yes, you will probably be the only message they hear but will they remember two months later? host: jack in texas, independent color. to philip bump about his piece on "the atlantic " online. caller: you talk about the money being wasted in the election -- i am out of breath. all the money spent in the campaign am in the matter what, it goes to support the media. systemia is part of the that support each other. one hand washes the other. there is never any dollar spent in a campaign that protects the vested interests, which is wasted. not one. you talk about bloomberg spent all that money.

my god, he owns half of the media new york city. host: philip bump. the role of the media and also the importance of using midi -- media to win an election. guest: i think it is a valid point. local news stations make a lot of money during elections. they do. there is no way to dispute that. they make a lot of money selling ads. october an ad in late will sell for x amount during an election year, two times or three times -- yes, that is a valid point. that the media make money in political campaigns. however, there are a lot of aspects of little campaigns that don't actually touch the media. there are times lyrical campaigns try to get free media, earned media where they have events and hope the news shows up. they do a lot of direct mail and online advertising. they do a lot of field campaigns. people or they get

volunteers to go when aqua doors of the print flyers that get handed out. i think the idea that the media and political campaigns are living in a symbiotic relationship is not the case. yes, there is a benefit for the media but it is not the case that the media tries to blow politics out of proportion to get more money. host: a viewer tweets in - media will not get behind any effort to limit campaign season and spending. vineland, new jersey. democratic caller. caller: good morning, greta. good morning, philip. i wanted to get your opinion, if i may come and make two quick points. you seem very astute with politics and have followed it for a long time. tell me what you think about in terms of the supreme court or saidever court it was that money is also speech and how that figures into your

conversation today. and if i might ask you -- please, bear with me on this a little bit, greta. i am not trying to go backwards, -- i know he has also studied politics as well over the years. when did it become so amazing that a politician would or aould or could or even tells lie -- where in history in your opinion where there has been no politician literally to tell no lies. i only make that point because ng this president lied -- and then the question, how many hundreds of thousands of civilians have died since president barack obama "told this lie" if you want your health care you can keep it. i am just talking about it from a political point of view from a person is that his politics. host: we will leave it there. philip bump? guest: to your first point, the extent to which the media gets money from corporations,

particularly following the citizens united decision. this goes to your point about eyer andg and tom st the other external spending. it is not the same sort of spending but it is in effect the same thing. actuallyorations can affect the outcome. there are different schools of thought. some people feel as though it already had a significant effect on how political campaigns have run and some people feel it has been a and nothing has happened with it yet. i think time will tell. i think people are trying to explore that and we will see how that actually shifts things or if it does. to your second point, i wrote a piece in the campaign last year. the point at which political candidates say what they think people want to hear to get the vote. the definition of lie is a philosophical question which we can lead to people at universities to some extent. but beyond that, i think politicians are very adept at framing a message in a way that

people will respond to. whether or not it hums to a lie is subjective. host: michael on twitter ways in on the united citizens part of the conversation. does it mean that the citizens united ruling is accelerating the end of democracy? upper classes continue to manage the system. let's go to kyle in california, san francisco, republican caller. good morning. thank you for taking my call. on the subject of citizens united, i noticed the last couple of races, particularly the virginia governor's race, seeing are routinely headlines and data that are showing that the democratic party super pacs seem to be outspending the republican super pacs and i just wanted to get your thoughts on the irony of that. because just a couple of years ago, even in 2012, democrats

were saying things like super pacs are bad, the worst decision ever, a lot of hyperbole. and a lot of commentary i have heard since then --there has been, in my opinion, limited media coverage of this. say things like, well, this is the new reality and we have to adapt to it. but they are not only adapting to the new reality, they are doing it in quite a much larger number than republicans in terms of funds. i am just wondering what your thoughts are on that -- the politics of that. answerefore philip bump that i want to show our viewers the open secrets website, and the top pac recipients -- house candidates, eric cantor getting the most on the house side. on the senate side, mark pryor, democrat from arkansas. you can see the list. mitch mcconnell, tom cornyn, tim

scott, mary landrieu, and then on the house side, dave camp, kevin mccarthy, steny hoyer, john boehner fred upton, etc.. largely leaders and people who are in tight races. the open secrets site, that pac money includes, for example, candidate pacs so it is not strictly external money. to the point of citizens united, i think we have the tendency to assume we will see all negative effects -- that the citizen united ruling will be something that echoes over time. i think it will continue to evolve. i think we can expect further rulings from the supreme court about it, as well as potentially something coming up congress. although i don't think there is any traction on that at this point. but we will see. i have seen the reports that you have the same democrats outspent -- democrat leaning pacs outspent republicans over the course of the last election cycle. and i think that is interesting

as well. what i also think that beyond the super pacs and citizens united, there have always been ways and legal loopholes to invest in and affect political campaigns. and i think the vehicle under which that happens has shifted a little bit, but i think that the process remained largely the same, that people who want to affect the political race and have the money to do so will figure out a way legally to do so. host: we are talking about campaign cash and whether or not it affects votes with philip bump from "the atlantic wire." website, therets most expensive races in the senate. looking at money raised the money spent. you can feel some of the most contested senate races being some of the most expensive. chuck in hamburg, new york. independent caller. this modernink in day of electronics that we have now, do i have to watch 12

commercials during a tv half- hour at night? can't we, with something better? half of the money we donate, people, corporations, everybody donate to these, -- politicians. we can actually pay off our national debt. we can take care of a lot of our problems. we can have less influence -- that is all money doesn't is corrupt and by influence. -- all the money does is corrupt and buy influence. it is a sad world right now. if people don't wake up to the fact that they are getting messed over every day by our government, the people we put in there. host: mr. bump? guest: i think the church bells in the back of the call might've have had some significance. i am not sure what. i think the slew of political ads you will hear shortly before a campaign, before election day on local tv, everyone agrees that is annoying. forn, i was watching ads

both gubernatorial candidate in new jersey when i was watching tv in late october and it doesn't make any sense. often times when you work on a little campaign people call and say, if i see your ad one more time, i am not voting for you. if i get one more piece of mail from you, i would've voted nobody takes it seriously because obviously the odds of that person actually not voting for a candidate if they support them are very slim. but there is not an awful lot you can do about it. this is the market in which we live. we live in a capitalist world, where the media says we have this thing we can sell you and you can reach x number of people and one political campaigns want to reach x number of people. it is annoying. i do not know of money has corrupted influence over everything. i don't know the extent to which money corrupts everyone in congress, which is sort of a standard -- you know, congress passed the approval according to gallup is nine percent. that is a factor, that everyone in congress is not representing their guns but you went because they are out chasing dollars.

i don't think it is necessarily the case. but it is absolutely the case that a lot of campaign ad can be annoying. host: springfield, missouri. independent caller. caller: i am james from missouri. thank you for holding this important program. . have a question has anyone done an impact study about allowing the airwaves to be given access to the candidates for a small period of time before the elections? we often hear the american people own the airwaves, free speech, one of the four freedoms of fdr is free speech. take thehis would money from driving politics into allowing the merits of the case or the legislative agenda to determine who gets the vote instead of who can be heard the most. yeah, that is an

interesting idea. i am very, frankly, skeptical that it would work because at some point americans stopped paying close attention to politics. , all of us play close attention to politics but not everyone does. i am -- to tune in to see the candidates debate. in 1992, ross perot got lots of time on network television, spent half an hour going through charts. it actually worked. part of it was the novelty and parted it was because it was on prime time, network stations at a time when cable was not to the extent it was now. -- it is now. i like the idea. it is a classical sense of people being informed and making decisions based on it. i just don't know and the modern world if it is practical. and i think the political campaigns, part of what they spend a lot of time doing is figuring out how to get people

who are generally disinterested to pay attention to what they are trying to say. they know they have a brief period of time in which to talk to people, so they make their message as compact and compelling in that brief amount of time that they can, which often means you get sort of -- here aretead of the 19 things i plan to do with my campaign. .ost: peter in texas independent caller. hi, peter. caller: i was just asking for -- you got any statistics about vote in correlation to how much was spent in the field, but what about statistic as far as votes depending on how much you spend in the media. winning elections are not. very: it varies widely. field percentages is basically rule of thumb. it depends on how many you are able to contact.

let's say there are 1000 voters in town and you can knock on 100 doors and able to convince 50 of those people to actually go out and vote, you can figure out the math there in terms of the effect the field has. frankly, it is easier to study. if you run a tv spot in that town, it is much harder to tell who you influence. you are not standing them asking them -- ok, are you now likely to vote for a candidate because i just asked you? thumb, butvisible of you are better to gauge based on. you can do polling. campaigns will do polling of a particular area and then do a television spot and then repoll to get a sense of how effective it was. presidential campaigns and senate campaigns do this. most campaigns can't, so as a general rule it is specific to that campaign that moment. host: what about getting voters to turn out the day of? targeting, other types of technology that is used for that?

is -- especially in a close race, essential. race,appened in the 2012 no question president obama was going to win based on the actual outcome. but one of the things the romney campaign marked failure was the fact they get out the vote tool do not work as effectively. when you have a close race, your ability to know -- in a field campaign is over the course of the campaign you identify, this person said they will vote for us, and on election day, your job is to make sure that person actually goes out and does show. -- does so. republicans typically do not more than democrats do. it is generally some the democrats focus more on our the get out the vote operations. it can be critical. it is the most important part of fieldwork. host: jerry in baltimore. democratic caller. caller: thank you for taking my call. thank you, c-span. i see all those numbers. i don't know about anybody else, but i see an untapped revenue

source. why can't we as citizens get a taxingdo a referendum on superpacs. political donations. the supreme court says they are people, too, let them be taxed at 25% like me. worker,hourly independent, sole proprietor. but still, you know, i am the one who gets gouged the most. look, i'm a democrat. i give to them dnc --you would not believe how many e-mails i get. let them take $.25 out of every dollar to pay the debt or go into the general fund. eric cantor and the rest of them -- might see a little more, let's get the house in order and not cut because nobody is helping me with building up

my business. thank you. isst: i think that it extremely appealing in the abstract. i think it would be -- part of what citizens united determined is these corporations have the right to be involved in political campaigns because it is an act of free speech. therefore, what you are suggesting is basically a tax on free speech, which is probably a nonstarter both congressionally and judiciary. secondly, this is something that has already been taxed to whatever extent it has been taxed. this is money that let's say the koch brothers, people like to cite, when they put money into a and it is money they earned paid taxes on. maybe it is the capital gains taxes so it is not 25%, but this is their own money. like if you took money from your savings account. , ifou give to the dnc someone were suggest 25% of that should equip them only be taxed -- equivalently be taxed, a lot

of people would not. host: democratic caller. you're on the air. caller: as far as taxing the contributions for little cool has been all money taxed, whether you spend it at walmart or anywhere else. it has already been taxed by somebody, yet they pay taxes on it. so, why not tax the contributions. another thing that i think theld be done is contribution should be put in the pot and divided equally, that no party could get more money than the other party. it is my thought on the subject. i appreciate you taking my call. this is tricky. the one thing to keep in mind is that all of the suggestions would have to go through congress. congress as a general rule is perfectly content with the campaign financing system, certainly a majority of congress is. dea of putting it all into

one big pool for the parties to share, i think honestly is a little unfair. i like it in theory, but it is easy to point out -- if you, for example, are a republican and you are told, please give $100 to this campaign. by the way, a bit of this will go to my democratic opponent. i think you will probably be reticent to do so and the only solution would be federal financing of elections or some other system. i am i sure that would have congressional support. host: vicki is watching us in anchorage, alaska. republican caller. caller: i had a question regarding how is the money spent to secure absentee votes for our men and women overseas? thank you. guest: that is a very good question. and my experience -- i worked on political campaigns in california and one of the things we did, there are publicly available list of absentee voters. especially as more and more

states start adopting early voting or stock at national start adopting absentee-only voting like in the northwest, it becomes more important. frankly, from a campaign standpoint it is much easier. as well as knowing who the absentee voters are, often you will get a list of people who have already voted. that allows you to check them out of the list, of the people you need to reach out to. essentially a work the same way. you find out who the people are -- as well as you would find other people living on a particular street. you send the mail. you will advertise in places where it you know they will be watching. and once they return their ballot and they voted, you take them off the list. host: joshi here in dc independent caller. caller: thank you for taking my call. i have been listening to your program and i think it is a valid point that money raised obviously as a result of elections one. but i would suggest it is not the main concern. because oftentimes money raised can connote support for

candidates. the concern is the quid pro quo, the concern that if you give me money i will vote your way. i am wondering what you think professorons --one suggested -- i'm wondering what you thought about that or other solutions available. guest: it is a great question. i wrote a piece earlier this month, maybe last month, that actually looked at that point. which is, to what extent do campaign contributions actually buy votes. again, another common misconception is that congress gets money from exxon mobil and then vote for exxon mobil. really what those donors are doing is they are buying access to the politician. they are donating to events so they can go to the events and build a relationship. there is an extent to which exxon mobil -- not to pick on them unnecessarily -- they would give money to political candidates and go to the

campaign events and the lobbyists get to meet the staffers and naked to have dinner by paying $50,000. it builds a personal relationship and gives them an opportunity to talk to elected officials, where they can make the case. expandinge case for alaska for more oil drilling. mys is the manifestation and experience of how works. it is basically just paying money to become friends, in essence. i am sorry, you have a second point which escaped me. host: we will move on because we are running on a couple of e- mails here -- deborah says cut out the middleman and pay me for my vote. m colorado says, does the money gravitate to candidates who are winning? guest: yes, to some extent, it does. that is a very good point, too. it is a tie the knot that exist on the data. people who have more money to spend on political races and are doing better in the polls and can get more media, although that helps contribute to the fundraising.

and again, the data we looked at was primarily looking at fundraising and it looked at spending. we looked mostly at the spending side in an effort to try to move past that bias, because fundraising can be different from spending and there are ways -- effect, there is an which the non-squeaky wheel gets the grease. bump, our final week bank. our democracy is diminished when it comes to who can spend more rather then having to debate the issues. thank you, philip bump.

house and senate conference met today to work on creating a budget blueprint for 2014. that's next on c-span2. about the westbound's capacity on the the day of the rollout.

mr. park, you're here today and taken away from your other duties because of a serious concern about what you knew and what the administration may have had you say. i want to give you an opening opportunity to clarify that. after the october launch, i'll paraphrase, you basically said the problem with the westbound was there were 250,000 simultaneous use users. they could have handled 60,000. but then 250,000 simply brought it to the knees. with your opening statement. the opening statement of others what you now know, would you like to, please, for the record, give us the number of users could have been handled through the portal on day one? >> thank you, mr. chairman, for the question. it's the nature of this kind of

situation -- >> mr. park -- >> yes, sir. >> i want to treat you with respect. >> yes, sir. >> i have very few minutes. >> yes, sir. >> you gave a number. it was erroneous. it couldn't handle 60,000 simultaneous users. documents placed in the record showed the system crashed with 1100. the goal to get to 10,000. would you like to tell us, for the record, -- based on working on this. what number the american people simultaneously on the site working on day one before the system began to time out. >> so to answer as quickly as i can. thank you for the question. the information that we had at the time was that cms designed the system for 60,000 concurrent user. right now, if you ask me right now based on what i know now. what the system is currently capable of handling. the thing i would be comfortable say. the system has been comfortably handled at present about 20 to

25,000 current users. >> it's fair to say. i'll paraphrase. on day one, on october 19st. the launch some amount perhaps greater than 1100 which was experienced on september 30th. closer to the goal set on september 30th which they thought in documents the committee received they could get to 10,000 simultaneous. but on day one, on october 1st. when this site launched, the site was capable of handling somewhere more than 1100, perhaps. but less than 10,000 simultaneous users and certainly not the 60,000, 50,000, or 250,000 that simultaneously tried to use the site; is that correct? >> so there may be a matter of confusion here which cms may be in a better position to clarify. i believe that the 1100 number was for a particular unit of capacity. >> okay. >> as opposed to the entire

system. >> but the problem is there was a front door and the unit of capacity was limited by the front door. you know, i think for -- i come out of the i.t. world. i come out of the tech world. but the american people can understand that you're only as strong as your weakest link. if you have a bottle neck that causes people trying to get through the site to not be able to do it. to timeout, that bottle neck is what determine it is. since on day one, only 6 people got to the end, i think that for the american people understanding whatever the capacity is today. the capacity was insufficient on day one; isn't that correct? >> sir to provide the most accurate testimony. >> i want to know on day one was the capacity sufficient? >> i can't speak to the numbers you were talking about. but clearly on day one, clearly on one day, the system was overwhelmed by volume. >> okay. mr. park. you are going back to something

i hoped you wouldn't do. the volume on day one. maybe gao can answer. it wasn't expected on day one. it was expect if you everyone is going on the site to see what it's all about after three and a half years of waiting? >> yes. mr. chairman, i don't have the specifics. these volumes we're talk abouting for you go to example like irs on e filing and they handle the people filing taxes in the 1e9th hour. it's the same problem that irs deals with on an annual basis. you need to appropriately plan for your performance stress testing, and there's fundamental questions whether it was adequate here. you can watch all of todd park's testimony on c-span.org. the the head of the congressional budget off -- office testified before the house and budget conference committee. the committee was created as

part of the deal that ended the government shut down and avoided a federal debt default. the panel has a december 13th doll reach an agreement on the budget blueprint for 2014. [inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] the committee will come to order. cerve take their seats. good morning, everyone, and welcome. i want to thank senator murray and the entire committee for the work so far. since our last meeting we have been talking.

we're discussing the parameter of a potential agreement. we're trying to find common ground but not there yet. there's a big gap between our two budgets if anyone noticed. that's why we're talking. we hope today's meeting will keep the ball rolling. the last time, the reason we are here to get an agreement. we spent a lot of time talking about the difference. we have that down cold. that's the easy part. the hard part is figure out how we agree. i'm not starting with an opening statement. we are hear -- here to hear from the cbo director. he's giving us a brief on the budget, the economic outlook, and the long-term economic goi o budget outlook. us then open up for discussion.ic i'll recognize any member up to two minutes or discussion or asl a question of the cbo'sssion. director. the ani' will not come out of tn two-minute a lotment. we intend to adjourn at noon.

with that i would like that we intd tosenator murray for any comments. with that, i'd like to recognize senator murray for any comments she may have before we recognize dr. elmendorf. >> thank you dr. elmendorf for being here today and all of our committee members who are here to participate today. i think we all recognize that our nation is facing some very serious economic challenges. our economy is recovering, but far too slowly, and our highest priority has to be making sure we meet our short and medium-term needs to boost the economy and as dr. elmendorf will talk about today, we face serious long-term fiscal challenges, as well, that we've got to work together on. i think chairman ryan and i both know this is not easy. our budgets are dramatically different, but it is extremely important, and we agree that we need to step out of our partisan corners and make some compromises and lay down a

foundation for some long-term bipartisan agreements. we have been, as he said, had a number of discussions since our last meeting regarding the parameters of a potential deal, and i've been very encouraged by those conversations. they are going to continue in the days ahead, and i'm hopeful that we will get to a bipartisan compromise very soon. so, i, too, look forward to this productive discussion today to help us reach that goal, and i thank everybody for being here. >> thank you. dr. elmendorf, floor is yours. >> thank you very much. my colleagues and i are very happy to be here. i will briefly review the economic and budget outlook, and then we'll try to answer any questions that you have. i'll be referring to the charts that are in front of you for people in the room and charts posted on the website for people watching from afar. in february, we projected that economic growth would be slow this year and that a more rapid

expansion would begin next year. that is still our view. in particular, real gdp is on track to rise about 2% this year, a little above the 1.5% we had envisioned, but still only modest increase. the unemployment rate shown in your first chart at the bottom of the front page, has come down more than we expected, but employment has not grown more than we expected. instead, there's been a further decline in the number of people in the labor force. as a result, the share of the population with jobs shown in the chart in the top of the next page, is very close to what it was four years ago. this ratio is trending down gradually because of the retirement of the baby boomers and other demographic factors, but it has fallen well below its trend. we estimate that employment is now about 5 million jobs short of what it would be if the unemployment rate were back down to its sustainable level and participation in the labor force

was back up to its trend. the primary cause of the distress in the labor market is a shortfall in the demand for goods and services relative to the productive capacity of the economy. and, therefore, in the demand for workers. the primary reason why demand is weak is the lingering effects of the housing bubble and financial crisis, but fiscal policy has mattered, too. the positive short-term economic impact of the spending increases and tax cuts in the 2009 recovery act has been fading for three years. other stimulative measures have expired, and the congress has enacted additional legislation to reduce budget deficits in the near term. the combined effect of the deliberate policy choices you've made and automatic stabilizers in the budget has been to reduce the deficit from about 10% of gdp in 2009 to about 4% in 2013. that is the most abrupt fiscal tightening since the end of the

second world war, and though that tightening has had the beneficial effect of slowing the accumulation of government debt, our analysis indicates that it has also slowed economic growth during the past few years. moreover, uncertainty about fiscal policy has been unusually high, owing to the surge in debt and stark disagreements about tax and spending policies. disagreements that have led repeatedly to delayed enactment of appropriation bills, worries about defaults on federal debt, and showdowns over other budget issues. that uncertainty is also probably dampening growth, although we do not know by how much. the further tightening of fiscal policy built into current law for the next few years, as well as ongoing uncertainty about fiscal policy, represent continued headwinds to the economic recovery. at this point, we think that 2014 will see an upswing in housing construction, rising

real estate and stock prices and increasing availability in credit, as well as reduction in fiscal drag relevant to 2013 given to current law. in our judgment, all of that will help to spur a virtual circle, faster growth in employment, income, consumer spending, and business investment, however, everyone should be cautious about that outlook. researchers who have studied the historical record of housing bubbles and financial crises have been warning since 2007 that working off an excessive housing stock, improving balance sheets, restoring credit, and regaining confidence generally takes time. we think the economy will turn the corner next year, but no one can be sure. in addition to the near term economic challenges, the country faces significant long-term economic and budgetary challenges. for one thing, the prolonged weakness in the economy has lowered its productive capacity for years to come.

persistent long-term unemployment shown in your next chart will lead some workers to leave the workforce earlier than they would have otherwise and will erode the skills of other workers. in addition, lower capital investment and productivity growth will reduce future output and income. moreover, as you know, the aging of the population, expansion of federal subsidies for health insurance, and rising health care costs, will put increasing pressure on the federal budget. you flip to the next page at the top, your next chart shows our budget -- although deficits will fall to about 2% of gdp by 2015, they will then begin to increase again, reaching 3.5% of gdp or nearly $1 trillion by 2023. moreover, under the extended baseline in our long-term budget outlook, deficits continue to increase beyond the coming

decade. as a result, federal debt held by the public shown in the chart at the bottom of that page would reach 100% of gdp 25 years from now. even without accounting for the harmful economic effects of that increase in debt. there are at least three reasons why we and other analysts are concerned about the long-term budget outlook. first, debt is already larger relative to the size of the economy than is any point in our history, except for a brief period around world war ii. even if debt remains near its current 73% of gdp, future wages and incomes will be lower than they would be with less debt. also, the government's interest costs will rise dramatically when interest rates return to more normal levels. your ability to use fiscal policy to respond to future financial crises, recessions, and international threats will be much more constrained, and the risk of a financial crisis -- fiscal crisis, excuse me, would be higher than it

would be with less debt. all of those problems of keeping debt at its current share of gdp will be worse if debt rises significantly and persistently relative to the size of the economy. the second, we project that under current law debt will rise significantly and persistently relative to the size of the economy. projections and especially long-term projections are very uncertain, but our long-term outlook show that the federal budget is on an unsustainable path under a wide range of possible assumptions about some key factors that influence federal spending and revenues. you know the main reasons, retirement of the baby boomers and the rising costs of health care are pushing up the costs of the largest federal programs. your next chart, top of the next page, shows federal spending and revenues under cbo's baseline compared with past averages. for example, on the top left corner of the chart, you can see that social security outlays

represented 4.2% of gdp on average between 1973 and 2012, the last 40 years, where 4.9% of gdp last year will be 5.3% of gdp, we project, in 2023. if you take spending for social security and medicare together, that was about 6% of gdp on average over the last 40 years. but it will be more than 8.5% of gdp by 2023 and in our long-term outlook we show that by 2038 it will be more than 11% of gdp. meanwhile, defense spending shown in the third bank of the numbers is on track to be a shrinking share of gdp, and all other noninterest spending taken together, everything but social security and medicare and defense, will be roughly the same share of gdp in 2023 that it was on average during the

past 40 years and that it is today. i want to make clear that the steadiness of this gdp share of the all other category masks some very different patterns among its sub components. as you can see in the chart at the bottom of the page in this other category, means tested health care programs are taking a growing share of gdp, owing to the expansion of insurance coverage through the affordable care act and rising health care costs per person. in contrast, nondefense discretionary spending is on track to be a sharply shrinking share of gdp, owing in part to the caps from the budget control act. we show figures like these not to suggest that you should try to repeat the budget configurations of the past, but instead to help you and others understand which parts of the federal budget are expanding relative to the size of the economy and which are shrinking. there's no particular reason it outlays for social security and medicare need to be cut back to their historical average share

of gdp when a larger fraction of the population is old enough to receive benefits from those programs. however, if those programs are not cut back, then we will need to collect a larger share of gdp in tax revenue relative to our history, or cut back on other federal benefits and services relative to what we have been accustomed to. the third reason for concern about the long-term budget outlook is that current laws underline our baseline projections, include provisions that would restrain deficits in significant ways, but might raise widespread objections as they took full effect. i'll offer two examples, both of which can be seen in the charts i just discussed. first, given the structure of the tax code, revenues would rise above their historical average share of gdp in just a few years and would keep rising. reaching more than 2 percentage points above that historical average by 2038. at the same time, outlays for

defense and nondefense discretionary programs would be smaller relative to the size of the economy in 2017 and beyond than at any point in at least 50 years. indeed, discretionary funding for the next decade under the current caps would be about $1.5 trillion less than what would be needed to provide the benefits and services that were provided in 2013. to be sure, depending on one's goals and priorities, there may not be anything wrong with either of those developments. my point is simply that if either of those current law policies is not maintained, either the increase in tax receipts or the sharp drop in discretionary spending, if those are not maintained and other changes to spending and revenues are not made, deficits may be a lot greater than we're projecting under current law. to sum up, we face both short-term and long-term economic challenges, and those challenges are related to fiscal policy in different ways.

the long-term challenge can be addressed in part by reducing future deficits, whereas the short-term challenge has been exacerbated by the recent sharp reduction in deficits. policy changes that led to less fiscal tightening in the near term, but greater tightening in later years would improve the economic outlook for both time horizons relative to our projections. to help you and other members of congress make informed decisions about possible policy changes, we have just completed our biennial volume and we'll be posting the report on our website at noon today. i want to close on a note of optimism. when i make presentations like this, i worry that my toting up all the economic and budget challenges our country faces can make the problem seem so large, that it actually discourages people from tackling them. that would be unfortunate. of course, a clear resolution of

the long-term budgetary concerns would be beneficial, but even if that is not feasible right now, reallocating elements of the budget to comport better with the country's priorities as you view them, while reducing uncertainty about fiscal policy next year or improving or at least not worsening the long run budget outlook would be a good thing for the economy and for our fellow citizens. thank you. >> thank you, doctor. instead of making this more of a formal hearing type of procedure, i think we'll make it more of an informal discussion. i'll ask members to put your placards right-side up if you want to be in the queue to speak. just to keep the flow going and respect everyone's time, we'll limit members' comments or questions for the director for two minutes, not including his time, and members can speak more than once, of course. so, i see mr. portman, i'll go

with mr. portman and then mr. whitehouse in the queue after him. >> thank you, mr. chairman. director elmendorf, thank you for your insights this morning and, as you said at the end, you have kind of depressing information for us, which is things don't look good and they can be even worse until we continue to see these relatively high rates of revenue, as you said, over the coming decades and continue to see these relative low rates of congressional discretionary spending. i have two questions for you, quickly, one regarding to tax revenues, one regarding interest rates. you did not mention interest rates. it seems to me if we go back to an historical level on interest rates we also have a huge problem in terms of meeting these projections you lay out, specifically about $120 billion a year increase in deficit, so if you could give us an answer on that. what do you consider to be the the historic rate, if we went

back to that historic rate of interest and we already see it creeping up of the rate today, what would be the impact on the deficit, and second with regard to taxes, you mention that we are reading from what you said, tax revenues are going to be above the historic levels, by 2038, two points above the historic level. what will be over the next decade the average tax as a percent of gdp, i think that figure is 18.9% as i look at your material you gave us, and how does that compare to other decades? my sense is other than between 1993 and '02, we've never had a ten-year period with revenue at that level. if that's accurate, i'd like to hear it, if not, i'd like to hear it. and second, what it will be like in the next decade, or if you can give us the next two decades, more uncertainty further out. two questions, one on interest rates with respect to the deficit and second, where are we in terms of taxes as a percent of the economy and how does it

compare to past decades? >> so, senator, we expect the interest rates will remain fairly low for another few years, because the economy will be although recovering, will still have significant unused resources and low inflation and we think that will keep the federal reserve fairly easy posture for monetary policy and will keep private credit demands low. we think rates will stay low for a few years, but then we think they'll return towards more normal levels. we project that short-term interest rates on three-month treasury bills will rise to 4% by 2018 or so. and we think that ten-year treasury note rates will be a little over 5%, 5.25% at that point. and that normalization of interest rates has a profound effect on the interest, so nominal interest payments by the federal government last year, net interest, was a couple hundred billion dollars, and we

project in 2023 it will be about $800 billion. a little over $200 -- >> $800 billion in interest alone? >> in 2023 alone. interest payments will rise by 1.5% of gdp to more than 3% of gdp over those ten years. >> there can be different projections, but you're talking about almost a trillion dollars. >> it's a lot of money. >> interest alone. >> the question about tax revenue, as you know, the bureau of economic analysis revised historical gdp data this summer and we've incorporated that into our projections as a share of gdp, so the number i have in front of me is that tax revenue will average 18.3% of gdp over the coming decade. that's just taking the larger level of gdp that the b.a. has built into history and projecting it, taking the same projection of dollar revenues that we had from may, so we had 18.3% now, that compares with

average historically, as i said, of 17.4%. and if we look further out by 2038 under current law, we think that fraction will be up to 19.7%. >> and have we ever had, given the apples-to-apples comparison of the new gdp estimate, ever had 18.3% in our history? >> no, i don't think so, senator. >> we are historically high rates of taxation for the next decade? >> yes, taxes are well above what they've been historically. >> i think from '93 to '02 we had similar rates, perhaps close, but that was in part due to a bubble, as we know now, and also did not continue at this sustained rate and this projection is to continue at the highest sustained rates in our history. thank you. >> thanks, rob. mr. whitehouse. >> thank you, chairman. mr. elmendorf, welcome. >> thank you, senator. >> i think we come into this

discussion with spending cuts that we've already accomplished of $1.5 trillion adding to $1.75 trillion counting associated interest savings, with tax rate increases increasing revenues by $600 billion, count that $700 billion with associated interest savings, roughly. and with tax deductions, loophole closing, et cetera, of zero dollars, nothing yet. and i'd like to put up a slide, if i could, that shows the ratio between -- it's over here -- shows the ratio between what we collect through our tax system and what goes out the back door through deductions and loopholes and you'll see in the green and blue, for every dollar that we actually collect through the tax code, 90 cents goes out the back door for individual taxes. and for every dollar that we

actually collect through the corporate tax code, 60-some cents goes out the back door through deductions and loopholes. now, mr. elmendorf, you said, cbo said in a report last year on choices for deficit reduction, that expanding tax bases, which i think is cbo language for reducing that money going out the back door of the tax code, you're nodding yes, quote, would reduce the deficit and generally have a smaller negative effect, or even a positive effect on how efficiently the economy operates. now, small or negative effect was in reference to reducing the deficit by raising tax rates. but you did mention not only a smaller negative effect but also a positive effect on the economy from reducing the tax spending and the loopholes. could you explain that? >> yes, senator.

the different treatment of different sorts of consumption and different sorts of investment in the tax code, because of a whole slew of provisions that congress enacted over time, distorts the decisions that households and businesses make. and it, in some cases, those distortions behavior may be in effort to create some other distortion exists in the world, for some reason we think people don't do enough of something to achieve some social gain, but some of them distort behavior that would otherwise be efficient and becomes inefficient because of the greater tax subsidy or lower tax rate on some sorts of activities. so to the extent tax reform effort were to reduce some of the differences in the tax treatment of different household or business decisions, it could leave households and businesses to make more efficient decisions, and that would improve potentially gdp and improve people's well being. it depends, of course, on the nature of the changes that are

made. not anything that is labeled tax reform would have those effects, but certainly, tax reform could have those effects. >> just to be clear, the gains from tax loophole closing would go disproportionately now to the highest income sectors of the economy, correct? >> not trying to cut you off, but i want to make sure the two minutes are the two minutes --. >> i was following the example of the following question, we be treated alike. >> we've done an analysis of the distribution of tax expenditures. certain ones are received very disproportionately by higher income people, others are received disproportionately by lower income people, but i encourage you to look at that report and we're happy to send the copy for you all to look at. >> thank you. let's go with senator sessions, then mr. clyburn. >> mr. chairman, with regard to the tax loopholes, we do need to close those.

we've got a far too complex system that's causing abuses to occur. the finance committee in the senate, i know, is working on that very hard. they are trying to reform our system and senator bachus and senator hatch have solicited ideas where we can make progress on that, and i would support it for sure. looking at your chart, mr. elmendorf, on title 6-2, it's so -- i think it helps explain why it's important that we can train at least the growth in spending. we're not talking about long-term spending reductions, we're talking about containing or constraining the growth in spending, and you indicate on that chart that if we were to maintain or actually reduce spending over the next ten years by $4 trillion, that we would achieve greater growth than

would otherwise be the case. indeed, your chart shows that by 2038 we'd have 7% more growth, but if we were to maintain our present course and not achieve $4 trillion in spending reductions, we would end up with a minus 7%. that's a very dramatic difference, and i'll just share this with you, president of office management and budget, the federal reserve have missed the growth projections in the future. you might be closer this year, but in the past you've missed it quite significantly. and colleagues, i just saw the barons magazine had a cover story on slow growth. they project for the next 20 years growth would be 1.8%, based on a number of research numbers. mark zandi, who's testified as a

democratic witness several times, projects 1.8% for the next five years. so, mr. elmendorf, this prescription suggests we could have better growth if we get serious about constraining our spending. is that accurate? >> so, senator, as you know, you're referring to figure 6-2 from our long-term budget outlook, which looks at the longer term effects of different paths for federal debt. we do not distinguish here between the effects of reducing spending or raising revenues. you're absolutely right, narrower deficits will be good for the economy in the longer term. as i've said earlier today and on many occasions, the deficit reduction that's occurred over the past few years has actually been a headwind in economic growth because the near term is nearly a shortfall for the demand of goods and services, which is to boost the supply of the factors of production of labor and capital and technological progress.

>> mr. clyburn. >> thank you very much, mr. chairman. mr. chairman, on yesterday, "the wall street journal" ran a front-page story dealing with the widening job gap in our economy, and you may recall, mr. elmendorf, that during the so-called super committee, you and i had a little exchange about the impact of unemployment rates on our deficit, and there was a stark correlation between the two. now, this report that we just saw yesterday, if we look at the 30 years, 30-year study that you

reported to us that was released while we're having those discussions with the tax -- so-called super committee, it means that things have gotten even worse since then when it comes to unemployment rates and the impact that it's having on our deficit. and i really would be interested in how you view this study, as well as there's a study, i think, uc berkeley indicating that all of this increase in wages that 90% of those increases went to the upper 1%, and most of that to upper .1%. now, i'm really, really interested in that, but i'm also interested in whether or not you will define spending as many

others are beginning to define spending. a lot of people said, and i would not disagree, that we ought to look at just cutting spending. but the question is, whether or not entitlement programs, if you call that spending, would you call tax expenditures tax entitlements? because i have noticed that a lot of economists are now looking at what we call tax expenditures as tax entitlements, because this occurs time and time again and gets back to what senator whitehouse has said. and i would be interested in your views on tax entitlements versus tax expenditures. >> so, congressman, to start, i'm not afraid familiar with all the studies that you mention, but it is certainly true that there's a great diversity of economic experience in this country that all the charts i tend to show about the average

unemployment rate or overall income growth are missing, diversity lies underneath that. so, for example, if a look at unemployment rates, although the overall unemployment rate in october was 7.3%, the unemployment rate for people between 20 and 24 years of age was 12.5%, much, much higher. the unemployment rate for people with less than a high school diploma was less than 11%. the unemployment for african-americans was a little over 13%. so there's a tremendous, and, of course, there are categories, groups of people for whom the unemployment rate was less than the national average. there's a tremendous diversity of experience in how this recession has hurt people and to the extent of which people's fortunes have improved or not during this recovery. there also are, as you mentioned, long-term trends in which a larger, over time, a growing share of the total

national income is going to people at the higher end of the income distribution and more particularly, people at many other points in the income distribution have experienced rather small gains in income over a period of many years, and we do ongoing analysis of that and we are working right now to update our analysis. the last released was last year. there will be one released shortly from us to look at the distribution of federal tax burden and the distribution of income in the country. on your point about tax expenditures, the term tax expenditures is an old term. it is in the budget act that established cbo almost 40 years ago. but i think there are a large number of analysts on both sides of the political spectrum and with a wide range of views about appropriate policy who think from an analytic perspective tax expenditures are best viewed as a form of government spending, because they are direct actions by the federal government to give benefits to particular activities or particular groups of people, much like federal spending programs.

>> thank you. let's go with senator crapo and senator baldwin then. >> thank you, mr. chairman. dr. elmendorf, i kind of want to ask a two-part question like senator portman did. first of all, in 2009 when we had the $800 billion stimulus package before the congress, i believe you were cbo director. you were just starting then. >> yes. >> cbo issued a report that is a common type of report that we see from economists who testify before us, which said that the stimulus package, which was entirely borrowed money, would in the short term have a stimulative effect, and in the longer term, which i recall two or three years, it would start to have a depressing effect on the economy because of the impact of the borrowing. is that your recollection of that report?

>> so, our analysis, senator, and we actually still update this, pursuant to federal law, on a regular basis, is that the recovery act provided the biggest boost to the level of output and employment fairly soon after its enactment and provided a waning boost since then. we think that the extra debt will start to be an actual drag on the level of output later in this decade, not yet. i think your qualitative point is right. >> so my question is this, and the second aspect of it is, as we look at the fact that we are getting closer and closer to the drag of that stimulus spending and the debt that is growing, i think you've indicated we're on an unsustainable path, and as we look at the question of tax expenditures that senator whitehouse pointed out that we need to look at, many of us have been fighting not to raise revenue because of the utilization of the tax

increases, but to reform the tax code by flattening the base and reducing the rates. i believe that you have testified in the past that that would have a very positive stimulative effect on the economy if we approached the reform of the tax code in that fashion. would that be true? >> i think it would have a stimulative effect. the size depends on the nature of the tax reform itself, but i think it's certainly can be a very positive factor, senator, i want to be careful about attaching particular adjectives to a general notion of tax reforms. as you understand, lots of things can be labeled that and it really does depend on the extent you and your colleagues are willing to do the base broadening measures, remove the tax expenditures, in order to bring down the tax rates. >> thank you. >> thank you. >> senator baldwin. >> thank you, mr. chairman. i wanted to talk a little bit

more about the chart you have on the second page, short term versus long-term unemployment rates. the federal reserve recently released a paper that stated that long-term unemployment or long-term unemployed people become less and less attached to the workforce, obviously, lose skills that they once had, and as their productive capacity diminishes, it also diminishes the growth capacity for our overall economy. the paper concluded that what should be a cyclical downturn in employment has the potential to become structural. and i guess i just want to hear you dig down a little bit deeper on this topic, because when i look at that chart, this is an alarming figure. in terms -- if it were the top

priority of this conference committee to dig into that problem, what are our key fiscal policy options to prevent this from, you know, moving from a cyclical problem into a structural problem? >> so, senator, we do think that the weakness in economy over the past five years has reduced the productive capacity for the rest of the coming decade. what we've said so far is that we've reduced our projected level of potential output for the end of the decade by 1.5% because of the downturn, and that's partly through workers leaving the labor force or losing skills. that's partly reduced capital investment, partly through lower productivity, but we are carefully reevaluating those estimates. now beginning our process of doing next year's economic and budget projections, and we may

conclude these effects are larger than we had expected, and i think you're absolutely right that the persistently high level of long-term unemployment is a very worrisome factor for the economy. we wrote a report a year or two ago now about policies that could be used to bring down unemployment. i think some of those are on the macro economic side. basically, it amounts to stimulating the demand for firm's products so firms need to higher workers in order to meet that demand, could be done partly through monetary policy but also fiscal policy, and the primary way to stimulate activity in the short run is lower taxes or raise spending now. however, to be clear, there's a consequence of doing that without taking other steps to pay off that debt later, and that's the point that senator crapo was making about what happens over the medium term and long term. there's also some economists

would call microeconomics to improve the skills of workers by strengthening their training or by improving their ability to find jobs for which they have the right training, and our report detailed a number of things that can be done. i don't think any of them can be seen as silver bullets, they are mostly ideas worked on large scale. >> just as a closing comment on this, you know, i was talking about unemployment, short term versus long, but if you look at the jobs reports, you know, we have greatly diminished manufacturing and construction sector, and what added employment we have seen has been increasingly in lower-wage sectors like leisure and hospitality and retail, which also relates to the productive capacity of our nation. >> yes, that's right. it is importantly a matter of

people finding jobs but also a matter of finding jobs that use their talents in ways that contribute to the economy and also allow them to receive higher pay. >> thank you. >> let's go with dr. price and senator sanders. >> thank you, mr. chairman. i want to commend you and senator murray for continuing to provide opportunity for exchange of ideas and gaining information. dr. elmendorf, welcome back once again. i was struck by your three conclusions, one, debt larger than after world war ii, two, debt will continue to rise and we are on your words an unsustainable path, and, three, that current law, if followed, will result in a decrease of congress' ability, the people's representatives ability, to provide prioritization and spending on defense and nondefense areas to a smaller level than any time in the last 50 years in 2017 and beyond. real fundamental change in the work that congress does.

now i'm hopeful that we can reach a large agreement. i think we can reach an agreement. i'm not sure how large it can be, i'm hopeful that it is large, but i think we need to walk before we can run, likely. so my question is a specific question about sequester. the discretionary side of spending will decrease january 15th down to 965, 967 or so. many believe that's not appropriate and we ought to mitigate that. i've been intrigued by some that have come to me and say a possible way to mitigating that is to accelerate the contributions that states make to the expansion of the medicaid program that was contained in the aca. as you know, for the first three years, that's 100% federal subsidy. would that -- is that one option that might be able to allow us to mitigate the problem, the challenge, of sequester and also potentially decrease federal

spe spending? >> well, congressman, that is one way to reduce federal spe spending, is to have states bury larger portion of the medicaid costs, and if you were to do that and simultaneously raise the caps on discretionary spending, then, i think, you could accomplish the aim you are suggesting, yes. as you know, the point of the big book, there are an awful lot of ways to cut spending or raise revenue in ways you can reduce the debt relative to our projections or offset projections that you don't think are a good idea for the country. >> thank you. thank you, mr. chairman. >> mr. sanders. >> thank you, mr. chairman. thank you, mr. -- dr. elmendorf, for being here. dr. elmendorf, i thought your president was very, very strong and interesting, except you, i think, kind of left out some very important facts of contemporary america, and i'm going to tell you what i think and you tell me if you agree or if i'm wrong.

one of the difficult jobs that this committee has is not only trying to come up with a budget, which is hard, but also within the budget, deal with priorities. when you spend money, cut money, it impacts real human beings. now, my impression is, that in america today, we have the most unequal distribution of wealth and income since the 1920s, late 1920s, that, in fact, in terms of financial wealth, the top 1% owns about 38% of the wealth of america while the bottom 60% owns all of 2.3%, and my understanding also is, top 1% today in terms of income earns more income than the bottom 50% and between 2009 and 2012, 95% of all new income went to the top 1%. does that sound roughly right? >> senator, it sounds roughly right. we have not done analysis

ourselves through 2012 nor back to the 1920s, but you are certainly right that the distribution of income and wealth in this country is much more uneven now than it has been in decades. >> and i say that, because as we go forward in terms of our priority and some folks want to cut social security, medicare, medicaid, programs for low-income people, we also have to recognize, correct me if i'm wrong here, there are more people living in poverty than any time in american history, 46.5 million people. is that right? >> as you know, senator, the poverty rate is a complicated business. the standard series excludes many benefits the government provides to low-income people. i'm just not familiar -- >> okay, let me ask this also. i think this is an important point. again, it's important to understand the past as we go forward. your chart that you gave us tells us that up until 2001, i think '98, '99, 2000, 2001, we actually had a surplus. we had a surplus.

now, is it fair to say that the reason we began to go into deficit was because we went to war in iraq, which by the time we take care of the last veteran is going to cost us about $3 trillion. how do we pay for that war? >> so, senator, as you know, congress cut taxes and then spent significant -- >> you mean in the middle of the war you're not suggesting in the middle of a war which cost $3 trillion, congress actually cut taxes for the rich, you're not suggesting that, are you? >> senator, congress cut taxes for a lot of people, and the congress spent a lot of money fighting overseas. >> point being, the reason we're in a deficit today is because two unpaid wars, medicare part d program unpaid for, large tax breaks, trillion dollars of which went to the wealthy, and i only say that, as we go forward to figure out where we want to be as priorities, you got to remember that fact, as well. thank you, mr. chairman. >> so, let's go with senator johnson -- >> mr. chairman, may i just --

>> go ahead. >> my only response would be to note we released a study earlier this week of the distribution of federal spending and taxes. this is from 2006, which were the latest full set of data that we could collect, but it goes through in great detail the ways in which different federal programs, cash transfers and other sorts of transfers and also federal revenues, how they effect people, households, different categories and income levels, and those you are particularly concerned about, the distributional impact you're considering, we hope this information would be helpful for you. >> it is a helpful body of work, i encourage members to read it. let's go with senator johnson and congresswoman lowey. >> looking at the last chart looking at the dramatic -- i want to ask a multipart question on the affordable care act. certainly, when i learned the details of the act, in no way, shape, or form did i think every

american would be able to hold on to the health care plan. i knew millions of americans would lose their health care plan, which is why in our budget process here in the senate, we passed an amendment on a bipartisan basis asking the cbo to score what would happen when 30%, 40% of employees would get put in the exchanges and how much that costs in terms of subsidies, so three-part question. first of all, did you believe the question when he repeatedly said if you like your health care plan, you can keep it. two, has the cbo done any work to actually give congress that estimate of how much obama care is really going to cost, and, three, your current cbo estimate says over the next ten years obama care will cost $2.4 trillion. i think the estimate about $1 trillion of tax revenue associated with the plan. where does the other $1.4 trillion come from? >> so, senator, your first question, as >> as you know, our initial

analysis showed in our judgment some people would lose -- would not have employer sponsored insurance, who have had in the absence of the act and we discussed at some length with congress at the time our view that people who were buying insurance in the nongroup market, not through their employer but on their own, would face on average increase in the premiums they pay for health insurance because the policies they would be having to buy under the affordable care act would cover a larger share of health care services. so that their co-payments would be down but their premiums would be up. we made that information available to the congress in 2009. and your second question, as you know, we have done very lengthy analysis of how the cost of the coverage expansion under the affordable care act would vary depending on different sorts of responses by employers and employees and the incentives of

the act. and we did a very long analysis of what would happen in term of sources of insurance coverage and cost to the federal government if employees and employers behave in rather different ways than we had expected. we think that is plausible. as i said, senator, we viewed as a wide range of plausible possible outcomes. on the third issue, the affordable care act has a cost over the current ten-year period from the coverage provisions that we estimate to be about 1.3

or $1.4 trillion. and the -- that money is offset in our estimate by a combination of cuts in other sorts of spending, primarily in medicare spending relative to prior law and increases in tax revenue of $1 trillion. >> what am i looking at when i'm getting $2.4 trillion over the next ten years? >> i'm afraid i don't know, senator. i have the table in front of me contained in the aca. the bottom line over the coming decade is $1.4 trillion. >> mr. chairman, i ask the record of our proceeding include the letters submitted by the appropriation subcommittee chair along with a statement by each kolg for sequestration to be replaced. >> without objection.

>> as we're all keenly aware, january 15th is the deadline for passing legislation to keep the government running. the shut down caused our country 120,000 jobs, billions of economic activity. this conference committee must be successful in reaching agreement on a funding level for fiscal year 2014 with enough time for bills to pass before january 15th and a funding level for fiscal year 15 so that we avoid another dysfunctional, unrealistic budget and appropriations process in just a few months. as noted in the letter if our appropriations chairs. there is also bipartisan demand for us to end the sequester. as mr. rogers has said, sequestration, and i quote, is unrealistic, ill conceived, discretionary cuts must be brought to an end.

as cbo has repeatedly noted the sequester will cost our economy an estimated 800,000 more jobs in 2014 alone. so i think it bears repeating, could you please share cbo's analysis on the jefr all impact of sequestration on job and economic growth for 2013 and what you think the impact will be for 2014 if sequestration remains in place? >> so congresswoman, i think the things that -- let me quote from a letter we wrote to congressman van holland a couple months ago. we said that if the automatic spending reductions specified in the budget control act including both the effects on discretionairy spending and the mandatory spending, those reductions were eliminated that

would increase real gdp by .6% by the fourth quarter of 2014 and would raise full time equivalent employment by 800,000 people by the fourth quarter of 2014. >> i thank you very much. and i really thank you for your testimony today. this just amplifies the stakes of our conference committee's work. i hope that our committee will really begin working in earnest toward an agreement in the coming days to prevent the economic damage that partisan politics and the sequester could cause in the coming months. thank you, mr. chairman. >> thank you. let's go with -- right next to you, congressman cole. >> thank you very much, mr. chairman. i want to assure you that my grend and i d good friend and i did not coordinate our roshgz. i was going to ask that letter be placed in the record.

i'm glad my friend has already done it. so please make that for both of us. >> speaking order was just random. just a couple points and then a question. i want to quote from that letter. it does make a couple important statements. we ask that budget committee endeavor to agree on a common overall discretionairy number by november 22nd. november 22 is nine days away. and we don't have any schedule meetings between the 22nd and december 2nd. so this is a matter of some urgency. so our colleagues on the appropriation committees which includes my friend miss loy and myself have the opportunity to get about the business of arriving at real spending bills. this is a bigger and littler problem than what we're faced with. he has given us a wonderful presentation of long-term debt. we don't disagree with any of that. he is right.

we need to address it. on the other hand, the more immediate problem, the two bodies are $90 billion apart. we ought to be able to give the appropriation a number for both fiscal year 14. i would hope fiscal year 15 as well. so they can have an uninterrupted stretch of time to deal with the budget. let me ask you this question. i would ask you if you could, you may not be able to do this off the top of your head, proubbly can't, are there enough savings in the three budgets to bridge the gap between the house and the senate budget? which is again, only $90 billion and over a two-year period i think the two chairman have said they can deal with $125 billion

worth of spending. again, not a lot out of almost $7 trillion. >> i think there are proposals for spending cuts in the two budgets that overlap but i can't list them. i don't know what the magnitude is. >> could you just prepare for us for future reference a list of those sorts of cuts so we have the options really that all sides have agreed on to one agree or another in that area. >> we can try. budget resolutions is not pieces of legislation that we attach costs to. there are plans of the budget committees that they build using information from us. but i can see if we can, if we can be helpful to you in that. >> i would appreciate that. thank you very much. >> we have all looked at each other's budgets and look where the overlaps occur. that is the discussion we're having. >> just if we had that at the

disposal for all the members. i think question put the appropriators to work. >> thank you. >> senator coons. >> i'm deeply concerned about what's reflected in your chart that while short term unemployment has come back down, long term unemployment remains very high and is persistent and woringly so in terms of the human cost and the long term cost for our economy. you testified before that not all cuts are the same. and that there are some ways in which we are cutting that are hurting our long term competitiveness. they produce longer term reductions in our capacity and that we should be prioritizing things that will accelerate growth, that we should not be simply trying to get through this difficult fiscal time in a way that focuses on austerity. we should be investing in a way that sustains growth. what types of policies in your view could both help accelerate

growth and do so in a way that would deal with long term unemployment? and what are the budget airy implications for long term unemployment? >> the first part of your question, senator, of all nondefense discretionary spending, half represents investment of some sort about 20% of nondefense discretionary spending is investment in physical capital such as highways. another 15% is -- goes for education and training. over all, we think the investments build a stronger economy in the future and cutbacks in those investments would reduce output and kmk in the future. but i think it is also important to say that different pieces of those elements of spending may

be much more effective than others in terms of long term growth. we said that -- this is about research. federal spending and support of basic research has an average has a significantly positive return. we also noted that gross generalization is difficult to apply as guidance for decisions across budget functions, agencies budgets and appropriations subcommittee jurisdictions. so there is some evidence that we generated for other federal investments. it is nothing like a comprehensive evaluation of where in that large nondefense pool the money should be devoted. on the question of long term unemployment, this is very damaging. obviously for the people involved, many of whom have very little source of support for an extended period of time. but whatever savings people may

have to get through a short unemployment spell is much more likely to be exhausted if one is unemployed for half a year or a year or longer. but also has beyond the personal effects important economic effects over time. some people who are unemployed for a long time simply give up looking for work. some people find their way into disability insurance. the applications for the social security program have gone up rapidly over the past few years. people go into that program very rarely come back out of it into the labor force. z technical skills and connections to the workforce, connections to people who are working. so it poses a very large risk. of there being some set of people that will not find their way back to work at all or find their way to the productive sort of work that they were in before they lost their jobs. >> are therein vestments in skills training and in the manufacturing sector if

particular that strike you because of that combination of factors? >> i don't have a simple report to that. we reviewed the number on a large number of different ways of trying to help people get back into the labor force. a number of the programs have been successful on a small scale and have not been tried on a large scale. it's a hard thing to do. i want to zis courage people from doing it. i don't have a short, crisp answer. but we would be happy to sit down with you and talk about the elements in that report and help you -- help you construct poll i that area.

>> i don't know how we can hear that since sequestration is working. we've heard arguments for raising taxes. you can't raise taxes high enough to satisfy the appetite of washington spending money. the tax code is a mess. but closing tax loopholes to spend more is not going to have long range good results because you get the higher level of expenditure and keep it there. closing loopholes for tax reform is what is needed and i support that. i'd like to give a caution to rumors that there is compromise on sequestration so we can spend more on defense. since the economy is so bad and since jobs are what's on

everybody's mind and what we ought to be working on, i hope we keep in mind that economic strength of our nation is a necessary precondition to our military strength. xpri compromising on sequester is shortsighted and is -- and hopefully those suggestions that you hear primarily out of the house of representatives won't be pursued. if they are pursued, i think it's shortsighted from the standpoint of the cooperation that you have to have on hill between people the same political party it's kind of like feeding senate republicans to the wolves. i hope you remember to keep our eye on the ball. we can be the sleeping giant that admiral warned the japanese

warlords about. don't attack the united states. we have to have a strong economy in order to have a strong defense. i yield. >> senator nelson is not here. let's go to senator warner. >> thank you, doctor. i have actually two questions. first of all, i just a question. as i understand under the affordable care act there is a three-year assumption of 100% pay of the medicaid expansion. i wonder if that assumption carried out throughout your budget outlook or your assumption assumes that that share will be reduced, number one. and secondly, as i look at your budget outlook, where i see the real significant issues in terms of getting our fiscal house in order, the trustees have said medicare goes bankrupt in 2026.

the disability fund you referenced, 2016. and is there a way for us to address our long-term fiscal outlook if we don't reform those programs or also are we able to even sustain them for the beneficials that rely on them? >> senator, your first question, our baseline projections follow current law in which the federal share of medicaid costs for the additional populations under the affordable care act declines from 90% over a few years later. our projections incorporate that and that feature current law. >> so just to be clear, if after three years the states come to us and say we want you to continue to pay 100%, that is not accounted for in this fiscal outlook? >> that's right. we would provide a cost estimate for that legislation. it would show additional cost for the federal government. >> with regard to obviously important programs, i think, to all of us but also a big challenge we face.

>> yes. so on your second question, as my charts showed, the rise in spending for social security and medicare under current law relative to the sides of the economy is quite large. and that will require one of three possible or a combination of three possible courses of action. you could raise revenues above the historical share of gdp. or you could cut all other federal programs, the combination of all other federal programs below the benefits and services that we have become accustomed to. it's not an analytic matter to say which is better or worse. the analytic point is you don't have a choice about doing at least one of those things and can you do one or two or three of them if you choose to. but at least one of those things will have to change. >> you also pointed out we're going to be at historical highs for revenues. at some point it's a negative impact on economic growth. >> so revenues will be a

historically high share of gdp. this will be at historically low share of gdp. but the movements as we think they'll play out under current law is not enough together to support the extra costs for social security and medicare relative to their history. and that's why more has to be done. >> senator warner and then we'll go with congressman black. >> i think getting something done for a year or two will have a positive infect on the marketplace and upon the economic growth and replacing some of the worst sequestration i think is a worthy goal being kind of virginia being ground

zero. and i wondered whether, let me get this out, i believe we are now imposing upon the economy a debt ceiling tax that you'll see a spike in interest rates every time you see a debt ceiling date come about. i'd be curious to know whether the cbos done any estimate of what kind of cost that bear would have on the debt ceiling taxes coming around february 7th. delayed maintenance of our construction is a tax because at some point it will have to be replaced. and i'd love to know whether there's been any analysis made

on that subject. and third, i know senator portman and i have gone around and around on this. and this was just raised by percent of revenues. i would simply point out one of the reasons why we have a 17 trillion dollar debt is that based upon historic revenue numbers we've never -- we've always been at an annual deficit. the only times we've had a surplus within the last 30 years is when revenues have been between 19.5% and 21%. anything at the lower rates, we'll be in deficit. i will simply say even with entitlement reform, and stroingly believe in entitlement reform, i guess i question on a going forward basis and even look at your numbers with revenues that i -- at a higher rate that still below 19 were still in that gap. two questions. one, because of the demographic bulge, it's hard to imagine how you're going to be able to drive

the spend down to the numbers that could be dealt with on dmind of historic revenue basis. and last point, it seems to me that one thing that we may not have factored in, i don't know if you did any analysis, is that not just in america but across the world we have seen a dramatic shift from the private sector to the public sector in both the areas of workforce training and particularly the area of research and development. there is no longer bell lab and more and more corporate america and korncorporations around the world are accepting the public sector to pick up the r & d costs. can you see to that as well? >> yes. on your first point about interest rates. i would say we think we have it fully in our projection. you suggested that maybe we had not been fully taken onboard. our numbers, we think it is fully taken onboard. we have built in a substantial increase and normalization in interest rates to a level that is consistent with the historical experience but a little higher because they'll be more federal debt relative to

gdp under current law. we have not tried to quantify. that on your point of instra structure, we've done work on highways and drawing on work the highway frel administration. it says in order to maintain the current functionality of highways, more would need to be spent than is being spent under current law. and using a building off the cost benefit analysis that the federal highway administration did that amount of spending and they would exceed the costs would be much higher than the amount under current law. you asked about the difficulty of whatever reforms were made to social security and medicare and keeping costs back where they used to be and i think that's --

i think you're right, senator. over the past 40 years, social security and medicare represented outlays for the program were 6% of gdp. by 2038 under current law, outlets will be about 11% of gdp. so the cut if spending that will be required on the programs that will be required to bring them back to the historic am average will be a cut of almost one half. we don't have anything that would accomplish that. as i said to start with, there is no particular reason why those programs should go back to the historical share of gdp given that many more people and much larger share of the population is eligible for them. on the other hand, if one does not restrain the programs, then significant changes need to be ma made. >> is there anything els