and plans must be certified by professional engineer. second epa regulations stemming from the emergency planning and community right to know act or title iii requires the facility to inform their merchants a planning committee the state emergency response committee and local fire department of all hazardous materials in their possession. i should add the newly revised

2012 osha hazard communication standard requires documentation and vindication of all hazardous properties of all chemicals. in west virginia state relations require secondary containment for aboveground chemical and petroleum tanks that can protect the groundwater furley 72 hours. we understand that state and federal agencies in the chemical safety board are investigating the freedom industries access given the impact there's no question that these will be extensive investigations. and we expect resulting incident reports will cite factors contributing to the release of applicable regulatory programs and the possible violations of those regulations. i lta is interested in these findings in particular how the chemical escapes the containment even with an expansive regulatory map anomalous circumstances exist where an incident such as this could occur. we defend that a proper response would begin with understanding those circumstances.

i lta contends a legislative response at this moment would need premature. once final investigation reports are released specific reasons for these tank and secondary failures will be better understood and then measures to prevent recurrence in another community can be determined and implemented through refinement and simplification of existing regulations. if freedom industries disregard applicable regulations industry-standard towards own operating procedures the most effective response will be through more consistent enforcement represented bye bye the strait of burden and frankly the confusion of another layer of legislation regulation. with regard to the safe drinking water act measures have been proposed to require good design and construction standards spill protection inventory control emergency response training integrity inspections and financial responsibility. within a terminal industry and in my experience regulation requiring strict adherence to all of these provisions are already well established and

seem directly applicable to freedom industries. thank you for the opportunity to provide this testimony and i'm certainly happy to respond to questions. >> let me thank all seven of our panelists. i thought it was very helpful to us, the information that you supplied. to mr. olson and mr. faulk i couldn't agree with you more about the need for infrastructure. the state revolving fund is inadequate at -- inadequate to deal with the challenges of modern water treatment so we need to get adequate funding. this committee has worked very hard to try to increase the funding under the revolving funds and to reauthorize with a more updated means of the different states in our country and we need to find creative ways because in today's difficult environment it's tough

to get the type of resources necessary. but that is part of prevention, part of having the capacity to deal with today's challenges. there is a common theme i hear from all of you and that is as mr. faulk you said you need that are more specific data which is absolutely accurate. you got to have accurate information. it's not available today and too many of the watersheds. it's interesting it's aimed at the proper classification of the 80,000 plus chemicals that we have in america. that number grows every day and the safe drinking water act is aimed at making sure we have the delivery of safe drinking water in our communities through a variety of methods. mr. faulk i want to agree with you on federalism. i think federal as some does.

we believe the government closest to the people is the most responsive but we also need to recognize that safe drinking water is an interstate problem. maryland could do everything that is reasonable in the district could do everything that's reasonable but the waters coming from west virginia and west virginia doesn't do was reasonable. people are at risk so i think there is the proper balance of federalism but i couldn't agree with you more and that is why we are always reluctant to preempt local government. i know that issue has been debated. we are always reluctant because things change quickly. chemicals change quickly and the people -- the government closest to the people need to be able to respond and that is why we are very reluctant to take away that authority from the states. on the other hand we do need to have national guidelines and as you have said guidelines on

getting better and more specific information is an area where the federal government needs to fill in the blanks better than we have today. but i want to get to a point for one moment and our first objective is to make sure we minimize the risk particularly here where you have storage facilities else so close to the elk river. there should've been a red flag and obviously the information was not known and the response was very difficult to coast first of all just think if this chemical didn't have a unique smell what would have happened? the fact that it had a unique smell the public was able to determine something was wrong. if you didn't have that unique smell and had the same types of damage it would in several days before the source would have been determined and more people would have been put put at risk. a lot of people were damaged, their health was damaged in

their shops and homes were damaged. the company is in bankruptcy. i hope that during your work that you do in west virginia you will come forward with suggestions to us as to how we can minimize the cost to the taxpayer and the ratepayers and the individuals and find ways to hold those who are responsible accountable for the damage that they have caused. any thoughts on that? >> sure senator and thank you. there have been efforts made already and as i have talked about how devastating this is that our confidence has been shattered. when i receive letters from a father whose wife is pregnant and this is supposed to be a joyful time. it is now turned into a fearful time for them. most certainly ascended -- everyone understands what they are going through in the situation and what we have done within the secretary of state's office as i talk about being on the front lines, it was those businesses that we are trying to

help. 96% of our economy and west virginia is small business so when i talk about business and i made reference to a specific one think about what is behind those businesses. its people. it's those employees and i was on those water lines as folks were waiting to receive water, to get their water jugs filled up and that is where i met so many of these people who are minimum-wage employees who are off the job who missing a shift means perhaps missing a payment on your car or amusing utilities. missing utilities. i have worked hand-in-hand in the secretary of state's office with the west virginia legislature to have a piece of legislation called small business emergency relief fund where the governor along with several of his agencies have the ability, would have the ability to promulgate emergency rules that would aid those businesses and aid those employees and those workers who have lost

their wages wages. >> thank you very much. senator. >> thank you mr. chair and secretary can and i wanted to go to you. in your opening statement you raised a number frustrations in the aftermath of this bill about a lack of clear guidance and information. quote trustworthy consistent information" meant raid on january 24 the group of 24 west virginia and signed and sent a letter to epa and cdc voicing similar concerns and saying among other things quote if the government had been more forthcoming about what is not known about the leaked chemicals citizens and local officials would have been able to make that her choices about the actions needed to protect their families and communities closed quote. do you share those concerns and if so what would you like epa

and cdc to do now or as soon as possible to rectify that uncertainty and lack of trust? >> most certainly senator i share those concerns and that is why i have taken a measure on many different levels. take an action and writing to the cdc and asking and saying tell us what you know so west virginia and so would know how you were doing your tests and what level you think it is safe for the water and how did you get to that level? be open and forthright with the citizens. so as i said i have sent a letter and now have petitions with west virginia and sand we are working from within the secretary of state's office too working hand too working hand-in-hand too working hand-in-hand as we register many of these businesses and add oversight for the secretary of state to have indicating whether

a particular company holds chemicals and stores chemicals and how we might be able to indicate that on our database that we have. we have a very transparent agency within the secretary of state's office and i pride myself on that in the efficiency and transparency and that is what we will continue if we have that requirement through our state code. >> great, thank you and secretary huffman thanks for your comments about the reform effort that senator manchin is so involved in and also pass along my thanks to your colleague who voiced similar strong support and comments. i assume -- i want to highlight some important things in that work. i assume you agree and if you want to comment on it that epa shouldn't have to affirmatively fund unreasonable risk as they

do now under current law in order to move forward. would that be important in your mind? >> yes, senator. one of the things that created more confusion in a time of uncertainty in those first 24 to 48 hours was simply that lack of information about this particular chemical. it was very frustrating. it was frustrating to try to explain to a concerned public that has just been informed that they can't use their water what you don't know and you know they want to know what we do know and that was very little about this particular chemical. and then it's somewhat degraded from there but having that information about this chemical are any chemical that is within a zone or a range of a public water supply is information we absolutely must have.

>> also it seems to me it should be a big priority. it is with me and our efforts. first of all that the state have a clear role in dealing with epa and telling them what they think what you think should be a high priority. secondly that lack of health and safety information as in this case be a criteria for prioritizing and third, that these risk basis systems like a proximity to drinking water supply can be a clear factor in prioritization. those would seem to me lessons from this incident. would you agree with that or do you want to expand on that? >> absolutely senator. you have said it all. that is absolutely true. >> thank you all very much. senator boxer. >> yeah i read. as we look at this castro --

castor bill we should save these chemicals are stored senator vitter i would support your point if they chemicals stored by a drinking water supply could get into the water i think we should prioritize it. that is absolutely critical because as the laws currently proposed that is not the case and i wanted to say mr. olson i won to read from your testimony if you don't mind in seau much i agree with this. the problems with task a illustrated by the chemical spill in west virginia would not be fixed by the current chemical safety improvement act as introduced in some respects the bill as written would provide the public with the illusion of an effective program to regulate chemicals while tying the epa in knots in taking away existing state authorities. the chemical spill in west virginia is an alice ration on why we need to strengthen the bill. it's not a justification for enacting a fraud hill.

i just want to say in my view this says it all to me and the last thing i want to do is give people the illusion of protection and that is why i think as we go forward and i was going to say senator vitter senator cardin and senator udall and others this particular spill should give us a lot more i think urgency to get that right and not pass a bill that is a phony deal. i feel very strongly about it. i was very taken madam secretary of state tennant with what you said about your ability and i want to make sure i got this right, because you deal with small businesses. my understanding is you license them or what do you do? you created database of all the businesses? is that what you do? >> we register businesses and we

register corporations and limited liability companies and they file an annual report to keep up to date. >> right and what i thought i heard you say is you would look at trying to find out which of these companies store chemicals? is that what i heard you say? >> it is under the jurisdiction of the dep to monitor and have oversight over those companies but in an attempt for added transparency for added information. >> information is what i'm getting at. >> yes, we have that because as i said senator we have a wonderful database and the more informatiinformati on that you put into it the better it is for the public to be able to see and that is just one step that i'm looking at as a result of this crisis. >> here's the deal. we have 80,000 chemicals out there and we know very little about these chemicals.

when we know we have got chemicals along the drinking water path this is a red flag and despite mr. weaver your point about regulations the truth of the matter is there is no regulation except for the above ground oil storage. we haven't moved forward with regulation and i think the chairman here are senator cardin has pointed out there is a law but there is no regulation. that is why senator manchin's l. is so critical because we could could -- and mr. faulk i love lawyers. i'm married to one and my father was one in my son is one. you are eloquent in your philosophy but it doesn't get to the point of where we are which is that we have got people suffering at this time so it seems to me that without getting into an argument about federalism although i do agree with you the state should have

absolute flexibility to move on this, i would rather see if we can first of all help you solve a problem which i think since you have a responsibility under current law and states have the responsibility to declare whether water is safe it sounds to me we need some help here in monitoring and measuring and i want to get to that in a minute. but also we want to make sure in the future with these 80,000 chemicals out there mr. weaver do you have any idea how many chemicals might be stored all over this great nation at various area water supply is? do you have any idea that? >> how many? i can speak to our member facilities which i do know about it and honestly we look at the concern as the product leaving the property so as far as the terminal industry is concerned the harm is done if the product gets offside.

so if the product is breaching a private property or otherwise we consider that to be a concern for us. >> i'm asking you if you know and then i will ask mr. olson if he knows that i don't know. do you have any clue as to how many aboveground storage tanks, let's just put it in very simple terms, are loaded with chemicals in them? we know some of them have salad oil but we are talking about chemicals. how many of these are located in our water supplies? do you have any guess that? >> as we said in our testimony it's basically impossible to know that right now. we have reviewed literally scores of these assessments and virtually every one of them has some storage tanks near the surface water often done because

it's convenient. i will just close with this point. we have a massive problem and we don't know how massive it is that we know because the people in west virginia, my heart is out to them and we will do everything we can to help you to get the information you need. after this please let us know how i can help. i know senator rockefeller's doing a great job but if you need more help in ascertaining the safety that water supply a want to help you but we need to have an assessment. i think the quickest way is a bill because with the manchin bill says is that every state has to look at this huge problem. mr. weaver who is in this business has no clue. mr. olson who is an advocate for the folks doesn't really have a clue of how many of these freedom industry operations are out there waiting to cause haptic frankly and as was

pointed out i think by our chairman if there hadn't been a smell to this we still may not know. the manchin bill which i hope we can markup soon would basically say every state you make an assessment and i will help you. let's have a plan for an inspection carried out by the state for emergency plans for standards and how seriously that is taken in this industry. we have got a real -- who are cowards. running away and leaving the people is an outrage, an absolute outrage. people are frustrated. people are upset and they always turn to the government. why didn't you do more? how about having some corporate responsibility and making sure

that you as a good corporate citizen ensure the safety of the people and not hold a press conference today i have to go now. i saw that. i have to go now. i can't really talk to you and then file for bankruptcy. it is a violation of basic human decency and we have to protect the people. that's our job now so i am so grateful to chairman cardin and i'm so grateful to senators bozeman and vitter for cooperating with us and we are going to move forward and push this legislation which mr. faulk will give the responsibility to the states to make sure that they have the resources and we have their back as they move to protect the people from the most basic right to be able to take a glass of water and not worry

that your kid is going to be a cancer. let's put it that way. i just want to say to the people of west virginia through mr. hoffman and mr. mcnulty and certainly the great secretary of state how much i wanted to stand by you in this crisis and i thank you mr. chairman. >> thank you senator boxer. senator boseman i mentioned earlier your help in accommodating the turnaround time for this hearing and i thank you very much for that. i also acknowledge you had a conflict earlier and it's nice to have you sitting next to me at the committee and now a good opportunity to senator boozman. i appreciate you holding this hearing on such an important topic and i apologize for being late. the prayer breakfast is going on this week and we have people literally from all over the

world. i have some heads of state that i actually had to a visit with so again thank you very much for putting up with me and mr. chairman. i would like to follow along the same line as senator boxer. mr. mcnulty you mentioned that the importance of public exposure of all potential sources of contamination to regulate them, which i agree. i'm certainly very much in favor of doing that. do you or any of the other witnesses have any thoughts about how we can balance that, the value of public disclosure with the need to protect a post-9/11 world. in other words we don't want to create a situation where we somehow publicized the signs that are potential targets for terrorists or whatever would cause us harm.

>> thank you senator. i certainly understand that there needs to be a balance with the post-9/11 era that we live in now but i think in reality this information is out there now. you can comb the way up and find information on almost every drinking water utility in the united states i believe and find out information about where they are located, the treatment plants are located and so forth. how we would go about keeping information confidential and engaging the public and making them part of the solution and protecting the source water. i really don't have the full answer to that. >> anybody else want to comment? >> senator boozman i have some thoughts. some states have on line systems

for the management of hazardous substances for which companies under epcot are required to file and that information is maintained and confidential databases at the state and local levels. it seems to me perhaps that information could also be made available to water companies in proximity to those facilities in the same confidential database that exists. >> let me ask you, you explain that, in your testimony while it's for important to use the information effectively rather than just dumping massive amounts of data on the small water systems. can you explain what you envision in that regard, especially with improved notification to our small water system operators? >> one of my concerns, some of

these are very large. we are talking hundreds perhaps thousands of where miles with many industrialized facilities. if there was a requirement that these public requirements related to hundreds of facilities that is a lot of information for any public water system whether large or small to digest and understand and figure out how to respond to. i think what we have heard about prioritizing those facilities in close proximity to drinking water supplies ,-com,-com ma those are the ones that are absolutely critical. for that information to be in the hands of water providers downstream. >> i agree with that and i would say in fact as was highlighted earlier today a lot of these assessmenassessmen ts have already been done so a lot of the facilities have been flagged already. the water utilities have some

information available. the key is to get more detailed information to them and i think the will that has been recently introduced by senator manchin and senator rockefeller would take a major step in that direction to really force somebody to deal with that situation at the state level. i think that would be a significant step forward to actually get action to deal with these threats. >> anybody else? very good. i do appreciate your leadership mr. chairman and enjoy working with you on these issues. this really is an important topic that hopefully we can deal with. >> thank you and i appreciate your cooperation with this committee. we try to do everything we can in a nonpartisan manner because it involves the public health of the people of this nation. i will give each of you an opportunity to respond if you want to and that is through the

course of this hearing information that would have been very helpful or you have heard of the failure to exercise reasonable caution by the private property owner, a matter which dealt with its aboveground storage. epa currently publishes only 90 contaminants as far as regulations on how to deal with it. chemicals are one aspect and it could be other sources than chemicals but 90 is a small number compared to the total risk factors that could enter our water system. as we pointed out, if you ask for too much information none of the information is going to be terribly useful. we have forces pacific bill, bill authored by senator manchin and rockefeller and boxer. i would like to get your

specific views as to whether that bill represents the right priority as you see it for federal action, whether there are other areas you would like to see us look at? we will start first with secretary huffman. >> thank you senator. as with most successful environmental rules and policies in this country establishing minimum federal standards for which the states must meet is vitally important. we don't want too much of the disparity across the country and how anything is regulated or see various industries moving around the country to find areas that are least regulated. the thing about the manchin boxer bill it does that of course but the other thing it does is it's the prevention piece of it. we have talked a lot about understanding the chemical and

emergency response in planning and all of that but the key to this is prevention. that is what this bill does. it does other things of course but looking at it from the environment of regulator in the state of west virginia we have to keep this stuff in the tanks. if it leaves the tanks we have to keep it in the secondary containment. that can be done. we can absolutely do that and the other thing is we have to stop looking at chemicals in the form of whether it's oil-based or a hazardous classification. we have learned that anything that has the potential to negatively impact the public water supply however innocuous it may seem in the circus we need to be able to regulate that. in the state of west virginia we have 3500 tanks that are regulated or not the way freedom tanks are regulated. the only way to get that kind of

certainty that we can keep this material in the tanks in the secondary containment is to have annual or some other frequency of testing testing and inspectid certification. if we can do that we can minimize the risk of this happening anywhere in the country. >> let me go to mr. weaver to get to the different stakeholders. >> thank you senator. with regard to the proposed bill as i have observed all of the proposed measures are currently addressed to various degrees with existing regulations as they consistently apply to the vast majority of storage tank operators. with regard to this particular incident did very well may be that it exemptions could have enabled them to escape that question of regulations and it's also possible there may have been violations of those regulations. once we know the results from the investigation reports i think we will have a much better

cases upon which to begin at thing. specific reasons will be understood for the containment failures and for how the product got off of the site. at that point that is when measures to prevent recurrence in another community can most effectively be identified addressed and implemented and i believe through the refinement and simplification of existing regulations many of which are objective is to keep the product contained as opposed to adding layers of the best rated effort. >> it's my understanding we do have authority of controlling above the ground storage but some of the other contaminants and chemicals we do not. >> there are exemptions for many chemicals. some chemicals are included and others are not. certainly the facility gets brought into the regulation of

low threshold of petroleum products so within my sphere there are few facilities that do hold these facilities that are exempt because petroleum products and transformers are fairly pervasive. that could be a way to utilize those existing -- >> west virginia was not controlling a base product that caused the problem. it was a cleaning product. although petroleum based products are regulated under section 11 unfortunately epa has not issued standards for materials for spill prevention countermeasures so that is a gaping loophole as i mentioned in my testimony. the manchin bill definitely would move things forward at least for those tanks and drinking water supplies. the other point worth mentioning is one that you mentioned the state revolving fund.

we need investment in our infrastructure and this is yet another reason to highlight that this treatment plant simply didn't have the resources for the technology to deal with this type of spill. there are others across the country that don't. >> mr. faulk? >> yes, one of the things that i haven't heard about an act that is important i think that at least at this hearing we haven't talked about and that is the community right to know act. that was of course passed by this congress in response to the incident of many years ago. that involves notification procedures by which persons can become aware and know and respond to particular situations by virtue of notification. although i will hasten to say i am not an expert on that act i will say that it would be worse comparing those systems so that there is not a significant amount of duplication and burden

imposed on the communities in fact this bill is passed. >> thank you for that point. ms. tennant? >> i would echo that and what i think is so important. for the citizens of not just west virginia but across the country that these guidelines be made public whether it's what the chemical is, with the emergency plan that has put in place for the storage tanks and these companies that hold the storage tanks to be made on the transparent database that is easily accessible to the public. i would also mention in particular for west virginia as we tackle this crisis how do we make sure that it doesn't happen again? for us i want to emphasize once again the proposal to have long-term study that we might able to put in place that we need to start today, the long-term study for the health care and the health of the people of west virginia

self-confidence starts today and we have an understanding of what might happen over that 10 year. that. >> thank you for that. mr. mcnulty? >> i think secretary huffman's comments i think senator manchin has crafted a good common sense of roach to solve these problems. >> mr. chairman i want to reinforce a couple of things that have been said related to to -- whenever there's a spill of a reported quantity established there are three touch-points. immediate call to response entered i'm planning commission committee first responders and the state emergency response commission. i think it would be reasonable to expect one more call to a local water facility downstream. i think one of the benefits to in making bulk chemical storage facilities understand the risks

and may also be having them understand the closest water intake structure is so if they are aware of that under the requirement that local water provider downstream be notified i think that can go a long way. >> thank you. senator boozman. >> thank you mr. chairman and i really don't have anything else. i was going to follow up the way that you did and i was curious about existing regulations and loopholes but i think you all covered that. we have protections in place but certainly there are problems that we need to address in the future so hopefully we can work together and working with you all. this stuff needs to come from the ground up. we all worry about unfunded liabilities put on people that simply don't have any resources now. as you mentioned mr. olson most of our municipalities and most of these treatment plants are

struggling with the funding that they have got now. again like i said hopefully we can work together. thank you mr. chairman. >> once again i want to thank all seven of our witnesses. as senator boxer pointed out we really do want to work if you to figure out how it can be helpful. we are obviously, our first priority is to do all we can to prevent these types of episodes from happening again in our country and i think we have learned from what happened in west virginia and have taken steps of the private sector level as well as the governmental levels. we also push want to make sure that we have knowledge that we know the information out there. lastly when a company fails to perform they should be held accountable. we are very concerned about the business aspect of this company and the steps it has taken to avoid its responsibility as senator boxer pointed out and

has been pointed out by many of you here. i hope that we can work together to minimize these risks. there are always risks we know that but to minimize risk and do it in a way that is cost-effective and it really works. we don't want to do things that are going to cause additional burdens without benefits. i think working together i'm glad to see that is what is being done by the west virginia legislature and i expect the same type of respond here in congress that we can be a constructive partner to the efforts of the people of west virginia so again thank you all very much for your testimony and with that, the hearing stands adjourned. senators had the day off for the annual policy retreat and burgess everett with politico is a congressional reporter and i guess being a congressional reporter means covering these retreats. first senate democrats at

national park in washington hearing from president obama and former president bill clinton. what is the significance of the timing of their hearing from president obama? >> is significant because in some way senate democrats have been breaking from the president on certain issues and some of that is related to the 2014 elections. it's also a big moment for legislation in the senate. unemployment insurance still is not then revised and they are preparing to go forward with a minimum wage increase so i think they are preparing to strategize as a party. congressional aides have been critical of the coordination from the white house and democrats. >> understand there's not a lot of media coverage coming out of these retreats that bill clinton what is his purpose for being there? just as a cheerleader for the agenda?

>> yes, i think he's familiar with what's going on at the meetings and it's more of we are going to hold, i'll be on the same page on the democratic team so i look at it as more of a teambuilding exercise right now. >> democrats go to the wall park and republicans are the library of congress for their retreat. what was the book is of their meeting? >> they are going to get on the same page in terms of getting their agenda out there rather than just opposing the democrats agenda. i think there's a recognition that there are is an opposition party more than a party of ideas so i think they are going to be looking at how can we offer alternatives to waiving the minimum wage or offer alternatives towards extending unemployment benefits indefinitely. >> the houses holding the legislative --

on capitol hill hearing from doug elmendorf the congressional budget office director and teach we did about that saying house republicans members have been given a five point list of cbo talking points for the day. the first of which is about those 2.5 million jobs so tell us about some of the fallout of that messaging coming out of the cbo hearing today. >> i was in the house to get that little tidbit today. they said the primary one was the 2.5 million jobs that will be lost due to obamacare is and the administration democrats talking point perspective that was americans won't feel obligated to juggle so many jobs and working hours and have a more comfortable lifestyle with the insurance subsidies that they would not have had without it. >> going back to the senate as we wrap up the mentioned earlier the unemployment insurance with the issue coming back on the

floor thursday. what is proposed? >> democrats moving forward with [inaudible] it looks like that may not get 60 votes that may be able to get that past however is a wink and a nod agreement with republicans to repeal an adjustment as part of the budget deal affecting veterans so there may be interplay between those two things. there may be a deal in the works to have more votes on amendments on their proposals and alternatives. >> burgess everett politico congressional reporter. you can read more at politico.com and follow his twitter at burgess -- burgess e thee. thank you very much. >> thank you very much. >> the very constitution and the

constitution of this country. we still had a meeting of the constitution. then and only then we will not be represented in americanism. americanism will be converted into zionism. >> father divine was slowly retiring to a quiet life in the 1950s and another religious leader in indiana my home state was beginning to borrow from his teachings and his model to create an inter-racial collective community modeled on the peace mission. revivalist and utopian as james warren jones replicated many of the teachings of father divine including claims to divinity, critique of racial inequality and a desire to economically empower his children. a.

>> in a few moments the head of the congressional budget office on the economic outlook. in two and a half hour senior officials testify about worldwide threats to national security.

>> i think the american public sees the first lady and very glamorous circumstances usually for a state dinner in a beautiful gown you now and some speech where the heads of suit or whatever but i think what they may not imagine looking at the white house from the outside is that it's actually a very normal life upstairs on those two floors. first ladies probably and i know i did actually would lie on the couch and read a book and in my case my cat would always curl up next to me.

>> up next the head of the congressional budget office on the deficit. the economic outlook and how the labor market is being affected by the health care law. douglas elmendorf was before the house budget committee for two and a half hours. >> the hearing will come to order. hello everybody and welcome. i first want to thank director elmendorf for joining us. we appreciate your time to be with us today and we know this baseline was late because congress was a little late so i'm glad we had time to get to this. you have put together a very informative report. it does a great job of laying out the challenges we face. my main take away is this. we still have a lot of work to do. this year we are going to run a deficit of $514 billion. that's less than last years but it's nothing to brag about. in fact the deficit will start

growing in just 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 so even though taxes are at a historic way high place we still have trillion dollar deficits in the future and that is because spending will be growing twice as fast as revenue. over the next 10 years we will add $10 trillion more toward 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 the bipartisan budget deal last year. i think it was a step in the right direction but only a step. we need to do more. we need to do much more. it's déjà vu all over again because we know what the problem is. autopilot spending and interest payments are driving our debt. interest alone will quadruple over the next 10 years. obamacare is clearly part of the

problem. it adds trillions of dollars in government spending and it has made things worse for our economy and working families. i 2017 the cbo projects that people will be working fewer hours precisely because of the incentives created in this loss. the effect will be severe. as if 2.5 million people had stopped working full-time by 2024. between 2017 and 2024 overall labor compensation will also decline and these changes disproportionately affect low-wage workers. translation, washington is making the poverty trap much worse. your report points out some weak spots in our economy. low investment, high unemployment, people leaving the workforce. if we got our act together we could start paying down our debt and give our economy the certainty that it needs.

tax reform, regulatory reform, energy reform. i think all of these could help 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 that not only does the debt get worse, that we have slower economic growth compared to the last forecast for what is particularly troubling is cbo's projection of the labor force participation. cbo says about half is attributable to the aging of the population. baby boomers are coming and they are retiring and fewer people are going into the workforce. a problem that we have had for a long time that we have yet to solve that knows -- most notably is the cbo also says government policies especially the president's health care law are discouraging work. washington is making this problem worse. this does not have to be our fate.

we need to reverse this decline. so i would consider this reporter 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 us. the men and women and the representative ranch of government that were elected to serve and represent them. we need to take action so i want to thank you once again for this report dr. ohman dorff and for your time and i look over to a great conversation and your testimony and with that i would like to recognize the ranking member mr. van hollen. >> thank you mr. chairman and i join the chairman and welcoming you dr. ohman dorff and i think you and your entire team for the good work you do. as i looked over the most recent cbo report it's a good news bad news story. the good news is that we have seen economic growth over the last few years and project continued economic growth going

forward. the economy has added over a .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 have projected the average unemployment rate in 2014 what actually be higher than the unemployment rate in december of last year. that clearly is not good news. in fact page three of your report sums up this next story when it states quote economic growth is projected to be solid in the near term but weakness in the labor market will persist. that sums up our challenge. it seems to me we should therefore take actions within the control of this congress. congress can change that trajectory. your report is based on current law that congress can take action today that will actually change that story for the

remainder of this year and increase job growth. the president and house democrats have put forth clear ideas to do it and we have a jobs plan that calls for significant additional investment in our national infrastructure our roads and bridges and broadband to help boost international competitiveness and put people back to work. we can increase the minimum wage which allows more americans to keep the fruits of their labor and by putting more money in the pockets of relatively lower income individuals who tend to spend it more. it will create more demand in the economy and at the same time while we have a chronic problem with long-term unemployment we can extend unemployment insurance to those 1.7 million americans and is the congressional budget office itself is said that will actually create additional jobs this year, 200,000 being the last projection so there are things we can do to date mr. chairman to get back to work

and get the country back to work one thing we should not do is mess around with whether or not america pays its bills on time because that will create uncertainty in the economy and that will hurt economic growth and jobs. now dr. elmendorf we have a comprehensive report but the one thing that is on the front page of all the papers is the thing that chairman ryan referred to. i have to say this is an example of when one misinterpretation gets out of the box early and goes around the world it takes the truth an awful long time to catch up. what we believe we should focus on is the availability of jobs today whether or not there's there is a demand for jobs today and instead with the chairman was focusing on was beginning in two skousen 70 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 your 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 her health insurance. now you can go to the exchange and get affordable health insurance. as a result people may choose differently. i find it really kind of ironic that back in 2008 when senator mccain opposed to help find the heritage foundation and conservatives heralded it as a plan that would break job lock and today changing jobs means leaving behind health insurance provided at the place of work. individuals take a better job or change careers or leave the work worse to raise a family or retire early take substantial risk and buy got the mccain health care reform plan will and that job lock. the affordable care at this and that job lock.

it allows americans to choose to spend more time with their family or pursue their dreams and that is not a bad thing. it's a good thing. what is a bad thing is the lack of available jobs today and the fact that here in the house we have one focus on trying to eliminate the affordable care for millions of americans rather than focus on creating more jobs for millions of americans. that should be our focus mr. chairman and that is really the vision of this report if you look at the entire thing instead of a few paragraphs. i thank you dr. elmendorf for your work. >> dr. elmendorf the floor is yours. >> thank you chairman van hollen and members of the committee. i'm pleased to be here to discuss cbo's report on the outlook for the legit and the economy as well as our companion report released yesterday that the more deeply into the slow recovery of the labor market. beginning with a budget of the federal budget deficit has fallen sharply during the past

few years and is on the path to decline further this year and next year. we estimate under current law the deficit will accrue $500 billion this year compared with $1.4 trillion in 2009. at that level this year's deficit would equal 3% of the nation's economic output or gdp close to the average or scented seen during the past 40 years. the baseline projections show what we think would happen to federal spending for revenues and deficits over the next 10 years if current laws generally were unchanged. under that assumption the deficit is projected to decrease again in 2015 to 2.5% of gdp. after that however deficits are projected to start rising both in dollar terms and as a percentage of our made nation's economic output. because revenues are expected to grow at the same pace as gdp whereas spending is expected to grow more rapidly with gdp.

why the more rapid spending growth? in our baseline spending is boosted by four factors the aging of the population, the expansion of federal subsidies for health insurance, rising health care costs per beneficiary and the mounting interest payments on the federal debt. without changes in the applicable laws spending for social security will increase from 5% of gdp in 2014 to 5.5% in 2024. spending for health care programs the category that includes medicare medicaid to children's health insurance program or chip and subsidies through insurance exchanges will climb even 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 noninterest bending for defense benefit programs apart from the ones i just mentioned but for all other nondefense activities

is projected to drop from 9.5% of gdp this year to 7.5% in 2024 and their current law. that would need the lowest percentage of gdp since 1940 which is the earliest year for which comparable data has been reported. thus a sharply increasing share of the federal budget will go to benefits from a few large programs and a shrinking share will go to the rest of the government's functions under current law. .. orical 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 thea