national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org] >> after the announcement, the democratic leader nancy pelosi saying, quote, despite our differences i commend paul ryan's steadfast commitment to our country. paul ryan retiring next january. next here on c-span, we will take you live over to the senate budget committee. they are hearing from the c.b.o. director, the congressional budget office director keith hall with his latest projections on the deficit. hearing got under way about 10 minutes ago. >> our witness this morning is dr. keith hall, director of the congressional budget office. earlier this year he appeared before this committee to discuss c.b.o.'s work and his efforts to increase responsiveness and transparency at the agency. this morning, dr. hall will be

talking about c.b.o.'s latest projections and the challenges we face as a nation. we look forward to receiving your testimony. for the information of colleagues, dr. hall will take up to about seven minutes for his opening statement followed by questions. welcome, dr. hall. please begin. dr. hall: chairman enzi, ranking member, members of the committee, thank you for inviting me to testify about the congressional budget office's most recent analysis of the outlook for the budget and the economy. my statement summarizes c.b.o.'s new baseline budget projections and economic forecast which the agency released on monday. in the congressional budget office's baseline projections, which incorporate the assumption that current law, governing taxes remains unchanged, the federal deficit grows substantially over the next few years. later on between 2023 and 2028 it stabilizes in the relation to the size of the economy though at a high level. as a result, federal debt is projected to be on a steadily

rising trajectory throughout the coming decade, approaching 100% of gross domestic product by 2028. projected deficits over the 2018 to 2027 period have increased marketedly since we issued our last budget and economic projections in june of 2017. the increase stems primarily from tax and spending legislation enacted since then. especially the 2017 tax act, the bipartisan budget act of 2018, the consolidated appropriations act of 2018. in our economic projections which underlie our budget projections, inflation adjusted g.d.p., or real g.d.p., expands by 3.3% this year and by 2.4% in 2019. most of this growth is driven by consumer spending and business investment, but federal spending also contributes a significant amount this year. growth of real g.d.p. exceeds the growth of real potential g.d.p. over the next few years.

this marks a path in g.d.p. will occur in large part because the recent legislation provides significant stimulus at a time when there is very little slack in the economy. those effects as well as a larger federal budget deficit results from the new laws exert upward pressure on interest rates and prices. during the 2020 and to 2026 period, those factors, along with slower growth in federal outlays and the expiration of reductions in personal income tax rates dampen economic growth. after 2026, economic growth is projected to rise slightly, matching the growth rate of potential output by 2028. between 2018 and 2028, real actual output and real potential output alike are projected to expand on an annual rate of 1.9%. in our forecast, the growth of potential g.d.p. is the key determinant of the growth of actual g.d.p. through 2028 because actual output is very

near its potential level right now and is projected to be the near potential level at the end of the period. potential output is projected to grow more quickly than it has since the start of the 2007 to 2009 recession as the growth of productivity increases to nearly its average over the past 25 years. nun the less, potential -- nonetheless, potential output is projected to be more slowly held down by the slower growth of the labor force because of the ongoing retirement of baby boomers. the effects of the 2017 tax act on incentives to work, save and invest raise real potential g.d.p. through the 2018 to 2028 period. over the same period, the tax act is projected to boost a nonpayroll and employment by 1.1 million jobs. our current economic projections is different than

those we made in june, 2017, in a number of ways. the most significant is potential and actual g.d.p. are projected to grow more quickly over the next few years. projected output is greater because of the recently enacted legislation, data that has become available after our previous projections were completed and improvements in our analytical methods. particularly during the next few years, economic stimulus boosts demand for labor. although both short and long-term interest rates are projected to be higher from 2018 to 2023. turning to the budget projections, we estimate the 2018 budget will total $804 billion, $139 billion more than the $665 billion shortfall recorded in 2017. in our projections, budget deficits continue increasing after 2018 as deficits accumulate, debt held by the public rises from 78% of g.d.p. or $16 trillion at the end of

this year to 96% of g.d.p. or $29 trillion by 2028. that percentage would be the largest since 1946 and well more than twice the average over the past five decades. for the next few years, 16.6% of g.d.p. in our projections, then they rise steadily reaching 17.5% of g.d.p. by 2025. at the end of the year, many provisions of the 2017 tax act will expire causing receipts to rise sharply to 18.1% of g.d.p. n 2026 and 18.5% in 2027 and 2028. they have average 17.4% of g.d.p. over the past 50 years. in our projections, outlays for the next three years remain near 21% of g.d.p. which is higher than their average of 20.3% over the past 50 years. outthat outlays grow more quickly than the economy does.

that increase reflects growth in mandatory spending, mainly because of the aging of the population and rising health care costs per beneficiary are expected to increase spending for social security and medicare among other programs. it reflects significant growth in interest costs which are projected to grow more quickly than any other major component of the budget. the result of rising interest rates and mounting debt. by 2028, outlays for interest are projected to be roughly triple what they are in dollar terms this year, roughly double when measured as a percent of g.d.p. in contrast, discretionary spending is expected to decline in relation to the size of the economy. for the 2018, 2027 period, we now project a cumulative deficit as $1.6 trillion larger than the $10.1 trillion deficit we anticipated in june. projected revenues are lower by $1 trillion. the projected outlays are higher by half a trillion. laws enacted since june, 2017,

above all the three mentioned earlier, are estimated to make the equivalent -- cumulative deficit $2.7 trillion larger than previously projected 2027.n 2018 and it caused us to reduce our deficit by $1 trillion because of the expectations of faster growth in the economy in wamings and in corporate profits. other changes have relatively small effects on the projections. c.b.o. also analyzes an alternative scenario which current law was altered to maintain major policies that are now in place. so that substantial tax increases and spending cuts would not take place as scheduled under current law and provide more typical amounts of emergency funding than the sums provided for in 2018. in that scenario, far larger deficits and much greater debt will occur in current baseline projections. debt held by the public will

reach 105% of g.d.p. by the end of 2018, an amount that's exceeded once in the nation's history. moreover, the pressures contributing to that rise will accelerate and push debt up more sharply in subsequent decades. such high and rising debt will have serious negative consequences for the budget and the nation. in particular, the likelihood of a fiscal crisis in the united states will increase. i appreciate the invitation to testify today about c.b.o.'s budget and economic outlook. i will be happy to answer questions. senator enzi: thank you for your testimony. and even more for the expanded documents that you do to help us know where things are going. we'll now begin a round of questions and i think everybody knows how we alternate back and forth. it's based on being here at the sound of the gavel or arrival since that time. so i'll begin my questions.

the tax cuts and jobs act has already stimulated the economy, putting more dollars in the hands of hardworking families and businesses for investments. as we look forward to the reduction in the business tax rates, they are incentivizing more work and higher investment. noticed in your chart on ble two that revenues grow every single year. i noticed that outlays grow every single year, too, and more substantially than revenues do which is the problem that we need to solve. can you expand on the expected individual and business response to the tax bill in the medium term? dr. hall: yes. the tax act will encourage savings and investment in work. the reduction in -- the lower tax rates and the bonus

expensing, we think will lower the user cost of capital. increase in investment in the economy and boost g.d.p. growth. we also see that the effective marginal tax rates on labor income is also down. we think that will increase labor force participation, hours worked and increased employment throughout the 10-year period. the o think that reduction in effective marginal tax rates from both capital and labor will have a significant effect. i think our average boost to g.d.p. over the 10-year period the 10-year over hirer because of the tax act. mr. -- senator enzi: we were hoping for .4 so .7 is good. income from sources outside the government such as social security, payroll taxes and medicare premiums, you estimate

that the trust fund programs will add to deficits through the 2019 to 2028 period by amounts that grow from $655 billion to -- in 2019, to $1.5 trillion in 2028. these trust fund programs will add a total of $10 trillion to the 10-year budget window. is the current practice jectry of these programs fiscally sustainable, and without legislative action, which year do you project that the social security disability trust fund and medicare's hospital insurance trust fund will be exhausted? not that i'm suggesting cuts in those. i'm suggesting solutions somehow. if you -- dr. hall: the aging of the population and rise in health care costs we think are the major forces driving the increase in the deficit over the next 10 years and beyond.

that's exactly right. the health insurance fund, for example, we think is going to run out of money in 2026. we haven't re-estimated the old age and survivors insurance program, but our last estimate is that will be exhausted in 2031. senator enzi: thank you. the latest baseline includes more than $14 trillion in discretionary spending over the next 10 years. while the armed services committee is able to authorize its spending each year, many of the nondefense programs remain unauthorized, a problem that persists. i know that c.b.o. prepares a report each year on unauthorized appropriations, but this year it was released prior to final appropriations being enacted. assuming defense continues to be authorized on an annual basis, do you have an estimate of what portion of this $14 trillion in your current baseline is unauthorized? dr. hall: we really don't. the last estimate we did was

2016 and was a pretty large number, about $310 billion. we haven't updated the estimate. we don't really want to forecast too much because obviously congress decides what to authorize going forward so that number will change. senator enzi: ok. i think we will be interested getting that number anyway. the tax cuts and jobs act made the corporate rate permanent to ensure long-term investment decisions that businesses have to make over the long term and show the u.s. is a competitive market. dr. hall, does the lower statutory corporate rate encourage firms to locate their establishments domestically? dr. hall: yes. we do believe the overall effect of the tax act is to make the u.s. a more appealing location for activity. so we do see the reduction in corporate rates and some of the changes in the international tax system will boost investment and actually

increase investment in the united states. from abroad. senator enzi: thank you. my time has expired. dr. sanders. senator sanders: thank you for the doctorate. barely made it through college. [laughter]ell -- senator sanders: dr. hall, as you know, president trump and my republican colleagues said over and over again that the tax cuts, tax cut bill will pay for itself. on page 128 of your report on the budget and the economy, however, the c.b.o. projects that the trump tax plan will increase the deficit by nearly $1.9 trillion over the next 11 years, is that correct? dr. hall: that's correct. senator sanders: so my friends, after the end of how many hours we sat in this room hearing

about the benefits of trickle down economics it will cradle the growth and tax revenues will increase to overcome the deficit. turns out not to be true. dr. hall, president trump, among others, has claimed -- this is a quote from trump. quote, the rich will not be gaining at all with this tax plan, end of quote. but according to the tax policy center, by the end of the decade, 83% of the benefits of the trump tax plan go to the top 1% and 60% of the benefits go to the top .1%. is that roughly accurate? dr. hall: i think that's their estimate. we have not done a similar calculation, though. senator sanders: what we're talking about is a tax plan that significantly grows the deficit and almost all of the

benefits go to the very, very wealthiest people in this country. one of the issues that concerns e is that what we are seeing happen to working families across this country -- dr. hall, i don't know if you have even seen it, but a report came out literally today from bureau of labor statistics and the report tells us the average worker in america has seen zero, zero wage growth over the past year after adjusting for inflation. in march of 2017, the typical nonmanager in america made about $22.60 an hour. in march of 2018, the same worker made the same, $22.60 an hour. that sound does that sound roughly right to you? dr. hall: it does sound roughly right.

dr. hall, while we're at it, can you talk a little bit about income and wealth inequality. is it true, based on your understanding, that the three wealthiest people in this country own more wealth than the bottom-of the american people? dr. hall: that i don't know. we did just release a report, i don't have the numbers in my head but we released a report about income inequality that's worth looking at. senator sanders: we will do that. my colleague from wyoming, the chairman talked about social security and medicare. i introduced legislation that would lift the cap on taxable social security income for people making $250,000 a year or more. now everybody is concerned about the financial future of social security. that is a legitimate concern. if you -- correct me if i'm wrong here but according to the

social security administration, you lift the cap on income of $250,000 or more, this is just the very highest income earners in this country, social security will be solvent for the next 60 years and we can increase benefits for lower income social security beneficiaries. does that sound right to you in dr. hall: i don't know if that's true or not. senator sanders: according to the social security administration it is. so all the people concerned about the solvency of social security, the sans not to cut benefits but at a time of massive income and wealth inequality to ask the people on top to start paying their fair share of taxes so we can protect the many, many millions of people today who are struggling to keep their heads above water. in my state, i'm sure in every state in this room, and we don't talk about this enough, mr.

chairman it might be worth a hearing on this, we've got a lot of elderly people who are cutting their prescription drugs in half, can't afford the medicine they need, can't afford to keep warm in the wintertime. we have a real crisis in terms of poverty among elderly people in this country. and the answer is not to be talking about cutting social security or medicare. the answer is to be strengthening those programs through a fairer tax system. thank you very much, dr. hall. thank you, mr. chairman. senator grassley: thank you for your work, director hall. sorry that there's such a bleak picture painted. having the public debt go from 8% to 96% of fwrose national product isn't very good news. i hope congress thinks about the impact on our children and grandchildren. but with that debt and deficit,

my colleagues on the other side of the aisle want to make this all about revenue and the historic tax cuts that we enacted. think that that completely disregards the economic effects of these reforms that i think you pointed out in your exchange with the chairman so my first question is kind of carrying on where the chairman left off, is it not accurate based on your analysis that the tax reforms enacted last year will increase economic growth, lead to lower unemployment, increase hours worked, increase capital investment, increase wages? dr. hall: those are all true. senator grassley: so i have to conclude when democrat says they want to repeal tax reforms, they're telling the american people that they want fewer jobs and lower wages and no american is going to think that's acceptable.

based on your analysis, how would allowing the individual tax reforms to expire after 2025 impact the economy? dr. hall: we think that would be sort of the on soist stimulus. we do think it will help slow growth. one of the reasons we did the alternative scenario was to sub submit some things like the tax rates don't expire and they continue. we can give you an idea of that senator grassley: ok. instead of asking a question, unless you disagree with this percentage, i'm going to say that revenue is a percentage of over has averaged 17.4% the last 50 years. according to your analysis, what will revenue as a percentage of g.d.p. be in 2025, which is prior to the expiration of the

ndividual tax reforms? dr. hall: i think it's somewhere north of 18% of g.d.p. a bit higher. senator grass lee: if you're saying north of 18%, that's better than i thought it was going to be, 17.5%. sovepb with the tax cuts enacted last year, fully in effect, revenue as a percentage of g.d.p. will exceed the historic average. dr. hall: that's right, i did misspeak, i was looking at the next year. senator grassley: turning to spending is it correct that over the past 50 years spending has veraged about 20.3% of g.d.p.? dr. hall: yes. senator grassley: what do you expect spending to average over the next few years as a percentage of g.d.p.? dr. hall: i don't have the

number in front of me but it's something north of 23%. senator grassley: quite a bit north. i have here 22.4%, reaching 23.6% in 2028. dr. hall: that sounds right. senator grassley: primary drivers of spending fwreth. dr. hall: primary drivers are things related to aging population and health care costs. it's things like medicare, medicaid and thosing the entitlements because of the aging population. senator grassley: yeafment and i think i agree with that. i don't know whether these percentages are accurate. but they take up 12.9% of g.d.p. today and that's going to go up to 14.9% while discretionary spending that -- that part we appropriate every year is projected to fall 1 percentage point. 10 in sum, revenues even with

tax cuts will remain on a par with historic averages but spending is set to increase significantly over historic norms. it seems to me that if we're going to get control of our growing debt and deficits, our focus needs to be on spending side, particularly mandatory spending programs. i yield. >> senator wyden. senatorwide n: thank you, mr. chairman. dr. hall, good to see you again. your professionalism is always appreciated. here in this room a bipartisan tax reform bill was produced by then-chairman judd gray. and i was proud to be one of the sponsors of it. our approach would have put the bulk of the tax relief into the pockets of the middle class, rather than the multinational corporations. unfortunately, our colleagues on the other side rejected that bipartisan approach and others

and decided to put the massive tax cuts for the multinational corporations on the national credit card. so let me keep you clear of politics and let's just walk through a couple of numbers so we can be clear about this. in the updated jut look you all estimate that the trump tax law is going to increase the deficit by almost $1.9 trillion over the budget window even after taking economic feedback, economic possibilities into account. nearly $600 billion of that cost is due just to bigger interest payments on that this new debt. so here's my question. just apropos of the numbers, besides slashing social security , medicare, and medicaid, i don't know where else

republicans could possibly go to pay for this $1.9 trillion in debt largely going to the multinational corporation. in fact, when i sort of strip the budget down, it would seem to me that cutting the defense dget would be the only other realistic option. what is missing here with that analysis? dr. hall: you know, i don't want to make recommendations, i suppose on how to fix the problem. senator wyden: i don't want you to. i thought maybe they could cut everything discretionary he -- like n.i.h. and we'd lose the prospect of research. but other than the defense

department, where else would they go or could they go on -- other than social security, medicare, and medicaid? dr. hall: i actually have, one of my favorite fig wrurs gives you a little insight. from the report. fig you are 4-3. right now net interest alone is about 1.6% of g.d.p. and that number is going to triple, just interest payments, is going to triple over the next 10 years that will become about 3.1% of g.d.p. that's bigger than all of defense spending. discretionary spending. it's bigger than all of nondefense discretionary spending. so my point is that the interest cost is starting to swamp things like defense spending and nondefense spending. so it's -- whatever the fix is going to be it needs to be something pretty big. senator wyden: so you can't just wave your hands and throw up

fairly dust -- fairy dust and say you're going to drive down the debt. i'm looking at three ranges of kind of numbers. one of them, when you have that amount of debt, is, and this is where i think they're going, social security, medicare, and medicaid. i base that on their budget proposal for this year. then i think you could wipe out the discretionary budget, n.i.h. and parks and the like. but i can't see any other budgetary, you know, real estate and i know my time is almost up. can you give me some examples for other possibilities in what aye mentioned? dr. hall: that figure gives you some idea where the buckets are but even that is sort of underestimating the problem because that's just the interest cost. that's just getting the deficit down toward zero.

we then would have a huge amount of debt sitting out there. so i think the problem is even more extreme than that. senator wyden: i'm not going to pummel this any longer. you have certainly made a very good point with respect to the debt. but when the growth projections are nowhere near what was promised, number one, the middle class aren't seeing what they were told they were going to get, which was a $4,000 pay raise, and the middle class drives 7 % of the american economy, i don't see how growth going to get you close to paying for that $1.9 trillion that was put on the credit card and it still leaves us with the safety net and defense, unless

you want to cut the discretionary programs and i don't see that being proposed either. i look forward to talking with you about this more. i certainly share your view about the debt. thank you, mr. chairman. >> senator corker. senator corker: thank you. dr. hall, thank you for being here. i have several committee assignments, like most people here. this has nothing to do with our leadership, i find this to be the least serious committee i serve on but we thank you for being here today and it seems like it's always sort of a partisan, whoever is in charge, tit for tat. none of us have covered ourselves in glory. this congress and this administration likely will go down as one of the most fiscally irresponsible administrations and congresses that we've had. my best vote, one of the best votes i've made here was the budget control act of 2011.

and we didn't finish the work by leaving the sequester, by making the cuts that needed to be made. i was not on the special committee, i don't know if anybody here was, but we didn't finish our work and so we ended up with a sequester. but it was the best vote i have made in that we at least capped domestic spending for a period of time. it would have been better if we did our work. you've talked about the cost of this tax bill and if it ends up costing what has been laid out here, it could well be one of the worst votes i've made. i hope that's not the case. i hope there's other data to assist whether it's jobs or growth or whatever. i want to get back to that in a moment. but the -- the thing that's never talked about here is we, i my , bipartisan budget, group just did an analysis on the bipartisan budget we squst

passed, you didn't do that in your papers because it had just happened. i think you're saying the tax bill could add $1.9 trillion in debt over the next 10 years this espending bill we just passed if policy continues would be $2.1 trillion. would you say that what we did in fairness passing the spending bill we just passed would add about the same order of magnitude of indebtedness as the tax bill? dr. hall: actually, we do have a bit of an estimate. i think the discretionary spending from those two bills is about $650 billion over 10 years. he bipartisan budget act and omnibus combined to about -- to add about $650 billion in 10 years. >> not under current policy.

dr. hall: that is. >> $650 billion in debt? current policy? over what we just passed? >> yes. -- dr. hall: yesment about $305 billion of that is from exceeding the caps. then we added about another $33 billion to spending not subject to the caps. senator corker: we added $150 billion to the baseline, did we not? dr. hall: you mean in -- senator corker: we just added $150 billion to the baseline. how can you multiply that by 10 and getters 600 billion. you'll be in the $2 trillion raise. dr. hall: if you look at table a-1 we've got changes in our budget forecast since june,

2017. look under discretionary outlays, you'll see we have a forecast here of discretionary outlays adding around $650 billion. to the deficit over 1 years. hat didn't exist before. senator corker: if you keep current policy in place. dr. hall: yes. senator corker: that cannot be accurate. if you do the math, add $150 billion to the baseline, multiply it by 10, it cannot be accurate. but anyway, the point is that we had both spending that is increased the deficit and tax reform that's increased the deficit. is that correct? dr. hall: yes. senator corker: the only three people on this committee that haven't been involved in increasing the deficit over the last 15 months are senator harris, senator sanders, and

senator merkley. oklahoma it's because they're fiscal conservatives. i think it's because they didn't atpwhree with the priorities in these bills. but they're the only three that haven't participated in increasing the deficit. we all have participated. i voted gepts the spending. some of you voted against the tax bill. but let's face it. i mean, both sides of the aisle. totally remiss as it relates to deficits. and i mean, i listen to this partisan bickering over blaming people, it's ridiculous. we are absolutely not capable of dealing with our country's finances and of course a big part of it is the american people don't really want it to be controlled. i want to get back with you on the numbers. i know my time sup. the thing that is confusing to me, i notice that, and i'll . ose with this, on page 117 .7%, anot the growth at

average increase growth of .7% over the 10-year period. and we were looking at an average growth increase of .4% paying for this bill. that was passed. the tax reform bill. and i'm just confused as to whether that's just a .7 increase in the baseline and there really isn't that much growth. i'm confused other that. i want to get back to you on that. i know my time is up. dr. hall: that's a level. we think g.d.p. on average would be .7 higher over 10 years. n average. >> dr. hall, i want to start by thanking you and your team for your nonpartisan, professional work and as your report clearly indicates, the claims that the

recent tax cut would pay for itself were pure fantasy. you indicate here that even with additional economic growth, the debt will increase by close to $2 trillion over 10 years. i want to dig could be down a little bit into the different impact this tax bill has on gross domestic product versus gross national product because both are measures of our economy but am i correct in saying gross national product is a better measure of the income that comes to the people of the united states? dr. hall: that's right. gross domestic product focuses on where things are made an gross national product focuses on who gets the income from what's made. senator van hollen: so to the extent that the republican tax law boosts gross domestic product by more than gross national product it's because some of that income from increased economic activity is flowing to foreigners, instead of americans, is that right?

dr. hall: right. one of the big reasons is the big increase in were rowing. that we're having to do both pivetly and publicly. it's coming from abroad. when you borrow money you owe interest payments, those interest payments are income that flow out of the country. senator van hollen: it's also a fact that if you look at the stock of american companies, 35% of that stock is currently owned by foreigners so when there's a stock buyback that's money that flows directly into the pockets of somebody overseas, non-americans. if you dig into your report ou'd find that by 2028, c.b.o. concludes that the republican tax law boosts gross domestic product by .5% but boosts gross national product by only .1%. is that right? r. hall: that's correct.

senator van hollen: doesn't this mean that roughly 80% of the income of the tax plan in the fully -- in the final year when it's fully kicked in is going to foreigners. dr. hall: i'm not sure i'd characterize it that way but i get your point about -- senator vannle hon -- senator van hollen: you just said it's the amount that gos to foreigners. so you are finding that g.d.p. is growing a lot faster in year 10 than g.n.p. right? dr. hall: that's right. senator van hollen: five times faster, right? dr. hall: right. senator van hollen: 80%, i want to be clear, mr. chairman, 80% of the benefit of increased activity from the tax law is going in the%s of foreigners. every dollar of increased economic activity in 2028, 0 cents of that is not going into the pockets of hardworking americans that the chairman referred to, it's going in the pockets of foreigners, right?

dr. hall: your calculation is right i'm just not sure that's how i'd look at the benefits or the impact of the tax contact. senator van hollen: it's -- dr. hall: i'm not trying to argue. senator van hollen: let me ask about two parts of the plan i tried to spend time on the floor warning my colleagues about, the global intangible low tax income, guilty, for short, you're familiar with that? dr. hall: yes. senator van hollen: and another part that's a deduction for profits from foreign sale the ftii. on page 109 of your report you state, quote, i low -- by located more tangible assets abroad, a corporation is able to reduce the amount of foreign income that is characterized as guilty, similarly by locating fier tangible assets in the united states, a corporation can increase the amount of income that can be deducted as fdii and

you conclude together the provisionings may increase corporation's incentives to locate abroad. when we talk about moving tangible assets abroad we're talking about things like plants and equipment and that kind of thing, right? dr. hall: right, although ypt to -- i don't want to exaggerate that part of what we were doing is pointing out that it's complicated. senator van hollen: i'm just reading your report. your findings are consistent with lots of economists, as you know, that this provision, the way this provision was written, create this is perverse incentive to shift jobs overseas and if a corporation does succeed in lowering its tax bill by moving its factory overseas along with the jobs, they're getting a tax break by moving plan plant and equipment overseas. dr. hall: yeah, i just want to put it in context. we think overall, the tax act

encourages investment in the united states not abroad. senator van hollen: but part of that investment is from foreigners who are getting 80 cents of every dollar from increased economic activity. more foreign investment and more profit for foreigners in a bill sold as something that will help the american worker. final question that relates to the other half, the fdii, would you agree it's a tax expenditure. dr. hall: it's not our call. that's up to the sgroint committee on taxation. senator van hollen: is that something you've said in the past that that's a tax break? dr. hall: we rely on them to make the call. senator van hollen: i find it rirnic we have a program that ebb courages people to move plant and equipment overseas. >> senator cotton. senator cotton: there's been a

lot of talk about macrosmick pictures, budget debt, deficits, economic growth and so forth. let's bring it down to the micropicture, what this means for family. the c.b.o. outlook in 20193rk.3%. royce torically low, that's good news. maybe even better news, c.b.o. projects an increase in hourly wages and attributes that to competition among labor for businesses because of the -- because the bidding up of wages is necessary to attract new employees and keep existing workers. what is fostering that kmp decision and leading the increase in hourly wames? dr. hall: we have a lot of stimulus from the tax act and other two bills. that stimulus is pushing g.d.p. growth above potential, we're get logue unemployment rate we hink in higher employment. senator cotton: so does that mean some of the gains from that

growth, whatever it may be, will accrue to a greater degree to labor than capital since you're seeing wage increases for people's labor? dr. hall: well, yeah, we do see a decline in marginal tax on labor. senator cotton: i think that's a good thing given that labor for many decades now, especially low-skilled, unskilled laborers, people getting out of high school, are not seing their wages encrease. one important policy we need to continue is immigration enforcement. i think we need to take a look at immigration levels. obviously we can increase our abstract g. f. p. simply by bringing in millions more workers. inthe way to increase your g.d.p. is more productivity or more workers. that wouldn't be good for american families or for g.d.p. on a per capita or per household basis. i want to turn to something i didn't see in your report. i looked through and did not see much if anything about national

defense and military spending. did i overlook that or did you not put much focus there? dr. hall: we didn't put a ton of focus there. senator cotton: i raise that because i want to make the point that i don't think our military is responsible for driving much of the deficits and debts we face now. i think your report makes that clear in part by not scutsing the increased military spending. there's no doubt we increased military spending substantially this year and next year. but as your report makes clear, the long-term debt picture is driven by -- primarily by retirement, especially health care spending. is that right? dr. hall: that's right. senator cotton: i would make the case that in the long-term, military spending is essential for controling our deficit and all matly our national debt because it creates the international system in which our economy operates. i have a few figures here, end of world war ii about international trade and investment, that trade expansion in the united states has produced luffry -- roughly $2.1

trillion in economic gains that translates into more than $7,000 her person and more than $18,000 per household and that our economy is about 13% larger than it would have been absent that increase. it's hard to imagine that kind of increase in trade happening if we had had a conflict on the scale of world war ii again no doubt there's been many wars and our nation has participated in manufacture othose wars but certainly we have not had the great power conflict in this world we saw from 1939 to 1945. the federal reserve bank studies the effects of war on trade and concluded that it not only severely diminished trade in the long-term for countries directly involved but even for neutral company countries trade declined 10%. it's the united states military that's been creating that environment that's been patroling the seas, securing critical choke points, forcing our allies to conciliate or

mediate their differences so their small conflicts don't rise to big conflicts as well as deterring first the soviet union and now other peer competitors from the kind of adventurism that launched us into world war ii and before that world war i. we spend more on our military, more than many of the closest nations combined, in part because military competition is so destructive of economic growth and prosperity and therefore we can't afford to skimp on it. i took that to be the message of the absence of much discussion of military spending in your most recent report and your testimony, is that the military is one of the most fundamental thing ours government spends taxpayer dollars on and we have to continue to do so if we have any hope of achieving the prosperity we all hope for our country. thank you. >> senator harris. senator harris: thank you, mr. chairman. good morning. i reviewed the c.b.o.'s outlook

for the next decade. i'm deeply concerned about the increase to the deficit as many members of this committee has sr. expressed. i'm especially troubled that much of the deficit increase can be attributed to the republican tax plan that was passed a few months ago which will add nearly $1.9 trillion to the deficit. according to the c.b.o.'s analysis, the debt will exceed the size of the entire united states economy in just over a decade. two years sooner than you forecasted in june. the debt problem created by a massive giveaway to wealthy and corporations and by making the individual tax cuts expire in 2025 while makes the corporate tax cuts permanent. this was a pure giveaway to the corporations and the top 1% of the united states. and when congress talks about how we fix this deficit increase from the tax plan, some of my colleagues on the other side of the aisle discuss the need for entitlement cuts. entitlement cuts really mean cutting medicare, medicaid, and

social security. t means cutting the main programs 4.3 million seniors in my home state of california rely on. seniors who deserve to retire with dignity. for my constituents, retiring with dignity means being able to afford their prescription drugs. it means not living paycheck to paycheck. and having the peace of mind that government will not take away the benefits promised to them. at a time when so many seniors cannot afford their life-saving medication, we need a budget that allows medicare to negotiate drug prices. what we don't need is a budget that cuts $500 billion from the program over the next decade. when trying to repeal the affordable care act this past year, congressional members proposed cutting medicaid by $700 billion. the same program that cut six out of 10 seniors nursing home

uses. nearly 2/3 of california's seniors depend on social security for at least half of their annual income, an average of $21,300. with cuts to social security, millions of seniors would struggle to make ends meet. so when we discuss balancing the budget, we need to speak the truth that this tax plan has ballooned the deficit for the purpose of delivering billions of dollars to the top 1% while putting access to affordable health care an a shot at a decentre tirmente at risk for anyone else. so dr. hall, my question is based on your updated budget outlook, can you tell me whether the effects of the tax bill, either directly or indirectly, impact the future solvency of medicare and social security? dr. hall: certainly anything that adds to the deficit and the debt is going to have an impact on things going forward. we get a little boost in

economic growth, that might extend the exhaustion dates but the basic problem is still there and the basic issue of the debt getting to an unsustainable level is maybe more intense than it was before. senator harris: do you agree it will have a disproportionate impact on senior americans? dr. hall: certainly changes in medicare and that sort of thing would have a disproportionate affect. i guess it depends on how congress decides to deal with the problem. senator harris: thank you. thank you, mr. chairman. >> thank you. senator murphy. senator murphy: thank you very much for coming in and bringing your expertise to bear on our economic situation. i was looking at numbers from percent of the tax benefits that go to those who earn more than

$100,000? dr. hall: we haven't updated those numbers. we did in this base line we haven't tried to reprodouse that. i can't tell you anything different than what j.c.t. has on the topic. mr. murphy: do you have any reason to they j.c.t. is father off the mark? dr. hall: yo. -- no. senator murphy: i think that's an important point. something sold as beneficial to the middle class is actually beneficial to the best off. that brings me to the second point which is your analysis shows that from 10 months ago until now, the annual deficit has grown from an estimated $563 billion to an estimated $804 billion or roughly $241 billion increase from 10 months ago. dr. hall: that's correct. senator murphy: and over o10

years i think your numbers were about $1.6 billion. on top of the baseline 10 months ago. dr. hall: yes, sir. senator murphy: how much of that is the tax bill and how much of that is the spending bill? dr. hall: the -- that's a good question. the tax bill is a big part of that i think the tax bill is, i'm sorry, let me look it up quickly. dr. hall: i can tell you he the spending part of it. spending is about 45% of that increase. it's a significant part. but the remainder, probably more than the remainder is the tax

bill. senator merkley: so a great share of the tax bill is funded through borrowing? dr. hall: correct. senator merkley: so essentially we have a bill that's borrowed from our children, because they're the ones that inherit the debt, to deliver the vast majority of benefits to the richest americans. dr. hall: that's a way of looking at it. senator merkley: not just a way of looking at it but a fair reading of the numbers? dr. hall: obviously it depends upon who winds up fixing the deficit, i suppose, who bears the burden of how congress decides to deal with it. but delay is certainly, delay is certainly pushing the burden back in time. senator merkley: i want to point out a pat herb i found quite interesting. under president carter, we had essentially him closing out with the same deficit that existed a year before he took office

despite the oil shocks, about $73 billion. under president reagan, the deficit increased from $73 billion to $149 billion, roughly doubling. under president bush, the first president bush, we had another near doubling, going from $249 billion to $290 billion. under president clinton we had ea ducks from $290 billion to a surplus of $236 billion. a vast decrease in the deficit. a surplus. and so we were reducing our national debt. under bush the second, we had increase from $236 billion to $458 billion another rough doubling and under president obama, the results of the recession, his first year in office, $1.4 trillion in deficit reduced to about $584 billion when he left office. why is it the deficit decroces under democratic leadership and increases under republican leadership? dr. hall: i wouldn't want to offer an opinion on that senator

merkley: have i read the numbers accurately? dr. hall: that sounds right. senator merkley: i think it's an important point to make because what we have seen for a pat thearp increased our debt vastly has been republican leadership has repeatedly taken us deep into the red, democratic leadership has reduced that damage, and yet all we hear from our republican colleagues is how they're fiscally responsible. how can one square the rhetoric ith the reality? dr. hall: i wouldn't want to -- senator merkley: that's not your responsibility but i'm glad you confirmed my numbers. i'll just say, our children are financing the biggest theft of money in america and this is what you normally see in corrupt, irresponsible third world governments not the united

states of america. senator king. >> i want to draw your attention to page 33 of the report, i want to ask you about trade. changes to trade agreement or tariff policies on the part of the united states and its trading partners that impede trade could have significant adverse effects on activity whereas the removal of trade barriers could improve aggregate economic conditions. senator kaine: we have a -- had a hearing recently where thed of the down soifl economic advisors appeared before us. it was immediately after president trump indicated he was going to impose tariffs on imported aluminum and steel, before any of the subsequent potential retaliation discussion back and forth. i asked kevin hassett at the time, based moin understanding that a number of workers in

american industries that make aluminum and steel is dramatically smaller than the mber of workers that work in industries that make things from aluminum and steel. i asked whether the tar rir i haves would be a plus or minus for american workers. he said the economic literature would suggest it would likely have a neg tiff effect on jobs. do you agry with that? dr. hall: i do. senator kaine: if we get into the subsequent retaliation issues, the aluminum and steel issues matter to virginians i've got coors beer and annheuser-busch, big breweries buying alum numb for cans and i ve a doubling truck plant in pulaski, the only manufacturer of volvo trucks, going to razz their costs, raise costs to

consumers. there is some effect just on the aluminum and steel issue in virginia. over the course of the last couple of weeks, been on recess, traveling around a lot of concern in virginia on the retaliation side, the announcement by china they'd retaliate on soy and pork and other agricultural products, are channeling to virginians. have you at the c.b.o. started to do analysis of what either this -- the tariff on aluminum and steel or more broadly if retaliation were to occur, what would the effect be on american workers and american farmers? dr. hall: we haven't. in fact, our economic forecast closed about mid february. so we haven't taken into of that on board. certainly this sort of thing we'd pay attention to and see how things turn out. it would be something we'd include in our baseline economic forecast at a later date next

time we do it or whenever significant changes are made. senator kaine: you did generally agree with the hassett conclusion that the imports -- import tariffs on aluminum steel are likely negatives on american workers. do you have an opinion about if there are retaliatory actions is that a net good or net bad? dr. hall: to be fair, the real solution, how it winds up, is how it winds up rather than just this -- just one act like that. i do think a lot of the concerns, efind them interesting because they're the inverse of the benefits of freer trade. of having trade negotiations, trade agreements. right. is that you can have lower price, you can have lower cost of production. you can have access to foreign markets. with good trade agreements.

so undoing those can have the reverse effect. but again, to be fair, we have to sort of see where we wind up. >> sounds like the retaliation discussion is at the retorical level. tariffs have been imposed on aluminum and steel. the retaliation discussion is retorical right now. dr. hall: and we don't know what sort of tariff changes the u.s. is likely to make or may make going forward. senator kaine: i'm going to say i think it's interesting that the the constitution gives congress plennary power over trade, we delegate to the president through fast track, which i support, the ability to negotiate trade deals and then set up a process for bringing those back for congressional up or down vote. i think it's interesting that we allowhe trade deal but we presidents to start trade wars without a volt of congress even

though the constitution suggests trade is ultimately for congress. i don't think a president should be able to do a trade deal or start a trade war without congress giving an imprimatur. i hope to work with my colleagues to maybe come up with some improvements in the process so that there can't be a unilateral executive decision to start a trade war when the constitution reserves trade powers to congress. but that's just my opinion. you needn't comment. thank you, mr. chairman. >> thank you. senator whitehouse? senator whitehouse: looks like i'm bringing up the rear here, just down to us and dr. hall. dr. hall, you and i have talked before about the health care spending projections graph and this is the one from -- that i've used before. but, guess what. we have a new one. a new year has gone by. just for the record, back here,

when the affordable care act passed, c.b.o. did the yellow line estimate of what federal health care spending, all in, all the different federal health care programs, was expected to look like. then as time went on, and we had the experience of the affordable care act and whatever else took place, we got this actual result which came in below what was expected and then here there's been a new projection that is made going forward. this is the old projection. this is the actual through this period and this is the new projection. now, in the graph that i used to use all the time, this savings delta was $3.3 trillion in savings between the expected spending and the new projection. in this, the number go toups

$4.2 trillion. w, i believe that about $300 billion of that relates to the repeal of the individual mandate. so you could back that out, but hat still leaves $3.9 trillion in savings up from $3.3 trillion in savings just in the intervening year and i think it's important to try to do whatever we can to figure out what is going on here. so i ask you to keep working with us on that. this has a particular emphasis now because as you know, there's a bicameral select committee working on trying to reform our budget process. and nobody has been more eloquent than chairman enzi in

understanding the how broken our existing budget process is. one of the areas where he and i have considerable common cause. i think that one of the ways that we need to fix our existing broken budget process is that we need to have all of the elements that mathematically add to the debt to be considered in our budget process. so not just appropriated spend bug also health care spending, also tax expenditures and also revenue. that's what mathematically leads to debt and deficit. as a general proposition, do you agree with me that those are four key elements that mathematically lead to debt and deficits? dr. hall: yes. senator whitehouse: if we're going to look at health care we need to look at ways to address this. i disapprove of and will fight to my last breath to approve of

attacking medicare and medicaid and taking benefits away from people in order to achieve savings because i think there are better ways to achieve savings, i think there are efficiencies that can be gabed, we're seeing remarkable results out of some of the accountable care organizations. and it's very hard to extrapolate from coastal medical in the state of rhode island, a provider practice that is now reduced its per pisht, per year cost by $700 while dramatically improving the experience and are that their patients get to $3.9 trillion in savings. i suspect that there is something going on out there as we improve the payment system for the health care enterprise

so that it is diverted less toward doing things to people and prescribing things for people and seeing people than it is to doing the things that keep people healthy so they don't need those things in the first place. i just want to first of all ask if you concur with that, with the general thought and second when you keep working with us, is there any way we can be help to feel try to figure out what is behind, you know $3.9 trillion is a lot of money. it ought to be a matter of real priority to try to figure out what is working that made that dirns in this period. dr. hall: we are interested in that topic. we are trying to do some work on that. i know you're interested beyond this but if for no other reason we keep getting the forecast wrong. keep having to low you are or estimate of health care cost growth. if we understood that better we could give you a better forecast of future costs. so we are working on that.

we'd be happy to followup and talk to you about what we're doing. senator whitehouse: i know my time has expired, may i ask an additional chairman -- an additional question, chairman? does your work, can you look at any way down through the ex-of say a coastal medical or rhode island primary care physicians or a vider group where they're seing that cost not just not go up so fast but actually driving the cost down for their patients and maybe that's too big an extrapolation but what does that look like from your perspective? dr. hall: i think that is certainly where we start working on this is talking with providers and their experiences to get an understanding of what's happening at individual providers and see if we can find some common -- some common factors in there. that's going to be part of our methodology. senator whitehouse: thank you. surely if we could save $700 per

person per year on health care expense while providing better care that would be a serious win-win. senator enzi: it would. i thank you for your congressmens at the last hearing regarding that and sharing the information that you did with me. i have to get together with you and ask a few questions about that though. to get more detail on how it actually works. and i thank you for your work on the special budget task force as well. we're really relying on you to come up as you did working bipartisan before to come up with some solutions that maybe we can fix that process. senator whitehouse: we're inspired by you, mr. chairman and senator perdue and i on this committee comm are doing our best to channel your concerns and wish into that process. senator enzi: thank you. i want to thank you, dr. hall, for your testimony today and for all the documents you oversee the preparation of and your full

statement will be included in the record. as information all senators' questions for the record are due by 6:00 p.m. today with a signed hard copy delivered to the committee clerk in dirksen 624. under our rules, our witness has seven days from receipt of questions to respond with answers. with no further business to come before the committee, the hearing is adjourned. [captioning made possible by the national captioning institute, inc., in cooperation with the united states house of representatives. [captions copyright national cable satellite corp. 2018] [captioning performed by the national captioning institute, which is responsible for its caption content and accuracy. visit ncicap.org]

>> among the issues that are really sort of near and dear to me is this idea of having

conversations across party lines and political ideologies and a lot of people throw around the term common sense and common sense requires common experience. i really like the idea of having a sharing point of information we can all rely on as opposed to all be suspicious of. hat's something that we're working on as educators and as participant citizens. >> affordable house, we want to address homelessness which many, many cities are struggling with nationwide. and 1st century policing and bureau ure our police reflecks the city we live in. >> one of the most important issues for me is the economy and -- in oregon, here we have a growing economy with tech firms growing but still have education funding issues in our area. and i'm concerned that

librarians are being let go across the nation because of funding issues and this day and age with media literacy issues, we need librarians an we need teachers working with kids and so we need to figure out the best we ke we can have stable funding in schools while also encouraging our growing economy. >> two big issues, number one, ending gun violence. especially in schools. there's no reason why students are teachers should have to go to work and be concerned about the safety of themselves and their students. number two, i think we need to get money out of politics, citizens united, too many congresspeople, senators, congress men and women are beholden to corporate interests and need to be beholden to the people themselves. they need to be working for us, the people. >> my name is miranda bellinger, in my state an important issue to me is education. i think our schools need to be funded properly, our teachers need to be treated right because the children are our future and

if they're well educated we have well educated adults in the work force and a better future for all of us. >> voices from the the states. part of c-span's 50 capitals our. >> the house will be back in just a moment here at noon eastern. they will first take up debate rules for an upcoming financial regulation bill and a balanced budget amendment to the constitution. debate on the balanced budget amendment is scheduled for about four hours tomorrow in the house. also today, lawmakers will continue consideration of bills that would repeal parts of the 2010 dodd-frank financial regulation bill. the senate has already passed legislation making major changes to the dodd-frank bill. the house also has been considering a large number of smaller bills changing the financial regulation law. we'll also hear members make remarks about the announcement of retime of -- retirement of house speaker paul ryan. live coverage of the house. e pr the guest chaplain, chaplain

scott foust, u.s. air force, arlington cemetery, arlington, virginia. the chaplain: join me, please. gracious lord, when king david of old faced a seemingly insurmountable mountain of problems to solve, questions to answer, obstacles to overcome, he had a brief yet powerful prayer. hear my cry for help, my king and my god, for to you i pray. similarly, after