much different than projections earlier in the year. the economy, we think, is on a path of recovery, but it has been of disappointingly slow recovery. we do think now it will pick up over the next few years. market will strengthen where people find jobs, but even with that pick up any improvement to the budget that will bring because of underlying the federal budget is still on an unsustainable path because deficits have come down in the last few years, but a few years from now they will start increasing in size again, and the outstanding debt of the federal government is very high relative to the size of the economy in our history. and by the end of the coming decade and beyond, it will increase even more relative to the size of the economy. and that high rising debt has negative and serious consequences and ultimately,

cannot be sustained. >> can you tell us about -- you know, really strong growth numbers for the second quarter. creating jobs in the past few months. but there does seem to be a disconnect and americans still feel like we are in a recession. what are the -- what is the ?isconnect we still have 50 million people on food stamps. what is going on right now? the -- >> the economy contracted so much in 2008 and especially in the first half of 2009 that the actual output of the economy fell way below what we could produce if all the people who wanted to work for back at work, if all of the equipment was being used and so on. it has been growing for the last five euros -- years, but has fallen to level that is below what we had before the downturn. and that is not fast enough to

put everyone back to work that wants a job. that is seen partly in the unemployment rate, which has come down, but still higher than in 2007 any years before that. you can also see this in the labor participation rate. this is just the sheer of the working age population that is actually employed or looking for a job. participation rate has 2012, sharply in 2010, and 2013 and leveled out since late last year. part of that is underlying demographic trends, but part of that is people who became discouraged because they could not find a job. productsmand for firms increases in the next few years, unemployment rate will come down further. but also, some people will be force.ack into the labor and we think ultimately, faster increases in wages. in placesan catch up

like this? >> the recovery is so it is not so, clear. that is part of the channel -- challenge that we face. whennd to recover only firms are trying to hire workers and cannot get workers at the existing wages, and we have not really come to that point yet. >> what are the particular trends you're looking for? what if they don't play out? and the wages just stay stagnant , and people are coming back to the workforce, but taking part-time jobs? up,ell, if wages don't pick then there will be fewer people who will come back into the labor force. some people will decide that given the other costs they have of working, they won't actually find their way back to work. also, for many people who would be working, they will have lower incomes than otherwise.

for a long time in this country, the sheer of total -- the share of total income going to workers and the share going to owners, those have been pretty stable. and we have really deviated from that in the past few decades. the gradual downtrend turned into a sharp fall and we have not seen a recovery from that. in our projections, we think there will be a recovery. not back to the previous average level, but a recovery from where we are now. there is every reason to think that it will happen, but it will take businesses feeling enough demand for the goods and services they are selling that they need to hire more workers to produce those goods and to hire, and in order them, they will feel the need to pay higher wages. it is coming, but not yet. growth in wages remains quite subdued relative to what it was before the recession. productions,oad

almost every single year, it seems, the cbo says the year after this it will be a sharp uptick in growth. why should investors to leave next year wesay, will see a higher rate of growth? >> everyone who deals with forecasts should recognize there is a tremendous amount of uncertainty. we find that our forecast is no worse in general than the forecast of outside forecasters. but that is a pretty low bar, just because economic forecasting is so difficult. we have been disappointed a number of years in a row. and in retrospect, we think we misjudged how long the damage from the financial crisis and the housing bust would last. there's plenty of evidence across different countries and over long time frames that the economic downturn that follows

housing bubbles and real problems in the financial system tend to lead to very slow recoveries. in the united states, think a number of people, including we, felt that because of monetary policy and fiscal policy responding initially very powerfully to the downturn that the united states on this as long would not have and protracted a recovery as has happened in other countries. it is still true that we have done better in this country than many of the other countries in europe have done. relative to other countries in this particular cycle, the u.s. has done a little better. but it has still been a much slower recovery than we expected. and what we expected was lower than the average u.s. recovery. >> if i could just go into a question about the deficit for a second, the way i read your report is that congressman past year or so has pivoted away from the deficit. it is not the number -- congress in the past year or so has pivoted away from the deficit.

it is not the number one thing being talked about. you talk about debt increasing over time. would it be fair to report it as saying that it is a mistake for congress to turn away from concerns about the deficit? >> we certainly think the fiscal challenges the country faces remain very large. all along that as the economy improved, deficits would fall. for while. but the real challenge always and thehe medium run long run. and the challenge comes, as you know, primarily from underlying forces like the aging of the population and the movement of the baby boom generation into retirement and providing health care costs. and those challenges basically remain. we have made adjustments to our projections over the last several years, partly in response to action congress has taken. but nevertheless, deficits in the last decade are large enough, more than seven dollars trillion -- more than seven chilean dollars in the past -- more than seven trillion dollars

in the past decade. and this year, debt is larger now relative to the u.s. gdp than it has been since 1950. and over the next decade, we think it will be larger relative to gdp under current laws, and then increasing beyond that. those high levels of debt have in the long run significant consequences. and unless congress acts to address them, those are costs that we will bear and something will have to be done. you don't endorse specific legislation, but what are the types of things that congress should be looking at doing? i mean, you have said generally in the past. >> one of the things that we provide to congress every few years is a thick report of many, many options for addressing the budget. some on the spending side, some on the revenue side. as you say, we do not take positions about which are good or bad. we try to lay out the pros and cons of all of them. but when you think about the

budget, over the spending side, they are sending for a few programs, a few very large programs that are growing quite rapidly. we are thinking here of social security and major health care programs, which will be medicare and medicaid, and the subsidies through the charlotte -- the insurance exchanges. social security will grow at 80% in the coming decade. sending for major health care programs will also grow in the coming decade. in sharp contrast to that, all of the other programs, defense spending, highways, veterans health care, a whole slew of activities, all of those activities put together, manning is growing much more slowly than it is for those few -- spending is growing much more slowly than it is for those few large programs. and it is partly because congress put in place in the appropriations through 2021. many analysts see those caps

that restrict spending are focused on the other sorts of spending, primarily social security and the other health-care programs. and the other side of the budget is on the revenue side. and we have analyzed a whole range of options for increasing revenues that could be done in a broad-based way or in a way that is more targeted. >> you were not the cbo director when a mate social security order medicare, so gnome was burdened with trying to search the numbers are for that. but you had to figure out the aca, and there is obviously national tension over the job that you guys did. in retrospect,at you got that right mostly, your estimates on that? has it surprise you with being too extensive for less expensive? hadwhat impact has the aca on health care costs? that is a big debate right now as well.

>> yes. on the question of whether we were right or not, we don't know. and in some important ways, we will never know. for some provisions of the affordable care act, they established new streams of money that one can identify separately. the affordable care act has credits,ed credit, tax to help people buy insurance through exchanges. and those credits did not this before aca was put in place. assess howmately much money is being spent on those credits and compare that to what our production was. but still very early for that, of course. this is the first year and we still have quite a bit available. the enrollment in the insurance it changes this year is very close to the projections we made earlier this year. a number ofons from years ago. but this is just the first year. we don't know when enrollment will be in the exchanges and we don't know what the costs those credits will turn out to be. and in other provisions of the

affordable care act, we made changes to pre-existing programs like medicare. in some ways, we will never really know the effect those provisions had, because medicare spending would have happened otherwise. the aca change the payment rates and the payment mechanisms and so on. we will know in the end whether medicare costs more or less than we predicted it would cost after the aca was passed, but if it turns out to be different than we expected, whether that difference comes from the effect of the aca itself, or just a misunderstanding of what would have happened under the lobby for the aca is not something that you can readily -- under the law before the aca is not the minute you can readily understand. >> would you say that the aca in its entirety would reduce the deficit over the next two decades or two if it did not exist? >> we have no reason to change that assessment, but neither can we do an estimate -- a new estimate of that again today

because the aca has only been in place for four years and its provisions are intertwined with other provisions of the pre-existing law in ways that we cannot readily separate out. but we have no reason to change those up nothing has happened that invalidates -- but we have no reason to change will stop we invalidate theto numbers that we have. >> what are you seeing in terms of medicare health care spending? >> health-care spending as a whole has flowed very sharply over the past several years. slowed very sharply over the past several years. there has been research to understand why that has occurred. we have focused on medicare. in the work that we published last year, we found that business cycle problems, slowing income growth, the loss of wealth, does not seem to have been a factor in the medicare cost slowdown will stop -- slowdown. has comeare slowdown

in the way that providers of medicare and beneficiaries of medicare are behaving. in the health-care sector as a whole, there is a dispute about how important the cyclical slowdown has been. little doubt that there are important changes going on in the health care system and that they have an important in slowing the growth of medicare costs to the point where medicare spending this year is rising more slowly than the number of beneficiaries. not only the cost per beneficiary in medicare this year, that is actually going to be less than the cost per beneficiary last year. >> is that good news? >> we think it is. there are a number of factors going on in medicare. there are changes in the way the providers of medicare are acting. there are also restraint on the rates that medicare is paying to providers for the services they deliver. there were some before the afford care act, and the affordable care act added to that. feature, as baby

intors move over 65 and medicare, they raise a number of people to benefits. but 65-year-olds are much less expensive than 75 or 80-year-olds. it is holding down the cost per person over the coming decade, although pushing up the total cost. all of those factors are at work. our projections try to sort them we are pretty good at knowing how many 65 and 75-year-olds and 80-year-olds that will be on medicare or 10 years from now, but it is harder to know what the behavior of those beneficiaries and providers will be. we think the slowdown we have seen them of the slower growth rate per person, will persist for a while. and the last four years, we have brought down our projections of medicare spending, let's say, by 2020, by about 15%. that is a very sizable

reduction. it produces federal spending by more than $1 trillion in the coming decade. -- it reduces federal spending by more than $1 trillion in the coming decade. i want to emphasize that notwithstanding that slowdown, there will be more people are seating medicare benefits, more than one third more people on medicare 10 years from now than today. even though each individual cost is not going up very fast, it still means a big increase in the overall cost of the program. in addition, there is this expansion of federal subsidies for health insurance under the afford the care act through the subsidies and tax credits and insurance exchanges, and also through medicaid. beneficiaries in a program are going up as well. the slowing cost per person is a very good thing for the federal budget. but notwithstanding that, total

federal spending on health care is the fastest-growing part of the federal budget. but i have a personal interest. as someone contemplating my my first home, what can you tell me about interest rates and what they will mean for the economy echo >> i cannot give you any personal financial advice. you don't necessarily want mine. interest rates have been very low, obviously, in the last several years, because there's been a week private demand for credit and the federal reserve has been trying to simply the economy by holding short-term .nterest rates down we think with the economy healing and the recovery we expect in the labor market in the next few years, that the federal reserve will raise rates. the increase in interest rates will have very important effects on the federal budget. the federal government owes a lot of money and any increase in

meanste that it pays larger federal interest payments. between now and 10 years from now, we think the outstanding federal debt will increase by a lot. we also think that the average or interest rate that the government pays will more than double. and because of that, the total interest payments the government makes will more than triple over the next decade from more than $200 billion today to essentially $800 billion in 2024. >> how will we know we are in a "debt crisis" that some people talk about? >> a way that we use the term "the school crisis goes quote -- "fiscal crisis" is the way that investors are worried about the abilities to pay bills. they start to raise interest rates. in other countries, that shift in perception tends to happen ify rapidly, partly because

somebody starts to worry, then other people start to worry as well. and interest rates rise and it becomes harder for a government to pay it builds. -- pay its bills. it can be a self fulfilling thing in that way. what we might end up in that situation, we just don't know. "we" i'm referring to analysts in general. there is not sufficient ability on the part of analysts to predict when that shift in confidence would occur. but certainly, higher debt raises that risk relative to lower debt. in 2007, the federal debt held by the public was about 30 5% of gdp. this year, it will be about 74% of gdp. the end of the decade, and higher still be on that. >> we have time for a few more questions. horizon,ou look at the

and in looking at your data, 2017, 2018 is where we start to get to that inflection point where we will have had several declining deficit years, but going into this pick up where we are well into the baby boom generation and these programs, and there are other issues as well. is there any issue on the horizon that people should be most cognizant of, that is going to propel the debt to grow in perpetuity? or is it just a, nation of theors that is really issue? >> it is accommodation of factors. -- combination of factors. and risinglth care interest rates. all of the factors become more pronounced as the decade goes on. growth inint is the federal spending militant to the size of the economy does not come -- does not become faster

across the board. it is really from a few programs. over the next decade, the total growth in federal spending, 85% will come from social security, the major health care programs command net and tryst. every thing else -- net interest. editing of accounts for only about 18%. if you're really worried about it is reallying, mainly those programs. the spending in those programs depend very much on a number of andle who are over age 65 health care costs beyond that per person. what has happened over the last few years, and we think will happen again next year, is declining deficits as the economy is recovered. not strong enough for everyone to have a job at this point, but stronger than it was. that will mean more tax revenue. this year, tax revenue is up 8% from last year. and spending is only up 2% from last year. that deficit is narrowing.

the improvement in the economy, once the economy gets back to a sustainable level of output, then the economy will grow at a lower, more sustainable pace beyond that. thatecovery of revenues one sees now, we will see those kinds of growth rate going forward every year. >> your projections do not account for a possibility of another deep recession coming up. is it fair to say the government has leslie way to simulate the economy due to its already high leewayrden -- has less to stimulate the economy due to its already high debt burden you are >> if that were to happen, there would be less ability to respond to economic challenges. that could be economic downturns, a natural crisis, international events. the more debt we have, the less ability congress has to do what it did in 2008 and 2009 and 2010, which was probably just to allow revenues to fall with the .eclining economy but beyond that, to make specific changes in policy that cuts taxes a little further and raise spending to provide a

short-term boost for goods and services. we started in 2007 with debt at 77% of gdp. ability -- if we had started in 2007 with debt at 77% of gdp, our ability to do what we did would not have been there. this is not a friendly town right now. i know you never pick one side or the other, but can you pass any kind of judgment on the process itself echo is it beneficial? is it serving the american people? are there things that could be done better in terms of policy decisions, not picking one or the other, but just the way things are legislated? >> and your answer will have to be the last. go ahead. >> the fundamental issue now is that members of congress disagree strongly about what should be done to address the fiscal challenge, and absent greater agreement among the

policymakers, and ultimately agreement among the american people about how to proceed, is very hard to make more progress that has been made. >> director elmendorf, thank you very much for being on newsmakers. >> i'm happy to be here. thank you. [captions copyright national cable satellite corp. 2014] [captioning performed by national captioning institute] >> and we are back with our reporters. eric, let me did -- let me begin with you. there was a much debate on capitol hill about government and debt and deficit and the government shutting down. the conversation does not seem to be happening anymore. >> they have pivoted away from it. last year, there was some kind of bipartisan budget deal and the battles have been raging ever since the publicans -- and the battles that had been raging ever since republicans took over the house seem to have subsided. they need to come back and reengage in this. you see from the white house and democrats noting that the deficit this year and next year we are going to be below the 3% of the economy that has been the

historical average in the last 40 years, and basically giving the impression that the deficit problem is solved. on the other side, you see republicans pointing to the debt that has a committed due to the increasing government spending during the recession and saying that we were headed for a debt crisis. mr. almond or sort of went right down the middle -- mr. elmendorf sort of went right down the middle and said we are seeing a reduction in spending, and we would like to see congress rain gauge. i think we will see in march or a couple of months after that, we would like to see the debt ceiling raised again. that has caused a flurry of action in the past. that is one thing that could make congress reading age -- reengage again. >> what other options, really echo -- really? >> again, mr. elmendorf laid out the fact that there is a revenue issue any spending issue.

-- where thewere both sides do some kind of grand raise somere they taxes and lower others, or maybe a payroll tax contributions social security, but cutting benefits and raising retirement age. all of those things are painful, and the idea of split government where president obama is dealing with this robust talk of -- bogus talk of impeachment on the right is interesting. >> if republicans win the senate, which it looks like very likely they will do, maybe they will feel like there are no political consequences for doing that again. and they will do more of the sort of "stand up and fight for what they believe in" we get into 2016. the threat of a government shutdown could force some tough socialns on medicare and

security. >> dealing with the so-called 85%. , if you'rerf said worried about winning, you need to deal with that 85%. -- worried about spending, you need to deal with that 85%. with theicans can deal budget for torn a 16 the way they want and -- the budget for that to the it ministration. act, youfordable care asked him about that. >> i thought his answer was really interesting, because when you have people making projections, you want to know if they were right or wrong in retrospect. and his point was, we may never know. the affordable care act sort of change health-care spending landscape so much that it is hard to measure what things would be like in absence of it ever existing. my sense is that they feel pretty comfortable with where they are. obviously, there have been so

many changes after the law was passed, and continue to be changes from the administration, that it is probably hard to exactly measure what the impacting cost will be. but my sense is that this is a legacy issue. for obama, it's kind of going to be a legacy issue -- for obama. it's going to kind of be a legacy issue for mr. elmendorf when he leaves office. >> is mr. elmendorf leaping, saying? >>leaving, that is a good question. the situation is more confusing because he came in on an unexpired term when he started in 2000 and nine -- 2009. my guess is that he would not stay for a while. elmendorf is a democratic appointee. i'm sure the house want their own person there. story about this and i had republican sources close to tom price, who is likely to be the house budget chairman,

because paul ryan is moving on to ways and means, likely, indicating he would likely keep elmendorf. and jeff sessions, who would likely be the check -- these -- the chairman of the senate budget also like elmendorf. i think the reason is if they present anserve -- conservative budget, they want a neutral referee. i think there's the possibility he could be allowed to stay on. >> thank you both very much for your time. q&a, our guest is robert a katzman, chief judge of the u.s. circuit court of appeals. ,e talked about his new book "judging statutes," which explores his views about how they should be interpreting laws passed by congress.

he talks about his views on televising federal court proceedings. tonight at 8:00 on q&a on c-span. presentsonth, c-span debate on what makes america great, evolution, and genetically modified foods. issues spotlight with looks at health care, irs oversight, student loan debt, and campus sexual assault. it was -- and new perspectives on global warming, and food safety. and our history tool or -- history tour. find a schedule one week in advance at www.c-span.org and let us know about the programs you are watching. you can call us. or e-mail us. join the conversation. like a fun facebook. follow us on twitt