community, i would make sure that our prosecutors receive the appropriate training to manage the this important issue. as i've seen in my practice as u.s. attorney, cyber issues are now in every area of practice that we have. that will continue to be the case. and i'm sure that should i become confirmed as attorney general i will see that throughout the department of justice. i will work to strength the resources in the criminal division and the national security division that deal with these cases. but another thing that i think is very important as we combat cyberattacks and deal with cybersecurity is the relationship between government and private industry. i believe that there's a very, very important collaborative relationship to be built there. it is being built. i've seen it. i've participated in conferences with both financial sector parties as well as pharmaceutical industry parties on this important issue. and we've had very, very good, positive collaborative results

involving the reportinging of cyberattacks as well as law enforcement's ability to work with private industry to gain knowledge of their systems, to prevent attacks as well. so i think we also, should i become attorney general, one of my priorities would be strengthening this connection between government and private industry as well. >> thank you very much. senator schumer mentioned earlier, i meant to mention in my opening comments, that we have a number of very capable basketball teams in north carolina, beyond the blue devils and the tar heels. many of whom i think this year could beat the knicks. [laughter] >> well. as an early carolina fan, i have to say that that is likely >> you can see more of that confirmation hearing on our website at c-span.org. the timing when the senate will take up nomination is still

uncertain. many say she is likely to be confirmed. john cornyn's is saying that outcome is likely, though he has not indicated how he himself would vote. and charles grassley has said he hasn't decided how to vote on the nomination. this week there will be another confirmation hearing on capitol hill. he was chosen in december to replace outgoing secretary chuck hagel. he previously several that previously served as that did in the obama administration. we will have live coverage beginning at 9:30 a.m. eastern on c-span three. here is more on what to expect this week in congress from the house and senate floor. >> for a look at week ahead a

congress we are joined by christina from the hill. what are the details that stood out for this budget and what has been the reaction for lawmakers? >> he wants to repeal the sequester. those harsh spending cuts that lawmakers agreed to during a bruising debt ceiling fight in 2011. with the economy showing signs of improving as well as threats abroad from the islamic state president obama is making the case that this is a good time to increase spending after three years of deficit dropping. republicans don't think this is a good time to raise spending, especially for domestic, because they don't believe it is quite at that point yet.

>> let's move on to the repeal of the affordable care act we might see. you actually had a tweet. you wrote -- how is this different from the other repeals we have seen and how many have there been so far? >> this will be the fourth standalone in the house and almost the 60th overall to undermine the law in the past four years. but what is different this time around is a committee for the alternative health care law. while we will see republicans united on the decision to repeal the law, they haven't come up with an alternative for health care reform since the law has been enacted in 2010. if the company is able to come up with an alternative this will be a major step for the party in

the last five years since they railed against the law being enacted. >> and then the house majority leader kevin mccarthy sent out a memo outlining what we might see in the month of february. two things we're missing, won the abortion bill and then also border security, which got sidelined because of bad weather and a short work week. what is in the spill and why skip these two items? >> those two were among the bills pulled this month from two different parts of the republican party. the abortion bill that would have banned abortion after 20 weeks of pregnancy was ultimately yanked from the floor because of opposition from republican women as well a centrists who have objection to language that would require the only exceptions for rates. since the justice department estimates that nearly 70% of rates go on reported these numbers were concerned that it would impose too harsh of a requirement on rate victims.

it was due in part to leadership aides that were in part because of the truncated work we did do to the snowstorm on monday last week. their skepticism this would be a ruse for them to pass a department of spending bill without aggressively challenging president obama's executive action on immigration. >> what is the timeline for that homeland security bill? what are lawmakers planning on doing with the college savings account? >> funding for the department of homeland security will be dominated in february because funding runs out on february 27. we only had a few weeks to deal with that deadline and find places to placate conservatives. that was originally going to be a part of president obama's budget to be released on monday. after democrats lobbied the president not to include it in his budget the white house announced they would not be part

of the budget. the house is going to respond and hit president obama on this point by voting on a bill sponsored by congresswoman lynn jacobs of kansas. that would prevent any taxation on these five 29th for college. >> we are hoping to see some action on the homeland security bill that passed in the house and those provisions for blocking the executive action on immigration. what do the parties have in mind for this senate action? >> democrats have announced they will unite in opposition against this bill because it includes language to defund president obama's executive action. since the procedural vote is going to need 60 votes in order to advance and republicans only have 54 seats in the senate, they are going to fall short of the necessary hurdles. republicans have been making the point that democrats could at least vote to offer amendments

as mitch mcconnell allowed them a litany of amendments. democrats are saying they don't even want to waste their time with this bill that is in human going anywhere. >> she writes for the hill newspaper. you can also follow her on twitter. to her virginity at the hill.com. thank you for your time. >> and many of those agenda items will come up tuesday on the house and senate. chambers are in session on monday. the house will be considering a series of bills at 2 p.m. eastern, including one hiring homeland security department to provide guidelines for use of social media during times of national crisis. the senate meets at 4 p.m. eastern to take up a house bill to prevent military suicides. you can watch the house live on c-span and the senate live he spent two.

>> the political landscape has changed with the 114th congress. not only are there 43 new republicans and 15 new democrats in the house and 12 new republicans and one new democrat in the senate, there are 108 women in congress, including the first african-american republican in the house. keep track of the members of congress using congressional chronicle on c-span.org. the congressional chronicle page has lots of useful information including voting results and statistics about each session of congress. new congress, fast access. them of the congressional budget office estimates that the national deficit will fall this year to the lowest level since president obama took office. the cbo director douglas elmendorf talked about that and other projections from an updated budget report released

from his office. this is an hour. >> hello, i'm doug l mundorf -- doug elmendorf. the cbo just released its budget projection for the economy over the next 10 years. i will summarize briefly and that my colleagues and i will be happy to take your questions. a federal budget deficit, which has gone sharply in the past few years, is projected to hold steady relative to the size of the economy through 2018. further increasing federal debt relative to the size of the economy which is already historicically high.

those projections are based on the assumption that current laws governing taxes and spending will generally remain the same, and they were built upon... output will be essentially elimit nated by the end ofas a result, the unemployment 2017. rate will fall a little further and more people will be encouraged to enter or stay in the labor force. beyond 2017, we project inflation adjusted gross domestic product or real gdp will grow at a rate that is notably less than the average growth during the 198 50s and 1990s. let me address the budget outlook first and then turn to the economic outlook. we estimate that the deficit for fiscal year 2015 will amount to $468 billion slightly less than the deficit for 2014. at 2.6 percent of gdp, this...

year's deficit is projected to be the smallest relative to the nation's output since 2007. but close to the 2.7% the deficits have averaged over the past 50 years. although the deficits and our baseline projections remained roughly stable as a percentage of gdp through 2018, they rise after that. the deficit in 2025 is project's to be $1.1 trillion or 4.0% of g.d.p. and cumulative deficits over the 2016 to 2025 period are projected to total $7.6 trillion. we expect that federal debt held by the public will amount to 74 percent of gdp at the end of this fiscal year, more than twice what it was at the end of 2007. and higher than any year since 1950. by 2025, in our baseline projections, federal debt rises to nearly 79 percent of gdp.

when cbo last issued long-term budget projections in the summer we projected that under current law that would exceed 100 percent of gdp 25 years frownoum and would continue on an upward trajectory hereafter. that trend could not be sustained. such a large and growing federal debt would have serious negative consequences, including increasing federal spending for interest payments, restraining economic growth in the long term, giving policy makers less flexibility to respond to unexpected economic events and eventually heightening the risk of a fiscal crisis. why will deficits and debt increase relative to gdp under current law? in our projections, outlays rise from a little more than 20 percent of gdp this year, which is about what federal spending has averaged over the past... 50 years. to a little more than 22 prpts infour key factors underlie that 2025.

increase: the retirement of the baby boom generation, expansion of federal subsidies for health insurance, increasing... consequently, under current health care costs per beneficiary and rising interest rates on federal debt. consequently, under current law, spending would grow faster than the economy for social security; for the major health care programs, including medicare medicaid, and subsidies offered through insurance exchanges and for net interest costs. in sharp contrast, mandatory spending other than that for social security and health care as well as both defense and nondefense discretionary spending would shrink relative to the side of theby 2019, outlays in those three economy. latter categories taken together would fall below the percentage of gdp they were between 1998-2001, when such spending was the lowest since at least 1940, the earliest

year for which comparable data would be reported. revenues are projected to rise significantly by 2016, buoyed by the expiration of several provisions that reduced tax liabilities and by the ongoing... economic expansion. in our projection based on current law, revenues equal about 18.5 percent of gdp in 2016 and remained between 18-18.5 percent throughout the coming... revenues from individual income decade. taxes are expected to rise relative to gdp mostly because people income -- people's income will move into higher tax... brackelingts as income gains outpace inflation which those brackets arebut those increases are indexed. expected to be offset by

reductions relative to gdp in revenues from the corporate income tax and other sources. turning from the budget to the economy, we anticipate that economic activity will expand at a solid pace in 2015 and the next few years, reducing the... amount of underused resources or slack in the economy. in our estimation increases in consumer spending, business investments and residential investments will drive the economic expansion this year and over the next fewthe growth in those categories years. of spending will derive mainly from increases in hourly compensation, from rising wealth from the recent decline in crude... oil prices and from a step-up in the rate of householdas measured by the change from formation. the fourth quarter of the previous year, real gdp will grow by about 3 percent in 2015-16 and by 2.5 percent in 2017,... the difference between actual

gdp and our estimate of potential gdp, which is a measure of slack for the whole economy, was about 2 percent of potential... g.d.p. at the end of 2014. during the next few years we expect actual g.d.p. will rise more rapidly than its potential gradually eliminating that slack. for the labor market in particular we anticipate that slack will dissipate by the end of 2017. by our projections increased hiring will reduce the unemployment rate from 5.7% in the fourth quarter of last year to 5.3% in the fourth quarter of 2017. which is close to the expected natural rate of unemployment. that is the rate rising from all sources except fluctuations in the overall demands. that increased hiring will also encourage more people to enter or stay in the labor force boosting the labor force participation rate, which is tl percentage of people looking

or actively looking for work. our projections beyond the next few years are not based on estimates of cyclical developments in the economy. these agency has not attempt to predict economic fluctuations that far into the future. instead those projections are based on estimates of underlying factors that project the capacity. for 2020-2025, we project that real gdp will grow by an average of 2.2 percent per year, a rate that matches the agency's estimate of the potential... growth of the economy in those years. potential output is expected to grow much more slowly than it did during the 1980ings and 1990s primarily because the labor force is expected to expand more slowly than it did growth and the potential labor then. force will be held down by the ongoing retirement of the baby boomers, by a relatively stable labor force participation... rate among working age women after sharp increases from the 1960s to the mid 1990s. and by federal tax and spending

policies set in current law. the elimination of slack in the economy will eventually remove the downward pressure on the rate of inflation and on interest rates that has existed... in the past several years. by our estimates, the rate of inflation, as measured by the price index for personal consumption expenditures, will move up gradually to the federal... reserve's goal of 2% hitting that mark in the end of 2017 and beyond. interest rates on treasury securities, which have been exceptionally low since the recession, will rise considerably in the next few years, we expect,... but remain lower than they were on average in previous decades. between 2020 and 2025 the projected nt rest rates on 3-month treasury bills and notes are 3.4% and 4.6%thank you and we're happy to respectively. take your questions. please start by identifying yourself and the publication you work for.

well, that should be easy. >> did any (inaudible) projections (off-mike) dynamics stored (off- mike)? >> so our baseline economic projections and our baseline budget projections are consistent with each other in that the budget projections are what we think will happen given the economic outcome we predict and those we expect to happen given the baseline budget projection. soprojections are always dynamic, the baselinei think, in the sense in which you mean that word, in that the budget and the economic effects are calculated... projected together. >. if i may, i guess i'm using the term (off-mike). well, the -- the interest of people in congress is generally focused on our cost estimates, not on the baseline projections. for cost estimates, there has

been a very longstanding custom that cost estimates by cbo or the revenue estimates by the staff of the joint committee... on taxation have not included the effects of the proposals on overall macro economic conditions and the feedback from those macro economic changes to thehowever, we and jct have federal budget. produced estimates of the economic effects of large proposals periodically over time and reported those to the congress. for example, nearly every year we do an analysis of the president's budget that starts with an estimate of the effects of the specific spending and revenue provision without allowing the mark ro economic conditions to change. but then we go back and do an economic analysis of the president's budget, including the feedback then to the budget itself. and we have done that essentially every year for a dozen years. we also do that sort of dynamic

analysis when we do different paths for federal debt and the long-term budget outlook. we did it for the comprehensive immigration legislation considered in the senate a few years ago. and our colleagues at jct have done it for a number of pieces of tax legislation including for example, champ camp's tax reform proposal last year. so we and jct are accustomed to doing analyses of the economic effects of major pieces of legislation. what is different in the rule that the house has adopted is that the budgetary feedback of those economic changes would be included in the official... cost estimate rather than being presented as supplementry information, which is the way it has been done in the cases in the past. and we are prepared to do what the house rule asks us to do. jonathan? >> jonathan (off-mike). two things.

one, you had some verbiage in there about interest cost, and there's often a concern that those will skyrocket. can you give us a little rundown of where you guys see where treasury (inaudible) paying for its debt. also, can you talk a little bit about wage growth? how much of that slowing of wage growth is basically for people, for lack of a better term being storied about losing their job and not being able to get a new job? seems to be people out of work for long periods. >> so the first question on interest payments, as you know interest rates on treasury debt have been extraordinarily low for the past several years. as a consequence of that, even though federal debt is historicically high relative to the economy, interest payments by the government have been quite low. so interest payments this -- this year, 2015, we project will be $227 billion. that's

just 1.3 percent of gdp, well below what interest payments were,... say 25 yearsbut over the coming decade, we ago. expect that interest rates will move up considerably. and as the treasury needs to finance new deficits and as it rolls over the existing debt the interest rate that it pays on average on the outstanding debt will rise. and with debt as high as it is and with the rise in interest rates, interest payments rise considerably. so in nominal dollars, we expect the interest payments that, say this year we think will be $227 billion will be $827 billion in 2025. that will be 3% of g.d.p. rather than the 1.3% that it will be this year. as for wage growth compensation growth since the recession has been a good deal lower than it was before the

recession. and although some measures... of sexengization growth picked up a -- compensation growth picked up a little last year they are still we will well below what we saw beforeand we think that is a direct the recession. consequence of the slack in the labor market. when employers are trying to attract workers, if there're a lot of people... looking for jobs employers don't have to offer as high a pay as if the labor market were more. so we think that as the labor market has tightened and we think will continue to tighten over the next few years, we think that will put more pressure... now, the share of national income going to labor has fallen quite a bit over the last few decades, and we think it will rebound but not to the level... >> (inaudible) permanent -- level that it was 15 20, 25 years ago.

>> do you think there are permanent structural changes between the share? >> we think there have been permanent structural changes but knowing how important those will be in the future is, of course, very hard. so certain technological changes, globalization are the forces that people look to a lot, but there are probably others that have been at work as well. and how important those factors will be in the future is very hard for us to know. the labor share of income tends to fall during the initial recovery from recessions, so i think we have a good basis for expecting it will come back... some from where it is now. but how far back it will come is hard to know. and we have projected it comes back partway towards its average of the previous few decades. yes? >> paul krawzak, cq roll call.

two-part question on dynamic scoring. number one, do you have a view on whether the house rule on dynamic scoring is a good idea, and number two will... there be a greater level of uncertainty to a dynamic score? under the house rules compared to the conventional scoring under the house>> we don't have a position rule? about whether the house rule is a good idea or not. we think it's natural for the members of the congress to be interested... in the macro economic consequences of major peafs of legislation and that is why cbo has for many years built models to estimate those consequences. andand we have, in the past few years, devoted a great deal of effort to improving those models, to getting feedback from outside experts and revisiting... the key assumptions. and then to writing a

collection of papers that spell out how we do analysis of the macro economic effects of changes in fiscal policy. i think there's really at this point a set of eight papers that go through the key aspects of that modeling one of which was about a dozen years old but the other seven we have written in the past three or four years. so we have always understood the importance of that kind of analysis to the congress. and we are doing our best to provide the best estimates that we can. but it's really up to the congress to decide how it wants to use that information. and if it wants that information to come in a supplementry form, not in the official cost estimates as it has in the past, then we are happy to do that. and if the company wants that extra set of estimates to be included in the official cost estimates as the how rule now requires for certain legislation, then we are happy to do that. it's up to the congress to decide the form in which it wants to receive our analysis.

as for uncertainty, the macroeconomic effects of legislation are often quite uncertain. it is also true that the non-macroeconomic effects of legislation... can be quite uncertain. and i think it's always important for readers of our work to understand that there is a great deal of uncertainty surrounding the numbers and we give point estimates because of budget process basically requires point estimates. things have to add up. allocations are given to committees. certain amounts of money are allocated. so we have to work in that world. we understand and we hope our readers understand there's always a great deal ofin some cases, the uncertainty. macroeconomic effects of legislation will be more uncertain than the effects we estimate holding the macroeconomic conditions fixed. but i think that won't always be the case. it really depends on the legislation that we're analyzing. as a general matter, legislation that make small

changes in programs or in the tax code, speaking from jct, small changes of the sort that have been... done before analysts have a reasonable basis for making fairly accuratebut for major changes in projections. policies, for a comprehensive reform of the tax code or of our immigration policies, of our -- of our health insurance system then there's always a great deal of uncertainty that accompanies the estimates we provide for that as well. and i think that's just a general feature that people need to understand and that we need to continue to convey as clearly as we can. and for a number of our macroeconomic analyses we have provided ranges of the macroeconomic effects in addition to a central estimate to try to convey... very clearly the uncertaintyo that thoserobert? estimates have. >> can you talk a little bit... >> robert pear (ph) from the... new york times. could you please talk about changes in cbo's estimate of major health care programs since cbo has

updated (inaudible)? >> yes. so, let me talk, there are a few components of the major health care programs i think worth discussing. for the coverage provisions of the affordable care act, and to be clear what we mean by that the affordable care act changed a lot of features of spending programs in the tax code. we generally talk about them in a few large buckets. one being the provisions that expanded health insurance coverage like the expansion of medicaid and offering of the subsidies through insurance exchanges and related provisions. there are other provisions, mostly involving large changes to the medicare program and significant changes to the tax code. the provisions i'll focus on now are the ones involving the expansion of health insurance. for those provisions we have made a significant downward revision to the estimated costs over the next decade.

the downward revision of about $100 billion. 7% less than we expected last year. and relative to our projections in march of 2010 when the affordable care act was enacted, the cost of those insurance coverage provisions between 2015... and 2019, which was the last 5 years which we made estimates in 2010, for those five years 1015-1e9 we have now revised down the cost of the insurance coverage provisions by about 20%. that's been through a collection of revisions multiple times a year over the past five years. there are a number of factors that underlie that set of revisions. probably the most important one is a slowing in growth of health insurance premiums. but there are others as well including the supreme court

decision and any other external factors and improvements in our we also, as you know, robert, modeling. have revised down over the past several years our projections for medicaid and medicare spending a good deal. there's... a further downward revision in this set of projections and there are a number of factors that have fed into that. there are -- apart from economic changes, for medicare there have not been significant changes in this projection relative to the last one, apart from some thing that is relate to the economic forecast. but in terms of what we consider technical revisions. that are focused on developments in the programs and our interpretations of them. we did not make a significant downward revision this time. but, all told, since 2010, because of these technical factors, this assessment of what's going on in health care programs, we have marked down our projection...

of federal medicare spending, federal medicaid spending, and premiums in the insurance exchanges by about 15% each. for say 2020. so some of that is things that have happened already and some of that is our projection of slower growth over the next few years. so we've gone a little further in that direction this time in our projection of the health insurance subsidies, the cost of the aca expansion and in medicaid. nothing further at this time in medicare. robert. >> bob samuelson, washington post. you have figures on the decline in discretionary spending both domestic and defense as a share of gdp. do you have comparable... figures adjusted for inflation and population change? >> we don't have a continuous series of those. i think there

are some spots in the text where we talk about certain components of discretionary spending... relative to four or five years ago, adjusting for inflation. but i don't remember all those numbers offhand. and there are spot rempses. and i don'tspot references. and i don't think we've reported anything which adjusts for population growth. i'm happy to -- i'm happy to hem and haw for one moment while i -- while i thumb through this, bob, and see what we can tell you about that. so, for example, between 2010 and 2014, we -- on page 79 between 2010 and 2014, funding for defense declined by 15 percent in nominal terms or nearly 21% in constant 2010 dollars. excluding the funding for overseas contingency operations

defense funding if he will by 6% or 12% in real terms over that period. also between 2010 and 2014, on the same page, funding for nondefense discretionary programs declined by 4.5 percent in nominal terms or almost 11 percent... in constant 2010 dollars. yes? >> (inaudible) with the wall street journal. i was wondering if you'd talk a little bit about what prompted the downward revision on the potential output... for the u.s. economy. >> so we revised down our estimate of potential output by about 1 percent from what we had in our august economic forecast. and the primary source of that joup ward revision was a reassessment of productivity growth and especially productivity growth in the nonfarm business sector.

we had previously thought that the slow growth of a actual productivity, the slow observed growth in productivity over the past several years was mostly due to a shortfall in growth relative to the potential level of productivity. and we thus anticipated that actual productivity would rebound to its potential level over the coming years. and for some time that seemed like a reasonable expectation, because productivity often falls short of its potential level when the economy is weak. when demand for firms' products is weaker, firms don't push the workforce as hard as they do when demand isso it was reasonable, in our stronger. view, that to have a projection of potential total factory productivity growth in the nonfarm business sector that was above the actual growth we

werebut, as the economy has observing. strengthened over the past few years, one would expect that actual growth to not be falling further away from our projection of potential. but it was given the projection of potential growth that we had. and that didn't seem to us to be the best forecast in an economy that was strengthening. so we lowered our projection of potential total factory productivity growth. so it is still above actual growth. we still think there will be some rebound over the next few years but not as large a rebound as we have been expecting before. this is a very, this problem that we face in trying to understand how much of what's happened to productivity over the past several years is due to the business cycle. and how much is due to underlieling factors. it's hard and it's becomes harder as the length of time during this weak economic conditions last longer. so there are people, whom we

cite, who observed that productivity growth seemed to slow for a few years before the recession. that was a pretty short period. and then we had a very deep recession and a slow output. so it is hard to know how much of what's been going on during these past half dozen years is because the economy has been weak and will go away as the economy recovers further and how much is a part of the underlying structural conditions that we face. and on this particularvariable, productivity, we've -- we think that the persistent slow growth in the face of an improving economy suggests that more of that slow growth is due to structural problems rather than to the cyclical conditions. and because of that we have marked down our expectation for product tit growth going forward. >> hi, jim mccain (ph) from barron's. i have a topical question. on page 98, you talk about the erosion of corporate tax base. over 2.5 percent of

the erosion in the corporate tax base includes inversions the(inaudible) in the right-hand column. >> yes. but it says a final factor that partially offsets the effect of the (inaudible) others talking about pushing corporate tax revenue up is the average tax rate on domestic products will be -- now, what is the domestic economic profit and how is it different than corporate profits? how does it offset? i think the way to think about our projection of corporate tax receipts is to start with an economic projection of how much profits we think will be... earned by corporations in this country. because the profits are in this country are taxed much more than profits of u.s. corporations that are earned overseas. so we focus in this presenting our results on the domestic profits of the companies. and then the questionwell, what

share of those isprofits will be paid in tax? and one can't tell this by looking up just the statutory corporate tax rate, of course, because the tax that's paid depends on the expenses the deductions and so on that companies will make and how that will affect their tax for tax burden. we're trying to explain here is there's some different -- there's some cross-currents. part of what is going on is that the effective tax rate on domestic profits, which is part of what is going on is that the effective tax rate on domestic profits, the total amount of money the treasury has collected, expressed as a ratio of domestic profits, fell during the recession in a way that we cannot entirely explain. part of the reason we cannot explain it is that all we have for the past few years are the total amounts of money, the details before help unravel the puzzle that are only available to some. we have seen this tax rate defined as the tax collection divided by profits, it has been low. we think there will be recovery in the long-term average because we are making an educated guess that what happened in the last few years was partly due to particular economic circumstances so there will be rebound from the phenomenon. there's a different thing going

on which is that companies are trying to find ways to reduce the corporate tax that they pay. as we explain here, some of what they do involves moving business income from the corporate sector to the noncorporate sector, out of c corporations and into s corporations. there has been a downward trend in business income tax at the corporate level and we think that will continue. the second factor we describe is a set of effort by companies to increase income shifted out of the country. it is subject to less u.s. tax. there are various ways to do that. about -- we talked about inversions.

corporate inversions are a part of roughly half of the erosion and that factor is at work in reducing corporate tax receipts over the decade. but that is offset in part over the next few years in an increase in the rebound in the tax rate so there are other factors that we do not have a firm factor own. -- factor on. we think that corporate profits will decline later in the decade because of rising interest rates and faster compensation growth will push down the corporate share. and that factor, which affects hundreds of denominators, we think those factors will economic profits down relative

to gdp and pushed on corporate tax revenue expressed as well to gdp -- wealth to gdp. i will check with my experts to make sure i got that right. other questions. >> the updated revenue and spending outlook, you will be looking at the debt limit this year? >> we do write about that in the report. the debt ceiling was suspended as you know, through the middle of march of this year. when that suspension ends, the debt ceiling, under the law as it stands, will be reset to equal the amount where the ceiling was before it was suspended, plus all of the data that have been issued since it was suspended. the debt will be equal to the outstanding debt subject to limit. the treasury will immediately in march be unable to increase its net borrowing. at that point, we presumably will deploy is customary set of -- this customary set of extraordinary measures to obtain funds without increasing debt. we think those measures will be effective through september or october of this year. at which point we think they will have exhausted their extraordinary measures. shortly after that, the treasury will have run down its cash balance and be unable to meet all of its obligations in a

timely way unless some other action is taken. that production of september or october is uncertain and depends on inflows and outflows of money over the next eight or nine months. so, you know from previous rounds of this, projecting the treasury's cash flows is a very uncertain business. so we will continue to keep the congress apprised but we are not likely to know more precisely when the treasury will run out of extraordinary measures or run out of cash until we get quite close to those events occurring. >> could you go over the major factors causing the deficit to follow in the next couple of years? >> the debt? the deficits? >> the deficit. >> will be happy to talk about the pattern. we think that the dollar amount

of the federal deficit will be ordered $68 billion this year -- $468 billion this year and will begin to rise expressed as a share of gdp. the deficit will remain at 2.5% through 2018 and will rise beyond that, rising from 2.5% in 2018 to 3% in 2019 and 4% by 2025. let pattern results from accommodate -- that pattern results from a combination of factors. part of what happens is that tax revenues rise a good deal in 2016 relative to 2015 because of the expiration of some tax provisions in the improving economy. tax revenues we think that will

be 17.7% we project will be 18.4% next year. there is an increase in tax revenues, a market increase. -- marketed increase. after that they remain the same relative for the rest of the decade. they move up quickly but then our flat expressed as a share of gdp -- are flat expressed as a share of gdp. the retirement of the baby boomers is putting an upward pressure on spending for social security and medicare and medicaid throughout the decade. there will be more than one third more people receiving medicare and social security benefits that are receiving it today. -- van are receiving it today. that pushes up spending. but at the same time, the other thing is rising interest payments. we think interest rates will move up over the next two years the government interest costs respond slowly to that because the government does not roll over all of the debt in one year. the average interest rate paid

on treasury debt responds gradually to mortgage interest rates. we actually reported in table 1.3 on some page of the report i do not have the page number, the average interest rate on debt held by the public rises. we have the aging baby boomers rising health care costs per person, the expansion of health care subsidies, rising interest payments. all of those are pushing spending all. on the other hand -- spending up. on the other hand, there are declines in defense purposes and other purposes like highway infrastructure, r&d support, education and training support health research and veterans health care. and in the non-social security on health care benefit programs like -- non-health care benefit programs like snap and ssi. the particular pattern from year-to-year results in this combination of factors. again, the underlying point is that we have a handful of very large federal programs that provide benefits for older american or provide health care benefits or both. and with the rising number of older americans and the rising cost of health care, those programs get more expensive.

by 2025, one quarter of total projected -- projected spending will be for social security benefit. some of the other biggest pieces are medicare, defense spending interest payments. those four things alone, social security, medicare, interest payments, and defense spending those four items together represent two thirds of total federal spending in 2025. the growth in federal spending is not coming from a growth across the board in federal

programs, is a handful of large programs. the other parts of the budget as i said earlier are getting smaller relative to the gdp and that damps some of the effects of the growing spending. so it is a combination of these factors but the trend is clearly for rising deficit for reasons that are very well understood by analysts for decades. >> david, reuters. could you clarify your status? are you a contender for the job as chairman? >> my current status is to be the director of cbo. my term ended on january 3 but under the budget act of 1974 directors can continue to serve until after the terms of expired until new directors are appointed. and i like the job a lot so i am continuing to serve. i expect to do that, unless and until a new directors appointed. whether a new director will be appointed and one that would

occur, i do not know. and i will not be the first person to go on the first person to tell you. that decision -- to know or the first person to tell you. that decision rests with the senate. and he will speak to it when they want to speak to it. >> liz. can you talk about your estimate that by 2039, public debt will exceed 130% of gdp? as of the last time that happened was after world war ii -- you say the last time that happened was after world war ii. >> this is a projection from the long-term outlook last summer, we look 45 years. -- 25 years. we thought that under current

laws, that would exceed 100% of gdp within 25 years. we have not formally updated the projections but the projection in this report of debt relative to gdp at the end of the decade

is quite close to the production last summer in building longer-term projections. so we have not done anything since last summer that would change our view that unless some

significant changes are made in spending or tax policy or both that debt will exceed 100% of gdp within 25 years. and the on an upward trajectory at that point in time. -- be on an upward trajectory at that point in time. the only other time was at the end of the second world war. what was different then was that the debt ran up sharply during the second world war. but then started to come down relative to gdp. that was not particularly, on that picture, because large surpluses were run, but because as you mentioned, gdp grew rapidly in the budget was close to being in balance. -- and the budget was close to being in balance. the run-up was because of the cost of fighting the war. the run-up that we have seen is heavily because of the financial crisis and recession and the policy responses. so those are, one hopes, one-time events. but behind that, is this ongoing and highly anticipated event of the retirement of the baby boom

generation and the movement of a large number of americans to an age where the federal government provides significant benefits. and also underlying this is the rising cost of health care per person which has been less over the past have a dozen years than projected but we think the best projection is a continued growth. with many more people eligible for social security and medicare, and medicaid as time goes on, and with the cost rising, we face a structural long-term challenge that is quite different. it is quite different from the

situation at the end of war. the fact that debt doesn't rise very much relative to gdp over the next decade, does not mean it doesn't -- that that is high-level doesn't have significant cost. with debt this high, there will be significant interest payments or interest rate rebounds. there will be crowding out of capital investments. as time goes on. there is reduced flexibility for policymakers to respond to future financial crises or recessions or international events. there is heightened risk of physical crisis.

-- fiscal racist. even if that was -- that was lessened. moreover, we don't think the debt will be stable. another point we emphasize is that even though the reason that that only raises a little bit relative to the size of the economy, despite the demographic changes and rising health care cost, is really because it is sent into current lot a very sharp reduction in spending everything apart from social security. compare the historical experience. nondefense discretionary spending. the congress appropriate money each year. it is about the same this year as it was 50 years ago. this spending has fluctuated relative to the size of the economy overtime but it has shown no evidence trend over 50 years. over current law, given the cap, it will fall to a lower

percentage of gdp than we have seen. defense spending is a little more complicated. it has trended down relative to the size of the economy over the last 50 years. but not over the last 20 years. it fell a fair bit in the 80's and 90's. but, it has stabilized this year , over the last 20 years. we think that need loan -- need depends on what you think will happen in international events. defense spending is also on track to fall to a smaller number relative to the size of the economy. so, there's this very sharp shift underway under current law, and what the federal government spends its money on. because of the appropriation process, it occurs one year at a time, the caps have been set without decisions about which programs will be provided. in the future it would have been provided under historical experience with those government programs. we highlight the issue in our

report. at the risk going forward, that the caps have been set but the decisions about what will the cut and what will not be cut have not yet been made. other questions? yes. >> can you go back and talk a little more about inter-spending on projections, and although it is lower than the past it is still substantially higher.

i wonder whether not you consider the possibility that interest rates have declined structurally and are going to be lower in the future then anyone had predicted four or five years ago, and today what that would do? >> as i mentioned, we expect interest rates will rise considerably. but we do not think they will rise up to the levels they were at over the past few decades. we wrote about this at some length in our long-term look -- outlook.

we had a brief discussion. we recapitulate in this report. we got about what would be different in the future relative to the 1990's two 2007. --period. in that era, we think that inflation adjusted treasury interest rates will be about three quarters of a percentage point lower in the future than they have been in the past. that three quarters of a percentage point difference is pretty substantial. we project that a nominal tenure treasury note rates will be 4.6% by the end of the decade. with gpi inflation of 2.4%, that means inflation-adjusted tenure rate of 2.2%. that compares to about 3% for real treasury tenure rate in the 1990's. we made a substantial downward adjustment. that adjustment is the net effect of a number of factors. we list for. --4. number one, forward growth of the labor force, number two slow

growth of productivity. both of those factors we think lower interest rates because it basically affect the product of capital in the production process. we also think greater income inequality is pushing up saving which tends to lower interest rates. and we think they'll be greater risk premiums on private security. treasury rates will be held down because of their greater demand. those four factors alone would've argued for a lower revision act. on the other side, for --4 other factors that will push up interest rates. one of those is greater federal debt. another one is slightly smaller capital inflow from overseas. a third is fewer people in their prime seating years.

-- saving years. another way of saying baby boomers are getting older. people in their prime saving years. and also the higher capital share argues for higher returning cap that compete with capital for investors. as best we can judge, the factors pushing down rates relatives -- relative to this, will be more powerful than the pushing up rates. that is why we made this revision relative to history. nonetheless we think rates will move up from where they are now. that is consistent with expectations of participants in financial markets and consistent with our own modeling of demand for a fund as the economy strengthens. again, these are changes we mostly made last summer in the long-term budget outlook and

incorporated into our august projections. we made it further small downward nice to interest rates because of a declining interest rates in other countries that makes u.s. assets relatively more attractive. this is no doubt one of the sources of great uncertainty in our projections. we offer an appendix to the report, and a rule of thumb for how the projections could be different if economic projections were different. we have rules of thumb for faster or slower growth in gdp or higher or lower inflation and higher or lower interest rates. not surprisingly, budget outcomes are quite sensitive to interest rates. as much marjorie then maybe a decade ago. -- that is much more true than maybe a decade ago. i think we have balance the risks in this production but the risk on both sides -- there is risk on both sides. >> and trying to get a better handle on it. people in the exchanges. reduce the little bit of your outlook for that. this is based on one year of experience. now, given the path, how confident you feel about your original score? >> you are absolutely right.

to say we have only observed exchanging relevant -- enrollment in subsidies and medicaid enrollment in people who are newly eligible for one year. we don't have detailed data in all cases. what happened only happened that year. we will learn a good deal more in the years to come. on the other hand, the source of the revisions that we made, i think have more foundation then just looking at last year would suggest. part of what we have done if they have more information about private health insurance premiums. over five years since we did these estimates. it is true that insurance premiums could jump up next year.

they could fall next year or rise that small amount. there is a lot of uncertainty. we have seen now for a number of years significantly slower growth in private health insurance premiums than expected in 2010. that is including premiums paid in the insurance exchanges last year. and the premiums that we see offer -- offered in 2015. i think we have a strong basis for making a significant downward revision for the protected costs, although we have the amount precisely right now, we don't know. similarly for medicaid, we have seen a number of years of slower growth in medicaid costs for beneficiaries than we expected in 2010.

although there are particular aspect of the affordable care act we have only saw for one year, we had observed others for some time. we have a much stronger foundation with a cumulative foundations with the cost is the medicaid expansion than just from looking at last year's data. although once again there is considerable uncertainty. >> how important is that moving forward? >> as you know the excise tax on higher premium insurance plans have not yet taken effect.

it is particularly hard to -- we don't even have the one year in that sense. there is anecdotal evidence of people reporting making adjustments to their plans. to keep premiums on a trajectory below what they think they will be subject to that tax. those are just anecdotes that this point as far as i'm aware. we expected that most of -- there will be a significant adjustment i am players to try to keep -- by employers to try to keep the threshold low. of the total revenue that we show occurring because of the tax, only a quarter of it is to come in the form of excise tax receipts. three quarters of the revenue comes in the projections because employers hold down premiums and therefore pay more in cash compensation to their employees

because they will be paying less than they would advertise in a nontax health insurance. the extra cash will yield higher tax revenues. record of the revenues will never show up -- three-quarter of the revenues will never show up. they will nonetheless occur because of the excise tax, if that were to induce a behavioral response. we don't know what that would yield. it is true that this all equals the health insurance premiums in the economy of the whole. lots of other things are going on. we incorporate all factors in making projections. >> you popularized the term spending the curve. we have had five years now. you feel relatively confident at this point. how good a job do you think aca has done of spending the curve of national health expenditures? >> we don't know.

the reason we shied away from using the term bending the curve is because people tend to do it as a permanent state of affairs. what we do know is the curve meaning both federal health cost and national health costs, has been flatter over the past couple of years than we anticipated. the curve has been flatter. whether it is flattened -- and we think you'll stay flatter for a little while. but our projections don't show it being this much flatter indefinitely. it can be faster health and -- growth in health care costs again. but we don't know. we are trying to balance the risks of putting too much weight on a phenomenon that has gone on for a little while. or too little late on --weight. but the further question, is given that these cars have been flatter, how much is that is attributed to the affordable care act. we just don't know. so the slower growth of payments to a number of providers, even medicare, is a specific aspect of the affordable care act that we thought would lower medicare spending. belichick to the pre-aca -- relative to the pre-aca world. and it has. but, whether other provisions of

the act have had other or more indirect effects on federal health care spending or national healthcare spending, we just don't know. >> anything else? ok it is great to have you here as always. there are some specific parts of the health care act that matter here. it is a specific act of the affordable care act. we think it has. whether other provisions of the act have had more indirect effects on federal health care spending on national healthcare spending, we don't know. anything else?

ok. it has been great to have you here. thank you very much. [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] [captions copyright national cable satellite corp. 2015] >> [indiscernible] >> president obama unveiled his budget request for 2016 at the homeland security department tomorrow. that is scheduled for 11:45 a.m. eastern. we will have live coverage on c-span2.

the pentagon will hold a set of briefings to go over the president's request for defense spending. that is also live on c-span2 beginning at 1:30 p.m. eastern. the senate arms service committee has been holding a series of of hearings on defense and national security strategy. one of them included testimony from henry kissinger, madeleine albright, and george schultz. they discussed issues like iran's nuclear program, the rushing-ukraine conflict, and isis. this hearing is just under two hours. it begins with the disruption by the protests group, code pink that prompted a reaction from john mccain.

>> arrest henry kissinger for war crimes. arrest henry kissinger for war crimes. arrest henry kissinger for war crimes. arrest henry kissinger for war crimes. arrest henry kissinger for war crimes.

>> can somebody find out where the capitol police is? >> arrest henry kissinger for war crimes. >> in the name of the people of chili. in the name of the people of vietnam. in the name of the people of chili. in the name of the people of vietnam. in the name of the people of east timor. in the name of the people of cambodia. in the name of the people of laos.

>> i would like to say to my colleagues and to our distinguished visitors this morning that i have been a member of this committee for many years. i have never seen anything as disgraceful and outrageous and despicable as the last demonstration that just took place that you know, you're going to have to shut out or i will have you arrested. if we can't get a capitol hill police in here immediately -- get out of here, you low life scum. [applause]