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[House Hearing, 115 Congress]
[From the U.S. Government Publishing Office]

                   THE CONGRESSIONAL BUDGET OFFICE'S
                      BUDGET AND ECONOMIC OUTLOOK

=======================================================================

                                HEARING

                               before the

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED FIFTEENTH CONGRESS

                             FIRST SESSION

                               __________

            HEARING HELD IN WASHINGTON, DC, FEBRUARY 2, 2017

                               __________

                           Serial No. 115-02

                               __________

           Printed for the use of the Committee on the Budget

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                        COMMITTEE ON THE BUDGET

                DIANE BLACK, Tennessee, Interim Chairman
TODD ROKITA, Indiana, Vice Chairman  JOHN A. YARMUTH, Kentucky,
MARIO DIAZ-BALART, Florida             Ranking Minority Member
TOM COLE, Oklahoma                   BARBARA LEE, California
TOM McCLINTOCK, California           MICHELLE LUJAN GRISHAM, New Mexico
ROB WOODALL, Georgia                 SETH MOULTON, Massachusetts
MARK SANFORD, South Carolina         HAKEEM S. JEFFRIES, New York
STEVE WOMACK, Arkansas               BRIAN HIGGINS, New York
DAVE BRAT, Virginia                  SUZAN K. DelBENE, Washington
GLENN GROTHMAN, Wisconsin            DEBBIE WASSERMAN SCHULTZ, Florida
GARY J. PALMER, Alabama              BRENDAN F. BOYLE, Pennsylvania
BRUCE WESTERMAN, Arkansas            RO KHANNA, California
JAMES B. RENACCI, Ohio               PRAMILA JAYAPAL, Washington
BILL JOHNSON, Ohio                     Vice Ranking Minority Member
JASON SMITH, Missouri                SALUD O. CARBAJAL, California
JASON LEWIS, Minnesota               SHEILA JACKSON LEE, Texas
JACK BERGMAN, Michigan               JANICE D. SCHAKOWSKY, Illinois
JOHN J. FASO, New York
LLOYD SMUCKER, Pennsylvania
MATT GAETZ, Florida
JODEY C. ARRINGTON, Texas
A. DREW FERGUSON IV, Georgia

                           Professional Staff

                     Richard E. May, Staff Director
                  Ellen Balis, Minority Staff Director
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                  
                            C O N T E N T S

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                                                                   Page
Hearing held in Washington, D.C., February 2, 2017...............     1
Hon. Diane Black, Interim Chairman, Committee on the Budget......     1
    Prepared statement of........................................     4
Hon. John A. Yarmuth, Ranking Member, Committee on the Budget....     6
    Prepared statement of........................................     8
Keith Hall, Ph.D., Director, Congressional Budget Office.........    10
    Prepared statement of........................................    12
Hon. Tom McClintock, Member, Committee on the Budget, questions 
  submitted for the record.......................................    52
Hon. Todd Rokita, Vice Chairman, Committee on the Budget, 
  questions submitted for the record.............................    53
Director Hall's responses to questions submitted for the record..    54

 
     THE CONGRESSIONAL BUDGET OFFICE'S BUDGET AND ECONOMIC OUTLOOK

                              ----------                              

                       THURSDAY, FEBRUARY 2, 2017

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The committee met, pursuant to call, at 10:00 a.m., in Room 
1334, Longworth House Office Building, Hon. Diane Black 
[interim chairman of the committee] presiding.
    Present: Representatives Black, Cole, McClintock, Sanford, 
Grothman, Renacci, Johnson, Lewis, Faso, Smucker, Arrington, 
Ferguson, Yarmuth, Moulton, Jeffries, Higgins, DelBene, 
Wasserman Schultz, and Khanna.
    Interim Chair Black. The hearing will come to order. 
Welcome to the Committee on the Budget Hearing on the 
Congressional Budget Office's Budget and Outlook. I want to 
thank everyone for being here this morning. We are holding this 
hearing today to discuss the Congressional Budget Office's 
budget and economic outlook which gives us a 10 year projection 
of our spending, our national debt, and how the economy is 
going to perform over the next decade.
    The report forms the cornerstone of the work we do here at 
the House Budget Committee, and I want to thank everyone at the 
CBO for their hard work in producing this report. I would also 
like to welcome the CBO director, Keith Hall. Director Hall, I 
do appreciate your taking the time to testify today, and I look 
forward to your insight as we discuss this report.
    The discussion we will have today is a serious one because 
as CBO indicates, we face enormous fiscal and economic 
challenges. Deficits are beginning to rise again and economic 
growth continues to be subpar. Legacies of the last 
administration's policies that encourage more spending, more 
debt, and more government. These challenges have a real impact 
on every person in this country.
    The numbers we are reviewing today affect the ability of 
every American to buy groceries, obtain a loan, to start a 
small business, or to get a good return on their retirement 
plan. We know this to be the case because CBO's report is 
telling us of what would happen if we kept President Obama's 
policies in place. Without any changes to the current law, the 
deficit would rise from $587 billion in fiscal year 2016 to 
$1.4 trillion in fiscal year 2027. And during that same time 
period, our national debt will jump to $30 trillion.
    To put that in human terms, that is $93,000 for every 
American. And for a lot of folks, that is about what it costs 
to buy a home. CBO tells us that this ever-increasing debt 
spiral will hamper economic growth and consign the country to a 
lower standard of living.
    As a grandmother, I want my grandchildren to have every 
opportunity that I did. But on our current path, the dream of a 
good job or owning a home and sending their kids to college is 
becoming harder and harder. Much of this unsustainable fiscal 
path is driven by projected spending for Medicare, Medicaid, 
and Social Security over the next decade. But without reforms, 
these programs are going to fail our seniors who have worked 
hard and paid into them for their entire lives.
    To compound these problems, economic growth is set to 
average at a morbid 1.9 percent over the coming decade, well 
below the historic average of just over three percent.
    Slow economic growth hurts our country in multiple ways. It 
means fewer jobs and less opportunities for Americans, it means 
smaller paychecks and less financial security for those 
Americans who have a job. In fact, more than 5 million 
Americans are working part-time because they cannot find a 
fulltime job.
    That means that we got welders, computer technicians, 
nurses, and people in all sorts of industries who want to 
contribute to our economy, but they are being let down by the 
rules and regulations coming out of Washington. The problem is 
particularly acute among men.
    One of the key symptoms of this subpar economic recovery 
has been the decline in the labor workforce participant rate of 
those of primary working age. And here is a story from a 
gentleman named Chris back in my own district in Tennessee.
    He said he was laid off just last year, and in his letter, 
he said this to me, and I want to quote, I worked at this job 
for 7 years. I am a hard worker and I have never tried for any 
government assistance. I am positive I will have a job soon, 
but I have been without a paycheck for months now, and if I 
have to wait anymore, I will have no money for utilities or 
support for me, my wife and 7-year-old.
    Now, it is pretty clear that Chris is exactly the type of 
worker that makes our economy the best in the world, and he is 
a good husband and father who wants to take care of his family. 
Chris wants to make our country stronger, and it is our job to 
help give him that opportunity. A job is so much more than the 
way we pay for rent or put gas in our car. A job helps us to 
define ourselves. It gives people a sense of purpose. It helps 
to build communities, and it can break cycles of poverty, and 
when Americans have a steady job, they know the dignity of 
work.
    CBO's report tells us what will happen if we do nothing, 
but that is certainly not the only choice we have. We can 
choose to get our fiscal house back under control. We can 
choose to get our economy growing again so that it works for 
men and women of this country. And here, at the House Budget 
Committee, that is exactly what we intend to do.
    Director Hall, thank you again for being here, and I look 
forward to your testimony in how I can help guide us informing 
the best policies to hold the Federal Government accountable, 
grow our economy, and serve the American people. And with that, 
I yield to my ranking member, Mr. Yarmuth.
    [The prepared statement of Interim Chair Black follows:]
    
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    Mr. Yarmuth. Thank you, Chairman Black, and thank you, 
Director Hall for appearing before us today to outline CBO's 
updated economic and budget outlook. Long-term outlook remains 
troubling, of course. We are a few years away from an increase 
in Federal deficits and debt driven by the increased healthcare 
and retirement costs of an older population.
    Your report outlines our circumstances as a new 
administration takes office. Total deficits over 10 years are 
essentially the same as you projected in August. You projected 
this year's deficit to be lower than last year's and next 
year's to be lower still, and as your report says, the economy 
is currently on solid ground. That is a much better starting 
point than President Obama faced 8 years ago. President Obama 
inherited an economy in freefall. The country was in the midst 
of the deepest recession in generations, losing nearly 800,000 
jobs per month.
    In its January 2009 outlook, CBO was projecting a deficit 
of more than $1 trillion and the economy was projected to 
shrink by 2.2 percent. That turned out to be optimistic. In 
contrast, President Trump is inheriting a healthy economy.
    The economy has added 15.8 million private sector jobs 
since 2010. The unemployment rate is less than half its 2009 
peak, and the budget deficit has fallen by more than $800 
billion, a nearly two-thirds reduction as a share of the 
economy. This year's CBO report projects that the economy will 
grow at a 2.3 percent rate. Job creation will also grow at a 
steady rate, and the deficit will shrink over the next 2 years. 
What a difference 8 years makes. President Obama's economic 
agenda is also paying dividends on many other fronts. Tens of 
millions of Americans now have the economic security that comes 
with having health coverage and thereby being free from fears 
of an accident or illness sending them into bankruptcy. Stock 
market has tripled in value, the auto industry has recovered 
from a near death experience, manufacturing has added jobs for 
the first time since the 1990s, and wages have begun to grow at 
a healthy pace.
    The financial industry is better capitalized and more 
secure with stronger protections for consumers. We have 
dramatically reduced our dependence on foreign oil and 
increased our production of renewable energy. Housing prices 
have largely recovered and millions of home owners are no 
longer under water on their mortgages. I could go on and on, 
and I probably should because I know my colleagues on the other 
side of the aisle will present an alternative reality.
    I am dealing in facts, and the fact is this Congress and 
the new Trump administration are getting ready to take our 
country down a far different path. Republican leadership is 
moving to repeal the Affordable Care Act with no plan to 
replace it. Thirty-two million people will lose health 
coverage, premiums will double, and we will return to the days 
when insurance companies decide who lives and who dies. House 
Republicans are planning deep tax cuts and a rollback of 
financial protections. Recent Republican Presidents have tried 
this approach.
    Each time, it resulted in skyrocketing deficits, a 
recession, and ultimately a financial crisis, the most recent 
of which brought our country to the brink of total collapse. I 
was briefed by Paulson and Bernanke in 2008. I know how close 
our Nation came to having the lights go out. The American 
people cannot afford for us to make those same mistakes again.
    Finally, I want to raise the issue of immigration. It has 
been heart wrenching to see the immediate impact of the 
President's executive order during the past week. It is 
discouraging that the first immigration action of this White 
House separated families, vilified the innocent, and will fail 
to make our Nation safer by every logical measure.
    That being said, I was a member of the Gang of Eight in 
2013, four democrats and four republicans. We drafted 
comprehensive immigration reform legislation that we were 
confident had the bipartisan votes to pass the house. The only 
thing missing was the political will of Republican leadership 
to bring it to the floor.
    Beyond addressing humanitarian and security needs, CBO has 
repeatedly told us that comprehensive immigration reform would 
mean a larger economy and a smaller budget deficit. It is my 
hope that my colleagues across the aisle will recognize these 
facts and enact the immigration reform we so desperately need. 
We cannot solve the challenges we face as a Nation whether it 
is immigration, health care, the economy, or passing a 
congressional budget without acknowledging what got us here and 
continuing on that path.
    To return to where we were and abandon all the progress we 
have made would be devastating, not just for American families 
today but for generations to come. With that, Director Hall, I 
look forward to your testimony. I yield back.
    [The prepared statement of Mr. Yarmuth follows:]
    
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    Interim Chair Black. Thank you, Mr. Yarmuth. In the 
interest of time, if any other members have opening statements, 
I ask you to submit them for the record.
    I would like now to recognize the director of the CBO, Dr. 
Keith Hall. Mr. Hall, thank you again for your time today, and 
the committee has received your written statement, and it will 
be made part of the formal hearing record. You have 5 minutes 
to deliver your oral remarks. You may begin when you are ready.

 STATEMENT OF KEITH HALL, PH.D, DIRECTOR, CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Hall. Thank you. Chairman Black, Ranking Member 
Yarmuth, and 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 for the 
economy.
    I will discuss a few highlights of our updated budget and 
economic projections which were released last week. After my 
brief remarks, I will be happy to take your questions.
    The economic forecast that underlies CBO's budget 
projections indicates that in real terms gross domestic product 
will expand an average annual pace of 2.1 percent over the next 
2 years, if current laws remain generally unchanged, after 
rising last year at an annual rate of 1.8 percent. We expect 
that growth to boost employment, virtually eliminate the 
remaining slack in the economy, and drop the unemployment rate 
to 4.4 percent by the fourth quarter of 2018.
    Further ahead, according to CBO's projections, GDP will 
expand at an average annual rate of 1.9 percent over the second 
half of the coming decade. That growth rate represents a 
significant slowdown from the average over the 1980s, 1990s and 
early 2000s, mainly because of the slower growth projected for 
the Nation's supply of labor which largely results from ongoing 
retirement of baby boomers and the relative stability in the 
labor force participation rate among working women.
    As slack diminishes over the next 2 years, we expect the 
rate of inflation to rise to the Federal Reserve's goal of 2 
percent and to stay there on average. We also anticipate that 
the Federal Reserve will steadily raise the target for Federal 
funds and that interest rates over the next few years will be 
significantly higher than they are now.
    CBO's current economic projections differ a bit from those 
it published in August 2016. The agency now expects GDP in 2016 
to be modestly lower than it projected last summer. It also 
expects lower interest rates in the next 5 years but projects a 
higher rate of labor force participation throughout the next 
decade than it projected in August. In fiscal year 2016, for 
the first time since 2009, the Federal budget deficit increased 
in relation to GDP.
    CBO projects that over the next 10 years, if current laws 
remain generally unchanged, budget deficits would eventually 
follow an upward trajectory, the results of three main trends.
    First, strong growth in spending for retirement and 
healthcare programs targeted to older people, especially Social 
Security and Medicare.
    Second, rising interest payments on the government's debt.
    And third, modest growth in revenue collections. By the end 
of the period, the accumulating deficits would drive up debt 
held by the public from its already high level. Moreover, 3 
decades from now, if current laws remain in place, that debt 
would be nearly twice as high relative to GDP as it is this 
year and would reach a higher percentage than any previously 
recorded.
    Such high and rising debt would have serious negative 
consequences for the budget and the Nation including an 
increased risk of a fiscal crisis.
    Our estimate of the deficit for 2017 is lower than our 
August estimate, primarily because we now expect lower 
mandatory spending. The current projection of the cumulative 
deficit for the 2017 to 2026 period, however, is about the same 
as we published in August.
    I am often asked specifically about our projections for 
Medicaid and Federal subsidies for health insurance purchased 
through the market places established by the Affordable Care 
Act. By CBO's estimates, an average of 12 million people under 
the age of 65 will have health insurance in any given month in 
2017 as a result of the expansion of Medicaid under the ACA.
    In addition, CBO and the staff of the Joint Committee and 
Taxation estimate that this year, nine million people per month 
on average will receive subsidies for nongroup coverage 
purchased through the marketplaces. An additional 1 million 
people are projected to be covered by unsubsidized insurance 
purchased through the marketplaces. We estimate that 27 million 
people under the age of 65 will be uninsured on average in 
2017.
    CBO and JCT currently estimate that in 2017, Federal 
spending for people made eligible for Medicaid covered by the 
ACA will be $70 billion and that net Federal subsidies for 
coverage obtained through the marketplaces will be $45 billion. 
For the entire 10 year period, 2018 to 2027, if current laws 
remain in place, those two types of costs would total $1.9 
trillion. It is important to note CBO's baseline is not 
intended to be a forecast of what will happen. Rather, it is 
meant to provide a neutral benchmark that policymakers can use 
to assess the potential effects of policy decisions.
    CBO's budget and economic projections are predicated on the 
assumption that the laws that are currently governing Federal 
taxes and spending generally remain in place for the entire 
projection period. Even if that occurred, and there are no 
changes in those laws before the end of the period, it would 
still not be possible to predict budgetary and economic 
outcomes precisely because many other factors are uncertain.
    Our goal is to construct budget and economic projections 
that fall in the middle of the distribution of possible 
outcomes given both the fiscal policy embodied in current law 
and the availability of economic and other data. I would now be 
happy to answer your questions.
    [The prepared statement of Mr. Hall follows:]
    
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    Interim Chair Black. Thank you, Mr. Hall. Now, we will 
begin the question and answer session. If I could ask the staff 
to bring up Figure 5 from my first question. Mr. Hall, CBO's 
economic forecast has been trending sharply downward in the 
recent years, and roughly 5 years ago, CBO was expecting real 
GDP growth to average around three percent over the 10 year 
budget horizon. Close to that long-term average growth rate 
that we have seen here in the U.S., that figure has been 
dropping consistently, and in this latest forecast, it is down 
to just 1.9 percent.
    So, it seems that CBO is expecting that the U.S. economy 
will experience a protracted economic malaise for at least the 
next decade under current policies. So, two questions I have 
for you. First of all, what are the reasons for CBO keep 
ratcheting down its projections for the GDP growth, and 
secondly, how will this much lower expected growth path affect 
our Federal budget?
    Mr. Hall. They look forward over the next 10 years. We do 
expect the slack in the economy to be virtually eliminated over 
the next 2 years, so we will be on what we think is the 
potential growth of GDP, and what is constraining the potential 
growth of GDP as we forecast it something like 1.8, 1.9 
percent, is a combination of a more slowly growing labor force. 
A lot of that is an aging population as baby boomers retire, 
not all of it, however, and slower productivity growth.
    Since the end of the recession, productivity growth has 
only been 0.8 percent, so it is less than 1 percent 
productivity growth. We expect that will go up by the end of 
the period as something like 1.3 percent, but that is still 
lower than it has been in the past. So, in fact, if you sort of 
take that labor force of growing 0.5 percent, productivity 
growing 1.3 percent, add those together, that 1.8 percent, 1.9 
percent is about our economic forecast. And so, the challenges 
are slower growing labor force and slower growing productivity, 
and again we have this issue with baby boomers in particular 
that we have seen coming for a long time. It is just starting 
to get closer and closer now.
    Interim Chair Black. How do you expect what you are 
projecting up here to affect the Federal budget?
    Mr. Hall. Well, this is going to have an impact. This is 
going make, it is going to contribute probably to the growth in 
the deficit going forward. Something like productivity, for 
example, which is part of what is at the heart here, has a 
pretty significant impact on our budget forecast, so if we get 
some increase, for example in productivity, we will have a 
smaller growing deficit, but the problem is so big that even 
that is not really going to solve the problem.
    Interim Chair Black. So, to the other end of that, coupled 
with this sluggish economy is the relentless rise in our 
government spending and deficits. And your figures show that 
the tax revenues are already above the 50 year averages of 
percentage of DDP and are projected to keep growing, and yet 
our spending keeps growing faster. If we tried to balance the 
budget just by raising taxes, how big would the tax increase be 
required in order to be able to catch up?
    Mr. Hall. Well, just to give you some idea. We have 
actually got a great little Figure 17, and it gives you some 
idea of the size of the deficit relative to the size of things 
like revenues and discretionary spending and etc. We see the 
deficit in 10 years it is going to be about $1.4 trillion. That 
is about 5 percent of GDP, and total revenues are going to be 
about 18 percent of GDP in 10 years. So, it is a major chunk of 
revenues right now. So, it would be a pretty significant 
increase in revenues to get there.
    Interim Chair Black. Any idea of what percent we would have 
to increase taxes in order to be able to get there?
    Mr. Hall. We have not done a scenario like that.
    Interim Chair Black. But significant is what you are 
saying.
    Mr. Hall. It would be significant, and it would probably 
also significantly change our economic forecast as well, so it 
makes it particularly complicated.
    Interim Chair Black. So, even for those who would favor 
some combination of spending restraint and tax increases, is it 
fair to say that getting control of spending is really 
indispensable in this equation to overcome those chronic 
deficits and debt?
    Mr. Hall. Well, that seems to be the picture. The growing 
deficit and the growing debt is so large it is hard to imagine 
just picking on either revenues or outlays and not looking at 
both things, and the broader you look, the smaller the change 
you need. So, if you restrict yourself to just smaller buckets, 
for example, just discretionary spending, you really got to 
reduce discretionary spending. So, that is clearly one of the 
features here that we see that this is a really big hole to 
fill.
    Interim Chair Black. So, on the other side of that. If we 
could achieve a more robust degree of economic growth, say 
something closer to that historic average of just a little over 
3 percent, how much would that help us in shrinking those 
deficits?
    Mr. Hall. I will give you a little bit of an idea. We do 
not have GDP in here, but we have a little scenario with 
productivity growth. For every one-tenth of a percentage point 
in productivity growth, we see the deficit in 10 years 
shrinking by about $50 billion. So, something like an increase 
in productivity of a half a percentage point would be pretty 
significant, and that is going to reduce the deficit by about a 
$250 million and that is out of a $1.4 trillion deficit. So, 
that makes a difference, but it is, even a half a percentage 
point is not enough to balance the budget essentially in 10 
years.
    Interim Chair Black. Let me go to another topic. Let's go 
to Figure 2, please. One of the most troubling aspects of our 
CBO's outlook is the stubbornly low rate of labor workforce 
participation. That rate now stands at 62.7 percent close to a 
40-year low, and CBO expects this to continue declining over 
this next decade which is just really disappointing. Obviously, 
the ongoing retirement of baby boomers generation plays a key 
role, but CBO also states that government policies are 
exacerbating the trend. Is it correct that the labor force is a 
key component of economic growth, and how large does that role 
play, and second to that is, what are some of the policies that 
do affect this, and how do they crease incentives for work?
    Mr. Hall. Sure. I would say if you look at the long run 
growth of the economy, long run health of the economy, you can 
look at two different things. You can look at labor force 
growth, and you can look at productivity growth. If you compare 
our growth that we see over the next 10 years to what we had in 
the 1990s when we had 3.3 percent GDP, the slowdown of labor 
force growth is about half that difference.
    So, it is pretty significant, and you are right, although 
baby boomers retiring is a source of that decline in labor 
force participation, we also have lower labor force 
participation by every cohort in the United States. And, that 
is certainly one of the targets I think for having sort of a 
supply side impact that raises potential GDP is doing things to 
increase the labor force participation by working age people.
    Interim Chair Black. What kind of policies can we initiate 
to change this tragectory?
    Mr. Hall. Well, certainly we have identified, we often do, 
we point out what amounts to implicit taxes on work. There are 
a number of things that are implicit taxes on work where we 
reduce benefits when income goes up. The ACA itself probably 
reduces labor force participation. That is a drag as well. 
There are a number of things like that. I do not want to get 
too specific about it, but just the sort of things that will 
get people back into the workforce are things that will help 
that labor force participation and help this potential GDP 
growth problem that we have.
    Interim Chair Black. I do thank you for all of your 
comments on this, and I will go back to my opening remarks as I 
conclude my time, that it really bothers me so much that we 
have people who are out of the workforce because I know from my 
career and my children and so on, that work is good for the 
soul. And I often tell people that after you ask someone, you 
say hello, this is my name, what is the second question you ask 
them? What do you do? And if you are productive and you are 
feeling good about your work and what you are contributing to 
society, that overall helps the entire society.
    And so, this is for me even more about how we have our 
society grow as a society that is whole and healthy as much as 
it is and what it will do to help keep the economy going. All 
of this together is what makes our country great. Thank you, 
and I now yield to the ranking member, Mr. Yarmuth.
    Mr. Yarmuth. Thank you, Chairman Black. I am going to defer 
my questions to later in the hearing.
    Interim Chair Black. So, who came into the room? Oh, it is 
coming. Okay. Would you like to yield to one of your members?
    Mr. Yarmuth. Sure. I would like to.
    Chairman Black. You know, that was here first.
    Mr. Yarmuth. All right, Mr. Jeffries from New York was here 
first, so I will yield to him.
    Interim Chair Black. Mr. Jeffries, you are recognized for 5 
minutes.
    Mr. Jeffries. Thank you, chair, and thank the distinguished 
ranking member for yielding. A statement was made earlier that 
we can chose to get the economy working again. I want to pursue 
that for a moment, because I think that the economy has been 
working ever since the turnaround that we engineered by the 
previous President 8 years ago. Is not it in fact the case that 
when Barack Obama came into office this country was in a mess 
and in the danger of total collapse?
    Mr. Hall. Well, that is right. We were undergoing 
significant job loss and decline in GDP growth.
    Mr. Jeffries. Stock market was a mess. Correct?
    Mr. Hall. Yes.
    Mr. Jeffries. Automobile industry a mess. Correct?
    Mr. Hall. Yes.
    Mr. Jeffries. Bank industry a mess. Correct?
    Mr. Hall. Yes.
    Mr. Jeffries. 401k is a mess. Correct?
    Mr. Hall. Yes.
    Mr. Jeffries. Housing market a mess. Correct?
    Mr. Hall. Yes.
    Mr. Jeffries. And since 2010, this country has gained more 
than 15 million private sector jobs. Is that right?
    Mr. Hall. I think that is right.
    Mr. Jeffries. Eight years ago, the stock market was around 
6,000. Is that right?
    Mr. Hall. That sounds right.
    Mr. Jeffries. And now it is over 19,000. Is that correct?
    Mr. Hall. Yes.
    Mr. Jeffries. Eight years ago, the unemployment rate was at 
over 10 percent. Is that right?
    Mr. Hall. Yes.
    Mr. Jeffries. And now it is under 5 percent. Is that 
correct?
    Mr. Hall. Yes.
    Mr. Jeffries. The deficit has been reduced by more than a 
trillion dollars over the last 8 years, correct?
    Mr. Hall. That sounds right.
    Mr. Jeffries. Okay. So, the statement about getting the 
economy working again I think perhaps is inaccurate as a 
snapshot of what actually has occurred over the last 8 years, 
and so it seems that what we need to do is build upon the 
tremendous progress that has been made under the leadership of 
Barack Obama and keep this country moving forward. I would also 
note on this question of whether we should cooperate with the 
new President, that Barack Obama was able to lead an economic 
turnaround without an ounce of cooperation from the other side 
who decided to pursue an agenda of obstruction today, 
obstruction tomorrow, obstruction forever over the last 8 years 
and so hopefully we can find ourselves in a situation where we 
move forward in a cooperative fashion in a way that benefits 
all of America. In terms of our present situation, the CBO 
expects that economic growth will be sluggish over the next 
decade. Is that right?
    Mr. Hall. That is correct.
    Mr. Jeffries. And in part that is because of a decline in 
labor force participation. Correct?
    Mr. Hall. That is correct.
    Mr. Jeffries. Now, would the retirement that will continue 
of baby boomers out of the labor workforce exacerbate this 
problem in a way that will continue to provide modest, if not 
sluggish, economic growth moving forward over the next 10 
years?
    Mr. Hall. That is right. It is almost certainly going to 
happen and certainly going to be a difficulty in achieving 
higher economic growth.
    Mr. Jeffries. And this is a problem that Japan for instance 
which had a booming economy in the 1980s is experiencing today. 
Is that true?
    Mr. Hall. That is true.
    Mr. Jeffries. And one of the reasons why Japan in 
experiencing that problem is because they got very harsh 
immigration policies, and they do not have the natural growth 
from their own population that would lead to robust 
participation in the labor force. Is that right?
    Mr. Hall. Yes.
    Mr. Jeffries. So, there was a comprehensive immigration 
reform bill that I think was passed by the Senate in 2013. Mr. 
Yarmuth mentioned it worked hard to get it enacted into law 
here in the House, but due to the politics of the situation, it 
did not go anywhere. I believe the CBO studied that particular 
piece of legislation and concluded that over about a 20 year 
period it will reduce the deficit I think by $700 billion. Is 
that right?
    Mr. Hall. That sounds right.
    Mr. Jeffries. So, it would have a positive impact, 
comprehensive immigration reform, on our economic situation. 
Correct?
    Mr. Hall. That is right. It is primarily through increased 
growth in the labor force. So, that is one of the primary 
constraint going forward is the growth in the labor force.
    Mr. Jeffries. And one of the ways that we can deal with the 
labor force moving forward is to make sure that our immigration 
policies continue to welcome individuals who come to America, 
work hard, will contribute to the labor force since we are not 
naturally able to produce the numbers that would result in 
increased economic productivity. Is that a fair statement?
    Mr. Hall. It probably is, although keep in mind the effects 
of any particular labor immigration policy can be complicated, 
so we would have to sort of see exactly what is being proposed, 
but there is one constant in that it does affect the labor 
supply and that labor supply does help GDP growth.
    Mr. Jeffries. Okay. Thank you. I yield back.
    Interim Chair Black. The gentleman from Oklahoma is 
recognized. Mr. Cole.
    Mr. Cole. Thank you, Madam Chairman, and thank you, Mr. 
Director, for your testimony. It is always good to have you 
here. I want to focus in on this trendline in terms of the 
deficit just a little bit, and we as you know think of the 
Federal budget in two different pots, discretionary and 
mandatory spending, mandatory being primarily Social Security, 
Medicare, Medicaid, the classic entitlement programs.'' What 
has been the trendline on discretionary spending over the last 
few years?
    Mr. Hall. Well, discretionary spending is looking like it 
is going to decline as a share of GDP. It has been declining, 
so in fact while we look forward to the next 10 years and see 
spending increase really significantly, discretionary spending 
is not increasing significantly, and that in fact is declining 
as a share of GDP.
    Mr. Cole. As a share of GDP and since 2009 it has actually 
declined very substantially in real terms just as an amount. I 
mean we were actually spending considerably less on the 
discretionary portions of the budget and that is everything 
from defense to NASA to National Institutes of Health than we 
were in 2009 and 2010. Is that correct?
    Mr. Hall. That is correct, yes.
    Mr. Cole. Give us the trendline if you would on mandatory 
spending, again the classic entitlement programs. What has that 
trend been in the last 5 or 6 years? Where do you see it going 
over the next decade?
    Mr. Hall. Well, mandatory spending continues to grow faster 
than GDP, quite a bit faster. Ever, you know, the revenues are 
growing as a share of GDP, but spending especially mandatory 
spending is growing a lot fast. So, it is sort of a race that 
mandatory spending is winning in adding to the deficit going 
forward.
    Mr. Cole. And are there any significant proposals out there 
on either side of the aisle to change the direction of that, 
slow it down, manage it a little bit better?
    Mr. Hall. Nothing comes to mind. You know, one of the 
things I like to point out, we just produced something called 
options for reducing the deficit. Sort of a nice thick volume 
with over a hundred options, and we give you some options on 
things like mandatory spending and other things that you can 
look at for reducing the deficit going forward. It gives you 
some idea of how much of an impact those different options 
would have.
    Mr. Cole. When was the last time we had significant reform 
in, let's say Social Security?
    Mr. Hall. I think it has been a while. I am not an expert 
in Social Security. There have been some adjustments in 
benefits in delaying eligibility and some things like that, but 
they still have not affected the long-run problem that we have 
seen coming for decades. It is still coming.
    Mr. Cole. I think the last time we really made much 
progress in this area was actually very bipartisan, and it was 
with President Reagan, and the House was Democratic in the 
period. Tip O'Neill, Howard Baker in the Senate. In other 
words, they came together, set up a commission and extended the 
life of Social Security fairly dramatic in the middle 1980s. We 
have not really gone back and done too much since then. Is that 
correct as you recall?
    Mr. Hall. That is correct.
    Mr. Cole. I say this in a very self-serving way because my 
friend, Mr. Delaney, on the other side, and I have a bill that 
would set up another commission that would be, by nature, 
bipartisan. It would be 7 and 6. We actually have introduced it 
in a couple of Congresses. Seven members chosen effectively by 
the President and the majority party, six by the minority, but 
you would have to have nine votes to actually report something 
to Congress. Congress would then have about 60 days to vote it 
up or down, and I would invite my colleagues on both sides of 
the aisle just to look at that legislation because I think if 
you read the numbers, which you so accurately and persuasively 
put out here, sooner or later we have to address mandatory 
spending.
    Neither side in the last campaign did that in any 
meaningful way. Neither side, frankly, in the House and the 
Senate has actually advanced legislation. We actually always 
write a budget that addresses this, and I hope we do that 
again, Madam Chairman. I hope we do not ignore the elephant in 
the room, so to speak, and I am sure we will not under your 
leadership and my good friend and ranking member I know has 
these same concerns. But I know I am not using the question, 
but I do want to finish and then I will yield back. I just 
would invite my colleagues.
    We can score points against one another all day. We both 
have great arguments and great talking points. This is a 
problem we could solve. It is a math problem. It is not as 
tough as Medicare and Medicaid. We literally could sit down and 
negotiate this through just as President Reagan and Speaker 
O'Neill did and Howard Baker, and I would invite us to begin 
that process because I do not like the way your numbers look at 
the end of the decade. With that, I yield back. I thank you 
very much. I thank you for your indulgence, Madam Chairman.
    Interim Chair Black. Thank the gentleman from Oklahoma. The 
gentleman from Massachusetts, Mr. Moulton is recognized for 5 
minutes.
    Mr. Moulton. Thank you, Madam Chair. I would just like to 
begin by echoing the comments from Representative Cole because 
I think you are right. Sometimes people ask me about what it is 
like to serve on the Budget Committee and I say it is often a 
great place for people who do not do math. If we started doing 
math, we could solve a lot of problems. So, thank you, Mr. 
Cole.
    Director Hall, as I am sure you know, immigration has 
become a major topic of discussion following President Trump's 
executive order last week. Now, there is a lot of evidence that 
the order is unconstitutional and it is certainly hurting our 
national security overseas. Secretary Mattis and others have 
made that clear, but it is also having a detrimental impact on 
our economy here at home. The concern, of course, is that with 
this executive order, the Trump administration is scaring away 
some of the very people we need to continue growing the economy 
as our labor force shrinks.
    Now, many of America's major corporations and businesses 
were founded by immigrants. For example, Steve Jobs. His father 
came from Syria. Apparently, more than half of the current crop 
of U.S. based startups valued at a billion dollar or more. So, 
more than half of the current startups with a valuation of 
billion dollars or more. Collectively, these 44 companies are 
valued at 168 billion.
    They were started by immigrants.
    So, $168 billion of valuation creating 33,440 jobs in the 
U.S. market and immigrants in these companies make up more than 
70 percent of key management or product development positions. 
So, we have heard in the past weeks CEOs from Facebook, 
Starbucks, Goldman Sachs and other leaders in the business 
community who have already stated that this ban will hurt their 
ability to attract and retain talent, and that it may spur 
people or companies to discount the U.S. as a place to pursue 
business and investment opportunities. Colleges and 
universities have also raised alarms, including those in my 
district, about the impact that this will have on students and 
faculty who hail from the seven countries targeted by the 
order.
    In 2016, international students in U.S. colleges surpassed 
1 million for the first time, contributing more than $32 
billion a year to our economy. Thirty-two billion dollars a 
year, Madam Chair, would certainly help with our budget 
deficit. That is the kind of consumer spending that we need 
because it creates jobs.
    So, I want to speak briefly about the impact on our 
healthcare system because more than a quarter of the physician 
workforce in the U.S. comes from other countries with more than 
8,400 doctors working in the U.S. from two countries listed in 
the executive orders, Syria and Iran alone. Now, we want those 
talented doctors to be here saving American lives and helping 
our healthcare system at a time of physician shortage. America 
does not currently produce enough physicians to keep up with 
demands. We have a current deficit of over 8,200 primary care 
doctors. So, that deficit would literally double if the doctors 
from Iran and Syria were not here.
    And so, Director Hall, I know you cannot speak directly to 
the effects of this executive order as it was just released, 
but based on the 2013 CBO report on immigration reform and 
other work that CBO has done on this issue, can you talk in 
general terms about the impact that such restrictive 
immigration policies might have on the growth of our economy?
    Mr. Hall. Well, you raise an interesting aspect of 
immigration. And one of the reasons why we really kind of need 
to see specific proposals is because the type of proposal has 
different kinds of effects. The evidence is, for example, that 
increased immigration of unskilled workers probably has an 
effect in lowering wages for lower skilled workers in the 
United States. However, when you go to the skilled workers, 
they in fact increase productivity because as you say there are 
a lot of entrepreneurs, etc. who are immigrants and skilled 
immigrants, so that has sort of a different sort of side 
effect.
    Mr. Moulton. Right, and if you look at the countries in the 
order like Iran and Syria, are they mostly skilled or unskilled 
workers who are coming to the U.S.
    Mr. Hall. I do not know offhand.
    Mr. Moulton. It is mostly skilled workers. 
Disproportionately, entrepreneurs and business people. Thank 
you. Please continue.
    Mr. Hall. Okay. Sure. So, you know, if you look at 
immigration proposals it makes a difference if you are just 
going to broadly increase immigration. If you are going to 
increase immigration that is focused more on skilled workers 
that has sort of a different effect than if it is unskilled 
workers. The fundamental that our increased labor supply is 
there, it is sort of the other effects that depend upon exactly 
who is immigrating, and then of course the size of these would 
be pretty significant. It is not clear that the executive order 
that, at least from what I have seen, that that is large enough 
to make us change our forecast.
    Mr. Moulton. Thank you, sir.
    Interim Chair Black. The gentleman's time has expired. The 
gentleman from California, Mr. McClintock is recognized for 5 
minutes.
    Mr. McClintock. Thank you, Madam Chairman. There seems to 
be two dominant themes coming from my friends across the aisle. 
One is that the Obama economy has been wonderful and second, we 
need more foreign immigration to compete for American jobs.
    As to the first, I give them the same advice I tried to 
offer them at our last meeting on Obamacare. Every American has 
an up close and personal experience with the economy. They know 
what is going on in their own lives, and any politician who 
tries to convince them otherwise looks downright foolish. Some 
people are doing very well in the Obama economy, most people 
are not. If most people were doing well in this economy, the 
Democrats would not have lost 67 U.S. House seats, 13 U.S. 
Senate seats, 11 U.S. governors and more than 900 State 
legislative seats, not to mention the presidency over the past 
four election cycles. Just a word of unsolicited advice. 
Second, with respect to foreign immigration, our foreign 
immigration over the last decade has been unprecedented.
    If my friends were correct, this should be the golden age 
of the American economy. The impact has been very clear. Badly 
depressed wages for working families and the lowest labor 
participation rate since Jimmy Carter. But that is not what I 
want to talk about. What I want to talk about is what Admiral 
Mike Mullen warned us was in his professional military 
judgment, the greatest single threat to our national security, 
and that was our Nation's debt. And that warning was issued 
about 5 years and about $4 trillion of debt ago. You report 
that the debt held by the public this year is 77 percent, but 
actually our total debt is well over 100 percent of our gross 
domestic product. Is it not?
    Mr. Hall. Well, we look at debt held by the public because 
that is the important debt for the economy.
    Mr. McClintock. I know you do, but I think that is highly 
deceptive. The difference is mainly because Social Security as 
it runs chronic deficits, we pay back what we borrowed by going 
to the public for further borrowing. So, what we have got in 
that overall debt number is in effect converting 
intragovernmental debt into debt held by the public. Is not 
that what is going on?
    Mr. Hall. Well, that is right. To get to your number.
    Mr. McClintock. So, we are so deceptively understating the 
problem since unless we change the law, that gross debt which 
is now over 100 percent of GDP is destined to become debt held 
by the public over the next few years. Is not that correct?
    Mr. Hall. Well, let me put it this way. The debt held by 
the public is going to grow really significantly.
    Mr. McClintock. It is already baked into our total debt 
which is simply converting the debt we owe to Social Security 
by borrowing from the public. That is already in those numbers 
as long as Social Security continues its chronic deficit, that 
is going to continue, and that is going to require a change in 
laws. Is it not?
    Mr. Hall. That would, yes.
    Mr. McClintock. So, we are already approaching uncharted 
territory for this Nation, and the question I have is that on 
our current trajectory, are we courting a sovereign debt 
crisis?
    Mr. Hall. We are. One of the difficulties is, I cannot tell 
you exactly.
    Mr. McClintock. What does that crisis look like?
    Mr. Hall. Well, as the debt continues to grow, interest 
rates when they go back up to normal ranges, we are going to 
have a major share of our budget just paying off interest. So, 
that is going to be a real drain.
    Mr. McClintock. So, would that affect our ability to 
provide basic services?
    Mr. Hall. It will. It is going to reduce flexibility.
    Mr. McClintock. Would it imperil our ability to respond to 
a military challenge on the magnitude that we faced after Pearl 
Harbor?
    Mr. Hall. Yeah, absolutely. Our ability to spend money is 
going to be really limited.
    Mr. McClintock. How would it affect our overall economy?
    Mr. Hall. Well, part of what is going to happen is this is 
a drag. This is an increase of interest rates. A lot of Federal 
borrowing crowds out private borrowing, so we actually have 
lower economic growth.
    Mr. McClintock. In other words, when the Federal Government 
borrows a dollar, it borrows it from that same capital market 
that would otherwise be available to loan to consumers to make 
consumer purchasers, to businesses to expand jobs. Is that 
correct?
    Mr. Hall. That is correct.
    Mr. McClintock. Home buyers to buy new homes?
    Mr. Hall. That is correct.
    Mr. McClintock. Taxes are often suggested as an antidote to 
debt, but are not debt and taxes the same thing? I mean, after 
we have spent a dollar, have not we already decided to tax it. 
The only question is whether we tax it now through current 
taxes or borrow it now and tax it later through future taxes?
    Mr. Hall. Yeah, we certainly sort of constantly remind you 
that however you do it, whether you raise taxes or spending or 
etc., a lot of the stuff it depends on how you pay for it. 
Whether you let the deficit grow or not makes a big impact.
    Mr. McClintock. Well, the deficit is just a future tax. We 
borrow it now and we pay it back through future taxes. In other 
words, is not to borrow from the Clinton maxim, is not the 
spending stupid?
    Mr. Hall. Well, certainly spending is the biggest single 
problem going forward. The rate of spending exceeds the tax 
rate.
    Mr. McClintock. Thank you.
    Interim Chair Black. The gentleman's time has expired. The 
gentlelady from Washington. Ms. DelBene is now recognized for 5 
minutes.
    Ms. DelBene. Thank you, Madam Chair and Director Hall. 
Thank you for being with us. My district in Washington State 
has a northern border and is also home to I am pretty sure 
nearly every point of view on every issue most of the time, but 
one key difference has been immigration reform. We have heard 
from business community, farmers, State-based community, folks 
in travel and tourism, law enforcement all asking for 
comprehensive immigration reform, and I was one of the folks 
who lead the bill that we introduced in the House in the 113th 
Congress similar to the one that passed the Senate that the CBO 
has said would have a significant impact in reducing the 
deficit about $700 billion in the second decade. I think you 
confirmed that was the correct number.
    Mr. Hall. That sounds right.
    Ms. DelBene. But when we look at individual sectors, and 
when I was elected in talking to our farmers, they said we need 
two things. We need a farm bill and we need comprehensive 
immigration reform, and we got a farm bill and folks have said 
we are not sure we can stay in business if we do not have 
immigration reform. If you look at a sector like agriculture, 
do you see lack of immigration reform as actually having a 
negative impact on economic growth?
    Mr. Hall. We have not done that sort of analysis. We would 
have to do a little work.
    Ms. DelBene. Well, I can tell you that farmers definitely 
feel that way, and it is an incredibly important issue, and the 
reckless executive order has not helped and has impacted many 
people's lives and has only continued to have a negative 
impact. Before coming to Congress, I was a business woman and 
entrepreneur and also ran the Department of Revenue for the 
State of Washington, and since coming to Congress, I have been 
very frustrated with our budget and appropriations process with 
how they do not work.
    In particular, we seem to live off of continuing 
resolutions, and you would never run a business 30 or 60 days 
at a time, and you definitely, it is no way to budget. It is 
probably the most expensive and least efficient way to budget. 
But we also, with sequestration on top of that, we end up 
looking at folks have been focused on cuts but not on return on 
investment, and I know that sometimes spending money on 
important projects actually saves you money in the long run and 
we get a great return. I was wondering when you look at your 
models and look at things like infrastructure, research, and 
education, how does our lack of investment in those areas 
impact our future growth?
    Mr. Hall. Well, I think the research is fairly clear that 
generally Federal investment does increase productivity and it 
does have an impact on growth. The research if pretty 
incomplete in that it, identifying the different kinds of 
investment is difficulty, what the rates of return are on 
different kinds of investment. One of the big things though 
about increasing investment is really depends upon how you pay 
for it. If you increase investment and reduce spending in 
another spot, so you do not have a net impact on spending, that 
is a much more positive impact on the economy than if you let a 
deficit grow.
    Ms. DelBene. But if we, for example, have a pothole in the 
road and we do not fix it and it might have cost a certain 
amount to fix that pothole, next time because we did not fix 
it, we end up having to replace the road bed, we end up 
spending a lot more because we did not make that investment 
early on. Is not that a fair point of view when we look at a 
lot of these issues that we are not funding, or providing those 
investments because we do not have a normal budget or 
appropriations process? Is not that hurting our ability to see 
progress in those areas?
    Mr. Hall. That is right. Federal investment doing anything 
that sort of helps companies be more productive, move products 
around, encourage innovation, that does help productivity, and 
that is obviously one of our big problems going forward. In one 
of the issues, it is a little bit like in my mind a little bit 
like cutting taxes. They both can stimulate the economy and 
depends on how they work. They can both affect long-term 
growth. The question a little bit is how much? You know, 
investment, Federal investment in particular, there is often a 
big delay, and there is some impact on interest rates, and that 
impact on interest rates does raise the cost of debt in the 
economy. So, it is not quite so clear, for example, that if you 
just increase Federal investment, do not pay for it, let the 
deficit grow, that probably does not have a net positive on the 
economy.
    Ms. DelBene. But also just cutting and not investing in 
programs that give us a great return has a negative impact too, 
and I think that is our role to decide what is giving us a 
great return and making sure we are making those investments, 
seeing what is not working and not making those investments, 
and continuing resolutions and sequestration are us not taking 
that responsibility seriously here and not making those 
decisions and making the investments in the right way they need 
to be made. Thank you. My time has expired. I yield back, Madam 
Chair.
    Interim Chair Black. The lady's time has expired. The 
gentleman from Ohio, Mr. Renacci, is recognized for 5 minutes.
    Mr. Renacci. Thank you, Madam Chairman. It is interesting. 
First, I want to go back to my colleague, Mr. Cole, and say the 
exact same thing. We could sit here all day and fire bullets 
back and forth on political issues, but that is not going to 
solve the issues of the day because the issue of the day is 
that we have to get a budget and we have to live with a budget, 
and before we can even get a budget we have to figure out where 
we are out which is another problem around here. I have 
mentioned since day one that we do not have a complete record 
of financial information because we do not allow for all of our 
debts to be added up, and we do not use the information that we 
have then to make decisions, and then we do not look at the 
past at the decisions we made.
    As a business guy for 30 years, and actually a business guy 
that took over 60 failed businesses and successfully turned 
them around, you have to see where you are at first before you 
can go forward. So, my frustration always builds when we start 
to get into these political talking points because everybody's 
district is going to have issues that concern them.
    My district, I can tell you, the businesses, the people, 
the individuals are all concerned about tax reform, regulation 
reform and Obamacare reform, so again it is not what the 
district is, it is what we can do as far as putting a budget 
together and getting things moving. But, Dr. Hall, do not we 
have the record revenues in the Treasury over the last few 
years?
    Mr. Hall. That is right. Well, I am not sure the record. 
They are certainly above average right now and they are going 
to actually go up as a share of GDP. So, we do not have 
declining revenues.
    Mr. Renacci. Right. So, we have record revenues, and in my 
business world, what I would find is if you have record 
revenues you were really doing really well except when you had 
record expenditures that were exceeding those record revenues, 
and I heard you say earlier that one of our issues is that we 
are spending, you know, our biggest problem really is our 
spending problem. Would you agree?
    Mr. Hall. Yes. That is the major contributor to the 
deficit.
    Mr. Renacci. So, until we come together as Republicans and 
Democrats and realize we have spending issues, and taxing, we 
are not going to tax our way out of this, and we can put a 
budget together, I think that is the starting point that I hope 
at some point this committee can get to, having a good solid 
budget that then we live with. My concern is again, it is 
extremely alarming that our interest and our national debt is 
projected to nearly quadruple to $768 billion in 2027. It 
appears that as numbers continue to grow, we are going to have 
less.
    The time is now to start looking at our spending side 
because if we just sit back and start saying the last President 
was great, the President before that was great, and we do not 
do anything, we are going to be in a deeper, deeper hole in the 
next few years. Would you agree with that?
    Mr. Hall. Absolutely. I think the sooner we get to solving 
the deficit problem whether it is spending or whether it is 
taxes or anything, but the sooner we start to address that, the 
less of a change it is going to be. The easier it is going to 
be to try to deal with it.
    Mr. Renacci. I think the sooner we recognize that it is one 
of the reasons I introduced the Fiscal State of the Nation 
which would require the Controller General would come before 
the House and Senate, a joint session of Congress, I had almost 
170 cosponsors, Republicans and Democrats.
    I actually hoped that new members here would join me as we 
have refiled that bill, but do you agree that it would be a 
good starting point to have someone, the Controller General, 
come before the House and Senate and explain our growing 
deficits and where the numbers are occurring and what is going 
on so we have a starting point?
    Mr. Hall. Absolutely. I hope we were providing some of that 
information to you, but yes.
    Mr. Renacci. I understand, and that is what you are doing 
here today, but I think the important is as we continue to look 
at these numbers, we have to start to realize that the growth 
of our Federal debt is another issue concerns me and I heard 
one of my colleagues earlier talk about this. If we do nothing, 
I think the Federal deficit is projected to grow, if we just 
stay on the same track, $9.6 trillion in the next 10 years. Is 
that correct?
    Mr. Hall. That is right.
    Mr. Renacci. So, these are all issues I hope that my 
colleagues on both sides of the aisle can start talking about 
as a way we can work together to come up with a solution and a 
budget. I also have another bill which I think is so important. 
When we pass a budget, we should follow a budget. We have had a 
Budget Act since 1974. Most people do not realize that even 
though we pass budgets, we never follow them.
    Members from this committee, other committees come to the 
floor, pass bills that break the budget. If we are ever going 
to make things work, we have to come up with a solid budget and 
live with that budget and not break the budget. So, I am hoping 
that we can continue to work forward with these numbers. I 
appreciate the information. There is plenty of information in 
your report if everybody takes the time to read them. We are 
not going in a great direction. We do not have a healthy 
economy. We have what I would call a--we have an anemic 
economy. Would you agree with that?
    Mr. Hall. Yes.
    Mr. Renacci. Thank you. I yield back.
    Interim Chair Black. The gentleman's time has expired. The 
gentlelady from Florida, Ms. Wasserman Schultz, is now 
recognized for 5 minutes.
    Ms. Wasserman Schultz. Thank you, Madam Chair. Our 
colleagues on the other side of the aisle would do well to stop 
patting themselves on the back for and take credit for voters 
putting them in the majority rather than the cartographers and 
map drawers who did a really good job of partisan 
gerrymandering, Mr. McClintock, to ensure that the scales are 
tipped in favor in virtually every State. Particularly, the 
States where Republicans hold the majority and voters are not 
able to choose their legislatures but rather legislators choose 
their voters. And that is reflected in the brimming sea of 
diversity that we see in this committee on the other side of 
the aisle as opposed to our side of the aisle, and that also is 
reflective of the difference dramatically in the policies that 
result in how we govern. So, please spare us the political 
advice.
    That having been said, I think it is important to note that 
Mr. Hall indicated that the slack in our economy is mainly 
attributed to the available labor force. Largely attributed as 
your said, Mr. Hall, to retirement of baby boomers and the 
stability of women in the workforce. Is that right?
    Mr. Hall. That is right, and by stability, I mean that in 
the 1990s we had this great period of where women's labor force 
participation was growing very quickly and we had significantly 
more economic growth as a result and they have sort of closed 
that gap and it is now sort of holding, so we are no longer 
getting that faster growth.
    Ms. Wasserman Schultz. You did indicate in your opening 
statement that primarily, the slack in the economy is 
attributed to those two things.
    Mr. Hall. Well, right, and really, I think I was trying to 
refer to the potential growth, the long-term growth of the 
economy, but yes, I did talk about those two things.
    Ms. Wasserman Schultz. Okay. Thank you. Our former CBO 
director, Douglas Elmendorf, in a recent talk noted that under 
the current caps on annual appropriations, Federal investment 
in infrastructure, R&D, education and training, will soon be 
smaller relative to GDP than at any time in the last 50 years. 
He said that is not forward-looking growth-oriented budget 
policy just to maintain the traditional level of investment as 
a percentage of the economy requires a substantial increase in 
the caps on appropriations. The caps on appropriations would 
you not agree are a large part of what limits our ability to 
see growth in the economy?
    Mr. Hall. It certainly has been the limit on the 
discretionary spending growth. That has been part of why it 
looks to be declining over the next 10 years.
    Ms. Wasserman Schultz. With the Budget Control Act of 2011 
and sequestration, we continue to see dramatic cuts in 
nondefense discretionary spending, dramatic cuts.
    In 2010, nondefense discretionary spending was 4.5 percent 
of GDP, 2016 it was 3 percent. It is projected that in 2027 
nondefense discretionary spending will only be 2.4 percent of 
GDP, and furthermore investment in infrastructure as a percent 
of GDP has dropped from 0.8 percent in 1980 to 0.5 percent in 
2015. Investment in research has dropped from 1 percent in 1965 
to 0.4 percent of GDP in 2013, and finally investment for 
education and training programs has dropped from 1 percent of 
GDP in 1975 to 0.5 percent in 2013.
    Director Hall, do you agree with your predecessor that 
capping investing in research, infrastructure, and education is 
incompatible with a budget policy that promotes growth in the 
American economy? And should not we aim each year to include a 
certain percentage of spending on discretionary programs that 
promote economic growth especially given the President's Muslim 
ban which will among other things keep those leaders and 
research and development out of our country and hurt our 
economy?
    Mr. Hall. I would not make a recommendation, but I will say 
that increase in Federal investment is one of the tools you 
have for increasing potential GDP growth because it does 
increase productivity of labor going forward.
    Ms. Wasserman Schultz. And would not you say that generally 
taking a balanced approach which is what Democrats have 
promoted over the last 8 years to responsible spending cuts and 
generating revenue is the most responsible way to address 
deficits over a period of time, and would not you also say then 
when it comes to dealing with our debt, that there is a 
dramatically negative impact on our overall economy when we 
threaten, as a Congress, to potentially not pay our bills?
    Mr. Hall. I should say however Congress decides to address 
the deficit, if they address it in a broader fashion, they may 
need to make less dramatic changes in any one thing so that 
does seem like that is a strategy certainly Congress could 
take.
    Ms. Wasserman Schultz. Thank you, very much. I yield back 
the balance of my time.
    Interim Chair Black. The gentlelady yields back. The 
gentleman from Minnesota. Mr. Lewis is recognized for 5 
minutes.
    Mr. Lewis. Thank you, Madam Chair, and thank you, Dr. Hall, 
for being here today. Talk a little bit about Federal 
investment or Federal spending. In 2002, the Federal budget was 
$2 trillion. Today, it is $3.4 trillion to your numbers. The 
50-year average is about 18.4 percent of revenues. We are well 
above that now and headed above that. Outlays, however, are 
well above the 50-year average as well. Correct?
    Mr. Hall. That is correct.
    Mr. Lewis. The top one percent of income earners, if we are 
going to look at revenues to balance this budget, the top one 
percent of income earners right now pay about $543 billion in 
income taxes. That is less than this year's deficit. Correct?
    Mr. Hall. I think that is right. I do not know the numbers 
exactly but that sounds about right.
    Mr. Lewis. My question is this, I do not think we have a 
revenue problem, if you look at these numbers again we are 
above the 50-year average of 18.4 percent and moving higher 
than that. How would we do that if you are just going to raise 
revenue? I mean there is not enough money at the top is there?
    Mr. Hall. Yes, we have not had any real specific analysis 
of that but you are right, putting it all in revenues makes it 
a pretty significant revenue increase just like putting it all 
in outlays involves a pretty dramatic outlay drop. So, sort of 
spreading it out is a different sort of strategy.
    Mr. Lewis. You are servicing the debt and that interest on 
the debt, $768 billion larger than the defense budget, for 
instance, I believe in the next 10 years. What are you basing 
that on with regards to interest rates? I think the post-World 
War II 10-year treasury average is about 5.7 percent or down, 
way down now to about 2.4 percent. How did you come up with 
that calculation?
    Mr. Hall. First of all, interest rates have been really 
low. We have interest rates climbing up into somewhat their 
historical range but we are still kind of at the lower end of 
that range. So, we are somewhere over 3 percent eventually on 
the interest rates. And that is a really important point to be 
honest, because we are at a pretty low interest rate relative 
to history and, in fact, if interest rates go up by more----
    Mr. Lewis. Or back to their average.
    Mr. Hall. Or back to their average. Let me give you an 
example; if interest rates were one percentage point higher 
over this 10-year period than our projection, we are talking 
about adding $1.6 trillion to the debt over that time period. 
And that is a lot of money for just one percentage point. So, 
that is one of the more important things in our forecast.
    Mr. Lewis. So, the debt interest payment of $768 billion in 
10 years is based on historically low interest rates?
    Mr. Hall. That is correct.
    Mr. Lewis. Let's talk a little bit about Japan. I am not an 
expert on their immigration policy, but I do not know that it 
has changed remarkably. But I do know their economy has hit 
this deflationary spiral. So I am not certain if you got the 
same policy in one particular area but all of sudden you go 
into a tailspin that you can blame that policy. But what you 
might be able to look at is credit expansion. And we have had a 
very similar experience here where we have monetized a lot of 
debt, where we have let the credit expansion go, created asset 
bubbles, as some would say, on the monetary side.
    Is it your experience, or I do not want to ask your 
opinion, but your analysis that Japan is suffering a debt lag? 
That we have created so much debt that they cannot grow their 
way out and is that a danger for America as far as a 
hyperinflation scenario stuck in a debt spiral and stuck with 
deflation and low growth?
    Mr. Hall. I am afraid I do not know enough about Japan or 
Japan's policies.
    Mr. Lewis. That makes two of us.
    Mr. Hall. Okay, so it would be hard. And we can follow up 
with some description, if you like, on Japan and what has been 
happening there.
    Mr. Lewis. I mean, there is a reason for these low growth 
rates. And, you know, we have created money, we have created 
fiat money, we have certainly engaged in Federal spending. We 
look at those figures I just cited, well above historical 
means, so why the low growth rates?
    Mr. Hall. Again, I do not know enough about Japan to offer 
an opinion.
    Mr. Lewis. I would suggest that the reason we have not hit 
3 percent growth for 11 straight quarters, the reason that 
during the Reagan robust recovery, even the Clinton robust 
recovery where we had growth of 5, 6, 7 percent is the level of 
debt today, that we are stuck. Our balance sheets do not look 
so good, and when you are trying to service that kind of debt 
it is very hard to grow out of it.
    Mr. Hall. Yeah, I will just say one of the most remarkable 
things that is going on now, and has since the end of the 
recession, has been very low productivity growth of 0.8 
percent. And we do not understand that very well. And that has 
been a major head wind.
    Mr. Lewis. One final point quickly, Dr. Hall, and thanks 
again for coming. But, when we fund Federal investment, where 
does that money come from? Some of it comes out of the private 
sector, some of that which would be private investment correct?
    Mr. Hall. That is correct.
    Mr. Lewis. Thank you, sir, I yield back my time.
    Interim Chair Black. The gentleman's time is expired. The 
Gentleman from New York, Mr. Higgins is recognized for 5 
minutes.
    Mr. Higgins. Thank you, Madam Chair. I am listening to the 
discussion here which is thoughtful, and I believe that people 
truly are sincere in their beliefs about the performance of the 
American economy and the policies that we in Congress are 
responsible for enacting to help influence hopefully economic 
growth. And I think there are two very different views of it.
    You know, the good thing about the economy is, you know 
policy either works or it does not. It is not ideological; it 
is arithmetical. And if you look at the performance under 
various administrations relative to the policies they advance, 
the measure of their effectiveness or lack of effectiveness is 
the performance of the economy.
    Now, it has been referenced here that in the waning days of 
the last Bush administration a decision was made to enact tax 
cuts that disproportionately benefited higher wage earners, 
people that make a lot of money. The theory is trickle down, it 
is supply side, it is call it what you will it is because if 
they save money because of tax policy, that money will find its 
way back into the economy in new business investment and job 
growth. That is the theory. That is indisputable. That is what 
they say.
    Job growth during the George W. Bush administration was the 
lowest level in the past 75 years. In the waning days, the 
economy went into a very severe contraction. In March of 2009, 
the stock market was at 5,600. We were losing 600,000 jobs a 
month. The auto industry was a disaster. The U.S. and world 
financial markets were falling apart. Something had to be done.
    So, new policies were put in place to allow those tax cuts 
for the very, very wealthy to expire and continue tax cuts for 
the middle class because higher wages, higher take home pay 
increases aggregate demand in the economy, aggregate demand 
creates economic growth. And as a result, since 2010, in the 
past 6 years, we created in this economy almost 16 million 
private sector jobs.
    You know, the American economy we used to make things and 
sell them to the rest of the world, now the things that we used 
to make and sell to the rest of the world they make and sell to 
us. As a consequence, 70 percent of the American economy is 
consumption.
    So, how do you create aggregate demand in the economy? You 
put more money in the pockets of more Americans as humanly 
possible because here is what you know, they are going to spend 
it. And when they spend it, there is growth. I think, you know, 
you are always looking for silver linings in these views of 
economic policy. And I think the one real clear silver lining 
here is infrastructure spending. And there is talk about a 
trillion-dollar bill, and it does two things. In the immediate 
sense, it creates jobs, I think 43 jobs for every million 
dollars of investment in the construction trades and supply and 
materials industry.
    But the second economic benefit you get from that is, when 
you invest in infrastructure, it unleashes the creativity and 
the resources of the private sector. So, your views on a 
trillion-dollar investments in infrastructure publicly 
financed. And do not tell me about deficit financing because 
this Nation spent $110 billion rebuilding the roads and bridges 
of Afghanistan. This Government spent $76 billion rebuilding 
the roads and bridges of Iraq, both of which were deficit 
financed and did not create one American job. So, your views on 
infrastructure investment and financed in a traditional way.
    Interim Chair Black. Mr. Hall, you have 10 seconds to 
answer this. And I am afraid, Mr. Higgins, since you did not 
leave him adequate time, I am going to let him give a very 
brief comment, but if Members would remember if they are asking 
a question and they need to leave a little time for our witness 
to answer the question. Otherwise if you could briefly answer 
and if there is more that you would like to do if you could do 
it in writing.
    Mr. Hall. Okay. A basic principle I think is all over our 
work. You know whether you change spending or change taxes, if 
you increase spending or lower tax, however. How you pay for 
that makes a difference because the deficit has an impact on 
that. So if you increase spending but you do not pay for it you 
increase the deficit, that makes a difference, how you pay for 
things. So that is something just to consider always with what 
we are talking about.
    Interim Chair Black. Thank you, Mr. Hall. The Gentleman 
from Texas, Mr. Arrington, is recognized for 5 minutes.
    Mr. Arrington. Thank you Madam Chair and Dr. Hall, I 
appreciate your time and your service and I am happy to be on 
this bi-partisan House Budget Committee, I say that a little 
tongue and cheek based on some of the comments that are made. 
The American people are tired of partisan bickering and tit-
for-tat. They want us to do like they do in their businesses 
and in their homes and their daily lives and roll up our 
sleeves and go to work and solve this problem.
    The other thing they are tired of is Congress playing by a 
different set of rules. And one of the rules that they have to 
play by and live by is that they have to live within our means. 
And so, we have to work together to solve this. I am excited to 
be on this committee because I think it is the greatest threat 
to the future of our country.
    My commitment is not to the Republican Party or to the 
leadership, my commitment is to my three children that they 
will have a safe, strong and free America to live in. That they 
will in fact have a future to grow up in the shining city on a 
Hill, and this is the greatest threat to that future. And so, I 
am grateful to be a part of the problem-solving venture that we 
are about to undertake.
    I think there is spending issues and cuts to be made across 
the board, but I am very concerned about the elephant in the 
room that was mentioned. That mandatory spending and the 
entitlement programs that were mentioned are squeezing very 
important investment that we need to make as a country if we 
are going to have a prosperous Nation going forward. Now, I 
think about agriculture.
    AG is the lifeblood of economy in west Texas and if we do 
not make the investment in risk management tools for our 
farmers or the safety net, we will not have the capacity to 
feed and clothe the American people. Dr. Hall, how much do we 
spend on the AG risk management or the AG programs within the 
farm bill as a percentage of our Federal budget?
    Mr. Hall. I do not know, but it is not a large percentage.
    Mr. Arrington. A quarter of 1 percent, so that we have a 
safe and affordable and abundant supply of food for the 
American people. We have cut billions of dollars in that 
discretionary program. Whether it is transportation and making 
sure that we meet the transportation needs or R&Ds so that we 
are the laboratory of innovation for the world and we continue 
to be on the cutting edge of technology in this country. Or it 
is on National Defense.
    I am concerned on the lack of investment in these important 
areas all because we have squeezed I think just about all of 
the blood out of the turnip on the discretionary side. At what 
point Dr. Hall do we reach diminishing returns on the cuts on 
the discretionary side, maybe in some of the programs I have 
mentioned?
    Mr. Hall. It is hard to say on any of this. You know the 
growing deficit, any of these numbers, they look bad and we 
have been on record to say that the debt is unsustainable if 
you look out a lot of years, so it is hard to say too much. 
Focus on discretionary spending, one of the things I think is a 
little interesting sobering factoid here, is we expect in 10 
years that just the payment on debt, the net interest on debt, 
will exceed all non-defense discretionary spending in the 
country. So, that will become a bigger item in all non-defense 
discretionary spending, that is part of the problem. You have 
this net interest becoming a major part in the budget going 
forward.
    Mr. Arrington. Quick response; of the risks to balancing 
our budget and getting our arms around this deficit spending 
and national debt, which one is the greatest risk, interest 
rates, economic growth, domestic spending or the entitlement 
programs and the runaway costs there?
    Mr. Hall. It is hard to rank them, right, because obviously 
you can look at any of those to address the deficit problem.
    Mr. Arrington. Here is my last point and again, thank you 
for your time. We cannot keep kicking the can down the road, we 
do not have any more runway. We do not need more analysis; we 
do not need more accountants or budgetary experts. We need 
leaders with the courage to solve the problem. The problem is 
mandatory spending. I look forward to getting after it, as we 
say in West Texas. Madam Chair, I yield back.
    Interim Chair Black. The gentleman's time is expired. The 
gentleman from California, Mr. Khanna, is recognized for 5 
minutes.
    Mr. Khanna. Thank you, Madam Chair. I appreciate following 
Congressman Arrington. We may not agree with much regarding 
economics but he has shown a lot of graciousness in reaching 
out to the freshman class across the aisle and trying to build 
stability in the country first so I appreciate following him. 
Dr. Hall, thank you for your service, and your service not just 
in this role but at the Commerce Department and Treasury 
Department and White House and I look forward to hearing some 
of your expertise.
    I represent a district at the heart of Silicon Valley with 
Google, Apple, Yahoo, Intel, Cisco and Enrico Moretti, 
economist at Berkeley, has written that there is a tech 
multiplier of 4.5 jobs. For every one job created in tech, four 
and a half jobs are created. Pastor Trieber and Pastor Burnell 
who are in for the National Prayer Breakfast will tell you that 
in our district not everyone who works for tech goes to their 
church but there are folks that are baristas, and lawyers and 
others who have those jobs partly because of the tech industry.
    Now in Eastern Kentucky, thanks in part to Ranking Member 
Yarmuth's work with the administration, there was this model 
where 40 jobs were recently created for folks of coal-miners' 
kids who were being trained on IOS software on the Apple phone 
and android software with the Google phone, a four month class. 
All of them have jobs. It was funded by the tech initiative 
that the administration worked on with Congress and the 
Regional Appalachian Economic Center. My issue, and I do not 
think it is a partisan issue, is how do we get these tech jobs 
across the country and what are your thoughts on what this 
congress needs to do to make that possible?
    Mr. Hall. It is a little hard to speak too specific to 
that, I do not want to make specific recommendations, that is 
not what CBO does. But I can put it in general terms, the long 
run problems are, you know we talked a little bit about the 
labor force participation. Getting the labor force growth 
increase, working age people sort of back in the labor force 
but also there is productivity side of things.
    There are lots of things that government can consider that 
will increase private sector productivity, right? Whether it is 
looking at tax policy, where trying to find a more efficient 
way of collecting taxes that is hopefully tax neutral. Whether 
it is looking at the regulatory environment, whether it is 
looking at increased Federal investment.
    All those things are things that can impact private sector 
productivity, and that is really an important part of the 
recipe. One of the real difficulties we have, anybody has right 
now, on being too specific, we do not understand productivity 
growth really well and we do not understand how policies affect 
productivity growth very well. So, it is very hard for almost 
anybody to have too many solid recommendations about how to 
achieve higher productivity because we just do not know that 
much about it.
    Mr. Khanna. I appreciate that, would you say that preparing 
folks for these jobs though has to be a component of it?
    Mr. Hall. Yes, absolutely.
    Mr. Khanna. The other line of questioning I have is 
slightly different and that is on Social Security and without 
taking a particular view. If we were to scrap the cap, how much 
revenue would that raise? And how much would that go towards 
solving some of the structural deficits?
    Mr. Hall. It would certainly have an impact. I do not have 
the number in my head. But we actually did that calculation and 
that options for reducing the deficit volume that we just 
produced, that was one of the options that we put in there. If 
you look at that, and we can follow up too, that will give you 
an idea of how much of an impact that would have.
    Mr. Khanna. I would appreciate that, I yield back the 
balance of my time.
    Interim Chair Black. The gentleman yields back, we 
appreciate that balance of time. The gentleman from South 
Carolina, Mr. Sanford, is recognized for 5 minutes.
    Mr. Sanford. Thank you, and I appreciate the thoughtful 
comments from my colleagues from New York and from California, 
and we do see things differently. And I want to bore down 
though on what my other colleague from California, Mr. 
McClintock was getting at. In the danger of a sovereign debt 
crisis, I think it is much more real than what people realize 
and I think it is much closer than people realize. So, you 
yourself have identified the debt as unsustainable, that we are 
on a path that we cannot possibly continue. And I think the 
numbers are compelling on that case.
    But what I would like to flesh out is how this may be a 
nearer term event that would have cataclysmic consequences with 
regard to the value of our currency with regard to future 
inflation with regard to the American standard of living. I 
think it is interesting, I saw a McKinsey report the other day 
and what it showed was, we are at about 250 percent debt to GDB 
globally and in the wake of 2008 what we saw was a roughly $57 
trillion increase in debt which was highly unusual because what 
the report showed was that going back really over the last 50 
plus years, actually no it was more than that, it went back to 
1930. That in the wake of financial crisis or economic 
slowdown, that historically there was a de-leveraging that 
followed.
    But in this instance, post-2008, what we have seen is a 
reverse, is significant leveraging in the wake of a financial 
crises. And therefore we lived in a time like no other, and you 
can see the same numbers at the Federal level, you know our 
debt to GDP numbers, I guess a post-World War II high, and they 
are at a peace time high. So, I was looking at the numbers the 
other day and I think this is a really interesting chart, that 
again suggests how vulnerable we are and how a crisis could 
come much sooner than people realize.
    This is from the Fed, and it's net worth as a percentage of 
disposable income, you could also do net worth as a percentage 
of GDP. But basically, what it shows is over the last 75 years, 
we have been fairly constant at an average of around 500 
percent of net worth to disposable income. But in the early, I 
guess late 1990s, we had a peak it represented the tech bubble, 
we went above 600 percent and we did it again in the housing 
crisis, or just pre-housing crisis went above 600 percent and 
we have done it again now.
    And what is interesting what followed the tech bubble we 
know, what followed the housing bubble we know, but we are at 
that same percentage in an overall inflated environment with 
regard to debt both domestic and internationally. Is there a 
much greater level of vulnerability than we realize? And let me 
add one other thought to that. I pulled the numbers on economic 
expansions, we are now living in the fourth longest economic 
expansion in American history. So, we had the tech bubble, we 
had the Reagan expansion, we had the Kennedy-Johnson expansions 
but you know the average is 60 months we are about a third past 
that which would suggest to me another layer of vulnerability. 
And finally, we live in a zero interest rate policy. Which is a 
policy that we have in essence never lived in.
    You know, I guess it was Roosevelt's Treasury secretary 
that at time of the Depression talked about pushing on a string 
how there was just no more juice in terms of making things 
happen. So, would you flush out in the minute and a half that I 
guess you have, with a little bit of color with regard to, you 
know, while we may be unsustainable in the long run, maybe this 
can creep up on us much sooner than people realize?
    Mr. Hall. Sure. Part of the trouble is that there just is 
not research, and there is no way to know how much debt is too 
much.
    Mr. Sanford. Well, I think there is regression to the mean 
for a reason. I mean, I think it is even dangerous when we talk 
about interest policy and we say, Well, we are going back to 
the average. Well that is not what has historically happened, 
the reason you regress to the mean is typically you go far on 
the other side so interest rates go up a bunch to give you that 
average. So, I think that the law of averages and numbers 
works.
    Mr. Hall. Yeah, and the sort of comparison that we wind up 
making and it probably should be a sobering comparison, 77 
percent of GDP and debt is a really high number. You go up a 
little bit more and you have the highest debt ratio since the 
end of World War II. The end of World War II was a pretty 
special time, so it is way above historical numbers.
    Mr. Sanford. Well, and that was a case where we were 
actually fighting for our survival as a republic. Right now, 
that money is in essence going towards consumption and again 
what many would argue to be sustainability. Oh, we are going to 
have fun, come on.
    Interim Chair Black. The gentleman's time is expired, I am 
very sorry. The ranking member, Mr. Yarmuth, is recognized.
    Mr. Yarmuth. Thank you, Madam Chairman. Once again, thank 
you, Director Hall. I look forward to reading your new 
publication. I think that would be something mandatory reading 
for all of us here. One thing we have not talked about yet 
during this hearing is tax expenditures. And I think your 
report shows that tax expenditures actually are on a path, if 
not now, they are larger than the discretionary spending in 
total, including defense spending. Somewhere going to $1.5 
trillion. Is there any difference, in terms of the impact on 
the budget, between a dollar of tax expenditure and a dollar of 
discretionary spending?
    Mr. Hall. No, the effect on the deficit is the same.
    Mr. Yarmuth. And have you done an analysis of what types of 
discretionary spending maybe have a more positive or negative 
impact on the budget as on the deficit as you would have . . . 
so, you would for instance, a charitable deduction versus R&D 
tax credits versus mortgage deductions.
    Mr. Hall. Not that comes to my mind so much. Our colleagues 
at the Joint Committee on Taxation who have done a lot more of 
that work they might have some numbers for you.
    Mr. Yarmuth. And last year, this House renewed about $800 
billion of tax expenditures as I recall with no offset 
[inaudible].
    Mr. Hall. The numbers, that could be correct.
    Mr. Yarmuth. It was pretty substantial.
    Mr. Hall. Yes it was.
    Mr. Yarmuth. So, what we are talking about, and I hope you 
dealt with this in the new publication, because clearly when 
you are looking at over a trillion dollars of tax expenditures, 
you are looking at another significant impact on the deficit. 
And something that we do not spend nearly enough time looking 
at in terms of which ones really pay off for the taxpayers. I 
mean, most of the mortgage deduction benefit goes to wealthier 
tax payers, is that not correct?
    Mr. Hall. I think that is probably correct. Can I just say 
something in general, I referred to it but one of the ways to 
try to approve efficiency and productivity is to look at the 
efficiency of taxes, of our tax system. Right? Because our tax 
system has lots of things that encourage behavior that causes 
distortions. And so there are things one can look at.
    Reducing taxes on capital investment for example--it is a 
really direct way of affecting productivity because capital 
investment increases productivity. Worrying about our tax base, 
right? There is some offshoring behavior that reduces our tax 
base. Some of those things, especially if they are sort of tax 
neutral, would have an impact potentially on long-term growth 
without adding to the deficit.
    Mr. Yarmuth. Well, presumably, we are going to have that 
debate later this year as the House takes on tax reform. So 
that will be an interesting forum. I know this will be totally 
out of character for me. I am going to ask questions that have 
no political point at all. I am just curious about them. In 
your report, you project Medicare spending per beneficiary to 
go up 4.3 percent through 2027, which is 3 percent higher than 
it has been over the last 5 years. Why such a dramatic increase 
in projection of the cost per beneficiary?
    Mr. Hall. That one is actually pretty difficult for us to 
forecast. Healthcare spending has been consistently growing 
faster than GDP. And a lot of that for us is just continuing 
the trend that we have seen in that. And it is actually part of 
our forecast that will continue, per beneficiary growth of 
health care generally, will grow faster than GDP. And that 
actually is part of the growing deficit.
    Mr. Yarmuth. But that has not been the case over the last 5 
years.
    Mr. Hall. Right.
    Mr. Yarmuth. Part of it is the ACA, part of it is in the 
economy and so forth. I know there are a lot of actors there. 
My point being that could be a dramatic difference in your 
long-term forecast for Medicare. If the growth rates per 
beneficiary stayed at one third of what you are projecting.
    Mr. Hall. Well, that is right that could have an impact. 
And you are right that the growth has slowed down. And I do not 
know if we have it in this report but somewhere we have got a 
sensitivity analysis where we vary the cost of health care to 
see what sort of impact that has on the budget deficit. We can 
get back to you on that.
    Mr. Yarmuth. Thanks. Another point you make is that the 
subsidies on the exchanges, assuming that they are not 
repealed, would double basically from this year until 10 years. 
I was curious whether that was predicated on doubling the 
number of insureds. A rise in the premiums so the subsidies 
have to keep pace with the premiums under current law. Is that 
the reason it would double in 10 years or is it a combination 
of both?
    Mr. Hall. It is probably both, but certainly, I would think 
most of it is the increased use of the exchange and increased 
use of the expansion so I think they are both in there.
    Mr. Yarmuth. Okay, so now turn to Medicaid. This is now 
regular Medicaid not the expanding Medicaid, you project 
expenditures growing from $389 billion in 2017 to $650 billion 
in 2027 which is a significant increase. I do not know what it 
is, 70 percent growth over that period of time, but it's 5.5 
percent a year growth.
    Is that because you are projecting, again rising cost per 
beneficiaries or because you expect that more people to be 
involved and be eligible for Medicaid? Which would reflect a 
really bad economy. Or would it be because such a huge 
percentage of Medicaid is used for skilled nursing and you 
expect the senior population to eat up a larger chunk of the 
Medicaid budget?
    Mr. Hall. Yeah, to get to that level of detail I have to 
get back to you. I am pretty sure a big chunk of that is simply 
the increased number of people but we can break that out for 
you.
    Mr. Yarmuth. Okay, but would that be on the skilled nursing 
side because to say that the population eligible for Medicaid 
is going to grow that much over the next 5 years, again 
indicates an economy that is going in the tank which does not 
comport with the rest of your forecast.
    Mr. Hall. Right, I mean we have pretty modest growth, but 
one of the things we do have is a continuing trend and faster 
growth in income for high income folks so the distribution of 
income, we have that continuing to change and that is a trend 
going forward that is been there for a while.
    Mr. Yarmuth. And now going to Medicaid expansion, your 
projection is that between now and 2027, the number of people 
and the expanded Medicaid would go from 12 million to 17 
million people.
    Mr. Hall. Right.
    Mr. Yarmuth. And that the total expense of expanded 
Medicaid would go from $70 billion to $142 billion, so that is 
100 percent increase, 7 percent a year is what you are 
projecting? Again, I am curious to why that is such a huge 
increase.
    Mr. Hall. That one I know.
    Mr. Yarmuth. Okay, good.
    Mr. Hall. Right now, there are 31 States and D.C. that have 
expanded and that is about 50 percent of the eligible people. 
We expect that the increase, the number of States that adopt 
Medicaid expansion, that will increase about 70 percent of the 
total people of all the States. So, it is from growing State 
acceptance of that.
    Mr. Yarmuth. Okay, good answer. Wish we could see that. 
Policy does not look like it is going in that direction, 
however. You know in my State we have, I think arguably the 
most successful expansion of Medicaid in the country. We do 
start insured by more than 60 percent and in my district now we 
are at 3 percent on insured, 81,000 on expanded Medicaid.
    And the projections if, not your projections, but other 
projections, show that if we actually were to rescind the 
Affordable Care Act, the Medicaid expansion or just the 
Medicaid expansion we would lose an awful lot of jobs, 10s of 
thousands of jobs in Kentucky; one estimate--44,000 jobs and 
$30 billion worth of economic activity over the next 5 years. 
Does your data, your analysis of the Affordable Care Act 
reflect that kind of potential loss in economic activity and 
employment in other areas of the country or across the country?
    Mr. Hall. I am not sure if we have that level of detail. 
The main impact of, for example ACA repeal, is a change in 
labor supply. We think that would be an increase in labor 
supply that would sort of increase the economic growth from and 
that would sort of counter some of the effects. That level of 
detail, I do not know offhand what we have thought about that.
    Mr. Yarmuth. Well, thank you very much once again for your 
testimony. I yield back.
    Interim Chair Black. The gentleman's time has expired. The 
gentleman from Pennsylvania, Mr. Smucker, is recognized for 5 
minutes.
    Mr. Smucker. Thank you, Madam Chair. Good morning, Dr. 
Hall.
    Mr. Hall. Good morning.
    Mr. Smucker. Thanks for being here. As any other freshman 
here, and probably other members as well, we have just come 
through a campaign where, I know I have had many, many 
conversations with people throughout my district and heard 
concerns that they have expressed. And one of the top things 
that we have heard is people believe that the economy is not 
working for them as it should. They are concerned that their 
kids, their grandkids, will not have the same opportunities to 
live the American dream that we all have had. People are very 
concerned about that. And they are concerned that we are asking 
future generations to pay the bill. And is it not true, Dr. 
Hall, that is what we are doing? If we cannot solve this 
problem here, we are transferring that problem to future 
generations.
    Mr. Hall. I think that is a fair statement. We do have a 
literature. It is a little research talking about the 
intergenerational effects of the debt that we can get to you. 
But I think that is a concern.
    Mr. Smucker. So, that is one concern. People are also very 
concerned; their perception is that their elected leaders are 
not willing to make the tough decisions to solve the problems 
that we are faced with. And I am hoping that we are about to 
change that. And I am pleased to be on the Budget Committee to 
work to try to solve some of these difficult issues.
    And I agree with many of the other comments that have been 
said here today; this is not a partisan issue. These are issues 
that we should be looking to try to find solutions. It will 
take us working across the aisle to move our country in the 
right direction. So I am hoping that this is the beginning to 
finding some of these solutions.
    The other thing that I have heard and I am going to get 
another question to you, you know I am Pennsylvania, Lancaster, 
Pennsylvania, a lot of entrepreneurs, small companies that have 
grown, developed in technology or whatever it might be and 
created jobs.
    And the business owners that I talked to today believe that 
it is more difficult and as a business owner myself I have seen 
this myself, it is more difficult, there is less incentive to 
invest additional capital into new technologies, to hire people 
because of the environment that we have created this economy. 
They believe the regulatory environment holds them back, holds 
individuals, holds businesses back. Prevents that kind of 
economic growth that we have seen before. They believe the tax 
policy is no longer working for them. Do you think we are 
seeing that kind of impact?
    Mr. Hall. I certainly think that that is a potential area 
for improving the long-term growth, right? Because one of the 
two big challenges is productivity. You need some regulation, 
eliminating some regulation can actually hurt productivity but 
having regulation that is unnecessary or goes too far can 
impact productivity. Tax policies can impact productivity.
    Mr. Smucker. We have talked about whether we need to tax 
our way out of this--whether we need to cut spending. I think 
we also need to look at establishing the right environment to 
encourage capital investment, to encourage more hiring, to 
encourage activities by individuals and business to create that 
economic growth. I think it has been done before. But my 
question to you in this regard is how much impact will that 
have? Say for instance we are able to get to a 3 percent or 4 
percent annual growth.
    You know the numbers I am looking at look every bit as bad 
and worse, they do not look any better from this side of the 
table than they do before. But how much impact could we have if 
we create an environment for much stronger economic growth?
    Mr. Hall. The problem is so big, you cannot do it with just 
economic growth, I think.
    Mr. Smucker. Can you give a sense though on how much of a 
difference that would make?
    Mr. Hall. Well, right now, we think that productivity is 
going to grow to about 1.3 percent a year by the end of our 10-
year period. In the 1990s it was as high as 2 percent, which is 
very unusual. Well let's say we got another half percentage 
point of productivity. In 10 years, we are talking about having 
a deficit of about $50 billion lower. So, the deficit going 
from 1.4 to .9, that is an impact but it is not balanced and we 
still have the continuing worsening demographics going forward.
    Mr. Smucker. Thank you, Madam Chair, my time has expired.
    Interim Chair Black. The gentleman's time has expired. And 
I now recognize Mr. Faso, from New York, for 5 minutes.
    Mr. Faso. Thank you, Madam Chair. Dr. Hall, thank you. You 
raise productivity, how much would making permanent the 179-tax 
incentive for business investments or 100 percent expensing for 
capital expenditures, how much have you factored that into or 
done an analysis as to how much that could improve 
productivity?
    Mr. Hall. I do not know if we have done an analysis on 
that. We assume that they expire when they expire. So, I would 
have to see if we have done an exercise like that.
    Mr. Faso. Could you get back to us on that?
    Mr. Hall. Sure.
    Mr. Faso. And I am also a member of the Agriculture 
Committee and I was appointed to the Nutrition Sub-Committee, 
and I have noted that despite the general improvement in the 
economy in terms of employment, that we still have not seen a 
decline in recipients under SNAP. And I am wondering if you 
have factored in and looked at that factor as well?
    Mr. Hall. That is sort of part of our forecast and we do 
think there is still slack in the economy. But the underlying 
forecast on SNAP I think does incorporate our economic 
forecast. We think we are still about one and one half million 
jobs short of full employment right now even though the 
unemployment rate is very low, so that is still a significant 
slack left.
    Mr. Faso. And I would add some of the comments of my 
colleagues, one of the things I heard frequently on the 
campaign trail and speaking to business was that they have 
jobs, they just cannot find qualified people to fill the jobs. 
And often these are jobs that might have technical skills, they 
might need some basic mechanical skills and training in 
robotics etcetera.
    I am thinking of one particular school, near my district, 
Hudson Valley Community College where the guy who runs it, is a 
robotic training facility, he has about 150 students in it 
every year. Every single student has a job. He told me that you 
could have literally 50 of his type centers around the country, 
and you still would not meet the need for employment of those 
kind of jobs. Any comment on that?
    Mr. Hall. Two things come to mind, our issue with slowly 
growing labor force, that is not going as quickly. Part of that 
is, working age people are not entering the labor force like 
they have in the past, so the participation rates of working 
age rates are really lower now than they have been in the past. 
That is a puzzle and we think a lot of that just does not look 
like it is coming back, so that is something that maybe is 
important here.
    And the second is, you know, one of the things that we have 
done a little work on is some Federal investment in things like 
education and training. And, in fact we are coming out very 
shortly on a blog on the affects about what we see is the 
evidence on the effects of education and training that going 
forward that might address that issue.
    Mr. Faso. Okay, I would be interested in seeing that. I am 
also interested in seeing that publication you referenced about 
the 100 best ways we could use to reduce the deficit. Speaking 
of the debt, what did you say our 10-year growth in national 
debt is going to be?
    Mr. Hall. We are going to hit about 89 percent of GDP.
    Mr. Faso. And in terms of actual amount of debt, it is 
going to go from, right now we are at about $19 trillion to?
    Mr. Hall. I think it's $30 trillion.
    Mr. Faso. Ten-trillion dollar increase in the debt over 10 
years, does it get a little frustrating coming up here to 
Congress and to tell us and the American people that their 
national debt is going to be $30 trillion in 10 years, and no 
one seems to pay attention?
    Mr. Hall. One of things I notice every year when we put out 
this report, we do a little press conference or we talk to 
press and let them ask questions, and one of the question is 
always ``What is new about this report?'' And the most notable 
thing to me is well, it still has the same punch line and a 
year ago, debt is large and it is growing and at some points it 
is unsustainable. That is a continuing message from CBO and it 
has been that message for quite a while.
    Well Dr. Hall thank you for your service. I would not 
recommend it but maybe you need to set your hair on fire when 
you are giving that presentation, maybe they would pay 
attention then. Thank you so much. I yield back to Madam 
Chairman.
    Interim Chair Black. The gentleman yields back time. Thank 
you very much. The gentleman from Ohio, Mr. Johnson, is 
recognized for 5 minutes.
    Mr. Johnson. Thank you Madam Chair, and thank you Dr. Hall 
for joining us today. Let me turn to direct spending or 
mandatory spending. You know, when I was first elected in 2010, 
the first phone call I got was from my nearly 80-year-old 
mother, and it was not to say congratulations it was to say, 
``All right, son, what are you going to do to make sure 
Washington protects my Social Security benefits because if they 
do not, I am coming to live with you.'' The next phone call I 
got was from my wife who said ``You better do what your mother 
said.''
    For many years after the 1983 Social Security reforms, the 
Social Security trust fund ran fairly large surpluses. This was 
done deliberately to try to ensure the trust fund would have 
resources to pay benefits for a long time. So, what is the 
current cash flow situation with Social Security?
    Mr. Hall. Right now, their outlays exceed the revenues, 
even excluding interest by a fair amount. This year the outlays 
will exceed revenues by about $55 billion.
    Mr. Johnson. Wow. How long do you think Social Security 
will last at that rate?
    Mr. Hall. Right now, we have our exhaustion date at 2030.
    Mr. Johnson. Okay. If Social Security continues to pay out 
more in benefits than it collects in taxes, what, in your 
opinion, will that mean for current beneficiaries if we do not 
take any action here? I can guess what that is, I can kind of 
put the two and two of what you just said together, but I would 
like to hear it from you on the record.
    Mr. Hall. Actually, our assumptions in this is that the 
beneficiaries will still continue to get what they are 
promised. So, even though, unless Congress acts, beneficiaries 
will not get their full outlays, we assume that that happens. 
If they did not, in 2030, benefits would just have to be 
reduced by about 29 percent right away.
    Mr. Johnson. All right. So, is it true the longer Congress 
waits to reform Social Security, the harder it is to implement 
the reforms without affecting current retirees?
    Mr. Hall. It is.
    Mr. Johnson. Okay. Let me go back and talk a little bit 
about economic growth. You know in a 2015 study on repealing 
the Affordable Care Act, the Congressional Budget Office 
determined that repeal would increase GDP by about 0.7 percent 
on average over the median term, that is 2021 through 2025. 
Mostly, by repealing the provisions that are expected to reduce 
the supply of labor in the economy. So, how would repealing the 
Affordable Care Act affect the expected supply of labor in the 
economy? Would it lead to an overall benefit in the economy in 
your view?
    Mr. Hall. Repealing it would likely increase the supply of 
labor in the economy, not quite 1 percentage point and actually 
would give a boost to GDP growth because of that increase in 
labor supply, our latest estimate was about 0.7 percent on GDP.
    Mr. Johnson. Okay so if we were to repeal, it would 
increase the GDP by about 0.7 and the expected supply of labor, 
tell me again what that would go to.
    Mr. Hall. Sure, we think that the number of people that 
would increase their hours or re-enter the labor force that 
would increase by 0.8, 0.9 percent of the labor force. That 
would be the boost to the labor force.
    Mr. Johnson. I am asking you to do some mental math here, I 
know that, but at the current labor rate that we are 
experiencing, you got any idea of how many millions of people 
that would be that would be back in the labor force.
    Mr. Hall. Right. I do not off hand. I do not want to guess.
    Mr. Johnson. Can you take that as a question please?
    Mr. Hall. We can do that pretty quickly, somebody just 
needs to look it up for me.
    Mr. Johnson. Yeah, I need a calculator too, I am sorry. So, 
thanks a lot, I appreciate you answering my questions. Madam 
Chair, I yield back.
    Interim Chair Black. The gentleman yields back. I do want 
to reference the report that did come from CBO, Budgetary and 
Economic Effects of Repealing the Affordable Care Act and I 
will read a line from this, in addition to the questioning by 
the Gentleman from Ohio. And the paragraph begins with ``The 
Macroeconomic feedback effects of repealing the ACA would lower 
the Federal Deficit by $216 billion on the period from 2016 to 
2025.'' So, it would have a significant economic affect in 
lowering. The gentleman from Georgia, Mr. Ferguson is 
recognized for 5 minutes.
    Mr. Ferguson. Thank you, Madam Chairman. Dr. Hall, thank 
you for coming today. I guess one of the joys of being a 
freshman and going late in this game is I have gotten to hear a 
lot of these comments and have learned an awful lot.
    So, a couple questions for you. First of all, do you 
believe that the rules set by Congress that you have to follow 
for scoring the budget and the policy changes do they allow us 
to accurately look in the future. Just a yes, or no.
    Mr. Hall. I do not have an opinion on that, we will do 
whatever you like.
    Mr. Ferguson. I would suggest that we are $20 trillion in 
debt. I will let the answer stand for itself there. Next, can 
you accurately talk about how the proposed reforms, tax reform 
policy, the rolling back of the regulatory cost, possible trade 
policy changes, spending in defense, infrastructure and poverty 
initiations simultaneously affect the budget?
    Mr. Hall. No, we would have to do a lot of specifics and do 
a lot more work.
    Mr. Ferguson. It just seems, you know, it is awfully tough 
for us to have an honest conversation if we do not accurately 
know where we are going with these numbers and how they are 
actually going to affect us. Do you think that we should be 
using more dynamic scoring models based on predictive analytics 
to give your office and those around you more tools to 
accurately reflect what the policy changes are going to 
suggest?
    Mr. Hall. I think the policy right now is working well, the 
dynamic scoring we believe makes for a more accurate forecast. 
And it really makes a difference on the large pieces of 
legislation and that is when we are required to use it, so that 
seems appropriate. We are going to continue to get better at it 
and quicker at it but I think it does probably help improve the 
accuracy.
    Mr. Ferguson. You know, as we sit around and we talk about 
this, the [inaudible] mandatory spending and I think we are 
going to have to be honest with ourselves and the American 
people about the promises that have been made and our ability 
to continue to keep those promises. We are going to have tough 
decisions to make and it is you know, I kind of look at it and 
we talk about where we are in the budget process, are we going 
to have a budget that balances in 10 years, are we going to 
have one that balances in 5 years, is it going to be one that 
balances in 12 years.
    Are we not going to vote for a balanced budget because it 
ruins the political purity of a particular representative? I 
just get the sense until we are willing to fundamentally 
address and honestly address the mandatory spending crisis that 
we are not doing anything more than rearranging the deck chairs 
on the Titanic. Is that a fair statement?
    Mr. Hall. I want to be fair and say that there are a lot of 
ways you can address it, you do not have to just focus on 
mandatories. The broader way.
    Mr. Ferguson. Dr. Hall you said earlier, the question I 
might be paraphrasing, all of the mandatory spending is going 
to outstrip all of the discretionary spending.
    Mr. Hall. That is right, and the spending is mandatory.
    Mr. Ferguson. Thank you.
    Mr. Hall. That is right.
    Mr. Ferguson. So, I mean it is coming, at some point it is 
going to eat up every single resource we've got so we have to 
address that. You know, the other thing and I will close with 
this. You know it is interesting, I kind of feel we are a 
political version of Thelma and Louise right now. We have been, 
just in this here, and we have been talking about who has been 
the better driver for the last 50 miles. And now we are fussing 
about who is driving and the car is about to go over the cliff 
and it does not matter who is right or who is wrong if we do 
not stop that car from going over the cliff.
    The American people expect us to stop this car from going 
over the cliff and I think it is a real challenge that we have 
as a Congress and as an American people to have those very 
honest conversations that we have got to have. We have to get 
better at scoring the budget, I believe we have to get better 
at scoring the proposed changes. I think we have to able to 
strip the emotion and the politics out of our decision and use 
better analytics to make these tough decision and with that 
Madam Chair I yield back.
    Interim Chair Black. The gentleman yields back. The 
gentleman from Wisconsin, Mr. Grotham, is recognized for 5 
minutes.
    Mr. Grotham. Thank you. I want to take up again a little 
bit looking into why the economy is doing so poorly, you know 
this 1.6 percent growth is kind of pathetic with all of the new 
technology that is out there. Labor participation rate is 62.7 
percent and I want talk a little bit more about these 
entitlements because in the last decade, means tested spending 
has gone up from about $670 billion to $740 billion, so more 
than double. When you look at so many of these programs it is 
like they were designed by politicians who intentionally either 
wanted to keep people out of the labor force or not making a 
lot of money.
    And I want you to comment a little bit on whether, say if 
we did something about low income housing, where we kind of 
give people free housing as long as you do not work. Or the 
earned income tax credit where we like punish people if they 
make more than $19,000 a year.
    Do you think we could begin to lift these numbers up, lift 
up the GDP as well as lift up our tax collections if we were to 
get rid of some of these programs and free people from the 
incentives not to work? I mean in my district my employers 
again and again I feel, ``Glenn it is tough competition out 
there to find workers and the toughest competition is from the 
Federal Government that is paying people not to work for me.'' 
Could you comment on what would happen if we would scale back 
some of these programs?
    Mr. Hall. Well, sure, obviously, we would need some 
specifics to actually do a real score and do it carefully. And 
of course, repealing some of these programs would have some 
other effects that you might want to consider. But we do a 
number of things, and we make a point of putting it out 
occasionally, which are implicit taxes on working that if 
people work more and earn more they lose benefits or if they 
begin to work they lose benefits. So, that is part of our 
calculation when we look at something we look and see what 
impact it has on supply of labor, willingness of people to 
work, and that is consideration.
    Mr. Grotham. Could you easily come up with a hypothetical 
in which people, say if they work and make another $10,000, 
lose $10,000 in benefits between their Pell Grants and their 
earned income tax credit and their food stamps and low income 
housing.
    Mr. Hall. Well I mean those are all reasonable versions of 
that. For example, we have been talking a little bit about the 
ACA, that is part of the issue about the ACA the decline in the 
labor supply is essentially an implicit tax on working where 
you lose your health benefits.
    Mr. Grotham. And it is not just a decline on labor supply, 
I think a lot of these programs will encourage you to work but 
not very hard. You know the earned income tax credit was 
clearly designed to discourage somebody to make more than 
$20,000 a year. Right?
    I mean that is what it appears it was designed to do. There 
are various different cliffs in the Affordable Care Act. I was 
in a different hearing yesterday in which an accountant talked 
about people holding down their income to get their subsidies. 
So, in other words again the Affordable Care Act was designed 
by somebody who wanted to discourage Americans from working 
hard, correct?
    Mr. Hall. Well, I do not know that was the reason for it, 
but certainly looking at the possible side effects of programs, 
at what affects they may have on incentives is an important 
part of any public policy analysis I think.
    Mr. Grotham. We can do both a great step towards reducing 
things on the spend side and getting a big increase on income 
collection if we paired back some of these programs and allowed 
people to work. When, you know, you run into people back in the 
district that have stories, some of you do not talk to these 
people but you talk to their parents, you talk to their 
siblings and they will tell you, you know. My brother, my 
sister, my daughter, they are not working because of the 
benefits. You think we could make a big step towards balancing 
the budget if we pared some of these things back?
    Mr. Hall. It would undoubtedly have an impact. I do not 
know if it would get us towards balancing the budget because 
this is such a big problem. But that could have some 
significant impact if one looked at some of the programs and 
worried about the incentives.
    Mr. Grotham. Well, means tested spending, according to what 
I have here, went up about $370 billion in the last 10 years, I 
mean that by itself would be almost half way towards balancing 
our budget. And you turn around and look at the huge degree in 
which we discourage people from working and also you get that 
income tax coming in. I suppose you would just be afraid to 
take a ballpark estimate on what would happen.
    Mr. Hall. And that is right and there is an element too of 
a onetime change and then apart of what we are looking for is 
the more permanent change. What happens to not just labor 
supply, but the growth of the labor supply going forward.
    Mr. Grotham. Well, thanks for coming over here its 
enjoyable listening to you.
    Interim Chair Black. The gentleman's time is expired. As we 
conclude today, I just want to clip off a few things to help us 
recognize what a situation we are in as a country right now, 
and how desperate we are to change the current trajectory that 
we are on.
    And so, let me just clip off a few reminders. Real GDP grew 
only by 1.6 percent last year, a 5 year low and half the long-
term average growth rate in this U.S. Since the recession ended 
in 2009 the economy has grown by an average of 2.1 percent 
making this the weakest economic recovery of the modern era. 
The headline on unemployment rate has declined sharply in the 
recent years and currently stands at 4.7 percent and that all 
sounds good but the other aspects of the labor market remain 
weak. The broader unemployment rate, which includes those, 
working part-time because they cannot find full-time work and 
discourage workers who have stopped looking for work is 9.2 
percent nearly double the headline rate.
    The labor workforce participation rate, which I continue to 
remind people in my district as they hear the low rate that is 
only unemployment rate, that really is the only the rate that 
matters, 62.7 percent. That means that of able-bodied workers, 
only 62.7 percent of them are actually employed in a full-time 
employment. Close to a 40-year low and CBO expects this rate to 
continue to decline in the future. CBO maintains that the 
Affordable Care Act is contributing to this decline in the 
overall labor supply in the economy.
    The average hourly earnings have increased by about 2.5 
percent over the latest year, but that is well below the 
previous session level when earnings were growing by about 4 
percent a year. Real median household income is finally on its 
upswing but at $56,500, is still $900 or 1.6 percent below its 
pre-recession peak in 2007. So, as we can see by all of its 
statistics and these numbers, this is affecting our economy and 
more importantly this is affecting the people of this country.
    So, thank you Mr. Hall for appearing before us today. 
Please be advised that members may submit questions to be 
answered later in writing. Those questions and answers will be 
made part of the formal hearing. Any members who wish to submit 
questions or any extraneous materials for the record may do so 
within 7 days.
    Mr. Yarmuth. Madam Chair, may I make just a brief comment 
in response to your comments?
    Interim Chair Black. Absolutely.
    Mr. Yarmuth. In listening to both sides and to Director 
Hall during this hearing we heard very few ideas for 
stimulating growth in the economy or specifics about what we 
would cut or how we would fix some of the mandatory spending 
programs.
    So, I think if it would be possible maybe to have another 
session in the next few months to discuss the actual 
recommendations that are in the new publication from Director 
Hall and maybe get some other people in here who can talk about 
how we can actually grow the economy. Because I am not exactly 
sure we know how to do that, either side of us.
    Interim Chair Black. Point well taken, Mr. Yarmuth. With 
that the committee stands adjourned.
    [Whereupon, at 12:11 p.m., the committee adjourned subject 
to the call of the chair.]
    [The following questions and responses were submitted for 
the record.]

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