current health care law. so they're willing to make those kinds of projections. he also told us medicare currently pace physicians 80 cents on the dollar but is on course to pay 30 cents on the dollar in decades ahead. he's basically telling us there's going to be massive access problems and providers are going to stop taking them. we're getting this kind of analysis from cms. i think it would be helpful to get it from bo. let me ask you another question about your tool kit. there have been many comments that have argued that choice in competition would actually lower cost and improve quality and we've seen anecdotal evidence of that. a premium support model which we've talked about quite a bit, you have bipartisan efforts that have been made. allison river len former cbo director. my recent work with senator ron wyden would attempt to em ploit

a bidding process. do you still enact that? >> we're working very hard to try to fill that gap as well, mr. chairman. in the analysis that we did, for example, your proposal last spring, we were able to incorporate the effect of competition and other factors through the cost of insurance through the medicare around private sector today, but we did not have the tools to try to analyze how the flexibility of the providers that insurers would have in your proposal or proposals like it or how the price pressures people would face would affect the dynamic path of spending of time and that's what we're working to. do again, we're working with our panel of health advisers, getting their insights as well as our own work, but we're only partway along that road as well. >> here's the point i'm trying to make.

the work you do with respect to medicare and held care spending because as you mentioned health care is the big driver of our health care in the future, these gaps in the tool kit need to be filled. look, i know you face serious challenges, but i want to basically get your response to some of the caveats i have so we can better understand how medicare analysis works today to get a better understanding of what we're really looking at when we get these analyses and where they're lacking. when you compare the impact of proposed medicare reforms relative to the current alternative fiscal scenario, we acknowledge that is unsustainable. the comparable is not accurate since the government would not have the means to fully fund the funds to beneficiary. so we don't want to compare ourselves to some mythical future that we know is unsustainable and knows will not exist. when you compare it to the extended baseline, we ignore the

notion that providers, if they're going to be paid 30 cents on the dollar, aren't going to be continuing provide benefi benefits. so that scenario is pretty implausible. and we're not capturing a dynamic and a phenomenon that has been advocated by experts on both sides of the aisle that choice and competition actually work to reduce costs, to tame inflation. and so i think it's important to acknowledge that we're not fully capturing a proper analysis of what we achieve to the scenarios which are untenable or we can't measure the full effect of these two alternative scenarios. is that pretty accurate? >> i certainly think we have not provided you with all the information we'd like to provide to help you understand better the trade-offs that we face. let's make sure all of us

understand. over the course of the past year, we've worked desperately hard for the secession. even though those were not ultimately voted upon. so i have a team of people who have been doing an awful lot of work on a number of proposals, but it has no doubt slowed our work on the yids that you're discussing. now, what effects we will find when we finish this work are unclear, i think. there was an exchange recently in the last couple of weeks in the new england journal of medicine about support plans. leading health economists wrote for or against. some are members of panel health vieszers and among people we've consulted. i don't want to prejudge what our findings will be. we all agree that we need to push very hard to bring more to bear to give you a fuller sense of the true choices you make. >> there was a lot of in irplay

on congress on super committees and all of these efforts which tied up with cbo and analysts to do that work instead of trying to improve on the analysis of these kinds of health care reforms. but the problem is where we are is these programs which are the biggest drivers of our debt in the future, we are measuring any reform effort against two futures that we know based on the cms analyst and outside analysis are untenable. we know from other analysis that if we pay providers pennies on the dollar, they're just not going to keep providing. and what good is having a program if no provider will actually provide the benefit. and then we also know if we stick with the status quo, meaning current policy baseline, that our debt gets so out of control that basically we go into a tailspin. so there's got to be another way, and we need to make sure that we have a better analytical tool kit to analyze how best to

chart that better way, and we've got our work cut out for us. with that let me turn it over to mr. docket. >> thank you for your testimony, service, and the very studies that you bring to our work. >> thank you. >> i think all america would benefit if we were able to return to the prosperity of the clinton years, contain the short-term deficit as we did when president clinton was in office, and begin to work together to address these long-term challenges of soaring health care costs. i think we have to do it in a way that is different from what the chairman recommends because i believe whatever label you put on it, what is basically a medicare voucher system simply shifts the health care costs on seniors with individual disabilities and does not resolve the problem.

it just shifts the problem from the tax payer to the seniors. looking at the issues of how we advance our immediate economic growth, your office put out a study back in november that looked a at the impact of the economic are e coverry act, and while i believe you had a wide range of the effects of that act, all of it was positive, wasn't it, in encouragingic nomic growth and in encouraging job growth? >> yes, we think it's been certainly positive and we have a range effecting the uncertainty in the economic literature. >> and that range reflecting the uncertainties of even predicting the past, if you will, that range suggested that growth may have been advanced through the economic recovery act by over 4% in 2010 and again by over 2% in 2011 than the economic recovery

act may well have been largely responsible for creating millions of jobs in this country. is that right? >> yes. you identify the high ends of those ranges, congressman, but you identify those correctly. >> right. looking at the effects of the economic recovery act and the composition of it and then trying to unless what that means for policy choices now, again, those policies that would place dollars into the pockets of the families that need them the most right now, for example, extending unemployment compensation, that is the type of policy that will encourage ek nom iks growth, is that correct? >> yes, that's right, congressman. >> the same thing would be true of a good infrastructure investments in terms of roads and bridges and rail across the country. those also would be likely to encourage economic growth. >> yes, congressman, they would. >> and on the other extreme, other than building things that

taxpayers can see the advantages of and encouraging economic growth, how does it compare to eliminate the inheritance act, the estate tax in terms of encouraging economic growth. does that have much real benefit innen couraging job growth? >> so, congressman, i don't think we've produced estimates of changes in the estate tax. we produced a testimony in the fall that had a chat of this sort that looked at the effects of different sorts of tax and spending policies in boosting economic activity this year and next. on the higher end of the ranges that we -- the policies that seem to have the higher bang for the buck, if you will, are increasing aid to the unemployed and payroll tax reductions for employees or employers. on the lower end of the range

are thinks like broad-based cuts in income taxes. also on the lower end of the rage is trawly infrastructure spending. that's not because it doesn't matter when it happens but because it tends to happen rather slowly because of the contracting and planning process. >> thank you. >> and specifically since you mention the senate and the effect of tax -- changes in the tax rate, i believe that you did a study that was presented in the senate in 2010 concerning what the effect would be of extending over the next decade the bush tax cuts. and what did you find would be the effect on economic growth of extending the bush tax cuts? >> our findings in that testimony are consistent with what i've said today, that

extebding those expiring tax it cuts for a few years provide as boost for-to-the economy during those few years but will by the end of the decade and beyond be a drag on gdp because the effects of the accumulating debt in crowding out private investment outweigh the beneficial effects of lower tax rates. that's what we showed in this testimony you referred to in 2010 and the senate and again consistent with the analysis we presented in this outlook yesterday. >> it sounds really great in political speeches. the actual effect of extending the bush tax cuts over the next decade is to reduce economic growth by between 1% and 2%, isn't that correct, over the decade? >> yes. again, there's a range of estimates, depending on precisely what one does. >> that doesn't inclues any plus economic growth. all of it is negative in extending those tax cuts. >> in the outlook we released

yesterday, congressman, thing what you're referring to, when you look at the tax cuts plus other things but the effect of that set of policies is to boost the economy over the next few years but wi 2022 to reduce gdp by between 1% and 3.7% relative to what would occur under the current law baseline. >> and there were a number of things in that alternate baseline that you looked at other than the negative effects of extending all of the tax cuts over the next decade during the short term, if i understand your testimony to chairman ryan, it is that if we reduce the short-term deficit too quickly with sudden reductions in expenditures for vital public services, we'll actually retard economic growth in the short term. >> yes, i think that's right, congressman. reductions in the deficit too quickly through either tax

increases or spending reductions would retard the economic recovery, and that is consistent with, i think, the con census of thinking in the economic professi profession, consistent with the experience we're seeing in europe where countries that are in worse budget shape than we are and are forced by their inability to borough to make very drastic changes in policy very quickly are suffering economic consequences from that. when we wrote an issue brief a year or soing a about a crisis in the united states, one of the risks we highlighted is budget situations tend to deteriorate when economies are already in trouble and that makes it a particularly bad time to then have to implement these changes very quickly. that emphasizes the importance of congress acting before we had a crisis of that sofrmt but given the low level of current treasury interest rates, our continued ability to borrow for now at least, i think many

experts believe that although -- the that the changes should not be implemented. i want to emphasize that's not an argument for them making changes in policies. given the scale of the changes that will be needed, the more warning that people have, businesses have, that state and local government have about what policies will be undertaken, the better it will be. so there are real costs to waiting to decide upon the courses of action. one one decides, there's a difficult trade-off of speed. waiting too long, it can cause a fiscal crisis. moving too quickly has the cost of slowing the economic recovery. >> assuming an aggressive austerity program pursuant to that that the government and united kingdom has pursue and some of the other euro pearn countries is likely to produce some of the same economic

problems for us that it is presenting today for the europeans. >> i think that's right, congressman. i want to be careful not to second-guess the decisions they've made. they faced a particular set of circumstance as and in some case had no choice because of their inability to borrow money. so i'm not suggesting that they've done the wrong thing necessarily. we have not studied their choices to speak to that. just speaking as an example that sharp fiscal con trarkz does weigh of economic activity and jobs in the short run. >> as far as enkurping more jobs though it's not my preferred policy choice, extending the payroll tax cut is one very poive way of encouraging economic growth. >> yes, we think so. >> thank you doct, dr. canes --

garrett. >> one of your heroes. >> right. >> so just following up on a couple of points we just raised on this point, with regard to what was done in europe and the decision-making there obviously, we cannot second get them. some of that goats to one of the questions i have, your presumption on interest rates. according to your baseline, the american people will be paying about $4.3 trillion in net interest over the next ten years. based upon, thing it's on page 30 or 31 of the charts and what have you, obviously if those interest rates are skewed in a different direction, that number goes up significantly, right? >> yes, congressman, no doubt. >> what's that?

>> yes. yes. >> and right now we eastern at it and that's able to keep it down but we saw what occurred in the private sector, how the spreads changed in '08 basically overnight for these various companies that initially had very good rates, is that correct? >> yes, that's right. >> didn't we say that in europe with the pigs in portugal and italy that their interest rates were somewhat favorable before but basically in an overnight figuratively period, overnight period of time, the spreads expanded beyond any one's objective. is that right? >> yes, that's right. certainly in a way that surprised in observers. yes, thing a significant risk in our projections is that the interest rates will rise more rapidly. i should say it. there's risk on the other side. our projection of interest rates lies well above the rates that are implicit in current financial market transactions.

when one can essentially back out of the treasury yield curb, the markets predictions of interest rate over the second half of the decade. >> but they're certainly not above historical averages for the united states if all you have to do is go back to the carter years and see the rates off the charts. and that would put this number at the multiple of this $4.3 trillion. is that not correct? >> yes, that's right. >> within our lifetime we have seen interest rates in this country dramatically above where they are and we could -- >> yes, congressman. >> which may give credence to the argument that we may not be an overly aggressive contraction but aggressive might be the prudent direction that this congress should go in. >> yes. i think -- and we've said in other testimonies as well, there is this trade-off. >> i understand that. let me just go back at something. earlier this past month -- last month, a bill came out of the committee. the budget and accountability

transparency act. it changes the reform of the methodology reform. by including a market-based risk premium it provides a more come pre membersive measure of costs which recognizes that the financial risks that the government assumes is more costly to the taxpayers than as the estimates suggest. look at that. do you agree? >> yes, congressman. we believe that the fair value method of accounting for federal credit transactions provide as more comprehensive measure of their true cost. >> okay. moving on to another topic that we've had and that's the fha bailout -- you can still hear me, can't you? >> i can still hear you. >> very good. on that bailout, there's a possibility, reports out of there, chances of future net

outstanding capital could exceed current 50% which could necessitate a taxpayer bailout for them. currently the numbers show that their leveraging ratio is around 400-1, which makes everything else we've been seeing on wall street pale by comparison. have you examined the budgetary implication it is we have to go through a bailout or fha? have you looked that? and, b, what would the implications be to debt limit? c, quick answer on that one, can you give a quick projection on the next step limit increase? >> so you're correct, congressman, the reserves that fha holds are below the stat statutory minimum but there will be no bailout required in the sense that the congress does not need to take any action to deal with this low-level reserves. if more people default on fha guaranteed mortgages then fha has reserves for, then like other federal credit programs,

there will be what's called a credit reestmeimate. recorded in the budget but would not require the congress to take any explicit action. this is the case for all federal credit programs. what it will mean, of course, is that if the fha does not get any money back, his money out, thought it wouldn't have to, that will affect future government borrowing. >> the estimates we have seen by analysis means we may have so pony up another 50 to $250 billion if that 25 basis points goes to zero and they will not make the payments we will not have to come up with the cash to do that? >> what i was saying was that automatically in the budget without congressional action, there will be a -- so there's no explicit, there will be no vote about whether to bail it out. >> what would the impact be on the budget deficit. >> our baseline projection includes our assessment of what the costs will be for it going forward.

and i think that's incorporated in the projections that we've shown. >> we've got a lot of members here. with all due respect we've got to keep it timed so everyone has a chance. >> thank you, mr. chairman. thank you, doctor, for the good work that your staff does and your patience with this committee coming before us as we plow some of the same ground. but i think each of your visits, for me, provides greater clarity. and i'm not as grumpy as our chair. i think -- i think there are -- there's a pretty clear path going forward which actually is buried in your report, i'm police it -- implicit in your testimony and i think what we can get our arms around. the chair references in the problem we have had over controlling medicare costs over

time and because it's we have a flawed payment system more than anything else. and as long as we're going to pay for volume, people will up the volume. and when congress, when the heat comes on, dial down what purported to be reforms, and it's a bipartisan failing. congress has folded. more volume. less value. what we have in the affordable care act, at least, is an outline of things that if your studies show, if allowed to work, over the course of the next 20 years, would have a substantial affect on bending the cost curve. i think we could have a very robust conversation around this table if we focused on how we right size the military. i think most of us don't think we need troops in western europe. 65 years after world war ii. we can dramatically scale down as much necessary to maintain a nuclear arsenal.

do we need 12 multi-billion dollar aircraft carriers and build another one when nobody else in the world even has one comparable to what we've got and you don't build those things overnight. so we could gear up if some change took place. i mean, i go through the things with the chairman on health care. not health care, excuse me, agriculture. i thought that was a little bright spot in an otherwise mixed bag that was offered up. there's a chance to come together to actually save money. what you buried in your testimony there, i love the line where you talked about the vary courthouse scenarios going forward and you talked about one where the deficit scale is up a little bit in the short term, but with balanced policies that deal with refinement and revenue, we could end up having lower deficits in the outyear without economic disruption that are predict we'd some of the

other scenarios that you're talking about. and i would hope that we get to the point where this committee starts zeroing in on areas of agreement that aren't necessarily ideological or partisan, but really point us towards the path that you've outlined. i think it's very, very important. but i -- one thing that i am concerned about is equipping you to be able to help us go through. there was a fascinating article, ezra klein's column this morning. how much of the deficit is attributed to policies that president obama signed into law and how much is attributable to policies that were part of the bush administration. he comes up with a calculation, $1 billion obama, $5 being billion bush administration policies. now, debate more or less what you're talking, you know, on this, but this shouldn't be from a columnist in the "washington

post" and a couple of think tanks. it would be great to be able to work in a refined basis with you on things like that going forward. but i wish that you would comment on your capacity to deal with the demands of this committee for more data, more methodology, more ideas that are coming thick and fast s, and we want faster turn around and the implications with what we do with the data is profound dealing with trillions of debt and spending in the outyear, what's happening in your budget and your ability to respond to this committee? >> i appreciate your concern. >> please answer in 30 seconds. >> i appreciate your concern for our capacity, congressman. for the three years i've been at cbo the demand for work from us has greatly outpaced our ability to supply it. and we feel bad about that all the time. and the chairman had some specific cases but it happens

many, many times i'm on the phone with colleagues of yours for apologizing for what we are not able to get to. yes, our budget is being reduced along with the budget of the other congressional support agencies and the committee staffs. from my parochial perspective, that's too bad but it's not for us to judge that decision of the congress any more than we judge the other decisions of the congress. >> my time has expired. i appreciate the chair's patience but i think this is one thing we ought to look at, cutting their budget 10% when we're throwing more things at them and there's more that relies on what they can produce for us is something that every member of the budget committee ought to maybe reflect on the that's main not penny wise and pound foolish. we're so persuasive, i think it would make a difference if we outline being the budget torch carriers. >> mr. campbell?

>> okay. it looks like i'm in a concert ready to sing. if i do sing i think i would rather sing like president obama than mitt romney, unfortunately. but there's one of them would be better at being president. but that's not what we're here to talk about. anyway, i don't know whether i'll be as they are. i will try to be cheerfully realistic. doctor, good morning. the ranking member in his opening comments talked about, and threw out a couple of federal government urs, if all the bush tax cuts were allowed to expire and the amt index, et cetera, they would raise about $6.3 trillion using static modeling, which those of us here don't always subscribe to. but $6.3 trillion over the ten years. and he also said that if it was just the wealthy, which i presume is $250,000 or more since that's the number the president has thrown out that would raise about a