>> have we said it all this afternoon? >> i also want to thank those of you who shared your personal stories. >> a reminder you can see this event at our video library c-span.org. we will be the last few minutes and take you live to capitol hill, a hearing about to get underway with the congressional budget office director doug elmendorf, set to testify before the house budget committee. a cbo report released yesterday shows the federal budget will decrease in the short term before increasing in the next decade, in part because of the health care law. the cbo report predicting the affordable care act, the president's health care law will reduce the number of full-time workers by 2 million in the the ditching -- coming year. white house economic adviser jason furman spoke to reporters at the white house. we cover that and you can find that in our video library. chairman paul ryan coming into

the room. we are live on c-span2. [inaudible conversations] [inaudible conversations] >> a moment before the hearing gets underway a reminder you can join the conversation on line with your comments about today's hearing at c-span chad and on facebook.com/c-span. [inaudible conversations]

[inaudible conversations] [inaudible conversations] [inaudible conversations]

[inaudible conversations] [inaudible conversations] >> hearings will come to water. welcome. i want to thank director elmendorf for joining us again. we appreciate your taking time to meet with us today and we know this baseline was late because congress was a little late. i am glad we got time to get to this. you have put together a very

informative report. we still have a lot of work to do. we will run a deficit of $514 billion. that is less than last year but nothing to brag about. the debt that deficit will start growing in two years by 2022, we will be running trillion dollar deficits again even though we will be taking in a historically large share of revenue. even though taxes are at a historically high place we still have trillion dollar deficits in the future. because spending will be growing twice as fast as revenue. over the next ten years we will add 10 fully in dollars more to our national debt for a grand total of $27 trillion. it is hardly time to start congratulating each other. i was glad to see we passed a bipartisan budget deal last year. it was a step in the right direction but only a step.

we need to do more. we need to do much more. it is deja vu all over again. we know what the problem is. auto pilot spending and interest payments are driving our debt. palmer acare add trillions in government spending and made things worse for the economy and working families. by 2017 cbo projects as if 2.5 million people stopped working full time by 2024. between 2017 and 2024 labor compensation will decline and these changes, disproportionately affect low-wage workers.

translation, washington is making of a poverty trap much worse. report points out weak spots in our economy. low investment, high unemployment, people leaving the work force. if we get our act together we could start paying down the debt and give our economy the certainty that it needs. tax reform, regulatory reform, energy development. all of these could create jobs and increase take-home pay. if you could bring up from the cbo report slide 2.8. this is a point i would like to highlight. this report says not only does the debt get worse, we have slower economic growth compared to the last forecast but what is particularly troubling is cbo's projection of the labor force participation. cbo's says half of this decline is attributable to the aging of the population. baby boomers are coming,

retiring, fewer people following them into the work force. a problem we had for a long time we have yet to solve but most notably in this report is cbo also says government policy especially the president's health care law discouraging work. washington is making this problem worse. this does not have to be our fate. we need to reverse this decline. i consider this a call to action. we know what the problem is. we know how to fix this problem and i believe we can work together to get it done. the debt won't take care of itself. it is up to was. the men and women in the representative branch of government elected to serve and represent them. we need to take action. i thank you for this report, dr. elmendorf. i look forward to a great conversation and i would like to recognize the ranking member, mr. van allen. >> i joined the chairman in welcoming you, dr. elmendorf, welcome to you and your entire

team for the good work you do. as i look at the most recent cbo report it is good news/bad news story. the good news is we have seen economic growth over the last few years and continued economic growth going forward. the economy has added over 8.2 million private sector jobs over the last 46 months. on the other hand, this report projects very sluggish growth in the job market. in fact as i read it you project the average unemployment rate in 2014 will actually be higher than the unemployment rate in december of last year and that clearly is not good news. page 3 of your report sums of this next story when it states, quote, economic growth is projected to be solid in the near term but weakness in the labour market will persist and

that sums up our challenge and it seems to me we should therefore take actions that are within the control of this congress. congress can change that trajectory. your report is based on current law but congress can take action to date that will actually change that story for the remainder of this year and increase job growth and the president and house democrats put forward clear ideas to do it. a jobs plan calls for a significant additional investment in national infrastructure in roads and bridges and broadband to help boost our international competitiveness and put people back to work. we can increase the minimum wage which allows more americans to keep the fruits of their labour and by putting more money in the pockets of relatively lower income individuals who tend to spend it more, they can create more demand in the economy and at the same time, we have a chronic problem with long-term

unemployment we can't extend unemployment insurance to 1.7 million americans and the congressional budget office has said that will create additional jobs this year. 200,000 being the last projection so there are things we can do today to get back to work and get the country back to work and one thing we should not do is mess around with whether or not america pays its bills on time. that will create uncertainty in the economy and hurt economic growth and jobs. dr. elmendorf, a comprehensive report. one thing that has gotten attention on the front page, the thing chairman roger and referred to, i have to say this is an example of when one misinterpretation gets out of the b goes around world and we should

focus on whether there's a demand for jobs today and instead what the chairman was focusing on was beginning in 2017 when the economy gets back to full employment as a result of the affordable care act more americans will be able to voluntarily choose, choose to work fewer hours or not take a job because they don't depend on that job anymore for the provision of health insurance because before the aca if you lost your job you lost your health insurance. now you can go to the exchange and get affordable health insurance and as a result people may choose differently. i find it kind of ironic that back in 2008 when senator mccain propose the health care reform plan the heritage foundation and conservatives heralded it as a plan that would help break job lock. they said today, changing jobs

leaves behind health insurance in a place of work. individuals who work to change careers or leave the work force to raise a family or retire early take substantial risk. by god the mccain health care reform plan will end that job block. the affordable care act does end that job lock. allows americans to choose to spend more time with their family or pursue their dreams. that is not a bad thing. it is a good thing. what is a bad thing is the lack of available jobs today and the fact that in the house we have on one note focus on trying to eliminate affordable care for millions of americans rather than focus on creating more jobs for millions of americans. that should be our focus, mr. chairman. that is the conclusion of this report if you look at the entire thing instead of a few paragraphs and i thank you, dr. elmendorf, for your work. >> dr. elmendorf, the floor is yours. >> thank you, members of the committee, congressman van

hollen, i am pleased to discuss cbo's report on the outlook for the budget and the economy as well as our companion report released yesterday that dug more deeply into the slow recovery of the labour market. beginning with a budget the federal budget deficit has fallen sharply during the last few years and is on the path of decline further this year and next year. we estimate under current law the deficit will total $500 billion this year compared with $1.4 trillion in 2009. at that level this year's deficit with = 3% of the nation's economic output or gdp close to the average percentage seen during the last 40 years. the baseline projections show what would happen to federal spending, revenue and deficit over the next ten years of current laws were generally unchanged. under that assumption the deficit is projected to decrease

again in 2015 to 2.5% gdp. after that deficits are projected to start rising in dollar terms and percentage of our nation's economic output. because revenues are expected to grow at the same pace as gdp, spending is expected to grow more rapidly than gdp. why the more rapid spending growth? in our baseline spending is boosted by four primary factors, the aging of the population, expansion of federal subsidies for health insurance, rising health care costs per beneficiary and mounting interest payment on federal debt. with no change in applicable laws spending for social security would increase from 5% gdp in 2014 to 5.5% in 2024. spending for the major health care programs include medicare, medicaid, children's health insurance program and subsidies through insurance exchanges requiring more under current laws.

net interest payments by the federal government are projected to grow rapidly mostly because of the return of interest rates to more typical levels. in sharp contrast, the rest of the federal government's non-interest spending for benefit programs apart from the ones i mentioned and all other nondefense activities is projected to drop from 9.5% of gdp this year to 7.5% in 2024 under current law. that would be the lowest percentage of gdp since at least 1940 which is the earliest year comparable data had been reported. plus the sharply increasing share of the federal budget will go to benefit from a few large programs and shrinking share will go toward most of the rest of the government functions under current law. the large budget deficits recorded in recent years substantially increase the federal debt and the amount of debt relative to the size of the economy is very high by

historical standards. we estimate the federal debt held by the public will equal 74% of gdp at the end of this year and 79% in 2024 under current law. such a large and growing federal debt could have serious negative consequences including restraining economic growth in the long term, giving policymakers less flexibility to respond to unexpected challenges and eventually increasing risk of a fiscal crisis. in terms of the economy we expect after a frustratingly slow recovery from the severe recession of 2007-2009 the economy will grow at a solid pace the next few years but will continue to have considerable unused labour and capital resources. further growth in housing construction and business investment should raise output in employment and result in increase in income should boost consumer spending. in addition under current law the federal government tax and spend policies will not restrain

economic growth to the extent they did last year. state and local governments are likely to increase their purchases of goods and services adjusted for inflation after reducing them for several years. as a result our baseline shows inflation-adjusted gdp expanding more quickly from 2014-2017 conlan average rate of 3% year than it did in 2013. we expect increases in output will spur businesses to hire more workers pushing down the unemployment rate and tending to raise the rate of participation in the labour force as some discouraged workers returned to the labor force in search of jobs. that affect in participation will keep the unemployment rate from falling as much as it would otherwise. we project the unemployment rate will decline gradually over the next few years finally dropping below 6% in 2017 and edging down further after that. nevertheless the labor force participation rate is projected to decline further in the next

few years because according to our analysis the increase in participation, improvements in the economy will be more than offset by downward pressure from demographic trends essentially the aging of the baby boom generation. after 2017 when the demographic trends will be unfolding but the effect of cyclical conditions will we expect largely wayne participation rate is projected to decline more rapidly. that is the main reason beyond 2017 we predicted economic growth will diminish to a bit more than 2% year, a pace below the average seen over the last several decades. thank you, happy to take your questions. >> all right. a few questions about the health care law and how it is affecting the labour market. what is your best estimate of the effect obamacare will have on the total number of hours worked which is the issue we are talking about? i want to make sure we

accurately understand what it is you are saying? >> we think the affordable care act will reduce the total number of hours worked in the economy by one% or 2% between 2017 and 2024 relative to what would have happened in the absence of that act. >> what is that in equivalent to full-time equivalent workers? >> given the fact the calculation we have done, translate that, suggests the equivalence between 2.5 million production in full time equivalent employment, to make sure -- >> i think 2 million equivalent, in 2024. just to understand, it is not that employers are laying people off, but people aren't working in the work force, supplying it

labored to the equivalent of 2.5 million jobs in 2024 and as a result work force participation rate, less labor supply lowers economic growth. >> that is right. >> who are these workers? who are the people typically in this category? what kind of worker from an income scale side are being affected by this? >> the effect is principally on the labor supply of lower wage workers. the reason is what the affordable care act does is provide subsidies focused on lower and more middle income people to buy health insurance and in order to encourage sufficient number of people to buy an insurance like health insurance the subsidies are fairly large in dollar terms. those subsidies are then withdrawn over time for people as their income rises.

by providing heavily subsidized health-insurance to people with low income and with trying those subsidies as income risess, creates a disincentive for people to work relative to what would have been the case in the absence of that act. the subsidies are of course make those lower income people better off. this is an implicit tax, the government raises taxes we are worse off and disincentive to work more but providing a subsidy people are better off but they have less incentive to work. >> i understand the better route in the context of health care but better off in inducing the person not to work who was on the low-income scale, not to get on the ladder of life, to begin working, getting the dignity of work, getting more opportunities, rising the income, joining the middle class, this means fewer people will do that. that is why i am troubled by this. in the report we are seeing a

significant labour force participation rate, 2.8. i will make a point here. this is what is so concerned about this. if i understand your point a big part of this is something we knew which is boomers are retiring so we are effectively basically doubling the amount of retirees we have in the country over a generation and fewer people are following them into the work force. something like 100% increase in retirees and a 17% increase in workers' on demand so that is already a problem. where we are not prepared for the boomers and retirement but what this is doing is adding insult to injury. you are saying because of government policy and welfare state expands the incentive to work declines meaning grow the government you shrink the economy. fewer people are going to be working and the economy will be slower as a result, we have about a trillion dollars in less revenue because of slower

economic growth from your last forecast which goes to the deficit, to the debt and makes it less prepared to get ready for the baby boomers to pay off the debts. that to me is jaw dropping. if you look at this budget, i am rounding your social security and medicare near the double over the window, the ten year window, medicaid more than doubles but interest on the debt quadruples. is that about right? >> in nominal dollars. >> your base line shows us adding $10 trillion to the debt over the next 10 years, 57% increase in the amount of the national debt at the same time interest payments as i mentioned quadrupled to $880 billion by 2020 for. here is what i am worried about. you assume stable interest rates, you assume normalization of basically no inflation on the

horizon over the decade and the ten year goes 4.8 or 5% at the end of the window. >> 5%. >> we have a 4 they trillion dollar expansion of monetary base, we are in uncharted territory with respect to monetary policy and the federal reserve. they had just begun to normalize. we are seeing reverberations in the third world and the emerging markets and they have tapered little bit. what happens if interest rates don't go as we hope they do? what happens if we have a spike in interest rates? >> reporter: we try to forecast the middle of possible outcomes. we think interest rates could be higher than we project for lower. >> give me a sense of 1%. >> as you know mr. chairman, changes and economic conditions would affect the budget. these are meant to be used only roughly. the rough estimate is an

increase in interest rates of one industry being one percentage point higher than we project for the entire decade would increase the deficit by $1.5 trillion over that period and correspondingly interest rates one percentage point lower than we project over the entire decade would reduce the deficit by $1.5 trillion. i would say, mr. chairman, there's upper pressure on interest rates from all large amount of federal debt and we take that on board in our projections and downward pressure on interest rates from easing of the population. economy is with slower economic growth tend to have lower interest rates, taking them on board in our projections as well and we do not see any sign of inflation over the past year has been unusually low and over the last dozen years has been at or below the federal reserve's goal of 2%. we do not see inflation as a substantial risk going forward. but mackerel economist should never say never. >> ten years out it is hard to

project. here is the issue. i think you could make a good case the federal reserve has been bailing out fiscal policy for some time since the crisis by keeping interest rates artificially low and depressing true fiscal picture that we have. unfortunately congress did not take advantage of that moment to lock in a real fiscal consolidation plan and long-term debt reduction plan to tackle entitlements which the budget we passed three years in a row did. of the budget pay off the debt that would be entitlements. federal reserve normalize, basically pulling back, still very loose, $65 billion a month. still buying more assets. just not as fast as they were before. but they are showing signs of normalization. >> we have never been in this territory before. whenever had this kind of a balance sheet. it is all new. if they get it wrong.

if unforeseen things happen, it is not $1.5 trillion increase in deficits. time is running out. we are looking at the fact that we squandered the opportunity in the last five years to do something about this and in the future is more uncertain because monetary policy isn't going to bail us out like it used to be. that is my concern. let me ask you one point in relation to that on the driver of this, figure 1.2 in your report, page 15 in your report is interesting. it compares where we were in 1974 to where we are going to be in 2024. we are on track to increase the deficit ten fold compared to 74. meanwhile if you look at the upper right side of this, we will have cut defense in half, we will be collecting a full percentage point more in revenues. given these facts what is driving so people are clear,

what is driving the tenfold increase? growth in spending for social security, medicare and medicaid above all else. by aging the population, expansion of health insurance subsidies and rising cost of health care per person. >> thank you, mr. van hollen. >> thank you, mr. chairman. a quick comment on the fed. the federal reserve pointed out perfect that congress created a fiscal drag on the economy, made things worse than the fed made some accommodating actions but their message to congress was sequester is doing harm, hurting economic growth, hurting job growth and it continues to do so to this day, this refusal to take action on investment and infrastructure and the foundations of our national economy in many areas. there has been a lot of talk about the report and what you said about the affordable care act. i want to go through a couple

things. you found the premiums offered in the exchange would actually be going down 15% compared to your earlier projection. >> for 2014. >> on page 125 you point out there is, quote, no compelling evidence that part-time employment has increased as a result of the affordable care act. is that right? >> that is right. >> we heard a lot of statements about how people are forced into part-time work by the affordable care act. one of the findings of cbos is there is no compelling evidence that that is the case. there is nothing in this report that changes cbo's earlier assessment that over the ten year window and the longer-term window the net effect of the affordable care act is to reduce our national deficit. isn't that right? >> that is right. >> doesn't reducing the national deficit especially as the economy gets into higher gear mean stronger economic growth? >> yes. >> as a result of deficit

reduction impact the affordable care act in 2017 and beyond the affordable care act will spur economic growth? i want to talk about what we are focusing right now because on page 125 the cbo talks about the impact on the labour market on labor demand today. it says, quote, on balance the cbo estimates aca will boost demand for goods and services over the next few years and you go on to say the net increase in demand for goods and services will in turn boost demand for labor over the next few years. ..

>> let me be clear. we've not broken down the size of the various pieces we talked about in this actress i don't have any estimates of the effects of a particular channel he appointed by the that is, in fact, something we think spurs employment and would reduce unemployment over the next few years. >> so i think it is a factor and as a result if you repeal the affordable care act you will at least in the near-term increase the unemployment rate because it will be less demand for jobs. and over the longer term because the affordable care act reduces the deficit you will actually spur economic growth as the

economy continues to recover. now, i think it's really important that that information gets out there because as the media themselves confess, they bought hook, line, and sinker some of the talking points from our republican colleagues, and, unfortunately, misrepresentations go around the world three times before the truth begins to catch up but maybe it will begin to catch up at this point. now, in terms of the long-term deficits and debt, as the chairman indicated, as you go out into the future, we will see rising deficits. it is important to point out that your findings show that right now our deficits are dropping and will continue to drop for the next couple of years, but as more baby boomers retire and more people on medicare, social security, spending was let go, isn't that right? >> that's right. there will be one-third more people collecting a decade from

now that are doing so today. whatever the benefit is per person, multiply that by a much larger number of people, the overall cost of rice very sharply. that's right. >> we're talking tens of millions of people. i believe in the range of additional 30 plus many more people on medicare. and just the people who are following this understand, this is not because they're increasing the medicare benefits. this is just more people coming into the system. this is a demographic change, is that right? >> yes, that's right. >> that's a big driver. now, our republican colleagues say those deficits concerned them. however, they are only willing to look at the spending side of the equation, meaning if you want to address those spinning problems it means you got to reduce the benefits and social security or medicare somehow. if we are looking at those two pieces, right? >> yes. unless one is willing to contract the rest of the government and the where was as a show of economy in 1940. if one wants to cut spending.

>> as you would -- we've squeezed those programs to the lowest point in reported budget history, is that right? >> will have a few years from now. >> so our republican colleagues which is simply to look at squeezing those benefits, which helped millions of americans, including a lot of middle income struggling seniors. they have refused to look at the revenue side of the equation. it is their decision that you cannot close a single tax loophole for the purpose of reducing the deficit, right? that's the grover norquist pledge. you can't close one loophole, taxes for the oil and gas can do hedge funds or to help reduce the deficit. and my question, dr. elmendorf, if you go back a little weight in his, when was the last time we had a balanced budget? >> in 2000 or 2001. >> 2001. and, in fact, the last time we had a balanced budget over a

very limited time was the years 1998, 1991, 2002001? >> that's right. >> for decades before that, we were running deficits and since 2001 we run deficits. now, dr. elmendorf, you look at the revenues as a% of dvd -- as a percent of gdp during that time. they are hire in each of those years than they are today, is the rights because that's right, congressman. >> and their higher, are they not do, in each of those years than it will be as a percent of economy 10 years from? >> yes, that's right. >> my calculation is that the average amount of revenue as a percent of gdp when the last balance the budget was 19% of gdp. during those four years the average amount of revenue was 90% of gdp. now, you have just testified that the main reason that we're going to see an increase in the

deficit in the out years is because we have tens of millions more americans on programs like social security and medicare, right? >> yes. >> our republican colleagues position is that we can somehow deal with that huge increase in the number of americans on social security and medicare with less revenue as a percent of gdp in lebanon last balanced the budget in 1998-2001 women had a lot fewer americans. on social security and medicare. that is the problem, mr. chairman, a lot of our democratic -- you take the position that you will close a single tax break for the purpose of reducing the deficit. you say you care a lot about the deficit. you recognize that you that tens of millions more americans on social security and medicare, but you still want the government to operate on less revenue as a percent of gdp than the last time a balanced budget when we didn't have all these

americans and social security and medicare. so the only solution that our republican codes are proposing, unless they want to cut even more deeply into investments in defense and scientific research and infrastructure, is to simply cut these other programs. and the irony here is the affordable care act actually was able to reduce the medicare spending i reforming it instead of cutting it. we come as a result of the affordable care act, dr. elmendorf, we are seeing reduce medicare costs, isn't that the case? >> yes, that's right. >> that's a significant part of the reduction or repair time, right? >> yes. >> our republican colleagues after initially lambasting that an demagogy that, they included a provision in their own budget so they would achieve those deficit savings. so we were able to achieve medicare savings without hurting beneficiaries. and that is the model that we will continue to look at, and combined with closing tax rates

or special interest in order to meet these long-term challenges. but our immediate challenge is to put people back to work, and that's why we need to adopt our infrastructure investment plan, pass the minimum wage, and for the folks who are still out there hurting, we should extend emergency unemployment insurance. and we certainly, mr. chairman, should not mess around with one that we pay our bills on time. thank you very much. >> dr. price. >> dr. elmendorf, welcome to the committee once again. appreciate the good work cbo has done anything my friend from maryland says the report is good news and bad news. and i would agree with that. the problem is that when you compare it to last your support and reports prior to the, there's more bad news issue than it was last year, and less good news this year. our friend makes a comment about decreasing medicare spending. spending in medicare has decreased by $700 because of the affordable care act but it is forced reductions and as a

physician i can say that my former medical colleagues will say that it actually is harming health care for seniors. and so the challenge that we have here is to put in place programs that don't harm seniors. and our friends on the other side seem to be willing to put in place programs that do harm seniors. dr. elmendorf, what happens in a fiscal crisis to those benefits for seniors? >> well, it depends on the nature of the crisis and what the congress does to respond to it but the fiscal crisis as we use the term, at a point in which investors are unwilling to buy u.s. government debt unless it carries very high interest rates. and that then put determined to squeeze on the rest of the government budget -- >> a squeeze that might happen is that services to beneficiaries actually decreased significantly under a fiscal crisis, is that not correct the? >> that could happen. >> your estimation that congress hasn't done anything to address challenges of a fiscal crisis in

the last year's? >> as you know that congress has taken a number of steps and i don't want to diminish those that it is clear from our report that the fundamental fiscal challenge remains, which is significant increases in spending for certain programs, and even all the rest of the government is on track to become smaller relative to the size of economy we show high and rising debt. the country will need to make choices that have not yet made about cutting back those large programs or raising tax revenue to pay for them. >> which is a great segue to the medicare program. trustees say the medicare program is going to go bankrupt by 2026. what does it mean to real people? it means that services that been promised to seniors, there won't be the resources to be up to provide those services. so what our side, and i love how our friends on the other side of you like to characterize our solution. effect of the matter is our solution actually solve the problem. in fact, we put forth multiple solutions for the mandatory

program any and medicare, we talked about a pregnant support system and i want to draw your attention, if of may, dr. elmendorf, to report that cbo put out last september that modeled premium support systems. and it wasn't the specific one but the question that i want to get the answer to is, it brings support system may, in fact, be possible without to quote the report, combined spent by both the federal government and beneficiaries that premiums and out of pocket costs would be less than if current law remained in place under premium support system. is that the conclusion you alter? >> yes. as you know, there are many, many specifics that can affect the budgetary outcomes and the effect on beneficiaries of an awful lot so one should not take that as a statement about anything that would be labeled a premium support system but that would be affect by our estimates of the system we analyzed. >> a premium support model, that

is, something that saves medicare for seniors would decrease spending in potential decrease in to the federal government and decreased spending for beneficiaries. i think it's important when folks are listening to solutions that the solutions be explained by those individuals that actually promote the solution, not those that criticize the solution to in the short, i have remaining i want to touch on this issue of the interest rate question that the chairman got to. again as i said, i think this is more bad news than there was last year. and table de- 1 the pilot stage the british interest rates, a percent increase, 1% increase in interest rates last year was projected to cost $1 trillion. this year it is $1.5 trillion. what happened? what's the difference? >> i believe, congressman, most effective change in a projection of the amount of debt.

yeah, so jeff is pointing out that on some issue to this day was two years ago. we did a more abbreviated report last year because congress acted even later under more time constraint. two years ago it is more expensive because larger debt projection but it's not funny extra trillion dollars of this years provisions in this year year, included provision lecture which was much larger, remembered him because our current law based on before that -- >> what it means him as the chairman said, time is running out, it's time to act. >> thank you, mr. chairman. dr. elmendorf, nice to see. thanks for your testimony. i want to dig deeper into the methodology that you use to assess the impact of the affordable care act on hours worked. and the chairman i think was mentioning an example of a young person, at least that would be a shame if somebody couldn't find his or her way up the economic

ladder starting to work and so forth. my son is 30, single. he found insurance through the kentucky exchange, pretty good coach for him at $180 a month. so we talking about $2200 a year, premium. if he got 100% premium support, subsidy, what in the world kind of incentive would he have to not work? >> well, by working your income is dependent on many other things. health insurance is only one of -- >> seems to me there's an impression out there that you talk about a disincentive to work as a part of the impact and i'm guessing i'm committed of the methodology because i can understand why a 62 year-old under the affordable care act mindset i want to retire, and now i can retire because i guess

i can find coverage that i can afford, whether and not i get a subsidy or not. i understand that example. i'm trying to figure out the example of somebody who is at the lower end, who, where it would be an incentive not to work spent i guess you are right, pakistan, if some of these people, the early retirees as you describe. the way i put the other part of it is, it's not so much an incentive not to work. it's less of an incentive to work. so under the law prior to the affordable care act, if one were to, decided to work more hours, then one would earn higher cash wages and what made receive health insurance. but would give up some of those extra cash wages in the sense of paying some tax on them or losing some of the benefits. by providing additional benefits to people of very low income, a significant one in the form of subsidized health insurance been increase in the standard of living of those people would have been working working more

hours would be smaller than would b be otherwise. those who have a higher standard of living by working, but the standard of living wouldn't be as much high relative to what could have if they didn't work or if they work fewer hours. so by providing a somewhat smaller incentive to work, somewhat fewer people would work. >> as i understand it, the subsidy was set up in a way to you should not have, know what you got to be more about 9% of their income for health insurance. could you give me, and -- not on the spot, some kind of numerical examples of someone who have a disincentive to work because of subsidy, whether 90% or 50% or whatever it is? i'm having a hard time understanding how that could possibly make sense. >> happy to send you an example. they have a smaller incentive than they would otherwise. >> moving on, as we look at the

long-term repercussions of deficits and projections and so forth, and the impact of entitlements, ma social security, medicare and so forth, have you done an analysis of what immigration reform would do to soften the impact of those expenditures? i shouldn't prejudice as you. to change the long-term impact of health care costs, such as grid, benefits and also of economic benefits? >> yes. so we did a very thorough analysis of immigration bill that was passed by the senate last year and we found that legislation would reduce budget deficits and lead to larger economy, and over time lead to higher output per person in this country. >> and it does that because you could have a lot of younger people paying into social security and paying the medicare tax, but not receiving benefits

for 30 years or 40 years, isn't that kind of just -- >> the age matters, also the composition of the additional people who would be let into the country and given a chance to work under the senate legislation. so a number of those people would we think we see some benefits but a number would be high skill, high educated people who would be paying a lot in texas. >> thank you very much. i yield back. >> mr. campbell. >> thank you, mr. chairman. thank you, dr. elmendorf. if there's one good thing to you from both sides this morning is no one is saying it's great that the deficit has increased and that it's going to get to a trillion dollars. everyone is interested in reducing the deficit, that is a good thing. let's talk about taxes, that decided to read bunch of tax increases in 2013. those are reflected in these projection. also 2014 there's about 60 tax,

i think it is tax credits and deductions that expired. had to include those in this as well? >> no. the provisions that have expired as you we follow current law on the projection but we do provide some alternatives, policy scenarios for your use. one of which extends all of these expiring tax -- >> but in summary table one can you assume to expire. >> that's right. >> they were tax increases in 2013. they were tax increases in 2014, and they think there's even some in 2015. that are reflected in this which is what revenues go from 15 points 7% of gdp last year the summer between 18-18-point for. >> two key factors. one of them which is the change in a tax provision and the other is the strengthening of the economy which pulls in more revenues as a share of gdp. >> okay. but a number of tax increases

from 2013-2014 are included. we have had tax increases. you mentioned four things and i have probably 30 seconds for each one. i'm not going to mention the order you did in your opening statement that you said are driving the deficit from certainly from the spending side. one was interest on the debt. two reasons for that, interest rates are not expected to stay at these historical low level but the others is the deficit itself feeds more debt which feeds more interest. so the best cure for that is to eliminate the deficit, right? >> i mean, all other considerations aside, yes, a small deficit would lead to less interest payments. >> venue talked about the cost of medical care going up and now that's affecting the various medical programs, so you're still rejecting the cost in medical care will go up but i'm trying to balance that against the argument that obamacare is reducing the cost curb.

>> congressman, there's been a very pronounced slow down in the rate of growth of health care costs per person come in both federal programs and the private sector over the past half-dozen years or more. we've taken significant lesson from that end of lowered our projections for the federal program going forward. but we're not lower them so much that they have no more growth left. that would be a really quite extraordinaire turn of events. what role the affordable care act has played in this is i think quite unclear to analysts. >> said you're basically saying that there are conditions out there before obamacare, whatever, that increased health care costs independent of government actions to continue to some degree? >> exactly. not at the rate we thought before but at a positive spin you mentioned aging of the publisher which is something that guess what, we here in congress for chilling cannot control. so those two factors are what is driving up the cost of so many

of the major entitlement programs. so if we're going to get the steps under control we got to do something about those, don't we? >> i think you either need to cut back on some of those large programs or raise revenues to a larger share of gdp, or some combination of those two policies. >> we just did raise revenues as a share of gdp -- >> to some extent, yes. >> okay. then the last thing you mentioned was driving this was obamacare. so that's driving on the cost side to understand their our tax increases involved with it but it's driving a lot of additional costs as well. >> yes. the expansion of medicaid and subsidies, the tax credits to be provided through exchanges is part of what's pushing a federal healthealth care spending. >> while the two-and-a-half million full-time equivalent job loss, whatever that is,

2 million, doesn't that retard revenue as well? that's people who aren't working to aren't making money, aren't paying taxes. >> yes, relative to not having those attacks. that lowers tax revenue. revenue still rising of course. it means it would've happened without that effect, that reduction in implementing reduction in gdp, has a reduction in tax revenue. >> thank you. i yield back. >> that morning, mr. chairman. director elmendorf, do you believe that when social security was passed, it had an impact on labor supplies since we're distinction between labor supply and demand? >> yes, absolutely. >> very clearly in a similar way you would project obamacare will have? >> i think, the specifics will be different but the basic point is in which is the provision of them, -- over 60 doses of have allowed some of them to choose not to work who otherwise would have felt compelled to work.

>> i wonder if there's a headline back then in 1936-37 about what was going to happen to demand. if it were revealed, let me ask you this question. -- repealed the court benefits were quite cut through privatization, an option, that would have an impact on labor supply, wouldn't it is? >> yes, that's right. >> how? >> it would push up labor supply. in fact, with an aspect of the effect of raising the eligibility age for social security. we think that would increase the amount of work that people do primarily in the '60s. >> particularly with seniors more would work beyond -- spent they would work longer than they could under current law. >> the fact that americans would be tied to a job they don't want or need so because of its the only way for them to get affordable health care, it's a feature of obamacare.

as i look at it. director elmendorf, if your assumptions prove cracked, 2.39 americans -- proved correct, what effect will that have on the unemployment rate and on wages? >> we think that people will be leaving, choosing not to work because of the incentive provided by the affordable care act would have essentially no effect on the unemployment rate big we said that very clearly in our report. the ethics and wages can we did not analyze formally, complicated, depends on how the capital investment responds to changes in work, and we've not tried to model that our estimate that specifically. >> what you're saying is because of the security of obamacare, that it provides, a six-year-old, let's take that as an example, to retire and open up a job for someone who is

unemployed today, is that correct? >> yes, that's right. >> this is an example of a drop in the labor supply. now, in fact the cbo report, you specifically state the estimated reduction spends almost entirely from a net to climb the amount of labor that workers choose to supply rather than from a net drop in businesses demand for labor. i didn't see this any of the announcements about this yesterday. i just wonder why. very trees about that. you said it, i didn't. so in other words, this isn't employers cutting jobs, newly empowered workers choosing to go a different path. i think that's a good thing. chairman ryan, my good friend, you said in 2009 when we were debating obamacare -- [inaudible] why not? we want to address job loss,

this is what you said. so the key question that ought to be addressed in any health care reform legislation is, are we going to continue job loss, or are we going to allow individuals more choice? and probability, affordability to fit the 21st century workforce, unquote. i agree with you 100%. i think the answer is yes, giving workers more choice is not unique to obamacare. other federal programs have reduced the amount of labor that workers choose to supply just like social security, right, mr. chairman speaks i will take the rest of your 39 seconds to respond. >> go right ahead. >> a couple points. the purpose of in was to help produce a system so that older workers could not be destitute and can be for younger workers

for jobs. so it sort of the opposite intent which was to bring under workers into the workforce by providing those yesterday benefits back during those days. this is the opposite. this is saying, younger workers, the very people we want to go into the workforce to work are being disincentivized to do that. so it is certainly opposite of what you're trying to suggest -- >> can i take my time to speak with i will continue. i told you i was going to do this. job loss in this case is a subsidy that ends and it's a cliff to try. what we've always said is common it should be structured differently so that you don't produce this kind of effect. so we have literally a very different idea how to address this issue so that you always encouraged a person to go into the workforce, so you always encourage a person to work. and obamacare is structured the opposite of what --

>> that's your opinion. that's your opinion. we are still evident and basically talk about older workers -- >> my point -- >> i'm glad which is a because now we can all agree it's not a socialist at scheme. >> the gentleman's time has expired. [talking over each other] don't ask one to get a position of the other because you won't get a straight shot. mr. cole. >> thank you very much. although i hate to interrupt that debate, it was actually pretty good. [laughter] i may just yield my time back to both of you. [laughter] but a couple specific points and for someone to thank you for the work is exceptionally helpful. and i think very fair. i'll just say for the record i'm exceptionally -- i think most of us are disappointed. we worked and made a little progress here in the last few years on the deficit. i thought -- mr. chairman, you

did as well. the budget agreement that you negotiated with senator murray also restrained discretionary spending. that made a little more progress in the right direction and some mandatory spending as well. we were spending $164 billion less indiscretion budget and we were spending in the last year of the bush administration, fiscal year 2008. so that's real problem -- progress. when you look at this report it really doesn't translate in the long-term deficit reduction for the simple fact we simply haven't done enough on the endowment fund. is that a for statement? >> i think congress hasn't done enough on and commerce and revenue and some commendation. it's not our place to say which side of the budget you should -- >> between the two which have we done more on, revenue or entitlements? >> well, that depends on how you view extension of expiring tax

provisions. a few years ago. under current law assumptions we worked on, the extension of most of expiring income tax cuts in the early 2000s produced a big cut in revenue, and a big increase in the desert. i recognize that's not what many of you have thought about the starting point in your own mind. >> i know, that's why want you to answer it. are we going to have a lot more revenue than we would have had, had we retain all of the bush tax cuts speak with you would have had more revenue, exactly. some were allowed to expire. >> roughly how much more over a decade? >> i would guess a trillion dollars or so but i'm not sure that we -- >> ballpark but if you want to correct it later, that's fine. >> i think my ballpark has been agreed to. >> let me ask you this. if we had $1 trillion worth of reforms and empowerment

programs? >> well, the transfer made substantial reduction in spending for medicare, as you know. i really have not tried to assess what that would look like over the same 10 year time period as s. like some of these tax cuts to expire so i think i should not speculate those numbers i haven't looked up. >> let me come at it -- politically, it's obviously i think the revenue picture is easy to do within the entitlement picture is easy to deal with. i don't care which side of the aisle you're on. that's just the case of it. we saw the struggle with entitlement spending, frankly, in the budget agreement between chairman ryan and chairman murray. that's just politically a very charged every. let me ask you this. of the entitlement programs, which are the largest conservators to the deficit going forward over the next decade? >> the largest program, single largest program is social security, the programs that are growing, whose increases our

sharpest in dollar terms are social stratum medicare and medicaid. >> let me ask you this. this is going to be a pop on both houses. has either party put forward a plan to deal with social security? >> we've not analyzed any plan, in the last few years. years. >> i suggest that's because one hasn't been present. we have not presented one on our side of the aisle because it's politically -- our friends and the administration haven't presented one. it's probably statistically the easiest one to deal with because we got to know how many people turn -- it's much more predictable, much easier and yet neither party has had anything to say about it, is that correct? >> well, we have provided congress with a large menu of possible changes to sosa security and other parts of the federal budget. >> i'm not suggesting -- [inaudible] >> the last person who tried to lead visiting with president bush who actually did put forward proposals and did do

something. so i would actually, i would say this for the record for my friends because we'll have a lot -- this is in a way think we ought to sit down. is where got to go down. our friend, mr. delay come on your side of the aisle had an interesting bill to make congress vote up or down the same way we do in brac. i would suspect it would be full of unpalatable choices for both sides of the aisle. but that's something i would like to see us begin to look at and did. are most important single program we have, most likely, the one most americans want us to ensure and yet neither side of the out has put a plan on the table. yield back. >> thank you very much. at the outset i would like to say, chairman ryan, i was listening to your opening remarks and it was interesting because you kind of echoed some of the language president obama from his state of union address. you said you hope this is a call to action, and the president last week said they should be a year of action, so i hope there's a way we can come

together to focus on speed. [inaudible] >> economic opportunity, economic growth and there is some goo good news because we he made progress on job growth. but we have to do more to the economy has added private sector jobs for 46 consecutive months, and the total of 8.2 million jobs has been added over that period. this is reflected what i hear at home in florida where small businesses are doing better. it's been a very difficult kline from out of the great recession that kind of his earlier in housing in 2007, but he we are 2014 and people -- businesses are hiring again. the economy looks better. except we have this intractable problem, it's kind of a jobs crisis. and the cbo report demonstrates that the outlook for job creation remains weak. and then we are dealing with the retirement of the baby boomers.

that's what every time there's an announcement on jobs numbers, every month the unemployment rate is going down but yet people are retiring and dropping out of the work force. so we're going to have to be much more strategic in how government partners with this is to create jobs. and that's why it was a very concerning to me, the part of your report that highlighted congress is eroding commitment to scientific research, education. you say now that that kind discretionary spending that has been really, that provides the jobs for the future is going to be at its lowest level in 40 years but can you expand on that and take us through some of the areas, whether its r&d education, or tell us where that weakness is? >> yes. we wrote a report in the fall about the facts a federal

investments that have the amount of federal investment has changed over time. i think roughly speaking, about half of non-defense discretion spending can be viewed as an investment in physical capital like highway, bridges, in human capital, economist called in education and training of workers. and the research and development. and that nondefense discretionary spending will under, current law, under the cap, fall two a share of gdp. lower than any point in 50 years for which there is date on that has been collected in that way. now we don't know, congress does not just how the money under this category allocated for different activities so we can do projection, research investment, spending directly. but that estimate about half of that total amount of discretion spending over time. and if that sure is maintained in future and the federal government will be do less

investing relative to the size of its economy by the second half of this decade and it is in any point in my lifetime. >> so that's education? >> education. it is investment in physical infrastructure like roads and highways to it is investment in research and development. >> so that's the national institutes of health, nih, national cancer institute, medicine speed all in that category, yes. >> infrastructure and defense as well? >> defense, discretion spending is also on track have also lower share of the economy than it's been at any point in the last 50 years. and again how those cutbacks are allocated between the research done by the defense department in the things the defense department something that congress we did decide in future appropriation bills. >> a lot of folks are believed that this question has been replaced here in the short term for a couple of years. and they tend to focus on the crisis that is right in front of

them, but the challenge of looking ahead in the next decade is going to be how we maintain these investments in what makes america great in education and research and development, and infrastructure. and that's why i do think it's important for us to work together as we learned that the aging population is going to be a challenge, a fundamental budget jumped into my colleague, mr. gore, i would agree to work with you -- mr. cole. i don't think it's fair to say that the democrats haven't been focus on social security. we are focused like a laser. i would recommend congressman ted deutch bill from florida. i agree we need to work together to make sure that we are being -- >> thank you. >> thank you, mr. chairman. and thank you for the work on this as well. let me just bring a couple of things together we've talked about already. there's been some conversation

about discretionary spending obviously. there's been a lot of conversation about discretionary spending. is it the cbo's conclusion that there is no additional waste in government and the government is running as efficient as it can possibly run so there is no additional places in the discretion area where we can do with whistles been? >> no. our volume of budget office in the fall which provided to congress was a dozen of options for cutting back on discretionary programs if you choose to go that direction. we also noted that i think the entire staff of options we give you would all be needed and maybe more than that in order to meet the caps are already in place because the caps are such that the current set of programs, there will be enough money to continue the current set of programs and services under those caps. even under current law you and your colleagues would need to take event of a wide range of cutbacks and programs in order to meet the caps spent programs and services come with it in reducing duplication and try to do with some of those

inefficiencies, inappropriate payments and all that? >> congress and, that would depend on what the cost i doesnt also on people's interpretation. my experience, some members of u.s. ways, other members view as important. not my place to judge that. >> i've noticed that as well i suppose. let me mention a couple things on interest. last year once we get the tender when the we get the 2023. you estimated the interest payments alone at 857 billion. that interest payment in 2020 is 819 billion. so we have made some quote unquote game at that point. but a i've also noticed the amount of interest with a versus the increase in the deficit each year, that number is strikingly similar many years. some years the interest payment increases higher than the deficit and some years it's a little bit different. but if i try to just the increase in how much interest we are paying, it's very similar in

numbers to actually the increase in our deficit every single year. so this seems to be a problem that is driven primarily right now, obviously there are other factors as well, by an increase in interest rates going up as well. am i tracking that correctly? from 2017-2018% increase in interest payments of $89 billion. at the same time there's an increase in deficit spending of 74 billion. so if the interest rate wasn't accelerating, we would make progress but we are not. it's increasing but if the go between 2018-2019, it's an increase of $76 billion in interest payments that $97 billion in deficit spending. can we talk about the interest? >> yes, congress and to your right, one can isolate the interest is that all the rest of government spending and revenues, the gap between them would actually be fairly stable in dollar terms over the coming decade and -- spinning but what

do you asked with rising interest payments, why is that interest them accelerating at this point? >> interest payments are rising part because of rising debt. but even more so because of rising interest rates but interest rates as you have been unusually low over the past half-dozen years and we expect as financial markets expect those rates to return to typical levels. so interest rates on the 10 year treasury note will be rising from 2% something to we think 5%. that's the cause of a very sharp rise in interest in the government will have to make. >> ten years in our only payment is $880 billion speak with yes. in the 10th year, 2024. >> 2024. >> this concept of simply getting to the primary balance and we're just going to try to get the balance for separate interest is what pays the same with hud get the balance except for around the last trillion. >> we are not testifying that

but you're right, the interest things will be very, very large. >> i want to make it, that is not related to cbo and a square structure. each year, the conversations there is a scoring issue that deals with manager programs. where we take money from existing in a fund to move into the next is fun, count that as savings. would you consider that -- i know cd officially considered that savings. would you consider a change of program or an account to be an actual savings? >> yes, congressman. we think that if an appropriations bill make a change in mandatory program so the government pays out less in the year, that is a real savings. you are right that the budgetary passion is comfy and these things can look -- and next year we tend to focus on you done in appropriations and make the change demanded for spending part of our mandatory spending projection. but i don't think we believe that there's anything that is

fake about the changes in medicare programs, not you really haven't made a change in law that cuts been is a, then that's a we are recording when we give you an estimate. >> i yield back. >> thank you very much. drama. first of all, thank you and welcome. 50 years ago, the war on poverty represented a dramatic shift in the federal government's priorities for helping those who are left behind in the growing economy. we hosted president and lady bird johnson's daughter, last month, she reminded us that the major legislation that was passed during that time was bicameral, bipartisan and was with the leadership of the white house. and it worked, even though we have a long way to go. i want to thank the chair, congressman ryan, chairman ryan for at least beginning to engage in a debate around poverty.

in the omnibus appropriations bill, the president signed into law january 17 come we were able to secure link and i just want to read this just want to reduce the, it says poverty is far too prevalent in the united states. congress and the administration should work together to implement in the agency efforts and support proven antipoverty programs that reduce the existence of poverty and the suffering associate with it. so i want to ask you, what policies are antipoverty initiatives tend to get the most bang for our buck in terms of boosting economic growth? for example, what is the impact of economic impact of not extending unemployment compensation for the 1.7 million people have lost their checks what they're looking for a job? will we see them fall into the ranks of the poor? does raising the minimum wage boost economic growth and reduce poverty? what's the impact on poverty and economic growth rate as a result

of, unfortunately not, the impact of structural and long-term unemployed as we continue to recover from the recession and can't seem to get any jobs past. i would like for you to respond to this issues around poverty, given the sense of congress that was put into the omnibus bill. >> yes, congresswoman. we have estimated that if the congress were to extend the additional unemployment insurance benefits that expired, that would add about a quarter of a percent in 2014. and would have a couple hundred thousands people to the ranks of the employed. and we've not done an estimate of the poverty rate but that would be good for people. some people who would otherwise be below the poverty line in the above the poverty line because of extra benefits. we've not tried to quantify that. on the minimum wage, we are currently doing an analysis with

respect to raising the minimum wage, both in terms of the high wages income for people who keep their jobs and in terms of people who would probably lose their job. and we hope to present that announces to the congress in just a few weeks. so i don't want to speculate at this point about the results of that analysis. on the long-term unemployed, you are exactly right that for many people who lose jobs and cannot find jobs again, the economic consequences to them can be devastating. and, in fact, the consequences on families on on the health and so on come and there's a substantial amount of research about this and we report on it a few goes -- a few years ago. many independently bad shape and end up below the poverty line. i begin we have not tried ourselves to quantify just how many more people that would be, but persistent level of high unemployment. we should and are labor market report, a company the outlook,

that the rate of long-term unemployment remains today, although it come down from its peak of you is is a, remains toy than at any high point before this last recession and weak recovery. the economic and human costs of that are very, very large. >> i would like for you to look at the language in the bill, in the senate bill, and see if it's appropriate and possible to give us some of your suggestions as it relates to congress and the president, what we should do to implement the policies and interagency effort, and support and to operate from programs. we would like your perspective on what we voted into law. finally, i have a few more minutes. let me ask you about the cbo report last year as it relates to the public option. in the health care exchange. i think you said it would reduce the federal deficit by 158 billion through 2023, which reflects a 37 billion reduction

in at least. and 121 billion increase in revenue. now, with your new report, have you recalibrated that or do we think that still hold? >> we've not we estimate that, congresswoman, but this estimate was to be quite applicable. >> thank you. >> turn one. director elmendorf, thank you for joining us today. i'm sure that americans, real-world americans that are watching today's adjustment, their eyes are glazing over, so for that i would summarize -- >> i'm offended. >> no offense to you. but i would like to summarize that economics is essentially a mathematical expression of aggregate human and business behavior. and in that vein i would say that this latest cbo report i think is a better reflection of aggregate human employ an employer behavior over time as a result of government policy.

obamacare is one policy that has been enacted by the federal government in addition to that there were several other policies had been enacted over the past five years that have affected our economy. in your report you talked about the impact, the affordable care act or obamacare, on the supply side of the equation in terms of what employees are prospective employers did come and use of equipment of 2.3 million jobs would be lost due to expressed, let me rephrase that. hours of labor would be less, would be offered and job losses would be 2.3 million to not be 2.3 million. not to sit 2.3 when jobs would be lost. have you looked at the demand side of the equation? the affordable care act, or obamacare, has a huge impact on employers. and they're making economic

decisions to determine how many employees they hire and what sort of hours that they ask these opposed to work. can you tell me in a short amount of time what impact that would have? >> yes. we looked in report and outlook on the effects of the affordable care act on the demand for labor. we highlighted two channels, one was defective the overall demand for goods and services and unemployment. the other is the effects of the employer penalty, the demand for labor. in the very short run, requiring employers to pay something the amount for each of the employees in some circumstances amounts to raising the cost of those employees and would lead employers to reduce their number of people they hire. but we expect as other analysts believe that over time, costs that employers bear for their employees into being borne by

employers in the form of lower wages, health insurance causes one example in this mandate would be another. so we think after a few years the cost of implementing is basically showing up in wages, and are affecting ultimately workers supply of labor, but no longer employers demand for the most part. >> just to summarize, you potentially, essentially took the potential negative impact on labor demand and translated it further into labor supply. >> because we think wages will adjust. >> i can live with that. i mean, i don't like the fact that we are labor supply or labor demand, even when. i think that's bad policy, and we as republicans in the house are looking forward to our replacement, alternative that doesn't do that. does the cbo routinely analyzes administrative actions and tries to trim the impact on the economy.

that's -- that process isn't terribly transmit at this point but when you take obamacare and epa action and department of labor actions, just to show actions, you could after every agency and they have issued tens of thousands regulations over the last five years. what has been the impact? i ask you from this frame of reference, as a person has created or helped create hundreds of jobs in the real world, i know firsthand the impact of that policy but i was wondering, do you have accused the number of potential jobs lost because of obamacare and all the government policies that been an active the last five is? >> i'i'm sorry, we do not to our focus as you know, legislation that congress is considering the we got to go back and look at how the law is a minister and as part of why we look at the affordable care act again this time but we don't in a sort of copper into the analysis.

>> i think that would be well served because i mean, one of the reasons the inflation rate is so low because employers have decided that they can't hire those types of employees where they stand and so -- prospective employee base has given up. i would just say that the government policy allows the use has expanded the poverty trap but it's dropping, pushing them out of middle-class and hurting opportunities. i yield back. >> the gentleman's time has expired. i just want to keep us on the clock. >> thank you, mr. chairman. and thank you, mr. director, for your testimony. i believe you testified last year that the imposition of sequestration would cost the economy potentially 750,000 jobs that would be lost, is that correct is? >> that sound right. i don't remember without looking. >> there are estimates that

engineered unnecessary reckless government shutdown post a comment about $24 billion in lost economic productivity, correct? >> i've seen investment but we're not done investment ourselves. i can't vouch for it. >> i believe cbo itself is set as it relates to the failure to renew or extend unemployment compensation, that could cost the economy 200,000 jobs during this calendar year, correct? >> yes, that's right. >> so that our choice this congress has made or will make moving forward that could adversely impact the economy economic productivity and job creation moving forward, correct speak was yes, congressman. >> as it relates to the cbo, discussion concerning the aca, if you estimate that the aca will result in the decline of full-time equivalent employment, correct? >> that's how, one of the ways we have measured the effect that

we've and alaska yes. >> just so i understand, this stems from a net decline in the amount of labor that workers would choose to supply. i believe you said that on page 117. >> exactly. >> as an that estimate on impact of the aca's -- this estimate of the impact the aca would have on labor market participation, you yourself nonetheless go on to characterize its substantially uncertain, true? >> yes spent the reason why is because this is a new program and the impact of the imposition and the effects of the program are on clough, correct? >> correct. >> notwithstanding all the hysteria that has been created over the last 24 hours related to asthma on the impact of labor participation, by her own as mission is not even clear that

there will be an adverse impact moving forward, correct? >> we've not tried to quantify the uncertainty. in some cases we give the congress not only our best estimate but a range of possibilities. that requires more analysis. we've not done that in this case. >> on page 118 of your report you state that the actual effects of the aca code, on labor participation, could differ notably from your estimates, true? >> yes, that's right. >> now, it's my understanding that the cbo also concludes that the impact of the aca on the supply, even assuming that your estimates prove to be true, will be small or negligible for most categories of workers. is that also your position? >> yes, that's right. >> okay. now, just so i understand, and i

believe this was pursued in an earlier line of inquiry. the reason why you estimate that the aca could have an adverse impact on labor participation is because the aca its older workers in particular in a better position than they otherwise might have been at a certain stage of life, is that true? >> it puts a set of workers in a better position. some are older and some are younger so we've not tried analyze this for different age cohorts separately. >> because it puts a set of workers in a better position, they might voluntarily decide not to participate in the labor market at numbers that they otherwise might have done, correct? >> exactly, congressman. >> okay. now, at the turn of the century did the imposition of child labor laws reduce the impact on labor participation? >> i guess, i think so. i never thought about that question. >> this standardization of the 40 hour workweek in america

reduce labor participation in this country? >> it reduce the number of hours, total number of hours worked. i think, yes. >> would you also say that the successful assault, not complete, but the successful assault on sweatshops in american reduce dissipation in the labor market? >> yes, i think it probably has. >> thank you. i yield back. >> mr. rush. >> thank you, mr. elmendorf. is a really interesting material, and getting my hands about, still a freshman congressman. i have some questions that probably i should know, but i just need clarification. trying to add up these alloys in this figure. what percentage, total spending -- what is the percentage of total spending -- total spending as a percentage of gdp in 2024

based on the statutes? >> in 2024 we think the federal government cover outlays will be 22.4% of gdp. .. >> revenues will be about 1% of gdp. >> so, at what point -- i know

economists speculate what point of the revenues of gdp will drag on the economy. if you collect too much it begins to drag on the economy. what percentage is that? >> there is no tipping point that economists are aware of, congressman. in part because the effect depends an awful lot on how the tax code is structured. it's not just a total amount of revenue raised, it is even more so the way the revenue is raised and so this has do with the nature of the tax code and the particular incentives and disincentives created by the provision. >> said it could be 50% of gdp and it wouldn't be a drag on the economy? >> i didn't say that. but i want to say is there is no magic number. the higher the tax rates are, all else equal the more that distorts people's behavior. and if you're taxing work and saving the more that will reduce

the amount of work and saving all else equal. the amount of debt we have depending on the gap in the revenue and outlay also affect economic growth over time. so what else is equal in the = the calculations. but leaving aside when you have taxes of a certain level, the higher the tax rates are, the more that would tend to distort the behavior. also, the more revenue than you might raise and reduce the deficit and have beneficial effects. but in our analysis we take on board the benefit of the tax rates on the economy but there is no number that you go beyond where it is a problem and it becomes an increasing problem as you work your way up. >> i don't have any more questions. thank you. >> thank you mr. charan and

doctor ellmendorf. i want to talk about the jobs portion of what you have. first if i can briefly -- i know it's repetitive but i think it's important given the new i got the chance to see the washington misinformation sheehan yesterday. when we had the best panels because of the affordable care act and i got to see up close around the 2.5 million jobs it was going to cost it was employed there would be a decreased demand for labor from businesses that somehow people would be reducing the number of hours people are working and the economy would be worse off. i want to verify and doublecheck these things one more time. you said that workers would be leaving participation because they are going to be choosing to leave rather than businesses demand for labor reducing, correct? >> yes, congressman. >> second, you said there is no compelling evidence part time has increased because of the aca? >> yes congressman. >> you also sent by allowing low-income households to

redirect some of the funds they would have spent on the purchase of other goods and services they have increased overall demand which would induce some employers to hire more workers or increase the hours of current employees during the period. >> yes chairman. >> i know it happens, sometimes perception becomes reality rather than reality becoming reality so i want to emphasize those points. >> the reason we don't use the term lost jobs is there is a critical difference between people who like to work and can't find a job or have a job that's lost for reasons beyond their control and people who choose not to work. if someone comes up to you and says the boss says i'm being laid off because we don't have enough business to pay any other person feels bad about that and we sympathize for them having lost her job. their job. if someone says i decided to retire or stay home and spend more time with my family and

spend more time doing my hobby, they don't feel bad about it, they feel good about it and we don't sympathize. we say congratulations. >> i think it was just inferred earlier that somehow if fewer people -- you mentioned that they would be better off in your report and language presented to us and it was implied people had an opportunity to get to middle-class you wouldn't be better off. but part of it is you're saying in the aging population people aren't participating. that's part of statistic for people who like my mom don't have to do that, but secondly it could be on the the low were and who is now working two part-time jobs instead of three part-time jobs and instead they might be able to tuck their child in bed at night and read a bedtime story or go to inactivity which means they are better off. at least that's what it means in my part of wisconsin. then let me ask a question about what we can do in your report about jobs. as we talked about with

mr. jeffries, the sequester was about 750,000 in full force. i know we released some of the pressure this year but we go back to putting a lot more of that in 2015. we are going to lose jobs because we are not extending unemployment extensions. while people want action by congress rather than the president, the problem is that congress isn't acting. we aren't doing anything to create those jobs come in jobs, therefore someone has to do something about that. what policies tend to get the biggest bang for the buck in terms of boosting economic growth that we could be doing in the near term? >> a number of times now in the past, we have given to congress our estimate of congress our estimate of the set options for spurring the economy in the short-term. as the fiscal policy options, does that put money in the hands of people most likely to spend it. so increasing the aid the unemployed has been very high on

the list in terms of the bang for the buck, so providing additional refundable tax credits to the lower income households reducing the payroll taxes. those things are more effective in spurring growth in the short term under the current economic conditions than the government spending increases or tax cuts focused on people who are likely to save rather than spend a larger part of the extra money the end up with. >> at some point you can only buy one so far you can't buy 100 sofas come is that the theory? >> those are some big houses, congressman. but people tend to spend a smaller share. >> let me ask on the unemployment benefits because in the state of the union in my district someone lost his benefits and has his house for sale because he doesn't want to go into foreclosure, they are not even having friends over for dinner because they don't believe they can't afford food. what is the unemployment often than in this country? >> i'm sorry, i don't have the facts of that at hand i am afraid the congressman.

but the unemployment rate in the country remains very high and the rate of the long-term unemployment is higher today than it has been at any point in decades. except for the past few years it's come down a little off its peak but it remains extraordinarily high and the cost of that to the economy and the people involved. >> i hadn't planned on it but i want to follow-up with what he said because i think it's important. i agree with all of your answers to questions about what stimulates a short-term growth. and of course we have done that. we had a stimulus package in the first year of the president's administration. we did a trillion dollars health care bill. and as i look at all of that, the effort that was supposed to produce short-term result, what i see from your report is that it virtually doubled the public debt held by the public. so, we were so committed to the short-term stimulus that we

borrowed more as a percentage of gdp coming in in about five years than we had in the previous nation combined and we can argue whether that was a good idea or bad idea but we did that to create a short-term growth. when in your projections do we return that dates back to historically normal levels presumptive lead we are going to do these things to stimulate short-term growth and have to pay the piper sometime. when in your projections do we end up returning to the historically normal levels? >> if it doesn't return to the historical traditional share of gdp at any point in the next ten years or as we showed in the long-term outlook last fall in the decades beyond that. >> i agree what you say that we can do things in the short-term to stimulate economic growth. presumptively that's good for the economy. what you are saying is the things we did has exacerbated our debts not just in the ten year window but also in the longest term when does we never

return back to historically normal levels? is always at this abnormally high perhaps dangerous levels? >> so, let me add a bit of interpretation to this. the first thing to realize is that a large share of the increasing in baghdad was not anything you did deliberately. it was an automatic stabilizer in the federal budget and we quantify those as best we can in this outlook. the biggest thing that raised the deficit and debt wasn't a deliberate action but it was the tax revenue has fallen by a lot and spending rises automatically. this large share taking no actions. additionally congress took actions that by our estimate substantially strengthen the strengthened the economy had added outputs and jobs, but you are right that if that debt is never -- the extra debt is never paid it down, then for all that's good in the short-term, it becomes a drag on the economy. >> sort of a long-term drag. i regretted when you were having

your discussion earlier we talked about balanced budgets in the '90s and in the early 2000's. but i think of as a cash flow, the congressman was borrowing from the social security trust fund that was supposed to be elsewhere. it's hard to call that a spending balance. i don't want to take issue with that. what i want to take issue with is that the tax rates were higher and that led to some prosperity. when i look at your ten year window, i see income tax receipts as a percentage of gdp rising to about 9.4%. and as i look back historically in the decade upon decade upon decade that your report covers, i can only find one year in the history of the nation that income tax revenues were higher than they are projected to be in this ten year window. so we are going to have historically high income tax collections. but, to see again, you are saying that the debt is not going to return to the normal levels and in fact that is going to continue to rise nominally?

>> yes, and i would add there has been a shift in the distribution of taxes over time. so certain tax going to corporate income tax had collected less revenue in some payroll taxes as well. and the individual income taxes are the portrays the rising was to substantially over the next decade. >> you have a difficult job, and i'm glad you have agreed to do it. you opened your statement with saying that decline sharply wilkey -- sharply decline more. that is accurate. what is not said if they are declining to a level that is still higher than the historically highest level they have ever been before this administration. and i just would ask you going forward because it is something that we agree on collectively. when the extremes on either end looks less extreme than where

you were but whether or not it is the responsible thing to begin to accept that as the new normal or whether we had an opportunity to continue to describe it as being damaging and high i think is a question that we can continue. becausewhen doctor ellmendorf talks, people listen. i'm glad that they do, but those words matter. >> we tend to focus on the size of the economy as a percentage of gdp during the comparisons over a long time period when the population and the size of the economy have changed a lot since the deficits we see for this year and next year are actually at or below the share of the gdp looking back over the last 40 years. with outside of the historical average it it as best as a share of gdp. and i look pain and that remark as well. >> thank you. >> thank you very much

mr. chairman. thank you, doctor ellmendorf for your report and remarks. i have a question for you. let me set up where i'm going so that you can understand what my question is. today unemployed americans continue to struggle seeking a job that will support their family and give them a chance to earn their share of their american dream. the american worker doesn't want a handout. i don't believe the american worker wants a handout. they want to work. they want a paycheck, and i think we must come together to remove the barriers that promote full-time employment. while long-term unemployment is a national problem, it doesn't fall evenly across the united states. disparities exist and unemployment from heavily impacted states and those with with liver unemployment rate. how would the rate would be greatly impacted by the long-term unemployed workers with a lump-sum unemployment benefits to help cover living costs for the workers can move

from one area of high unemployment and perhaps area of london limit rate in order to accept employment that would require them to move? >> have not had an opportunity to analyze the proposal. it is an interesting one that might have beneficial effects but we would need to sit down and spend some time to give you a useful answer i'm afraid. >> does the data show that in some areas of america today a snapshot of it is employment opportunities are much greater in certain regions of the states where other states it is higher than other regions? >> the labor market is very tight in some places and poor in others. historically part of what has helped to bring the labor market back to a better place after the previous downturn has been the mobility of people. and there's evidence the mobility of americans has actually declined over time which may be an aggravating

factor but we have to think how of a particular policy might be able to address that. >> so you don't have any analysis that indicates perhaps one of the factors is a lack of resources to make that move. it costs more to move across the town or across to another state or another region than it would drive back and forth to work. there are impending factors, financial factors that say if i don't have the first and last to get another rental place for my family, what have you, there are expenditures in a move. >> that is certainly true, congressman, and the logic sounds right to me. i just analyzed the policy of complicated. i try not to do it just sitting here without the benefit of the expertise of my colleagues. i would be happy to spend some time -- >> it would be helpful for us to look at that because again, as you would seem to agree it is logical that that is a factor,

but you probably would probably would have to analyze it in order for you to dispense about here. >> if in fact we figured out a way to help people mobilize from one region or one state for example to another one, where they have a much higher likelihood of finding employment just because of the simple fact they are looking for employees and they have a much lower unemployment rate. if we figured out a way to do that, would that help the economy? >> yes that would. >> is it overly logical to assume if somebody gets off the unemployment rolls and into the taxpaying working role that helps the economy? >> it certainly helps the budget if we gave people the jobs they can earn money and pay taxes on it. i want to emphasize the difference across the region as you understand taking the country as a whole, there are significantly fewer jobs and ban

people that want them. moving people to where there are more jobs can help. but in any case, however effective it can be by itself, it won't solve the whole problem because right now there is less demand for goods and services than we have the ability to produce them and that weakens the demand by workers across the country. >> there's the bigger picture come about if ima parent who is trying to feed my family and i'm tired of getting an unemployment check and i want to work and have that dignity of work like many americans i believe do, to that person, the bigger picture is their picture. here i'm living in a city or the county i grew up in and i finally have the guts to go ahead and say i hear where my cousin lives they are hiring an unqualified. all i have to do is move my family over and i can get that employment. to me that is a big enough picture to concentrate on that kind of effort so that we can

actually hopefully make progress that can improve the family. >> thank you. >> thank you mr. chairman. doctor ellmendorf, i'm sure when you write your notes on fun things i did this year they said that the day may not make the list. but we appreciate you. >> i appreciate the chance to talk about the analysis my colleagues and i have been doing the question about the 2 million equivalent lost jobs, and i think the best way that i could explain back as the chairman, the equivalent of 2 million full-time jobs are people that look at the benefits that they are getting under obamacare and sable gets better for me to just stay and not work because i get those benefits. is that right?

if we look at that in isolation, what effect does that have on the total tax revenues to the federal government? >> reduction and employment whether it is voluntary or not, and in this case or not, either way that will reduce the all else equal the income earned in the country and the amount of the tax revenue that is collected. >> people choosing not to work because they are not paying into the revenue is going down. i think i read the report and it estimates that there is about $1.2 trillion over the ten year budget window that are used to subsidize the exchanges. and about 792 billion for medicaid expansion. so, roughly a total of $2 trillion over the two years to pay for exchanged subsidies and medicaid expansion under obamacare. >> recall that the gross cost of taking account of some of the

other effects on tax revenues and so on. we end up with a net cost of $1.5 trillion over the next decade. >> we are spending 1.5 or $2 trillion more. we are taking in less revenues because people are choosing to work less or stay home. it looks to me like that is adding to the problem of our death; is that right? connect again, congressman, when we evaluate the affordable care act as a whole and not just be affordable as you have been referencing that the exquisite cuts to medicare payments and the cuts to the increase in tax revenue, the last time we did the analysis of and behold we found out it would reduce the budget deficit. but you are right that a piece of the wall that expands the subsidy for the insurance coverage costs the federal government money on balance. >> obamacare also includes a bailout for insurance companies in case things go bad.

the risk. since enrollment started in the fall, it looks like we have had fewer people enrolled in obamacare than we thought were going to. have you looked at the fact that insurance companies called this adverse selection, but it's the sick people, those that are going to need more extensive coverage -- what is that going to do to the subsidies for insurance? >> by our estimates, the risk quarter program in the affordable care act will actually reduce the government deficits and it will lead to the net savings on the federal government because it is a program in which it ensures the cost significantly exceed their expectations. the federal government is on the hook for some of that but if they fall short of their expectations, then the government can share those savings. and the closest analogue that we are aware of is the risk quarter medicare program in part and if

it's which has yielded savings for the government consistently. our estimate is that the quarter program on the affordable care act will yielded savings into and those are very uncertain estimates. our original projections on the affordable care act takes care of the adverse selection that you're talking about. we thought that enrolled -- enrollment would be one third of what it is right now and we thought the people that would enrolled this year would be more sick on average than the people that enrolled over time and we presumed insurance companies understood that as well and incorporated that into the settings of premiums. neither we or the insurers know now how many people left this year or how healthy they will be or if that is -- their estimate in setting premiums and our estimates now are highly uncertain. >> one final question. i think the report indicates over the ten-year window we anticipate under the unemployment rate actually go down. that's a good thing. but this is the labor

participation is also going to decrease. how is it that we have fewer people working in the unemployment coming down? we think that employment will rise. the participation rate is a total share of the population over age 16 that is working. a lot of people in their 50s and 60s now well be into their 60s and 70s where the participation rates are much lower. so if that is the aging of the population. of the people that choose to participate in the labor force, we think it is a smaller share over time will not be able to find work. they are unemployed. but the growing share will be able to find work and the employment will rise over the next decade. but not as fast as it was if we didn't have the aging population under way at the same time. >> thank you. >> thank you mr. chairman and i

appreciate the line of inquiry because it's very important. what i heard you say is the risk corridors, which we actually borrowed from the republicans when they did the prescription medicare drug program. the risk corridors were in there where they not? >> yes. >> and you said that helped save money over the long haul. and that in your estimation, and that of your team of analysts, it will save money over the long haul under the affordable care act. >> it's only a three-year program as you understand. >> unlike the medicare prescription drug program that didn't have a time limit, this is just three years. but if it were eliminated, it adds to the volatility and it will probably cost more. >> i really appreciate my friend

bringing that out and i appreciate him digging in with you the difference between jobs and workers. the unemployment rate is very likely to go down even though there are people leaving the workforce as we are not going to put a gun at their head and force them to work past retirement age or if for some reason they are not tethered to a job cause of their fear of losing their. people might have more choices. so there is less participation for whatever reason, but not less jobs. i appreciate the clarification. i don't know if you have had a chance for your team to look at and analysis from the urban institute and the robert wood johnson foundation that found that 1.5 million americans might start new businesses. because of the freedom under the affordable care act. have you looked at that report?

>> i think my colleagues have that i have not had the chance myself to talk about it. >> i found it interesting that here's an opportunity to actually increase employment, and it would appreciate at some point getting some feedback whether the folks at the robert wood johnson and the urban institute were off in the ozone or if s. is usually the case it's pretty good and analysis, that would be very valuable to hear that from you experts if you have had a chance to look at it. >> i want to just focus for a moment on this notion that my friend talked about on the tax levels being high, higher than if i understood them correctly and that if we haven't seen this era of high deficits such as we have experienced and maybe looking at the future.

looking at the chart that you provided that shows that the long-term average for the revenues was 17.4%. you'd think that that is going to go up to 18.1% on going forward as a percentage of gdp. but on that same chart on page six of the documents provided to us, it shows back when we were actually in the surplus. the revenues were higher than the 19.1%. and i think that my friend, mr. van hollen eluded to that in his opening statement. no, we have seen revenues that were higher back when we were producing surpluses. and we have seen deficits that were much higher back when we

were struggling with the depression and world war ii and we get these things into balance. i hope this is the day that you look forward to, because i like watching you walk the tightrope, refer back to the data, encourage us to do so, and not take the topline focus group points, but look at what it actually says. and i think what you have done here in your testimony is pointing out the difference between jobs and workers and loss of workforce persecution, not necessarily bad. and that risk corridors are not some foreign concept that's going to cost us money that we can steal as part of a budget debt ceiling notion and that revenue we have enjoyed over time when we were in surplus are actually