U.S. GOVERNMENT PUBLISHING OFFICE

30–543 WASHINGTON : 2018

THE CONGRESSIONAL BUDGET OFFICE’S BUDGET 

AND ECONOMIC OUTLOOK: CONSIDERING 

CBO’S ANNUAL BASELINE 

HEARING 

BEFORE THE

COMMITTEE ON THE BUDGET 

HOUSE OF REPRESENTATIVES 

ONE HUNDRED FIFTEENTH CONGRESS 

SECOND SESSION 

HEARING HELD IN WASHINGTON, D.C., APRIL 12, 2018 

Serial No. 115–13 

Printed for the use of the Committee on the Budget 

( 

Available on the Internet: 

www.govinfo.gov 

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(II) 

COMMITTEE ON THE BUDGET 

STEVE WOMACK, Arkansas, Chairman 

TODD ROKITA, Indiana, Vice Chairman 

DIANE BLACK, Tennessee 

MARIO DIAZ-BALART, Florida 

TOM COLE, Oklahoma 

TOM MCCLINTOCK, California 

ROB WOODALL, Georgia 

MARK SANFORD, South Carolina 

DAVE BRAT, Virginia 

GLENN GROTHMAN, Wisconsin 

GARY J. PALMER, Alabama 

BRUCE WESTERMAN, Arkansas 

JAMES B. RENACCI, Ohio 

BILL JOHNSON, Ohio 

JASON SMITH, Missouri 

JASON LEWIS, Minnesota 

JACK BERGMAN, Michigan 

JOHN J. FASO, New York 

LLOYD SMUCKER, Pennsylvania 

MATT GAETZ, Florida 

JODEY C. ARRINGTON, Texas 

A. DREW FERGUSON IV, Georgia 

JOHN A. YARMUTH, Kentucky, 

Ranking Minority Member 

BARBARA LEE, California 

MICHELLE LUJAN GRISHAM, New Mexico 

SETH MOULTON, Massachusetts 

HAKEEM S. JEFFRIES, New York 

BRIAN HIGGINS, New York 

SUZAN K. DELBENE, Washington 

DEBBIE WASSERMAN SCHULTZ, Florida 

BRENDAN F. BOYLE, Pennsylvania 

RO KHANNA, California 

PRAMILA JAYAPAL, Washington, 

Vice Ranking Minority Member 

SALUD O. CARBAJAL, California 

SHEILA JACKSON LEE, Texas 

JANICE D. SCHAKOWSKY, Illinois 

PROFESSIONAL STAFF

DAN KENIRY, Staff Director 

ELLEN BALIS, Minority Staff Director 

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(III) 

CONTENTS 

Page 

Hearing held in Washington, D.C., April 12, 2018 ............................................... 1 

Hon. Steve Womack, Chairman, Committee on the Budget ......................... 1 

Prepared statement of ............................................................................... 3 

Hon. John A. Yarmuth, Ranking Member, Committee on the Budget ........ 5 

Prepared statement of ............................................................................... 7 

Keith Hall, Director, Congressional Budget Office ........................................ 9 

Prepared statement of ............................................................................... 11 

Hon. Gary Palmer, Member, Committee on the Budget, questions submitted for the record ..................................................................................... 53 

Answers to questions submitted for the record .............................................. 55 

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(1) 

THE CONGRESSIONAL BUDGET OFFICE’S 

BUDGET AND ECONOMIC OUTLOOK: CONSIDERING CBO’S ANNUAL BASELINE 

Thursday, April 12, 2018 

HOUSE OF REPRESENTATIVES, 

COMMITTEE ON THE BUDGET, 

Washington, D.C. 

The Committee met, pursuant to call, at 10:00 a.m., in Room 

1334, Longworth House Office Building, Hon. Steve Womack 

[Chairman of the Committee] presiding. 

Present: Representatives Womack, Rokita, Black, McClintock, 

Woodall, Sanford, Brat, Grothman, Palmer, Westerman, Renacci, 

Johnson, Lewis, Bergman, Faso, Smucker, Yarmuth, Lujan Grisham, Jeffries, Delbene, Boyle, Jayapal, Carbajal, Jackson Lee, and 

Schakowsky. 

Chairman WOMACK. The hearing will come to order. Welcome to 

the Committee on the Budget hearing on the Congressional Budget 

Office’s Budget and Economic Outlook. Bear with me. In the congressional budget process, we often refer to this annual report as 

a baseline, because it provides a benchmark when considering the 

effects of policy options and determining funding levels. That being 

said, receipt of the baseline each year means that the process of 

writing the budget resolution in this committee can begin in earnest. 

While the CBO’s report is typically published earlier in the calendar year, we knew that this year’s would be delayed in order to 

adjust for the recently enacted tax reform law. However, regardless 

of when it is released and updated each year, CBO’s baseline is important because it sheds light on our Nation’s current fiscal challenges and guides us in mapping out a sustainable path for the future. 

Assuming the continuation of current law, CBO’s baseline offers 

projections of Federal spending, revenue surpluses or deficits, and 

debt. CBO’s baseline also includes a forecast of key economic indicators, as well as detailed budget estimates for specific programs 

and categories of spending. 

We are joined today by Dr. Keith Hall, who is the Director of the 

Congressional Budget Office, and we appreciate his attendance at 

yet another hearing involving the CBO. And, Dr. Hall, we appreciate you being here today. 

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Before we welcome his comments and then begin, in earnest, our 

question and answer period, I would like to yield for some opening 

statements from the Ranking Member, the gentleman from the 

Commonwealth of Kentucky, Mr. Yarmuth. 

[The prepared statement of Chairman Womack follows:] 

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WOMACK OPENING STATEMENT 

THE CONGRESSIONAL BUDGET OFFICE'S BUDGET AND ECONOMIC 

OUTLOOK: CONSIDERING CEO'S ANNUAL BASELINE 

Washington, D.C .. Tuesday, February 27, 2018 

Remarhs as prepared for delivery: 

Good morning and welcome to the House Budget Committee's hearing on the Congressional 

Budget Office's Budget and Economic Outlook for 2018-2028. 

In the congressional budget process, we often refer to this annual report as the "baseline" 

because it provides a benchmark when considering the effects of policy options and determining 

funding levels. 

That being said, receipt of the baseline each year means that the process of writing the budget 

resolution in this committee can begin in earnest. 

While CBO's report is typically published earlier in the calendar year, we knew that this year's 

would be delayed in order to adjust for the recently enacted tax reform law. 

However, regardless of when it is released and updated each year, CBO's baseline is important 

because it sheds light on our nation's current fiscal challenges and guides us in mapping out a 

sustainable path for the future. 

Assuming the continuation of current law, CBO's baseline offers projections of federal spending, 

revenue, surpluses or deficits, and debt. 

CBO's baseline also includes a forecast of key economic indicators as well as detailed budget 

estimates for specific programs and categories of spending. 

The baseline paints a picture of the potential fiscal future, but it does not have to dictate the 

future. 

However, the baseline should encourage Congress to heed warnings of what could be ahead 

and respond with solutions. 

Without question, we have our work cut out for us in order to confront the nation's growing debt. 

It is sobering that mandatory spending, including interest on the federal debt, continues to be 

the greatest driver of our debt. It is growing at an unsustainable pace. 

While it is discouraging, this trend is not a surprise. 

For years, House Republicans have called for real action to reform and strengthen mandatory 

programs upon which many Americans depend. 
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If we do nothing, these programs will eventually fail for those relying on them today and may not 

exist for those who hope to depend on them in the future. 

The longer we wait to address these problems, the more difficult the solutions become. 

Despite the many challenges, CBO's baseline does show where we are getting it right. 

Take, for example, tax reform. It's working. 

In fact, CBO expects that employment will rise, wages and income levels will increase, and 

potential output will grow as a direct result of tax reform. 

CBO also expects that tax reform will lead to greater business investment in the economy and 

the creation of approximately 1.1 million new jobs over the next 11 years. 

Another sign that recently-enacted policies are boosting the economy, CBO projects that 

unemployment will continue declining in the next few years. This is good news for our country. 

As part of its analysis, CBO included an in-depth discussion on its handling of tax reform, 

comparing its estimates against nine other organizations. 

While it is certainly not unusual for CBO to compare its projections for overall economic 

forecasts, this is the first time the baseline has used detailed comparisons to explain 

conclusions about the economic effects of a specific piece of legislation. 

After concerns that were brought up about transparency in our oversight hearings with CBO 

earlier this spring, I applaud the agency for using that feedback and providing more context 

regarding assumptions. 

During today's hearing, we welcome CBO's Director, Dr. Keith Hall. 

Thanks for being with us today, Dr. Hall. Your insight about CBO's projections and expectations 

for the economy will help us understand the fiscal challenges we face as we write a responsible 

and balanced budget. 

While CBO's projections are daunting, the current track does not have to dictate what the future 

will be. We can and, frankly, we must make the responsible choices to secure a prosperous 

nation for generations to come. 

Thank you, and with that, I yield to the Ranking Member, Mr. Yarmuth. 
5 

Mr. YARMUTH. Thank you, Mr. Chairman, and welcome, Director 

Hall. Thank you for appearing before us once again. This year’s 

economic and budget outlook offers a contrasting story. CBO presents us with an optimistic short-term economic forecast, one that, 

you note, is more optimistic than that of the Federal reserve and 

most private forecasters, along with a very disturbing longer-term 

budget forecast that shows the deficit reaching $1 trillion 2 or 3 

years earlier than in your previous estimates. 

The two, of course, are not unrelated. Congress has provided a 

large jolt of economic stimulus with tax and spending bills this 

winter. We would be better off if the other side had been as willing 

to support economic stimulus nine years ago, when it was urgently 

needed, as they are today. But we are where we are, and these bills 

are giving the economy some juice today. But they are also increasing our current and long-term deficits. 

The tax bill focused its benefits on the wealthy and corporations. 

The Treasury Secretary and many Congressional Republicans kept 

insisting that the bill would pay for itself. No credible source has 

ever agreed, and your report confirms the obvious: the tax bill does 

not pay for itself. Indeed, its economic feedback does not even quite 

pay for the additional interest spending needed to finance it. The 

numbers in your report indicate that, if we had not passed the tax 

bill, the deficit outlook for 2018 to 27 would have actually improved 

since your June estimate. Instead, it is $1.6 trillion worse. 

We are getting some economic boost from the tax bill, and while 

that will be welcome, it will also be short-lived. The boost is very 

front-loaded. Indeed, your report indicates that the tax bill will actually reduce our economic growth rate beginning in 2025. I also 

worry that the benefits, as short as they may be, will not be broadly shared; that they will primarily help those who are already 

doing well at the expense of everyone else, just like the tax cuts 

themselves. 

I think it is important to point out that this picture assumes we 

will not have a recession for a decade, that the fed will be able to 

raise rates just enough to keep the economy from overheating over 

the next four years, then drop them just enough from 2022 to 2026 

to engineer a soft landing. I hope you are right about that, but I 

do not think we can count on having the current expansion last 

nearly twice as long as the longest previous one in our history, and 

a recession would surely mean a weaker economy and larger deficits than you forecast. 

That is a reality Congressional Republicans and President 

Trump are pretending we do not live in. They have succeeded in 

making the deficit worse. They are now trying to use the deficit as 

an excuse to make massive cuts to programs vital to American families, including Medicare, Medicaid, and Social Security. The Balanced Budget Amendment we are debating on the floor today 

would force those cuts. It will not pass, but I think we can count 

on our colleagues to keep trying. 

After all, it is what we have seen for decades. It happens every 

time a Republican President replaces a Democratic one in the 

White House. Ronald Reagan cut taxes, sent deficits skyrocketing, 

and unsuccessfully sought to slash the safety net. The second 

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6 

cits, and unsuccessfully sought to cut Social Security. Even President Nixon inherited a surplus that immediately disappeared. 

It is no surprise that we see the deficits soaring again now that 

Republicans have taken full control over the Federal budget. Some 

things never change. The only thing Republicans in Washington 

like better than complaining about deficits and debt is increasing 

deficits and debt. It is part of a three-step process that we have 

seen time and time again. 

First, they cut taxes primarily for the wealthy. Second, they shed 

crocodile tears and raise the alarm about the rising deficits that 

they just worsened. Third, they insist that the deficit is purely a 

spending problem and push for extreme cuts in programs that are 

vital to American families. 

I suspect we will hear at least some of my colleagues pursue 

steps two and three today, but before we get to that, Director Hall, 

I look forward to hearing your testimony. I yield back. 

[The prepared statement of Mr. Yarmuth follows:] 

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YARMUTH OPENING STATEMENT 

THE CONGRESSIONAL BUDGET OFFICE'S BUDGET AND ECONOMIC 

OUTLOOK: CONSIDERING CEO'S ANNUAL BASELINE 

Washington, D.C., Tuesday, February 27, 2018 

Remarl<8 as prepared for delivery: 

Thank you, Mr. Chairman. And welcome, Director Hall. Thank you for appearing before us 

once again. 

This year's economic and budget outlook offers a contrasting story. CBO presents us with an 

optimistic short-term economic forecast- one that you note is more optimistic than that of the 

Federal Reserve and most private forecasters - along with a very disturbing longerterm budget 

forecast that shows the deficit reaching $1 trillion two or three years earlier than in your previous 

estimates. 

The two, of course, are not unrelated. Congress has provided a large jolt of economic stimulus 

with tax and spending bills this winter. We would be better off if the other side had been as 

willing to support economic stimulus nine years ago when it was urgently needed -- as they 

are today. But we are where we are and those bills are giving the economy some juice today. 

But they are also increasing our current and long-term deficits. 

The tax bill focused its benefits on the wealthy and corporations. The Treasury Secretary and 

many congressional Republicans kept insisting that the bill would pay for itself. No credible 

source has ever agreed. And your report confirms the obvious. The tax bill doesn't pay for 

itself. Indeed, its economic feedback doesn't even quite pay for the additional interest spending 

needed to finance it. The numbers in your report indicate that, if we hadn't passed the tax bill, 

the deficit outlook for 2018-27 would have actually improved since your June estimate. Instead, 

it's $1.6 trillion worse. 

We are getting some economic boost from the tax bill. And while that will be welcome, it will 

also be short-lived. The boost is very front-loaded. Indeed, your report indicates that the tax bill 

will actually reduce our economic growth rate beginning in 2025. 

I also worry that the benefits, as short as they may be, will not be broadly shared. That they will 

primarily help those who are already doing well at the expense of everyone else just like the 

tax cuts themselves. 

I think it's important to point out that this picture assumes we will not have a recession for a 

decade, that the Fed will be able to raise rates just enough to keep the economy from 

overheating over the next four years, then drop them just enough from 2022 to 2026 to engineer 

a soft-landing. I hope you're right about that. But I don't think we can count on having the 

current expansion last nearly twice as long as the longest previous one in our history. And a 

recession would surely mean a weaker economy and larger deficits than you forecast. 

That's a reality Congressional Republicans and President Trump are pretending we don't live in. 

They have succeeded in making the deficit worse, and they are now trying to use the deficit as 

an excuse to make massive cut programs vital to American families, including Medicare, 

Medicaid and Social Security. The balanced budget amendment we are debating on the floor 
8 

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today would force those cuts. It won't pass. But I think we can count on our colleagues to keep 

trying. 

After all, it's what we've seen for decades. It happens every time a Republican President 

replaces a Democratic one in the White House. Ronald Reagan cut taxes, sent deficits 

skyrocketing, and unsuccessfully sought to slash the safety net The second President Bush 

cut taxes, turned record surpluses into record deficits, and unsuccessfully sought to cut Social 

Security. Even President Nixon inherited a surplus that immediately disappeared. It's no 

surprise that we see the deficit soaring again now that Republicans have taken full control over 

the federal budget 

Some things never change. The only thing Republicans in Washington like better than 

complaining about deficits and debt is increasing deficits and debt It's part of a three-step 

process that we've seen time and time again. First, they cut taxes, primarily for the wealthy. 

Second, they shed crocodile tears and raise the alarm about the rising deficits that they just 

worsened. Third, they insist that the deficit is purely a spending problem and push for extreme 

cuts in programs that are vital to American families. 

I suspect we'll hear at least some of my colleagues pursue steps two and three today. But, 

before we get to that, Director Hall, I look forward to hearing your testimony 
9 

Chairman WOMACK. Thank you, Mr. Yarmuth. As noted earlier, 

Dr. Keith Hall, Director of the Congressional Budget Office, is in 

front of you today. The committee, sir, has received your opening 

statement, and it will be made part of the formal hearing record. 

You will have 5 minutes to deliver oral remarks, and then, I am 

sure that the members that are gathered here today, and those 

that will arrive at some point during this hearing, will be anxious 

to engage you in a question and answer period. 

So, we are going to yield the floor to you for 5 minutes for your 

opening remarks, and the floor is yours, sir. 

STATEMENT OF DR. KEITH HALL, DIRECTOR, 

CONGRESSIONAL BUDGET OFFICE 

Mr. HALL. Thank you. Chairman Womack, 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 the economy. My statement 

summarizes CBO’s new baseline budget projections and economic 

forecast, which the agency released on Monday. 

In the Congressional Budget Office’s baseline projections, we can 

incorporate the assumption that current laws governing taxes and 

spending generally remain unchanged, the Federal budget grows 

substantially over the next few years. Later on, between 2023 and 

2028, it stabilizes in relation to the size of the economy, though at 

a high level. As a result, Federal debt is projected to be on a steadily rising trajectory throughout the coming decade, approaching 

100 percent of gross domestic product by 2028. 

Projected deficits over the 2018 to 2027 period have increased 

markedly since we issued our last budget and economic projections 

in June of 2017. The increase stems primarily from tax and spending legislation enacted since then, especially the 2017 tax act, the 

Bipartisan Budget Act of 2018, and the Consolidated Appropriations Act of 2018. 

In our economic projections, which underlie our budget projections, inflation-adjusted GDP, or real GDP, expands by 3.3 percent 

this year, and by 2.4 percent in 2019. Most of this growth is driven 

by consumer spending and business investment, but Federal spending also contributes a significant amount this year. 

Growth of real GDP exceeds the growth of real potential GDP 

over the next 2 years. This marked cyclical path in real GDP will 

occur, in large part, because the recent legislation provides significant fiscal stimulus at a time when there is very little slack in the 

economy. Those effects, as well as the larger Federal budget deficits resulting from the new laws, exert upward pressure on interest 

rates and prices. 

During the 2020 to 2026 period, those factors, along with the 

slower growth and Federal outlays in the expiration of reductions 

in personal income tax rates, dampen economic growth. 

After 2026, economic growth is projected to rise slightly, matching the growth rate of potential output by 2028. Between 2018 and 

2028, real actual output and real potential output alike are projected to expand at an average annual rate of 1.9 percent. In our 

forecast, the growth of potential GDP is the key determinant of the 

growth of actual GDP through 2028, because actual output is very 

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near its potential level now and is projected to be near its potential 

level at the end the of the period. 

Potential output is projected to grow more quickly than it has 

since the start of the 2007 and 2009 recession, as our growth and 

productivity increases to nearly its average over the next 25 years. 

Nonetheless, potential output is projected to grow more slowly than 

it did in earlier decades, held down by slower growth of the labor 

force. 

In our projections, the effects of the 2017 tax act on incentive to 

work, save, and invest raise real potential GDP throughout the 

2018 to 2028 period. Over the same period, the tax act is projected 

to boost a level of real GDP by an average of 0.7 percent and nonfarm payroll employment by an average of 1.1 million jobs. 

Our current economic projections differ from those that we made 

in June 2017 in a number of ways. The most significant is that potential and actual real GDP are projected to grow more quickly 

over the next few years. Projected output is greater because of the 

recently-enacted legislation, data that has become available after 

our previous economic projections were completed, and improvements in our analytical methods. 

Over the next decade, the unemployment rate is lower in our current projections that our previous ones, particularly during the 

next few years, then, economic stimulus boosts demand for labor. 

Also, both short and long-term interest rates are projected to be 

higher, on average, from 2018 to 2023. 

Turning to the budget projections, we estimate that the 2018 deficit will total $804 billion, $139 billion more than the $665 billion 

shortfall recorded in 2017. In our projections, budget deficits continue increasing after 2018. As deficits accumulate, debt held by 

the public rises from 78 percent of GDP, or $16 trillion, at the end 

of 2018, to 96 percent of GDP, or $29 trillion, by 2018. That percentage would be the largest since 1946, and well more than twice 

the average over the next few decades. 

For the 2018 to 2027 period, we now project a cumulative deficit 

that is $1.6 trillion larger than the $10.1 trillion that we anticipated in June. Projected revenues are lower by $1 trillion. Projected outlays are higher by half a trillion. 

Laws enacted since June 2017, above all, the three mentioned 

earlier, estimated to make the cumulative deficit $2.7 trillion larger than previously projected between 2018 and 2017. However, revisions to our economic projections caused us to reduce our estimate of the cumulative deficit by $1 trillion over the same period, 

mainly because of our expectations of faster growth in the economy. 

I appreciate the invitation to testify today about CBO’s budget 

and economic outlook, and I would be happy to answer questions. 

[The prepared statement of Keith Hall follows:] 

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Testimony 

The Budget and Economic Outlook: 

2018 to 2028 

Keith Hall 

Director 

Before the 

Committee on the Budget 

U.S. House of Representatives 

April12, 2018 
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Chairman Womack, Ranking Member Yarmurh, and 

Members of rhe Committee, thank you for inviting me 

to testify about the Congressional Budget Office's most 

recent analysis of the outlook for the budget and the 

economy. My statement summarizes CBO's new baseline 

budget projections and economic forecast, which the 

agency released on Monday. 

In the Congressional Budget Office's baseline projec~ 

tions, which incorporate rhe assumption that current 

laws governing taxes and spending generally remain 

unchanged, the federal budget deficit grows substantially 

over the next few years. Later on, between 2023 and 

2028, it stabilizes in relation ro the size of the economy, 

though at a high level by historical standards, 

As a result, federal debt is projected to be on a steadily 

rising trajectory throughout the coming decade, Debt 

held by the public, which has doubled in the past 

10 years as a percentage of gross domestic product 

(GDP), approaches 100 percent ofGDP by 2028 in 

CBO's projections. That amount is far greater than the 

debt in any year since just after World War II. Moreover, 

if lawmakers changed current law to maimain certain 

current policies-preventing a significant increase in 

individual income taxes in 2026 and drops in funding 

for defense and nondefense discretionary programs in 

2020, for example-the result would be even larger 

increases in debt. 

Projected deficits over the 2018-2027 period have 

increased markedly since June 2017, when CBO issued 

irs previous projections. The increase stems primarily 

from tax and spending legislation enacted since thenespecially Public Law 115-97 (originally called the lax 

Cuts and Jobs Act and called the 2017 tax act here), the 

Bipartisan Budget Acr of2018 (EL. 115-123), and rhe 

Consolidated Appropriations Act, 2018 (P.L. 115-141). 

The legislation has signilicandy reduced revenues and 

increased outlays anticipated under current law. 

In CBO's economic projections, which underlie irs budget projections, output grows at a faster pace this year 

than in 20 l7, as the recent changes in fiscal policy add to 

existing momentum in spending on goods and services. 

Growth in actual GDP outpaces growth in potential 

(that is, maximum sustainable) GOP both this year 

and next, pushing the unemployment rate down. After 

2019, economic growth is projected to slow, eventually 

matching CBO's estimate of the economy's maximum 

sustainable rate of growth. 

Real GOP (that is, GDP adjusted to remove the effects 

of inflation) and real potential GDP are now projected to 

be greater throughout the coming decade than projected 

last June, in part because of the significant recent changes 

in fiscal policy. Also, interest rates arc projected to be 

higher and the unemployment rate lower in the next few 

years than CBO projected previously. 

Even if federal laws did generally remain in place, 

budgetary and economic outcomes would be difficult to 

predict and thus uncertain. CBO's projections, especially 

its economic projections, are even more uncertain than 

usual this year, because they incorporate estimates of the 

economic effecrs of the recent changes in fiscal policyand those estimates are themselves uncertain. CBO aims 

to formulate projections thar fall in the middle of the 

distriburion of possible outcomes. 

Economic Growth Is Projected to Be 

Relatively Strong This Year and Next 

and Then to Moderate In CBO's projections, the growth of real GDP exceeds 

the growth of real potential output over the next two 

years, putting upward pressure on inflation and interest 

rates (see Figure 1). But during the 2020-2026 period, 

a number of factors dampen economic growth: higher 

interest rates and prices, slower growth in federal outlays, 

and the expiration of reductions in personal income tax 

rates. After 2026, economic growth is projected to rise 

slightly, matching the growth rate of potential output by 

2028. 

Economic Gro"1h 

Between 2018 and 2028, actual and potential real ourput alike are projected ro expand at an average annual 

rate of 1.9 percent, In CBO's forecast, rhe growth of 

potential GDP is the key determinant of the growth of 

actual GDP through 2028, because actual output is very 

near its potential level now and is projected ro be near its 

potential level at the end of the period, 

Potential output is projected to grow more quiddy than 

it has since the start of the 2007-2009 recession, as 

the growth of productivity increases to nearly irs average over the pasr 25 years and as the recent changes in 

fiscal policy boost incentives to work, save, and invest. 

Nonetheless, potential output is projected to grow more 
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2 TflE BUDGET AND ECONOMIC OUTLOOK: 2018 TO 2028 

~r_o_wt_h_o_f_Rea_I_G_DP~an_d~e~-- ............. ·····--~----··-·--· -···-----···----~ Percent 

2013 2015 2017 2019 

Sour-ce: Congressional Budget Office. 

2021 2023 2025 2027 

In CBO's projections. real GOP growth 

and real potential GOP growth average 

1.9 percent over the 2018-2028 period. 

even though real GOP grows more rapidly 

at first. 

Real values are nominal values that have been adjusted to remove the effects of inflation. Potential GDP is CBO's estimate of the maximum sustainable 

output of the economy. The growth of real GOP and of real potentia! GDP is measured from the fourth quarter of one calendar year to the fourth quarter 

of the next. 

slowly than it did in earlier decades, held down by slower 

growth of the labor force (which results partly from the 

ongoing retirement of baby boomers). 

In CEO's projections, real GDP expands by 3.3 percent 

this year and by 2.4 percent in 2019 (see Table 1). It 

grew by 2.6 percent last year. Most of the growth in ourput in the next rwo years is driven by consumer spending 

and business investment, but federal spending also contributes a significant amount this year. After averaging 

1.7 percent from 2020 through 2026, real GDP growth 

is projected to average 1.8 percent in the last two years of 

the 2018-2028 period. 

Effects of Recent Legislation on the Economy 

The recently enacted legislation has shaped the economic 

outlook in significant ways. In CBO's projections, the 

effects of the 2017 tax act on incentives to work, save, 

and invest raise real poEential GDP throughout the 

2018-2028 period. In addition, all three major laws 

mentioned above provide fiscal stimulus, raising real 

GDP more than potentia! GDP in the ncar rerm. Over 

the longer term. aU of those effects, as well as the larger 

federal budget deficits resulting from rhe new laws, exert 

upward pressure on interest rates and prices. 

The largest effects on GOP over the JecaJc stem from 

the tax act. In CBO's projections, it boosts the level of real 

GDP by an average of 0. 7 percent and nonfarm payroll 

employment by an average of 1.1 million jobs over the 

2018-2028 period. During those years, rhe act also raises 

the level of real gross national product (GNP) by an annual 

average of about $470 per person in 20!8 dollars. (GNP 

differs from GDP by including the income that U.S. 

residents earn from abroad and excluding the income that 

nonresidents earn from domestic sources; it is therefore a 

better measure of the income available to U.S. residents.) 

Those projected effects grow in the earlier years of the 

period and become smaller in the later years. 

The other two laws arc estimated to increase output in 

the ncar term but dampen it over the longer term. The 

fiscal stimulus thar they provide boosts GDP by 0.3 percent in 2018 and by 0.6 percent in 2019, in CBO's 

assessment. However, the larger budget deficits that 

would result are estimated to reduce the resources available for private investment, lowering GDP in later years. 

GDP Is Projected to Be Greater Than CBO 

Previously Estimated CBO's current economic projections differ from those 

that the agency made in June 2017 in a number of ways. 

The mosr significant is that potential and actual real 

GDP are projected to grow more quickly over the next 

few years. As a result, the levels of those measures are 

1.6 percent higher than CBO previously estimated for 

2027 (the lasr year in the previous projection period). 

Projected output is greater because of recently enacted 
14 

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TFSTJMONY THEBl!DGhl AND ECONOMIC OUTLOOK: 201R TO 2028 3 --~----------- ---------···~····-·-·-·-···--···--···------· ·-- ·-··· .. __ ,. ,._ 

Table1. 

CBO's Projections of Key Economic Indicators for Calendar Years 2_0~1~8~to_20~2~8 _________ _ 

Gross Domestic Product 

Reata 

Nominal 

Inflation 

PCE price index 

Core PCE price indexb 

Unemployment Rate (Percent) 

Payroll Employment (Monthly change, in thousands}' 

Interest Rates (Percent) 

Three-month Treasury bills 

Ten-year Treasury notes 

Actual, 

2017 

2.6 

4.5 

1.7 

1.5 

4.4 

181 

0.9 

2.3 

2018 2019 2020 

Annual Average 

2021-

2022 

2023-

2028 

Percentage Change From Fourth Quarter to Fourth Quarter 

3.3 2.4 1.8 1.5 1.7 

5.2 4.5 3.9 3.7 3.9 

1.8 2.0 2.1 2.1 2.0 

1.9 2.1 2.2 2.1 2.0 

Annual Average 

3.8 3.3 3.6 4.4 4.8 

211 182 62 25 57 

1.9 2.9 3.6 3.7 2.8 

3.0 3.7 4.1 4.1 3.7 

Sources: Congressional Budget Office; Bureau of Economic Analysis; Bureau of Labor Statistics: Federal Reserve. 

PCE = personal consumption expenditures. 

a. Real values are nominal values that have been adjusted to remove the effects of inflation. 

b. Excludes prices for food and energy. 

c. Calculated as the change in payroll employment from the fourth quarter of one calendar year to the fourth quarter of the next, divided by 12 (the 

legislation, data that became available afr.cr CBO's previous economic projections were completed, and improvements in the agency's analytical methods. Also, because 

inflation is now amicipated to be higher, the level of 

nominal GDP is projected to be 2.4 percent higher in 

2027 than previously estimated. 

Over the next decade, the unemployment rate is lower 

in CBO's current projections rhan in its previous onesparticularly during the next few years, when economic 

stimulus boosts Jernand for labor. Also, both short- and 

long-term interest rates are projected to be higher, on 

average, from 2018 to 2023-by roughly 0.7 percentage 

points and 0.4 percentage points, respectively-than 

projected in June. That faster rise in interest rates primarily reflects stronger overall demand. 

Deficits Are Projected to Be Large by Historical Standards CBO estimates that the 2018 deficit will total $804 billion, $139 billion more than the $665 billion shortfall 

recorded in 2017 (see Table 2). Both amounts, however, 

are atTecred by shifts in the riming of some paymems. 

Outlays in 2018-and thus the deficit--have been 

reduced by $44 billion because October I, 2017 (the 

first day of fiscal year 2018), fell on a weekend; as a 

result, certain payments that were to be made on that 

day were instead made in September. in fiscal year 2017. 

If not for those shifts, the deficir projected for 2018 

would be $848 billion.' 

In CBO's projections, budget deficits continue increasing 

after 2018, rising from 4.2 percent ofGDP this year to 

5.1 percent in 2022 (adjusted to exclude the shifts in 

riming). That percentage has been exceeded in only five 

years since 1946; four of those years fOllowed the deep 

2007-2009 recession. Deficits remain at 5.1 percent 

between 2022 and 2025 before dipping at the end of 

the period, primarily because some tax provisions are 

scheduled to expire under current law, boosting revenues. 

Over the 2021-2028 period, projected deficits average 
15 

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APRIL 12,2018 

Table 2. 

Total 

Actual, 2019- 2019-

2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 2023 2028 

In Billions of Dollars 

Revenues 3,316 3,338 3,490 3,678 3,827 4,012 4,228 4,444 4,663 5,002 5,299 5,520 19,234 44,162 

Outlays 4,470 4,685 6,015 6,322 7,046 24,893 56,580 

Deficit -981 -1,008 -1,352 -1,320 -1,526 -5,660 -12,418 

Debt Held by the Public 

at the End of the Year 14,665 15,688 16,762 17,827 18,998 20,319 21,638 22,932 24,338 25,715 27,087 28,671 n.a. 

As a Percentage of Gross Domestic Product 

Revenues 17.3 16.6 16.5 16.7 16.7 16.9 17.2 17.4 17.5 18.1 18.5 18.5 16.8 17.5 

Outlays 20.8 20.6 21.2 21.3 21.6 22.3 22.3 22.2 22.6 22.9 23.1 23.6 21.8 22.4 

Deficit -3.5 -4.0 -4.6 -4.6 -4.9 -5.4 -5.2 -4.9 -5.1 -4.8 -4.6 -5.1 -4.9 -4.9 

Debt Held by the Public 

at the End of the Year 76.5 78.0 79.3 80.9 83.1 85.7 87.9 89.6 91.5 93.1 94.5 96.2 

Memorandum: 

Deficit as a Percentage 

-3.5 -4.2 -4.6 -4.6 ·4.9 ·5.1 -5.1 -5.1 ·5.1 -4.8 -4.6 -4.8 -4.9 -4.9 

Source: Congressional Budget Office. 

GDP =gross domestic product; n.a. =not applicable. 

4.9 percent ofGDP; the only time since World War II 

when the deficit has been so large over so many 

years was after 2007-2009 recession. 

Revenues 

For the next revenues hover ncar their 

2018 level percent of GOP in CBO's projections. 

Then they rise steadily, reaching 17.5 percent of GDP 

by 2025. At the end of that year, many provisions of the 

2017 tax act expire, causing receipts to rise sharply-to 

18.1 percent of GOP in 2026 and 18.5 perccnr in 2027 

and 2028. They have averaged 17.4 percent ofGDP over 

the past 50 years. 

Outlays 

In CBO's projections, outlays for the next three years 

remain near 21 percent ofGDP, which is higher than 

their average of 20.3 percent over rhe past 50 years. After 

that, outlays grow more quickly than the economy does, 

reaching 23.3 pcrcem ofGDP (adjusted to exclude shifts 

in timing) by 2028. 

That increase reflects significant growth in mandatory 

spending-mainly because rhe aging of the population 

and rising health care costs per beneficiary are projected 

to increase spending for Social Security and Medicare, 

among other programs. It also reflects significant growth 

in interest costs, which are projected to grow more 

quickly than any other major component of the budget, 

the result of rising interest rates and mounting debt. By 

2028, net outlays for inrerest are projected to be roughly 

triple what they are this year in nominal terms and 

roughly double when measured as a percentage of GDP. 

In contrast, discretionary spending in the projections 

declines in relation to the size of the economy. 

Deficits Are Projected to Be Larger Than 

CBO Previously Estimated The deficit thar CBO now esrimares for 2018 is 

$242 billion larger than the one that ir projected for that 

year in June 2017. Accounting for mosr of that differ~ 

ence is a $194 billion reduction in projened revenues, 

mainly because the 2017 tax act is expened tO reduce 

collections of individual and corporate income taxes. 
16 

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TESTJM01\l' THE BUDGH AND ECO\!OMJC OUTLOOK: l018 TO l0l8 5 --- -- --~----~---·--·~~~ --- ~~- ~-- ----~~--

Figure 2. 

Fede_ral Debt f:l~ld~}'t~e Public 

Percentage of Gross Domestic Product 

120 120 

100 100 

80 80 

60 60 

40 40 

20 20 

1940 1945 1950 1955 1960 1965 1970 1975 1980 1985 1990 1995 2000 2005 2010 2015 2020 2025 

for the 2018-2027 period, CBO now projects a cumulative deficit that is $1.6 trillion larger than the $10.1 trillion rhat the agency anticipated in June. Projected 

revenues are lower by $1.0 trillion, and projected outlays 

arc higher by $0.5 trillion. 

Laws enacred since June 2017-above all, the three mentioned above-are estimated to make deficits $2.7 trillion larger than previously projected hctween 2018 and 

2027, an effect that results from reducing revenues by 

$1.7 trillion (or 4 percent) and increasing outlays by 

$1.0 trillion (or 2 pen::cnt). 2 The reduction in projected 

revenues stems primarily from the lower individual 

income tax rates that the tax act has pur in place for 

much of the period. Projected ourlays are higher mostly 

because the other two pieces of legislation will increase 

discretionary spending. Those revenue reductions and 

spending increases would result in larger deficits and thus 

in higher interest costs than CBO previously projected. 

In contrast, revisions to CBO's economic projections 

caused the reduce its estimate of the cumula-

$1.0 trillion. Expectations of faster growth 

in rhe and in wages and corporate profits led w 

trillion in projected tax receipts from 

2. 

adjustments -are classified as technical updaH'S. 

all sources. Other changes had relatively small net effects 

on the projections. 

Debt Held by the Public Is Projected to 

Approach 100 Percent of GDP As deficits accumulate in CBO's projections, debt 

held by the public rises from 78 percent ofGDP (or 

$16 trillion) at the end of2018 to 96 percent ofGDP 

(or $29 trillion) by 2028. That percentage would be the 

largest since 1 946 and well more than twice the average 

over rhe past five decades (see Figure 2). 

Such high and rising debt would have serious negative 

consequences fOr the budget and the nation: 

• Federal spending on interest payments on that debt 

would increase substantially, especially because interest rates are projected to rise over the next few years. 

• Because federal borrowing reduces total saving in rhc 

economy over rime, the nation's capital stock would 

ultimately be smaller, and productivity and total 

wages would be lower. 

• Lawmakers would have less flexibiliry tO use tax and 

spending policies to respond to unexpected challenges. 

• The likelihood of a fiscal crisis in the United States 

would increase. There would be a greater risk that 
17 

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investors would become unwilling ro finance the 

government's borrowing unless they were com pen~ 

sated with very high interest rates; if that happened, 

interest rates on federal debt would rise suddenly and 

sharply. 

Deficits and Debt Would Be Larger If Some 

Current Policies Were Continued CBO also analyzed an alternative scenario in which 

current law was alrered w maintain major policies that 

are now in place and ro provide more typical amounrs 

of emergency funding than rhe sums provided for 2018. 

Specifically, CBO analyzed what would happen if: 

• More than 50 expiring revenue provisions were 

extended, including the individual income tax provisions of the 2017 tax act; 

• Delays in implementing certain taxes established 

by the Affordable Care Act were extended or made 

permanent; 

• Scheduled limirs on discretionaty appropriations 

did not take effect, and most appropriations instead 

grew each year from their 2018 amount at the rate of 

inflation; and 

• Lawmakers provided inflation-adjusted emergency 

appropriations for nondefense discretionary programs 

equal to the average amount of such funding from 

2012 through 2017-about $11 billion-each year 

between 2019 and 2028, rather rhan the roughly 

$100 billion a year projected in the baseline, 

In that scenario, tar larger deficits and much greater debt 

would result than in CBO's baseline projections for the 

2019-2028 period. Deficits would be larger by an average of a full percentage point ofGDP, rising by a total 

of $2.6 trillion ro yidd a cumulative deficit of nearly 

$15 trillion over that period. And debt held by the public would reach about 105 percent of GDP by rhe end 

of2028, an amount that has been exceeded only once in 

the nation's history. Moreover, the pressures contributing 

ro that rise would accelerate and push debt up even more 

sharply in subsequent decades. 

This testimony reiterates the summary of The 

Budget and &onomic Outlook: 2018 to 2028, 

which is one in a series of reports on the state of 

the budget and the economy that CBO issues each 

year. The report satisfies the requirement of section 

202(e) of the Congressional Budget Act of 1974 

for CBO to submit to the Committees on the 

Budget periodic reports about fiscal policy and to 

provide baseline projections of rhe federal budget. 

In accordance with CBO's mandate to provide 

objective, impartial analysis, neither that report nor 

this testimony makes any recommendations. Both 

pubHcations are available on CBO's website, at 

www.cbo.gov/publication/53651 and www.cbo.gov/ 

publicarion/53722, respectively. 

Keith Hall 

Director 
18 

Chairman WOMACK. Thank you, Dr. Hall, once again, for your 

appearance and for your opening remarks. And now, we are going 

to begin our Q-and-A with you. 

Dr. Hall, this is the first hearing we are having with you since 

the conclusion of the CBO Oversight Hearing series. In the course 

of those five hearings, the committee expressed concerns about the 

CBO’s level of transparency in its interactions with outside organizations in the course of developing projections and analysis. 

In what ways has CBO responded to those concerns in the budget and economic outlook that you present today? And then, I will 

follow up by asking, would you characterize the work that you have 

done in this product fundamentally showing your work on the baseline? So, help us understand where you are in the area of transparency. 

Mr. HALL. Sure. Well, one of the things we did, of course, when 

we talked about our economic projection, we did put that in context 

of other economic projections around. So, we compared it to bluechip. We compared it to the Federal Reserve, and some of those 

things. And then, one thing that we did that I thought has been 

particularly helpful already, is when we estimated the impact of 

the tax act. 

One of the things we focused on in appendix B was we focused 

on how we formulated our economic impact of the tax act, how we 

incorporated that. So, we spent a lot of time in appendix B going 

through great detail of how we saw the economic impact working 

out, and we produced a table comparing our estimate of economic 

impact with estimates of the eight other groups or individuals that 

did a comparable job of trying to estimate the effect of the tax act. 

Chairman WOMACK. In the CBO’s budget outlook, you project 

mandatory spending will reach 15 plus percent of GDP by the end 

of the budget window in 2028. By that point, your budget outlook 

projects mandatory spending, plus net interest payments, will be 

77 percent of the Federal budget. Talk a little bit about the composition of the Federal budget in terms of mandatory spending 

versus discretionary spending, and how it has changed down 

through the last several decades. In other words, how these proportions have basically flipped from, say, 50 years ago. 

Mr. HALL. Right. Well, for example, in 1968, mandatory outlays 

were something like 6 percent of GDP, and discretionary outlays 

were something like 13 percent. Discretionary was much larger. 

Right now, mandatory outlays total about, as you say, 12, 13 percent of GDP. Discretionary outlays are now only about 6 percent 

of GDP. So, mandatory outlays have completely overtaken discretionary outlays. 

And in our 10-year forecast, that trend is only going to continue. 

Discretionary outlays are going to continue to fall as a share of 

GDP, and mandatory outlays are going to grow significantly. 

So, we are getting to see a very, very different picture of how the 

Federal Government spends money. And one aspect of that I think 

is important is net interest is going to become a very large share 

of Federal spending going forward, hitting a number that is over 

3 percent of GDP in the next 10 years, which is going to be higher 

than total spending on either defense or nondefense discretionary 

BU00-A363290 with DISTILLER

19 

spending. Either one of those will now be overtaken by net interest, 

going forward. 

Chairman WOMACK. One of my takeaways in the outlook is the 

fact that discretionary spending—and I am addressing what we 

just talked about in a little different way, here—that discretionary 

spending in the aggregate numbers goes up over the 10-year window, as one would expect it might, but its share, its percentage of 

GDP, actually goes down. 

So, is that not another way of saying that the fiscal challenges 

facing the United States right now is more complicated on the 

mandatory side, the autopilot spending that this Congress provides 

every year for big programs, and less to do with what is happening 

on the discretionary budget? 

Mr. HALL. Absolutely. 

Chairman WOMACK. Okay. I think my Ranking Member is going 

to defer his questions, as he traditionally does. 

Mr. YARMUTH. I am going to defer. 

Chairman WOMACK. So, we are going to go straight into member 

questions, and I am going to yield first to the gentlelady from Tennessee, Ms. Black, for 5 minutes. 

Ms. BLACK. Thank you, Mr. Chairman, and again, welcome, Dr. 

Hall, for being here to talk about the report. I want to ask you if 

you can explain how CBO treats the cost-sharing reduction payments in the baseline, and along with that, is CBO doing this in 

full compliance with the section 257 of the Balanced Budget and 

Emergency Deficit Control Act of 1985, commonly known as the 

Gramm-Rudman? 

Mr. HALL. Sure, sure. Well, the cost-sharing reductions used to 

be paid for with direct payments, and that has now ended. And in 

reality, what has happened is insurance companies have had the 

ability to raise their premiums on silver plans to compensate for 

the lack of direct payments for the CSRs. In fact, I think we are 

projecting something like an increase in premiums of about 10 percent. 

And so, in our forecast, we have the CSRs paid for by these higher premiums, which are then subsidized by the Federal Government. And those subsidies are sort of taking the place of the direct 

payments on the CSRs. And so, the CSR entitlement is paid for in 

our forecast, it is just paid for a different way that reflects the reality of what is going on. 

Ms. BLACK. So, just to make sure that I understand completely 

and to clarify, does this mean that the CBO continues to treat 

CSRs as an entitlement obligation in the baseline, in accordance 

with the law as stated before in this committee? 

Mr. HALL. It does. It is an entitlement in our baseline, and we 

have it paid for in our baseline. 

Ms. BLACK. And then, my final piece of this is, what is the benefit of CBO reflecting the entitlement obligation through the premium tax credit? And does this show the American public a more 

realistic picture of our fiscal situation? 

Mr. HALL. Well, absolutely. We are required to show that it is 

paid for, and it is paid for, but in reality, it is being paid for 

through increased subsidies from higher premiums. So, it is reflectBU00-A363290 with DISTILLER

20 

ing the reality. And again, we are describing, I think, accurately 

how the CSRs are operating and being paid for. 

Ms. BLACK. Thank you, Mr. Hall, and I yield back the balance 

of my time. 

Chairman WOMACK. Mr. Jeffries, New York. 

Mr. JEFFRIES. Thank you, distinguished chairperson, as well as 

the distinguished Ranking Member, for yielding. Good morning, Dr. 

Hall. You were asked earlier today about mandatory outlays, is 

that correct? 

Mr. HALL. Yes. 

Mr. JEFFRIES. And mandatory outlays primarily include Social 

Security and Medicare, correct? 

Mr. HALL. That is right. 

Mr. JEFFRIES. So, when some folks in this town talk about reducing mandatory outlays, that is ‘‘Washington speak,’’ as Mick 

Mulvaney might say, for cutting Social Security and Medicare. 

True? 

Mr. HALL. Most of the increase in mandatory spending is keeping 

up with the aging population and the scheduled payments out of 

Social Security and Medicare. 

Mr. JEFFRIES. Okay. Now, before becoming the Director of the 

CBO, you served as the chief economist for President George W. 

Bush, correct? 

Mr. HALL. Yes. 

Mr. JEFFRIES. And you were chosen for your current role by congressional Republicans in 2015, is that right? 

Mr. HALL. Yes. 

Mr. JEFFRIES. Okay. So, according to CBO’s new baseline budget 

projections, remind me again, how large is the 2018 deficit projected to be? 

Mr. HALL. It is projected to be $804 trillion this year. 

Mr. JEFFRIES. Okay. That is under a Republican-controlled 

House, Senate, and Presidency, correct? 

Mr. HALL. Yes. 

Mr. JEFFRIES. How does that estimate compare with last year’s 

level? 

Mr. HALL. It is a significant increase over our estimate last year 

for 2018. But it is a significant increase since last year. It was, like, 

$655 trillion last year. It is now $804 billion [sic]. 

Mr. JEFFRIES. Okay. So, let me try to get an understanding of 

what accounts for that significant increase. Now, I think in your 

testimony you said that a $194 billion reduction in projected revenues accounts for much of that difference. Is that right? 

Mr. HALL. Yes. 

Mr. JEFFRIES. And that reduction in revenues is mainly because 

of the effects of last year’s so-called Republican tax reform bill. Is 

that right? 

Mr. HALL. That is correct. 

Mr. JEFFRIES. And, according to the CBO’s new budget and economic outlook, the Republican tax bill increases the projected deficit over the next 10 years by about $1.9 trillion. Is that right? 

Mr. HALL. That is correct. 

Mr. JEFFRIES. Now, we are going to hear a lot of talk on the floor today about the notion of confronting this existential $20 trillion 

BU00-A363290 with DISTILLER

21 

debt that we face, and certainly, that is enormous. I am trying to 

get an understanding of how we arrived at that point. Is it fair to 

say that part of that debt results from a failed war in Iraq that occurred under a Republican administration? 

Mr. HALL. I would not want to characterize the war, but certainly, spending on the conflicts has been a part of the budget. 

Mr. JEFFRIES. Okay. And we also had what I would call an unnecessarily prolonged conflict in Afghanistan. Several of us were 

just there. Our troops are doing a phenomenal job. But 16, 17 years 

is an incredibly long period of time. Would part of that $20 trillion 

debt be accounted for by the war in Afghanistan? 

Mr. HALL. Yes, it would. 

Mr. JEFFRIES. Okay. And that war, of course, unnecessarily prolonged by going into Iraq, occurring under a Republican administration. Now, would the debt that confront now, in part, be accounted for by the 2001 Bush tax cuts? 

Mr. HALL. Yeah, I am not sure how that plays into it, but I think 

it did have a negative impact on the deficit. 

Mr. JEFFRIES. And a negative impact on the deficit could also be 

attributed to the 2003 Bush tax cuts, is that correct? 

Mr. HALL. I believe so. I have not looked at those numbers lately. 

Mr. JEFFRIES. It also seems to me that the economy, which collapsed, in 2008—perhaps because of this theory of Republican financial deregulation, but I know you will not characterize that one 

way or the other—but the collapse of the economy in 2008 contributed, in some measure, to the debt and the financial situation that 

we find ourselves in right now. Is that not correct? 

Mr. HALL. Yeah. There is a nice statistic I can throw at you, is 

the debt in 2007 was about 35 percent, the cumulated debt of GDP. 

And in just 5 years, it doubled to about 75 percent of GDP over 

that time period. 

Mr. JEFFRIES. Okay. And then, the icing on this cake that has 

been given to us by my good friends on the other side of the aisle 

seems to be the $2 trillion in additional debt to subsidize the lifestyles of the rich and famous in a way that was totally unnecessary, given the state of our economy at this moment. 

And so, I know my friends on the other side of the aisle, in good 

conscience, have a different perspective, but it is really hard to be 

lectured about fiscal and financial restraint, given all of what we 

just detailed that has taken place over the last 18 years. I yield 

back. 

Chairman WOMACK. Mr. McClintock, California. 

Mr. MCCLINTOCK. Thank you, Mr. Chairman. I would remind my 

colleague that the deficit annually exceeded $1 trillion in the 

Obama-Pelosi era, and the national debt doubled under that administration. But that does not excuse the deficit numbers and projections that we are seeing today. I have also tried to educate my 

friends over the years to the fact that debts and taxes are really 

the same thing. A deficit and a tax are the only two possible ways 

to pay for spending. This is driven by spending. A deficit is simply 

a future tax. We borrow now and pay it back out of future taxes. 

But it is all driven by spending. 

My greatest fear for our country is that our spending-driven debt 

and our annual deficits are setting the stage for a debt spiral that 

BU00-A363290 with DISTILLER

22 

could well lead to a sovereign debt crisis. We have already seen 

years of irresponsible fiscal policy having cost Puerto Rico access 

to the credit market, which has left it absolutely helpless to respond to emergencies when it was struck by natural disasters. 

Mr. Hall, are we setting the stage for a debt spiral, when the 

capital market begins assessing higher interest rates to compensate for higher risk? 

Mr. HALL. Yeah, the difficulty in that is knowing how much is 

too much, but I think that we have accumulated a lot of debt. We 

have increased the risk of a debt spiral, of a financial—— 

Mr. MCCLINTOCK. Now, that 5 years ago, Standard and Poor’s 

downgraded our AAA credit rating for the first time in history, did 

it not? 

Mr. HALL. It did. 

Mr. MCCLINTOCK. How are credit markets assessing our current 

situation? 

Mr. HALL. Well, it is hard to know how to characterize that, but 

that is, I think, the right thing to focus on, because if the U.S. debt 

gets sufficiently higher and we seem to show insufficient resolve to 

fix it, then it can affect the willingness of credit markets to lend 

Federal Government money without a premium. 

Mr. MCCLINTOCK. And we do not know when that is going to 

occur, but we are quite certain, on the path that we are now on, 

it will occur. 

Mr. HALL. Yes. I think we have characterized, and I still would 

characterize, the path as unsustainable. 

Mr. MCCLINTOCK. Now, if Treasury yields begin to rise due to 

market concern over all level of debt and our inability and unwillingness to manage that debt, what does that do to our interest 

costs? 

Mr. HALL. Well, it can raise our interest costs significantly. Our 

forecast already has really high interest costs. At some point in the 

future, that could raise it significantly. 

Mr. MCCLINTOCK. Now, we are already paying, both Republican 

and our governmental debt, about $475 billion just to rent the 

money we have already spent, are we not? 

Mr. HALL. That is right. 

Mr. MCCLINTOCK. What does a 1 percent increase in the interest 

rate do to our interest costs annually? 

Mr. HALL. We have not worked out that rule of thumb number, 

but it raises it significantly. 

Mr. MCCLINTOCK. Is it roughly $200 billion a year? 

Mr. HALL. Yeah, I think that is what we worked out last year. 

It should probably be about the same. 

Mr. MCCLINTOCK. So, a 1 percent increase in interest rates this 

year would add another $200 billion to our interest costs, even if 

we balanced the budget this year? 

Mr. HALL. That is right. And I would say, in terms of the uncertainty in our forecast, that is one of the biggest ones. 

Mr. MCCLINTOCK. Now, a debt spiral occurs when the market begins raising interest rates or interest costs balloon accordingly. 

Since we have to borrow that money as well, the risk goes up, the 

treasury yield goes up, and we enter a debt spiral. Is that correct? 

Mr. HALL. That would be the—— 

BU00-A363290 with DISTILLER

23 

Mr. MCCLINTOCK. What are our policy options, at that point? 

Mr. HALL. They are pretty tough. They are much more Draconian than anything we have faced, I think, maybe ever, if that happened. 

Mr. MCCLINTOCK. Is Venezuela, right now, going through a sovereign debt crisis? 

Mr. HALL. I believe so. I do not know that much about Venezuela’s situation. But there are countries like Venezuela who have 

gone through this. 

Mr. MCCLINTOCK. Well, I think history is screaming this warning 

at us that countries that bankrupt themselves simply are not 

around very long. Now, a lot has been said about mandatory spending, but does the Budget Act not give Congress expedited powers, 

streamlined powers, to deal with mandatory spending? 

Mr. HALL. I am not an expert in that, so I am going to have to 

pass on that one. I do not know. 

Mr. MCCLINTOCK. Well, the budget adopted by Congress has discretionary and mandatory spending levels, and then triggers a reconciliation bill, which gives us expedited, streamlined powers to adjust any statutes to conform to those mandatory budget levels. But 

that requires a budget to be in place. What effect on our ability to 

deal with this looming crisis is our failure to even produce a budget 

this year? 

Mr. HALL. Well, certainly, the uncertainty is not efficient for the 

Federal Government, and certainly for expectations going forward. 

I think that one of your concerns is a valid one, that a lot of our 

ability to function depends upon people’s confidence in our ability 

to handle the deficit. 

Mr. MCCLINTOCK. And we do not even have a plan to do so, at 

this point, and certainly have shown no inclination. 

Mr. HALL. None that I have heard. 

Chairman WOMACK. Thank you. Mr. Boyle, Pennsylvania. 

Mr. BOYLE. Well, thank you to the Chairman, Ranking Member, 

and thank you, Dr. Hall, and not just for testifying, but your work. 

But I also want to say for everyone at the Congressional Budget 

Office, it is incredibly important in any time that we have a nonpartisan agency to simply call the balls and strikes without partisan interference. But I think especially in these times, the work 

that CBO does is vital. So, thank you, and to everyone at CBO. 

Last year, at a number of town halls I held in my district, I predicted that the fiscal and budgetary plan of the majority was in two 

parts. First was to push through a massive tax cut, which they ultimately did, to the tune of $1.9 trillion. 

And to put that into perspective, the Obama-era stimulus—back 

when the worldwide economy was in the great recession that some 

on the other side complained wildly about for its enormous size— 

that was under $1 trillion. So, the tax cut that was just planned 

was actually double the size of the Obama stimulus. And bear in 

mind something that is often forgotten—half of the Obama stimulus was a tax cut. Only half of it was, in fact, spending. 

Part two of the majority’s plan, though, after spiking the deficit 

and the debt to unsustainable rates, is to come back and say, ‘‘My 

God, we have a deficit problem. We have a debt problem. It must 

be because of out-of-control spending.’’ And then, of course, the 

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24 

area to target are the two biggest drivers of our spending, Social 

Security and Medicare. Part one of that plan has already happened, and I fear that 2018 will be, as Speaker Ryan put it, about 

‘‘entitlement reform,’’ which is, essentially, part two of that plan. 

Now, on to this deficit and debt. There have been previous periods, as one of the speakers on the other side pointed out, where our 

deficit has exceeded $1 trillion. They did in the great recession. 

You also saw, in the 2001, 2002, early part of the George W. Bush 

era, a massive tax cut which spiked the deficit and took us from 

a few straight years of surpluses to deficits. But at least, in those 

last two examples, the economy had fallen into recession. 

We had, of course, the great recession beginning in December of 

2007, though no one knew at the time that recession had started 

in December of 2007. Everyone knew it by the fall of 2008. And, 

in 2001, the economy also went into recession. 

What really concerns me is the fact that in an era of an unemployment rate of almost 4 percent, in an era of growth, not recession, that we are already exceeding, as we will next year, $1 trillion in deficit. I ask you, what tools will be at our disposal when 

the next recession hits? 

Because sure enough, just as we know the sun will rise tomorrow, we know that there will be another recession yet to come, and 

that this economic growth cycle of approximately 8 to 9 years now 

will inevitably end, and we will enter into recession. And if we already have a $1 trillion deficit when that happens, what tools will 

be at our disposal in order to inject stimulus into the economy? 

Mr. HALL. You are focused on something that I think is really 

important, is we have deficit and debt at this time period when 

there is essentially no slack in the economy. There is no recession 

going on. This would be a time where one could run a surplus and 

try to pay for debt that has been accumulated during the last recession. But we are not in that position, and if you think about 

what happened with the great recession—I think I mentioned this 

before but I will mention it again—debt doubled from 35 percent 

of GDP, which was already considered to be a high level, to 75 percent in just 5 years. 

So, one of the real worries going forward is exactly what you described. If we go into an economic downturn, the tools available for 

Congress and everybody else to deal with it will be much more limited than they have been in the past. And I think that should be 

a real concern. 

Mr. MCCLINTOCK. Thank you. I yield back the remaining 25 seconds of my time. Thank you. 

Chairman WOMACK. Mr. Woodall, Georgia. 

Mr. WOODALL. Thank you, Mr. Chairman, and thank you, Dr. 

Hall for being here. Dr. Hall, I want to pick up where my colleague 

left off. You said in these more robust economic times, these are 

times where we could be running a surplus. I have your economic 

outlook that you just published. I have the one from last April. I 

have the one from last January. Which one should I be looking at, 

where you were forecasting America’s economic future and you saw 

those surpluses in the numbers? 

Mr. HALL. Well, under current law, it has been quite a long time 

since current law pointed toward surpluses. 

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Mr. WOODALL. Well, let me make sure I understand, then. If 

these are the times where we should be running surpluses, but no 

look that you have taken in your tenure at CBO has us running 

surpluses, what tools are there, then, to get us from where we are 

to the surpluses that you think we should be achieving? 

Mr. HALL. Well, what I was trying to suggest is not that we 

should be running a surplus. I do not want to offer advice like that. 

But if you are going to run a surplus, and you are going to run a 

surplus to deal with the debt, the time to do it would be when your 

economy is in full force, it is functioning near its potential. 

Mr. WOODALL. Undeniably, that is true. I am thinking about 

what are the tools to make that happen? I heard one of my friends 

on the other side talk about spending, and that we did not have 

a spending problem. What I am looking at, at the CBO reports, and 

I look at taxation as a percent of GDP—certainly, we have just undergone a tax cut, but all of your previous reports suggested to me 

that the level of taxation in America was already higher than the 

historical norm. Have I been reading your historical reports accurately? 

Mr. HALL. Oh, yeah, you have. You have. 

Mr. WOODALL. Absolutely. I saw that in the appendix. But I 

guess what I am trying to understand is, if the CBO is reporting 

that we have been experiencing record high levels of taxation in 

this country, way above the historical norm, that we are experiencing a sound economy in ways, that you would expect this to be 

the time to dig us out of any hole that we have been in, I am just 

trying to think of what other tools are available to us, and I cannot 

think of many. And I was hoping you might, in your expertise, 

have some other ideas. 

Mr. HALL. Well, in a sense, the tools are three, right? You can 

reduce spending, you can increase revenues, you can try to grow 

the economy, but I do not think growing the economy is going to 

make enough of a difference on its own. And I think it is such a 

big problem, you need to think about it broadly. 

Mr. WOODALL. Well, I appreciate your saying that. I appreciate 

all the kind words that you have received for your leadership and 

for your organization. I think you are exactly right. If we are experiencing record high taxation, experiencing more record high taxation is probably not the best tool in the toolbox. Dealing with 

spending, on the other hand, is an important thing to do. We can 

demonize it all we want to, but you cannot demonize deficit spending and reducing spending simultaneously. 

What I also want to follow up on is folks applauded your role as 

the nonpartisan scorekeeper, which I value. But I also noticed in 

your response to the Chairman about transparency, you made a 

note of other institutions that were also looking at economic prognostication, and how you compared to them. If we were to have the 

Federal Reserve economist sitting beside you this morning, would 

you think that would be a partisan analysis they were sharing with 

us, or would you put that in the nonpartisan analysis, also? 

Mr. HALL. My experience is that they are nonpartisan. They are 

very solidly nonpartisan. 

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Mr. WOODALL. Now, what if we brought in one of the big Wall 

Street macroeconomic analysis groups. Would that, then, be a partisan analysis, or would they also give us a nonpartisan view? 

Mr. HALL. Probably nonpartisan. It sort of depends. 

Mr. WOODALL. So, you would say that, while we might all recognize the importance of a nonpartisan analysis, that finding nonpartisan analysis is not a particularly difficult thing to go? We do 

have institutions across this country, including the CBO, perhaps 

even led by the CBO, but institutions across this country that provide that same high-quality analysis and effort to do it in a nonpartisan way. 

Mr. HALL. Right, yeah. And certainly, we offer more than just an 

economic forecast because we are doing the whole baseline. But we 

do. There are other places, and we do look at them, actually. We 

do compare our numbers to make sure that we are not too out line 

and understand if we are a little out of line that we are confident 

in what we are forecasting. 

Mr. WOODALL. Thank you very much for your work on this product and for being here today. Mr. Chairman, I yield back. 

Chairman WOMACK. Ms. Jayapal, Washington. 

Ms. JAYAPAL. Thank you, Mr. Chairman. Director Hall, thank 

you so much for being with us again, and thank you for all the 

work that you and your staff do. I, too, wanted to echo some of the 

comments that Mr. Boyle made. I am troubled by some of the statements that we heard last year, as our Republican colleagues attempted to push through—did push through—a tax plan that really 

benefited only the wealthiest in the country and tried to say that 

it actually paid for itself. And I just want to read some of the 

quotes that we heard. 

So, President Trump’s top economic advisor, Gary Cohn, said, 

‘‘We can pay for the entire tax cut through growth.’’ Treasury Secretary Steve Mnuchin agreed; ‘‘The plan will pay for itself.’’ Senator 

John Thune said that, ‘‘Even a modest amount of economic growth 

could cover the cost of this bill,’’ and White House Budget Director 

Mick Mulvaney went so far as to say that he thinks that it, ‘‘actually generates money.’’ Director Hall, does this bill—do the tax cuts 

pay for themselves, in your analysis? 

Mr. HALL. No. Our estimate is that they increase the deficit by 

almost $1.9 trillion over the next 10 years. 

Ms. JAYAPAL. So, the tax cuts increase the deficit by almost $1.9 

trillion over the next 10 years. And, do you think that we will be 

in a position where there is any level of sustained growth that, in 

your analysis, would somehow mitigate that? Your analysis counts 

for that, obviously, but tell us about the growth assumptions. 

Maybe that is a better way to state the question. 

Mr. HALL. Well, sure. And really, there are kind of two different 

growth things going on. The tax act, in particular, made some 

changes that encourage investment, encourage capital deepening, 

and we think that that did, in fact, contribute to potential GDP, 

which is sort of the supply side of view. And we do have an increase in potential GDP throughout the 10-year period, and probably some increase after that. But also, at the same time, a lot of 

the tax act and actually the other two bills, the Bipartisan Budget 

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Act and the Consolidated Appropriations Act, provided a lot of 

stimulus. 

So, you have some increase in potential, but you have a lot of 

stimulus, and that stimulus is going to push growth above its potential for a while. And while that is good in the short run, the fact 

that it is above potential is going to cause pressure. It could increase pressure on inflation and interest rates, and we think what 

is going to happen is the Fed is going to react, raise interest rates 

faster, interest rates are going to go up faster. 

So, we are going to have to then go through a bit of a cycle. After 

this strong growth from stimulus that is going to come down, we 

are looking for a soft landing to get us back toward potential. So, 

we go through this sort of cycle now, I think. 

Ms. JAYAPAL. So, for people who are listening who may not be 

as familiar with the numbers as you are, that means that you estimated, I think it was 3.4 or 3.5 percent for this year. Is that correct? 

Mr. HALL. That is right. 

Ms. JAYAPAL. And then you brought it down to a much lower 

level for the following year. So, in other words, it is not generating 

sustained growth in the economy. And the result of that is this $1.9 

trillion deficit. So, let me ask you another question sort of related 

to growth. Did you factor in any effects of a restrictive immigration 

policy? 

Mr. HALL. No. Our assumptions on the level of immigration has 

been pretty much the same. 

Ms. JAYAPAL. So, if we were to pass bills that the other side has 

been pushing that would significantly restrict immigration policy to 

this country, what would happen to growth? 

Mr. HALL. Well, it depends on what is done, exactly. 

Ms. JAYAPAL. Let’s say we cut legal immigration by 25 million 

over the next five decades. 

Mr. HALL. Sure. 

Ms. JAYAPAL. Which is the proposal that Chairman Goodlatte has 

put on the floor. 

Mr. HALL. Well, one of the concerns we would have on the possible outcomes would be a lowering of the labor supply. And it is 

part of why our near-term projection is pretty high now because we 

have the labor supply increasing pretty significantly, labor force 

participation going up. That would, potentially, have the other effect, where it would lower the labor supply, and it could restrict 

our ability to produce. 

Ms. JAYAPAL. And so, it could significantly increase our deficits, 

because it could significantly decrease our growth. Let me ask you 

this. I said last year, as Mr. Boyle did, that the plan here is to first, 

transfer trillions of dollars of wealth to the wealthiest—you do not 

have to comment on that—through the tax cut. 

Second, balloon the deficit, which is what has happened; $1.9 

trillion deficit, the majority of which is because of this tax cut. And 

then, third, to use that as an argument to cut spending on programs that I consider earned benefit programs, programs like Social Security, programs like Medicare. There are other options besides that. 

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What would happen, for example, if we raised the cap on Social 

Security? And you have just 8 seconds, and I know the Chairman 

is very certain about these things. 

Mr. HALL. It would generate some more income, and revenue 

would go up. We have an exact estimate. I do not have it in my 

mind, but we have a document called ‘‘Options for Reducing the 

Deficit,’’ and we do go through that scenario. 

Ms. JAYAPAL. So, there are lots of opportunities to do things that 

do not involve cutting Social Security, even though that is certainly 

what, sometimes, the majority seems to be focused on, is cutting 

Social Security. 

Mr. HALL. Right. Though I do say, just in general, sometimes the 

effect of raising that limit gets exaggerated. It does have an impact, but it is not a solution. 

Ms. JAYAPAL. Fair enough. Thank you. 

Chairman WOMACK. Let the record reflect that I did give her a 

chance to throw one more question. 

Ms. JAYAPAL. You are always very generous with me, Mr. Chairman. I have to say that. 

Chairman WOMACK. Thank you. Mr. Renacci, Ohio. 

Mr. RENACCI. Thank you, Mr. Chairman. I want to thank Director Hall for being here. I was a business guy for 30 years. I used 

to love when the numbers guy came in and talked to me, so I love 

your numbers. Let us talk about them. Let us go to your numbers. 

Mr. HALL. Okay. 

Mr. RENACCI. Total revenue over 10 years goes from $3.3 trillion 

to $5.5 trillion. That shows me an increase of 66 percent. You do 

not have to answer that. It is 3.3 to 5.5. You can calculate it. It 

is 66 percent. That is great. In my business world, if you came to 

me and told me revenues were going to increase by 66 percent, I 

would say, ‘‘We are going to have some record good years.’’ The 

problem is, mandatory spending goes from $2.519 to $4.524 trillion. 

That is an increase of 80 percent, and I would say to you, ‘‘Wow. 

We have got some serious problems. Not on the revenue side, because we are growing 60 percent. We have got problems in the 

spending side because we are growing 80 percent over 10 years.’’ 

Again, these are your numbers. 

The other problem we talk about is growth, and I am going to 

ask you a question, and I know you are going to have a long answer about growth. We talk about growth, and of course, the tax 

plan is going to get us some growth. I heard you say just earlier, 

‘‘Growth is not that important, in many cases.’’ But I go back to 

1996 to 2006, and the average growth rate was 5.52 percent. That 

is the reason we balanced the budget. 

That is the reason we had surpluses. It had nothing to do with 

anybody sitting around this room, or anybody in Congress. We had 

growth because the economy was booming. It was the tech age. It 

was the computer boom. I was living it. In fact, government even 

budgeted for $2 trillion in expenses during those periods and doubled their expenses. So, Congress just got in the way half the time. 

It was the economy that was moving. 

The problem is, we keep narrowing ourselves down to the tax 

cuts. The other side wants to talk about the tax cuts. And let us 

talk about that. According to table 4.4, page 47, the gross Federal 

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debt increases from $21.3 trillion in 2018 to $33.8 trillion in 2028. 

That equates to an increase in the national debt in that time period of $12.5 trillion. While I disagree to the extent the impact of 

the debt that H.R. 1 will provide, it does say that H.R. 1 will provide $1.854 trillion to that debt. That is your calculation. 

Mr. HALL. Yes. 

Mr. RENACCI. That is 15 percent of the total problem. That is 15 

percent of the total deficit; $12.4 versus $1.854. There is $10.564 

in additional debt that is going to occur over the next 10 years, and 

we keep talking about the tax bill. Tell me what you believe is in 

that $10.564, because that is really the problem. That is the 80 

percent increase. Where are we at, and what is going to cause that? 

Mr. HALL. Well, this is something that we have actually been 

saying for a long time, that the aging population is going to raise 

spending on the entitlements pretty significantly. It has been coming for a long time. That is the big driver of the increase in the 

deficit, going forward. And part of why I caution about not counting 

on economic growth is we also have, for the same reason, we have 

some limitations on our ability to grow the economy, because we 

have an aging population. We are just not going to get that sort 

of growth in the labor supply that we had at one point. 

Mr. RENACCI. But you do agree that the aging population, which 

does contribute to mandatory spending—which does contribute to 

your numbers going from $2.5 to $4.5 trillion over 10 years, which 

is an 80 percent increase—that needs dealing. 

Look, it is not the fault of many people here. I call it ‘‘demographics.’’ We have an aging population bubble that is coming 

through. Would you agree that that is our biggest problem, with 

our debts and deficits? 

Mr. HALL. Well, that is the biggest reason for why we have a 

growing deficit, absolutely. 

Mr. RENACCI. That is the greatest answer I have heard, and I appreciate that, because too many times, people on the other side and 

even on this side, we talk about taxes. I just told you, our taxes 

are going up. Our revenue is going up 66 percent. If I was in business, I would be slapping you on the back, and I would say, ‘‘Let 

us go have a beer today, because our revenues are going up 66 percent over the next 10 years.’’ 

But I really would be saying, ‘‘What are we going to do to cut 

this 80 percent increase in mandatory spending? What do we have 

to do to cut those numbers?’’ And you just answered it. It is a demographic bubble that we, as people here in this budget, better 

start talking about. 

Now, there will be somebody on the other side that will say, 

‘‘Renacci wants to cut Social Security.’’ That is not true. I think 

that is a program that has to be around, but I think you would also 

agree that these programs have to be looked at. They are not sustainable, and if we do not look at these programs, we are going to 

have a massive debt problem. I heard one of my colleagues talking 

about spiraling debt. God help our children and grandchildren. I 

say it all the time. I am concerned for them every day because we 

cannot make the decisions that are necessary to fix this mandatory 

spending. I thank you for your time, and I yield back. 

Chairman WOMACK. Mr. Carbajal, California. 

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Mr. CARBAJAL. Thank you, Mr. Chairman, and certainly, I appreciate my colleague, Mr. Renacci, on the other side’s comments. I 

was just hoping to see him at my Armed Services Committee asking for an audit to finally be done of the Department of Defense, 

which has never been accomplished to date in the history of our 

Nation. 

Dr. Hall, thank you for being here and for the nonpartisan good 

work that the CBO does. CBO’s new forecast shows a worsening 

fiscal outlook for our Nation, with a large part due to the recently 

passed Republican tax plan. The tax bill alone increases our deficits over 10 years by about $1.9 trillion, almost half of our national 

budget. Is that correct, Dr. Hall? 

Mr. HALL. That is correct. 

Mr. CARBAJAL. Dr. Hall, in your analysis of the economic impact 

of the Republican tax bill, it looks like most of the short-term benefits fade away over time, in particular, on page 115, on the last 4 

years of the outlook window. Your table B2 shows that the tax bill 

will actually reduce our GDP growth rate. Is that correct? 

Mr. HALL. That is right. That is the cycle I mentioned from the 

stimulus being thrown into an economy with near potential. 

Mr. CARBAJAL. Thank you. It is troubling that my Republican 

colleagues insist these tax cuts would pay for themselves, when we 

can see it is just not true. Meanwhile, later today, the majority 

plans to vote on a flawed balance budget amendment. Now that we 

have thrown our finances out of whack, we want to move forward 

with a balance budget amendment. That would lead to deep cuts 

to Social Security—let me repeat, Social Security—and Medicare, 

and Medicaid. 

There is no question we need to address our growing debt, and 

that requires painful tradeoffs. Unlike some of my Republican colleagues, I believe that cuts to Social Security, Medicare, and Medicaid to pay for tax benefits that mostly go to multi-national corporations and the wealthiest 1 percent of Americans is not the 

right priority for our country. Looking at ways that we can grow 

our economy, Dr. Hall, as a general rule, does immigration tend to 

increase or decrease our economic growth? 

Mr. HALL. Well, in general, immigration can raise the labor supply and increase growth. 

Mr. CARBAJAL. I want to remind my colleagues that a 2013 comprehensive immigration reform proposal would have reduced Federal deficits by $850 billion over 20 years, and increased GDP by 

5.4 percent over 20 years. I hope we can consider proposals like 

this one, that would actually make our economic future better. 

Thank you, Mr. Chairman. I yield back. 

Ms. BLACK. [Presiding.] The gentleman yields back the balance 

of his time. The gentleman from Virginia, Mr. Brat, you are recognized for 5 minutes. 

Mr. BRAT. Thank you, Chairman. Thank you for being with us 

today. Let me ask you a couple of questions. In your view, all else 

equal, what would generate more economic growth: if you reduced 

taxes $2 trillion, or raised taxes $10 trillion? 

Mr. HALL. Well, certainly, tax reduction would generate more 

growth, and that is what we have reflected in our forecast. 

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Mr. BRAT. Great. And so, thank you for that thoughtful, accurate 

answer. In response to the comments on immigration in the labor 

force, I think people have not taken Econ 101. And so, it is clearly 

true if you imported everyone in the world, right, all 8 billion people into our country, what would happen to economic growth? It 

would go through the roof. Would anyone be better off? 

Mr. HALL. Well, we would not necessarily have a rise in GDP per 

capita, I think. 

Mr. BRAT. Correct, right? And so, this whole conversation is totally misplaced on labor supply, right? What people care about is 

income per capita, right; how they are doing. And so, the immigration and labor supply, et cetera, is missing the point. 

I wish my Democrat friends would go back to their buddy and 

my buddy, JFK, who got tremendous economic growth by focusing 

on things that matter. Productivity is what matters. That produces 

per capita growth. Adding more labor supply by itself, it depends. 

So, immigration, if you are pulling in folks that have, on average, 

a tenth-grade education, what, is your guess, happens to productivity for the country? 

Mr. HALL. Right. I am sorry, once more. 

Mr. BRAT. On average, the folks that are coming into the country 

have about a tenth-grade education. 

Mr. HALL. Oh, I see. 

Mr. BRAT. All children of God, they are all Catholic brothers and 

sisters, but what does that do to national productivity, on average? 

Mr. HALL. It really kind of depends upon the mix. Less skilled 

immigration does not add to productivity. More skilled actually 

does, so that mix is important. 

Mr. BRAT. Right. And so, I want to get to this year on the spending side. It has been abstracting from reality, in my view. If you 

look at what happened this year on the Budget Committee, the 

House did a budget and plussed up the military, nothing else. And 

we did tax cuts, and I have asked the CBO to score, right? The Chicago guy said the tax cut bill does not pay for itself. I think that 

is true. It pays for maybe a third of itself. 

But the Republican agenda with deregulation, et cetera, has produced economic growth that, for the past 10 years or so, we have 

been growing at about 1.5 or 2 percent, and now we are looking at 

3 percent. Right after you do tax cuts and get rid of regulation, I 

do not think there is anything shocking here. 

The shocking thing is that we did the tax cuts, and the mainstream press, the Democrats discovered this thing called the deficit. But then, when we went over to the Senate and we needed 

nine Democrat Senators, we had to plus up the budget by $400 billion, and not a word on that $400 billion from the colleagues. $400 

billion is bigger than $150 billion. And just to show you who we 

needed to negotiate with, the biggest block of votes on the Democrat side—and this is why I asked you the opening question—the 

Progressive Caucus got 107 votes for their budget, the Progressive 

Caucus budget, that raised taxes by $10 trillion, raised spending 

by $11 trillion, and had more debt and deficit than the Republican 

agenda when we cut taxes. 

Right? And so, I asked you the question, ‘‘Which is better for 

growth, raising taxes $10 trillion, as the other side wanted, or cutBU00-A363290 with DISTILLER

32 

ting taxes by $1.5 or $2 trillion that we wanted?’’ And now you 

guys did not get the growth forecast right. It would be pretty hard 

for you to forecast who is going to be President a year out or whatever. 

But now, it seems empirical evidence is coming in. And, in your 

view, when consumer confidence is at historic highs and when business capital investment and business future expectations are at alltime highs, do those two variables usually go along with economic 

growth in the future? 

Mr. HALL. Yeah. There are signs that consumer spending is 

going to be strong. 

Mr. BRAT. Yeah, and there are signs that consumer spending is 

going to be strong, but consumer spending is passive, right? It is 

kind of the Keynesian composition of demand, right? So, consumption is 70 percent of demand, blah, blah, blah. Why do consumers 

have money to spend? Because the business side did capital investment. And what leads to capital investment? Do you think the Republican tax cut policy, that allows for immediate expensing, is 

good for capital investment? 

Mr. HALL. Yes, I do, and in fact that is part of our forecast, is 

that we think that part of the tax act encourages capital deepening, 

and maybe reduce some distortions. So, it is giving a boost to this 

potential GDP. It is one of the reasons why I focused on that. 

Mr. BRAT. Right. And in the comments, I wish we had more on 

the supply side. Some folks on the other side of the aisle like to 

poo-poo the supply side. Another name for the supply side is ‘‘business.’’ Everybody in the country that goes to work in the morning 

at a business is on the supply side, and that is the cause of the 

growth that allows consumers to spend. In your view, in the growth 

theory, what are the two or three major variables that cause economic growth? 

Mr. HALL. Well, in the long-term, it is almost kind of a simple 

recipe, right? Labor supply, productivity, and then productivity depends upon capital deepening. And then, you can get things like 

regulation in there, that helps productivity, and maybe helps the 

labor supply, too. 

Ms. BLACK. Gentlemen, time has expired. 

Mr. BRAT. Right. I think I ran out of time. Thank you very much. 

Ms. BLACK. Gentlemen Mr. Sanford from South Carolina is now 

recognized for 5 minutes. 

Mr. SANFORD. I suspect that both sides could point plenty of fingers at the other side in aligning blame, but I guess my bigger 

question is, ‘‘Are we set up for a disaster, in financial terms?’’ And 

so, I was jotting down, here, some notes. If I am not mistaken, this 

is an all-time peacetime high, in terms of debt, to GDP numbers. 

That we have never, in our country’s existence, seen a higher number. 

We are in a benign interest rate environment relative to historic 

patterns. We have an aging population. To a degree, we still have 

at least a remnant of Pax Americana, maybe not the 1950s or 

1960s, in terms of America’s percentage of GDP relative to the rest 

of the world, but still, well over robust. But it is still a shrinking 

role, relative to the GDP of the world. 

BU00-A363290 with DISTILLER

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We have asset inflation, and you can look at that in real estate 

values. You can look at it in PEs, you can look at it in dividend 

yield, which I think, in part, drives consumers spending, which is 

the wealth effect. We have economic longevity. I think we have the 

third longest economic recovery in American history going. It has 

been anemic; had not had wide distribution. Maybe it has been 

more concentrated than light. But it has had the duration. 

You add all those things up, and you say, ‘‘Wow. If something 

went wrong, it could go really wrong.’’ I guess going back to my colleague from California’s point on debt spiral. Are we set up for a 

disaster? 

Mr. HALL. Well, part of my concern—I alluded to it before—is we 

have such a high debt and deficit level right now when the economy is operating near potential. So, the concern is, of course, is we 

want to be operating near potential forever. And when we go 

through business cycle, we will be going through business cycle 

where the debt deficit’s starting at a very high level. So, if you go 

through normal sort of cycle, those numbers could get much worse 

than we had forecast. 

Mr. SANFORD. Give me odds 

Mr. HALL. Sorry? 

Mr. SANFORD. Odds. 

Mr. HALL. We try not to do that. A timeframe, I would be a little 

worried right now as we are going through a cyclical period with 

GDP. Right? GDP is now going to be above potential. We are looking for a soft landing, so. 

Mr. SANFORD. When I look at the kind of ingredients that I 

looked at here, I do not know of a civilization that has seen a soft 

landing from this kind of economic unraveling. I mean, if you combine all of these different things in with the aging population, with, 

you know, interest rates possibly clicking up. Tell me how many 

other civilizations have seen soft landings. 

Mr. HALL. I am not an expert in that, but we are certainly having a lot of faith, I think, in the Federal Reserve’s ability to sort 

of deal with the cyclical aspect. 

Mr. SANFORD. Yet if I remember right, back in the 1930s the 

Fed’s comment at the end of the day was they likened it to ‘‘pushing on a string.’’ That there was, in fact, limited effect as to what 

they could do. If I am not mistaken, the Fed’s balance sheet has 

quadrupled over, you know, basically since 2008. We have gone 

from about $1 trillion in asset base to about $4 trillion in asset 

base. Are they not quite limited in what they could do going forward? 

Mr. HALL. Well, I would say to me one of the most encouraging 

things is expectations on inflation have just remained very calm, 

around 2 percent. And really what that is is that is investor confidence that the Federal Reserve is going to be able to handle 

things. 

Mr. SANFORD. I cannot remember the name of the gentleman. He 

may have been head of the New York Stock Exchange or maybe the 

head of the Fed. But his point was stocks had reached a permanent 

new plateau. And this was 1929, just prior to the crash. Again, 

these things have a way of unraveling, and I will come back to 

that. But I do want to ask one question going back to the point that 

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was made earlier on the tax and spending front. Our rough back 

of the envelope number for the last 50 years on spending as a percentage of GDP has been what? 

Mr. HALL. It has been a little over 20 percent. 

Mr. SANFORD. Revenue as a percent of GDP roughly has been 

about what? 

Mr. HALL. Seventeen-something percent. 

Mr. SANFORD. At the end of the tax cut, at the end of the 10- 

year mark, we will be about what? 

Mr. HALL. Will be at about 18.5 on revenue. 

Mr. SANFORD. We will be about where we have always been for 

the last 50 years. 

Mr. HALL. And 23.6 percent. 

Mr. SANFORD. So, spending is the part that is projected to unravel the budget going forward. Is that correct? 

Mr. HALL. Right. And both numbers are above the 50-year average. Both numbers are going up. Spending is going up by more. 

Mr. SANFORD. Thank you. 

Ms. BLACK. The gentleman’s time has expired. The gentlelady 

from Texas, Ms. Jackson Lee, is now recognized for 5 minutes. 

Ms. JACKSON LEE. Mr. Hall, let me thank you for your presence 

here, and your repeated presence before the Budget Committee, 

and to the Chairman and Ranking Member. Mr. Hall, is this your 

testimony? You put it in a nice package for us. It looks like it says, 

‘‘Keith Hall, Director.’’ Is this the testimony that you submitted? 

Mr. HALL. Yes. 

Ms. JACKSON LEE. So, if I hold this in my hand and begin to 

read, you would surmise that I am not making it up as I read it 

from your testimony. 

Mr. HALL. Yes. 

Ms. JACKSON LEE. And I thank you very much. I think the responsibility of the American people is to be diligent. But those of 

us who represent the American people, our responsibility is to be 

truthful. And as Members of the United States Congress, which I 

tell the children in my district, the most powerful lawmaking body 

in the world, it is to provide the detailed oversight that is necessary. So, let me first of all read this, and you just simply say that 

is my testimony. 

‘‘As a result, Federal debt is projected to be on a steadily rising 

trajectory through the coming decade. Debt held by the public, 

which has doubled in the past 10 years, as a percentage of gross 

domestic product approaches 100 percent of GDP by 2028.’’ Is that 

your testimony, sir? 

Mr. HALL. It is. 

Ms. JACKSON LEE. As I also reflect, so that my good friends on 

the other side of the aisle, you do have something that says, ‘‘GDP 

is projected to be greater than CBO.’’ That is a headline. And then, 

you say, ‘‘It is projected to grow more quickly over the next few 

years. As a result, the levels of those measures are 1.6 percent 

higher than CBO previously estimated.’’ So, you have got a little 

bit more growth. And you wanted to make sure that we knew that 

you knew that, and the CBO wanted to make that statement. Is 

that correct? 

Mr. HALL. That is right. In the near term, yes. 

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Ms. JACKSON LEE. And in the near term. Very important point. 

In the near term. It does not say 10 years, 20 years; it says in the 

near term. You have got a headline, but this is in your statement. 

‘‘Deficits are projected to be large by historical standards.’’ Is that 

correct? 

Mr. HALL. That is correct. 

Ms. JACKSON LEE. And my surmising is—this is in his testimony—that the tax cut as have been given as a dupe to the American people will be about a $800 billion deficit in 2018. I am so glad 

I voted against it. A trillion-dollar deficit in 2019; a trillion dollars 

in 2020 and keep on growing. Now, have you had a chance to look 

at the tax cut? 

Mr. HALL. Yes. We did an analysis of it. 

Ms. JACKSON LEE. Do you recall the corporate tax rate at this 

time? 

Mr. HALL. Twenty-one percent. 

Ms. JACKSON LEE. 21 percent, down from? 

Mr. HALL. It used to be a scale, but it was as high as 35 percent. 

Ms. JACKSON LEE. Correct. But let me just say my understanding, my factual understanding is that corporate America said 

give us 25 percent, but it might have been able to work with 28 

percent. This tax bill wanted to overdo it on behalf of the American 

people, screw them out of, in essence, Medicare, destroy Social Security. They gave 21 percent. So, let me ask you this question. And 

what that means is that is less income coming into the Treasury. 

Is that correct? 

Mr. HALL. That is right. 

Ms. JACKSON LEE. And so, working Americans, but poor Americans, poor Americans have a devastating impact by a growing deficit. Do you think so, Mr. Hall? 

Mr. HALL. Well, I think it raises the risk of economic downturns. 

Economic downturns are very hard on everybody, but it is particularly hard on lower income folks. 

Ms. JACKSON LEE. Do economic downturns possibly generate loss 

of jobs? 

Mr. HALL. Yes. 

Ms. JACKSON LEE. And that would be loss of jobs of individuals 

who may be hourly workers, or temporary workers, or just workers 

in positions that might be considered expendable? 

Mr. HALL. Yes. 

Ms. JACKSON LEE. And say restaurants close because of the lack 

of business or the lack of the ability to carry the overhead. Is that 

correct? 

Mr. HALL. That is right. 

Ms. JACKSON LEE. All right. Let me also ask you this question. 

What have you learned about per capita spending for the Medicaid 

expansion population, and how have you revised your 10-year estimates for the program since June, which by the way go beyond 

poor people, but are elderly in nursing homes, are children with 

programs that we have touted, but they depend upon Medicaid 

spending. What have you determined there? 

Mr. HALL. Well, we recently just lowered our forecast on Medicaid spending since June of 2017, particularly on the expansion 

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stage. Spending has been lower than we projected, so we have lowered our forecast going forward. 

Ms. JACKSON LEE. You mean you lowered it in terms of it not 

being available for those individuals who need it? 

Mr. HALL. No. No. It is just that the cost to the Federal Government has been less than we expected. 

Ms. JACKSON LEE. And what do you attribute to that? 

Mr. HALL. Just costs are lower. I do not think it is anything particularly with the number of people. 

Ms. JACKSON LEE. Well, what do you project long-term about the 

viability of Medicaid in being able to pay for those individuals who 

might need it? 

Mr. HALL. Yeah. I do not recall offhand what exactly our forecast 

is. But we do have a forecast going forward on that. 

Ms. JACKSON LEE. Let me ask for the record, Madam Chair—— 

Ms. BLACK. The gentlelady’s time is expired. 

Ms. JACKSON LEE. Well, let me ask for the record to be able to 

have that from the Director, and just say that the frivolity of a balanced budget amendment should have been discussed when my 

friends passed the frivolous tax cut bill. With that, Madam Chair, 

I yield back. 

Ms. BLACK. The gentlelady’s time has expired. The gentleman 

from Arkansas, Mr. Westerman, is recognized for 5 minutes. 

Mr. WESTERMAN. Thank you, Madam Chair. Thank you, Dr. 

Hall, for being here today. The fiscal year 2018 deficit projections 

went from $563 billion to $804 billion from the June 2017 CBO report to the April 2018 one. How would you assign liability for this 

deficit growth among specific legislative, economic, and technical 

changes? 

Mr. HALL. Most of the increase was the Tax Act. A pretty big 

part of the increase was also an increase in discretionary spending 

from the Bipartisan Budget Act and Consolidated Appropriations 

Act. In fact, the number would have—the deficit would have actually improved a little bit if it were not for those three pieces of legislation. 

Mr. WESTERMAN. So, the CBO report shows that under current 

law, the debt held by the public will be 96 percent of GDP by 2028. 

Mr. HALL. Yes. 

Mr. WESTERMAN. And if you add the other debt, we are already 

over 1-to-1 ratio on debt to GDP, are not we? 

Mr. HALL. That is right. 

Mr. WESTERMAN. Right. So, when was the last time in our Nation’s history where a debt has been that large? 

Mr. HALL. It was immediately after World War II. Just one brief 

period, about 1946. And that is it. And that is the only time. And 

one of the things I want to caution is that was a really different 

time than now. All right? We are at a very different time. And I 

think going forward, it is looking to get larger going forward, I 

think. And the trend is upward. 

Mr. WESTERMAN. So, what would be some of the potential consequences of having a debt that is equal or above our Nation’s 

GDP? 

Mr. HALL. Well, number one is if we have an economic downturn, 

we will have much fewer tools in dealing with it. It could be much 

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more severe because we just do not have the tools because we have 

got so much debt. Second, the chances of a financial market collapse, or a financial market problem is higher now than it was before. And it really relies on the Federal Government is going to 

continue to borrow. 

We really rely on people having confidence that the Federal Government is going to pay them back. Right? So, this is the part that 

makes it difficult to forecast because who knows when people are 

going to start asking for a premium from the United States? And 

then, of course it restricts the ability of Congress to do things. 

Right? Discretionary spending is going to be a smaller and smaller 

part of the budget. 

Mr. WESTERMAN. And you may have already covered this, but 

what is the current interest on the debt payment? 

Mr. HALL. I do not know offhand. I should know that, but the 

number is evading me. But we do think the long-term interest 

rates are going to go up significantly. 

Mr. WESTERMAN. Can you give an approximate interest on the 

debt? 

Mr. HALL. Okay. Our 10-year interest rate right now is about 2.4 

percent. And we think it is going to go up to about 3.7 percent by 

the end of the decade. 

Mr. WESTERMAN. But in dollar value, what is the interest on the 

debt payment? 

Mr. HALL. I do not know in dollar value. One thing I do have is 

we have interest payments being about 1.6 percent of GDP. That 

gives you a little perspective of how easy it will be to pay it back. 

Mr. WESTERMAN. So, 1 percent of GDP. 

Mr. HALL. One-point-six percent, yes. 

Mr. WESTERMAN. But I am saying for every 1 percent, that is 

about $200 billion. 

Mr. HALL. Yeah. 

Mr. WESTERMAN. And 1.6, we are over $300 billion in interest on 

the debt payment currently. 

Mr. HALL. That sounds right. Yeah. And in 10 years, actually 

that interest payment is going to get very close to a trillion dollars. 

Mr. WESTERMAN. And how will that affect our ability to fund 

other government services and the economic outlook of the country 

if we are paying a trillion dollars per year in interest on the debt? 

Mr. HALL. I think I said this before, but I will repeat it. It is 

going to be larger than all of defense spending; it will be larger 

than all of nondefense discretionary spending. 

Mr. WESTERMAN. It will be the largest single expenditure in the 

Federal Government will be interest on the debt? 

Mr. HALL. Well, mandatory outlays will still be larger. 

Mr. WESTERMAN. Is not Social Security the largest one now, just 

over $900 billion? 

Mr. HALL. Yes. 

Mr. WESTERMAN. So, we are talking about interest on the debt 

at over a trillion. I was looking at the outlays in 2017, 3.982 trillion; 2027, 6.615 trillion. That is 2.633 trillion in 10 years, or 66 

percent increase if you average that 6.6 percent per year. Is that 

what you consider the baseline, and if we reduce that growth, 

would that be considered a cut? 

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Mr. HALL. That is right. That is right. We compare things to the 

baselines. So, we are comparing things to a growing baseline. That 

is right. 

Ms. BLACK. The gentleman’s time has expired. 

Mr. WESTERMAN. Madam Chair. 

Ms. BLACK. The gentleman from New York, Mr. Faso, is recognized for 5 minutes. 

Mr. FASO. Thank you, Madam Chairman. 

Dr. Hall, thank you for your service, and thank you for the sobering analysis that you and your staff have provided for us today. 

CBO is projecting that mandatory outlays for major healthcare programs, including Medicare, Medicaid, health insurance subsidies, 

and SCHIP will total a little over a trillion dollars in fiscal year 

2018, and almost doubled to two trillion by fiscal year 2028. What 

are the biggest or largest factors that CBO is attributing this large 

increase in Federal healthcare spending? 

Mr. HALL. Well, the number one thing is the aging population. 

We are just going to have more people who are 65 and older, and 

of the people 65 and older, more will be older. 

Mr. FASO. And that is not a Democrat or Republican, a Liberal 

or Conservative factor; that is just plain simple demographics, is 

not it? 

Mr. HALL. It is demographics, and it is demographics that we 

have seen coming for a long time. 

Mr. FASO. And so, other than demographics, what do you attribute that increase in expenditure to? 

Mr. HALL. Well, the second biggest thing is the cost of 

healthcare. For decades now, the per beneficiary cost of healthcare 

has been growing faster than GDP. And I am not sure that we understand that well, but it has been, and so we forecast it will continue to grow faster than GDP going forward. 

Mr. FASO. Could you attribute a portion of that growth in 

healthcare expenditures to the fact that we have created, since 

World War II, a third-party payment system through insurers 

where consumers and providers actually do not have an economic 

relationship to each other? 

Mr. HALL. I mean, that is certainly one of the changes. I am not 

an expert in the field, so I do not want to talk too much about what 

is causing that. 

Mr. FASO. But you are more expert than most. 

Mr. HALL. There certainly has been an increasing Federal role in 

healthcare. And that has become a bigger and bigger part of the 

budget as a result. 

Mr. FASO. And so, when we are looking at the means testing programs for mandatory spending, the CBO last year told us that this 

spending grew substantially over the prior decade, doubling from 

385 billion in fiscal year 2007, to about 745 billion in fiscal year 

2017. What accounts in this area for the most significant growth 

in mandatory means tested spending? 

Mr. HALL. I suppose a lot of it still is the aging population part 

of that. I am not sure I can answer that really well. I have not 

looked at that lately. We did a report last year on it. We have not 

updated that. But certainly, part of it is still the aging population. 

Some of it is simply that healthcare costs are rising fast. 

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Mr. FASO. Now, we just had the budget agreement that I supported in the House. It was 6 months late. We had passed all the 

appropriations bills in the House. None of them passed the Senate. 

We wound up in a continuing resolution situation. And that budget 

that we passed, those spending bills, defense and nondefense discretionary spending, represents about 28 percent of the Federal 

spending. The mandatory Social Security, Medicare, Medicaid, and 

interest, and other mandatory items I guess as well in that, represents about 72 percent of Federal spending. 

How can we get better public recognition of the fact that, yes, our 

friends on the other side will blame the tax bill, but so much of the 

growth in spending is on automatic pilot in Washington? And when 

Congress is considering and goes through long, extended discussions and continuing resolutions about budgets, we are talking 

about 28 percent of spending. 

Mr. HALL. We have been talking about this for a long time. 

Every year we put out the report; we talk about the role that mandatory spending is playing not only up to now, but also going forward, having a larger and larger share of the Federal budget. 

Mr. FASO. And the major factor in this, as you said at the outset, 

are demographic factors—— 

Mr. HALL. That is right. 

Mr. FASO.——which have no left or right, Democrat, Republican, 

Liberal, Conservative slant to them. The facts are what they are. 

The demography of our country is that we are all living longer, and 

that is great. But the demography is that there are not enough 

young people coming in behind us to help sustain the mandatory 

spending. And that, it seems to me, is the major challenge that we 

face on both sides of the aisle in getting the public to understand 

what truly is driving these expenditures. 

Mr. HALL. I think that is correct. 

Mr. FASO. Thank you, Madam Chairman. I yield back. 

Ms. BLACK. The gentleman’s time has expired. The gentlelady 

from Illinois, Ms. Schakowsky, is recognized for 5 minutes. 

Ms. SCHAKOWSKY. Just to follow up on the line Mr. Faso was 

talking about. What about prescription drug prices? Is not that 

driving a lot of an increase? We have seen a dramatic increase in 

prescription drug cost as well. 

Mr. HALL. Right. That is part of the growing healthcare cost per 

beneficiary just continues to grow faster than GDP. 

Ms. SCHAKOWSKY. So, the CBO cast doubt on what the GOP tax 

bill does to support American workers. For corporations, the bill included a tax on global and tangible low tax income. GILTI, G–I– 

L–T–I; I do not know. And the deduction for foreign derived intangible income, FDII. So, I am going to read a part of the outlook, 

and then I would like your help in understanding it. 

Mr. HALL. Sure. 

Ms. SCHAKOWSKY. ‘‘By locating more tangible assets abroad, a 

corporation is able to reduce the amount of foreign income that is 

categorized as GILT. Similarly, by locating fewer tangible assets in 

the United States, a corporation can increase the amount of U.S. 

income that can be deducted as FDII. Together the provisions may 

increase corporation’s incentive to locate tangible assets abroad.’’ 

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So, what are tangible assets, and would that be things like manufacturing equipment and physical factories actually moving? 

Mr. HALL. That is right. Then let me be clear, though. One of the 

things we are pointing out there is that that particular aspect of 

the Tax Act is complicated. Right? It encourages companies to locate in the United States, but there is also this other aspect where 

it can encourage companies to also locate abroad. 

So, our point there is that that is sort of complicated. We think 

on the whole, the Tax Act does encourage locating production in 

the United States on the whole. But on that particular one, like I 

say, that one is an example of how sometimes this is more complicated than simply looking at the Tax Act as intended. 

Ms. SCHAKOWSKY. But that is a factor, you are saying. 

Mr. HALL. Right. 

Ms. SCHAKOWSKY. So, when CBO says corporations may ‘‘locate 

tangible assets abroad,’’ that could be moving manufacturing, and 

of course the manufacturing jobs with them, overseas. Is that a fair 

characterization? 

Mr. HALL. Yeah. We do say that it may be possible that some 

companies will do that. We are not saying that that is going to be 

the rule. But that is a possibility. 

Ms. SCHAKOWSKY. Let me see if I have got any more. Maybe I 

will yield back. I did want to follow up on some of the questions 

I have asked previously in other hearings about how the tax bill 

and changes in agency implementation affects healthcare costs and 

coverage. So, how does CBO’s analysis reflect the Trump administration’s decision to stop making cost-sharing reductions? If that 

has been asked already, I can yield. But cost-sharing reduction 

payments that help keep down health insurance costs? 

Mr. HALL. We did talk about that. But what has happened is insurance companies have raised their premiums for silver plans. 

And by raising their premiums, it has increased the subsidies they 

receive from the Federal Government. And those increased subsidies, tax credits for people, is sort of replacing the direct payment. So, the point is that we are still spending money for the CSR 

even though we are not making the same direct payments. 

Ms. SCHAKOWSKY. I think I am going to yield back. And I think 

all those questions have been answered. I appreciate it. 

Chairman WOMACK. The gentlelady yields back. Mr. Lewis, Minnesota. 

Mr. LEWIS. Thank you, Mr. Chairman. Thank you, Dr. Hall. 

There seems to be some mixed messages here I want to try to drill 

down on a little bit. I believe in your report you cite that revenues 

over the 10-year period will be about $44.1 trillion. Is that correct? 

Mr. HALL. Yes. 

Mr. LEWIS. And that is about a trillion dollars more than your 

previous estimate? 

Mr. HALL. Let me check. 

Mr. LEWIS. Before the Tax Cut and Jobs Act? 

Mr. HALL. Yeah. The change is in revenues. 

Mr. LEWIS. Yes. 

Mr. HALL. Yeah. 

Mr. LEWIS. That is all right. 

Mr. HALL. Yeah. I think revenues are down about a trillion. 

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Mr. LEWIS. It is about a trillion. 

Mr. HALL. Yes. Catching up to you, sorry. 

Mr. LEWIS. So, to what do you attribute the increase in revenues 

after we passed the tax cut bill to? 

Mr. HALL. Well, it is a decline in revenues, not an increase in 

revenues. 

Mr. LEWIS. But the previous estimate was below $44 trillion. So, 

are you saying we are getting the $44.1 trillion because of growth? 

Mr. HALL. Yeah. We have a number of things going on. That is 

right. We have stronger growth. And stronger growth has added 

over one half trillion dollars—— 

Mr. LEWIS. I got you. 

Mr. HALL.——reducing the deficit. And that stronger growth 

than we earlier forecast has meant we have higher revenues. 

Mr. LEWIS. All right. 

Mr. HALL. The revenue collection has been higher. 

Mr. LEWIS. Growth and revenues are actually higher post the 

Tax Cut and Jobs Act than you had previously estimated. 

Mr. HALL. Well, not in our forecast, but in our current level. 

Mr. LEWIS. Your current level. 

Mr. HALL. Right. 

Mr. LEWIS. So, what do you attribute that to? What was the 

change from June 2017 to June 2018 for revenues going to 44.1 

trillion, and growth going higher? 

Mr. HALL. Well, some of the growth being higher was from the 

Tax Act. Overall, the Tax Act had lowered revenues. 

Mr. LEWIS. Well, you say ‘‘than otherwise would be.’’ But if you 

take a look at the actual revenue tables, they go up every year to 

$44.1 trillion, which is a trillion dollars higher than the previous 

estimate. And so, was growth. And I am just wondering why you 

made that change from a year ago? 

Mr. HALL. Yeah. I am not tracking that we have got an increase 

in revenue. 

Mr. LEWIS. We should check on that. 

Mr. HALL. I am sorry. 

Mr. LEWIS. It is quite all right. But you do say there is more 

growth in the near term. 

Mr. HALL. Yes. 

Mr. LEWIS. All right. So, there is more growth in the near-term, 

but you say it is slower later on. 

Mr. HALL. Right. 

Mr. LEWIS. To what do you attribute that to? 

Mr. HALL. It slows down because we think real GDP is going to 

get out ahead of potential. So, in other words, we are nearing to 

where we are at full employment, basically. And we have a lot of 

stimulus coming in. And so, we are going to see an increase in 

labor force participation; we are going to see more employment, unemployment rates going down. All this is leading to growth above 

potential. So, what then will happen is eventually that will increase pressure on prices and then interest rates. 

Mr. LEWIS. So, if increased growth was a result, at least in the 

near-term, and we have an increase in the deficit of 1.6 to 1.9 trillion—there seems to be some dispute there, but regardless, an inBU00-A363290 with DISTILLER

42 

crease in deficit—what would the deficit look like if we did not 

have the increase in growth? 

Mr. HALL. Well, overall our change in our economic forecast 

added a trillion dollars to reducing the deficit. So, it would be a 

trillion dollars worse. 

Mr. LEWIS. So, because we have got higher growth, we have got 

a lower deficit. 

Mr. HALL. That is right. 

Mr. LEWIS. Right. I guess where I am going with this is I am not 

quite certain why growth is always considered, well, underestimated in my view, but always considered inflationary. You mentioned the bottlenecks, which is the traditional economic view, 

when you get a spike in interest rates and a shortage of capital. 

But you are old enough to remember, I certainly am, when Ronald Reagan took office, the prime rate was 21.5 percent, inflation 

was running 13 percent; came in with Kemp-Roth, delayed for a 

year, but then kicked in. And what happened to interest rates? 

They were cut in half. How is that possible? You are saying because of this tax cut, interest rates are going up. How did we miss 

that? 

Mr. HALL. Well, we have had two effects from this tax cut. Part 

of our forecast, we do have an impact of potential GDP. We do 

think potential GDP is going to be higher. That is the supply side 

as a result of the Tax Act. And that will be higher throughout the 

period. 

Mr. LEWIS. More capital, more productivity. 

Mr. HALL. Exactly. So, we have that happening as well. It is just 

that there is more stimulus pushing GDP above that outweighs 

that. 

Mr. LEWIS. I certainly agree with you to the degree that we think 

we can prime the pump in consumer spending. That is not progrowth. What is pro-growth is getting that truck to the truck driver. And that requires capital. 

Mr. HALL. Correct. 

Mr. LEWIS. And that is what we tried to do with the Tax Cut and 

Jobs Act in my view. Final quick point; spending growth between 

2017 and 2019 is driven in large part by, in fact, the increase in 

discretionary spending. Is there a danger of us just saying everything the problem is mandatory, and we can keep pumping up discretionary? 

Mr. HALL. Well, sure. Discretionary spending is contributing. 

Mr. LEWIS. Thirty percent. 

Mr. HALL. Yeah. You know, it has gone not noticed, but I can tell 

you that discretionary spending, from the three pieces of legislation, increased the deficit by $650 billion. 

Mr. LEWIS. I yield back. Thank you. 

Chairman WOMACK. Mr. Smucker, Pennsylvania. 

Mr. SMUCKER. Thank you, Mr. Chairman. Good afternoon, Director Hall. As someone who voted for the Tax Cuts and Jobs Act, I 

am very proud of the work that was done and pleased with the impact on individuals that I represent in my district in Pennsylvania. 

I have heard from countless constituents back in my district about 

the benefits that they have seen. For instance, using just the first 

name, Gage, from Lancaster County, shared, ‘‘We are a family of 

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four, and we will use the savings that we have seen towards purchasing our first house.’’ 

Ken, from Chester County, shared, ‘‘My daughter has special 

educational needs. Although she is only in second grade, my wife 

and I recognize the value of a strong educational foundation and 

have enrolled her into a private school where any and all of our 

savings are going.’’ And what I am hearing from folks across the 

district, that they are seeing the impact of more money in their 

pockets. And it is beneficial to them. 

I have also seen the optimism among businesses. And a quote 

from your report says that the recent enacted tax law, and I quote, 

‘‘Will encourage workers to work more hours, businesses to increase investment in productive capital, thereby raising employment and raising income.’’ We are seeing an impact on wages 

today? 

Mr. HALL. Yes. 

Mr. SMUCKER. And how much do you expect we will see wages 

be impacted? 

Mr. HALL. Yeah. You know, I do not have an estimate on the 

wages, but I can tell you about employment. We think employment 

is going to be an average of 1.1 million higher over the 10-year period because of the Tax Act. 

Mr. SMUCKER. So, we are not only seeing more money in individual’s pockets today, but we are seeing wages rising for the first 

time in a while, more than we have seen in the past. 

Mr. HALL. Yes. 

Mr. SMUCKER. 1.1 million. That is what you just said, 1.1 million 

more jobs created over the next 10 years as a direct result of the 

Tax Cuts and Jobs Act? 

Mr. HALL. Yes. 

Mr. SMUCKER. One of the things I am now hearing, and I just 

recently met with a group of large staffing companies. So, these are 

companies that are working with businesses to fill available spots. 

And the availability of individuals to fill that spots has reached almost a crisis point for a lot of businesses. And I guess I would like 

to hear from you whether you are seeing that as well? Going down, 

what are you projecting the unemployment will go down to? 

Mr. HALL. You know, I do not have it in front of me, but it will 

go down. It is already very low. Do have it going down a bit lower. 

Mr. SMUCKER. To about 3.3 percent? 

Mr. HALL. That sounds about right. Yeah. 

Mr. SMUCKER. Yeah. 

Mr. HALL. Yeah. 

Mr. SMUCKER. Which is historically very low. Right? 

Mr. HALL. Right, which are already historically low. 

Mr. SMUCKER. Right. 

Mr. HALL. Three-point-three percent would be very low. 

Mr. SMUCKER. So, what I have heard from these individuals— 

and this is anecdotal, but I want to get your thoughts on this— 

businesses are ready to reinvest back into building factories and 

creating jobs here. But literally today still are forced to make decisions about where they will locate a new plant, or where to locate 

their operations based on available workforce. Do you think your 

report bears that out? 

BU00-A363290 with DISTILLER

44 

Mr. HALL. Yeah. It does, and it should. I mean, we have started 

to see some modest increases in wages. And we think that is going 

to accelerate. We are going to get much stronger wage growth in 

the next few years. So, that is absolutely true, and that is a big 

part of getting the slack out of the economy. 

Mr. SMUCKER. So, do you think that lack of labor availability will 

impact economic growth over the next 10 years? 

Mr. HALL. I think it will. 

Mr. SMUCKER. I would like to get to that, but I have run out of 

time. So, 62 percent labor force, or 63 percent is the current labor 

force participation rate. Can you give us some historical perspective 

on that? 

Mr. HALL. It is already a little bit of a low level, and it is a low 

level because we have an aging population. And the long-term 

trend actually for that is it is going to go down as people age out. 

But what will happen from the tax bill is we will get some stimulus; we will have that not decline so fast as it was before. And 

it will hold up, we think, as a result. 

Mr. SMUCKER. I felt, you know, businesses are saying this is a 

very real problem. They cannot find available spots. Is there an opportunity to build more participation in the labor workforce? I have 

always felt like we have not made that connection very well, providing the skills, training, and so on to connect people with the jobs 

that are available. Is there an opportunity for us? 

Mr. HALL. Well, I think that is true, yes. Because I do think that 

the aging population means that if we can focus on the non-aging 

population and get their participation rates up, that can make a 

difference. Historically, for some reason, the cohorts below the baby 

boomers have not participated in the labor force like baby boomers 

have. And that is a little puzzling. 

Mr. SMUCKER. Thank you. 

Chairman WOMACK. The gentleman from Michigan, Mr. 

Bergman. 

Mr. BERGMAN. Thank you, Mr. Chairman. And thank you, Dr. 

Hall. It is always good to see you here. If I was not unquestionably 

positive about life in general, I may have a darker view of just listening. But let me ask you a question. Considering all the factors 

that have been discussed today, are we as a country, to use an old 

quote, damned if we do and damned if we do not? 

Mr. HALL. I think there are some important trade-offs that need 

to be made. I think the debt, the rising debt, is going to be a challenge if it is not dealt with. And in a sense, there is going to be 

a price to pay in dealing with that. 

Mr. BERGMAN. Okay. So, the old saying, life is a series of tradeoffs from beginning to end. And kind of rhetorically speaking here 

for a second, you know, how do we, as the elected, you know, officials, if you will, elected by the people to come here, how do we, 

in our deliberations and our performance, build confidence in the 

American people that their government will do the right thing if 

left to its own devices? Kind of again, you know, rhetorically speaking, you know, T.S. Eliot has got a lot of quotes. But one is that 

only those who will risk going too far can possibly find out how far 

one can go. 

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45 

So, when we talk about the future, we predict to an extent. You 

just mentioned a second ago about the post-baby boomer generations being less motivated to participate in the workforce. I find 

that interesting. I was not given an option as a kid of participation. 

My parents explained to me what my participation would be. They 

left it up to me to the level and the quality, which they watched 

very closely. But the future of jobs and careers, who do you think 

is better at predicting and adapting to the future; government or 

business, or public versus private sector? 

Mr. HALL. In my personal opinion, private sector. 

Mr. BERGMAN. Okay. So, when you take something like the Tax 

Cuts and Jobs Act, and put more money into the private sector 

hands, how should the government then evaluate that that money 

that goes back into, if you will? You know, corporate coffers is just 

one thing. But that small business coffer, how does government 

then evaluate what they did; what we did? 

Mr. HALL. You know, I am not sure I can tell you how to evaluate it. I can tell you that we will do our best to sort of describe 

what we think is going to happen and what the trade-offs are. 

Mr. BERGMAN. And I agree with you, by the way. We cannot really evaluate. But if we have an idea of metrics and milestones that 

then as we go forward, we go, okay, we were close on this; we were 

off on that; here was a positive; here was a negative. That is a way 

for government to, if you will, evaluate its laws and its policies. Because when you make a law, it is for 100 percent. When you make 

a policy it is for, at best, 84.6 percent on the statistical average, 

because you have got a bell curve. And that is policy. 

You know, the CBO report shows that mandatory spending continues to escalate due to demographic changes and other factors. 

And in fact, spending on Social Security, Medicare, Medicaid, and 

debt interest is due to double between now and fiscal year 2028. 

Can any serious effort to reduce our growing deficit and debt problems exclude reforms to Social Security, Medicare, and Medicaid? 

Mr. HALL. Well, that is getting a little dangerously close to recommendations for us. I can tell you, you do need to look at the size 

of changes you could make. You need pretty significant change. 

You kind of need to go where the money is. 

Mr. BERGMAN. Thank you. I see my time is about to run out. But 

is it fair to say that everyone needs to have skin in the game in 

order for us to make the tough decisions? The answer is yes, because anybody who does not have skin in the game is not fully invested. I yield back, sir. 

Chairman WOMACK. I will take that. The gentleman from Alabama has reappeared, and he is recognized for 5 minutes. Mr. 

Palmer? 

Mr. PALMER. Can I have 15 minutes? I am kidding. Thank you, 

Mr. Chairman. A couple of questions, Mr. Hall. I think earlier Congresswomen Black asked about the new baseline being altered with 

CSR payments. 

Mr. HALL. Right. 

Mr. PALMER. And I have asked that this be handed out. In June 

2017, you were projecting $44 billion savings. You were anticipating that these payments would be made. When did you change 

that? 

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46 

Mr. HALL. I am sorry? 

Mr. PALMER. Baseline? You raised the baseline. 

Mr. HALL. And this is the direct payments for the CSRs? 

Mr. PALMER. Right. 

Mr. HALL. Well, that is not the baseline now, because there are 

no direct payments being made. What we have adjusted is we have 

adjusted the tax credits that people get because insurance companies, in response to not getting the direct payments, have raised 

premiums. And now people are receiving increased tax credits. So, 

that is how the Federal Government is paying for it now. 

Mr. PALMER. Section 257 B1 of the Gramm-Rudman-Hollings Act 

requires budget scorekeeping decisions to assume that funding for 

entitlements already is adequate to make all payments required by 

those laws. 

Mr. HALL. Right. 

Mr. PALMER. In other words, you would have had to of gotten instructions to do that. I do not think you had the authority to do 

that. 

Mr. HALL. Well, we do. Funding for CSR is in our baseline. It is 

just in a different spot. It is not the direct payments. It is through 

the higher premiums of the subsidies for those. 

Mr. PALMER. All right. I am sorry I have had to miss most of 

this. I have been trying to keep up with what is going on. And I 

just got a little bit of Mr. Bergman’s questions, your answer to that 

about skin in the game and where we are in terms of getting to 

a balanced budget. That is kind of a hot topic today with the balanced budget amendment coming up. 

One of the questions I would like to ask you is does the CBO anticipate a reduction in uncollected tax revenues as a result of the 

tax reform bill that we passed? Because I believe the projection for 

uncollected taxes last year, or this year. Last year was, like, $450 

billion. I will emphasize $450 billion, with a B. 

Mr. HALL. You know, I do not know offhand. I would have to talk 

to our tax folks, and maybe I can get back to you about it. 

Mr. PALMER. Well, considering that is almost half the deficit, 

would not that be relevant? 

Mr. HALL. Sure. And I am pretty sure it is in our forecast. I just 

do not know the number offhand. 

Mr. PALMER. I would be interested to know if that is in the forecast. 

Mr. HALL. Right. 

Mr. PALMER. That was one of the objectives of the tax reform was 

to simplify the tax code; that would substantially eliminate the failure to collect all the taxes that are owed the Federal Government. 

I just left the hearing in the Oversight Committee on improper 

payments. That is $140 billion-plus. It is going up every year. This 

committee last year included in our budget reducing that by half. 

That is 700 billion. 

The point I want to make is really that we can get to a balanced 

budget. The issue is do we have the courage to tell the American 

people the truth about where we are in terms of our fiscal condition 

and make recommendations that will get us back where we need 

to be to get our fiscal house in order. That includes collecting all 

BU00-A363290 with DISTILLER

47 

the taxes. That means taking advantage of our energy resources. 

That means eliminating improper payments. 

I pointed out that in 2015 we collected $516 billion just in fees. 

If we could have collected another $16 or $17 billion in fines, if we 

captured just 10 percent of that, that is 50-plus billion per year. Do 

you believe that we could get to a balanced budget? 

Mr. HALL. I think it would take some very difficult decisions and 

take some planning. But of course, I think it is possible. It is certainly above my pay grade as to how to do that. 

Mr. PALMER. If it is above your pay grade, that is kind of depressing. With that, Mr. Chairman, I will yield back. 

Chairman WOMACK. Not recognizing anyone that has not had a 

chance to grill the CBO Director, or at least question him, I am 

going to yield the remaining time to the gentleman from the Commonwealth of Kentucky, the Ranking Member, Mr. Yarmuth. 

Mr. YARMUTH. Thank you very much, Mr. Chairman. Thank you 

very much, again, Dr. Hall. And you spent a lot of time, you and 

your team here before this committee over the last few months. We 

appreciate all of your time and your responses. 

I want to talk about your unemployment projections for a 

minute. The unemployment rate has been steady at 4.1 percent for 

several months now, which is pretty remarkable stability during a 

time when we have had strong job creation. And it is a level that 

not too long ago was thought to be unachievably low. And most 

people are characterizing us as being at full employment at this 

level. 

But your report forecasts a dramatic reduction to an average of 

3.8 percent this year, and 3.3 percent next year. Since we already 

have one quarter at 4.1 percent, getting to 3.8 percent for the year 

would require we have about 3.5 percent average for the rest of the 

year. And one reason we have seen the unemployment rate hold 

steady, even through strong job creation, is through growth in the 

job force, the labor force. Your projections also call for a higher 

labor force participation rate than you have projected in the past. 

And finally, you have the unemployment rate climbing from 3.3 

percent to 4.6 percent in 2022, which is a rather unusual rate, it 

seems like, while the economy continues to expand. So, I am interested, again, not to try to make any point, I am just curious, is if 

you would walk us through your unemployment projections and explain how and why you would expect the changes that you have 

projected. 

Mr. HALL. Sure. It is the cyclical pattern from the stimulus. We 

have had a lot a stimulus into an economy near potential. What we 

are essentially forecasting is that growth will get above potential. 

And what that means then is employment will actually get above 

potential. The unemployment rate will get below potential. And by 

potential we mean sustainable. 

So, while the unemployment rate may get to a lower level as we 

think it will, we do not think that is sustainable. So, we think that 

will lead to inflationary pressures, pressures to raise interest rates, 

and that will lower economic growth, slow down wage growth, and 

make the unemployment rate go back up towards its sort of more 

permanent sustainable level. 

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48 

Mr. YARMUTH. Okay. I think you just said a few minutes ago 

that you are projecting about 1 million new jobs because of the tax 

cuts. 

Mr. HALL. Right. 

Mr. YARMUTH. One million new jobs because of the tax cuts. I am 

curious about the model, because most of the analyses so far done 

studies of corporate America and so forth, is that the vast majority 

of the tax cuts given to corporations are going to be spent on dividends, stock buybacks, and mergers and acquisitions, none of 

which result in additional capital formation. I guess you could 

argue that dividends might, but probably not. And a very small 

percentage, about 20-something percent, of all of the corporate tax 

cuts, the business tax cuts, went to actually go to reinvestment and 

to employees. 

So, I am just curious as to whether those are similar to the way 

you viewed the way tax cuts are going to be used, or if you had 

a different analysis of that? 

Mr. HALL. Well, we do think that the tax act will lower the user 

cost of capital, and it will essentially lower the marginal tax on 

capital. And that will encourage companies to increase their investment. Similarly, we think that the marginal tax on labor will be 

lower going forward, making it easier for companies to bring labor 

on. And those are the things that affect our view of potential GDP. 

But then, we also have this stimulus coming in. We have a lot 

of aggregate demand coming in, pushing the economy above its potential for a while. So, for example, if you look at our estimate that 

employment will be 1.1 million higher over a 10-year period, that 

is on average over the 10-year period. In fact, the employment level 

will probably be higher in the middle before the inflationary pressures kick in and interest rates go up. And so, it takes some of that 

stimulus away. 

Mr. YARMUTH. Turning to another subject. Your report includes 

extensive analysis of the economic impact of the tax bill. And as 

we just discussed, predicts strong economic growth this year and 

next year. Of course, we have been experiencing one economic expansion, soon to be the second longest in our history. But too many 

parts of the country, particularly in rural areas and older industrial cities, have not shared in the benefits of the expansion so far. 

I think it is a concern that that trend may continue over the next 

few years. 

So, my question is have you done any analysis of whether the 

near-term economic boost from the tax law will be broadly shared 

across the country? Is there any reason to think that the laws benefits will make a significant and transformative difference in communities with weaker economies, or is it more likely that the benefits will be concentrated in areas that already have healthy economies? 

Mr. HALL. We just have not been able to think about that at all. 

We have been so focused on the big budgetary impact, the economic 

impact, that that is significant extra analysis to try to look at that. 

Mr. YARMUTH. Got you. Thank you for that. So, as you know, we 

are going to be debating and voting on the balanced-budget act 

amendment this afternoon. And one of the things that concerns me 

about that whole idea is—there are a lot of things—but one of the 

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49 

things that concerns me most is that if you had that proposal in 

effect right now, we would be looking at figuring out how to cut 

roughly $800 billion worth of Federal spending in the next year; 

roughly 20 percent cuts in all Federal spending. I am curious as 

to whether you can make an estimate as to what impact on the 

economy a loss of $800 billion in Federal spending, and whether it 

is in jobs or so forth, what would be the impact of that kind of a 

cut? 

Mr. HALL. Well, of course it depends a lot on the details. You 

know, how much time and that sort of thing. But certainly, a drop 

in revenue would be the opposite of stimulus. A drop in Federal 

spending would slow down the economy; just something that large. 

Mr. YARMUTH. And since, you know, in my state, Federal contributions to our state budget amount to about 37 percent. A cut 

of that magnitude in Federal spending, or anything approaching 

that, in your opinion, would that have a significant impact on state 

budgets throughout the country and local budgets as well? 

Mr. HALL. Sure. But of course, it depends on how it is done. You 

know, one of the things that certainly happens with Federal budgets is there is a cyclical aspect to it. So, when you go into recession, 

revenues go down, spending goes up. And that has an impact on 

helping stabilize the economy going forward. 

Mr. YARMUTH. Yeah. And just to go back to one of the prior questions, you were asked about basically the income-based spending, 

why it spiked from 2007 for those 10 years. A good portion of that 

growth in income-based spending would have had to do with the 

recession, would it not have? 

Mr. HALL. Yes. 

Mr. YARMUTH. Right. Thank you. I just wanted to clarify that. I 

have no further questions. Once again, I thank you very much for 

your efforts and your responses, and I yield back. 

Chairman WOMACK. Thank the gentlemen. And we have one 

other member that has arrived here toward the end of our meeting 

that I will yield to; Mr. Grothman of Wisconsin. 

Mr. GROTHMAN. Okay. Well, thanks for coming over here. A goal 

of this committee is to propose of discretionary spending. And I believe originally President Trump, last year, proposed about a 5 and 

one-half percent increase in defense discretionary spending, and a 

cut in nondefense discretionary spending. Is that accurate? 

Mr. HALL. I believe that is right. 

Mr. GROTHMAN. Considerable. Instead what happened, in part 

because of this committee’s action, and in part because of pressure 

from Democrats in the Senate, there was a significant increase in 

nondefense discretionary spending. Is that accurate? 

Mr. HALL. It is. 

Mr. GROTHMAN. Significant. Do you know how much more we 

spent in nondefense discretionary than President Trump originally 

wanted? 

Mr. HALL. I can tell you on our 10-year forecast, because of the 

three bills, discretionary spending is up by about $650 billion. 

Mr. GROTHMAN. Yeah. And can you tell us what the difference 

in nondefense discretionary is considered to be now, compared to 

what President Trump originally proposed a year ago? 

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50 

Mr. HALL. Yeah. I do not know. I just do not remember what 

that proposal was that well. 

Mr. GROTHMAN. It is a significant cut. Right? About 6 percent. 

I should not say 6 percent. It is significant. I think all sorts of people have gotten 6 percent cuts all the time. It was about 6 and onehalf percent. Right? Could you comment on the, what I think is 

rather bizarre policy that has grown in Congress that if we needed 

an increase in defense spending, we have to spend more in nondefense spending to be fair? 

Mr. HALL. Well, CBO, we would not want to comment on what 

is or is not fair. 

Mr. GROTHMAN. Well, what do you think is the long-term fiscal 

effect of the idea that if somehow this body believes that we need 

to spend more on defense, we have to go up in nondefense as well? 

Could you tell us what the difference is between what your deficit 

looks like 5 or 8 years out now, compared to if this body would 

have gone along with President Trump’s recommendation a year 

ago? 

Mr. HALL. I cannot so much. And one of the things that is important about our forecast here is we follow Budget Committee direction on discretionary spending. Because it is discretionary, it is 

Congress’s choice. We make a very mild assumption that discretionary spending grows by inflation, except, of course, with the 

caps. So, we are really not even forecasting what is going to happen 

with discretionary spending. We are just making a very—— 

Mr. GROTHMAN. Are you basing it on, though, the current omnibus, then, plus inflation for the next few years. Is that what you 

are basing it on? 

Mr. HALL. That is right. The current omnibus changes the caps. 

Mr. GROTHMAN. Right. 

Mr. HALL. And once the change in the caps, once they go back 

in place, and the caps are holding things back. And once the caps 

are gone, then we have inflation driving discretionary spending. 

Mr. GROTHMAN. So, in other words right now you are anticipating a cut in nondefense discretionary 2 years out? 

Mr. HALL. Yes. 

Mr. GROTHMAN. Okay. 

Mr. HALL. It is one of the reasons why we have an alternative 

fiscal scenario in here, where we assume roughly rather than constant current law, we have current policy. So, we sort of assume 

that the caps do not readjust. We assume that the drop in the individual income tax rate does not go back up and give you an idea 

of what that looks like going forward. 

Mr. GROTHMAN. I do not know if you have the numbers in front 

of you. Let’s take a number; 4 years out or whatever. Can you tell 

us what you are anticipating in both defense and nondefense discretionary compared to the current year? Pick, say, 5 years out. 

Mr. HALL. Yeah. Yeah. We have a nice chart that does not put 

it in dollar numbers, but we have it in terms of percent of GDP. 

So, right now, for example, defense spending is about 3.1 percent 

of GDP. And under current law, that is going to go down to 2.6 percent of GDP in 10 years. That is in our forecast. And then, for a 

nondefense, it goes from 3.3 percent to 2.8 percent. So, we have discretionary spending growing slower than GDP. 

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51 

Mr. GROTHMAN. I suppose you could if I gave you the time, but 

you cannot translate that into a nominal dollar amount? 

Mr. HALL. No. We can follow up, though, and give you the dollar 

amounts. 

Mr. GROTHMAN. I would like to know that, so we know what we 

are shooting at. I think President Trump, before he, maybe, listened to the Congress too much, what he would have liked those 

numbers to be say 5 and 10 years out in nominal terms. Okay. 

Thank you very much, Mr. Chairman. 

Chairman WOMACK. Thank you very much, Mr. Grothman. Because I did not use all of my time in the beginning, I just want to 

close with a couple of observations. There has been a lot of discussion in here about various impacts of what the Congress does, 

taxes and so forth. And its implication for the long-term fiscal condition of the country; i.e., deficits continue to rise, debt continues 

to rise to unsustainable levels as a percentage of GDP. 

And there have been attempts made to make the villain in this 

whole thing the Tax Cut and Jobs Act. And then, occasionally other 

things, like increases in defense spending, or increases in nondefense discretionary spending. So, I just have a couple of questions for you, Dr. Hall. Is it fair to just basically single out one part 

of the economic condition and paint with a broad brush on that; 

i.e., put another way, should not the Congress look at economic 

output as a whole; i.e. lower taxes, maybe a lower regulatory 

framework that businesses and industry have to live under? 

I mean, it goes without saying that a business or an industry 

that thinks there is going to be a hyper-regulatory environment is 

probably not going to want to expand and introduce new products 

and those kinds of things because of the fear of the unknown, the 

regulatory pressures that may be coming. Mandates on healthcare 

certainly impact decisions made about whether to grow or expand 

an economy. I think that all those things go right to the heart of 

consumer confidence. And consumer confidence is a big piece of 

whether people spend money and live their lives in a little different 

way. 

I also believe that the policies of this Congress, particularly those 

on means tested programs, have an impact overall on the budget. 

So, I guess the point I am making is this—and some of these things 

you can score, and some of these things are difficult to score at 

best—that can we not just say that an economy that is built 

around a lower tax framework, a lower regulatory environment, 

fewer mandates from the Federal Government, maybe a little more 

empowerment to our States to be able to solve some of the problems that we try to solve at the Federal level? 

Would that not have a real nice impact on the economic productivity of this country in such a way that it could one day help us 

rid ourselves of the deficits, particularly if we were able to do 

things like my friend Gary Palmer suggests; you know, go after a 

lot of these improper payments, and make people more accountable 

again? 

The unknown about the Tax Cuts Jobs Act that we know that 

when we simplify that, people then are more predisposed to doing 

their taxes accurately, so that we do not have taxes that should be 

BU00-A363290 with DISTILLER

52 

due and payable certainly unaccounted for. Should we not look at 

that as a whole? Should the Congress not consider that as a whole? 

Mr. HALL. Well, I am first going to start by not making a recommendation. But I will say that all of those things do in fact impact the budget outlook and the economic outlook. Those are all important factors that do affect, I think, the outcomes going forward. 

Chairman WOMACK. And I think the last thing I want to say is 

this. And I said this earlier in my remarks. There has been a lot 

of discussion on both sides of the aisle about the omnibus package, 

and a lot of comments about discretionary spending. We hear it 

back in our districts. And sure, they do impact. But overall, as I 

said earlier, when you see the aggregate numbers on discretionary 

spending tracking higher, but its percentage of GDP tracking 

lower, it sends, I think, a very loud and strong message to the Congress that if you are going to get your arms around the deficits and 

the debt, you are not going to be able to ignore in the process what 

is going on on the side of the ledger that is by law, that is autopilot, that we call mandatory. 

And with that, I will yield back the balance of my time. And 

thank you, Mr. Hall, Dr. Hall, for your attendance not only here, 

but for the previous 5 hearings that you and your staff have been 

available to answer our questions and stand in front of that mic 

or sit in front of that microphone. 

With that, please be advised, members, you can submit written 

questions to be answered later in writing. Those questions and 

your answers will be made part of the formal hearing. Any members who wish to submit questions or any extraneous material for 

the record may do so within 7 days. With that, this committee 

stands adjourned. 

[Whereupon, at 2:05 p.m., the committee was adjourned.] 

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Insert offset folio 12 here 30543.012

PALMER Questions for the Record 

How is CEO's new decision to assume funding for cost~sharing reductions (CSRs) ''through higher 

premiums and larger premium tax credit subsidies rather than through a direct appropriation" 

consistent with Section 257(h)(l) of the Balanced Budget and Emergency Deficit Control Act 

(BBEDCA), which states that under the budgetary baseline, "funding for entitlement authority is 

assumed to be adequate to make all payments required" by law? 

Does CBO's new trealment of CSRs assume that Congress will not make a direct appropriation for 

CSRs'1 

How is any potential assumption that Congress will NOT appropriate CSR funds directly consistent 

with the requirement of Sectlon 257(b)(1) of BBEDCA to assume funding to "make all payments?" 

How can the federal government fund CSRs through "larger premium tax credit subsidies" as well as a 

direct appropriation? 

Pleasf~ name any other 

the purposes of Section 

past or present, for which CBO has scored entitlement authority fOr 

of BBEDCA as coming from indirect, as opposed to direct, payments. 

Please explain any and all actions CEO has taken to reconcile the discrepancy of the baseline 

treatment of CSRs with OMB ofllcials. 

Did CBO obtain legal advice from its General Counsel regarding the legality of changing the budgetary 

treatment of CSRs, and whether the change complies with Section 257(b)(l) of BBEDCA? 

When did it obtain any legal advice regarding the budgetary treatment of CSRs-before or after 

Director Hall's comments at the ~January 30 House Budget Committee hearing on "CBO Oversight: 

Organizational and Operatlonal Structure" that CBO would not take action unless and until directed to 

do so by the Budget Committees? 

In its October 25, 2017 estimate of the Bipartisan Health Care Stabili,ation Act, CBO stated that "after 

consultation with the Budget Committees, CBO has not changed its baseline to reflect the 

Administration's announcement on October 12, 2017 that it would stop making payments for CSRs." 

Why did the Budget and Economic Outlook contain no references to subsequent convm·sations with the 

Budget Committees regarding CEO's decision to change its scoring methodology? 

Subsequent to its October 25, 2017 estimate, did CBO engage in any consultations (either orally, in 

person, in writing, or via any form of electronic communication) with the Chairman of the House 

Budget Committee, or staff for the House Budget Committee, regarding the budgetary treatment of 

CSRs? 

Subsequent to its October 25, 2017 estimate, if CBO did not engage in any consultations (either orally, 

in person, in writing, or via any form of electronic communication) with the Chairman of the House 

Hudget Committee, or staff for the IIouse Budget Committee, please explain how failing to conduct 

such consultations--"and then subsequently altering the baseline----is consistent with CBO's statement 

in its August 15, 2017 analysis that. should administrative action on CSRs occur, CBO would "consult 

with the Budget Committees to declde whether and how to reflect [administrative] action in tht: 

agency's baseline and cost estimates?" 

Subsequent to its October 25, 2017 estimate, did CBO engage in any consultations (either orally, in 

pt:rson, in writing, or via any form of electronic communication) with the Chairman of the Senate 

Budget Committee. or staff for the Senate Budget Committee, regarding the budgetary treatment of 

CSRs'' 

Subsequent to its October 25. 2017 estimate, if CBO did not engage in any consultations (either orally, 

in person. in writing, or via any form of electronic communication) with the Chairman of the Senate 

Budget Committee, or staff for the Senate Budget Committee, please explain how failing to conduct 

such consultations~and then subsequently altering the baseline-is consistent with CEO's statement 
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15, 2017 analysis that. should administrative actlon on CSRs occur, CRO would "consult 

Committees to decide whether and how to ref1ect [administrative] action in the 

and cost estimates." 

At the House Budget Committee's January 30 hearing on "CBO Oversight: Organizational and 

Operational Structure,'' you w·ere asked whether CBO would score CSRs "as if [President Trumpj is 

ending them or as if he's continuing them," to which you replied that "We've been treating it as an 

entitlement, so it'H remained there"--unless we get direction to do something different." 

o From whom did CBO get "direction to do something different" in changing its baseline scoring 

assumptions subsequent to your comments? 

In its August 15, 2017 CBO stated that eliminating CSRs would increase health insurance 

subsidy spending by a net billion. However, the line in Table A-1 of the Budget and Economic 

Outlook regarding Technical Changes to health insurance subsidies includes a net spending increase of 

only $44 bjJlion? What accounts for this discrepancy? 

Did Cl30 also use the line in Table A-1 of the Budget and Economic Outlook regarding Technical 

Changes to health insurance subsidies to incorporate changes in behavioral assumptions related to the 

individual mandate, alluded to in CEO's November 2017 analysis regarding the mandate? 

If CBO did use the Technical Changes line to incorporate changes in assumptions regarding the 

individual mandate, please provide separate estimates for J) behavioral changes regarding the 

mandate; 2) thE~ impact of changes related to CBO's treatment of CSRs; and 3) any other component 

changes included in the $44 billion number in Table A-L 
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Answers to Questions for the Record Following a Hearing 

Conducted by the House Committee on the Budget 

on 11ze Budget and Economic Outlook: 2018 to 2028 

Jlil.Y 26, 20 l B 

CEO's new decision to assume funding for cost-sharing reductions (CSRs) 

higher premiums and larger tax credit subsidies rather than 

"PIJtopriati<)ll" comistcnt 257(b)(l) of the Brdanced Budget 

Control Act (BBEDCA), which states that under the budgetary basdinc, 

r:ntit!cmcnt authority is assumed to be adequate to make all payments required'' 

is any pntcntial assumption thar Congress will NOT CSR ftmds 

consistent with the requirement of Section 257(h){1) 

funding to "mc1kc it!! paymems?" 

Answer. CBO's treatment in tl1e baseline of payments tl:1r CSRs botll the realityf)f 

how the ( ~SRs ;1.n: hcing fundC'd and consistcnr with requirements of BBEDCA. 

marla·mlau·s established tmdcr the Affonbble 

CSR5 decrease dcductibles and 

CSRs, people must generally 

int:ome hcrwecn 1 no percent and 

{also known as the federal poverty 

BefOre October 12,2017, the tCderal government reimbursed insurns for rhc costs of 

CSRs through direct payments. However, on thar dare, the Administration announced 

that, without an :1ppropriation for that purpose, ir would no make such payment:. to 

insurers. Because insurers still required 10 offer CSRs and to their costs even I.!Vithout 

direct payments from the government, most have covered those costs by inz:rcasing premiums 

for silver plans offered through the marketpLtccs for the 2018 plan year, and CBO t'X]KCts all 

insurers to do so beginning in 2019. 

2. 
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2 

But(f(etilry 1ir:'dtrnent ajC:\'R.•. Fnr the spring 201 S baseline, ( :HC) and the :-;rafT of the Joint 

Committee on 'Taxation (JCT) project th<tt the cmitkmcm 1-(H sub\idics f{H CSRs 

funded thmugh higher premiums and larger tax credits based on those premiums of 

t\x 

policy. 

direct 111c reflect the insurers arc currently rcirnbmscd 

enrollees in of th(' Administr;tion's chang~ in 

two key considcrarion:s imo accounr: 

rlw requirement that rhc ft:dera! govcrnmcnr ,_.ompcnsatt: insurers 

ofcntit!erncm authority. 

that, in rhe baseline, funding f{n emitlcnwnr ;-Juthority should be 

adequate to make all payments required'' by Lnv. 

m1nour.1mQ insurers fOr the costs of CSRs through 

h~l'l ro treat ;m entitlement and considered two 

irs spring 2018 baseline projections: 

CBO would keep the dirl."ct for CSRs 

made) and project 

dies in the as if insurers not raised their premiums ro covt.·r the costs 

ofCSR~. Suz:h projections would not match actual 2018 in the markctphccs. 

1'v1oreovcr, the approach would l{:ad to too low, resulting 

in kss estimates f{)r 

have covered the costs of CSRs 

the marketplaces for the 20 18 

rxpcct,uion rhar, in the absence 

premium tax credits in the future. 

to th'"· Congress h-c•ctusc the :l.ppw.lch reflects the 

hdng incorponued into pn.·miwm and into of premium 

r!fC'::;.Rs \f/itb l1REDL/1's Requircmmt>. RBEDCA specifics 

assun''pnon that funding for entitlement 

by laws creating direct and 

consistent 

• Under BBEDCA, the baseline should reflect the payments by the la•v as a whole. 

The ACA directs insurers to CSRs ::mel provides thar government reimburse 

insurers for them (section requires tbctt be -allowed to claim premium 

credits (sccrioll 140 {),and instructs that Blade to il1Sttrcrs f()r both c:SRs 

and premium tax credits (section 1/t 12). 

direct CSR to insurers, the 

credits 1401 ,1nd 1412) 

undl',Jt how tho~c st<Hl!tory requirements \vould he fulfilled, m;Jking 
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more rclevam to the baseline. l() reflect all payments 

the law a ,whole, the baseline should account for CSR payments once; in 

arc hcing funded through premium tax credits. 

to make all p:1ynwms 

under the law. BBFDCA 

How em the federal government fund CSRs through "larger 

as well as a direct appropriation? Docs CBO's new rrcannent 

premium t:lx crcdcosts fOr CSRs \viii be 

credit 

Congress will not make a direct appropriation f{)r CSRs~ 

hy the law as a whole, the hasdine should 

is vvhar is occurring nmv. 

cn;~crcd that appropriated funds for direct payments for CSRs, 

the agency update its baseline to those appropriations and ro 

lower its projections of premium ux ;md other insurers would no 

longer increase gross for silver plam ofi't:red through the marketplaces to cover the 

costs of providing 

Answer. -I11c situation in which the meam 

direct appropriation ro a 

for \vhich CRO has scored 

of BBEDCA a.s coming frorn 

fn somt: other situations \'\'hen the source of funding has bc<.:n ar issue, CRO hJs projected 

that entitlement to lx:ndlciari-.:s come from source:, other than those specified 

in Security benefits projected to be 

paid as baseline despite the EKt that Sndal Security's tmst funds nor 

projected to have sufllcicnt funding to pay for those benefits. 1hc :>ource or that funding 

outside of the tru:>t funds not in lavv. 

PlcJsr explain and all anions CBO has taken ro reconcile the discr('pancy of 

baseline treatment of CSRs with 0Iv1B officials. 

Answer. CP.O has discussed 1 he \-virh staff hom the Office 

(OMB). ~fhc tlvo agencies have come~ to a different conclusion about the treatrncnL 

Such diHCrcnn.·s occur For example, CBO and OMB have treated Fannie Mae 

and Freddie i\hc diffcrt·ndy in since those t:ntcrpriscs entered conservatorship 

in 2008. 

Did CBO obtain legal advice fiom its Gcner;:ll Counsel regarding the legality' 

the budgetary trcauncnr or CSRs, and wherhcr the chJnge complies with 

3 
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Section 2'17{b)(l) ofBBEDCA? When did it obtain legal advice reganl!ng 1hc 

treatment of CSRs~bd(m· or after Director Hall's commcnb th~~ .)0 House 

Com mince and Operational 

CBO would not to do so by the Budget Committees? 

Amwcr. ( :BO's im~rnal discussions of the issue;;; involved with the of 

CSRs included Office of General Counsel throughout. Those discussions soon 

after rhc t\dmini:.rration ceased mJking CSR payments in Ot.:tohcr 2017 and continued for 

before the hearing in 2018 vvhere Dirt'Ctor l bH first discussed 

and 

At the House Budget Committee's January 30 on "CHO Oversight: 

gcuuDUW'""' and Structure," you were asked CBO would score CSit~ 

is ending them or as if he's 

that "\'V'c'vc been treating it an entirlcmem, so ir's therc~unlcss we get dirccrion 

fO do diffcrcnr." From whom did CBO get "direction do something diiK·n.:m" 

scoring subsequent to y-our comments? 

2017 cstimarc. did in any consultations (eithcJ in 

in writing, or any form of clccrronic communication) with rhc Chairman of 

House Budget Committee, or staff for the I louse Co!Timittec, regarding tbc 

hudgeury treatment ofCSRs? Subsequent to its October 2017 <,~sri mate, ifCBO did not 

engage in any consultations (either in wriring, or any h)rnl of ckctronic 

conununicarion) with tltc Chairman Cornmittcc, or slaff for the HOltsc 

Budget Committee, how failing to such consu!tations~ .. ..zmd then 

subst.~quemly consistent with CBO's starem;:nr in its August l 

2017 analysis rhar, administcHivc action on CSRs occur, CBO would "consult vvith 

rhc Budget Committees to decide \Vhcthcr and how to reflect [administrative] action in 

the ba:.e!inc and cost estimates?'' to its October 25, 2017 cstimatc, did 

engage in any consultations (either orally, in form of 

clcctrouk communication) with 1hc Chairman Senate Budget ~H.fr 

J~H' tht: Senate the huJget~uy trc::mnent of CSRs~ Subsequent 

cstirnatc, not engage in :my consultations (either 

in pcr::,on, in or via any fOrm of electronic communication) with the Chairnun 

tlw S,:na\c Budg<?t or sufl' for the Sen:lt<.:: Budget Committee, pka,\c 

how fti!ing to condncr such con.sultations-·-anJ tlwn sur>sccjucnny 

conshrcnt with CBO's 5tatemcnt in l '1, 20 J 7 

acrion on CSRs occur, CBO would the 

and how to reflcc1 [administrativcl action in the ;tgcncy's 

administrative 

~U'UUUUCCL,, to decide '\VhCtht;f 

.Answer. CBO did not direction w change if:'i tn . .\1.tmcnr of compensation for CSRs 

entitlement and did not make such a change. CBO made the change to the pro jeered source 

br those following irs normal procedures for consultation with rhc 

Scnat<..' Committees. 

CBO discussed the involved with the budgetary treatment ofCSRs with borh 

committees soon after the Administration ceased making CSR 

2017. -llw:,e discw,sions continued for mc,ntiils--l>,ogi'nn 

January 2018 vvhcre Director Hall first discuss~;;~d the issues 

ward-~during which time CBO observed how the go';en:mJcm 

markets adaptr;:d and how CSRs being 
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consultation culminated wirh rt 

in derail ho\v CBO was handling 

Director Hall dcsnihcd 

In addition, the question asked ar th(· hearing was about scoring~tbat is, cstirnaring the 

cfl'ccr:-: of legislation on the dcficiL to appropriatl' (unding fi.1r 

CSRs, what vvould change the cmidcmctH; the 

fOr payment exists regardless Consequently, and after 

committees about the baseline and abom cosr cstimat<.:'s rcbrive to that 

concluded that a cost estimate fOr such legislation 'vvould ::.how no ctfCcrs on 

or revenues. ~lbat approach would continue the used in pas! 

to appropriate funding for If such a proposal V\'as 

to incorporJtc those approprLnions and 

new law. 

In its October 2017 estimate of the 

st.Ht'd rhat ''after consultation with tht• Budget changed irs 

baseline to reflect the Administration's announcement on Ocrohcr 12, 2017 that it would 

.:.rop making payments for ~.SRs." \Vhy did rhc and Enmomic Omiook contain 

no references to subsequent conversations with the Committees regarding CRO's 

decision ro change its scoring methodolos'Y? 

Answer. In the Outlook, CBO described its estimates of sptnding f{)r subsidies l{)r 

purchased the marketplace.:. this "1hosc c.:.tlmares preliminary, and 

vviH provide details about them and impllcnions fOr future cost csrim,1tc.:. in an 

report. ' CBO bdkved that, bccattse there interest in rhc and 

issues are somewhat complicated, best in publications that focused 

on hcalrh insurance 1bosc provided a fC\v weeks later in the 

committees. 

publications mention CBO's consultations \Vith the 

CSR.:. \-vould incrrase 

line inl~tblc A" 1 of 

Changes to health insuraJKC sub::;ibillion? \Vhat ;Kcnunt.s, f{)r rhis discrepancy? 

Budget and Economic Outlook regarding 

to health insurance subsidies to incorporate in behavioral 

to th<' individual mandate, alluded to in CRO's 2017 

the mandate? If CBO did usc the T~:chnical Changes Hnc to incorporate changes 

in assumptions rc:garding the individual mandate, provide ~cparatc estimates f(n 

l) behavioral clunges the mandarc; 2) imp.!cr of changes n:latcd tn CBO's 

treatment ofCSRs; :cmy other compont·nt t:hangcs included in rhe S44 billion number 

in 'Iahk A,L 

5 
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Answer. ln the Outlook, published in ApriL the increase in 

2018-2027 period reported in 'bbk A~l reflects the net effect 

mates of spending for sub:\idics t(w coverage 

under the ACA and related between April 20 18.(' 

cJpturing technical revisions, a 5206 billion reduction in such 

CBO's estimates of the dTt-cts of legislative .;..hanges 

of outlays f()r marketplace subsidies and 

First, incorporating that the costs of CSRs arc being funded 

pn:.'mium tax credits stemming gross premiums fOr silver 

the marketplaces increased both average J.moum per 

receiving subsidies. Second, revised methods for estimating 

penalty for not health insurance diminished the estimated reduction in insurance coverage and, increased the number of people 

projected to receive subsidies through the marketplaces. 

m;, rkc•rnlace subsidies 

ad min isrrative data enrollmarketpLKes in 2018 was lower than CBO dnd JCT had estimated in 

lower their estimates of subsidized enrollment in aH years 

projected the efFects of all of the components of the technical changes afFectinsurance subsidit.'S simultaneously and have not estimates of 

effects of the components the order in 

which the components were considered. 

of a new version of CRO's health insurance simulation 

preclude such an undertaking.-

6. 

n10dd, see Jessica Banthin and Akxandra 1V1inkozzi, 

Health ln:,manu' SimuLnion Mode! (HISl1\1)" 

D.C., june 19, lOIS),