that's not my position. that is the state's position and that is their incentive along with a lot of grants to establish exchanges. now, the opponents really have to take the position that the statute has one and only one permissible reading because there is a strong presumption that you read statutes to be effective, that you read statutes in furtherance of their evident purpose. justice scalia says that in his book "unstatutory interpretation." and the argument here is that this self-emulating interpretation that the treasury department was so derelict in rejecting can prevail only if it is impossible to construe the statute any other way. it's crystal clear, they say, but no one at the time the statute was enacted was aware of

it. in fact, it was so obscure that it wasn't discovered and that's the word that has been used discovered until months after the statute was enacted by a lawyer whose announced mission was to find a statutory glitch that would take down obamacare. nor is this a one and only interpretation except now by an authoritative interpretive probably for at least four members of the supreme court. the solicitor general, senate and house leaders and staffers who are involved in the drafting of the bill. health insurers. the american hospital association. american cancer society. 22 states. the former director of the cbo. all of these people interpret the statute the same way the irs does and to say that their

interpretation is impermissible is to question either their literacy or their candor and neither is really endowed. let me just say with regard to the irs and their process truth is a defense, and the irs engaged in a process that produced a reasonable result one that did not gut the statute, as the interpretation offered by the aca opponents would do. one that was consistent with the commonly -- with the commonly understood meaning of the statute by those who enacted it at the time. thank you. >> thank you very much. i'd like to thank each of the members of this learned panel. you know, i agree very much with the testimony of mr. carvin, that this is fundamentally about the rule of law. this is fundamentally about the question of whether the federal government can impose billions

of dollars of taxes upon millions of americans directly contrary to the text of federal law. it is likewise about whether the federal government can spend billions of dollars explicitly prohibited by federal law. if the answer to both of those questions is yes, if the administration's interpretation is aceded to, it makes the constitutional law making function sirpurfulous. if they direct and spend directly contrary to statute the limits on the executives' authority are altogether abricated. the legal question is not complicated. the statute provides that monthly premiums for qualified

melt health plans enrolled through an exchange established by the state the entire argument here is whether the federal exchange established by hhs is in exchange established by the state. now several witnesses have testified that no one possibly envisioned that an exchange established by the state meant an exchange established by the state. i would note, if we can have the second panel, please, i would note that at least one person understood that very well, someone who has been described as one of the leading architects of obamacare. professor jonathan gruber who, indeed, achieved worldwide fame when he candidly admitted that passage of obamacare depended upon, as he put it the stupidity of the american people. and professor gruber quite candidly said, "what's important

to remember politically about this is if you're a state and don't set up an exchange, that means your citizens don't get their tax credits." now, i would note we heard several times no one understood this. well apparently professor gruber understood it very well but was relying upon a lack of transparency and as he put it the stupidity of the american people to keep it hidden. i want to focus on the decision-making process that occurred at treasury and the irs. mr. weiner mentioned that no one is questioning the candor of treasury of the irs. well, it's difficult to make happen assessment of thatq&yk

for 3 1/2 years. the chairman of the house oversight committee after being frustrated by treasury and irs' unwillingness to release those documents to his committee issued a subpoena for those documents. treasury and irs have been ignoring that subpoena, for how long ago september of last year. almost a year. >> let me stop you on that point because it was said a moment ago no one is doubting the candor of treasury or the irs. you're telling me the treasury and irs are denying a congressional subpoena, refusing to show up to this hearing? is that correct? >> that is -- well the congressional subpoena has to do

with a house committee for the document, not a subpoena to show up to the hearing. they're ignoring a subpoena to provide the documents which i think bears on the suggestion made by the ranking member that if they don't show up at this hearing, perhaps compulsory process could be pursued. compulsory process has already been pursued against treasury and irs -- >> the obama administration is defying that process. that seems at a minimum not an exercise if candor, living within the ordinary bounds of the english language. >> it's not an ideal transparency, no. >> now, my understanding is staff was permitted to review some documents under highly restrictive circumstances. can you describe those circumstances as you understand them? >> well after much persistence by the staff of the house oversight government reform committee, the treasury and irs did release some documents. 386, 387 pages i believe. a fair amount of which was the final rule itself. about half of it a lot of it

maybe i would think a fifth, 20% of it, was my work hatthat they just released to the committee. only about 5% even commented on was there any substantive discussion by treasury and irs officials? and it was never -- here are the factors we're considering. it was just mentioning these things trance gentans gently. those are the documents they released -- >> also allowed to review some documents but not take notes, not make copies. >> there are many documents treasury and irs have not released and on two, three occasions staff were allowed to review those documents. they're allowed to go into a room sometimes with pen and paper, sometimes without pen and paper. not allowed to take documents out of the room o or make copies. on one occasion, they were not allowed to make notes. >> no notes no copies, no transparency to congress, no transparency to the american people, defying is asubpoenas,

refusing to show up at this hearing. my understanding is the documents they're fighting tooth and nail to avoid sunshine coming upon show that initially career staff at treasury and the irs analyzed the phrase, an exchange established by the state, and concluded it means exactly what it says, an exchange established by one of the 50 states. is that correct? >> well i'm not sure about that, senator. what we know is that -- this is from the in-camera review, they're allowed to go into the room with documents but couldn't take pen and paper with them. they had to scramble out of the room and write down everything they remembered. staff were allowed to look at different drafts of the proposed rule before the proposed rule was issued. from what we know of their review of those drafts is initially irs officials had included that statutory requirement that tax credit recipients be enrolled, quote through an exchange established by the state. around the same time a treasury official raised this issue with the irs that requirement, that

statutory language was dropped from the proposed rule. >> so, mr. cannon, i want to make sure this committee understands that. our understanding, although to be clear the obama administration is blocking release of the documents so it is all deliberately hidden in the lack of transparency that professor gruber bragged about. but our understanding is the initial version of the rule drafted by career staff at the irs and treasury attempting to follow the law followed the plain text and concluded it had to be an exchange established by a state but then subsequently it appears that political appointees at the department of treasury overruled that decision and substituted instead a political decision contrary to the judgment of the career staff but consistent with the political outcome desired by president obama and the white house? >> what we know for a fact is that that provision, that

statutory provision was dropped from the implementing regulations around the same time this political appointee at the treasury department intervened. we don't know anything of the substance of those discussions, what happened there. we do know that was a statutory provision that was on its way of being implemented as part of the proposed rule and then it was dropped and that's significant because that tells us a couple things. one, it tells us treasury and irs officials never believed that the phrase, the statutory requirement through an exchange established by the state was a term of art as the solicitor general now argues. >> nigh understandmy understanding is some of the documents have notations, initials, perhaps may reflect an individual who also worked in the white house as part of the policymaking apparatus. is that correct? although this is all murky and opaque by design of the administration but is that your understanding as well? >> there was white house input into the development of this rule. there's white house input into the development of many rules. we don't know exactly who

provided that input. >> the initials l.f. were written on at least one of these documents? >> i have not reviewed those documents but that is what house investigators report. >> all right. let me ask a final question. the administration is arguing pursuant to chevron deference that it is the courts owe deference to its efforts to implement this law. i want to ask mr. carvin, if the process that there appears to be a suggestion occurred here, although quite deliberately the administration is blocking any effort for the american people to know if it occurred but if it is the case that career professionals at treasury and the irs in their expert judgment read the statute to mean exactly what it means on its face, that an exchange established by the state means an exchange established by the state, and if it is the case that political operatives ordered those career professionals to disregard the law and reach a political conclusion instead, is it your understanding that that sort of

partisan political decision to disregard the law is the kind of decision that is orderinaryily given chevron deference? >> no mr. chairman. as you know, one of the principle things that agencies can't do under chevron is behave in an arbitrary and capricious manner and obviously the par pardimatic of it is simply inch implementing political objectives. in terms of process, you're not deferring to the tax expertise of the irs the task force which i think is undisputed drawing up these regs was not just irs people. it was hhs and white house operatives. so i don't even think they went through the pretense of pretending this was a neutral interpretation of the law. i hasten to add, of course, chevron's inapplicable here any way because the statute is completely unambiguous so there's no opportunity for deference and as justice kennedy pointed out during oral argument, there's a strong cannon of statutory construction

because this body, congress controls the purse moneys will come out of the federal treasure riff only if that's done unambiguously. >> thank you, mr. carvin. i would note if it is, indeed, the case that partisan political operatives in the obama administration instructed career professionals to disregard the law and reach a political outcome, it's not surprising that they were afraid to come here and testify and explain that that's what occurs and perhaps give some context to why the three witnesses on the first panel chose not to attend. senator coons? >> thank you, mr. chairman. i'll note you've taken nearly ten minutes in your first question, i hope i'll have roughly the same period of time if possible. i believe the core issue we are seeking to have a conversation about here today is the availability of subsidies, the role in the aca and the appropriateness of how the aca has been interpreted and applied. so let me first speak more broadly to that general context. the aca, as mr. weiner pointed out in his testimony, is working. thanks to the aca 16 million people have gained access to

affordable quality health insurance and since october 2013, the uninsured rate just to take one of many positive statistics for the non-elderly adults in america has fallen by nearly 35%. this success would not be possibility without the availability of the premium tax credit which provides nearly 8 million american individuals in the 37 states using healthcare.gov with an average subsidy of $3,200 to purchase health insurance. as we all know, this historic decrease in the number of uninsured is only possible under the aca, is only possible that it becomes affordable because the 87% of individuals who signed up under healthcare.gov qualify for subsidies and this was central to the intent of the law in my view, eliminating subsidies which may well be the outcome of supreme court action if they i think rule on this in a way that is advocated by some today. would result in a massive disruption in the individual

market with millions losing access to affordable insurance and average costs of remaining insured increasing significantly. it is my contention that that is not required by the structure, the text, the history of the law. in fact, the opposite. that the text and the history and the structure of the aca leads to only one possible conclusion. that tax credits are available to all poor, working class, and middle class americans those who earn between 100% and 400% of the poverty level. as we all know, there are many who have opposed the aca for principally ideological reasons. they fought it in congress and lost. they fought it before the treasury department and lost. they fought the individual mandate in the courts and have lost. now another group of opponents has raised another legal challenge. asking our courts to bless a contorted reading of the law in a way that would sabotage a core provision of the act and undue the way that the subsidies work to the fulfillment of the core

goal of the affordable care act. now, neither the distinguished chairman of the subcommittee nor myself were present as the law was crafted but there have been a number of quotes in the press recently from those who were actively engaged suggesting that this cramped reading that's being advanced runs directly contrary to the universally held understanding of those who were engaged in its drafting and implementation. from doug elman door f, head of the cbo at the time, to members of the joint committee of taxation, charles clapton, former senator enzi senator snow, herself, recently been quoted saying they did not see or recall any distinction between federal and state exchanges as this was being drafted. and the denial of subsidies based on that would have gone contrary to their understanding of the intent. so let's be clear in my view, this hearing is just another part of a five-year effort to deny working class americans any help in affording health insurance, having failed at

frontal assaults the aca's opponents are trying to contort the letter of the law, this important law, to defeat its spirit. so for some insight into that let me begin with mr. weiner, if i might. in your view,s is there any doubt at the time the aca was adopted it was understood to mean what treasury has subsequently said it meant? at the time that it was passed? and what, in your view happened to create the dispute that we're discussing today? >> senator, there's no doubt at all of that proposition. we see, for example, jonathan gruber's statement several years after the statute was adopted. he's an economist, an academic economist. well, i see your jonathan gruber and i raise it with four aces. senator orrin hatch who said back in january, 2010 that -- that establishing an exchange is

not a condition of receiving federal funds. and that was stated by other people as well. in june -- well, i mentioned when the states amended their complaint. october 2011. the american legislative council, exchange council, alecka right-wing legislation, said there's no penalty for a state in allowing the federal government to implement an exchange. november 2012, nebraska's governor explaining why states -- why the state wouldn't set up an exchange, said there's no real operational difference between a federal exchange and a state exchange. officials assessing exchanges in georgia, south carolina west virginia all these state ss

advanced knowledge that subsidies were available. this is the way the statute was ubd understood and since it was understood that way, it really doesn't prove much to say that the treasury department incorporated the incorporated the language of the statute into an early draft of the regulation. >> if i might miss wydra, the majority of witnesses have urged us to read four words in isolation and have argued that it leads to only one possible interpretation. the supreme court in its 2007 decision, national association of home builders versus defenders of wildlife wrote "the meaning or ambiguity of certain words or phrases may only become evidenced when placed in context how does the context of these four words how does the text of the entire statute support the reading that exchanges established by the state includes exchanges established for the state by the secretary of hhs? you touched on this in your previous testimony. i'd appreciate your revisiting the point. >> thank you, senator.

yes, the supreme court has made absolutely clear in numerous court rulings by justices of all ideological stripes that statutes are to be read in their entirety, in their context, and to effectuate rather than to defeat their central purpose. and i think it's important to note that there are basically three main features of the affordable care act that make its insurance market reforms work. you have the individual mandate which ensures that either you sign up for health insurance or pay a tax penalty assuming you have the income to do so. the important market reforms such as preventing insurance companies from discriminating against individuals with pre-existing conditions. and then of course you have what we're talking about here today which are the tax credits, which make it affordable for americans to enter the insurance market and to make the entire

affordable care act's reforms work as they are intended to by the law. so in looking at the statute as a whole and in looking at the issue that is before the supreme court in kim v. burrwell it's important to note the role of the tax credits in effect waith the key purpose of the affordable care act to make insurance available for all americans. so i think when we're look at the xchsz it's important to note that when you're talking about who is going to run the exchange, whether or not the state establishes its own exchange or the federal government does it according to section 1321 standing in the shoes of the state the idea is still to make sure tax credits are nationwide available to all americans who need them. otherwise the action doesn't work and numerous provisions of the law are rendered absurd if you take the reading of the tax credit provision that critics of the treasury rule have put forth. you know, we talk about what congress intended.

and when you look at what they in2e7bded, it was again because of the purpose of the act and the way that it is structured integral to achieving the purposes of the law that every american who needs these tax credits be able to have them. that is the way that it was scored by the congressional budget office, the statute. that's the way that the joint committee on taxation understood the law to work. that is the clear congressional intent behind the law. so when you look at the law and the way that the supreme court tells us looking at it in context, reading the text of the law, looking against the backdrop of cooperative federalism which justice kennedy raised in oral argument, noting that if you take the critics of the treasury department's rule you could basically put the states to an irrational choice either set up an exchange or if you take the federal fallback which the statute allows you to do, we will take away millions, perhaps even billions of dollars from your constituents who need

the tax credits desperately. that doesn't make sense and it's not in line with the way the supreme court tells us we should read statutes. >> thank you, miss wydra. that's very helpful. i appreciate the testimony of both witnesses. >> senator sessions. >> thank you mr. chairman. well, the fact you that say it was a goal to make insurance available for all americans doesn't mean the statute can be written in any which you'd like to effectuate some theory of care. congress will be faced with the legislative responsibility if the court rules to deal with the statute as it is left standing. it's going to be a difficult challenge but i think that's what we're paid to do. the president doesn't get to make up the law as he's done so often. it's really troubling to me the extent to which this has become the theory around here that the executive office must do

something. congress failed to act. but when congress fails to act, it acts. it makes a decision. it says no to some of these things. it didn't pass the law unless the state exchange language was in there. that's what the congress passed. so i think we're really in dangerous ground when we get this far away from plain statutory law. with regard to the health care cost, i see in cnn money a recent report from cnn money united health care cost in florida is up 18%. humana up 30% in texas. that's two of the biggest states and two of the biggest insurers in america. i don't know how well it's doing in the practical world. now, mr. grewal let's take another area that i think is even simpler that you raised in your study that the affordable care act provides tax credits to

u.s. citizens win comes between 100% and 400% of the federal poverty level. are you aware of anything else in the affordable care act that would alter that number that range, 100 to 400? >> no, for aliens there's an exception. congress decided that for aliens they would come up with a special rule because aliens could not get medicaid. but for citizens there's no statutory exception and the irs has effected that amendment by regulation. >> so by regulation irs altered that what would appear to be plain language to extend credits for citizens they would effect several million people below 100% of federal poverty level. is that right? >> right now the estimate by kaiser is about 4 million people

aren't eligible for medicaid but don't get -- don't satisfy the 100% statutory floor. so we're talking several million people, yes. >> and mr. carvin, you've studied this. are you aware of any exception that could be used to justify adding several million people when they don't fall within the statutory range? >> it's precisely the rationale they use for the lawless irs rule here, which is it's a good thing to give poor people insurance. congress cut it off below 100%. we don't like that. so we're going to take billions of dollars from the federal treasury and help poor people. we don't need no statutory language, we'll just do what's right. and so no it's precisely the same analysis you've seen here, which is this is supposed to be available for all americans and therefore we can do whatever we want. >> mr. grewal, another one it seems to me is dramatically clear and has been violated as

you noeknow section 36-b of the aca grants credits to some non-citizens with low incomes only if they themselves are lawfully present in the united states and cannot obtain medicaid coverage. irs regulations issued pursuant to that statute, however, contradict the statute and allow subsidies if "the taxpayer or a member of the taxpayer's family is lawfully present in the united states" and "the lawfully present taxpayer or family member is not eligible for the medicaid program." do you find any statutory basis for the administration to find such an exception to what appears to be plain language? >> absolutely not. and the odd thing about that particular change as opposed to the other two, at least for the other two they had the courtesy

to announce what they were doing in the premiumball to the regulation. for this one there's no explanation at all. just the text of the regulation goes beyond the statute without any hint they're expanding the credit to persons not lawfully residing here. >> i think your analysis is important to us. we've had a number of statutes that talk about governmental ledge shaigs. and the american people have an expectation that when a law is passed the chief executive will follow that law and this is just plain. mr. carvin, you've studied the aca. is mr. grewal correct? is there any authority that you can find that would allow the administration to provide health care coverage to individuals if they're a member of their family is lawfully present in the united states? >> it's yet another revision in

a series of stark revisions to the aca that the obama administration has done all pursuant to roughly the same analogy, which is we want to make this better, we want to make it work in the way that we want and do all the kinds of legislative compromises that go into actually crafting statutes will be disregarded if the people in the administration view it as inconvenient. >> our goal is to make available health care for all americans. that wasn't what the law said, however. thank you, mr. chairman. >> thank you, senator sessions. senator blumenthal. >> thank you, mr. chairman. mr. carvin, you argued in the supreme court, did you not? >> i did. >> you argued for the plaintiffs? >> correct. >> are they here today? >> no. >> you know, this hearing has been conducted with a lot of

hype and hyperbole not uncharacteristic of the debates surrounding the affordable care act. a lot of overheated, overreaching rhetoric. but there are some facts. and as ronald reagan said, facts are stubborn things. the fact is the affordable care act is working. it has provided insurance coverage to millions of americans, more than 10 million americans. and not only did congress intend certain results but what congress intended is actually happening. we're dealing here with reality on the ground. in connecticut, which has a health exchange like 13 states do the uninsured rate has been cut by one half from 12.3% to

6%. 7.7% of connecticut consumers have qualified for the tax credit. millions of people across the country are now protected against discrimination. for example based on pre-existing conditions. for years and years as the attorney general of the state of connecticut i did advocacy on behalf of people who were discriminated against because of supposed pre-existing conditions. there's mental health care that has been expanded along with substance use disorder benefits and federal parity protection. 62 million americans have benefited, and more than 600,000 in connecticut. so the aca is working. and the public health and prevention fund has provided connecticut alone with $31 million for tobacco cessation obesity prevention, health

coverage enrollment assistance. those facts in effect i think support the argument that congress not only intended certain consequences and the interpretation suggested by ms. wydra and mr. wiener fits within the statutory whole and the context of the statute but also the results of the statute. i'd like to ask mr. wiener whether that interpretation in effect of the statutes the reality on the ground, comports with what congress intended. >> yes, it very much comports with what congress intended. congress did say in the statute

that the goal was to extend health care, affordable health care to all americans. it said it six times. that was in language that was enacted by congress not some purpose intuited by a judge. it was what congress said it was trying to achieve in the statute. >> ms. wydra, do you agree? >> yes, absolutely. senator sessions joked that the statute should have been written to say health care should be able for all americans. well, point of fact, title 1 of the act is titled "quality affordable health care for all americans." so that is the stated purpose of the law. and it wouldn't make any sense for congress to have written the tax credit eligibility to defeat that purpose. >> and mr. carvin i assume you disagree. >> the model that was followed in the aca for the subsidy was precisely the model for medicaid. we all agree that medicaid was

conditioned on the states doing certain things. my friends on the left here would say it would be insane to end medicaid payments for the needest americans. and yet the aca conditioned the medicaid on the states doing certain things. and that's because this body thought we can get the best of both worlds, we can get the states to do something and we can get universal coverage. precisely the same logic obtains here. you give the states a real incentive to do things, and then the premiums will flow if the state does it. so there's two purposes to the aca. one is stated in 1311 states shall run exchanges. the second is we want subsidies to be available. the only way to accomplish both purposes is to condition the subsidies on states running the exchanges, just like congress conditioned medicaid funds on the states altering their medicaid eligibility standards. there's nothing inconsistent with the purpose. there's nothing illogical. unless this body is going to say

it was utterly illogical to do what it did with medicaid. so no it's perfectly logical perfectly reasonable public policy. >> well, let me just say that your friends who from your perspective are on your left actually are on our right. >> i was giving a geographic description, not an ideological one. >> which i think in a sense reflects the different perspectives that we may bring to these issues, and i respect yours. but i would just suggest again that congress establish a system that fits together as a whole. it's working as a whole. we can argue hypothetically. we can use rhetoric. but the fact of the matter is congress actually did something good here. i can say that because i wasn't a part of congress at the time. and i approached this area with

a lot of humility. very simply, in my view a ruling for the plaintiffs in king v. burrwell would be contrary -- would have catastrophic for millions of families who owe their health insurance to the statutory structure that congress approved. not a perfect structure. not absolutely perfect in all of its wording and statutory language but a ruling for the plaintiffs in my view would be a human tragedy. as well as a legal travesty. and so i'm hopeful that the reasoning that you advanced to the court will not succeed but i thank you for being here today and i thank all of the members of the panel. thank you. >> thank you very much. i would note on the discussions of the expansion of health care that studied have also shown that virtually all of the expansion has been on medicaid and that roughly 900,000 people have received private insurance

that nearly as many people have had their insurance canceled as have signed up on the exchanges for private insurance and the data are compelling that forcing people onto medicaid ends up predictably producing worse health care outcomes. with that senator hatch. >> i might also add that more people are now going to the emergency rooms because they can't get care. too long a wait to get care they need. i also want to bring out that there were about 30 million people that didn't have health care when we started this issue and this bill. guess how many there are today. between 30 and 35 million still don't have health care. now, maybe you can make some explanations about that. you quoted my letter, mr. wiener. i'll just put the letter into the record if i can. >> without objection. >> also mr. carvin. let me just say another thing to mr. wiener. with respect to mr. wiener, the

quote that you made from my law review article where you said supports the president's position was a reference to a supreme court's holding in south dakota versus dole. i do address that issue in my ucla law review article. and let me just put that into the record as well. just the page where i address it. okay? >> without objection. >> mr. carve inin, you've been carrying a load on your shoulders here. proponents of the president's position have argued that congress could not have intended to deny subsidies to federally established exchanges. but isn't it a fact that a very good reason the congress would have wanted subsidies to

establish exchanges was namely to incentivize states to create these exchanges. and congress couldn't order the states to create exchanges directly. so it needed a way to incentivize the states to create exchanges. i think isn't that a perfectly reasonable argument as to what was going on here? >> you're entirely right about the constitutional provision. this body has in countless statutes incentivized states precisely the same way. it's noteworthy the help committee at the same time was considering it conditioned subsidies on certain insurance reform provisions. the clinton administration health care proposals also conditioned subsidies on state cooperation. so far from departing from the norm, this is the norm that this body has continually used not only in the health care area, not only with respect to medicaid and the aca, but with respect to virtually every provision, which is since we can't force the states to do it but we wanted them to take an

operational role the best traditional way of doing it is conditioning federal funds on having the states become our cooperative partners. >> all right. well let me just say -- ask this question to you and mr. cannon as well. i want to thank you both for your important work on this issue. i'd like to read for you a passage from my recent ucla law review article and then ask you to comment. "advocates of the president's position that obamacare authorizes subsidies for federally enrolled plans would have us believe that statutes are infinitely malleable, up can mean down right can mean left established by a state can mean established by the federal government. what matters to them is advancing some alleged statutory purpose regardless of what the statute actually says. that furthers the president's agenda. now, those of us on the other side, however, insist that text does matter, words matter. they always have.

and what the statute says is what matters because at the end of the day the words in our statutes and in our constitution are what bind our leaders and what prevent them from doing whatever they want to. now, fidelity of text is a foundation of the rule of law." do you agree with that passage? >> i do. and i want to make it clear we're not talking about ripping text out of context. i fully agree with my friends you that need to read this in context. i've said that approximately 400,000 times. and i always supplemented it with the point that context reinforces for the reasons i've already articulated at every turn that 36-b should be interpreted to mean what it says. so we're not talking about some green eye shade pulling words out of context. that's not statutory interpretation. read in context, this serves a very valuable, sensible purpose and there is no reason to depart from the plain language. >> mr. cannon -- yeah. mr. cannon in your written testimony you discuss an

investigation that two house committees conducted into the irs's drafting of the obamacare subsidy rule. what are your takeaways from that investigation? if you could add this too, in your view what are the most troubling things that the house investigators found? >> well as i mentioned in my testimony, i think the most troubling things are those that show -- or that indicate that the treasury department and the irs recognize that this statutory language posed an obstacle to how they wanted to implement the statute, so they jettisoned what the statute said and implemented the law as they saw fit. or they just exercised power as they saw fit. and this is not a victimless sort of scenario here. there are 57 million individuals and employers in this country who are being subjected to illegal taxes because the irs decided that it would ignore the clear language of federal law. one of those people is kevin pace, who i mentioned in my testimony. he took a hit to his income of

$8,000. he's a jazz musician. if you think $8,000 is a lot of money to you, it's a lot more money to a jazz musician. others who are affected by this rule are seeing their incomes hit by $1000. others are paying penalties to the irs that employers and individuals, from which they're statutorily exempt, that is -- and the irs it appears from what little we know that the irs knew that this language prevented them from doing that but they tried to find a workaround, they tried to disregard it. the other problem -- or the other thing that this investigation shows is how the arguments that the government has made before the supreme court are not the -- were not the reasoning the irs used when it developed this rule. the fact they jettisoned the statutory phrase through an exchange established by the state from their implementing regulations tells us that they knew it was not the term of art of solicitor general claims. if it were a term of art that

incorporated an exchange established by the federal government, there would be no reason to take it out of the proposing -- or out of the draft proposed regulations. you could keep it in there if it's a term of art. but they knew it was not. they knew it was an obstacle to implementing these taxes and spending that money. and so they threw it out. >> mr. carvin, let me just ask you this. under the well-known chevron doctrine if a statute is ambiguous, an agency interpretation can be sustained if it is a product of "reasoned decision-making." from the evidence we have do you believe that the irs subsidy rule is the product of reasoned decision-making and if not why not? and what does that tell us about the lawfulness of the rule? >> as i indicated -- >> you can also answer if you care to the arguments of -- or who were arguing for the administration's position. >> with respect to your specific question senator hatch no. as i've indicated to senator

cruz, fulfilling the administration's ideological agenda is the opposite of reasoned decision-making because they're simply substituting their policies for that of the enacted law. and i would in addition point out that it strikes me as interest, and i believe the solicitor general more or less admitted this during oral argument that from anybody's perspective the notion that this body was delegating to the irs the seminal decision on whether or not to have these subsidies which my friends to the left agree is very important to the act, strikes me as quite counterintuitive. this was not filling in the gaps in a statute. this was the basic policy decision. so no. congress spoke precisely to the question at issue as the chevron phrase has it. congress made a decision. so there was no room for the irs, much less white house operatives to change the basic policy decision embodied in the statute. >> well, thank you. now, let me ask professor is it

grewal? >> grewal yes. >> okay. i want to pronounce it right. i hope i'm pronouncing yours right. is it wiener? okay. now, you identify in your written testimony several other irs regulations that grant obamacare subsidies to statutorily ineligible recipients. these include regulations granting subsidies to individuals outside this statutory income range. individuals automatically enrolled in employer health care plans. and even some categories of unlawful aliens. now, what does the fact that the irs ignored limits on its authority to grant subsidies in other instances tell you about its general attitude toward obeying limits on statutory authority? >> regarding the king v. burrwell issue if that regulation is valid it's impossible to believe that it's because they closely paid attention to the statute and their statutory authority. it could be by accident that the regulation is valid. but i think with so many

instances it's obvious to me that they are implementing the law that they wanted to see enacted rather than what actually was enacted. >> all right. well, i think i've taken -- i appreciate the extra time that the chairman and ranking member have granted me. i appreciate you both. >> well, thank you, senator hatch. i'd like to thank each of the witnesses here. we have heard i believe incredibly important testimony. testimony that i think has particular salience to the millions of residents in the states that have not established state exchanges. to the millions of young people young people fresh out of college, millennials, whom the obama administration is trying to exact billions of dollars in illegal taxes from each of you, to a legal immigrant like my father 58 years ago.

if you live in a state that has not established an exchange the testimony we've heard today at this hearing is that the obama administration is trying to impose on you personally thousands of dollars in penalties that are flatly contrary to law. and i would note that these penalties coming from the individual mandate disproportionately hurt the most vulnerable among us. the people being hurt by these illegal taxes are not the warren buffetts and bill gates of the world. they're young people. they're single moms. they're hispanics. they're african-americans that are suddenly finding a big tax bill that is due from an administration that is ignoring and violating federal law to extract illegal taxes. and i would note the testimony this panel has given, that the career professionals at the irs and the treasury department recognize they were bound by law not to collect those taxes from millions of people who didn't

owe them until political operatives the testimony suggests, overruled them instructed them to disregard the law and collect taxes from people who did not owe them and could not afford them. that testimony is quite stunning and it is testimony that every american ought to consider. i want to thank each of the witnesses from the subcommittee. and the committee will keep the hearing record open for an additional five business days. which means the record will be closed. as of the close of business next thursday, june 11th, 2015. i note senator coons wishes to make a closing remark. so senator coons. >> thanks, mr. chairman. we came to this hearing today of differing views of the history, the structure, the purpose and impact of the aca. i thank the witnesses for their testimony. but i think we leave with

sharply differing views of the path forward and of what the purpose was of this hearing today. in my view this is just another part of a five-year-long effort to deny working-class americans any help in affording health insurance. having failed at repeated frontal assaults the aca's opponents are now trying to advance a contorted view of the letter of this important law in order to defeat its very spirit. and i too will raise the specter of a tax increase. these opponents of the affordable care act apparently find the idea that every american should have access to affordable health insurance so offensive that they are willing to advance a cause which if successful would immediately raise taxes for 7.7 million americans by an average of $3,200 a year. in order to destabilize this law and ultimately in an effort to bring it down. i hope they are not successful and i hope instead the affordable care act continues to be improved and to strengthen access to quality health care in this country. thank you for holding this

hearing. i appreciate the fairness with which you've conducted it. >> thank the members of the panel and the hearing is now adjourned.

former texas governor rick perry announced today that he's running for president, making ten the number of republicans currently vying for the white house. we'll have his remarks tonight at 8:00 eastern on c-span. and we invite your thoughts on rick perry's presidential announcement. you can leave your comments on our facebook page and on twitter @cspan.

this sunday on c-span's road to the white house, a conversation with former virginia senator and likely democratic presidential candidate jim webb. he discusses growing up in a military family. and his service as a marine in vietnam. american foreign policy, politics, congress, and why he wants to be president. >> this country needs leadership. i think if you look anywhere in the country and ask people what you believe is missing here at the federal level, it's leadership that they can trust. people who have the experience that they can show that they have a record, they can work across the aisle and get things done. and i've had sort of a blessing in my professional life in that i've been able to spend about half of my time in public service and then half of my time doing other things working for myself basically as a sole proprietor, and i just believe very strongly that we need to create a new environment in washington where we have leaders who can talk across the aisle

and actually solve our problems. >> jim webb, this sunday at 6:5:00 p.m. eastern on "road to the white house 2016" on c-span. >> with live coverage of the u.s. house on c-span and the senate on c-span 2 here on c-span 3 we complement that coverage by showing you the most relevant congressional hearings and public affairs events. and then on weekends c-span 3 is the home to american history tv with programs that tell our nation's story including six unique series. the civil war's 150th anniversary, visiting battlefields and key events. american artifacts, touring museums and historic sites to discover what artifacts real about america's past. history bookshelf with the best-known american history writers. the presidency looking at the policies and legacies of our nation's commanders in chief. lectures in history with top college professors delving into america's past. and our new series real america, featuring archival government and educational films from the

1930s to the '70s. c-span 3 created by the cable tv industry and funded by your local cable or satellite provider. watch us in hd, like us on facebook and follow us on twitter. >> congressional budget office director keith hall made his second capitol hill appearance yesterday, taking questions from the house budget committee on the cbo's fiscal year 2016 budget request. the committee looked at the debt and deficit entitlement programs, the potential impact of the health care law, and potential future downgrading of the u.s. credit rating. georgia republican representative david price chairs this committee.

>> 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 conference agreement of its kind in over a decade. working together the house and the senate put forth a plan that would get the nation's fiscal house in order, that would grow our economy, would strengthen our national security and make government more efficient, 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 in the first quarter of this year by 0.7%, that means decreased in size. there have been three such quarterly economic contractions

since this so-called recovery ban began. after more than six years of president obama's higher taxes and out-of-control regulatory schemes we have an economy that remains weak and plagued with uncertainty and we all hear from the administration their plans are to spend more money that we don't have to tax more money out of the pockets of hard-working american families, and to build more regulatory barriers to jobs and to growth. this new normal is simply unacceptable. that's why we've focused on putting forward a balanced budget with pro-growth policies that will help create more opportunities for american families and american business. 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 testifying here before the house budget committee since becoming director on april 1, and we welcome you. you bring a tremendous amount of experience and expertise to the job, and i want to thank you again for agreeing to serve as director. we look forward to your testimony and the insights you can share about how cbo works with congress, how it arrives at its conclusions, and how we might improve transparency, the functions and analytical tools available to the agency. and then more broadly what that all means for the larger fiscal and economic challenges facing our nation. as we're all well aware the reports that cbo has provided to congress over the past several years have shown a steady and troubling decline in economic growth projections. cbo has consistently raised the alarm about the unsustainable fiscal imbalance here in washington and the economic opportunity that is lost due to an out-of-control increase in debt. something must be done and i

appreciate the critical role that cbo has played and will continue to play in our efforts to ensure that the money that taxpayers send to washington is used responsibly and that there is transparency and oversight of all government programs. the information that cbo provides our committee and our colleagues here in congress is viet toll that goal and to the legislative process. having sound analysis in a timely manner that is responsive to the needs of 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 and tested practices but

what it does mean is adding more tools to the toolbox. you can rarely go wrong with more information. and i encourage the congressional budget office to remain committed to developing and refining its modeling and analysis, whether on the macroeconomic side of the ledger or on specific issues of interest like health care. cbo has done tremendous work over the past 40 years thanks to its incredibly talented and dedicated staff. i want to thank you again dr. hall, for testifying today and for your leadership of this important agency. i look forward to the work ahead to improve our efforts here in congress so that hard-earned taxpayer dollars are spent more wisely in a more efficient and effective and accountable manner, and so that the policies we pursue have a positive impact on our economy and on the lives and the livelihoods of the american people. and i'm pleased now to yield to the ranking member from maryland mr. van holland for the purposes of his opening statement. >> thank you, mr. chairman.

let me start by welcoming you, director hall, to your first house budget committee hearing. welcome, dr. hall. and as you well know the agency that you had the congressional budget office has a well-earned reputation as a non-biased 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 non-partisan 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 riflin wrote describing the importance of maintaining that non-partisan tradition. >> without objection. >> and director hall i know you know you're the caretaker now of

that independent non-partisan tradition, and we look forward to working with you. i think it's going to be particularly important given the fact that congress has now directed the congressional 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 mr. camp's tax proposal how those games can be played the joint tax committee did a whole number of 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 revenues but in fact that was

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 economy. and i would point out that according to the non-partisan congressional budget office's analysis of the republican budget at least over the next couple years it would actually create a contraction in the economy 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 congress that would actually slow down economic output at this particular time, which is what the congressional

budget office has concluded the republican budget would do. we're also gathered at a time when we're looking at a lot of appropriations bills coming to the floor of the house and i think 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 i just do think it's worth reminding my colleagues of what the republican budget report from fiscal year 2015 said about using the so-called oco funds the overseas contingency operations fund, the 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 integrity of 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've 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, and he's referring here to the secretary of defense ashton carter "as the secretary and the chairman of the joint chiefs have repeatedly stated, funding enduring operations through oco is harmful both to military planning and to service member morale. secretary ash carter has called this approach managerially unsound and also unfairly dispiriting 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 process, it's kind of a meaningless exercise. the president has been very clear he's not going to support any budget bills, appropriations bills based on this oco gamesmanship. and so we hope we can get beyond that in the near future and get on with the business of the country. thank you. >> thank you. mr. hall, i want to thank you again 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 but we 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 blessed with a staff that is knowledgeable highly skilled, very hard-working, and dedicated to providing the best possible objective and impartial analysis to the congress. cbo has consistently been rated one of the best places to work in the federal government. the congressional budget act of 1974 created this committee, the senate budget committee and the congressional budget office together. cbo's work follows processes specified in that law or developed 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. at cbo we are committed to providing information that is objective, insightful, timely and clearly presented and explained. also, we make no policy recommendations. instead, we strive to present fully and fairly the likely consequences of alternative ploemz proposals being considered by the congress. in response to your interest for the upcoming year, we've requested the funding for three new positions. these new wogss would be devoted to conducting dynamic analysis of certain legislation as specified in the recent budget resolution and in analyzing the economic effects of health care proposals. focusing for a moment on these two topics, over several 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 produced a number of

reports that have included these effects and we expect to devote considerable attention to further developing our capacity to conduct dynamic analysis in the upcoming year. interest in legislative proposals related to health care on the part budget committees, committees of jurisdiction and the congressional leadership remain very high. for example, we continue to analyze proposals to modify the affordable care act and could lead the forthcoming supreme court decision regarding that act could require significant changes to baseline projections that could lead to significant legislative activity. we're in the process of analyzing various aspects of the health care sxichbl hansing our capacity to assess the fekds 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 insightful and timely. in the upcoming year, we expect

to provide a wide variety of estimates and other analysis to congress. they include about 20 reports presenting an assessment of budgetary 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 tabulations for appropriation acts and produce roughly 85 analytical reports and other publications. all of our estimates and reports are reviewed internally for objectivity, analytical soundness and clarity. that rigorous process involves multiple people duff v at different levels in the organization. in addition it we consult with numerous outside experts who represent a variety of perspectives. a continuing challenge is how to respond in a balanced way to

requests from both the majority and minority of multiple committees in both the senate and the house. we regularly consult with this committee, other committees and the congressional leadership to ensure that we are focused on the work that is of the highest priority to congress. our second goal is to continue to present and explain the methodology and results of our analysis clearly. we'll make our work widely available to congress and the public by releasing publicly all formal cost estimates and analytical reports. input from outside experts and extensive external review will remain an important component of our transparency. also we will continue of it our documents and related information provide explanations that go well beyond just presentations of results. in addition, cbo analysts will regularly explain details underlying the agency's estimates and other analysis to interested staff hill staff and present their work at professional conferences. the transparency of our work is very important and enhancing it is one of my prime objectives. our third goal is to continue to

improof our internal management. at cbo we continue to face significant competitive pressure in attracting and retaining the highly educated skilled employees we need. more than 2/3 of the staff consist of economists and budget analysts. talented people of those backgrounds are sought by government agencies private organization universities and private companies. 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 in 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 constructive relationship for many years to come. thank you. >> thank you, dr. hall. i think regardless of our political perspective or ideological perspective we all 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, which we think is important, getting spending under control. 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 year, january through march, the economy actually shrank by 0.7%. it's the third time since the end of the great recession that the economy actually contracted. and i'm not aware of any other recovery, dr. hall, that had this kind of contraction within the recovery itself. are you aware of any recent

recovery that has this kind of contraction? >> no i'm not. and i think overall this has been a frustratingly slow recovery with respect to economic output. >> every time that the economy contracts or underperforms economists find an explanation for why they didn't see it coming. in the most recent instance it was because they had a winter, which comes around every year. 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? >> well, you know i do think that's a tough question because it has been frustratingly slow. and 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 kind of slow productivity growth, seems to be a big part of this.

in fact, productivity normally has sort of 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 can 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 but that's been a reflection of this low productivity growth. >> what i'd like to have folks take a peek at is this slide that's projected here. these are the projections of real gdp growth for fiscal year 2015. we're now through two complete quarters of fy15. the projections, as you see in blue there and then the actual, 2.2 for the first quarter and a contraction of minus 0.7% for

the second quarter. if you normalize those for the year, we would end up with a growth rate of 1.5%. clearly not what can get this economy rolling again. do you think we're missing some underlying weaknesses in our economy through the customary modeling that cbo has? are we missing something that makes it so the forecasts are not as accurate as we'd like them to be? >> i think economic forecasting is difficult. and it's always full of errors. it always has errors in it. and there are times where it's very hard to forecast the economy. and it's not just cba.o. it's everybody. i would feel like cbo was missing something if somebody else was forecasting any differently than we are. but they're not. these results are genuinely disappointing, but i can't tell you why. >> let me probe a little deeper on that and see. do your models -- is an increase

in taxes increased tax rates, does that 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 projections for fy15 include the increases in taxes we've seen through obamacare and the other tax that's have been increased through this administration? >> that's right. >> do your models -- does an increase in the amount of regulation at the federal level, does that have a drag on the economy? >> it can. it's sort of the idea that if you have an overall level of regulation and it gets too high it can slow things. there's also one thing that 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. one of the things i get concerned about is if we do things that slow job growth during bad times it delays

recovery in the labor market. >> and increasing regulation can slow job growth. >> it can. >> what about uncertainty, something that's hard to model, something that's hard to measure, but uncertainty in the market? does that 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 ii 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 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 categorized 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 going 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 difficult 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. 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? >> well, obviously the aca analysis we did before was valid. i can tell you one of the things that will happen when we look at the dynamic effect of this, the dynamic effect will probably help reduce the deficit, work 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 double, nearly double gdp is something of real concern and it handicaps us going forward. >> in the remaining 23 seconds, reagan recovery, obama recovery, compare and contrast. >> i can tell you that the gdp growth from this recovery has