past that date. and you still need to cut the benefits. >> that is amazing. it's very interesting. and your interest rates it goes down about 50 basis points and i'm curious to the rationale that you say it will be about 2.5% but i think lasser you said about 3% and i'm curious what is behind that projection and what if we do some simulations with this. what if they go back and what would it be be done if we go to the historic average and that goes back to question number one, which is why the downward basis points. >> we did a comprehensive re-examination of the interest rate projection on this a lot of discussion with researchers and

among people in the financial community about what the interest rates will go back up to undergo backup. and so we expect someone push interest rates down and for example the growth of the labor force which reduces the number of people who are coming to work with any piece of capital and that pushes down interest rates and we look at the interest rates and a greater share of income going to high income people and increases saving and pushes down interest rates and a number of this relative to history and we also is think that there will be a info from abroad and i don't think that will pushes the we have the letter, if you will and we have that using the evidence that

exists to assess these rules for sizes and let them we would like them to be somewhat lower over the next 25 years and so we took down the production of this by a percentage point. so if we put that back up, we did show in our report that if interest rates were have a percentage point higher over the entire 25 years and we had the entire 25 years and the debt to gdp ratio would be 135% of gdp instead of 111% including the economic feedback. and that is the feedback for the bad economy and the technology. >> the biggest driver of the labor force. >> it's the biggest source of downward pressure.

i spoke with people in the bond trading business in the spring and their principal criticism of our forecast for the next 10 years was that we have interest rates looking to high in the second half of the decade relative to a number of them. so there are not a lot of advanced market participants 25 years out. so we can't draw not directly and i think the movie we have made is quite consistent with what we have seen in the second half of the financial markets decade likely giving these fundamental factors beyond that. >> there's a lot of intervening factors and that is an issue that we will have to deal with here in great detail. i have one more question i want to talk to you about generational accounting. i know that you are familiar and do you think that it would be

valuable and can we produce the analysis that would give us a better idea of how this problem can act current and future generations. you are the only game in town that can give us a sense of what our current policy will fight for the next generation and our goal here is yes not only to make a difference for the time being, but to preserve this for the next generation and give us a better sense of the decisions we are making today and how they affect the next generation i would argue this is one of the best tools we can use. so what is your reaction to that and is this something you can do what you think is valuable? >> yes, we think that we can and should do more to illustrate how different ways of addressing the unsustainable current path would

affect people of different generations. we did a word where we looked at the budget in balance in different ways and we illustrated how the delay would affect people in generations. since that point we have spent time and we have another report well underway that will be very significant what we decided four years ago and i think beyond that we will respond whatever feedback we get to congress about what different sorts of scenarios and ways of quantifying the effects could be found as useful. so i would mention two quick things. the first is the effect on the way in which you act in what we will give you will be a set of results for a whole range of

scenarios that are very important. the second would be projections that are uncertain, just like the ones that we did today are uncertain. and as you know, we focus on this and we have a sense that we don't go beyond that. so in this we will try to think of ways to make sure that the result are not duly dependent on assumptions about what will happen in the distant future. so thank you. >> thank you chairman. thank you for your testimony and we are here talking about a long-term budget outlook in the deficit projections for the ten-year window mark in 2039. this is based on your current law projections. >> yes. >> so you have not taken into account, i take it, the more than $500 billion that the house would've added to the deficit over the last six weeks through

unpaid for tax cuts? >> that is right, carson. >> if those became current law both with the ten-year window and the longer term longer-term window would be worse? >> that is right. >> it's worth pointing out to members of the budget committee. because this committee went and filed something on the floor of his house, saying that the house will should make sure that no ills had come to the floor that violated the budget resolution here and they said that there would be no unpaid for tax breaks and yet we have seen an avalanche of unfunded tax breaks. another $300 billion according to the joint tax committee and it's one its one thing to talk about what we're going to do but it's another thing to do it and what we have seen in the house of the last six weeks is moving

us in the wrong direction when it comes to this closing up of the deficit. so we heard the chairman say that the average percentage of gdp is 17.5%. >> that is right. >> and i know in your budget projections you say in 2024 revenues will be 18% of gdp and then much further out, you stated the revenue would be 19.4% of gdp. so i would note that that does not take into account the number of times that we have actually balanced our budget historically. >> that is right. if you look at the last four years were rebounds the budget from 1998 and 1999, 2000 2001 revenues were actually considerably higher than they were in in 2024 and actually

around the range that we projected way back in 2039 in the year 2000 the revenues percentage was 19.9% and now i note in your report that on page 20, but you are anticipating that the number of americans over 65 years old respected more than one third. >> within the next 10 years. >> yes. so i just hope that we consider the facts. the last time we balanced our budget revenues to gdp were about 19.5% 20% of gdp for the four year. lack of time and that's when we had a lot fewer americans on social security and medicare. so i hope our colleagues will also recognize that the last time we balanced our budget before that in 1998, it was

1969. so when you talk about this, when you talk about the average of 17.5, it is completely detached from what the colleagues they are there other priority which is to have a reasonable fiscal picture and deficit as a percentage of gdp. democrats argue that in order to reduce long-term deficits we need to continue to make smart cuts and reductions and reforms and we also need to close some of these special interest tax breaks and the chairman mentioned that these are pretty great with american families and eliminating some of the special interest tax breaks like those that actually reward companies that move jobs overseas, some would say it would be good for the american workers to get rid of those tax breaks and invest the savings are at home. turning briefly to health care

will not let me just point out on the context of my earlier point on page 23 come you actually talked about breaking out the contribution to the increased deficit as a result of increased components to the health care and social security picture. if i look at page 23 you point out that the year 2039, 55% of the interest will be as a result of the aging americans and social security health care. >> yes, that's right. >> so you point out that just health care 39% of those increased costs will be simply because we have more. >> that is right the cost provides the same benefit to each individual is going out very sharply because we will have so many more people eligible for those methods is

because they are moving over the age of 62 or 65. >> so the only way to address this, these drivers, as you can see, they are major drivers of long-term spending and the majority is simply demographics. so our colleagues at liquid adding these new spending programs, but this is just the cost of providing more americans with current benefits. >> yes, that's more than half as you say, the increasing cost of providing the same benefits to a larger number of people. >> we want to reduce the deficit until either you cut benefits were you raised is to support existing level. >> that is right. >> let me ask you on the health care side. white is a driver of long-term deficits, we have seen some good news over the last five years or so. as i pointed out that some of

the earlier projections, the cost of health care in the year 2039 was over 10% of gdp. >> that sounds right. i don't have the 2007 or 2009 numbers with me. >> now they're down to around 8% of gdp. >> yes, for the production of 2039 and so if we were to reverse some of the mechanisms that we put in place a savings in the health care area the deficit numbers will go in a? >> yes, that's right. >> okay, let me just close on the question of immigration if we have a crisis of the border that we need to deal with in the immediate sense then certainly my democratic colleagues sometimes this is the symptom of the failure to pass immigration reform and the cbo has looked at

how comprehensive immigration reform would reduce long-term deficits and increased long-term economic growth. and so you're projections of that increased economic growth is not part of this long-term outlook report. >> and so the estimates reflected what the house did in terms of providing these tax cut, it would actually increase your deficit reduction if you had embedded a senate passed bipartisan bill or the bill of the democratic proposal that we asked to look at, the deficits would be lower, would they not? >> yes. >> could you talk a little bit about your earlier efforts to quantify this economic growth as well as the deficit that we

asked to look at? >> yes, as you know, we studied the house proposal that was very similar to it and we provided a more structured and briefer description. for the senate bill we thought the battle would reduce the deficits by a couple of billion dollars over this decade and by more in the second decade from now and so primarily because the legislation would increase its population the size of the labor force and we thought it would, over time push-up average wages by what raising productivity. so we did a detail analysis and a complementary macro analysis of detail. over the long-term that increased the u.s. economy and would reduce this. >> just a close, we actually

voted on this which the president said that he would sign today. the numbers in the long-term report would be much better. and if this report included the action that the house has taken and provides unpaid for tax breaks on a permanent basis, this report would look a lot worse. so we hope that everyone will join together in a bipartisan way. so thank you mr. chairman. >> thank you. i want to welcome you back to the committee. thank you for the work that you have done on this long-term budget outlook. i would like to just latch on to the comments made about the house in days when we balanced the budget.

we need a democratic president that we can actually work with unlike the one that we currently have and also that go to spot for our friends on the other side that tend to be increasing the taxes. in your report you stay dead higher marginal tax rates discourage economic activity. >> yes. i would like to talk about this. we want to raise taxes or should we decrease spending? slips talk about this in relationship to the long-term outlook. review the projected increase in revenue that you have in your long-term outlook. >> over the next 25 years, we

project that the total federal revenue will rise for about 19.5% of gdp than under current law and the biggest component is progressive income tax which is adjust for inflation. but then a little bit more income keeps getting shifted up into higher tax brackets. so there are aspiring tax provisions and new ones coming in and some other factors as well. >> so the absolute amount coming into the federal government and the percentage is increasing over this. matter of time? >> yes. >> so we are taking things as more revenue than ever before. >> in dollar terms yes. and so if that is the case then we must be decreasing the growth

and the debt. >> we are taking in more money but we are not reducing the increase in the debt. so help me to understand that. >> federal spending is rising more so under our projections of the current law. and so revenue is going on. more money being spent to washington dc, yet our debt continues to increase and you mentioned it will continue to rise to 111% of gross mastic product? >> yes. >> if i'm reading between the lines in all of your comments the 111% is a dangerous level, is that accurate? >> while, yes, we don't know of a particular tipping point and we don't think that economic analysis can tell you what the particular level is that you

can't go beyond. but the dangers, the costs, risks, the rise and debt rises relative to size and economy. >> let me turn now to the solution because i'm interested in the physical scenarios that you talk about. how it relates to the kinds of things that we have been working on. one of the alternative scenarios that you identify on page 70 of your report states that if there was a 4 trillion-dollar loring of the deficit, then we would increase in real terms by about $4000 per person and interest rates by three quarters of a percentage point and debt would get down to that rate that looks to be much more attractive as opposed to 111% and you stand by those numbers? >> yes, 25 years from now, those will be the numbers that we estimate. >> do you understand the budget that we put forward here would

reduce the deficit by 5.1 chilling dollars? so if we are looking for a budget that actually solves problems and get this to lower interest rates and debt than the republican budget, this is one that would accomplish that would it not? >> we don't study this in great detail, but yes, that fits the republican budget that i have seen. >> i am urging our colleagues were with us on the solutions with the challenges that we face. >> thank you. >> thank you, mr. chairman and doctor. it's good to see you again. two different areas. i would like to follow up on the gentleman's question regarding the recent activity of the congress and profits and inversions a little bit and the first part clearly in the report is not much we can do

about some of the spending increases that we have and we all know congress doesn't do especially a lot lately. but one thing that varies ills have passed off they're going to go onto the deficit and i think there's 300 million sitting in ways and means. and so i get the question specifically around that that how does that legislation fare worse than our long-term outlook in this negative feedback because of the higher rates that the government has. >> those deals were enacted into law and no other changes were made to revenues and spending and the larger deficits would crowd out this to some extent and would push the level of economic activity down below

what they would otherwise be and just like the deficits that we have projected under current law but a little bit more so. >> 's summer spending tax increases to make out. so for any given cause he would like to reach down the road, the bigger the hole you dig the more you have to deal with. >> let me shift. there was a report over a month ago that talked about american corporations having 12 tax havens and it specifically talked about the amount of profit that they attributed to these countries and is in some cases 1600% more than the gross domestic product of these countries. so truly this is outright tax avoidance and i'm a small business owner.

many owners pay their taxes legitimately but some take advantage of these tax havens and tax laws specifically the one that really has gotten a lot of attention lately, the fact that you know there are many that are looking at this, but most recently some retail companies like walgreens potentially going down this road, which would be a whole new area that we haven't seen taking advantage of this. so i understand that there's an estimate out there that in just over five years weakening lose this if they were to use this practice, which is something that is not in the version and it's a tax avoidance in the worst possible way. so do you have and any idea what we lose by this in version and how much we could be losing depending on this bill? >> i'm sorry, i don't have a

number for that, congressman. we are happy to point you in the right direction, but it's really our colleagues who are more directly involved in helping you and your colleagues think about the effects and the changes on corporate financial behavior and corporal reorganizations and so forth and so on. so i think right now the representative has a bill of how these inversions are done and we are looking at one trying to make it a more rational proposal that is currently out there. so about 19 billion, if were talking about this if that's going to cost four or 5 billion just from one company like walgreens, if we start losing hundreds of billions of dollars in revenue because of a practice that i think is really a subversion of the tax laws, that could have such a negative effect on us in the future at

what you're looking at. >> that's right. it's a very serious issue to rest away. >> we will follow a regular copy of that report and i yield back my time. >> thank you. ..

>> lowering the tax rate would reduce tax avoidance. >> four years ago the house passed budget produced by this committee didn't pass the senate. it didn't become a lot and didn't governor spending that it's a budget plan had been adopted four years ago and had kept it in place how would that change your projections for today? where would we be today where would you be projecting us to be going today? >> i'm sorry congressman. we only analyze budget resolutions as they are occurring and i don't member what was in that resolution from a few years ago so i can't speak directly to that. >> what did the cbo estimate it's a fact that the time four years after? >> we don't estimate the effects of budget resolutions. they are statements. >> of our spending and reforms that were enacted that were called for in the budget had

actually come to pass where would we be today? would we have a larger deficit or a smaller deficit than we have today? >> again congressman i don't know the details of that resolution. i presume you would have a small deficit today but i just don't know. we don't look at the policy resolutions carefully and total them up. >> but you have projections in terms of how much revenue would be coming in and how much spending would be done and how much deficit there would be. what was your projection? >> we never had a projection of their budget resolution. the committee often draws on sets of estimates we have done but we don't total up the resolution and say what would happen. we don't have those numbers. >> i wish you would go back to reports and get us the figures that you were giving to us at the time because i remember them being much smaller deficits in the out-years. i remember our health care costs coming back under control. i remember a projection to a

balanced budget within 10 years which would be six years from now. do you have no recollection of those events? >> congressman i think they were the committee's projections. cbo does not do projections of budget were resolutions. we only do projections of bills being considered under the current law so the committees draw on this that we have done sometimes but assembling of them in the bottom line for a budget resolution doesn't come from us. >> the last time in about the only time we had as high a percentage of our gdp as dead was during world war ii. >> that's right. >> in fiscal year 1945 and by the way we grew out of that did we not? >> yeah so what happened after world war ii was the budgets were more or less balanced not exactly but more or less and the economy grew very rapidly in the deck came down. >> in 1945 harry truman abolished the excess profits tax

and in fiscal year 1946 he dramatically reduced the income tax rates. he took in fiscal year 46 he takes federal spending for maybe $5 billion down to $30 billion in a single year. if fired 10 million federal employees or more to mobilizations. the keynesians at the time projected 25% employment and instead we got the post-war economic men. is that correct? >> yes that sounds correct to me congress men. >> candidate and reagan did the same thing with the same results. why would we want to do that now? >> congressman of the congressman were to cut tax rates it would provide a short-term boost to economic activity but if there weren't other changes made to offset the budget effects affects that there would be much larger. >> each of those presidents certainly reagan and certainly

clinton, certainly truman cut spending as a percentage of gdp as well as cut the tax rate. >> i think one needs to be careful in those comparisons to look at the sickle state of the economy. part of what is happening now part of what happened in the early 90s was our economy recovered. >> if you look at a percentage of gdp of revenue, spending and debt relative to gdp growth in the past. >> congressman we draw on that work and what we do. for example we wrote several reports a year or two ago summarizing the evidence on the effects of changes to labor income tax rates on people's work effort and it's from that review that we draw the parameters for use in these estimates and the summary of literature that we provide for the report. >> mr. bloom and -- mr. blumenauer is here. >> thank you. i'm pleased my friend from california remembered that you don't score resolutions.

but it would be interesting to compare with those rates were when we had that rapid deceleration post-world war ii. the tax rates and the marginal rate of 91% i think, the top bracket and there was massive investment in infrastructure. the government under president eisenhower instituted the interstate highway system and i would like to come back to that in a moment. but one thing that just struck me, this week i think you were advised the medicare trust fund life expectancy increase to five years from what you had in february? >> this is the part a in the hospital insurance trust fund and we think it will last five years longer than we said in february. >> i think that's perhaps an illustration.

you make the point that these things ebb and flow you do the best you can implementing based on new information. my colleague from maryland pointed out that my republican friends on the ways & means are proposing somewhere in the neighborhood of $800 billion of unfunded tax benefits that are going to have the effect of substantially increasing the deficit. you didn't have that information available to you. >> it's not an a lot. we would not put it in this report congressman. >> i note that our friends, and i appreciate the notion of tax avoidance and compliance. i notice my friends and their republican appropriations committee are proposing to slash further tax enforcement for the irs. with that on balance -- would that on balance increase or decrease the deficit over time if we can't enforce the tax was?

>> congressman women looked in proposals like this in the past we concluded that reductions in funding for enforcement would reduce revenues by more than the savings from cutting the number of people and if he did more devoted more resources to enforcement you would reap extra revenues that would outweigh the cost of the extra enforcement. >> so slashing your accounts receivable reduces revenue and will increase the deficit. >> again the proposals we looked at in the past. >> i think the irony some should say the hypocrisy of professing concern about the long-term deficit while increasing after tax policies and making it harder to collect the taxes that are due and owing and by the way it's the middle-class person with the w-2 that is not going to be able to evade taxes. it's people with more complex

forms, more money, more businesses, more that they can just forget or whatever area it but i would like to turn it around because i share my friend the chairman's concern about employment opportunities and growing the economy. i gave you at the beginning of the hearing in economic report which i'm going to ask unanimous consent to be put in a record from standard & poor's rating services that talks about the impact of infrastructure investment. >> without objection. >> thank you very much mr. chairman. and it says here that $1.3 billion investment in real terms in 2015 would likely add 29,000 jobs and would add $2 billion in real economic growth and reduce the federal deficit by $200 million in constant dollars for that year. now i know you have not examined this in detail and i didn't want

to ambush you but is this sort of finding consistent with what cbo has done in the past in looking at the benefit of infrastructure investment? >> yes congressman. we have looked at different methods that congress might use to stimulate economic activity. on a number of occasions in the past several years we have identified infrastructure investment as something that would add to activity and jobs in the short term and could also pay longer-term dividends in terms of facilitating the flow of commerce in the country. >> i just want to say if their republican budget which has no new federal projects in the next 15 months and a 30% reduction in federal infrastructure spending over the next 10 years were active, without potentially depress economic growth? >> technically the less infrastructure investment would hope that economic growth in the

long-term. that's one of the factors we weighed in this report but as you know we have not studied that particular resolution. >> i would add to the record all of this is follow the baseline. >> dr. elmendorf thank you for joining us again. i would like to shift gears just a minute and in the early part of my questioning to talk about the cbo cost estimate for h.r. 3230 having to do with the va health care issues that are facing the nation today. in your estimate in a nutshell you said that it would -- not you but the cbo said it would cost $22 billion in fiscal 16 for h.r. 3230 and that if the bill was fully implemented i f. y. 16 it would be about $38 billion. the question that arises is that current cost today in the va were $37 billion how can we have the more than doubling in cost

when we just have a slight potential increase of the number of people that it's used? i will break the question into two parts and again this is about h.r. 3230 and we'll talk about the senate bill next. for those that are currently enrolled in the veterans health care how does the cbo estimate the bill would affect health care utilization by veterans? >> congressman the detail provided is for the bill passed by the senate that adopted the house number so the estimate says h.r. 3230 but as i understand it was passed by the senate. i think the key issue here that is i think surprise me when i learned and surprised some people is for the veterans enrolled in va health care today they get only about a third of their care through the va system. they get two-thirds other ways and what this legislation would do is to enable veterans who couldn't get into the veterans facility to have the care they are getting through their current doctors outside the va

paid for by ca and because the veterans system has low co-payments relative to those private health insurance as there is financial incentive for those veterans to have more of the health care bear are to getting through the doctor to keep at the same doctors that have va pay so they save under co-payments. we think there would be an increase of about in terms of the share of health care spending or the veterans who are currently in world they would go from from having one third of their k. -- care paid for by the va to 50% tayfour through the va and also the people we think don't get health care through the va at all but would start health care to va. >> that's the second part of my question but what is the empirical evidence that cbo was able to rely upon to jump from actually 30% to 55% so almost doubled her it how does the cbo come up with that number? did you have empirical evidence or was it a slide?

help me out here. >> so we have evidence about the difference in co-payments what people are paying out-of-pocket in the va versus other places. then there's a body of evidence about how people respond to the cost of health care and their decision about where to get the care or to pay for that care. i'm not aware of evidence directly about a change in opportunities for veterans in va health care. this is a new approach really so there's a great deal of uncertainty and i wouldn't pretend otherwise that there is basic evidence in general about how people respond to changes in the cost of care that we drawn. >> it does sound like there's a substantial insert name estimates just because we don't have an actual fact pattern that we can rely upon historically. >> it's as close to the particular question as we wish we had. >> the second part of my question is what's the impact on health care who are eligible but

not currently enrolled in va health care? >> congressman we think that only a small percentage about 15 to 20% of those who are not enrolled in va health care or choose to enroll under this program eventually and we don't get to that 15 to 20%. >> as you know we are working with the cbo to try to get the numbers and it's hard for many of us to think it's credible that our costs are going to double when we are really not talking about a very big expansion in the population or the utilization of health care. i have a question for you for the record since we are running out of time. one of the things that came out earlier was the impact of immigration reform and i think your language was it increases the size of the labor force. since we are we are talking about the size of the labor force is it was said earlier in the conversation today in this hearing, the labor force

protection rate is at a long-term low and based on some analytics i have seen the difference between the labor force participation rate today in the labor force for dissipation rate it on a historical trend expressed in the number of workers is 4.7 million workers. i would like you to answer what is the impact on gdp if we put those americans to work if we have those policies and the impact on this and thank you very much. i yield back. >> thank you. mr. schrader for five minutes. >> thank you very much mr. chairman. mr. elmendorf how have projections for veteran health care change both before the enactment of the affordable care act and since the affordable edit -- care act has been put in place. >> between our 2010 long-term projections in and 2014 long-term projections we have reduced our projection of federal health care of federal health care spending as a share of gdp in 2039 by 1.5% 1.5% of

gdp and that is a substantial reduction relative to what we had, down 3% so from 9.5% to 8% since 2010. i don't have a comparison of the long-term from before 2010. essentially the affordable care act as you know raise certain kinds of health care spending paid for that partly by cutting other health care spending and raised federal health care spending but what has happened since that point is we never served -- everyone has observed a grey grey slowing and federal health care grey slowing in federal health care. federal health care costs and private health care costs as well and we have done analysis to understand the sources of that. it's hard to know exactly what's happening but we think it's been appropriate for us to substantially reduce our projection of the federal health care spending in the next 10 years by more than a trillion dollars and quite a bit in the more distant future. >> and would you say that the

affordable care act itself is in the part of the recent reason that went down or is it totally explain because we had a recession? >> we don't think it's totally explain because we had a recession and that's the consensus view. how much of a role-play there isn't a consensus around. the affordable care act as pacific things to slow health care spending in sums cases. they reduce medicare spending but also pushed of health care spending by expanding eligibility for federal subsidies. whether the aca matters for the slowdown of health care costs beyond these direct pieces we don't know. >> in the affordable care act was reduced -- does reduce our debt and deficit? >> by rs and that yes. >> how much were reductions in discretionary spending we are doing in a propitious process right now with lots of

reductions in discretionary spending. the sources of the debt deficit in the future outlying years like the substantial world will cutting our discretionary expenses especially given the graph you have on page 23? >> under current law and federal defense spending and federal non-defense discretionary spending will be smaller shares of the economy by the end of the decade and the endpoint and more than 50 years which is as far back as it was reported that way. those cuts the exact impact will depend on how congress meets those caps. congress caps for the probation on a year by year basis. relative to the size of the economy we will be devoting a smaller share of resources to a large collection of federal services and if for example the federal investments stayed the same share of non-defense discretionary spending which has

been historically ill would be falling to the smallest share of gdp. >> is that slow economic economic growth with infrastructure and research and development contributing to economic growth and it would slow growth. >> very good. your discussion on the aging of america the point was raised by the ranking member that we need to remember that a lot of our problems of the social safety net programs are very real are not the result of outlandish spending for various plots by a different precedences over time a random spending. it's a fact of aging. could you reiterate those figures with medicare social security and the result of the aging the simple aging of our population? >> for social security and major

health care or grams the growth of those spending as a share of gdp over the next 25 years, 55% we estimate just what the aging of the population. another quarter will be due to faster growth in health care costs per beneficiary and the remaining fifth in the federal health care program. >> thank you. mr. chairman at some point in time i would hope the committee next cycle might entertain a budget house resolution that we would make law so we can hold ourselves and appropriators and authorized committees all to account. i think that would help. >> fantastic. i would encourage the gentleman to look at ms. black spill which does do that actually. with that ms. black. >> thank you mr. chairman and thank you mr. mr. elmendorf for being here today. i had -- haven't had an opportunity to go through your port entirely but i want to go through your line of questioning

having to do with conference of tax reform. i know that all the folks in this room know that the house passed budget where the top rates on both businesses and individuals would be set at 25% and most of those tax rates and most loopholes would be ended. of course this proposal follows recommendations we have heard from economists that come before committees and testified and would also follow the president's fiscal committees design for an effective tax code when it would have a broad-based and have few distortions and loopholes and low marginal rates. in contrast to that let me ask you what is the economic impact of the tax code with higher marginal rate, complexity and distortions through deductions, credits and preferences. why did in your estimation would

it be? >> as a general matter shulman moving from our current tax code to a tax code that has a broader base and lower rates would probably strengthen the economy. how much it would strengthen the economy would depend on the details of the reform. as you know the devil is in the details on tax reform but as a general matter guess we share the widely held opinion among analysts that a lower rate on a broader base would encourage more savings would expand the economy and the long-term relative to the current tax code. >> just to follow through on that if an economy is expanded and a economy begins to grow what would be the effect of the revenue on that? >> so that would increase revenues relative to what would happen to the current gdp and we offered when the joint select committee reduction was considering production plans we

offer to do an analysis of the macroeconomic effects of tax reform that they were considering doing as part of their package. there was no analysis to be done but we do analysis every year essentially every year of the presidents budget proposal only do that macroeconomic analysis. we have released our analysis of the straight budgetary effects that we have almost completed the macroeconomic effects to. we can do that analysis further proposals that congress would bring to us. >> i can't end this conversation without applauding the ways & means committee of course shamefully i say that shamefully and also probably that i'm a member of the ways & means committee but we do have a draft copy out there for people to look at that does just that. if we could get a good

conversation going by personally i do think we would see a change in the economy as you economists about the folks that i've talked about this have said. i don't have much time left and i know you're not going to be able to enter this but i do want to send a letter to ask you to give me some ideas on this. what i would really like to know it says you are doing all these analyses and especially your work with baca all the changes that have been made in the aca either -- either the changes or delays in item out there in the report and as i say i've not read through but i would like to know the economic impact of those changes of the delays that are not going to put penalties in place and what will that mean for our long-term as we look long-term if they would need to be sustained or the difference that is making projectionwise on the collections i would take place with all of those changes that have occurred? so i would like to have some

information on that and if you could put something in your port that would be great as well. ..

changes and so on that are based upon what is in that act, so we do not have a projection of a baseline without it which we can compare the affordable care act. the one exception to that statement is that for the coverage provisions because those are really just getting started now the baseline for the last four years they don't have those provisions in them. we start with stated that does not have those provisions in and build them and. for everything else in the affordable care act of our revenue provisions medicare and medicaid provisions we just have a baseline that includes the affects of all of those provisions as they unfold. so we cannot go back and do an analysis and any clear way of the fsx those provisions have been an isolated sense. a map is see if we can provide information that would be helpful. >> thank you.

>> several times this morning you and others have said that you have basically two options for addressing this long term problem. one is reducing costs in our retirement and health savings programs and the other is increasing revenue through taxation. but it does seem to me that there is a third way that we are not talking about nearly in half today and that is growing the economy and actually reducing costs and improving the efficiency of the health care system that is so central to some of those projections. i just want to ask command and that you cannot give me specific numbers because there are assumptions that would need to exist he continued to assume that health care costs would rise at a rate faster than the economy will grow. >> that is right, congressman. i would suggest that i think congress would be crazy to allow that to continue to sit back as

a powerless to address that. if we are able to give medicare a chance to negotiate for better drug prices, if we get a hold of the rampant fraud that is in medicare part d continue with payment reforms the rewards physicians who make people healthier -- there are all sorts of things we can and should be doing good dress the side of the problem. if we can do that and bring health care cost increases below the rate of growth what does that do to your projection? >> i think you are right that there are important opportunities in those areas that obviously private health care providers and insurers are pursuing and congress could pursue as well to try to push the health care sector along. if you can find ways that would produce substantial savings that would be good for the budget outlook and reduced the need to make other sorts of changes. i would say in medicare for

example the rate of excess cost growth is excess of -- not saying it is bad necessarily but the rate at which growth exceeds gdp but it is low. because of changes that congress has already put into law which means pushing that down further would be harder. >> even a little bit would translate to a big numbers. >> if you push it down a little bit over a long time that can make a big difference in the numbers. >> and again, it does not have to be a conversation only about slashing benefits but making health care more efficient. >> it certainly can be. whether you can make enough progress to avoid the other conversation we are doubtful. everything helps. i do not mean to discourage the direction you're considering. i am emphasizing that the gap between spending and revenue under current law is really quite large.

it's not that tremendous improvements can be made but the question is are there provisions you could put into law that would accomplish changes beyond what has already happened under the laws in place and the work of people in the health care system. >> well dr. douglas elmendorf, you are surprised by the efficiencies we have already seen through the affordable care act. if we could rewind, you have dramatically reduced your projection for health care costs increased to to reforms put in place. if u.s. and we stand still, i understand your point, but if you assume we are determined to continue down this road is it fair to say that we could be seeing similar upside improvement ? >> pavilion and we have been surprised by the efficiency achieved that is why and our

analysis will look at the scenario which health care costs grow much more slowly. >> i want to ask you generally and of the middle-class. as you know democrats are concerned about the loss of middle class opportunity the growing concentration of wealth and income disparity. what does this do to the economy over the next 45 years but if we do not address this and also if we do create middle class opportunity and address stagnant wages and if you could in your remaining time are there any assumptions about climate change in your projections? if not one out? >> those are easy questions. for any given level of gdp the distribution of income cuts in different directions. for example more and come for high-income people.

income distribution also matters for the cost of federal benefit programs. the variety of direct budgetary effects. and we have seen now in the country for decades pronounced lightening of the income distribution and these projections incorporate further widening. i think that has consequences potentially for the economy and society that we have not tried to quantify directly. on climate change there is no specific affect built into our projections for the next 25. >> i just as members, try not to ask a long question with four seconds left to go. >> thank you, mr. chairman.

think you for being here today. i want to call your attention to page number three and also page number 13 and beyond. the sections i am calling your attention to address at least to some degree the consequences of staying on the staff leon. i want to give you an opportunity to respond. and only had a cursory review of this. you have running room here. i am a businessman and here i am. i am surprised and disappointed. have been serving for three and a half years in public service. the metrics are quite well-known all types of indices and know where you are and tell you if you are in almost a green yellow orange range. here it seems like you are

struggling to try to articulate the real impact of our failure to address our fiscal situation. it does remind me a little bit of lukewarm or room temperature of meal. i don't think you are doing this intentionally, but i don't think you're a pig is connect the dots on what will happen on a practical level two are working american family for stay on this path. and will ask you and give you an opportunity. >> congressman, we try to quantify the effect of the fiscal path we are on. overall gdp and then come for each family on average. so in chapter six which she may not have gotten to yet. a recognize it is a long and complicated report. we talk about the effects and quantify the effects of current

path and alternative scenarios of real gnp per person. real income per person and 2039. and it read the report that under current law we think real income per person would be $76,000.2039. if deficits were smaller than real income could be up to 78 or $80,000. >> i submit to you that it is -- as time goes on the severity of the impact on the hard working american family will increase, and i think each and every report you present to us i hope we will give you good news as some point. absent that the risk to our country is taking on is tightening. i am not an alarmist, but i am

realist. it troubles us greatly. let me prove it for a moment. i hear the call for a balanced approach. of was a strong advocate. as i have seen the last three and a half years there is a trillion dollars in tax revenue plan polanco and another 800 billion that came back as to the fiscal cliff. is there anything in your recollection that has looked like a balanced approach on the reforming mandatory spending side? all i see is almost 2 trillion in increased taxes. as i look and my democratic friends dollar for dollar, it was about 2 trillion justin mandatory reforms. a balanced approach means nothing less than dollar to dollar.

>> as you know congress has agreed out limits on discretionary. the budget control act which says it mandatory control a little bit. >> my numbers are pretty good. we have had the affordable care act and about 800 billion on the fiscal clifford f. lee. >> we are supposed to follow current law. >> the provision. revenue as a result. we do have almost 2 trillion coming at us that we did not have 50 years ago i thank you for being here in the report you provide and yield back the remainder of my time.

>> thank you. >> thank you mr. chairman, and welcome back mr. douglas elmendorf. a breath of fresh air, as usual. >> thank you congressman. >> let's see where we are at. have a lot of questions. correct me as i project some thoughts. we have got the lowest deficit since 2008 correct or incorrect? >> correct. >> we have the fewest amount of federal employees in nine years correct or incorrect? >> i don't know offhand congressman. >> well, the report last week in the "wall street journal," that is what is said. talking about the fact -- and you said it yourself the general growth is not a major problem. when you say general growth i mean that to say everything but entitlements. mi correct?

>> that's right. >> of the general growth has been -- it looks like it is in good shape. it is not a major problem. >> reducing spending relative to the size of the economy. >> if we were to cut anything else in the future since that growth the general growth under control not my word we have to look to entitlements in order to make further cuts. correct? >> that is why -- that logic is why most of the analysts focus on changes in the mandatory programs. and i like what your report does in september to link the amount of growth in terms of revenue how much revenue the government is bringing in and how much we have. that seems to be borne out in your latest report to us.

now, aside from the decrease in spending on federal health programs not a lot has changed in this report since september. that is not for lack of trying. i am a member of the ways and means committee. we have reported 14 separate bills that would make various temporary tax extended permanent . 1,205,000,000,000 counting. none of this has been paid for. on like the chairman's preferred vision for tax reform which for all its faults i think, was at least revenue neutral not a single dime of that has been offset, not a single dime.

these extended baseline that your report is based upon assumes that all of that tax expenditures expire horsetail expired correct? >> yes, that is right. >> your total projection of over seven and a half trillion dollars between 2015 and 2024 does not include that 825 billion in additional red ink still counting which would be added to the deficit if the majority have their way plus any other extenders they may choose to make permanent. >> it does not. >> these are not just extended for ten years mr. douglas elmendorf. they are made permanent, completely and paid for. can you talk of little bit about what kind of impact that policy

choice would have on our deficits and economic growth over the 40 year time frame which you report refers to. >> if those were enacted into law and nothing else changed at the same time the deficit outlook would get worse. the larger debt we project would lead to further reduction in future income relative to the numbers we have here. >> mr. douglas elmendorf compared to september's report he lowered your projection to gdp in 2039 by 4%. i understand that part of that is due to lower inflation expectations but part of that is a reduction in your expectation on the inflation adjusted to gdp. can you explain your reasons for the lower projection of our economic growth? >> seven seconds or less.

you've got it. so that reflects a change we made in our 10-year projection in what we published in february and is a combination of data about productivity growth and capital investment that comes to us to bring down a projection of real inflation adjusted gdp. >> thank you. >> thank you. i would like to follow up on my colleague's last question. if you could please compare their growth of the economy since 2007 and compares that 23rd growths in the economy after the recession in the 80's both in the time of recovery and the rate of recovery. >> this recovery has been quite slow relative to all of the post war to a post-world war two experience.

we and others have concluded most of that is slow pace. >> to use see any other policy differences with the recession back in the 80's versus year that have contributed to the slow growth other than what you say the initial cost was for the housing bubble? you just indicated that there is capital adjustment that has been less. in the 80's verses what you have seen here or not seen him that may have contributed to this. >> we have not tried to quantify the policy influences directly. we have looked at the experience of other countries that have gone through financial crises

and have generally found slow recoveries. waif to boost spending and cut taxes to provide stimulus low interest rates they helped to boost the economy but are just not enough to overcome other forces. >> i doubt if you have looked at it. probably not part of your analysis, but i would say that the uncertainty coming from washington has contributed to him that i visit with business centers in my district they have capitol, want to expand and grow their business but because of the policies coming out of here including the unaffordable care act high energy costs, overregulation that has caused them to hold on to capital and not grow and

expand. has that been taken into account? >> so we have written this book lula and, an effort by economists to try to quantify the effects of policy and certainly. >> switching gears the national security concern with the rising debt can you expand under concerns? >> as you and your colleagues look for ways to take an unsustainable path and make a sustainable one of the things you might push on his federal spending for defense. we cannot speak to the money

required the concern is squeezing that amount of money may create vulnerabilities on an ongoing basis but if the debt is high having so much debt me make it more difficult for us to then take the actions that he would like to take under those circumstances. >> that needs to protect our citizens. we will have the smallest army before world war ii and the smallest navy. i don't think we want to go there. i appreciate your raising that

concern. >> just how much of the force structure would need to be cut to meet the targets we're trying to provide information. >> thank you. >> thank you mr. chairman. welcome back. i want to return to an aberration for just a second. did you discuss the impact of that proposal on social security specifically? >> i do not recall. i might be wrong. >> would you -- i will postulate t you what i assumed to be the case immigration reform, you would have a significant number

of younger people in the workforce who would be cantor being the social security and not -- and medicare and not collecting benefits for 35-40 years. >> that think that is right. did break out the increased revenues. i don't think we put that together. there is not much change. i think it must be right. >> thank you. from time to time i raise my concerns about how the methodology not being critical of it but the methodology combined with our restrictions the country and the taxpayer

one of the things i am interested in now relates to saving performance contracts. eventually a lot of money. it is my understanding that this legislation now would extend for two years and contribute to the cbo score and that you have a different perspective on this. could you explain how cbo scores and whether they're is a chance to get together to move forward? >> i am sorry, i am not aware of the few of the omb. well look into that. we are working hard and doing another set of estimates trying to explain more clearly than we

have in the past. you are one of a large number of members who are dissatisfied. i think there are issues and budget procedural issues. the way these contracts work the savings up front meaning for a number of years well past the 10-year budget window go to the people who are installing the new equipment so that the substance the savings and to come long term. you're right to be concerned. focus on a certain budget window may be distorting in some way. there are also procedural issues . they have made a commitment. the full cost appears as direct spending. those are categories not because of less but the way the budget committee in process works.

>> a number of opportunities like this long term. we need to be allowed to figure out how to do that. thank you very much. >> thank you. >> thank you for being here. let me ask you a couple of quick questions. background how does cbo score or evaluate? the federal reserve has over 4 trillion in assets. how does that figure into your long-term what? >> it affects our revenue projections over the coming decade. as you know the federal reserve turns over to the government any extra money that it turns. it beyond the coming decade it does not matter directly.

we basically take the federal reserve receipts as a share of gdp. >> i should say it this way, your assumption is the federal reserve holds that using it for income basis. >> we presume they will be changing the size and composition of the portfolio over the coming decade. the projections we released and then your area and the update in august, we will try to be specific. not only does it affect revenue but the actions affect the economy. >> the assumptions of how you assume there will try to move. >> a lot more detail. >> will this be the expectation of how much we will pay in interest? they're is a change in your interest projections and what

that would be. would that be as well. >> i'm sorry? >> switching over to the budget as a whole. $880 billion. our single year nominal dollar interest payment. how does that change with the updated numbers? >> we do not change anything in the first few years. a real think about projections beyond that. in our august update we are revisiting all of our projections specific about the new estimate. i don't know what direction it will go caboclo we will be explicit in nominal dollars of the coming decade. >> and that will come out when.

>> under cbo extended deadline. >> we don't change anything in the window in this report. >> this same thing on page 104 and 105. time frame h0105. disability. another demographic variable is the rate of disability incidents defined here as the rate which people become eligible. the people that worked long enough an average of five and half will qualify each year.

kaelin side that with the chart. we did a rate per 1000. walk me through those numbers. >> that is the mortality decline people live longer overtime. disability incidents the same number reported in the text. and this projection of disability is higher than the rate predicted by a social security trustees and is a change we made last year the same projection, but different than the year before and that the evidence suggested the rate would be higher. >> i yield back. >> thank-you.

>> thank you mr. chairman. >> good to see you, doctor. appreciate your report and diligence and trying to be as straightforward as possible with your answers. when it comes to raising the sentiment i have a question about what may be the ramifications for the u.s. and global credit market. >> we think that a failure to raise the debt limit when we are bumping up against it poses significant risks. we do not know what would happen because we have not done and as a country. we have not let that lapse. if it were to happen, that could be very large and negative as far as ramifications for the u.s. and may be global economy. >> when you say maybe a global

cap economy is that because we are so interconnected? >> the economy -- the global economy is interconnected and we play a particular role especially treasury debt because eight is viewed as such a state asset. it is that safety being called into doubt which would be disruptive to a lot of financial institutions around the world as small as potentially costly put the u.s. treasury in future borrowing. >> now when it comes to health care when someone asks you about projections in 2009 the cbo estimated spending from medicare and medicaid would reach ten and a half percent of gdp. in this year the cbo estimates that combined federal spending

for medicare and medicaid covers expansions. 24 percent increase decrease. that outlook for federal health spending much improved from the pre affordable care activase. >> i don't have the 2009 projections. the outlook is a good deal better. we have seen slow growth for a number of years. we have taken some of those on board.

>> that is a significant reduction. >> a little below. hideo that has come and pray a and b of medicare and also how the private sector. we look ourselves very closely at what has happened in medicare the entire health care system, and the conclusion is that the weak economy plays some role in the national health care spending but much more than that. in fact, we do not think that they believe much of a role at all. when we talk to people in the health care system they are

clearly working hard to make their operations more efficient than they have been. the question for us and everyone is whether they can keep that it going, whether they will under the current incentives provided by law and whether that process will wrap up. in the late-1980s ago we saw was a marked slowdown. but then it came back up begin. we do not know at this point how persistent the slowdown will be. it our best projection is it will persist for a while which is why we have taken down health spending federal health care projections a lot in the decade. >> the major significant apology to the policy changes the affordable care act. >> we do not know how bigger

roles will play. >> thank you. >> congressman. >> always a learning experience to hear from you. i want to pick up on what was -- what is indicated on page five of your report about the idea that to solve the problems you have testified a combination perhaps of raising revenue and increasing spending. the wording indicates that we could raise revenue a decrease spending, or do a combination of both. so clearly i understand how we can decrease spending and reduce

cost to get as back under control. i am under the impression that we cannot just increase revenue and solve problems. >> well, it depends on what this says. the next 25 years. the ratio of debt to gdp. >> what does that look like? the same change for the next 25 years.

an increase in revenue or cut in spending and increase in revenue . that would -- >> well with that look like going forward. >> just over 1 percent of gdp. the way it is defined by people in the business to do this kind of analysis, the fiscal gap is the change in something to misspending indoor revenue that would require each and every year to achieve some target at the end of the time. the same share it yesterday. we also did estimates of what it

would take parliament which would be discovered two and a half%. >> and what are those? >> about $460 billion. in increase next year growing with gdp more than 5 trillion of it coming decade and more beyond that. >> in your expert opinion is that a large magnitude? >> it is a large change cono do it in any way is a large change. as we reported, to reach that goal and bring that down to a historical average 25 years from now would require an increase of about 14%.

>> ten or 20 years. >> an eye on transparency especially regarding your entitlements accounting using the accrual basis accounting the data. >> primarily cash based accounting and offer projections debt and deficit in the future

in the imbalances in the medicare part a trust fund that is done on an accrual basis. >> thank you. i apologize for coming in after you're prepared remarks. was over at the financial-services committee. there are a number of questions asked with no opportunity for the chair to answer. while i might not agree with the implications being able to answer the questions, i appreciate the way our colleagues have handled this hearing, at least by my reservation. i appreciate the complexity of

the questions. i have been trying to figure out cbo scoring. i assume it takes more than a year-and-a-half to complete end to figure out. i do understand that the analysis you provide is based upon a clear assumption none of the decisions we made operate within the confines of what one would call a zero sum game. so i am curious about your questions some of the actions of the house recently in enacting and paid for taxing standards that absent some other corresponding increase in revenue or production spending will have implications this may

be something off the cuff, but is it your -- would it be likely your conclusion that this type of spending through the tax code that is on paid for or has a net positive fiscal position. >> you are right. in particular in terms of the longer term budgetary economic effects but presumably conclude that costs and tax revenue not offset in some other way would lead to larger deficits, debt and would be a drag on the future. >> this is where i think we get into a conundrum. presumably those tax cuts would have an impact not only immediately on the deficit but on either our ability to invest

in long-term investments that have a payback or simply explode the deficit. if those results -- and let's take a couple of examples pell grants and other forms of support for higher education and blows up our ability, for example to fully fund on the ongoing basis the highway trust fund what would you think the likelihood would be that you would have a negative score for that set of policy decisions? >> now you have a more complicated scenario, congressman. >> i will say that in our analysis that channels the focus on on the effects of federal debt marginal tax rate is the changes in transfer programs and federal investments. we take very seriously.

>> take the decision to find or not find how would you evaluate that? >> we think and said a couple of months ago that if the projected shortfalls and trust funds or addressed by limiting spending that reduction would probably have significant negative consequences for the condition and performance of the nation's highway and mass-transit structure. their reaction was slow employment relative to what it would otherwise be. >> thank you and i appreciate that. have you offered in the recent discussion or commentary on the effects of extension of federal unemployment benefits and the effect that has long-term demand for federal services and

long-term budgetary effects of that decision. >> we have not come to my knowledge. we have done some analysis of the shorter term affects on output and jobs and have found that the extensions of higher benefits in place last year would be good in the short term for economic output and jobs. >> thank-you very much. >> thank you mr. chairman and thank you mr. douglas elmendorf. i will follow this same line of questioning. long-term budget aspects have significantly challenged our current rate of expenditures and population shift and the graying of america find the most

balanced approach to resolving the highest degree of certainty a path toward so that we are doing our jobs with your expertise chest coffee we need a long-term investment strategy. we ought to have a long-term investment strategy, and i agree. in a "washington post" article titled cbo rigid form holding the u.s. government back scoring patterns they like the federal highway system. if we know that and spurs economic growth and research at nih in the department of defense that have clearly identified some of those great breakthrough

schering is a return on investment and technology that cost money at the front end on that federal balance sheet. similarly changes in health policy that make the health care delivery system more efficient and integrated chemical were needed often when you know they are investments that will yield savings in the future. so mr. douglas elmendorf, like you to talk a little bit about how you scored these health care proposals and insurance companies in particular have developed a series of tools to develop health care costs. >> congresswoman, my colleagues and i share your concern about the longer-term effects a number

of things to try to give you and your colleagues more information that includes -- i work on the affordable care act, regulation of reform federal budget. we are interested because you are on the longer-term effects. i respectfully disagree but the challenges to be able to quantify those facts in a reliable way. we draw on the research literature dated from actuaries >> you do not hire or employee, particularly on the health care side this kind of experts? that is an area that we have to clearly understand short-term

and long-term impacts. >> ongoing contracts with outside actuaries, a panel of televisors and might have that expert in to talk with us. one example a detailed analysis of the ethics of raising the cigarette tax and the federal budget over 65 years and looked at the weight changes will affect smoking behavior today and people's health conditions and longevity. >> i appreciate you taking that. a great example. can you show me and others? particularly on the health care side. >> we can do that analysis and are currently doing or on the effects of obesity but i caution you the benefits to health are often quite positive.

a facts of the federal budget may or may not be positive in the way our estimates are. it is not always the case that prevention saves money. it is almost always the case that it is good for people. there are certain tests done. >> i would argue that we are doing all of one in nine of the other. sphere says in 99 see that and in exploring and encourage you to keep looking at that otherwise we cannot do our job. >> thank you very much. thank you for it your indulgence this meeting is adjourned. [silence] [inaudible conversations]

[inaudible conversations]

ms. mikulski: mr. president? the presiding officer: the senator from maryland is recognized. ms. mikulski: mr. president i urge today -- i rise today to talk about really an urgent

crisis at our border in which over 250 children a week are coming from central america fleeing horrific gang violence, horrific gang violence to seek refuge and asylum in the united states of america. this is being equaled a crisis at the border. a border crisis, but the crisis actually begins in central america where brutal, violent gangs based on organized crime are either trying to recruit the boys into organized crime drug smuggling, human trafficking or to recruit the girls into human trafficking and other just dangerous and repugnant circumstances. but when you go to the border the way i have, that you will

see that the situation is dire, and it's dire because as these children come to the border, crossing the rio grande, probably within really almost a 50-mile stretch of the grande. it's not over the 1,900 miles of the grande, that they come and actually -- they don't try to sneak in. they come right up to where the border control is, and they have pieces of paper with their name on it. they are then taken into custody by border control, they are placed in holding cells that are really designed for adult males. they were really designed to hold drug smugglers narcotraffickers and now they told as much as 20 or 30 or 40 children while under the law they are to be placed in the hands of the health and human service agency while their legal

and asylum status is being verified. well i'm telling you the entire infrastructure for dealing with these children, from the way the border control is trying to take care of them, the overrunning of the capacity of these holding cells to the backlog on processing their legal asylum determination to really trying to place them in facilities under the care of health and human services. the situation is dire, and the president of the united states has asked for emergency funding to deal with it. i hope that we consider this emergency funding. the amount of money that the president is seeking is $3.7 billion. this is to care for the

humanitarian needs of the children the enforcement at the border the identifying of their legal status under a law passed under the administration of president bush to deal with trafficking of children, both boys and girls and also robust deterrence in the home countries where these children are coming, but the deterrence comes from breaking down and prosecuting organized crime syndicates of the smugglers and the traffickers. we're also asking for money to conduct a massive educational campaign advising central american families against the dangers and false hopes of this journey. the journey is indeed dangerous mr. president. they come on foot, they come by car, they ride the tops of a train that's refused to as the beast. there is one little girl that i

smoke to with secretary johnson. she had stayed awake for two days on the rooftop of a train terrified that she would fall off and be mutilated just to be able to make it into the united states of america. and why did she make such a fearless dangerous -- a perilous dangerous journey? it's because they were trying to recruit her into these violent and vile ways. we need to make sure that we go go -- that central america with our help goes after the seven organized crime units that we know that are sparking this, that are trying to recruit these kids. give them false promises, too that they come to this country that they will be able to get a free pass somehow into getting into this country. we need to be able to stop this and be able to deal with it in the most effective way. the president's program actually does outline the money to be able to do that.

when the children do come, as i said while they are awaiting their legal status to be determined, they are placed in the hands of h.h.s. now, h.h.s. doesn't run group homes. h.h.s. doesn't run foster care. h.h.s. funds it, and they need to be able to turn to local communities to be able to have these children be able to stay. and i saw fantastic work being done while the children were being placed at lackland air force base and that the social services were being run by -- under contract by faith-based organization the baptist church. now, i know the distinguished presiding officer knows a lot about human services. i myself am a social worker, and

i will tell you that faith-based organization is really running a good program for these kids, but we are running out of money. we need money for food and shelter for the children. we need money for the border agents. we need money for transportation to shelters and also transportation when we can return these children home. we need money for immigration judges and legal services for the children to determine their asylum status. as i said, we need the muscular deterrence in the home country breaking up the organized gangs that then create the violence that then sets these children on their journey. the best way to make sure that the surgery of children is stopped is not by harsher immigration roles. it's -- rules. it's by making it hard on the drug dealers and the human traffickers, the smugglers the

coyotes because they are the ones that are the reason they are coming. looking at the data, looking at the data, we see that these children are coming not only where there is high poverty but the children are coming where there is a high level of crime particularly homicide, murder and other recruitment of children. these children were almost being recruited by child soldiers in their own country to engage in violent criminal activity. so we need to be able to look at this emergency supplemental and be able to meet the human needs while the children are here, make sure we fund the judges, the immigration judges and the services to determine their asylum status and be able to take care of them. already 60,000 unaccompanied children have come into our country during this last year.

in the two weeks that i toured the border, i saw young children as young as 5 with one instruction -- cross the border, turn yourself in and try to get as safe as you can. border agents find these children often dehydrated, malnourished and usually a victim of some type of trauma. and also they have heard false promises from the smugglers about what it will be when they come here. these smugglers see as part of these dangerous gangs and cartels see women and children as a commodity to be really bought sold, transported as if they were cargo. children leave these homes based on lies. they think that they're coming to an area where that they will never have to go home or that they will be safe. i hope that we then pass this

appropriation. i hope that in passing the appropriation, we'll be able to protect the safety of the children we determine their legal and asylum status and we have this muscular deterrence strategy in the home country. now, there are those who want to be -- have a new immigration policy or repeal the george bush law. i would caution that because remember, our problem is not the children. our problem is what causes the children to come. we have to go after what causes the children to come, and that's the drug dealers the smugglers the coyotes those that are engaging in such violent crime. the host countries along with mexico need to help deal with this and we need to marshall our law enforcement resources to be able to help them through

this. now, they say let's bring in the national guard at the border. what's our national guard going to do? when these little kids cross the rio grande, they're going to go right up to that soldier put their arms around his or her leg and say i need to be safe, can you help me? what are those national guard going to do? it is not a border enforcement problem. it is a criminal gang problem in central america. so we need to be able to be sure that we are targeting the right areas in order to solve this problem. the children are not the threats. the children are not the threats. they are coming here because they are threatened themselves. we need to meet these urgent humanitarian needs and we need to focus on our hemisphere to break up the gang in crime. now, later on today i hope that we are going to have a briefing

for every single senator so that they can ask the questions to -- about this situation. who are the children? why are they coming? what are their legal rights under the law? but how can we effectively deal with this children's march where the children are in danger aloan in their host country and on the long journey to this one. we are also asking that this $3.7 billion be designated as an emergency. there are those who will want to take from other domestic programs. i would caution that. and, in fact, i reject the very idea of that. the president has said this is an emergency -- an emergency because under the budget control act of 2011, it meets the criteria that it is sudden, urgent. unforeseen and temporary -- urgent unforeseen, and temporary that deals with the loss of life, property or our

national security interests. i think it meets that test. i do not want to take offsets from existing programs to do this need. it is unexpected. it's significant. we can deal with it but let's not do it at the expense of other programs designed to help the american family and the american middle class. mr. president, i know that there are others who want to speak on this. i will have more to say later. but for now i hope -- let's examine the urgent supplemental and let's really solve the problem at the border and what