Post of scorekeeping functions. In support of the appropriations process, tracking spending and helping Congress Figure out how much we are spending and how much bills will cost. Host talk about who you answer to. Phillip we are a nonpartisan agency and answer to the congress. We work through the two budget committees, but we work for the entire congress. Generally our work is for the chairs and ranking members of the various committees. If there is something on health care that would be in the senate for finance, and similarly in the house. And we answer to all of the members and support all of the members equally. Host all of the members are interested in your budget outlook. What is the take away who to work phillip it is twofold. On the economics side we have continued gdp growth in the forecast, but large budget deficits that persists. Reachingto gdp ratio, unprecedented levels. 180 of gdp, a level never seen before. That is what is striking, that conjunction that is in good shape, and a budget deficit that is wide and getting wider. Host what is the Tipping Point . Phillip we dont know. We know as the jet debt to gdp ratio rises, there will be negative effects on the economy. It will leave to a drag on lead to a drag on consumer spending. He also we dont see that now even though we dont see that now, at some point we will and rising debt makes the economy more vulnerable. If Interest Rates rise, that would make our fiscal challenge all the more difficult. We dont know when that Tipping Point will come, but we know there is a rising vulnerability from the fiscal trajectory. A lot of people would have said if we were at the point we are at now, debt to gdp where they are, we would be feeling those effects. What was your view on those issues can years ago and have you changed your view about when and how deficits and debt affect the economy as a whole . Phillip there is a sense in which we can look at the economy and understand why Interest Rates are low. Growth in the rest of the world, it has problems in recent challenges with the virus situation in china and the rest of asia. That has led to lower Interest Rates in the u. S. We see that situation. When the rest of the world has a problem, there is a safe haven. Inflation has remained low in the u. S. The risktaking appetite of appetite of markets and Market Participants has been lower. That leads to lower Interest Rates. You asked how has it changed my view . 10 years ago if you told me where we were in the economic upswing, with the Unemployment Rate at 3. 6 , i would not have expected Interest Rates to be as low as they are. That has led to a rethinking in the profession and at the cbo, we have marked down our projection of Interest Rates substantially. Host what were you doing 10 years ago . Phillip i am a professor at the university of Maryland School of public policy, on the on leave while serving the cbo. So i was the economist of the treasury for the Bush Administration and i was in academia. So the president s budget for fiscal year 2021 just came out this week. Very different forecasts on deficits, just which we havent really seen in a long time in the united states. I am curious what you make of the divergence between your forecast and the white houses on growth and deficits . Phillip we are analyzing the president s budget now. It is something we do every year. Their gdp numbers are pretty different than ours and the trajectory is different. They have a different way of doing a forecast. They assume everything the president is proposing is enacted. Our forecast assumes current law. That counters that counts for some of the that counts for some of the difference. We have productivity growth rebounding from the pretty low productivity growth after the financial crisis. We see better than that but not strong productivity growth over the previous decade or two. That is the main differences. Host are there a set of policies cbo has modeled you think would produce that productivity growth . As it is now, you see potential sort of maximum run of the economy being lower than the white house does also i think. Longertermthink gdp growth around 1. 7 , which is lowerthan the administrations lower than the administrations projection. There are things that could boost productivity growth over time. The Labor Force Growth is decelerating. We are an aging society. That affects the labor force. We know immigration is one thing that would increase the labor force and increase output and over time increase gdp and productivity growth as well. A diversity and energy to our economy, entrepreneurship as well. Policies that would support stronger growth. Those are debated in the congress. There is a variety of levers. It is difficult to know what is the right way to boost productivity growth. Productivity growth is one of the mysteries that it is hard to say what lever will boost it. What will be your role in the budget debate over the coming months . One. Ip an analytic we put out a baseline. Now we are analyzing the president s budget and in march we will put out a new baseline that accounts for the actual dollars of spendings over the last year, when the president puts out his budget, we get more information on the actual spending over the last year. We will go through that and put out a new baseline in march. As always, cbo will estimate whatever Legislation Congress is considering and evaluate that. Hear a lot from members on both sides with big ideas. I am curious how you are looking sort of 10 to 12, 15 months ahead of things like climate legislation, medicare for all, things that would take a fair amount of analytic work. On those things that the new administration and Congress Might but not necessarily bring . Phillip it is one of the challenges to figure out what we need to work on now. We are at our best when we have done the work before the legislation comes to us. One example is surprise billing, a topic subject to legislation. The house and senate in various committees, several analysts at cbo, 11, 12 months ago figured out this was an important issue we havethe work and so been able to support the congress with surprise building because of star analysts who figured it out before i arrived. That is the challenge now. We are working on these issues, climate. We know that is important to members. Both chambers and parties. We are doing the things you would expect cbo to do, how does climate fit into the baseline . Military installation, things like that. That spending is discretionary spending, annual appropriations. The longerterm, bigger dollars on the overall effect on the macro economy. We are looking at the research that relates Climate Changed overall gdp and saying how does it feedthrough to the budget . It is not attenuated by the steps are climate, gdp, spending revenue. Is reflected on the budget, your baseline now, economic up or down from Climate Change . Or do you expect a baseline adjustment to deal with that . Phillip we are preparing some health care as well. Climate change implicit in the budget now, we have a projection for the let insurance program. What is not broken up separately , we dont have a line that says the effects of climate does this to Flood Insurance and things like that. That is what we are working to understand. It is implicit. We are working to make it more explicit. Once we have the connections, we will be able to analyze policies in the future. Could then lead you to a position where cbo could score a bill to reduce Carbon Emissions as being proeconomic growth because it would reduce the effects of Climate Change on the environment . Phillip that is a good question. Cbo under my predecessor, two directors ago, did a work on cabinetry legislation. Looking at the effect of climate on the baseline and then developed to update the analytic tools to evaluate the policies. The policies are the sort of thing we would do. We work with the joint committee on taxation which does the revenue after that. What is the effective policy on the economy, carbon and other emissions and then ultimately what are the costs . One caution is that the sort of thing of avoiding future disasters doesnt score. We would talk about it, and we would provide as much information as we can, but instances avoiding future disasters is a good thing and it has a cost to it. I cant believe it took us this long with two tax reporters, but the cbo did do a in of work on the tax act the past, 2017. You forecast its effects on revenues and along with the other Group Modeling on growth. I am curious, two years of data have been elected. Collected. How do you think the productions fared and what have you learned and updated predictions fared, and what have you learned and updated from the . That . M phillip with my predecessor, cbo did an evaluation of the tax act. Overall it looks like the effects have been in line with our analysis. The impact, positive impact on gdp growth. It looks about what we expected. It is difficult because of the Current Events and policies which can interfere with the clear signal. Iniff policies in place 2018 looked to have an effect on holding down business investment. We have expected to see the positive impact of the tax act coming through business investment. We saw that in the first half of 2018 and then it has been dampened since then. It is hard to disentangle the positives of the tax policy and the dampening of the tariff policy. We are still tracking. , many of the tax returns, especially for businesses, were just filed last october. The gct gets first access. Later in the year, generally october, we will have access to the full file of tax returns working through the jct. What we do see is the incoming revenue, the payments by companies. On the whole, those are in line with our analysis but with important changes we detailed in a blog post last week. Estimate reduce revenues over a decade. Can you talk about that and we had the treasury secretary reasserted the administrations view that the tax cuts will generate enough growth to pay for themselves. Can you elaborate on what effect it is having on revenue and if it is paying for itself . Phillip i will start there and then go back to the other one area we were looking at incoming data and learning more as you said. 2018, inll, the cbo in this analysis, we indicated the tax act would increase growth. It was an amount that would pay for 20 of the revenue loss of the tax act. This includes all of the dynamic effects. Stronger growth, higher revenue, but the stronger growth would have an effect on Interest Rates and that would lead to increasing interest outlays. The overall growth is 20 . We think roughly it pays for 20 of itself. The administration has a stronger growth outlook, but maybe they have in mind with a stronger outlook, there will be more revenue. That is the sort of thing they have in mind. That is our take is 20 . On the corporate side, we learned a lot in the two years. We dont have the returns. ,he joint task many put out a Committee Just put out a nice report. That is their role. We are looking at changes in the share ofvise business profits and wages. In the economy, over the previous several years, corporate profits were lower and wages were higher. Onre was a bit of a mystery the Corporate Tax side. Incoming revenues were weaker than we had expected. But we knew how much money was coming in from tax payments. The data indicated corporate payments were high relative to the tax payments and now the data revision helped resolve the mystery. That is one thing. The other thing we have is two years of both the regulations pertaining to the tax law have been put forward by the treasuries and Internal RevenueService Within the treasury and taxpayers have reacted to that. We are seeing the incoming revenue as a result. That has led us to markdown our expectations. Swagel illip phillip swagel, cbo director. When your projections differ with the white house, what happens . Do you sit down and say this is why we should be looking at this data and this is why we came to this conclusion . How much back and forth is there to show why you projected what you did . Phillip we have a different or the councilmb of economic advisers. We look at what they are doing and we estimate the president s budget using our economic assumptions, but we dont try to coordinate that. We do different things. We respect them and pay attention. Do they try to convince you . Phillip not on the macroeconomic side. It is parallel play would be the agree to disagree. Phillip it isnt that. We are talking about what is the economy going to do over the next 10 years . We go out 30 years. Anyones level of confidence about gdp in eight years, everyone should have some humility about that. We see a wide range of opinions. We are in the middle of a distributional possible outcomes. We have a reasonable forecast, pretty much in the middle of the distribution, the bluechip forecasters to make us comfortable, so we are not out on a limb. Bowie recognize the diversity of but we recognize the diversity of opinions. We work with executive branch agencies. Re is legislators legislation that affects a cabinet department, a new at the Program Veterans administration, we talk about the appropriate place and how much would it cost, what would you do, and we use that in our cost estimates. There is good cooperation at the tech level. You have been on the job eight months. Do you like it . Phillip it is interesting and fun. Only economists could say that. The people at cbo are fantastic. The economic knowledge, Institutional Knowledge is incredible and the issues are endlessly interesting. You asked you before, i didnt answer but i meant to, members of congress can disagree with us. Sometimes the challenge and my responsibilities to explain it. If a member says this is wrong or a staffer says this is wrong, can you explain it, i have to be able to explain it in a way that is sensible. How many opinions have you changed . Phillip it is not that i am trying to change opinions. I am trying to explain this is why say, oh i understand why you say phillip it happens. I will not name members, but you are welcome too. Phillip there are some answers, not that it is complex but thinking through all of the ways the economy interacts with the budget. We do a lot of work on health care for example. There is provisions that would affect drug prices. That has a budgetary impact. The federal government subsidizes insurance premiums through the tax code. Everything was back to the tax code. Employers want tax insurance deductible and then through the afford will care act. Anything that changes drug prices can change insurance premiums and affects the fiscal situation. Setting that out. Not thing that will change anyones opinion or view, im just doing the analysis of the steps and how it works. I was going to get back to appoint raised earlier, that several democrats running for president in this cycle are campaigning on a medicare for all plan. If one of those candidates were to win, i am curious if cbo is equipped, and if it is harder to analyze plans that were not talking about billiondollar changes, but tens of trillions of dollars over 10 years. How does that change the way you approach analyzing a plan that is that large and consequential . Phillip that is the right question with these large policies. We have to start with humility. The range of uncertainty it changes the whole economy. It will be large. Before i arrived, the cbo put out a report on singlepayer health care and my colleagues testified the house budget committee. So we started building the analytic capacity to analyze those programs. We are looking broadly. Have various ways to expand Insurance Coverage because we realize there is substantial interest in expanding coverage. Whether all the way to universal coverage or building on the a credible the Affordable Care act, the administration has put hra rule, looking at how that will affect the health care system. We are building capacity in all if inse ways, to be ready 2021, whatever was to goes, we are hoping to be ready. I am sure you hear a balanced budget should be a goal. Is that a worthy goal and what are the levers one could pull, if that is worth it . In some sense we dont say what the goals are because that involves value judgment. So we want to avoid analysis. Effects, the economic effects of moves towards a balanced budget. One of the points i make is people talk about pay go. A move towards pay go would be a move towards fiscal adjustment but by itself, it makes the problem worse. It makes it harder because the things you pay for are no longer available to address the existing if you think of the low hanging fruit, the decisions are more difficult. How do you help with the tradeoff between the benefit they could provide to the public ,ow, whether use health care whatever the policies, versus whatever the future cost might be if we ran into the deficit at the top . How do you help members thinking about that the potential benefits of a fiscal stimulus, taxcut or whatnot. If you can do that in less than two minutes. The high points. It is difficult because these today, the immediate benefits, the spending side, we do our best. Is the cost. Focus dont want tos know what it costs but what are the benefits. We try to set that out, how many people will be insured, take a vintage of paid family leave take advantage of paid family leave, and not make a judgment. Cost, thell them the benefits as much as we can. They have to decide the tradeoff. The longer term is harder. At what point will this endowment pose a threat . We know it is out there. It is not in the tenyear horizon. We dont see it there but it is out there somewhere and we can tell policymakers to be cognizant of it, but we dont know when that will come. We started by talking about your report on debt and deficit. Were you surprised that that merited no mention in the state of the Union Address . Phillip you know, no. We support the congress and we are so focused on the policy of the congress that we dont do the analysis of what the president is doing, the campaign and we focus on what the congress is would you like him to have mentioned it . Phillip it is not for me to have an opinion on that. T thank you for bringing being our newsmaker this week. Now we continue with the roundtable portion with rich rubin, jim from the new york times. We started and ended that discussion with director swagel on debt and deficit. You have covered handwringing on capitol hill over your careers when it comes to these issues. How much handwringing did that latest report by cbo cause . I think it was a rehandwringing of all of the handwringing that has been done. Nothing has changed. Is, theterm fixture debt curve goes like this. In some ways it is reaffirming on capitol hill what everybody has already known, and what members have sort of deprioritized, made the decision in recent years to emphasize tax cuts now, spending now and either make the decision that those future issues would be dealt with in the future. Jim during the tail end of president obamas two terms, there was this agreement no one really liked that held down spending growth on areas. Republicans did to grow, which was defense and democrats wanted to Grow Research and education. Now we have the opposite consensus where they have just agreed to spend what everybody wants on those programs and also republicans text past tax cuts. Those two combined with the underlying demographic driver of larger debts over time are really sort of yielding this explosion of handwringing on one hand and inaction on the other. There has never been a greater divide i think in washington between the amount of people spend talking about the deficit and talking to reduce it. That is interesting compared to a few years ago. Reflection of a the economic reality. Would there be bad economic the consensus would have been yes and the reality has been different. The reality has been in part what changed the policy. ,ou see now people talk about even the democrats on the campaign trail are trying to align spending proposals with tax proposals to not make projected deficits worse. You mentioned the campaign trail. What did you think about his theer about some of proposals on the campaign trail . It is like playing basketball. You have to get where the ball is going to be. That is what they are trying to do for 2021. To see they have to have that analytic capacity in place. As we have seen in 2009 and 2017, new president s and new majorities come in and they are ready to go with policies in weeks or months. Nonpartisan groups have to be ready for that. President has indicated he will push for a second tax cut measure. There will be presumably second term initiatives, although we not have seen as many of those as from his potential rivals in the democratic side