helped millions of americans, including a lot of middle income struggling seniors. they have refused to look at the revenue side of the equation. it is their decision that you cannot close a single tax loophole for the purpose of reducing the deficit, right? that's the grover norquist pledge. you can't close one loophole, taxes for the oil and gas can do hedge funds or to help reduce the deficit. and my question, dr. elmendorf, if you go back a little weight in his, when was the last time we had a balanced budget? >> in 2000 or 2001. >> 2001. and, in fact, the last time we had a balanced budget over a very limited time was the years 1998, 1991, 2002001? >> that's right. >> for decades before that, we were running deficits and since 2001 we run deficits. now, dr. elmendorf, you look at the revenues as a% of dvd -- as

a percent of gdp during that time. they are hire in each of those years than they are today, is the rights because that's right, congressman. >> and their higher, are they not do, in each of those years than it will be as a percent of economy 10 years from? >> yes, that's right. >> my calculation is that the average amount of revenue as a percent of gdp when the last balance the budget was 19% of gdp. during those four years the average amount of revenue was 90% of gdp. now, you have just testified that the main reason that we're going to see an increase in the deficit in the out years is because we have tens of millions more americans on programs like social security and medicare, right? >> yes. >> our republican colleagues position is that we can somehow deal with that huge increase in the number of americans on social security and medicare

with less revenue as a percent of gdp in lebanon last balanced the budget in 1998-2001 women had a lot fewer americans. on social security and medicare. that is the problem, mr. chairman, a lot of our democratic -- you take the position that you will close a single tax break for the purpose of reducing the deficit. you say you care a lot about the deficit. you recognize that you that tens of millions more americans on social security and medicare, but you still want the government to operate on less revenue as a percent of gdp than the last time a balanced budget when we didn't have all these americans and social security and medicare. so the only solution that our republican codes are proposing, unless they want to cut even more deeply into investments in defense and scientific research and infrastructure, is to simply cut these other programs.

and the irony here is the affordable care act actually was able to reduce the medicare spending i reforming it instead of cutting it. we come as a result of the affordable care act, dr. elmendorf, we are seeing reduce medicare costs, isn't that the case? >> yes, that's right. >> that's a significant part of the reduction or repair time, right? >> yes. >> our republican colleagues after initially lambasting that an demagogy that, they included a provision in their own budget so they would achieve those deficit savings. so we were able to achieve medicare savings without hurting beneficiaries. and that is the model that we will continue to look at, and combined with closing tax rates or special interest in order to meet these long-term challenges. but our immediate challenge is to put people back to work, and that's why we need to adopt our infrastructure investment plan, pass the minimum wage, and for the folks who are still out there hurting, we should extend

emergency unemployment insurance. and we certainly, mr. chairman, should not mess around with one that we pay our bills on time. thank you very much. >> dr. price. >> dr. elmendorf, welcome to the committee once again. appreciate the good work cbo has done anything my friend from maryland says the report is good news and bad news. and i would agree with that. the problem is that when you compare it to last your support and reports prior to the, there's more bad news issue than it was last year, and less good news this year. our friend makes a comment about decreasing medicare spending. spending in medicare has decreased by $700 because of the affordable care act but it is forced reductions and as a physician i can say that my former medical colleagues will say that it actually is harming health care for seniors. and so the challenge that we have here is to put in place programs that don't harm seniors. and our friends on the other side seem to be willing to put in place programs that do harm seniors.

dr. elmendorf, what happens in a fiscal crisis to those benefits for seniors? >> well, it depends on the nature of the crisis and what the congress does to respond to it but the fiscal crisis as we use the term, at a point in which investors are unwilling to buy u.s. government debt unless it carries very high interest rates. and that then put determined to squeeze on the rest of the government budget -- >> a squeeze that might happen is that services to beneficiaries actually decreased significantly under a fiscal crisis, is that not correct the? >> that could happen. >> your estimation that congress hasn't done anything to address challenges of a fiscal crisis in the last year's? >> as you know that congress has taken a number of steps and i don't want to diminish those that it is clear from our report that the fundamental fiscal challenge remains, which is significant increases in spending for certain programs, and even all the rest of the

government is on track to become smaller relative to the size of economy we show high and rising debt. the country will need to make choices that have not yet made about cutting back those large programs or raising tax revenue to pay for them. >> which is a great segue to the medicare program. trustees say the medicare program is going to go bankrupt by 2026. what does it mean to real people? it means that services that been promised to seniors, there won't be the resources to be up to provide those services. so what our side, and i love how our friends on the other side of you like to characterize our solution. effect of the matter is our solution actually solve the problem. in fact, we put forth multiple solutions for the mandatory program any and medicare, we talked about a pregnant support system and i want to draw your attention, if of may, dr. elmendorf, to report that cbo put out last september that modeled premium support systems. and it wasn't the specific one but the question that i want to

get the answer to is, it brings support system may, in fact, be possible without to quote the report, combined spent by both the federal government and beneficiaries that premiums and out of pocket costs would be less than if current law remained in place under premium support system. is that the conclusion you alter? >> yes. as you know, there are many, many specifics that can affect the budgetary outcomes and the effect on beneficiaries of an awful lot so one should not take that as a statement about anything that would be labeled a premium support system but that would be affect by our estimates of the system we analyzed. >> a premium support model, that is, something that saves medicare for seniors would decrease spending in potential decrease in to the federal government and decreased spending for beneficiaries. i think it's important when folks are listening to solutions that the solutions be explained by those individuals that actually promote the solution,

not those that criticize the solution to in the short, i have remaining i want to touch on this issue of the interest rate question that the chairman got to. again as i said, i think this is more bad news than there was last year. and table de- 1 the pilot stage the british interest rates, a percent increase, 1% increase in interest rates last year was projected to cost $1 trillion. this year it is $1.5 trillion. what happened? what's the difference? >> i believe, congressman, most effective change in a projection of the amount of debt. yeah, so jeff is pointing out that on some issue to this day was two years ago. we did a more abbreviated report last year because congress acted even later under more time constraint. two years ago it is more expensive because larger debt projection but it's not funny

extra trillion dollars of this years provisions in this year year, included provision lecture which was much larger, remembered him because our current law based on before that -- >> what it means him as the chairman said, time is running out, it's time to act. >> thank you, mr. chairman. dr. elmendorf, nice to see. thanks for your testimony. i want to dig deeper into the methodology that you use to assess the impact of the affordable care act on hours worked. and the chairman i think was mentioning an example of a young person, at least that would be a shame if somebody couldn't find his or her way up the economic ladder starting to work and so forth. my son is 30, single. he found insurance through the kentucky exchange, pretty good coach for him at $180 a month. so we talking about $2200 a

year, premium. if he got 100% premium support, subsidy, what in the world kind of incentive would he have to not work? >> well, by working your income is dependent on many other things. health insurance is only one of -- >> seems to me there's an impression out there that you talk about a disincentive to work as a part of the impact and i'm guessing i'm committed of the methodology because i can understand why a 62 year-old under the affordable care act mindset i want to retire, and now i can retire because i guess i can find coverage that i can afford, whether and not i get a subsidy or not. i understand that example. i'm trying to figure out the example of somebody who is at the lower end, who, where it would be an incentive not to work spent i guess you are

right, pakistan, if some of these people, the early retirees as you describe. the way i put the other part of it is, it's not so much an incentive not to work. it's less of an incentive to work. so under the law prior to the affordable care act, if one were to, decided to work more hours, then one would earn higher cash wages and what made receive health insurance. but would give up some of those extra cash wages in the sense of paying some tax on them or losing some of the benefits. by providing additional benefits to people of very low income, a significant one in the form of subsidized health insurance been increase in the standard of living of those people would have been working working more hours would be smaller than would b be otherwise. those who have a higher standard of living by working, but the standard of living wouldn't be as much high relative to what could have if they didn't work or if they work fewer hours. so by providing a somewhat smaller incentive to work, somewhat fewer people would work. >> as i understand it, the

subsidy was set up in a way to you should not have, know what you got to be more about 9% of their income for health insurance. could you give me, and -- not on the spot, some kind of numerical examples of someone who have a disincentive to work because of subsidy, whether 90% or 50% or whatever it is? i'm having a hard time understanding how that could possibly make sense. >> happy to send you an example. they have a smaller incentive than they would otherwise. >> moving on, as we look at the long-term repercussions of deficits and projections and so forth, and the impact of entitlements, ma social security, medicare and so forth, have you done an analysis of what immigration reform would do

to soften the impact of those expenditures? i shouldn't prejudice as you. to change the long-term impact of health care costs, such as grid, benefits and also of economic benefits? >> yes. so we did a very thorough analysis of immigration bill that was passed by the senate last year and we found that legislation would reduce budget deficits and lead to larger economy, and over time lead to higher output per person in this country. >> and it does that because you could have a lot of younger people paying into social security and paying the medicare tax, but not receiving benefits for 30 years or 40 years, isn't that kind of just -- >> the age matters, also the composition of the additional people who would be let into the country and given a chance to work under the senate legislation. so a number of those people

would we think we see some benefits but a number would be high skill, high educated people who would be paying a lot in texas. >> thank you very much. i yield back. >> mr. campbell. >> thank you, mr. chairman. thank you, dr. elmendorf. if there's one good thing to you from both sides this morning is no one is saying it's great that the deficit has increased and that it's going to get to a trillion dollars. everyone is interested in reducing the deficit, that is a good thing. let's talk about taxes, that decided to read bunch of tax increases in 2013. those are reflected in these projection. also 2014 there's about 60 tax, i think it is tax credits and deductions that expired. had to include those in this as well? >> no. the provisions that have expired as you we follow current law on the projection but we do provide some alternatives, policy

scenarios for your use. one of which extends all of these expiring tax -- >> but in summary table one can you assume to expire. >> that's right. >> they were tax increases in 2013. they were tax increases in 2014, and they think there's even some in 2015. that are reflected in this which is what revenues go from 15 points 7% of gdp last year the summer between 18-18-point for. >> two key factors. one of them which is the change in a tax provision and the other is the strengthening of the economy which pulls in more revenues as a share of gdp. >> okay. but a number of tax increases from 2013-2014 are included. we have had tax increases. you mentioned four things and i have probably 30 seconds for each one. i'm not going to mention the order you did in your opening statement that you said are driving the deficit from certainly from the spending side. one was interest on the debt.

two reasons for that, interest rates are not expected to stay at these historical low level but the others is the deficit itself feeds more debt which feeds more interest. so the best cure for that is to eliminate the deficit, right? >> i mean, all other considerations aside, yes, a small deficit would lead to less interest payments. >> venue talked about the cost of medical care going up and now that's affecting the various medical programs, so you're still rejecting the cost in medical care will go up but i'm trying to balance that against the argument that obamacare is reducing the cost curb. >> congressman, there's been a very pronounced slow down in the rate of growth of health care costs per person come in both federal programs and the private sector over the past half-dozen years or more. we've taken significant lesson from that end of lowered our projections for the federal program going forward.

but we're not lower them so much that they have no more growth left. that would be a really quite extraordinaire turn of events. what role the affordable care act has played in this is i think quite unclear to analysts. >> said you're basically saying that there are conditions out there before obamacare, whatever, that increased health care costs independent of government actions to continue to some degree? >> exactly. not at the rate we thought before but at a positive spin you mentioned aging of the publisher which is something that guess what, we here in congress for chilling cannot control. so those two factors are what is driving up the cost of so many of the major entitlement programs. so if we're going to get the steps under control we got to do something about those, don't we? >> i think you either need to cut back on some of those large programs or raise revenues to a

larger share of gdp, or some combination of those two policies. >> we just did raise revenues as a share of gdp -- >> to some extent, yes. >> okay. then the last thing you mentioned was driving this was obamacare. so that's driving on the cost side to understand their our tax increases involved with it but it's driving a lot of additional costs as well. >> yes. the expansion of medicaid and subsidies, the tax credits to be provided through exchanges is part of what's pushing a federal healthealth care spending. >> while the two-and-a-half million full-time equivalent job loss, whatever that is, 2 million, doesn't that retard revenue as well? that's people who aren't working to aren't making money, aren't paying taxes. >> yes, relative to not having those attacks. that lowers tax revenue. revenue still rising of course. it means it would've happened without that effect, that reduction in implementing reduction in gdp, has a

reduction in tax revenue. >> thank you. i yield back. >> that morning, mr. chairman. director elmendorf, do you believe that when social security was passed, it had an impact on labor supplies since we're distinction between labor supply and demand? >> yes, absolutely. >> very clearly in a similar way you would project obamacare will have? >> i think, the specifics will be different but the basic point is in which is the provision of them, -- over 60 doses of have allowed some of them to choose not to work who otherwise would have felt compelled to work. >> i wonder if there's a headline back then in 1936-37 about what was going to happen to demand. if it were revealed, let me ask you this question.

-- repealed the court benefits were quite cut through privatization, an option, that would have an impact on labor supply, wouldn't it is? >> yes, that's right. >> how? >> it would push up labor supply. in fact, with an aspect of the effect of raising the eligibility age for social security. we think that would increase the amount of work that people do primarily in the '60s. >> particularly with seniors more would work beyond -- spent they would work longer than they could under current law. >> the fact that americans would be tied to a job they don't want or need so because of its the only way for them to get affordable health care, it's a feature of obamacare. as i look at it. director elmendorf, if your assumptions prove cracked, 2.39 americans -- proved correct, what effect will that have on the unemployment rate and on wages?

>> we think that people will be leaving, choosing not to work because of the incentive provided by the affordable care act would have essentially no effect on the unemployment rate big we said that very clearly in our report. the ethics and wages can we did not analyze formally, complicated, depends on how the capital investment responds to changes in work, and we've not tried to model that our estimate that specifically. >> what you're saying is because of the security of obamacare, that it provides, a six-year-old, let's take that as an example, to retire and open up a job for someone who is unemployed today, is that correct? >> yes, that's right. >> this is an example of a drop in the labor supply. now, in fact the cbo report, you specifically state the estimated reduction spends almost entirely

from a net to climb the amount of labor that workers choose to supply rather than from a net drop in businesses demand for labor. i didn't see this any of the announcements about this yesterday. i just wonder why. very trees about that. you said it, i didn't. so in other words, this isn't employers cutting jobs, newly empowered workers choosing to go a different path. i think that's a good thing. chairman ryan, my good friend, you said in 2009 when we were debating obamacare -- [inaudible] why not? we want to address job loss, this is what you said. so the key question that ought to be addressed in any health care reform legislation is, are we going to continue job loss, or are we going to allow individuals more choice? and probability, affordability

to fit the 21st century workforce, unquote. i agree with you 100%. i think the answer is yes, giving workers more choice is not unique to obamacare. other federal programs have reduced the amount of labor that workers choose to supply just like social security, right, mr. chairman speaks i will take the rest of your 39 seconds to respond. >> go right ahead. >> a couple points. the purpose of in was to help produce a system so that older workers could not be destitute and can be for younger workers for jobs. so it sort of the opposite intent which was to bring under workers into the workforce by providing those yesterday benefits back during those days. this is the opposite. this is saying, younger workers, the very people we want to go into the workforce to work are

being disincentivized to do that. so it is certainly opposite of what you're trying to suggest -- >> can i take my time to speak with i will continue. i told you i was going to do this. job loss in this case is a subsidy that ends and it's a cliff to try. what we've always said is common it should be structured differently so that you don't produce this kind of effect. so we have literally a very different idea how to address this issue so that you always encouraged a person to go into the workforce, so you always encourage a person to work. and obamacare is structured the opposite of what -- >> that's your opinion. that's your opinion. we are still evident and basically talk about older workers -- >> my point -- >> i'm glad which is a because now we can all agree it's not a socialist at scheme. >> the gentleman's time has expired. [talking over each other]

don't ask one to get a position of the other because you won't get a straight shot. mr. cole. >> thank you very much. although i hate to interrupt that debate, it was actually pretty good. [laughter] i may just yield my time back to both of you. [laughter] but a couple specific points and for someone to thank you for the work is exceptionally helpful. and i think very fair. i'll just say for the record i'm exceptionally -- i think most of us are disappointed. we worked and made a little progress here in the last few years on the deficit. i thought -- mr. chairman, you did as well. the budget agreement that you negotiated with senator murray also restrained discretionary spending. that made a little more progress in the right direction and some mandatory spending as well. we were spending $164 billion

less indiscretion budget and we were spending in the last year of the bush administration, fiscal year 2008. so that's real problem -- progress. when you look at this report it really doesn't translate in the long-term deficit reduction for the simple fact we simply haven't done enough on the endowment fund. is that a for statement? >> i think congress hasn't done enough on and commerce and revenue and some commendation. it's not our place to say which side of the budget you should -- >> between the two which have we done more on, revenue or entitlements? >> well, that depends on how you view extension of expiring tax provisions. a few years ago. under current law assumptions we worked on, the extension of most of expiring income tax cuts in the early 2000s produced a big cut in revenue, and a big increase in the desert. i recognize that's not what many of you have thought about the starting point in your own mind.

>> i know, that's why want you to answer it. are we going to have a lot more revenue than we would have had, had we retain all of the bush tax cuts speak with you would have had more revenue, exactly. some were allowed to expire. >> roughly how much more over a decade? >> i would guess a trillion dollars or so but i'm not sure that we -- >> ballpark but if you want to correct it later, that's fine. >> i think my ballpark has been agreed to. >> let me ask you this. if we had $1 trillion worth of reforms and empowerment programs? >> well, the transfer made substantial reduction in spending for medicare, as you know. i really have not tried to assess what that would look like over the same 10 year time period as s. like some of these tax cuts to expire so i think i should not speculate those numbers i haven't looked up.

>> let me come at it -- politically, it's obviously i think the revenue picture is easy to do within the entitlement picture is easy to deal with. i don't care which side of the aisle you're on. that's just the case of it. we saw the struggle with entitlement spending, frankly, in the budget agreement between chairman ryan and chairman murray. that's just politically a very charged every. let me ask you this. of the entitlement programs, which are the largest conservators to the deficit going forward over the next decade? >> the largest program, single largest program is social security, the programs that are growing, whose increases our sharpest in dollar terms are social stratum medicare and medicaid. >> let me ask you this. this is going to be a pop on both houses. has either party put forward a plan to deal with social security? >> we've not analyzed any plan, in the last few years.

years. >> i suggest that's because one hasn't been present. we have not presented one on our side of the aisle because it's politically -- our friends and the administration haven't presented one. it's probably statistically the easiest one to deal with because we got to know how many people turn -- it's much more predictable, much easier and yet neither party has had anything to say about it, is that correct? >> well, we have provided congress with a large menu of possible changes to sosa security and other parts of the federal budget. >> i'm not suggesting -- [inaudible] >> the last person who tried to lead visiting with president bush who actually did put forward proposals and did do something. so i would actually, i would say this for the record for my friends because we'll have a lot -- this is in a way think we ought to sit down. is where got to go down. our friend, mr. delay come on your side of the aisle had an interesting bill to make congress vote up or down the same way we do in brac. i would suspect it would be full

of unpalatable choices for both sides of the aisle. but that's something i would like to see us begin to look at and did. are most important single program we have, most likely, the one most americans want us to ensure and yet neither side of the out has put a plan on the table. yield back. >> thank you very much. at the outset i would like to say, chairman ryan, i was listening to your opening remarks and it was interesting because you kind of echoed some of the language president obama from his state of union address. you said you hope this is a call to action, and the president last week said they should be a year of action, so i hope there's a way we can come together to focus on speed. [inaudible] >> economic opportunity, economic growth and there is some goo good news because we he made progress on job growth. but we have to do more to the economy has added private sector

jobs for 46 consecutive months, and the total of 8.2 million jobs has been added over that period. this is reflected what i hear at home in florida where small businesses are doing better. it's been a very difficult kline from out of the great recession that kind of his earlier in housing in 2007, but he we are 2014 and people -- businesses are hiring again. the economy looks better. except we have this intractable problem, it's kind of a jobs crisis. and the cbo report demonstrates that the outlook for job creation remains weak. and then we are dealing with the retirement of the baby boomers. that's what every time there's an announcement on jobs numbers, every month the unemployment rate is going down but yet people are retiring and dropping out of the work force. so we're going to have to be much more strategic in how

government partners with this is to create jobs. and that's why it was a very concerning to me, the part of your report that highlighted congress is eroding commitment to scientific research, education. you say now that that kind discretionary spending that has been really, that provides the jobs for the future is going to be at its lowest level in 40 years but can you expand on that and take us through some of the areas, whether its r&d education, or tell us where that weakness is? >> yes. we wrote a report in the fall about the facts a federal investments that have the amount of federal investment has changed over time. i think roughly speaking, about half of non-defense discretion spending can be viewed as an investment in physical capital like highway, bridges, in human

capital, economist called in education and training of workers. and the research and development. and that nondefense discretionary spending will under, current law, under the cap, fall two a share of gdp. lower than any point in 50 years for which there is date on that has been collected in that way. now we don't know, congress does not just how the money under this category allocated for different activities so we can do projection, research investment, spending directly. but that estimate about half of that total amount of discretion spending over time. and if that sure is maintained in future and the federal government will be do less investing relative to the size of its economy by the second half of this decade and it is in any point in my lifetime. >> so that's education? >> education. it is investment in physical infrastructure like roads and highways to it is investment in research and development.

>> so that's the national institutes of health, nih, national cancer institute, medicine speed all in that category, yes. >> infrastructure and defense as well? >> defense, discretion spending is also on track have also lower share of the economy than it's been at any point in the last 50 years. and again how those cutbacks are allocated between the research done by the defense department in the things the defense department something that congress we did decide in future appropriation bills. >> a lot of folks are believed that this question has been replaced here in the short term for a couple of years. and they tend to focus on the crisis that is right in front of them, but the challenge of looking ahead in the next decade is going to be how we maintain these investments in what makes america great in education and research and development, and infrastructure. and that's why i do think it's

important for us to work together as we learned that the aging population is going to be a challenge, a fundamental budget jumped into my colleague, mr. gore, i would agree to work with you -- mr. cole. i don't think it's fair to say that the democrats haven't been focus on social security. we are focused like a laser. i would recommend congressman ted deutch bill from florida. i agree we need to work together to make sure that we are being -- >> thank you. >> thank you, mr. chairman. and thank you for the work on this as well. let me just bring a couple of things together we've talked about already. there's been some conversation about discretionary spending obviously. there's been a lot of conversation about discretionary spending. is it the cbo's conclusion that there is no additional waste in government and the government is running as efficient as it can possibly run so there is no additional places in the discretion area where we can do

with whistles been? >> no. our volume of budget office in the fall which provided to congress was a dozen of options for cutting back on discretionary programs if you choose to go that direction. we also noted that i think the entire staff of options we give you would all be needed and maybe more than that in order to meet the caps are already in place because the caps are such that the current set of programs, there will be enough money to continue the current set of programs and services under those caps. even under current law you and your colleagues would need to take event of a wide range of cutbacks and programs in order to meet the caps spent programs and services come with it in reducing duplication and try to do with some of those inefficiencies, inappropriate payments and all that? >> congress and, that would depend on what the cost i doesnt also on people's interpretation. my experience, some members of u.s. ways, other members view as important. not my place to judge that.

>> i've noticed that as well i suppose. let me mention a couple things on interest. last year once we get the tender when the we get the 2023. you estimated the interest payments alone at 857 billion. that interest payment in 2020 is 819 billion. so we have made some quote unquote game at that point. but a i've also noticed the amount of interest with a versus the increase in the deficit each year, that number is strikingly similar many years. some years the interest payment increases higher than the deficit and some years it's a little bit different. but if i try to just the increase in how much interest we are paying, it's very similar in numbers to actually the increase in our deficit every single year. so this seems to be a problem that is driven primarily right now, obviously there are other factors as well, by an increase in interest rates going up as well. am i tracking that correctly?

from 2017-2018% increase in interest payments of $89 billion. at the same time there's an increase in deficit spending of 74 billion. so if the interest rate wasn't accelerating, we would make progress but we are not. it's increasing but if the go between 2018-2019, it's an increase of $76 billion in interest payments that $97 billion in deficit spending. can we talk about the interest? >> yes, congress and to your right, one can isolate the interest is that all the rest of government spending and revenues, the gap between them would actually be fairly stable in dollar terms over the coming decade and -- spinning but what do you asked with rising interest payments, why is that interest them accelerating at this point? >> interest payments are rising part because of rising debt. but even more so because of rising interest rates but

interest rates as you have been unusually low over the past half-dozen years and we expect as financial markets expect those rates to return to typical levels. so interest rates on the 10 year treasury note will be rising from 2% something to we think 5%. that's the cause of a very sharp rise in interest in the government will have to make. >> ten years in our only payment is $880 billion speak with yes. in the 10th year, 2024. >> 2024. >> this concept of simply getting to the primary balance and we're just going to try to get the balance for separate interest is what pays the same with hud get the balance except for around the last trillion. >> we are not testifying that but you're right, the interest things will be very, very large. >> i want to make it, that is not related to cbo and a square structure. each year, the conversations there is a scoring issue that deals with manager programs. where we take money from

existing in a fund to move into the next is fun, count that as savings. would you consider that -- i know cd officially considered that savings. would you consider a change of program or an account to be an actual savings? >> yes, congressman. we think that if an appropriations bill make a change in mandatory program so the government pays out less in the year, that is a real savings. you are right that the budgetary passion is comfy and these things can look -- and next year we tend to focus on you done in appropriations and make the change demanded for spending part of our mandatory spending projection. but i don't think we believe that there's anything that is fake about the changes in medicare programs, not you really haven't made a change in law that cuts been is a, then that's a we are recording when we give you an estimate. >> i yield back. >> thank you very much.

drama. first of all, thank you and welcome. 50 years ago, the war on poverty represented a dramatic shift in the federal government's priorities for helping those who are left behind in the growing economy. we hosted president and lady bird johnson's daughter, last month, she reminded us that the major legislation that was passed during that time was bicameral, bipartisan and was with the leadership of the white house. and it worked, even though we have a long way to go. i want to thank the chair, congressman ryan, chairman ryan for at least beginning to engage in a debate around poverty. in the omnibus appropriations bill, the president signed into law january 17 come we were able to secure link and i just want to read this just want to reduce the, it says poverty is far too prevalent in the united states. congress and the administration should work together to implement in the agency efforts

and support proven antipoverty programs that reduce the existence of poverty and the suffering associate with it. so i want to ask you, what policies are antipoverty initiatives tend to get the most bang for our buck in terms of boosting economic growth? for example, what is the impact of economic impact of not extending unemployment compensation for the 1.7 million people have lost their checks what they're looking for a job? will we see them fall into the ranks of the poor? does raising the minimum wage boost economic growth and reduce poverty? what's the impact on poverty and economic growth rate as a result of, unfortunately not, the impact of structural and long-term unemployed as we continue to recover from the recession and can't seem to get any jobs past. i would like for you to respond to this issues around poverty, given the sense of congress that

was put into the omnibus bill. >> yes, congresswoman. we have estimated that if the congress were to extend the additional unemployment insurance benefits that expired, that would add about a quarter of a percent in 2014. and would have a couple hundred thousands people to the ranks of the employed. and we've not done an estimate of the poverty rate but that would be good for people. some people who would otherwise be below the poverty line in the above the poverty line because of extra benefits. we've not tried to quantify that. on the minimum wage, we are currently doing an analysis with respect to raising the minimum wage, both in terms of the high wages income for people who keep their jobs and in terms of people who would probably lose their job. and we hope to present that announces to the congress in just a few weeks. so i don't want to speculate at

this point about the results of that analysis. on the long-term unemployed, you are exactly right that for many people who lose jobs and cannot find jobs again, the economic consequences to them can be devastating. and, in fact, the consequences on families on on the health and so on come and there's a substantial amount of research about this and we report on it a few goes -- a few years ago. many independently bad shape and end up below the poverty line. i begin we have not tried ourselves to quantify just how many more people that would be, but persistent level of high unemployment. we should and are labor market report, a company the outlook, that the rate of long-term unemployment remains today, although it come down from its peak of you is is a, remains toy than at any high point before this last recession and weak recovery. the economic and human costs of that are very, very large. >> i would like for you to look at the language in the bill, in

the senate bill, and see if it's appropriate and possible to give us some of your suggestions as it relates to congress and the president, what we should do to implement the policies and interagency effort, and support and to operate from programs. we would like your perspective on what we voted into law. finally, i have a few more minutes. let me ask you about the cbo report last year as it relates to the public option. in the health care exchange. i think you said it would reduce the federal deficit by 158 billion through 2023, which reflects a 37 billion reduction in at least. and 121 billion increase in revenue. now, with your new report, have you recalibrated that or do we think that still hold? >> we've not we estimate that, congresswoman, but this estimate was to be quite applicable.

>> thank you. >> turn one. director elmendorf, thank you for joining us today. i'm sure that americans, real-world americans that are watching today's adjustment, their eyes are glazing over, so for that i would summarize -- >> i'm offended. >> no offense to you. but i would like to summarize that economics is essentially a mathematical expression of aggregate human and business behavior. and in that vein i would say that this latest cbo report i think is a better reflection of aggregate human employ an employer behavior over time as a result of government policy. obamacare is one policy that has been enacted by the federal government in addition to that there were several other policies had been enacted over the past five years that have affected our economy. in your report you talked about the impact, the affordable care

act or obamacare, on the supply side of the equation in terms of what employees are prospective employers did come and use of equipment of 2.3 million jobs would be lost due to expressed, let me rephrase that. hours of labor would be less, would be offered and job losses would be 2.3 million to not be 2.3 million. not to sit 2.3 when jobs would be lost. have you looked at the demand side of the equation? the affordable care act, or obamacare, has a huge impact on employers. and they're making economic decisions to determine how many employees they hire and what sort of hours that they ask these opposed to work. can you tell me in a short amount of time what impact that would have? >> yes. we looked in report and outlook on the effects of the affordable care act on the demand for

labor. we highlighted two channels, one was defective the overall demand for goods and services and unemployment. the other is the effects of the employer penalty, the demand for labor. in the very short run, requiring employers to pay something the amount for each of the employees in some circumstances amounts to raising the cost of those employees and would lead employers to reduce their number of people they hire. but we expect as other analysts believe that over time, costs that employers bear for their employees into being borne by employers in the form of lower wages, health insurance causes one example in this mandate would be another. so we think after a few years the cost of implementing is basically showing up in wages, and are affecting ultimately workers supply of labor, but no longer employers demand for the

most part. >> just to summarize, you potentially, essentially took the potential negative impact on labor demand and translated it further into labor supply. >> because we think wages will adjust. >> i can live with that. i mean, i don't like the fact that we are labor supply or labor demand, even when. i think that's bad policy, and we as republicans in the house are looking forward to our replacement, alternative that doesn't do that. does the cbo routinely analyzes administrative actions and tries to trim the impact on the economy. that's -- that process isn't terribly transmit at this point but when you take obamacare and epa action and department of labor actions, just to show actions, you could after every agency and they have issued tens of thousands regulations over the last five years.

what has been the impact? i ask you from this frame of reference, as a person has created or helped create hundreds of jobs in the real world, i know firsthand the impact of that policy but i was wondering, do you have accused the number of potential jobs lost because of obamacare and all the government policies that been an active the last five is? >> i'i'm sorry, we do not to our focus as you know, legislation that congress is considering the we got to go back and look at how the law is a minister and as part of why we look at the affordable care act again this time but we don't in a sort of copper into the analysis. >> i think that would be well served because i mean, one of the reasons the inflation rate is so low because employers have decided that they can't hire those types of employees where they stand and so -- prospective

employee base has given up. i would just say that the government policy allows the use has expanded the poverty trap but it's dropping, pushing them out of middle-class and hurting opportunities. i yield back. >> the gentleman's time has expired. i just want to keep us on the clock. >> thank you, mr. chairman. and thank you, mr. director, for your testimony. i believe you testified last year that the imposition of sequestration would cost the economy potentially 750,000 jobs that would be lost, is that correct is? >> that sound right. i don't remember without looking. >> there are estimates that engineered unnecessary reckless government shutdown post a comment about $24 billion in lost economic productivity, correct? >> i've seen investment but we're not done investment ourselves. i can't vouch for it. >> i believe cbo itself is set as it relates to the failure to

renew or extend unemployment compensation, that could cost the economy 200,000 jobs during this calendar year, correct? >> yes, that's right. >> so that our choice this congress has made or will make moving forward that could adversely impact the economy economic productivity and job creation moving forward, correct speak was yes, congressman. >> as it relates to the cbo, discussion concerning the aca, if you estimate that the aca will result in the decline of full-time equivalent employment, correct? >> that's how, one of the ways we have measured the effect that we've and alaska yes. >> just so i understand, this stems from a net decline in the amount of labor that workers would choose to supply. i believe you said that on page 117. >> exactly.

>> as an that estimate on impact of the aca's -- this estimate of the impact the aca would have on labor market participation, you yourself nonetheless go on to characterize its substantially uncertain, true? >> yes spent the reason why is because this is a new program and the impact of the imposition and the effects of the program are on clough, correct? >> correct. >> notwithstanding all the hysteria that has been created over the last 24 hours related to asthma on the impact of labor participation, by her own as mission is not even clear that there will be an adverse impact moving forward, correct? >> we've not tried to quantify the uncertainty. in some cases we give the congress not only our best estimate but a range of possibilities. that requires more analysis. we've not done that in this case.

>> on page 118 of your report you state that the actual effects of the aca code, on labor participation, could differ notably from your estimates, true? >> yes, that's right. >> now, it's my understanding that the cbo also concludes that the impact of the aca on the supply, even assuming that your estimates prove to be true, will be small or negligible for most categories of workers. is that also your position? >> yes, that's right. >> okay. now, just so i understand, and i believe this was pursued in an earlier line of inquiry. the reason why you estimate that the aca could have an adverse impact on labor participation is because the aca its older workers in particular in a better position than they otherwise might have been at a certain stage of life, is that

true? >> it puts a set of workers in a better position. some are older and some are younger so we've not tried analyze this for different age cohorts separately. >> because it puts a set of workers in a better position, they might voluntarily decide not to participate in the labor market at numbers that they otherwise might have done, correct? >> exactly, congressman. >> okay. now, at the turn of the century did the imposition of child labor laws reduce the impact on labor participation? >> i guess, i think so. i never thought about that question. >> this standardization of the 40 hour workweek in america reduce labor participation in this country? >> it reduce the number of hours, total number of hours worked. i think, yes. >> would you also say that the successful assault, not complete, but the successful assault on sweatshops in

american reduce dissipation in the labor market? >> yes, i think it probably has. >> thank you. i yield back. >> mr. rush. >> thank you, mr. elmendorf. is a really interesting material, and getting my hands about, still a freshman congressman. i have some questions that probably i should know, but i just need clarification. trying to add up these alloys in this figure. what percentage, total spending -- what is the percentage of total spending -- total spending as a percentage of gdp in 2024 based on the statutes? >> in 2024 we think the federal government cover outlays will be 22.4% of gdp. ..

>> revenues will be about 1% of gdp. >> so, at what point -- i know economists speculate what point of the revenues of gdp will drag on the economy. if you collect too much it begins to drag on the economy. what percentage is that? >> there is no tipping point that economists are aware of,

congressman. in part because the effect depends an awful lot on how the tax code is structured. it's not just a total amount of revenue raised, it is even more so the way the revenue is raised and so this has do with the nature of the tax code and the particular incentives and disincentives created by the provision. >> said it could be 50% of gdp and it wouldn't be a drag on the economy? >> i didn't say that. but i want to say is there is no magic number. the higher the tax rates are, all else equal the more that distorts people's behavior. and if you're taxing work and saving the more that will reduce the amount of work and saving all else equal. the amount of debt we have depending on the gap in the revenue and outlay also affect economic growth over time. so what else is equal in the = the calculations. but leaving aside when you have taxes of a certain level, the

higher the tax rates are, the more that would tend to distort the behavior. also, the more revenue than you might raise and reduce the deficit and have beneficial effects. but in our analysis we take on board the benefit of the tax rates on the economy but there is no number that you go beyond where it is a problem and it becomes an increasing problem as you work your way up. >> i don't have any more questions. thank you. >> thank you mr. charan and doctor ellmendorf. i want to talk about the jobs portion of what you have. first if i can briefly -- i know it's repetitive but i think it's important given the new i got the chance to see the washington misinformation sheehan yesterday. when we had the best panels

because of the affordable care act and i got to see up close around the 2.5 million jobs it was going to cost it was employed there would be a decreased demand for labor from businesses that somehow people would be reducing the number of hours people are working and the economy would be worse off. i want to verify and doublecheck these things one more time. you said that workers would be leaving participation because they are going to be choosing to leave rather than businesses demand for labor reducing, correct? >> yes, congressman. >> second, you said there is no compelling evidence part time has increased because of the aca? >> yes congressman. >> you also sent by allowing low-income households to redirect some of the funds they would have spent on the purchase of other goods and services they have increased overall demand which would induce some employers to hire more workers or increase the hours of current employees during the period.

>> yes chairman. >> i know it happens, sometimes perception becomes reality rather than reality becoming reality so i want to emphasize those points. >> the reason we don't use the term lost jobs is there is a critical difference between people who like to work and can't find a job or have a job that's lost for reasons beyond their control and people who choose not to work. if someone comes up to you and says the boss says i'm being laid off because we don't have enough business to pay any other person feels bad about that and we sympathize for them having lost her job. their job. if someone says i decided to retire or stay home and spend more time with my family and spend more time doing my hobby, they don't feel bad about it, they feel good about it and we don't sympathize. we say congratulations. >> i think it was just inferred earlier that somehow if fewer people -- you mentioned that they would be better off in your

report and language presented to us and it was implied people had an opportunity to get to middle-class you wouldn't be better off. but part of it is you're saying in the aging population people aren't participating. that's part of statistic for people who like my mom don't have to do that, but secondly it could be on the the low were and who is now working two part-time jobs instead of three part-time jobs and instead they might be able to tuck their child in bed at night and read a bedtime story or go to inactivity which means they are better off. at least that's what it means in my part of wisconsin. then let me ask a question about what we can do in your report about jobs. as we talked about with mr. jeffries, the sequester was about 750,000 in full force. i know we released some of the pressure this year but we go back to putting a lot more of that in 2015. we are going to lose jobs because we are not extending

unemployment extensions. while people want action by congress rather than the president, the problem is that congress isn't acting. we aren't doing anything to create those jobs come in jobs, therefore someone has to do something about that. what policies tend to get the biggest bang for the buck in terms of boosting economic growth that we could be doing in the near term? >> a number of times now in the past, we have given to congress our estimate of congress our estimate of the set options for spurring the economy in the short-term. as the fiscal policy options, does that put money in the hands of people most likely to spend it. so increasing the aid the unemployed has been very high on the list in terms of the bang for the buck, so providing additional refundable tax credits to the lower income households reducing the payroll taxes. those things are more effective in spurring growth in the short term under the current economic conditions than the government spending increases or tax cuts focused on people who are likely to save rather than spend a

larger part of the extra money the end up with. >> at some point you can only buy one so far you can't buy 100 sofas come is that the theory? >> those are some big houses, congressman. but people tend to spend a smaller share. >> let me ask on the unemployment benefits because in the state of the union in my district someone lost his benefits and has his house for sale because he doesn't want to go into foreclosure, they are not even having friends over for dinner because they don't believe they can't afford food. what is the unemployment often than in this country? >> i'm sorry, i don't have the facts of that at hand i am afraid the congressman. but the unemployment rate in the country remains very high and the rate of the long-term unemployment is higher today than it has been at any point in decades. except for the past few years it's come down a little off its peak but it remains extraordinarily high and the cost of that to the economy and

the people involved. >> i hadn't planned on it but i want to follow-up with what he said because i think it's important. i agree with all of your answers to questions about what stimulates a short-term growth. and of course we have done that. we had a stimulus package in the first year of the president's administration. we did a trillion dollars health care bill. and as i look at all of that, the effort that was supposed to produce short-term result, what i see from your report is that it virtually doubled the public debt held by the public. so, we were so committed to the short-term stimulus that we borrowed more as a percentage of gdp coming in in about five years than we had in the previous nation combined and we can argue whether that was a good idea or bad idea but we did that to create a short-term growth. when in your projections do we return that dates back to historically normal levels

presumptive lead we are going to do these things to stimulate short-term growth and have to pay the piper sometime. when in your projections do we end up returning to the historically normal levels? >> if it doesn't return to the historical traditional share of gdp at any point in the next ten years or as we showed in the long-term outlook last fall in the decades beyond that. >> i agree what you say that we can do things in the short-term to stimulate economic growth. presumptively that's good for the economy. what you are saying is the things we did has exacerbated our debts not just in the ten year window but also in the longest term when does we never return back to historically normal levels? is always at this abnormally high perhaps dangerous levels? >> so, let me add a bit of interpretation to this. the first thing to realize is that a large share of the increasing in baghdad was not anything you did deliberately. it was an automatic stabilizer in the federal budget and we

quantify those as best we can in this outlook. the biggest thing that raised the deficit and debt wasn't a deliberate action but it was the tax revenue has fallen by a lot and spending rises automatically. this large share taking no actions. additionally congress took actions that by our estimate substantially strengthen the strengthened the economy had added outputs and jobs, but you are right that if that debt is never -- the extra debt is never paid it down, then for all that's good in the short-term, it becomes a drag on the economy. >> sort of a long-term drag. i regretted when you were having your discussion earlier we talked about balanced budgets in the '90s and in the early 2000's. but i think of as a cash flow, the congressman was borrowing from the social security trust fund that was supposed to be elsewhere. it's hard to call that a spending balance. i don't want to take issue with that.

what i want to take issue with is that the tax rates were higher and that led to some prosperity. when i look at your ten year window, i see income tax receipts as a percentage of gdp rising to about 9.4%. and as i look back historically in the decade upon decade upon decade that your report covers, i can only find one year in the history of the nation that income tax revenues were higher than they are projected to be in this ten year window. so we are going to have historically high income tax collections. but, to see again, you are saying that the debt is not going to return to the normal levels and in fact that is going to continue to rise nominally? >> yes, and i would add there has been a shift in the distribution of taxes over time. so certain tax going to corporate income tax had collected less revenue in some payroll taxes as well. and the individual income taxes are the portrays the rising was

to substantially over the next decade. >> you have a difficult job, and i'm glad you have agreed to do it. you opened your statement with saying that decline sharply wilkey -- sharply decline more. that is accurate. what is not said if they are declining to a level that is still higher than the historically highest level they have ever been before this administration. and i just would ask you going forward because it is something that we agree on collectively. when the extremes on either end looks less extreme than where you were but whether or not it is the responsible thing to begin to accept that as the new normal or whether we had an opportunity to continue to describe it as being damaging and high i think is a question that we can continue. becausewhen doctor ellmendorf

talks, people listen. i'm glad that they do, but those words matter. >> we tend to focus on the size of the economy as a percentage of gdp during the comparisons over a long time period when the population and the size of the economy have changed a lot since the deficits we see for this year and next year are actually at or below the share of the gdp looking back over the last 40 years. with outside of the historical average it it as best as a share of gdp. and i look pain and that remark as well. >> thank you. >> thank you very much mr. chairman. thank you, doctor ellmendorf for your report and remarks. i have a question for you. let me set up where i'm going so that you can understand what my question is. today unemployed americans

continue to struggle seeking a job that will support their family and give them a chance to earn their share of their american dream. the american worker doesn't want a handout. i don't believe the american worker wants a handout. they want to work. they want a paycheck, and i think we must come together to remove the barriers that promote full-time employment. while long-term unemployment is a national problem, it doesn't fall evenly across the united states. disparities exist and unemployment from heavily impacted states and those with with liver unemployment rate. how would the rate would be greatly impacted by the long-term unemployed workers with a lump-sum unemployment benefits to help cover living costs for the workers can move from one area of high unemployment and perhaps area of london limit rate in order to accept employment that would require them to move? >> have not had an opportunity to analyze the proposal. it is an interesting one that

might have beneficial effects but we would need to sit down and spend some time to give you a useful answer i'm afraid. >> does the data show that in some areas of america today a snapshot of it is employment opportunities are much greater in certain regions of the states where other states it is higher than other regions? >> the labor market is very tight in some places and poor in others. historically part of what has helped to bring the labor market back to a better place after the previous downturn has been the mobility of people. and there's evidence the mobility of americans has actually declined over time which may be an aggravating factor but we have to think how of a particular policy might be able to address that. >> so you don't have any analysis that indicates perhaps one of the factors is a lack of resources to make that move. it costs more to move across the

town or across to another state or another region than it would drive back and forth to work. there are impending factors, financial factors that say if i don't have the first and last to get another rental place for my family, what have you, there are expenditures in a move. >> that is certainly true, congressman, and the logic sounds right to me. i just analyzed the policy of complicated. i try not to do it just sitting here without the benefit of the expertise of my colleagues. i would be happy to spend some time -- >> it would be helpful for us to look at that because again, as you would seem to agree it is logical that that is a factor, but you probably would probably would have to analyze it in order for you to dispense about here. >> if in fact we figured out a way to help people mobilize from one region or one state for example to another one, where they have a much higher

likelihood of finding employment just because of the simple fact they are looking for employees and they have a much lower unemployment rate. if we figured out a way to do that, would that help the economy? >> yes that would. >> is it overly logical to assume if somebody gets off the unemployment rolls and into the taxpaying working role that helps the economy? >> it certainly helps the budget if we gave people the jobs they can earn money and pay taxes on it. i want to emphasize the difference across the region as you understand taking the country as a whole, there are significantly fewer jobs and ban people that want them. moving people to where there are more jobs can help. but in any case, however effective it can be by itself, it won't solve the whole problem because right now there is less demand for goods and services than we have the ability to produce them and that weakens the demand by workers across the

country. >> there's the bigger picture come about if ima parent who is trying to feed my family and i'm tired of getting an unemployment check and i want to work and have that dignity of work like many americans i believe do, to that person, the bigger picture is their picture. here i'm living in a city or the county i grew up in and i finally have the guts to go ahead and say i hear where my cousin lives they are hiring an unqualified. all i have to do is move my family over and i can get that employment. to me that is a big enough picture to concentrate on that kind of effort so that we can actually hopefully make progress that can improve the family. >> thank you. >> thank you mr. chairman. doctor ellmendorf, i'm sure when you write your notes on fun things i did this year they said

that the day may not make the list. but we appreciate you. >> i appreciate the chance to talk about the analysis my colleagues and i have been doing the question about the 2 million equivalent lost jobs, and i think the best way that i could explain back as the chairman, the equivalent of 2 million full-time jobs are people that look at the benefits that they are getting under obamacare and sable gets better for me to just stay and not work because i get those benefits. is that right? if we look at that in isolation, what effect does that have on the total tax revenues to the federal government? >> reduction and employment whether it is voluntary or not, and in this case or not, either way that will reduce the all

else equal the income earned in the country and the amount of the tax revenue that is collected. >> people choosing not to work because they are not paying into the revenue is going down. i think i read the report and it estimates that there is about $1.2 trillion over the ten year budget window that are used to subsidize the exchanges. and about 792 billion for medicaid expansion. so, roughly a total of $2 trillion over the two years to pay for exchanged subsidies and medicaid expansion under obamacare. >> recall that the gross cost of taking account of some of the other effects on tax revenues and so on. we end up with a net cost of $1.5 trillion over the next decade. >> we are spending 1.5 or $2 trillion more. we are taking in less revenues because people are choosing to work less or stay home.

it looks to me like that is adding to the problem of our death; is that right? connect again, congressman, when we evaluate the affordable care act as a whole and not just be affordable as you have been referencing that the exquisite cuts to medicare payments and the cuts to the increase in tax revenue, the last time we did the analysis of and behold we found out it would reduce the budget deficit. but you are right that a piece of the wall that expands the subsidy for the insurance coverage costs the federal government money on balance. >> obamacare also includes a bailout for insurance companies in case things go bad. the risk. since enrollment started in the fall, it looks like we have had fewer people enrolled in obamacare than we thought were going to. have you looked at the fact that insurance companies called this

adverse selection, but it's the sick people, those that are going to need more extensive coverage -- what is that going to do to the subsidies for insurance? >> by our estimates, the risk quarter program in the affordable care act will actually reduce the government deficits and it will lead to the net savings on the federal government because it is a program in which it ensures the cost significantly exceed their expectations. the federal government is on the hook for some of that but if they fall short of their expectations, then the government can share those savings. and the closest analogue that we are aware of is the risk quarter medicare program in part and if it's which has yielded savings for the government consistently. our estimate is that the quarter program on the affordable care act will yielded savings into and those are very uncertain estimates. our original projections on the affordable care act takes care of the adverse selection that

you're talking about. we thought that enrolled -- enrollment would be one third of what it is right now and we thought the people that would enrolled this year would be more sick on average than the people that enrolled over time and we presumed insurance companies understood that as well and incorporated that into the settings of premiums. neither we or the insurers know now how many people left this year or how healthy they will be or if that is -- their estimate in setting premiums and our estimates now are highly uncertain. >> one final question. i think the report indicates over the ten-year window we anticipate under the unemployment rate actually go down. that's a good thing. but this is the labor participation is also going to decrease. how is it that we have fewer people working in the unemployment coming down? we think that employment will rise. the participation rate is a total share of the population

over age 16 that is working. a lot of people in their 50s and 60s now well be into their 60s and 70s where the participation rates are much lower. so if that is the aging of the population. of the people that choose to participate in the labor force, we think it is a smaller share over time will not be able to find work. they are unemployed. but the growing share will be able to find work and the employment will rise over the next decade. but not as fast as it was if we didn't have the aging population under way at the same time. >> thank you. >> thank you mr. chairman and i appreciate the line of inquiry because it's very important. what i heard you say is the risk corridors, which we actually borrowed from the republicans when they did the prescription medicare drug program. the risk corridors were in there

where they not? >> yes. >> and you said that helped save money over the long haul. and that in your estimation, and that of your team of analysts, it will save money over the long haul under the affordable care act. >> it's only a three-year program as you understand. >> unlike the medicare prescription drug program that didn't have a time limit, this is just three years. but if it were eliminated, it adds to the volatility and it will probably cost more. >> i really appreciate my friend bringing that out and i appreciate him digging in with you the difference between jobs and workers. the unemployment rate is very likely to go down even though there are people leaving the workforce as we are not going to put a gun at their head and

force them to work past retirement age or if for some reason they are not tethered to a job cause of their fear of losing their. people might have more choices. so there is less participation for whatever reason, but not less jobs. i appreciate the clarification. i don't know if you have had a chance for your team to look at and analysis from the urban institute and the robert wood johnson foundation that found that 1.5 million americans might start new businesses. because of the freedom under the affordable care act. have you looked at that report? >> i think my colleagues have that i have not had the chance myself to talk about it. >> i found it interesting that here's an opportunity to actually increase employment, and it would appreciate at some point getting some feedback whether the folks at the robert wood johnson and the urban

institute were off in the ozone or if s. is usually the case it's pretty good and analysis, that would be very valuable to hear that from you experts if you have had a chance to look at it. >> i want to just focus for a moment on this notion that my friend talked about on the tax levels being high, higher than if i understood them correctly and that if we haven't seen this era of high deficits such as we have experienced and maybe looking at the future. looking at the chart that you provided that shows that the long-term average for the revenues was 17.4%. you'd think that that is going to go up to 18.1% on going

forward as a percentage of gdp. but on that same chart on page six of the documents provided to us, it shows back when we were actually in the surplus. the revenues were higher than the 19.1%. and i think that my friend, mr. van hollen eluded to that in his opening statement. no, we have seen revenues that were higher back when we were producing surpluses. and we have seen deficits that were much higher back when we were struggling with the depression and world war ii and we get these things into balance. i hope this is the day that you look forward to, because i like watching you walk the tightrope, refer back to the data,

encourage us to do so, and not take the topline focus group points, but look at what it actually says. and i think what you have done here in your testimony is pointing out the difference between jobs and workers and loss of workforce persecution, not necessarily bad. and that risk corridors are not some foreign concept that's going to cost us money that we can steal as part of a budget debt ceiling notion and that revenue we have enjoyed over time when we were in surplus are actually higher. >> thank you. >> mr. williams. >> i'm going to take one of his second as he went on as you noted. >> i cut him off as well. >> i don't cut off director ellmendorf. i cut off members. [laughter]

>> now you get the drill. >> thank you mr. chairman and doctor for your testimony. i'm a small-business owner 42 years, family man. like a taxpayer and a small-business owner rather than a politician. the economy and main street economy is not fixed. it's hurting. i can tell you that. and the 0% hasn't worked in the stimulus money has not worked. the effects are evident from the high unemployment. people are living from paycheck to paycheck. people on food stamps, and frankly larger deficit. we see that. i believe the last thing that we have to fix its economy and turn it around is through small business owners and lower taxes. i think that is what we have left and i am a big supporter of cutting the corporate and cutting the cap gains and

dividends into the tax employer and employee, accelerated depreciation, and also inheritance tax. i believe there's places that if we let -- if we reduce all that small business generates a lot of our opportunity to do the great things to make money and frankly small business doesn't save money, they spend money on the infrastructure and hire people and i think that is a big answer to the love of the problems that we have had. with that being said, my question to you would be what benefits would we be reforming the book and tax code by lowering taxes and tax rates and broadening the tax base on the individual and corporate basis which is revenue neutral as i have indicated? >> congressman, when he and other analysts think that sort of tax reform that could you have described could boost economic growth. but the metal into the first depends specifically on the tax reform that the congress would consider.

and we are standing by to do an economic analysis that approaches the tax reform. if you and others on the committee would be interested. >> if you do these things, i'm convinced if you put more people than the job market, more taxpayers and more cash flow, it works. >> we talked a lot about the minimum wage today off and on. my question to be for someone that owns a business, we have raised the minimum wage. how do i pay for that? >> congressman cohen as i mentioned in the earlier question we are currently doing the analysis on the effect of raising the minimum wage and looking at the effect on the family income and we hope to present that in the congress, and i don't want to get ahead of that. >> it could raise prices and it could affect the consumer. next question would be we talked about the tax decreases. what would be the effect on the economy of increasing the marginal tax rates?

>> we think that, again, it is a widespread view that increasing marginal tax rates would slow down the economy. all else equal. and i would emphasize we have a significant deficit. we think growing deficits we have a high level of debt on the economy. so, unless some changes made to either spending or revenue, the sizable nature that high level of debt will weigh in on the economy so as you think about the partial tax rate and the spending programs and i think it's important for your colleagues to think about the direct effect on the changes but also to think about the effect on the overall balance and less on the debt and the economic impact on the debt in the economy. >> i agree -- the retailer when you're not selling your project, you don't raise the price cuts the price to get more people by eating and more people in the system. and i kind of think that's where we are. mr. chairman, i yield back.

>> mr. chairman and i would ask unanimous consent that we enter into the record the "washington post" article from february that says no cbo did not say obamacare will kill 2 million jobs. >> without objection. >> i enter that in the record because as i sit here and listen to this for two hours, i have to think of that the figures never lie. but sometimes people with an agenda misinterpreted facts. >> i spent all of yesterday sitting on the ways and means committee going through this name thing.

obamacare is causing a deep and jobs i heard over and over again and we are saying the same thing over again. we are blaming private companies are cutting hours on their own volition at the feet of the aca because somehow it is unreasonable to expect a million or billion dollar corporation to provide health insurance for their people to who work slightly less than 40 hours a week. has anybody bothered to read mr. ellmendorf's report all the way to the end coming and you heard mr. jeffries and others talk about it, but i want to talk about it again. may we read the conclusion in the appendix of the labor market. it is subject to, quote, and these are mr. ellmendorf's words, substantial uncertainty. and they would find this quote even more. quote, in the cbo's judgment, there is no compelling evidence, no compelling evidence that that part-time employment was increased as a result of the

aca. so all this disaster, without the airwaves, is simply fear mongering. this speculating about a disaster without evidence and before the reforms are fully implemented, but as a strategy. a political strategy for the campaign. it goes nicely with the classic deficit bogeyman that we have been hearing about for three and a half years. the affordable care act isn't going to kill any more jobs than our deficit is threatening our economy. our economy is coming back, but i still hear the bogeyman waiting around the deficit, the deficit. paranoid speculation. it might make it seem so come up but the facts do not add up. if you read that article in the "washington post" it is their fact checker that looks at the facts and comes up with the fact of what is being said while all

of the headlines in the country it is simply not what the report says three at what is hurting us is the persistent notion that as the economy is asking for a breath we believe we should tighten our belts and ration the air. the only way we will ever get these numbers by investing the education to research, the development of america's resources. we have the knowledge, the ability and the exception of people to build the economy back up. but we won't do it on scraps. this is a congress then the house of representatives we have with the tax credit expires. we have not asked the transportation bill. we are going to come up to the summer season and there isn't going to be any money in the state to build roads and bridges and all the infrastructure. we have cut research universities and it is an avenue that we say well the aca is

killing all the jobs. we cannot train if without the social programs. and mr. ellmendorf, my view is that if you have any kind of subsidy, you are going to have some disincentive to work. we are at 400%, to the senate is talking about 300%. they have a disincentive to work as well, right? >> yes, this problem is intrinsic in any program that provides benefits to people that don't have a churning in the labor market. and the amount of the effect on people's decision to work, how much to work depends on the size of the benefit and to some extent on the structure of the program. but the basic issue here is the same for any program that would try to provide that. >> let me put you to the end of that. if we had a universal system

that they are saying we need a universal system that covers everybody, if we had that kind of system, nobody would go to work, right? >> that's not true. >> if they go to work in different ideals goes to work, right? >> yes, congressman. [laughter] >> thank you mr. tremaine and doctor ellmendorf. it's good to see you today. i want to go to a topic not talked about in the deficit and growing deficit in where we might be in the future if we do not address that. but social disability, to go back and put some context on this, since 1970 one of the inflation adjusted to disability insurance expenditures have risen from 18 billion to 140 and 100 -- 2014. a portion of the increase is due to two things and we have heard that from testimony before the aging population which we all know and also the entrance of women into the workforce. we have heard that.

but if you look at these factors they only account for 6% on the aging side and 17% increase on the entrance of women for the increasing disability caseload. so at the same time, the individuals are self reporting an increase in their help. but it's improving. and so, we see approximately 20 people per 100,000 of the received benefits and 1970 as compared to now about 80 people per 100,000 today. so the latest projection from the cbo estimate is that social security disability insurance will go bankrupt so by the end, no more dollars, 2018 were bankrupt. notwithstanding the aging population and the women entering the workforce. can you tell me why this spending has grown rapidly in this program? >> i don't have the specific

numbers at hand but as you know we have have retained two reports for the insurance trying to document and explain the sources of growth and to offer you and your colleagues some specific alternatives for changing the disability insurance program if you would like to go that route. in addition to the factors of the population and rise of participation to the women in the workforce making them eligible for the disability insurance benefits that they become disabled. they've also been important changes in the rules for entering the disability insurance program legislated by the congress over the past decade that have pushed up the number of people receiving benefits and the state of the economy matters as well and one thing that has happened in the past several years is people have lost jobs and haven't been able to find new jobs. to find a job to accommodate the disabilities in some cases to

enter the disability in the programs into programs that there is a wide array of factors but i do not have on hand at the relative importance of those factors. >> i want to make sure i'm reading those reports because i've read a lot of reports and i want to be sure that i'm reading the reports that you have referenced. what happens when this goes bankrupt? how will this affect the beneficiaries? >> well, congresswoman, the trust fund runs out of money and we think that there will be no legal authority to pay until more money comes in. as you know the last time the disability insurance was on the cusp of the problem of the congress they should get money from the old age survivors trust fund into disability trust fund in that outcome. but if nothing were done, then i believe that the legal authority on the to pay money in the trust fund, and that would require a substantial reduction in the benefit to fall down at the level of the ongoing income in recent.

>> said, -- so,pardon me for interrupting. but for those of the recipients to actually gain the benefits. >> this would have been in 2017 at the trust fund would run out of money to the money to pay the benefits promised under the current law. >> do you reference the consequences that we are seeing in the abuse of the program? >> so, we talked about that, congresswoman. and i -- the issue for the congress is to find the policy to change that. and i think there are some that we talked about in that report. >> i appreciate that and my final question is what is the reduced labor participation would have on the economy? >> the central factor in slowing the economic growth out of the current downturn later in the

decade and beyond, the principal reason why we think the economic growth will be less than it was well be a slower rate of growth on the workforce. >> i yield back mr. charan. >> mr. chairman thank you very much and i, like both of my colleagues, appreciate your efforts and the work that you do because i don't think there is a single member of this committee or anybody in congress who isn't concerned about making sure the economy is growing and we are providing every kind of policy support that increases job growth in any context particularly in a state like mine where we actually have the negative population growth and really struggling for economic growth because we have a higher than national average on the federal investments, but it

largely related to the intellectual investment in the laboratory that we haven't figured out that segway to stable out of the economy. i'm interested in both sides of the aisle about what we ought to be doing to make sure that we are focusing on as many policies to give as many opportunities to grow the economy as much as possible and i know we talked about unemployment and i appreciate that but i want to talk about two more. one is increasing the minimum wage and some of my colleagues are going to argue that the minimum wage earners are mostly teenagers entering the workforce for the first time and they are going to argue that it's a drag increasing the minimum wage on the economy and you might suspect i disagree with that statement and that the average age of the minimum wage workers 35 and these are the adult to

bring a significant portion of the family income and a majority of these are women. mostly two thirds of the minimum wage workers are women. while we have you here i would like to get more information on the second plate and really point and really hone in on the impact of the increase in the number of wage would have on the economy. >> you are certainly right that the minimum wage workers stand the age distribution and some are teenagers but many are not. we are currently trying to complete a report on the effect of the increasing on the minimum wage on the economy taking into account the increases and the wages to income for many people. we hope to finish that report in a few weeks and i don't want, rather enough to offer my sense of that until the analysis is completed, but this is in time to the useful information for you and your colleagues that you

consider this legislation. >> the studies have had a positive impact on both the wages, earning, spending and therefore jobs. and certainly it impacts women in my state where you have so many women as a single head of household that is going to be a significant impact on our economy. and as a comprehensive immigration reform has a significant impact on the economy. not only in new mexico, but on the entire country. can you estimate of the entire immigration reform on the gdp over the next decade? >> we did a very thorough analysis that was passed by the senate to increase immigration and we thought that legislation would reduce the budget deficit in this decade and in the following decade we thought it would increase the size of the economy and overall gdp.

i should emphasize that analysis was specific to that piece of legislation and to be situations in the immigration policy might lead to rather different effects that that piece of legislation would, as i said come increase the size, increase the size of the economy and the budget deficit. it's 832 billion the impact over the few decades is about 850 billion. does that sound about right? >> i don't have the numbers in front of me. >> the point being that again we increase wages and jobs, we increase opportunity and stabilize the economy. which on the other side i'm interested in all of the impacts on health care and the acute care and primary care system in

my opinion, with the affordable care act and the future changes are easy. the long-term spending on medicare and medicaid and long-term care and home healthcare and hospice benefits and of the last days days of dying in the hospital, this gives us the opportunity to be thoughtful about those decisions going forward and really making a much it much more than a balanced decision in the economy. >> thank you. >> doctor ellmendorf, thanks for coming. i always appreciate it. picking up on where my colleague left off, contrary to her assumption or assertion, i want people coming and my party wants people to live the best possible ways to build for themselves that they can. whether or not they vote for us. that is what america has always been upheld. i am for young people having their first job. imf are women actively being part of the workforce.

we are not saying no. we are just saying that there is a better way. so in light of that, when you are completing your study, can you tell me if you are going to contemplate any alternatives to the approach of just raising the federal minimum wage across all of the sectors? are you going to look at the effects of the earned income tax credit for the subsidy in terms of the payroll tax deduction on "the side of things or anything like that? >> this will focus on the effects of raising the minimum wage and we would note other approaches have been discussed in the past and the alternative ways of boosting the tax income on the low income people come and as you know, they have been an analysis of some of the alternatives in the past. >> so i came from an education and workforce committee and we were talking about early

childhood education and that is combined with remarks i have heard so far that reminded me of the president's state of the union address, where again he demanded the across-the-board minimum wage but there wouldn't be any effect that i came in being is being replaced by machines or declining of unemployment by his businesses. at the same time, he was calling for head start increasing the early childhood education program. so if the federal minimum wage that he is calling for a prized programs that he's also calling for like head start, that would increase the administrative costs of the head start programs thereby the number of slots of the kids that need programs like head start. >> i see your point, congressman we will tell you all that we think we've been able to figure out.

>> are you going to have particular programs as examples of your analyst is? >> we are not quite finished and i would rather not be specific about exactly what we are doing, but we will try to talk about -- we do intend to talk about how the changes in the minimum wage would interact with parts of the government budget. that is exactly what we will say on how specific we would be on certain things. >> so, because i was in the other hearing i didn't hear the beginning of your testimony or questions. but did you discuss at all in any depth my program? let me go down that road a bit. the president recently proposed in the same speech, my ra program which would allow all americans who qualify in the u.s. debt instruments similar to the debt instrument similar to what is available to the federal employees through our thrift savings program. it's called the g. fund that is available to the employees and

and it is nonmarketable. and the best way that i can describe it is that it provides a subsidized interest rate over the the long term of what is a short-term security. if we apply something similar to the g. fund product to the entire american population or a subset of it within that increase the borrowing cost as a government? >> congressman, i don't know. as a matter of course we do not affect the particular administrative action. as you know. however we do fault on the administrative action because we need to understand that when we are updating the refund if this particular change is one that we conclude ultimately that has important effects on the budget, then you will see that come through in the next base fund projection but i don't know if at this point we have had any time to stop and look at that.

>> just in general in the 22nd i have remaining talking about the deficit versus the debt, i hope you'll understand at this point, that is not going down, right? the debt has increased? >> right. >> is it better to encourage people to work in order to reduce the deficit were to encourage people not to work in order to reduce the government's deficit? >> well, it could be done at no cost to the budget itself. let me rephrase that debate. people who work all else equal the larger input in the tax revenue into smaller deficit. >> thank you, chairman ryan we started with ryan and we will end with ryan. the report did not say that obamacare would get rid of or cost 2 million jobs, correct? it said that the affordable care

act will cost the equivalent of 2 million jobs and that means hours, correct, there will be a reduction in hours? >> we have it in total hours worked but i want to be careful about the word cost. we are trying to draw an important distinction between changes in people's work that it is forced upon them by their employer saying we can't afford to pay you to work or we can't afford to pay you to work as many hours and the choices the individual workers would make. >> so these are choices that the workers would make because of the coverage that i have, i can choose to reduce. >> the effects that we estimate -- >> of that group, who is the largest group that you would classify as people who will eat that choice? >> so, there are a number of channels to which the affordable care act reduces the incentive to work and thus we think would reduce the work hours. some of them are through the

subsidies of, particularly the subsidies for lower income people but there are also some effects on the tax rates of higher income people. >> so who would this be? would this be houses? >> i think a number of groups of people could be affected in that sense would not try to break this down. so it could be spouses, but they could be primary earners do decide to scale back their hours and may not leave the workforce altogether. it can be older people that decided to retire earlier than they would have been able to otherwise and it also includes younger people. >> so we are talking about a situation where there is a husband and wife and they are both working and they have a baby and one of them decides to not work or to reduce their hours in order to stay home with the baby. they would fall into this category. >> yes congressman. >> so if you worked from 18-years-old to 58 with 60-years-old, retired, now has a

little part-time job, low-wage job in order to pay for their health care if they stop working, because now they will have access to health care, that steelworker would fall into this category? >> yes. >> and your analyst as of this, do you account for anyone who is going from, say working three jobs to go down to working two jobs? >> that would fall into this analysis as well. we haven't tried to break this down. >> someone who has done that, because i remember george bush come at a set mr. president i'm having a hard time working. i have three jobs. he said that's great. what we are saying is we want to try to make it a little bit easier to go from three jobs to two jobs or from two jobs to one job, and i think it's important for us to see those people fall into this number. they will be reducing their hours. if you are a two parent home and you have a sick parent and you

say well, i am now because we can afford healthcare, because of the credit or the expansion of medicaid or whatever the case may be, i can reduce my hours i'm working as a husband or wife to take care of a sick parent. and maybe they don't have to go into a nursing home and draw on the medicare program. none of that is factored into the long-term care cost either. you don't say a number of these people will reduce their hours and they will be able to take care of mom instead of her going to a nursing home. >> i think that's the point. there are so many different scenarios where average people across the country are living with right now, not anymore so much, but have struggled to make an. and the pressure put on these families is being reduced now because of the affordable care act. and i would like to say i think there's been an undertone of disrespect in this hearing as i sat through it about people just

don't want to go to work. there's always a few people i'm sure that would find a way even if they work to sca scan the coy or run a scam. there are always going to be people like that. but if there is a job that opens up in our town and the pays well, there are thousands of applicants that would want a job and we can get away from this idea nobody wants to work everybody just wants to get on and nobody wants to work for a living. that's not true. and the scenarios we discuss i think outline that, and so i appreciate you being very clear this isn't about 2 million jobs this is about average people having an opportunity to reduce the burden on their own family. >> doctor ellmendorf, thank you for your time today. the hearing is adjourned.

, hostss morning, politico a panel dealing with energy policy. ate coverage on c-span3 eight: 10 a.m. eastern. a house oversight and government affairs subcommittee will hear the i res of conservative groups today on c-span3 at 9:30 a.m. eastern. you can join the conversation on facebook and twitter. >> it is really an instrument of the president.

and that has always been the case. the president is always been master. i mentioned in the book that the president, and i served under 70 my time, each come to view it as -- i served under seven during my time. each come to view it as a -- they do not have to worry about the process. it is a convenient and sometimes overly seductive tool in the president's foreign policy arsenal. >> from the shadow to the center of political controversy, a look at the cia saturday night at 10:00 eastern and is sunday at 9:00 on "after words" on c- span2's book tv. onto book tv.org and click the club to enter the chat room.

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boren of that, david the university of oklahoma discusses education and budget cuts. we will take your comments on facebook and twitter. ♪ >> on capitol hill this morning, a house oversight and government a hearing onold the irs targeting specific groups. look for our coverage on c-span.org. join the conversation on twitter with the #cspanchat. decision to stop selling cigarettes at their stores is making headlines this morning. it