the non-partisan nature of the cbo's work is crucial and the law that created the cbo said only that the director and cbo staff should be appointed without regard to partisan affiliation but the first director, a giant of public service, really created a culture, being appointed without regard to personal affiliation to doing their work in a non-partisan manner. the director of the cbo is appointed by the speaker of the house and the president pro tem for of the senate who all c-span viewers know is a member of the majority party with the greatest amount of seniority. practically speaking it is the ranking members of the house and senate budget committees who are most responsible for selecting the cbo director. there have been eight directors since its formation. four of them have been nominal democrats. four have been normal republicans. what they all have in common is they are card-carrying middle of a road, people who you would consider to be relatively moderate members of their parties even though they are nominal -- >> host: who is the current director? >> guest: doug eleanor. th

that is -- the cbo director's words. and so, mr. chairman bernanke, we want to hear your views, and i hope you'll speak further about what the director said. >> thank you very much. >> mr. chairman. >> acting chairman nelson, ranking member sessions, and other members of the committee, i appreciate the opportunity to discuss my views on the economic out look monetary policy and thing challenges facing fiscal policy makers. >>> over the past two and a half years the u.s. economy has been gradually recovering from the deep recession. conditions have improved, but the pace has been slow. particularly from the perspective of the millions workers that are unemployed or under employed. more over the slow pace has left it vulnerable to shocks. spill overs from the european debt crisis risk derailing the recovery. unfortuna fortunately over the past couple of months, there have been signs of improvement and economic projections just released the participants indicated that they expect somewhat stronger growth this year than in 2011. the out

the cbo's outlook could not be more ominous. i look forward to your testimony, dr. elmendorf, which i hope can inform and guide the committee to advance solutions in the year ahead. and with that, i'll yield to ranking member mr. van hollen. >> thank you, mr. chairman. i want to join the chairman in weekending you, dr. elmendorf, and your two daughters. it's great to have members of the family here today. and i want to realference the reportived yesterday na the chairman mentioned because while it shows that the economy remains very fragile, it also shows that it is slowly recovering. it demonstrates that we still have much work to do to create jobs, tackle the deaf sanltd return the budget to a long-term fiscally stable path. but for a moment, let's focus on the positive signs of the budding economic recovery and remember where we were just three years ago. if you could please put up the slide. no, the first slide. this slide right here. what this slide shows is that the day president bush left office, the day that president obama was sworn in, the economy was colla

the o can ko spending. it does. but, we will have that conversation. because cbo includes that in their baseline as you pointed out. >> yes. y yes. >> let me turn to what is the essential question that we face, which is how do we achieve the deficit reduction we all recognize we need to get to over the ten-year period, how do we, you know, get the balanced budgets over the longer term and stabilize the debt as a percentage of gdp and really that means that there are choices to be made. and, you know, 98% of our republican colleagues in the house signed this pledge saying they will not close one tax loophole for the purpose of deficit reduction. not one penny can go to deficit reduction from closing a tax loophole. you get rid of a subsidy, you cannot use that for the purpose of deficit reduction. i think what the president proposed is that we want to achieve a net of 1.5 trillion dollars in additional revenue, doing kn ining it in a way that middle earners and asks those at the top to pay more. we hear, the wealthiest are paying a growing share of income, it's not

i think we would all agree that the cbo is the referee and i want to make it clear that cbo scores oko as savings. >> so, if we assume we are going to be at war for ten years in the baseline, because that is what the law requires cbo does by the way. it's not cbo's fault. and all of a sudden we are going to have a pull out from iraq and afghan before ten years is over, this money is all of a sudden a spending cut, it's savings? >> savings relative to the baseline according to the cbo. it closes the back door on discretionary spending. >> if this is how we measure reality heaven help us. i'll use your budget and your chart, bring up figure one. i have your number for you. so we will get into it if you want. you are adding $11.4 trillion to the debt, excuse me, the baseline adds that to the debt. that means if we do not do anything. we sit still, we add $11.4 trillion to the debt. your budget adds $11.2 trillion to the debt. how on earth do you claim deficit reduction when your own numbers show instead of increasing the debt by 78% it increases it by 76%? >> two points that i would make.

i want to begin by highlighting what i believe are the key findings in cbo's report. this first chart depicts the ten-year budget outlook under the cbo new fiscal scenario. it shows the definite falling to $1.1 trillion in 2012. continuing to fall through 2015 and then rising through the latter half of the decade reaching $1.5 trillion in 2022. we cannot permit that to happen. please, colleagues, let's find a way to get this country back on track. we can do better than this. we are better than this. and we've got an absolute obligation to try to find a way to come together to get this country back on track. it's important to note that most of the increased deficit over the next ten years under cbo's alternative fiscal scenario can be attributed to tax policies, not spending policies. we can see $6.4 trillion of the increased deficit under the scenario can be attributed to the extension of the 2001 and 2003 tax guts and other related debt service. in comparison, only $1.5 trillion of the increased deficit of the scenario can be attributed to spending policies. including

who would bear the brunt of this new fee. cbo responded quote, the cost of proposed fee would ultimately be borne to varying degrees by an institution's customers and employees and investors. so he's proposing the same thing this year and so i would like to include in the record, mr. chairman, the questions i asked cbo and their responses, and then what i would like to have you do is read that and indicate if you agree or disagree with cbo's analysis, and particularly if you disagree with any of re that you provide a detailed explanation of why you disagree. >> objection. and that was for him. >> yes. thank you. i would like to ask you my first question about the economic impact of tax increases. as you know, january 1st, 2013, when the tax decreases of 2001 and 2003 are sunset, our nation will see a $3.5 trillion tax increase. cbo estimated the economic effect of this tax increase along with a few other policies. cbo estimates that the unemployment rate at the end of 2013 could be as much as two percentage points higher and that

the other assumptions we're making, cbo just released the baseline. in the baseline their assuming we're going to let these tax cuts expire, all of them. that's a $5 trillion bet. i don't think that's going to happen. the true cost of health care, i've worked with douglas on this and i've written some op eds on it. i've taken a look at it. again, we're deluding ourselves to think that this thing is going to be deficit neutral. it won't. it will add trillions of dollars to our total deficit over the next ten years. and i think -- the other thing we have to worry about is the economic growth assumptions that are put in these baselines. we've seen a couple of studies and the cbo itself says, to the extent we miss our growth target by 1%, that adds $3 trillion to our debt and deficit. we need to be concerned about that. and i think the final thing we need to be concerned about is we're trying to close the deficit. again, i think in my graphs i pretty well describe a spending problem. and i would just caution anybody that wants to increase tax rates. i wan

but i would like to urge the committee not to be solely attentive to the cbo with that. most of the problems in our fiscal path arise after the next ten years going out 15, 20, 30 years as our population ages and health care costs rise and so on. so what i would advocate is, you know, looking broadly. having a broad base discussion. but in particular, looking at the ability over the long run. i think that's going to take a lot of work on the part of congress. it's really not my place to make detailed recommendations about the specific components of the budget. but i do urge the congress and i heard many people on this committee express the same thing that we need a long term plan to put our debt to gdp ratio, our jefr all burden on a sustainable path. >> thank you. >> thank you, mr. chairman, and chairman bernanke. thank you. your remarks have been very insightful. and we all have differences of opinions. i think you're pretty close to what we need to be doing. and we value that. i would yield to senator grassley. >> personal note, i want to compliment you on your movemen

in fact, according to the cbo analysis, it was approximately 18% underpaid. so some of the folks at the federal government is trying to recruit in some of the most sensitive positions in the federal government are underpaid. and these are people i would think, that we would want to make sure that were able to continue to have in the federal government and so to take a hatchet approach, to say our solution to this is an across-the-board hatchet approach is the wrong way and even if we were to triefd to segment out groups here, that would be a many steak in the sense that this is an area that requires a more comprehensive view. people have proposed taking a study and looking at the discrepancies in these different reports, really getting to the bottom of this rather than taking an across-the-board whack. it seems to be the flavor of the day to go after federal employees but i think it's a short-sighted approach and i urge my colleagues to step back, ask yourself the question, why there are these big discrepancies between these different studies, huge swings and

if the cbo is right and we see a turnaround to the end of the year with it going back up that would beoblematic. we are in the key period now that the second quarter of the election year is when voters really take that snapshot and it is positive for the. the that he is seeing improvement at this moment. >> i would never disagree with the political expert but a couple of things, unemployment will go up before it comes down in a permanent way. there are 3 million, 4 million discouraged workers coming back and that will be confusing to people. good news will be bad news, and on the ground it's not going to feel that great. right now the numbers look better, that's fine but until we see steady job growth, even this rapid or more and employment increases that are matched by wage increases you're not going to see the incomes to are people to feel good. if we could happy talk in washington when it's not that great on the ground that's a tough story. >> nobody's doing happy talk on the ground but we have to recognize that the economy is stronger, that's what he said, and it has shown that it'

but the one thing that's out there that is an unknown for us as a committee, is when cbo had provide their reestimate. >> i guess we have the director elmendorf here. we should ask him that question and keep his feet to the fire as well. so i'll help you do that. but mr. chairman, you've done such a good job since i've been here of providing graphs so, i guess -- imitation is the greatest form of flattery, so i brought a couple graphs here today that i've been showing in wisconsin, to basically describe what i think is the problem facing our nation in terms of economic growth in our deficit and debt situation. certainly as i was reviewing the testimony that will be given just here today, my concern is that we're trying to address a problem of fal and i think we're seeing that in europe, and it just isn't working that way. one of the charts that i showed to groups in wisconsin, i turned smiling face into frowns is i describe the history of our debt. i like using this one because it shows in 1987, our total federal dead was 2.3 trillion. it took us 200 years to accumulate $2.3 trillion

so i think the cbo is based on current law, and therefore, is a projection that isn't reflective of the kind of policies that we would agree on, even if we don't agree on all of them. >> probably not any of them. >> well, i don't think any of us are looking to increase taxes on the middle class, for example. so the cbo assumption would have that. so i think you really are comparing apples and oranges. >> thank you. i yield back. >> guess what, time has expired. hearing is adjourned. mr. zeinst, welcome to your first trip to the budget committee. meeting is adjourned. >> thank you.

and the cbo earlier in the week said, you know, the debt outlook is horrible.deficit's horrible. and by the way, unemployment's going back up. so are we happy or are we worried? >> i think it was basically a good-newsweek. the unemployment figures and the new jobs in the friday report were good news. they aren't definitive. it was one month, but it was a good strong month and indication that the economy is taking hold. if it lasts, we'll have what the best thing that anybody is able to predict is a good slow recovery with gradual reduction in the unemployment rate from what is admittedly a very high level. >> but, you know, the cbo said 9.3 or something next year which i think is craziness. >> remember, the cbo, its job is to define the dark cloud for every silver lining. it did that, but the reason it did that, all kidding aside, the cbo has to assume that they have to assume an enormous tax increase next year and we have to assume we have bad economic growth, and that gets you high unemployment. strip that out, one month's good news in the labor market, but t

. >> on the spending issue, the cbo headlines in the papers this morning, here is the washington times. no sun in the cbo forecast. this is a tweet from joseph ramirez. representative ryan, the cbo saying spend more now, save later? explain. >> well, i think at this point politically that having investments coming from the federal government wouldn't even have a committee hearing in the house of representatives. and i think the most reasonable economist would say in this kind of liquidity trap that we're in, you spend now to get us out, and then have long-term deficit spending. and i think doing the buffett rule, getting some money up-front or even in the next ten years from the top 1% in investing that money in the infrastructure spending now would be a good thing. but the key is long-term. we've got to deal with the long-term deficit issue. there is no doubt about it. but if you don't get revenues up, you don't get people back to work, you're not going to have the revenues you need to have long-term deficit reduction. >> the cbo director may provide more clarity in what he was trying

we've seen a couple of studies and the cbo itself says, to the extent we miss our growth target by 3%. we need to be concerned about that and i think the final thing we need to be concerned about is we're trying to close the deficit. i think, again, i think in my graphs prepi well describe the spending problem and i would caution anybody that wants to increase tax rates. i want to raise more revenue but growing the economy. raise the revenue by significant tax reform that's pro growth. if we raise rates we delude ourselves to think we'll have the revenue increases by doing that. i think it would harm economic growth and in the end, i think that's what we'll hear in our testimony here today, the solution in europe is to try to enact governmental policies that will promote economic growth in the united states, we have the exact same dynamic and we have got to make sure nothing we do here in washington detracts from economic growth. so with that, i just have one final chart and it speaks to the u.s. government in relationship to european economies and to me, this is an incredibly key met

if we do nothing. >> a lot of the cbo numbers are predicated on ifs. i want to bring in a person that does not have a lot of ifs, but declaretive sentences. hello jim, thanks for coming to the program. >> how are you? >> i'm great, i'm great, we are happy to have you on the show. you had an article in the hometown paper yesterday saying that the outlook for the administration may be a little gloomier than we would think than based on the president's rhetoric today. tell me in terms of the number what the white house is looking at these days? >> there's three different pieces, the unemployment data, which no doubt was good for them. but when you look at thei itcbo report, others, there's a good chance that if it in the mid-eights that was bad news for the white house. the white house feels if it at 8.5% or above, it will be hard if not impossible to win back independents. the other two important pieces are money and his performance in swing states. that gallup poll about three or four days ago that looked at the swing states, the 12 states that either pa

so i think the cbo is based on current law, and therefore, is a projection that isn't reflective of the kind of policies that we would agree on, even if we don't agree on all of them. >> probably not any of them. >> well, i don't think any of us are looking to increase taxes on the middle class, for example. so the cbo assumption would have that. so i think you really are comparing apples and oranges. >> thank you. i yield back. >> guess what, time has expired. hearing is adjourned. mr. zeinst, welcome to your first trip to the budget committee. meeting is adjourned. >> thank you. >>> as this budget hearing comes to a close, you can see it in its entirety on our website, if you go to c-span.org and look for the video library. >>> homeland security secretary janet napolitano explains her department's 2013 budget request to a house committee this afternoon. we'll have live coverage starting at 2:30 eastern. president obama is proposing an overall spending can cut for the department of about a half a percent, but an increase for cybersecurity. again, live coverage starting at 2:30 eastern

the cbo and the joint task estimated when we used it previously, that the cumulative effect would be that 465,000 people would forgo health insurance coverage. that was their estimate 679. when we're trying, some of us, anyway, i think all of us to increase health care coverage. and the likelihood is according to these estimates, the same sources, as i understand it, is that if we overdo this or however you want to describe it, if we carry it the further step, about 170,000 more people will forgo coverage of health insurance. so in the search for -- >> will the gentleman yield for just a second? >> sure. >> that's 170 who won't take coverage through the exchange, correct? >> yeah, but, and the estimate is -- i'm glad you raised that. they don't know exactly how many of these people will be left without insurance altogether. and essentially, it will shift as we don't want to do, people getting health coverage instead of through insurance, through the emergency room. and nobody can be 100% sure of the exact number, but what we can be sure of is that more tens of thousands of people wil

the bigger picture. mr. moran, welcome back. i want to ask you about another cbo report. 8.9% unemployment by the end of the year and only 2% growth for the whole year and another year of trillion dollar deficits. now, look, president obama hardly mentioned any of this stuff at all in his state of the union, and i do want to be fair because i don't think that the republicans have really burned up the roads on coming forward with solutions for getting stuff done. the country is so unease they we're on the verge of bankruptcy, senator moran. what's going to happen here? >> well, absolutely, the state of the union, in my view, thea, dress failed to feature the greatest problem in our country and it's related to job, and i think republicans and others have had difficulty in tying the deficit and its consequences to job creation and the ability for people to feel secure economically in this country, and the reality is as long as we have this major deficit looming over the economy, no person, no businessman or woman, no farmer or rancher in kansas feels comfortable in m

go back to the carter years, we had the worst housing year on record. cbot, taxes going up 30%. four years consecutive. one trillion plus dollars. >> but the president push clean energy. i wonder why. every bun ghrer, how about tom conohan who received a lot of subsidies. he's got a wind farm. >> kennedy. >> you put windmills on nantucket sound. >> biggest red flag there. why is the green energy guys and why are they contributing. >> it's not even that. and favoring them over taxpayers and he gets them green energy deals. he gave preferential treatment george kaiser above the bankruptcy courts. >> sean: this is important. they made an extra exemption. if they go bankrupt we get paid less. his millionaire friends that got millions and billions total in dollars because they donated. they get their money back first. this is good thing because he is going to have to eat it again and again and again. >> voters see it and mainstream media reports it. >> sean:ly remind voters until i am hoarse, and i will remind. >> but you are not on the republican battle for pre

using information from the recent budget outlook from the cbo, one can assume that tax provisions are extended. under these assumptions the budget deficit will be more than gdp assuming that unemployment -- show the structural budget gap significanting further over time and ratio of rising gdp growing rapidly. these imbalances did not occur overnight, they are the extent of a aging population and especially fast rising health care costs. net federal outlays for health care entitlements could rise to more than 9% of gdp by 2035. although we have been warned about such developments for many years the time is coming closer when it reality. have aing a large and increasin debt runs the serious of economic conquestionsnces. high levels of debt stop the ability of policy makers to deal with other adverse efvents. as we have seen in a number of countries recently, interest rates can sore quickly

the cbo has given us. >> this body has -- i have a lot of problems with the cbo. i'm glad that 2014 is a target, if we get out by 2013, i think they're moving in the right direction. cbo has scored -- that's what helps pay for the project. i liked your phrase as a former mayor, the country, i think, i may paraphrase as one big pothole, i agree with you, and there's no better investment than the infrastructure of this country. when i was mayor in 5 1/2 years, we have built more roads in the last 20 years. you got to drive on some of them when you were there. also the work we did on the recovery money. i can show you and you saw where we put that money to work building roads. roads that cleaned up congestion, which in turn made people more product tifr, because they got to work on time. that is the value when you improve the infrastructure of this country, just from my perspective of roads. you know, i'm a builder, i love to build anything, roads, verticals, whatever it takes to improve an economy. so i think it's important. let me ask you, specifically, within your

want to ask you some questions about what perhaps the biggest news on the healthcare was and that's the cbo decision to remove the class program from the january 2012 base line. despite that development, there's no mention of class in your testimony. and as you know in the final cost estimate of the healthcare legislation which was issued in march 20 of 2011, cbo projected that class would save $70 billion in the first decade. those savings represented nearly 60% of the total and 75% of the on-budget deficit reduction show shown in the healthcare law over the ten-year window. the estimate of class and base line updates did not take into account the substantial risk that the program would be insolvent and workable even though a significant amount of evidence would sug g gest that' the likely outcome. you had stood by the original class estimate, that is in august you only assume that the program's immeltation would be delayed by about a year. on september 22, the class office at hhs was closing. on october 14, secretary of hhs kathleen sebelius notified congress there was no viable path forw

the cbo talks about the unemployment rate. while there may be new jobs created, they are likely to see unemployment rates rise to 8.9% by the end of this year and they say by the fourth quarter of 2013. the unemployment rate will be 9.2%. in light of these startling predictions, i think it is critical that the debate focuses on more than just paying benefits checks. it needs to preserve each state's ability to provide job search assistance. we do that in my home state of wyoming. i know other states are doing it. when it enables them to design programs to help get unemployed people back to work. it is time to consider reasonable changes and reasonable reforms to the ui program. i think we should not forget pr tram is to provide temporary relief for those in need. the sooner we get americans back to work, the better off they are. it seems in terms of education and g.e.d., and things like that, the president said when students don't drop out, they do better. i propose that every state requires that all students stay in school un

it sounded bad what the cbo was saying. >> the cbo is right. we are in trouble.% growth two years from now is barely staving off another recession. but if you think about what president obama is saying, he comes coming out with an optimistic view. we are better than we were two years ago. but look together future, we are not getting better. he's in a complete state of denial. he believes the economy is getting better with unemployment above 8%. megyn: they are saying in 2012 it will be 9.2%. >> as long as things are getting better, even more slowly but steadably then he has a -- steadily, then he has a chance. it's also ben bernanke saying we are going to be flat so we'll keep interest rates down to zero. megyn: brit hume was saying the way elections are decided, maybe a month before the election the american people will make a decision. are things going well and do i want a damage in leadership owe don't i. do i trust this guy to keep it rolling or do i think i need to change the up. that's where your point comes up. if things get worse, it can affect people psy

have the cbo look at that as an alternative sanyo and then just growth protections. what is the last -- in the last 50 years what is the average growth rate of the u.s. economy? >> senator johnson, can i stop you on that point, because senator johnson said something i don't want to let this moment pass by without riveting the point. i don't want to kind of float by here. what he is saying is exactly correct with respect to yesterday's hearing and they suggested that we ask cbo to thattic a look -- to take a look at what we might expect if we have a further erosion in europe. and i think that is absolutely critical because it's one of the biggest risk factors that we face out there. i want to make sure this doesn't come off of senator johnson's time. so restore his time. >> it took about five minutes, by the way. well, thank you, senator conrad. that is important. so just getting back to my primary point, i listed four things. i would encourage cbo to take a look at what are significant risks? >> so as you know, senator, these projections that we make are fraught with

a number like four trillion was the cbo's estimate of what would be needed to stabilize debt to gdp ratios over the next decade, which is important obviously. but i would like to urge the committee not to be solely loyal to the ten year window. most of our problems in the fiscal path arise after the next ten year going out 15, 20, 30 years as our population anyoneud health care costs rise. what i would support is looking broadly and having a broad based discussion, but in particular, looking at stainability over the long run and i think that will take a lot of work on the part of congress. it not my place to make detailed recommendations about specific components of the budget. but, i do urge the congress and i heard many people on this committee express the same feeling that we need a long-term plan to put our debt to gdp ratio, our overall fiscal burden on a sustainable path. >> thank you senator sessions. thank you mr. chairman, and chairman bernanke, thank you, your remarks have been very insightful and we all have different opinions but i think you are pretty close to what we need to

it's called the cbo, which we set up to give us that. who produced such a report that said that it raised real inflation adjusted gdp between 0.3% and 1.9 and lower unemployment, increased the number of employed between 400,000 and 2.4 million and increased the number of full-time equivalent jobs between half a million and 3.3. that's the independent agency congress set up. you may not like the answer, but asking somebody else, and independent agency to do it, i think is not going to get us further down the line. i am personally struck by what my good friend from idaho said, because, as usual, he's making sense subpoe sense. get to it. deal with the situation, and i have opined in this situation and others, that we know what to do. we could do things to rein in military spending without putting us at risk, could reform agricultural spending. we could, in fact, move to have a health care system that rewards value instead of volume, that meets mr. bernanke's test, which isn't just in ten years. the real test is 20 and 30 years that potentia

to do something great for the country and just a little while ago i didn't even mention this, but the cbo chief in washington announced that unemployment is going up to 9.2% by sometime in january. so it's going to go up and the growth rate is going to be at about 1%. this just came out. not good news. it's my honor, real honor and privilege to endorse mitt romney. i've gotten -- [ applause ] and by the way, this is a great couple. you look at this couple. but -- [ applause ] mitt is tough. he's smart. he's sharp. he's not going to allow bad things to continue to happen to this country that we all love. so governor romney, go out and get them. you can do it. >> thank you. [ applause ] >> there are some things that you just can't imagine happening in your life. this is one of them. being in donald trump's magnifisence hotel and having his endorsement is a delate. i'm so honored and pleased to have his endorsement and the people of nevada. [ applause ] donald trump has shown an extraordinary ability to understand how our economy works, to create jobs for the american people. he's done it he

and the cbo isn't offering a a lot of encouragement. >> the pace of the recovery has been slow sinceession ended 2 1/2 years ago. we project that it will continue to be slow for the next two years. >> in fact, the cbo believes economic growth will only be 2% this year and 1.1% next year. it says that will leave the unemployment rate at 8.9% at the end of this year, well above the current rate of 8.5, meaning the jobless rate would be increasing at election time. >> are there more people working today or fewer people working today than on inauguration day of 2009? >> i believe the answer to that is there are fewer people, congressman. >> in 2013, cbo estimates unemployment even higher at 9.2%. republicans worry about deficits, but one democrat railed against those who focused on cutting spending. >> people here that want to destroy the government that, it has no responsibility and it can't live up to the obligations. >> one of the factors that will expand future deficits is the entitlements such as medicare, which will explode as the baby boomers retire. >> the number of people age 65

i think my sharpest area of disagreement would be the new health care law because cbo told us that will reduce deficits and dealt by a trillion dollars many the second ten years and i believe that's the case. i know you don't share that view. that's what makes our democracy vibrant, having disagreements. but tlus much i agree with and what a most strongly agree with is that rear on an unsustainable course. and i think that's undeniable that we're on an unsustainable course. we've had the head of the congeeshl budget office testify before the committee that we're on an unsustainable course. we've had the head of office and management and budget so testify. the chairman of the federal reserve testify we're on an unsustainable course. we've had the secretary of treasury testify we're on a unsustainable course and i think it's undeniable and it's the central thrust of your argument as i hear it. and i think you're entirely right about that and we've got an obligation, we have an obligation on this committee and an obligation in the senate, the house has an obligation. the president does. to

basically, the cbo presented sort of two kinds of extreme proposals. one in, when is the current law proposal, which assumes, for example, all tax cuts are ended and dock fix not adopted and so on. and then an alternative scenario which sort of took the most -- >> we had testimony about both yesterday. >> which assumed there was no -- all the tax cuts were extended and, you know, took the opposite approach. our numbers obviously are based on an intermediate level. assumes that some of these policies are undertaken, but not all of them, and we try to make our best guess, but it's only staff guesses about what they think congress may do, and i don't think those forecasts, the details of that are particularly helpful to you. you obviously will be trying to figure out what the right thing to do is. >> with regard to an issue we've discussed when you've been here with the committee before on whether the policies of the financial community concerning rewards and compensation for taking excessive risk remain a problem, you've finally issued a report in october

>> to answer your question directly, as you say, the cbo calculated some effects on gdp unemployment. obviously, that required some assumptions about the counter factual it would have happened otherwise. but the fed, in our analysis and our modelling, we're basically comfortable with the cbo's conclusions. we think it did have some positive effects on growth and employment. so yes. >> thank you. then just shifting gears. there's also been a raging debate over the course of the last year over what is the best way to reduce the deficit? clearly we all share the goal of reducing the deficit as significantly and as quickly as possible. would you agree, though, because our friends on the other side of the aisle believe and have tried to enact only spending cuts that they deem wasteful as a strategy to -- towards deficit reduction. you would agree that wasteful spending also exists and is created in the tax code? >> well, i think you're pushing me into areas which are the province of congress. the law i support is the law of math. if you are -- if you believe that the government should be d