reiterated in the report we released is that fannie mae(kd freddie mac are financed and controlled by the federal government in a direct enough way that we believe they should be viewed as parts of the government for budget purposes. we do not in the end dictate the way administrationt( records th budget for yearsq that are passed. we are continuing including based on discussions with the committees to to project finances going forward. >> so you concluded that for the reasons you laid out that was a reasonable conclusion to place them on budget is basically what you are saying? >> absolutely. and the relationship changesç over time and we will revisit that. >> right now reasonable interpretation would place them on budget and it is contrary? >> that's correct. >> thank you. and this is not an inconsequential decision as to

whether it is on budget, is it? >> well, it matteredw3 most for the budget numbers last year because by our assessment taking on board -- absorbing the companies/+ the federal governt was on the hook for the risk the companies bore. the biggest difference was for last year. looking ahead this year and beyo beyond, the cash infusions and our version of subsidy cost are calculated differently. the numerical differences are not that large. but it is potentially important beyond the baseline projections in how one would estimate the effects of various changes in whichç fanny and freddie do. that is why we think it is very important to it continue to score them on the basis we have established. >> on the last point, in light of your consideration of how it is done and assumptions you make as time goes along if things

don't turn around there your number could go up dramatically had light of the trillions of dollars of risk that is exposed. correct? >> yes, that's çcorrect. >> thank you very much. >> thankçó you, congressman. chairman. dr. elmendorf, thank you for being here. appreciate it very much. i'm glad that you've had to say this morning i'm glad to hear that some economic indicators indicate we are beginning to turn around in the economy. however, we all know that job market is critical and it appears those lagging indicators are really hurting. let me tell you what they are is so important to me. especially my state of north coletta. we just reached an all time high of 11-point to 4 percent in the month of december. there are indications we haven't topped out. i've introduced a bill, the hiring after 2010 to help businesses attacked credit for job creation. to help those folks on the

fence. sort of push them off. in your opinion, what do you think the unemployment rate remains high, even in the face of economic growth, you have touched on this some? that's ugly, how do cbo improvement on this front, how do we get there? finally, we intend to the highly act and other bills out there similar, to increase job creation in the short-term, what kind of impact would that have on a projection number that you have over the long-term? >> congressman, i'm not examining your particular bill but in general, we did analyze alternative ways of spurring economic growth and job creation. and we think that one of the more effective ways for policies that are targeted at basically give money to firms in response to increases in the payroll. >> and that's what this one does. >> that works in two ways really. part of that is just that putting money into the spending stream, giving more money to

workers or to firms will incur a certain amount of excess spending. there is an incentive effect. if the program is structured right, and there are a lot of complexities as you know with a, it can create an incentive effect addition. at a policy like that were implemented, we would incorporate -- were tried as make the aspects of it. as was being considered, and we would certainly incorporate its effects in our next round of baseline projections. but i can't say offhand how much difference that makes. >> thank you. i understand it. the larger question on the economy, i agree we need to have commonsense in cooperation to fix the problem. and i think mr. campbell were here, because he said willie are is unsustainable. and that's true. it also is unsustainable last year and the year before that. and the year before that, and in the years the previous administration was in charge.

>> yes, that's right. >> and things have added to the problem we're in. here's some of them. because in 2000, i came here early enough to work on a cooperative way in to send us to the past. policies were put in place shortly thereafter in the first bush years that made the problem even worse because we were told then that we could pay off all our debt. where we are today. but there were those who said, that was not important as a matter for, vice president cheney said, deficits don't matter. if he's listening i want him to understand debt to do matter. and now the consequences of the actions that were taken. debts matter to children. so my question is this, as we look at the rotter road, we need a bipartisan approach. we don't need a partisan issues that are out there that are going to take everyone working together, making tough

decisions, we can go back to that. if we want to get the job done, that will make a difference so that people who live in my district whether they are on main street or on a country road, start enjoying some of the same benefits that the people on wall street are now enjoying and we are getting jobs. so how do we make these things fit from an economic standpoint, so this economy starts to go and everyone is able to sit at the table again rather than sit at the end of the chair and get people on? >> you ask a very important and very difficult question, congressman. and has not been a good period for many american families, and trying to adopt policies to encourage overall growth and to also ensure, as you like that that growth be shared in certain ways, it's very difficult. and it is made more difficult by

very large deficits and growing debt that exist under current policies. and we are one of the areas that we are plan to devote a good deal of effort this year in fact is working on programs of the income security and education area doing the sorts of analysis that we hope will help you make decisions in that area in an informed way. i don't have a cookbook and he was particular to pass you. but i do think that doing that will also taking note as you say, correctly that the debt matters, will be a very great challenge. >> thank you, mr. chairman. i yield back. >> we have seven minutes, 17 seconds. what we can do is let you answer questions and we got to go vote twice. there's a five minute boat following this one. let's take a was upended will leave here. we will leave you with two minutes to go. the floor is yours. >> thank you, mr. chairman.

thanks, mr. elmendorf. so i'm going to go really fast, rapid-fire. if we want to address the structural deficit, which is better for the u.s. economy in the long run? cutting federal government spending, or raising taxes? >> well, so, raising taxes depending on how one raises them, can have important effects on people's incentives to work to say. and if taxes are raised in a way that discourage work and saving, that would have dampening effects of economic growth that would offset the advantages of less debt. similarly, government probe lands on the spending side to have effects on incentives to work and save in the ways those programs are change can have incentive effects as well. so i don't think there really is a clean answer that should be on one side or the budget with other. it depends much more i think on adopting policies on either side of the budget that take account not just of the overall effect

on the deficit, but also the effects on people's incentives to. >> who is better for the economy and the long-term, a a federal government employee, or a private sector employee? >> i will take that personally, congresswoman. [laughter] >> look, we have to decide as side what we want the public sector to do and not to do. and i don't think there's a simple answer to the question. both employees will spend money and they will buy things that will help create jobs for other people. it's really a matter of judgment about what one wants the economy to be like, and how much we want to be in the public sector versus the private sector. which has taken care about health care to some extent. but there isn't a simple economic answer to that question. >> does the private sector employees taxes help pay for the position of the public sector

employee? >> yes. >> thanks. which is worse and longer, crowding out private investment, with government borrowing, or higher taxes that slow private growth of? >> so i think it depends critically on the nature of the taxes and how much they slow private growth. as you understand it will, not every tax increase is the same. not every spending cut is the same. it matters very much what specifically you would do in policy terms of. >> in this economy, if you had to raise taxes, why tax would you raise first? that you believe would have a positive effect or a less negative effect on the economy. >> i'm sorry, congresswoman, i'm not trying to be difficult that i have not thought carefully about breaking possible tax increases in that way. >> okay. i want to talk a little bit about the hagel bill.

you mentioned earlier that the pay go rules of the 1990s helped, and i've heard that also. but i've also heard that the paygo rules that we passed last year had so many loopholes and exemptions that they want the same as the paygo rules that were in effect in the 1990s lex is that true? >> the paygo rules that you passed last year exhibit significant amounts of perspective tax cuts and some spending increases from the paygo requirements. >> so would it be more meaningful if we went back to the paygo rules that were in effect in the 1990s, in terms of trying to address the structural deficit in the long-term? >> yes. if you adopted a paygo rules that did not exempt any prospective policy actions, that would have a sharper a fact on holding out budget deficits of. >> okay. what if we froze the topline of

medicare medicare, medicaid, social security, and the very same discretionary spending that the president announced for tonight's speech for the same time period? how much would that save? >> i can't think of the categories off hand but it would've saved a great deal of money. i think the challenge is to decide what the top line cap on medicare spending, what does that mean to medicare beneficiaries, who is that will not get paid in an amount that would've been paid without that cap. >> okay. let's say that you reduce the benefits to wealthy americans who did pay that money into social security, means tested the payouts and did it that way. >> so on social security side, with picking sort of a dollar amount up front it's easier to change those rules then want to do this sort of thing as you suggest. exactly how much you'd save depends on just what thresholds

you picked and how the testing worked. >> mr. chairman, thanks a million. [inaudible] >> thank you, mr. chairman. >> dr. elmendorf, thank you for being here. i applaud president obama for taking a significant first step toward getting this deficit under control, and i applaud those republicans such as i believe senator mccain and others who said they will support it. it's somewhat disappointing to me that some of my republican colleagues on this committee who had the majority for 12 years and helped, through their partisan budget, passed into law without democratic support led us from the largest surplus into the largest deficits in american history. and perhaps it's an inside it to

why we have the deficit problem have today, with some of my colleagues would suggest it's not significant that we are going through this freeze, be able to reduce the deficit by $250 billion more than it otherwise would be. i'm still hopeful we can build some bipartisan support for deficit reduction programs, short-term, long-term, because i don't think either party has the political will or the political ability to make the tough choices to get us where we need to be. but i do want to go back, not focus on the past, but i do want to be sure we understand how we got into this ditch so we can figure out how to not drive the car into the ditch again. and i'd like to begin with this question. in 2001 when president bush took office, what was the cbo's projected national debt for the year 200 2000 -- 2010.

>> i don't know offhand congressman. i'm sorry. >> wasn't a close to zero national debt? >> that seems plausible. >> so if you could get that for me i would appreciate it, but as i recall@@@@@@@ @ @ @ @ @ @ @ @) >> there was a projection of about $5.5 trillion so that would be a projection of having the national debt paid off by the year 2010. if you could verify those numbers. >> that's correct. >> what is the national debt today? >> the debt held by the public by the end of fiscal year will be about $8.8 trillion. >> the total national debt. >> if you mean the gross, gross debt is on the order of $12 trillion including debt held by the public. >> so, instead of the projected

situation where we have no national debt gross debt by 2010, projected when president bush came into office, in fact we have a gross debt of about $12 trillion. so, approximately a $12 trillion turnaround from what was projected with the policies in place in 2001. >> i think, congressman, that the numbers you are thinking about for the 2000 projection would have referred to debt held by the public. it was not gross debt that would have gone to zero because there would be bonds held in the social security and medicare. i think it debt held by the public and you correctly focused on because that is what measures the government's effect on the economy. that is the number we think will be about $8.8 trillion. and that would have been in the neighborhood of zero. we will check to be sure. >> wasn't there a projection that there would be about a $5.5 trillion surplus over a 10-year

period if you go back to the 2001 projections? >> that may be. i just don't have a personal recollection of that. we will check for you. >> so, instead of -- at a minimum, instead of zero public debt in 2010, we have about $8 trillion in public debt? >> yes. >> the gross debt is actually worse than that, $12 trillion. >> yes. >> incredible turnaround. i want to get this for the record. during the 12 years that republicans had a majority on this budget committee and passed the budget resolution without democratic votes, did they ever pass through this committee or in the house or through the congress a three-year freeze on nondefense discretionary spending? >> not that i am aware of, congressman, no. >> ok. during those 12 years that the republicans had the majority on this committee and passed every budget resolution they passed on

a partisan basis, did they ever pass on the floor of the house or in the law a long-term reform proposal to reduce the cost of entitlement spending? >> not that i am aware of, no, congressman. no, congressman. >> in fact, the reality is that without democratic votes under the leadership and push of tom delay in the wee hours of the morning, is that correct that the congress under republican leadership passed the largest increase in medicare funding since medicare was created, the medicare rt prescription program? >> that's right. >> was that the largest increase in medicare entitlement spending since medicare had been created to? >> yes, i think that was the largest increase, not is a the number seven increase over time based on the cost of providing benefits already written into law. in terms of the expansion of benefits, that was a very significant expansion, and it

was and acted without any particular means of paying for it being identify. >> in fact, it was asked without being paid for at all, is that correct? >> yes, congressman. >> all that money was borrowed in effect. do you know how much of a tenured -- what does the part d prescription program? >> that's a good question. >> can someone give me a ballpark? 10 years from the time it was passed. what did 10 year cost? [inaudible] >> i'm not sure, congressman. the actual cost is coming below cbo's estimate, even for the below the as that of the office of the actuary at the centers for medicare medicaid services. but still a substantial amount of money. i don't know what the tenure number would be. >> i've heard between $500,000,000,000.700 billion over a ten-year period. do you think that's approximate

range of costs, a ten-year cost of the medicare expansion program that was passed without being paid for by republicans when they controlled the congress? >> those numbers sound a little height to before the decade, but we will check for you, august and. and respond to that question. >> i think it is somewhere in the half a trillion dollar range, none of which was paid for. can you tell you, doctor elmendorf, how much the 2001 and 2003 tax cuts have increased the national debt, as of today? >> i think i'm zero for three for you, congressman. i don't have an assessment of cost of that over the past decade. on a related fact which may be interesting to you, and the deterioration in the budget outcomes over the last decade, wealth, about two thirds of that deterioration has come from

legislative changes in our estimation. and about a third has come from economic and technical factors that are less able than we expected. >> okay. do you think -- you have a ballpark? did the bush tax cuts of 2001 and 2003 on a ten-year basis at more or less than a trillion dollars to the national debt? >> i believe a good deal more than a billion dollars, congressman. >> more than $2 trillion, perhaps? >> so there we go. so we think over the ten-year, the appropriate ten-year window which in this case of the 2002 through 2011, fiscal years, that the cost of the 2001 tax cut was about one and a half trillion dollars, not including the extra

debt service that has resulted from it. >> do you know what the number is with the extra debt service because i don't think we've done that calculation of the debt service. as you know week as to make the effect of the debt as a whole and do a partial estimate for this piece but we have not done that. >> but when you increase the deficit, debt service is a real cost of increasing that deficit, is that correct? >> yes. >> so minimum of $1.5 trillion has been added to the national debt as a result of the 2001 -- 2003 tax cuts that if you add in interest that could be over $2 trillion, perhaps. okay. some of my colleagues in congress, just a few weeks ago, were proposing a complete repeal of the estate tax. in fact, some of my colleagues and this committee talk a great deal on a regular basis at every opportunity about importance of not adding debt to the next

generation and our moral obligation to our children. some of those same members who voted for the budgets that led to the largest deficits in american history, after they inherited the largest surplus, has also supported repealing the tax. to heaven as one of the cost of complete repeal of the estate tax? >> we may. >> i realize you're not the director of the ways and means committee, so i understand you're not having the exact number is on all these questions. i would welcome the follow-up. but some approximate number? >> i think we don't know. i take it back. as you say, it is the ways and means committee, that does those estimates. we can check on what the numbers would be. >> these are the have a direct budget application, that's why appreciate the answers in writing. i have heard numbers as high as

$700 billion being added to the national debt if we had complete repeal. the estate tax. does that sound like a ballpark cost in terms of extra national debt to? >> i'm sorry, congressman. we just don't -- we don't know. we have a lot nubs in our heads, but not every number we have aligned with your questions very well i'm afraid. but we will send that to you. >> i believe that might be the ballpark number for your. if we did what some members of this committee talk about reducing the deficit on a regular basis. if we did what they wanted to do, i think that would add somewhere between half a trillion to an extra $700 billion to the national debt over a period of time. could i just -- why don't we do this then? can i just ask you for the record, in addition to answering the questions i've asked, if you would also answer the question of what the ten-year cost would be of other tax proposals that had been made, one of them has

been reducing the corporate tax rate by perhaps 5%. i'd like to know what the increase in the national debt would be if we reduced the capital gains tax by 5%. and would you happen to know off the top of your head what the amt, complete amt permanent tax fix would cost, how much that would add to the national debt over 10 years? >> that we actually do have, and approximate number reported in our outlook that over the next decade, indexing the amt for inflation, particulars of what one might mean by fix, would add would reduce revenue by $558 billion. and would also have a debt service cost beyond that over the next decade of $125 billion. >> okay. and we will be able to tell more specifically when you get the

numbers, but the bottom line is, by my math, if you were to pass some of these tax proposals that some of the folks who give a lot of deficit hawk speeches but turn into deficit does when it comes to the tough decisions to balance the budget, if they were to pass all the tax cut proposals that they have recommended, you could not only frees the nondefense discretionary budget, you could eliminate the entire discretionary budget and probably including the national defense budget, and still not balance the budget. and i clear, in response to mr. doris questions, you said that if we were to extend all of the 2001 in 2003 tax cuts that were passed on a temporary basis, under the guise of being able to do that fiscally responsibly, for those who want to extend all of those permanently, did i understand

there was a $4.5 trillion cost over 10 years? i was there a different number there? >> yes. so if we were to extend expiring tax provisions that you say from 2001 and 2003 at also index the amt for inflation, those together would add about $4.5 trillion to deficits over the next 10 years. >> okay. >> including the debt service that would result. >> okay. dr. elmendorf, you said earlier is your opinion that no single step, either on the entitlement side or the discretionary side of spending or the tax side, no single step is going to bring us back into a balanced budget, is that correct? >> i think it's very unlikely that a single step would do that because of the magnitude of the gap between spending and revenues is so large that to try to close that gap, if that were your goal, only through one component of spending or of revenues, would require radical changes.

>> would you agree that the proposal that was ever made or passed under republican leadership in the congress over the last decade or so, the proposal that president obama has put forward now to have a three-year spending freeze on nondefense, non-security defense spending, discretionary spending, would you agree that that is a significant substantive step forward toward reducing the national deficit? >> so as i said before, it's a step in the direction of reducing the deficit, according to the newspaper accounts it is a small step relative to the overall deficit that we project over the next 10 years. but beyond that we just need to wait to see the actual proposal and to do our analysis of it. >> do you think it could also, i think it's a very significant step forward, i can understand you in your position being

hesitant to add adjectives to the steps because you're in your position on a nonpartisan basis. and i respect that. but don't you think there's some benefit to their could be some significant benefits to the private markets and the capital markets if they were to begin tuesday congress taking and the president together on a bipartisan basis, taking significant steps, real steps, meaningful steps, to get the deficit under control? >> i certainly think that bipartisan >> i certainly think bipartisan steps that would change the trajectory of the tpfederal deficit could have a very positive effect on financial market markets concerns about where that deficit is headed. >> i want to thank you for answering my questions and the other questions i would look forward to in writing. in fact, if your staff could look at any of the major tax cut proposals proposed by democrats

or republicans over the last six to eight months, if you could put a 10-year cost on those and include that in your answer, i would welcome that. >> we will provide as many answers as we can as quickly as we can. >> at this time i would like to have the committee recess subject to the call of the chair. thank you. >> thank you. [captions copyright national cable satellite corp. 2010] [captioning performed by national captioning institute]

>> the committee willonve >> the committee will reconvene. we will continue with the question and answer period and i would now like to turn to my colleague from virginia, mr. scott, for his questions. >> dr. elmendorf, thank you. i would like to call up the first chart. it is this one you are looking at. as you can see, this is a chart of the deficit going back to 19 1980. you will notice the blue bar shows the deficit, a significant deficit was inherited, eliminated, and we went up to surplus. the projected 10-year surplus starting in 2001, 10-year surplus was about $5.5 trillion. could you -- what happened in

1991 to create that chart, the blue part of the chart? in 1993, i'm sorry. >> well, as you know, congressman, during the 1990's there were significant policy actions taken to narrow the deficit. there was also an economic recovery and boom that increased revenues and increased spending. >> did the votes in 1993 help create that chart? >> yes, they did, congressman. >> what happened had 2001? >> well, as you know, the economy was in recession and also there were legislative actions taken that widened the deficit. >> 2001? >> excuse me? >> when did the recession in 2001 start? >> well, i actually have that.

it started in march of 2001 and ended in november of 2001. that is a calendar year basis. these are probably fiscal year. year. >> after the bush administration came in, then the recession started. the bush administration did not quote in here and recession, is that right? >> the national bureau of economic search date business cycle. they dated investing in march i think analysts would agree. >> and instead of a 10 year $5.5 trillion surplus, we ended up with, what, a 3.5% or deficit, additional debt for those just? >> yes. i don't have the numbers in hand but there was, as you know, and as the picture shows, there were significant deficits in this age. >> and not standing the fact the bush administration overspent the budget $9 trillion, can you present the next chart -- the jobs created under the bush

administration were about the worst sense when? >> i don't have those facts, but it is i believe true that net job creation over the past decade has now been essentially zero. >> and that's the worst since the great depression, a.q. >> that very well may be, i'm not sure, congressman. >> we are always in a very challenging situation where we are trying to create jobs. what impact does the fact over the last eight years we've overspent the budget a trillion dollars, and in addition states are cutting back significantly, what does that do to the challenge we have in trying to stimulate the economy to create jobs and? >> makes it harder. there's no doubt that in the late 1990s, there was discussion about the importance of budget surpluses. partly because they put the country in a better position to deal with future needs.

and by coming into this financial crisis in a recession with a budget that was already in deficit, with a substantial amount of outstanding debt, we were not in as good a position to deal with the needs that people felt then as we would have been if there had been less debt than a human in the preceding year's. >> and if we spend part of the stimulus package, was as several hundred billion dollars to the states, in addition to that, they've cut back. as a true that we would almost have to spend $500 billion just to offset what the states have cut back in just to get back up to zero? >> i don't have a specific number, congressman, but certain estimates have been budget shortfalls of the state during this period of several years would be in the hundreds of billions of dollars. this for 20102010 alone, the report states make changes in

their budgets, took budget tightening efforts exceeding $100 billion just in that fiscal year. >> so in the first 100 billion which is get us back up to zero in terms of stimulus? >> so, what happens in the recession as you know is government revenues decline, spending on certain programs tends to go up. that widens budget deficits as his habit at the federal level. at the state level, because the balanced budget rules they can't persist in that way and they take actions to offset the. so essentially, they are forced to take legislative actions that offset a good deal of the automatic stabilizers that would otherwise rise from their budgets. and then that seamless effect is quite small. but the federal government does not have those restrictions. it can run a larger deficits, and we think that one of the channels at which the stimulus package strengthened economic activity was by providing funds to states that they reduced their need to raise other taxes or cut other spending. . .

interesting statistic i would like to share with you, and, your level of knowledge and your acuety with numbers is reknowned but i'm going,

i think i will stump you on this one. >> as you've seen, congressman, it is all too easy to stump me. >> you have a moving train. take prettirage size of about 150 freight cars on this train, traveling at a pretty average speed of about 50 miles an hour. how long does that train travel from the point where the engineer pumps the brakes and says we need to do an emergency stop of this 50 mile-an-hour moving train? >> so stumped me, congressman, so i think it would take some distance. >> by some distance, do you have a sense of measurement? >> i wanted to be a train engineer when i was a kid, but never got to the point figuring out how good the brakes were. it would are as you're saying congressman, it is u.s. government and u.s.

economy are, have substantial amount of momentum in what they do and how they perform and to use policy decisions to turn the government or to turn the economy is very difficult because of the size and momentum they have. >> so the reality is, in good times, we could actually make a few mistakes and still be in pretty good shape because the economy, as a robust engine, will drive that train at 50 miles an hour, whether we want to brake it, or, if we happen to enact policies that would actually take it in the wrong direction? >> yes, that's right. >> would it surprise you know takes about a mile and a half to stop that 50 mile-an-hour traveling train that has about 150 cars loaded on it? >> i didn't know it was that far, interesting. >> a mile and a half. and so, if that 50 mile-an-hour train we call the u.s. economy, is doing

very well, as it was in the 1990s when we were creating 22 million jobs, even some mistakes done bysy makers, that economy could absorb. and so, in the year 2000, at the end of the year 2000, had you been sitting as the director of the aggressional budget office, you would have been telling us, we're looking at budget surpluses for as far as eye can seeing something over 5 trillion dollars, correct? >> yes. i think that's right. >> so with the inauguration of new president in 2001, would you have been advisinging that president, mr. president, looking at 5 trillion dollar deficit over next 10 years. >> surplus. >> that is the train moving in that direction. unfortunately you were not the budget director in the year 2001. you're the budget director in 2010 and rather than

looking at a budget surplus, you're advising this congress and the president we're all looking at massive budget deficits. but those deficits, that are massive, weren't created last night, or even last year, correct? >> that's right. as i said in my remarks there is an effect of the financial crisis and recession and recent policies. there is also very important effect of underlying policies built over a period of many years. >> so, this fast-moving train is now moving in the wrong direction, on the economy and deficits. but somehow we went from a train eight years ago that was heading in the right direction with.$6 trillion in surpluses for 10 years -- 5.6 trillion. to a deficit or budgets looking at deficits that are close to a trillion 1/2 strong in a year, and, somehow that train turned with some bad policies and

obviously bad economic conditions along the way. do you think we're beginning to brake that downfall, the stuck in the ditch situation that we've been in the economy for the last several years? >> certainly, we think that the economy has begun to grow again. the data for the second half of last year show expansion of production, as i said, we think that expansion will be slow, and that, traditionally, employment lags, and we think that will mean a particularly weak performance of the labor market for some time. but the direction we believe, of economic activity is up. and we expect that, at some point in year unemployment rate will start to turn down. number of jobs will turn up. >> when you talk about the labor market, which should concern us perhaps more than anything else if we're serious economists, obviously we all talk about interest rates and gdp but the most important thing

beyond, interest rates, gdp, should job and that's what an american wants to know is that he or she has a job that will bring us in revenues, tax payments so we could have a robust budget. if i could have chart 6 added to, put on the screens. we were seeing massive job loss. a year ago, we were receiving word from you and others we were going to be losing jobs. we found out it was close to 750 or so thousand jobs we lost in a month. that is 24,000 jobs a day americans were losing in this country. we're still losing some jobs. we actually had job growth in november of this past year, couple months ago, but still on the whole we're still losing but nowhere near that number. as the chart reflects, we're beginning to see the end of this trough that, we were in this massive ditch, that we

were in which is good, with you we have to generate more economic activity to really see us to break into the plus, when it comes to jobs, when it comes to our budgets and their deficits turning into surpluses. so it will take some time for us to get out of that ditch, is it not? >> that's right. the crucial point, getting back to zero is not enough because there is very large pool of people who are currently unemployed. >> right. >> other people who are not measured unemployed because they given up looking for work right now and are not counted in the labor force. it will take a tremendous amount of job creation to put everyone back to work, who is look would like to have a job. >> to sort of put graphically, what you just said, if we take a look at the chart, essentially, we saw how were just going deeper and deeper into a ditch. president takes office. the president takes office,

741,000 jobs lost. enough has been done by this big economic engine we call the economy with or without policy initiatives to start to turn around on its own but hopefully some policy initiatives have begun to help. but whether you are liking the blue bars that lead to less job loss, those are still jobs lost. so you have to add every bar, red and blue together, to calculate the number of americans who are out of work, who have lost a job, and it is not until we pass the zero line that we can say we offset one of the americans that represents any bar where we are putting people back to work, net? >> i think that is exactly right. official tats techniques show more than 7 million have lost jobs. the bureau of labor statistics has announced there will be a benchmark revision that will add more loss so it will shortly

measure eight million lost jobs and with a growing population the number increases over time. so the shortfall relative to what would have occurred without the recession is more than eight million lost in the short fall that would need to be made up. >> so we are essentially applying the brakes on the economic train that was taking us farther and farther down national ditch. we have begun to see those policies brake that fall, but it will take a mile and a half to stop the train. it won't happen in one day, in one year, or in 100 yards. it will take a mile and a half to stop that economic engine we call the u.s. economy that was traveling 50 miles an hour with 150 cars on it straight to the bottom. now, if i could get chart four up, we are seeing the changes. we see the job numbers getting better. and we see the economic numbers

getting better for the g.d.p. now let's talk macroeconomics, the economist' numbers, not the american workers' numbers an letters. the g.d.p. is getting better, which simply means that we are seeing more economic activity. which then means there are more companies in america or businesses that are willing to hire because i'm selling more. i need to produce more. if we continue to see the blue bars showing economic growth, at some point we are going to start to break that line where we are losing jobs and start creating jobs, correct? soon. >> how soon? if you had, based an estimate. sorry for. >> i think within a few months one might see some positive numbers. as you note in november, has actually been revised to be a very small positive change in employment.

i think it is possible within a few months. >> so there are some brakes in breaks in the cloud, reason to be hopeful. obviously if you're an american who lost their job you will not be hopeful until you have something in front of you. but given, numbers, acronyms up here, economists use, gdp, interest rates, really we can start talking pretty postively about jobs, j, o, about, jobs in the future if we continue in the right direction and get us out of that ditch, break that train that was going fast downward, and start to see the economy, which has its own locomation -- loco motion, apart from what any congress does or president does, let business community and businessmen and women and hard work of productivity of our american workers take hold? >> yes. we think the direction is for improvement. the concerns that i have expressed, i think they're

shared by many analysts are the pace of improvement may be slow enough that many people who will be looking for work will still be looking for work for some time but the direction seems to us to be positive at this point. >> can i have chart 8 as my last chart and i will conclude with this. to me, there's, there's reason for to us try to do whatever we can policiwise to try to move us in the right direction. the last thing we need to do is bicker over what happened in the past. we need to remember what happened in the past. it informs what we do into the future and certainly if that train hadn't been moving at 50 miles an hour with 150 cars on it wouldn't have taken a mile and a half to break that downfall into that economic ditch we were on. but it is important for us to be fiscally responsible as we make policies for the

economy, and for americans who wish to work. when you inherit a $1.2 trillion deficit, that's what president barack obama recehen w the keys to the white house, when you, are sworn in, in january 2009 and are told, that 741,000 americans will lose their job or have lost their job in that month of january 2009, when americans saw 2.7 trillion dollars of their retirement savings erased, when we saw the debt, national debt more than double in eight years we're talking about the great recession for the 21st century. we are now trying to pull ourselves out of that ditch which is the great recession of the 21st century. had we had not some of safety net provisions in place that franklin delano roosevelt helped institute we might have been in a great recession or a great depression of the 21st

century. dr. elmendorf, we'll be looking for your wise council over next several months as we formulate the budget for 2011 in this country. we look forward to working with you and appreciate your patience responding to some of my question. i see the gentleman from virginia, mr. connolly is here, so i will turn to him for his questions. >> thank you congressman. >> here we go. thank you, mr. chairman. and, sorry i'm late, mr. elmendorf. i was at the oversight and government reform committee hearing, listening to secretary geithner, and, you should be glad you're here, not there. i'm going to ask just, some, series of questions, real quickly if i can. first of all, i worked in the senate from 1979 to 1989 for a committee and those were the gramm-rudman hollings days, because we were so concerned about the deficit, growing debt.

in retrospect in your opinion, is there empirical evidence that gramm-rudma gramm-rudman-hollings ultimately led to a balanced budget? >> actually did a little work on, congressman. i was a researcher in economics. i think the evidence is mixed. i think there is a, as you know, of course the particular numerical targets that were chosen proved to be unreachable, political matter. so the particular targets, not just the first version but the second version were not actually adhered to. i think many analysts would say that experience did focus people's attention on the issue. it kept it on front burner of the political discussion. in the end the larger steps were taken in 1990 and 1993 and later. but i wouldn't want to, but i do think there, most

analysts say there was value focusing the attention on the issue even though it was not followed exactly. >> paygo was adopted in 1998, paygo legislation and allowed to laps in 2002? >> the original paygo legislation was adopted as part of 1990 budget agreement. as i mentioned earlier, you were interrogating secretary geithner, was, is viewed by analysts as having helped prevent fiscal actions that would have made the budget situation worse well let me ask the same question about paygo of i just asked about gramm-rudman-hollings. is there empirical evidence that paygo made a difference, empier evidence. >> there is a judgment call which would be the best kind of empirical evidence. most people's assessment, this is position of number of my predecessors of cbo in it did help to restrain

policy actions that might have worsened the deficit during a period when people were very focused on deficits at end of 1990s. as the economy was booming, deficits turned into surpluses then those constraints were widely ignored. but during the period of concern and attention on that problem, most analysts believe that that, those, the paygo rules, did help to restrain policy actions. >> a bipartisan commission with some enforcement mechanism to make decision or recommendations stick, could do you think it could make a difference? and do you believe, i know this is dicey, do you believe this body has the historically, looking at it from a historical point of view the discipline to abide by it? >> i really can't and shouldn't speculate on the actions that you and your colleagues would take, congressman. >> you're no fun at all, mr. elmendorf. >> in another context but i don't think hearings are quite the way to display,

that side of me. you know, i think the, having a commission does not avoid the need for difficult decisions. that ultimately you and your colleagues will have to make. the question, i think the crucial question is whether it creates an environment that encourages such decisions to be put before you and to be made. >> and could, such a commission, again be efficacious in effecting postively the debt, long-term debt only focused on the spending side [loss of program]

>> next month marks one year since congress passed the economic stimulus money. of the $787 approved $330 billion has been committed. to learn more about those projects go to pap org/stimulus.

>> you are watching c-span created for you as a public service by america's cable companies. up next "washington journal." at 10:00 eastern byron dorgan talks about jobs legislation. after that president obama's state of the union address followed by the republican response with new virginia governor bob mcdonald. >> american jazz can be an instrument for spreading good will overseas. >> i think so. over there jazz is stronger than the masons, just like a religion. >> they go in for it big, huh? >> they love it. >> he was the single most

important figure in jazz in the 20th century. >> q&a tonight. terry teachout on louisñi armstrong on c-span. up next "washington journal." today the guests include linda feldman of the christian signs monitor and david hawkings. they talk about politics and the latest news. then jacqueline o'neill of the institute for inclusive security talks about the role women play in muslim countries. then a former c.i.a. intelligence officer looks at al qaeda's determination to acquire weapons of mass destruction. "washington journal" is next. . >> good morning and welcome to

"washington journal" on sunday the last day of january for 2010. dozen president obama need a republican congress? will washington and the administration benefit from republicans in congress? is there more balance when one party doesn't control both the executive and legislative branches? we will take your calls on that. >> we are also on online. you can e-mail us. and twitter. you can also find us on facebook. we are looking at a column in the washington called "does obama need a g.o.p. congress?" down into the story he writes it is tempting to wonder whether obama may have better luck under a republican congress. it was floated by