screeria -- nigeria. -d applause ]

coming up on c-span 3 british prime minister david cameron takes questions in the british house of commons. after that, financial experts and former federal reserve staffers discuss monetary policy. and later the white house medal of honor ceremony for two soldiers killed during world war i. now, congressional budget officer keith hall testifies on his 2016 budget request. members ask about federal debt and the potential impact of repealing the affordable care act and downgrading the u.s. credit rating. this is two hours and ten

minutes. this hearing will come to order. i want to welcome everybody and wish everybody a good morning and thank you all for being here today for this cbo oversight hearing of the house budget committee. last month, congress passed the first balanced budget of its kind in over a decade. working together the house and senate put forth a plan that

would get the nation's fiscal house in order, would grow our economy, strengthen our national economy and make government effective and accountable. last week we were reminded why this effort is so incredibly important. on friday, the commerce department announced that the economy shrank, decreased in size. there have been three such quarter economic detraction since the it began we all hear from the administration their plans are to spend more money that we don't have, tax more money out of the pockets of hard-working american families and to build more regulatory barriers to jobs and growth. this new normal is simply unacceptable and it's why we've focused on putting forward a balanced budget with pro growth ideas to help grow american families and american

businesses. today we begin taking the next steps forward by examining how congress can have a better and broader understanding of how the policies we put forward will affect our budget our economy important programs like medicare and medicaid, our national security and other critical areas of interest and concern. today's hearing will allow this committee to hear firsthand from the very agency that assists congress in that effort, the congressional budget office. i want to welcome cbo director dr. keith hall. director hall, this is your first time hear since testifying on april 1 and we want to welcome you. you bring a tremendous amount of expertise and experience to the job and i want to thank you for agreeing to serve as director. we look forward to your testimony and the insights that you can share about how cbo works with congress and how it arrives at its conclusions and how we might improve trans parn

transparency and more broadly what that means for the economic challenges facing our nation. the reports that cbo has provided to congress over the past several years has shown a steady and troubling decline in economic growth projections. cbo has consistently raised the alarm about the unsustainable fiscal unbalance in washington and what has been lost due to an out of control increase in debt. something must be done and i appreciate the critical role that cbo has continued to play in our efforts to ensure the money that taxpayers send to washington is used responsibly and that there is transparency and oversight in all government programs. the information that cbo provides our committee and colleagues here in congress is vital to that goal and to the legislative process. having sound analysis in a timely manner that is responsive to the needs of the members of congress will help us advance real solutions. at the same time, it's obvious that congress needs a more complete and realistic

understanding of the fiscal and economic impact of legislation that we consider. the work we do on behalf of our communities would be well served by knowing how certain policies might affect the broader economy, job creation, investment decisions and more. and while it's impossible to perfectly predict the outcome of everything, we can and we must do a better job of getting more accurate projections. this doesn't mean throwing out tried practices but it means adding more tools to the toolboxes. you can barely go wrong and i encourage the budget office to be committed in the analysis whether on the macroeconomics side of the ledger or on specific sides of the interest. cbo has done tremendous work over the last 40 years thanks to its incredibly dedicated staff and i want to thank you, dr. hall, for your work for this agency and i look forward to

hard-earned taxpayer dollars being spent more wiser and in an efficient and accountable manner so there is a positive impact on our economy and the lives and livelihoods of the american people. i'm pleased now to yield to mr. van hollen for the purpose of his opening statement. >> thank you, mr. chairman. let me start by joining you and welcoming director hall to your first budget committee hearing. welcome, dr. hall. the agency that you had the congressional budget office has a well-earned reputation as a nonbiased source of information for the congress and the public. its credibility has been based on the fact that members of congress see it as an independent professional

nonpartisan arbitrator analysis of important questions. and i would like to just put in the record mr. chairman a letter that the first director of the congressional budget office alice riflan wrote describing the importance of maintaining that nonpartisan position. >> without objection. >> director hall, i know that you know that you're the caretaker of that independent nonpartisan tradition and we look forward to working with you. i think it's going to be particularly important now that congress has directed the national budget office to engage in what is commonly referred to as dynamic scoring and there are lots of concerns about how games can be played with dynamic scoring. we saw in an analysis that was released of the former chairman of the ways and means committee

tax proposal how those games can be played. the tax committee did an analyses of the potential dynamic effect of that proposal and, not surprisingly, in all his public presentation, the chairman of the committee used the one that showed the most aggressive benefits in terms of economic growth and revenue not a conclusion that had been reached by the joint tax committee. so as you embark in this area i just understand and i know you do, that it's happening in a political context of a lot of suspicion about abuse of that particular approach. the chairman opened with some comments about the state of the economy and i would just point out that according to the nonpartisan congressional budget office's analysis of the republican budget at least over the next couple of years, it would actually create a

contraction. in the economy, it would generally reduce total demand for goods and services and so i believe, as i think all of us do, we need to keep the economy on the right track and that means not taking actions through the budget process and through cross that would actually slow down economic output. we're also looking at a lot of bills coming to the floor of the house and it's important to remind members that each of these bills is based on a huge accounting gimmick which this committee on a bipartisan basis has rejected in the past and the

contingency fund and war savings fund as a slush fund to try to get around the budget caps. and here's what the republican budget committee wrote a year ago about using oco in that way. abuse of the oco cap adjustment is a back door loophole that undermines the budget process. the budget committee will exercise its oversight responsibilities with respect to the use of the oco designation in the fiscal year 2015 budget process and it will oppose increases above the levels the administration and our military commanders say are needed to carry out the operations. so that was the republican budget committee report from a year ago.

apparently they have torn it up, thrown it out the window and using oco for precisely the purposes that they said a year ago would undermine the integrity of the budget process. and i do want to read a letter that was written just the other day to the chairman and ranking member of the appropriations committee from the director of omb where he points out -- and i quote -- as the secretary is referring here to the secretary of defense, ashton carter, as the secretary and chairman of the joint chiefs have repeatedly stated funding enduring operations is harmful both to military planning and to service member morale. secretary ash carter has called this approach managerial unsound and disparaging to our force. i hope in the coming weeks we will put an end to this budget gamesmanship and approach the

budget in a serious way. the president has approached in a serious way, mr. chairman. he said that we need to invest both in additional defense and national security but we also need to invest in scientific research and education. and he proposed to address this issue in a straightforward manner increasing each by about $38 billion. unfortunately, the congress chose to take a back-door path, back door by the testimony of our republican colleagues. and that has put us in the situation where we're now kind of paddling down this river serenely when we all know there's this huge waterfall ahead. and if our republican colleagues want to keep quietly paddling towards a government shutdown, that's their choice. we hope they will join with us in preventing that from happening. thank you, mr. chairman. i think we all know that is what is happening in this

appropriations exercise. the president has made it clear he's not going to support any appropriation bills based on this oco gainsmenship so we hope we can get on with the business of the country. thank you. >> thank you. mr. hall i want to thank you for your time today. the committee has received your written statement and it will be made part of the formal hearing record. you have five minutes for your opening statement and we welcome you. >> thank you. chairman price, ranking member van hollen and members of the committee, i appreciate the opportunity to come before you today to discuss the work of the congressional budget office. we are pleased to discuss our accomplishments which we believe are substantial and also welcome feedback that you can provide about ways in which we can do our jobs better. in my short time at cbo it's become clear to me that the agency is left with a staff that is knowledgeable, highly skilled, very hardworking and dedicated to providing the best possible objective and impartial

analysis to the congress. cbo has been one of the best places to work in the federal government. the congressional act of 1974 created this committee and the budget office together. cbo's work followed by the agency in concert with the budget committees and congressional leadership. the agency's chief responsibility is to help the budget committees with the matters under their jurisdiction. also under this law cbo supports other congressional committees, particularly the appropriations ways and means and finance committees. we're committed to providing information that is objective, insightful timely and explained. also, we make no policy recommendations. instead, we strive to present fully and fairly the likely consequences of alternative proposals being committed by the congress. in response to your interest for the upcoming year we've

requested the funding for three new positions that would be devoted to conducting analysis of certain legislation as specified in the certain budget resolution and analyzing the effects of health care proposals. focusing for a moment on these two topics over sell years now we have been devoting significant effort to developing analytical tools that enable us to assess the macroeconomic effects of fiscal policies. we've included reports and will vote to further develop our capacity to conduct dynamic analysis in the upcoming year. interest in legislative proposals related to health care on behalf of the congressional leadership remain very high. for example, we continue to analyze proposals to modify the affordable care act and could lead to significant legislative activity. we're in the process of analyzing various aspects of the

health care system to assess the effects of future legislation on that system and on the federal budget. on a broader scale, in carrying out our mission of serving the congress during 2015 and 2016 we'll focus on meeting three goals. the first is to provide the -- to continue to provide congress with budget and economic information that is objective and timely. in the upcoming year we expect to provide analysis to congress that include about 20 reports presenting an assessment of developments during the current fiscal year, the outlook for the budget and the economy, analysis of the president's budget long-term budget projections and options for reducing budget deficits. we'll also produce more than 500 formal cost estimates, mostly for bills reported by committees with about ten times as many preliminary and formal cost estimates, mostly to aid committees in the drafting of legislation. we also produced about 120 score

keeping tab lagss for appropriation acts and produce roughly 85 analytical reports and other publications. all of our estimates are reviewed internally for objectivity and clarity. that rigorous process involves multiple people at different levels in the organization. initially we consult with numerous outside experts who provide a variety of subjects. the majority and minority of multiple committees in both the senate and the house and regularly consult with this committee, other committees and the congressional leadership to ensure that we're focused on the work that is of the highest priority to congress. our second goal is to continue to explain the methodology for analysis clearly. we make our work widely available to the cross and public by releasing publicly all former cost estimates and analytical reports. input from outside experts and external review will remain an important component of our transparency. also, we will continue to have

our documents and related information provide explanations that go well beyond just presentations of results. in addition, cbo analysts will explain details that underline the details and staff and present their work and professional conferences. the trans pearn see in our work is very important and advancing it is one of my prime objectives. our third goal is to continue to improve our internal management. we continue to face considerable competitive pressure in attracting and retaining the highly skilled employees that we need. more than two-thirds of the staff consist of economists and budget analysts. talented people with those background are highly sought by private companies and universities. in closing, i would like to emphasize how much we at cbo have relied on the oversight of this committee and your help in explaining and communicating to others in congress about our role and the complex federal budget process. we rely on your constructive

feedback and guidance on important legislative developments and congressional priorities. we are grateful for the support and guidance you've provided throughout the 40 years of cbo's existence and look forward to continuing that relationship for many years to come. thank you. >> thank you, dr. hall. i think, regardless of our political perspective, we want to get this economy rolling again and decrease our liability and our debt because it's that trajectory that helps growing jobs and opportunity. there are three ways, basically, to get more balance into our fiscal policy. one is to raise taxes, which our friends on the other side of the aisle want to do with great frequency. decrease spending but the real secret is growth. and i want to concentrate on growth and how we get an expanding economy and i'd like to focus on that in my time for questions. as i mentioned in my opening statement last week we received

some really disappointing news about the economy. in the first quarter of this engineer year, january through march, the economy shrank. it's the third time since the end of the great recession that the economy actually retracted. i'm not aware of any other recovery, dr. hall, that had this kind of retraction within the recovery itself. are you aware of any recovery that has this recent retraction? >> i have not. this has been a frustratingly slow recovery with respect to economic output. >> every time the economy contracts or underperforms, economists say there was a reason and in this case it's a winter that comes around every year. would you -- would you comment on why you think that the economy seems to have this fragility to it? what are the things that have related -- that have caused this

fragile nature of our current economy? >> i think that's a tough question because it's been frustratingly slow. as you'll see from prior -- our prior projections and everybody's prior projections, we all expected much stronger growth than we've seen. and i say it is rather frustrating. and i think part of it really seems to be slow productivity growth. it seems to be a big part of this. in fact, productivity sort of has a business cycle element to it. where you get maybe a little slow productivity growth at the start of a recession and then once the recovery kicks in you get fairly strong productivity growth. we just haven't seen that yet. we haven't had at all strong productivity growth. one of the ways to sort of see that is we've had this very modest output growth while we've had reasonably strong employment growth. and really, we've been lucky to get as much job growth as we've had and that's been a function

of this low productivity growth. >> what i'd like folks to take a peak at is this slide projected here. these are the projections of real gdp growth for fiscal year 2015 and we're now through two complete quarters of fy 2015. if you normalize those for the years, we'd end up with a growth rate of 1.5%, clearly not what can get this economy rolling again. so do you think that we're missing some underlying weaknesses in our economy through the customary models that cbo has? are we missing something that the forecasts are not as accurate as we'd like them to be? >> i think economic forecasting is difficult. and it's always -- it's always full of errors. it always had errors in it and

there are times that it's very hard to forecast the economy and it's not just cbo. it's everybody. you know, i think i would feel like cbo was missing something if somebody else was forecasting any differently than we are but they are not. so these results are genuinely disappointing but i can't tell you why. >> let me probe a little deeper and see -- do your models -- does an increased tax rates have a drag effect on the economy? >> yes, it does. >> and do your models account for that? >> yes, they do. >> so your models that are included in the projection for fy 2015 include the taxes through obamacare and that have been incurred because of this administration? >> yes. >> does the increase in the amount of federal regulation have a drag on the economy? >> it can. it's sort of the idea that if you have an overall level of

regulation that gets too high, it can slow things. there's actually also this one thing that i think may be a little underrated with respect to some of the economic data is the evidence on job loss, how long people are out of work shows that when people lose a job during a bad economy, they stay unemployed for a much longer time period. it's one of the things that i get concerned about, if we do things that slow job growth during bad times, it delays recovery in the labor market. >> increasing regulation can slow job growth? >> it can. >> what about uncertainty, something that is hard to model and measure but uncertainty in the market, does that have a drag on the economy? does that decrease growth? >> it seems like it probably can. there's been fairly recent research that sort of suggests that economic uncertainty has been playing a role in this. i have to say, though, that it's still not widely accepted. it's still an interesting idea. it's not sort of the conventional view quite yet but i think it's quite interesting

and that could be that it's having an impact. >> are you able to place that into your modelling? >> no we are not. >> so there may be things that we are not capturing with our conventional modeling? >> that's right. >> may we have the second slide, please? this is the one that concerns me and ought to concern us all. we are now in the worst recovery, worst recovery since world war 2 coming out of an economic down turn and the congress budget office for growth over the next ten years average growth over the next ten years given in january '12 '13, and and 2015. and every time you have a decrease in growth then what

that does is increase deficit. so what are the factors that you believe that the cbo believes is contributing to this continuing downward trend of growth projections? >> well certainly we've had some growth in consumer spending. that's actually held up pretty well, which is the really important part of this. but i think i swing back to the idea of the productivity. that productivity has not only rebounded but hasn't shown the usual sort of recovery that it has in the past. that's the most notable thing to me about this. >> and if we were to try to -- this is obviously a rate. the average rate over the last three years is 3.3% annualized. so we're a full point below, a percentage point. people say that doesn't make a

difference. a percentage point adds -- we could decrease the deficit over the next ten years by $3 trillion. that's the incredible importance of growth. so one of the kinds of things that we ought to be looking at as a congress to assist and get the economy growing again? >> well, i certainly -- i certainly believe in getting at least a credible plan on solving the federal debt problem because that is looming. that's going to continue to be a problem and that's going to continue to cause problems. it's going to have a significant effect on economic growth. and as you pointed out, i think in addition to the spending and revenues, economic growth is important. we maybe don't talk enough about that. economic growth is extremely important and it can solve a lot of issues.

if you look at our long-term budget projection actually it's coming out soon, one of the things we talk about is how much a difference in productivity growth over the next 25 years makes for the budget outlook. and that's a really good indicator of the importance of economic growth. >> let me just, in my final minute here, try to put a face on all of this. if we truly have 2.3% growth or even less over the next ten years, as opposed to our 40-year average of 3.3% growth what does that look like or feel like to the average american out there? what do they sense either is happening or isn't happening because of that decrease in growth? >> certainly one of the effects it's having is slow income growth. to get good, solid wage growth, you need a much tighter labor growth than we've had. again, that sort of shows up and even though we're having pretty strong or pretty reasonable job

growth, because of the economy it's not a tight labor market. and it slows revenue and things like that. >> dr. hall, thank you. i think it's important for folks to appreciate that these are real consequential decisions and it can have an adverse effect if we can't get the economy rolling again. i'm pleased to recognize mr. van hollen for his opening questions. >> thank you mr. chairman. there's no doubt about the fact that increased economic growth would be a very good thing. we've seen 62 consecutive months of good job growth, which is the longest sustained private sector job growth since the end of the 1990s.

but obviously the more we can do to increase economic growth, the better. you're knew but i'm assuming the cbo has not changed its analysis that the republican budget proposed would actually slow down economic growth in the next couple of years. is that the case? >> anything that slows aggregate demand in the near term could slow economic growth. >> yes. i understand that. and so -- and the republican budget slows aggregate demand, according to the congressional budget office. correct? >> that's right. so i do think it's worth emphasizing, since i thought we were all concerned about the last quarter's figures although there are powerful arguments that these have to do with some seasonal adjustments, but nevertheless, we should be concerned about anything that slows down economic growth in the short term and congressional

budget office has concluded that the republican budget would slow down economic growth in the next couple of years. i understand there are other arguments with respect to long term but let's just focus on that for a moment. because it's also the case, is it not director hall, that when you're looking at growth rates in the future compared to historical growth rates that cbo wants to anticipate that output will grow much more slowly than it did in the 1980s and '90s primarily because the labor force is expected to grow more slowly than it did then. i'm reading from a cbo document from january of this year. i'm assuming the cbo has not changed that analysis. is that right? >> that's correct. >> so one of the ways we can address the issue of an aging workforce in a way that actually boosts overall economic growth would be by implementing comprehensive immigration reform. in fact, the congressional

budget office concluded before you became director that the bipartisan senate immigration reform proposal would be something that would help mitigate this aging workforce issue and boost economic growth. and has cbo changed that analysis since you became director? >> i'm not familiar enough with that analysis to actually comment on it but i don't know that we've looked at that lately. >> well, i think it's true, we probably do all share the view that more economic growth is better so i think it's important to stick to the facts and they have concluded that the republican budget will slow down economic growth in the next couple of years and that the major reason long-term economic growth is not as high as the

historical average is because people are retiring and not part of the workforce and one way to address that is through immigration reform which allows more people to come into the workforce and that would boost economic growth and reduce our long-term deficits and again that has been a conclusion reached by the nonpartisan congressional budget office. so i hope when we're really actually looking at policies, that can impact economic growth we will focus on what the nonpartisan professionals tell us is the reality of the case. you refer to dynamic analysis. as you well know even under the previous rules the joint tax committee and cbo engaged in dynamic analysis. the difference now is the congressional budget office has come up with one score which is different than analysis right?

>> right. >> and so that is where there's potential -- i think many people believe for mischief and concluding that there's more certainty in some of the cbo estimates going forward than there is in reality. what i want to ask you about is cbo's capacity to apply that kind of analysis to the investment side of the equation because there's been a lot of focus on the tax side. with respect to the categories of the budget that relate to federal investments, for example, investment in education, the cbo assumes that additional federal investment in that -- in those areas yields half of the return of the average private sector investment with a delay of five years. is that correct? >> that is. >> and so there is no assessment

currently of different kinds of investment, like investment in education versus investment in infrastructure versus investment in places like the national institutes of health. is that right? >> that's right. obviously we could do that sort of work. >> that's really what i'm asking. because if we're going to be going down this road which i think has a lot of potential pitfalls with respect to the tax side of the equation are you, as an organization, going to be spending the time and effort to better refine your capacity to do this kind of analysis with respect to the investment side of the budget? >> we plan on improving everything. >> there also are parts of the budget that are not categorized currently as investment but still could have a positive economic effect. do you agree with that? >> i imagine so.

i'm not sure what you're -- >> well, i mean there was a study done just within the last 18 months, i believe regarding medicaid spending. and that's not part of the budget currently that's categoryized as investment so when cbo does a crude analysis of the impact of investments on growth medicaid spending is not counted and yet as there was a study that indicated that medicaid spending for children has significant feedback effects on federal revenue. found that children eligible for past medicaid expansion earned higher wages and paid more taxes as adults, enough for the federal government to recover 14 cents on every dollar by age 28 and 56 cents by age 60. so if that's accurate, that's a

pretty respectable return on that federal investment. now, i know it's a new study. i know cbo has not had time to evaluate it. but my question to you is, is cbo now going to take a very broad view of those kind of programs as well in terms of the impact they might have on positive economic growth as this particular study found with respect to medicaid spending? >> actually the goal is to look at the evidence and to apply the macroeconomic effect analysis -- the macroeconomic effect analysis on things where there is evidence of dynamic effect. so we will do that. >> i mean, this is a whole new world because while there's been a lot of analysis done, what you're being asked to do now is pinpoint a score. and i think, as you go through this exercise, you're kbggoing to need a lot more time

investigating the investment side. a lot of work has been done on the tax side. a joint tax provides a dynamic analysis on all of the big tax bills that are introduced right? they already do that. we've not seen that kind of in-depth macro analysis with respect to cbo. you have this crude measure right now for what you consider the investment side of the budget. first of all, it's crude. second of all, it leaves out all of the spending like the medicaid spending that is not categorized as investment. so i'm just letting you know because you're now charged with this important agency and you're charged with the time that you've been asked to undertake this whole new enterprise. everyone is going to be watching very carefully to make sure it's put in place and implemented in a fair balanced and mostly in an accurate way so we have an understanding of the impact on

the economy. so mr. chairman thank you for this hearing. we're in the middle of these appropriation bills and we are headed right now on a trajectory that seems like we're going down toward that waterfall, toward a government shutdown. the president has put on the table a plan to address this each in a straightforward way and we hope our colleagues will join us in finding a way to avoid the government shutdown that seems to be looming on the horizon with the coming fiscal year starting october 1st. >> thank you. mr. rokita. >> i think the chair. dr. hall, thank you for being with us today. the plan i see from the president only increases our deficits and debts and over the near and even longer term and so therefore i don't think it's a viable solution. let's focus on the debt for a minute. it's my understanding that the

debt as much as we're working and have evidence to show that are deficits are decreasing because of the leadership on this committee and, more recently, throughout congress, including for the first time since 2001 that we've had a budget resolution that the debt itself is still expected to expand, the 77% by the budget window and there after it's the red menace that some have described is becoming a tidal wave because 10,000 baby boomers are retiring into unreformed programs. there's a debt clock in my office. there's over $18 trillion. quite frankly, as much as i put that out there for my constituents to see, it's hard to understand and visualize what $18 trillion is so my first question to you is can you talk to us in terms of what this means to the individual family

what an increase debt load does to our standard of living? >> first of all, let me just say that the debt level is at right now 74% of gdp. that is really high. it's only been that high once and it was after world war ii. the extraordinary circumstances after world war ii. it is a very high level. and what is going to happen is we may have a few years where it's at that high level if the economy continues to recover. at some point, the effects of the aging population and rising health care costs are going to make that start to grow again and it's eventually going to get to an unsustainable level. and by unsustainable level we mean the ability of the u.s. government to borrow money is gone. it can disappear at some point. that would make it a really serious meltdown.

we're talking about a significant drag on the economy and economic growth. we're talking about slower income growth for folks. and all of those things are there and one of the things that i think i need to point out is as soon as you start to address this, the less you have to do to fix it because if you wait what you need to do to fix it gets more difld and more difficult. i mentioned one more thing because it relates to what you're saying. the debt has almost doubled since 2007 so our ability to deal with an economic crisis going forward is going to be really hampered with the ability to deal with it is going to be very difficult. that's a really important part of it going forward. we don't want to have another

recession. >> let's talk about the fix and what fix is this, as you mentioned. do slightly reforming the programs that are driving our debt medicaid medicare social security, the interest we owe ourselves and other countries, for example that make up 67% are spent, will that do it moving around the edges or will we need total restructuring if they are going to be available to my children, for example? >> well, we certainly need something pretty substantial and without talking about particular things we spent some time producing deficit reduction where we give you options to look at and you can get an idea for how big of a change we need in things to stop this growth in debt. and one of the things that actually isn't in here that you should keep in mind is when you

look at the long-term budget outlook, one, you're at a high level, second, it's still getting worse, the trajectory part of it. so when it gets to be something like -- if it gets to be 100% of gdp in 25 years it's not only going to be 100% but getting worse, which is why i'm saying something pretty significant needs to be done. >> you mentioned trajectory. >> yes. >> some account for debt in terms of what acceptable levels are. but you don't -- you talk in terms of trajectory. there's a difference there. >> well the notion is that, one, you don't know where a tipping point is. you don't know how big the debt needs to get before there are really serious problems. one of the things that factors into is not just the level but how believable it is for people that it's going to get under control and going to be fixed. that's what i mean by the trajectory. there's a credibility part to

this. >> >> thank you. i've been listening very tentatively. it seems to me what we want to do in the opening questions here is go back to the decade when clinton was the president until the end of bush's regime when there was an $11 trillion turnaround. you remember what the surplus was in 2000 and how we got to this deficit. and then on top of that, since you brought the subject of tax cuts up, we had huge tax cuts in 2001 and 2003. do you want to know what the quotes were during the analysis then, what this was going to

mean to the economy, what -- not only was it going to mean to the economy but to the job picture. we all know what the numbers are. you saw the graphs. we've thrown more graphs at you than exist, i think. and you know what those graphs are. but take those numbers away and take those graphs away and take what i just said. but what is dynamic analysis and dynamic scoring. i'm concerned about your position, mr. chairman and your party's decision to use dynamic scoring and that's what much of the discussion is about here or macroeconomic analysis. an official cost estimates for major legislation this type of analysis is highly unconcern. you have a low number and a high number and you can make of it

whatever you wish at whatever time you wish to make of it. and it provides widely different cost estimates. we can fudge the numbers easier. for example, jct's analysis of the proposal used two different models if you remember. came up with revenue estimates from $50 billion to 700 billion over ten years. i mean that's a -- you could drive 5500 mac trucks through that. he used the most optimistic estimate to taught the plan of reform. some models depend on actions, that future congresses will take

my take to reduce the deficit. there's no guarantee what congress will or will not do in the future. a ten-year budget is a fake. you know it and i know it. i believe that, including dynamic scoring will diminish the credibility of the budget process. so i want to start off with an easy one on the affordable care act in terms of what you said and i quickly read over your testimony here. so it's supposed to stay steady as a percentage of gdp through 2018. it's at the lowest point since president obama took office. none nonetheless, the republican budget requires each of the five health-related committees to find $1 billion in savings to reduce the deficit. by repealing the aca would add

200 billion to the deficit. that's a little dynamic analysis ourselves here. so i'm not a mathematician here by any stretch of the imagination, as you are. but, in your opinion, if we repeal the aca and replace the law with policies that save $1 billion, which i just referred to what would the budgetary impact be, dr. hall? dr. hall. >> obviously the ac analysis we did before was valid and i can tell you one of the things that will happen when we also look at the dynamic effect of this, that will reduce the deficit work a little against that at least. and with respect to dynamic analysis -- >> are you saying if we repeal the aca, we would reduce the

deficit. >> the gentleman's time expired. >> i yield back my time. >> the gentleman's time expired. mr. cole is recognized. >> i appreciate the extra time yielded me. if i can, let me start with discussion about historical record of the 1990s, then i want to get specific and pick up where mr. akita left off on the debt. you like to give credit to president clinton. if you're on our side, you remind yourselves you had a republican congress, never could have gotten it balanced with a democratic congress for sure. he had three things going for him that we don't today. first, he had peace. the soviet union was gone and we did get a peace dividend and that lasted throughout the '90s. second thing is you had baby boomers working not retiring

and actually in peak earning years. finally an internet boom that nobody in washington, d.c. can take any credit for that poured revenue into the treasury in terms of capital gains. we don't have any of those three today. we are in a state of war and likely to stay in a state of war, and we can debate that, we will be militarily spending more than we were in the '90s as percentage of budget and gdp baby boomers are going to be retiring and we know they're going to be living longer than any previous generation, so they're going to be drawing social security, using medicare longer. finally, economic booms are not predictable but we certainly don't see a growth rate anything like what we have seen in the past. we have some really unique challenges that transcend what our predecessors in the 1990s had. we don't have the favorable conditions they had to work with. we have been able to bring down

the deficit in a bipartisan way. i don't think we give either side enough credit for this in the last few years. we have had obviously a little bit of deficit spending, we had a little bit of economic growth, not anything we would like but that generates a little money, and had a fiscal cliff deal that raised federal revenue by $700 billion over a decade so that's a tax increase effectively. and those things brought that deficit down from $1.4 trillion to a little under $500 billion, 460 or 80, somewhere in that range. are those measures sufficient to budget the deficit? >> they're not. the effects of aging population

and rising health care costs will be more apparent going forward, we are going to have a much harder time keeping the debt anywhere near the current level. it will be difficult to do this. >> you touched on this i don't want to we labor it with mr. akita, what's the debt on economic growth. >> it is a dragon economic growth, puts us at risk in terms of economic policy if we have another downturn the ability to deal with that. at some point we get to a tipping point where the debt is just so high that the federal government has a hard time borrowing money, then we have a real issue. >> any way to deal with the debt without dealing directly with entitlement programs? >> we have a lot of choices for deficit reduction. obviously entitlement programs the growth of those are a big

part of the growing debt in our forecast. >> this committee has put forward a couple of provocative ideas on medicare and medicine tad that would slow their growth. i know the chairman talked about social security in the past we had private discussions about the need to have a process to address that. do you know if the administration put out any proposals on entitlement reform? >> i don't. >> how many years has this administration been in office? seventh year i think? >> that i should have been able to calculate. >> fair enough. obviously i am leading the witness if we were in a courtroom, but the point is we have a huge crisis, we know it is here. we have been around seven years, it is time to deal with it. this is an area the administration has to lead and frankly the committee has been willing, has put out ideas and i

think congress is ready. i would hope, mr. chairman, and i'll close out, i would hope that the administration will take that opportunity, sit down and talk about the real long term problems we have, because they're just going to get worse. >> the time is expired. mr. mcdermott is recognized for five minutes. >> mr. chairman. do you own a house? >> i do. >> did you pay cash for it? >> i did not. >> so you went in debt to buy that house. >> that's right. is that a common occurrence in the united states? >> it is. so we have a population that understands the idea of investment creates debt and that in the end in 30 years you'll have a house probably and you'll have some house that's probably worth quite a bit more than what

you paid for it maybe already is. would that be true? >> that would. >> that would be a projection you would expect. >> yes. >> now, the idea of investment, is one i think we lost sight of in congress. republicans don't seem to want to invest any more. and i was reading "the new york times" and couldn't believe on 22nd of april that i saw a great political leader of the conservative right had come out with a suggestion we should double the nih budget. newt gingrich. i ask unanimous consent to put his editorial in the record. >> objection. >> even as we let financing for basic scientific and medical research stagnate, government spending on health care has grown significantly. that should trouble every fiscal conservative. as a conservative myself i am skeptical of government

investments. when it comes to breakthroughs that could cure not just treat, the most expensive diseases, government is unique. it alone can bring the necessary resources to bear, the federal government roughly funds one-third of all medical research, it is ultimately on the hook for cost of illnesses so does the research to try to deal with it. it is irresponsible and short sighted, not prudent, to let financing for basic research dwindle. now, the last budget that we put out of this committee was $1.7 billion less. 14,000 less grants is what the omb suggests that is equivalent to. tell me how that spurs the economy to cut investment at the national institutes of health? just explain to me how that will

spur the economy. >> you know, i don't know that we have done analysis of that sort of thing. >> can you imagine any way it would? >> well certainly there are things on the spending side that have the positive effect of macro economic growth. >> do you think the national institutes of health over the course of the last 50 years have had a positive effect on the economy? >> i just don't know. i don't want to speak lightly of it. i really don't know. >> you're kidding you really are a politician. our senator from washington said once he was looking for a one armed economist, one that didn't say on the one hand this on the other hand that. you cannot look at what's come from the pharmaceutical industry, health care industry and all that's going on it

covers 16% of gdp and you're saying the national institutes of health with all of the research they've done in aids cancer, heart disease kidney disease, none of that has been positive? >> i didn't say that. >> you said you couldn't say it had a positive effect. the effect is without that kind of research, medicine in this country would fall behind. would be like sierra leone or bot swan a if we stop doing research. we say we're going to go forward in the next century by innovation. we are going to innovate. that means you have to do the things that innovate, that's nasa, that's nsf, that's all the places we invest money. if we stop investing money in the military, all these places where money is invested, republicans say no, we have to

cut back we have to cut back, we have to cut back. if you cut this, you're cutting your own throat in my view economically. after the second world war we had the same debt as today we invested, gave free college education to every soldier who came back. that's investment. >> the gentleman's time expired. mr. mcclintock recognized for five minutes. >> to pick up on that point when we were at the end of world war ii and exhausted all of our resources, carrying a debt proportion as great as it is today, didn't harry truman in 1945 abolish excess profits tax. in 1946, didn't he slash income taxes from 60% down to 20 or so percent? didn't he reduce the federal work force called war demoebization, didn't he take the federal budget from $85

billion down to $30 billion in a single year, and didn't they warn us at the time of a 25% unemployment rate and second great depression? >> i don't know my economic history like i ought to. >> please check it out. i believe you'll find that's a fact. instead of a second great depression, had the post economic war. we are paying $230 billion a year just in interest costs to service that debt. that means if you're an average family paying average taxes $2,000 of what you sent to the government this year did nothing more than rent the money that we already spent. as you pointed out, end of world war ii when we carried this much debt there was doubt if we could continue to 1946. resources was exhausted credit

was shot. we are at that point at this moment in history and i am very concerned what happens to our ability to respond to an international crisis if one is hoisted on us in the position we're currently in. the budget that congress just adopted sets a course back to solvency. how important is it that we stay that course. >> i think it is important that we do something fairly quickly. and get a plan together quickly because the longer you wait, the more dramatic change you need. >> we have a plan that's the budget in place. we heard the ranking member echo what we heard from democratic senators and from the administration that if the congress doesn't agree to spend a lot more money they're going to shut down the government. how damaging would be that path being suggested, that we massively expand spending at

this moment in our history? >> well, you know the economics of it is kind of interesting. spending in the short term is a stimulus, adds economic demand but adding to the debt over the long run time period is a drag. >> it adds temporarily because when you take a dollar from peter and give it to paul, paul has an extra dollar to spend. doesn't peter have one less dollar to spend in that same economy? >> that's right. >> and isn't the net impact over the long run negative not positive? >> that's right, making the debt worse is a problem. >> my friend from new jersey rightly pointed with pride to the clinton administration surpluses and rightly criticized the bush administration deficits and impact that he had on the economy, but reminds me of churchill's description of clement at lee that carries on

as if nothing that happened. isn't it true bill clinton's administration cut 4% of gdp, reduced entitlement spending, in his words, ending welfare as we know it, approved the biggest capital gains tuck in american history. george bush comes along, increases federal spending two% of gdp, approves the biggest expansion of entitlement spending since the great society, started the entire era of stimulus spending. mr. obama came in increased it by another 2% of gdp. further expanded our entitlement obligations, drove stimulus spending through the roof. what do these experiences tell us? >> well, i don't know about those experiences in particular but let me say that right now the end result from 2007 to now, having the debt doubl