Congressional Budget Office testify before the Senate Subcommittee on physical response ability and Economic Growth. Thank you all for participating. I think it will be good. Im sorry we cannot have it in a more, what to say, a more kind of formal setting because it may have been better because im not sure if there is any hearing we have that was more important than this. Our Witnesses Today will be philip schlagel, director of the congressional Budget Office and jean todaro who is the comptroller general of the United States and head of the u. S. Government accountability office. With that i will make my Opening Statement and then turned to maggie, my Ranking Member, and then Ranking Member wyden for the entire committee has a statement he would like to make as well. Again, thank you all for being here and im grateful to all who are there during us by internet. Todays hearing will address the topic that was shied away from Syrian Refugees and when it comes to our health we make choices that arent so easy and we want to exercise or we exercise and we want to relax and we prefer to splurge and we think these promote our health and fitness is worthwhile for overall [inaudible]. Similarly, we have to monitor our fiscal position and keep revenues in balance with spending. Unfortunately, we begun the fiscally soft and savvy because we want to pursue the analogy to our own physical health. Congressional Budget Office expects debt to rise to 107 of gdp by 2023 which will be the highest and her nations history. It also projects that debt held by the public will be equal to 195 of gdp and 2050 if all goes well. That is if all goes well. Meanwhile, a highway medicare and Social Security trust fund are on a path to insolvency. All three will be depleted by 2031 by current productions. Cbo longterm report says 2019 levels by 2050 since the spending cuts and tax increases amount to 2700 per person per year and the longer we wait, the worse it gets. This will not be an easy fix. The current coronavirus pandemic reminds us we live in a permanent and unproductive old world. Even in our country is relatively short history we have seen powerful nations decline, most recently the soviet union with the satellite first nation to put a satellite in space to collapse in over 30 years. That is the timeframe of the long term cbo report i am not saying that the United States is like the soviet union or that the debt led to its downfall but instead im saying let the unthinkable happened and we should not be so arrogant as to assume our current position will last forever and does not need to be addressed. Since world war ii the United States has become the greatest economic power in the history of the world and weve used this power to maintain our long period of relative global peace as part of our success weve enjoyed the benefits of a prosperous economy and a dominant role in foreign affairs. We cannot take this status for granted but one way we show complacency is by spending without thinking for the future which, wastes if you will, our inheritance. This ensures the rise of all of this nation and we need to stay strong and i think we all agreed that our children and granddaughter will have their own challenges. One contribution we can make is not to leave them in a financial bind. Right now we are in a unique situation where i and others have advocated for additional fiscal stimulus and our failure to pass another package has much more to do with politics then with a willingness to spend. Whether or not a relief package gets passed we will spend trillions in Coronavirus Relief this year and a number so massive we can hardly fathom. There is a disagreement on exactly how much should be spent but congress is not being stingy. When it comes to our current fiscal situation there is enough blame for all. I hope this wont go into a conversation of who is more at fault which is not a particularly productive conversation, nothing will be done without collaboration giveandtake. As has been said sometimes in this Coronavirus Crisis we are all in this together and when it comes to solving our debt and deficit in making sure our different trust funds remain strong in there for those who need them we are truly all in it together. Recent polling suggests people want to see action to rein in the National Debt but i think we all know that addressing the issue will force tough tradeoffs. No easy answer. Something that Congress Must lead on to do its job. First step is to acknowledge a problem and some of the Public Square argue that deficits dont matter and i disagree and i think history disagrees. I hope to hear details from the witnesses about the scope of what we are up against and a frank appraisal for the consequences of not acting. Thank you all for being here and i will now turn to senator hassan for her opening stateme statement. Thank you, senator cassidy. I thank you to director slagle and comptroller general for testifying today and for the work that your entire team does for our country. Each subcommittee is charged with promoting physical response ability and Economic Growth because of the two go hand in hand. As a nation we must be concerned about the growth in the National Debt. If not handled carefully it could threaten to slow the economy and jeopardize our ability to make continue [inaudible] the first step is approving the Economic Outlook of family, businesses, communities and states that have been hit hard by the covid 19 virus. Yesterday Federal Reserve chair powell warned that debt, too little support would lead to a weak recovery creating unnecessary hardship for households and businesses. Providing assistance to families who cant make ends meet and helping hardhit businesses that stay afloat is not only the right thing to do but also the fiscally responsible thing to do. It will help ensure that families can pay their rent or buy groceries at their local stores and that Small Businesses can continue to employ their workers which will help to keep local economy moving and improve our nations Economic Outlook. The second step to getting our nations fiscal house in order asks for recovery and and bipartisan the promote physical response fully and reduce the National Debt. As recommended by gao we have to address the tax gap which comes from corporations and millionaires avoiding taxes by underreporting and come to the treasury. We need to revisit the partisan tax giveaways that were jammed through congress in 2017 in order to ensure major corporations are paying their fair share in taxes. We need to eliminate waste, fraud and abuse across the federal government. One of my Top Priorities as a Ranking Member of the Homeland Security and governmental subcommittee on federal spending oversight. In seeking a bipartisan path to and proving our physical, Congress Mustering can protect Social Security and medicare while making it absolutely clear that seniors will receive the full benefits they have earned over a lifetime of work. Overall it is clear that once we have recovered some from covid19 the sooner we address the National Debt the better. As shown by cbo and gao the difficulties of addressing the fiscal outlook only compounds over time making it all the more pressing that we Work Together in a bipartisan way to get to the crisis and then develop a fiscally responsible longterm plan for the federal budget. Senator cassidy, i look forward to working with you and the other members of the finance committee and i look forward to hearing from director slagle and comptroller general on ways to improve the fiscal outlook. Thank you. Thank you, senator haskin. Now i think Ranking Member wyden would like to make a statement. Thank you very much, mr. Chairman. I also see we have been joined by our colleague senator scott and also possibly senator carper. Weve got a good contingent on finance members out today and i too want to thank the cbo director who worked so closely with us on the Prescription Drug bill that we worked to get out of the finance committee and showed opportunity for a fresh approach and in effect create incentives to hold down subsidies when there are price gouging so we appreciate him. Jane daddario has competed done good and professional work and we are so appreciative of him. Interment cassidy, Ranking Member haskin i am glad you all have put this hearing together. Senator hassan has, in my view, been the Gold Standard for elected officials and showing that you can care deeply about the human needs of our people and do it in a fiscally responsible way that the two are not mutually exclusive. You can do both. I so appreciate her leadership and i agree with so much of what she said for her Opening Statement. Joining you for my dining room table in southeast portland. This morning i hope everyone participating and watching is healthy and safe. I would like to make a few key points and with your leave i will put my full statement in the record. With that acceptable mr. Chairman . Very good. First, apropos of senator haskins point i think Jerome Powell statement yesterday ought to be required reading for every Single Member of congress because he laid out so clearly in an objective way backed by the nonpartisan fact driven approach about what is at stake here. I think he summed up my views very clearly and i think that obviously if you walk into a coffee shop in america most people wouldnt be talking about the fiscal outlook but i think this topic is going to dominate a lot of discussions in the congress for the years ahead. I will just say that when you set aside all the fiscal lingo this is a debate about whether the congress ought to quit prematurely on the Pandemic Recovery while locking in constant Social Security, medicare and medicaid down the road. This is essentially the far right republican agenda behind a bunch of vague, fiscal buzzwords. I personally think its a recipe for nightmare in the middle class. The country has only recovered half the jobs lost in the pandemic hit. The 600dollar enhanced up limit events that we worked so hard for and did so much to allow millions of families in america make rent and buy groceries and also as has now been reported did an awful lot to keep the economy afloat during the spring. It has expire now. Republicans blocked and extension, permanent job losses and corporate layoffs are stacking up. I was particularly concerned by chairman cassidy about this new report that i just saw people permanently dropping out and they just thought there wasnt an opportunity for them to get ahead. A patchwork of policies hold back in and flinch of predictions and millions of americans lost their healthcare when they lost their jobs. Over the months of september alone just one month, colleagues, nearly 1 million women dropped out of the workforce which is why ive been looking at those numbers with such care. The economy does got a lot of open wounds here and yet a lot of people on the far right and conservative rob wiggins they cut, cut, cut and apparently those are the folks who dont want to have a Major Economic rescue package and i think we need one. I think we need to make sure that if you are laid off through no fault of your own that you have an opportunity to make rent, pay groceries and people get those on up limit benefits for not using those dollars by a bunch of fancy scars from europe and they are using that money to pay for essential and i think that is why the safety net so important and why we should oppose any kind of backdoor cuts the programs like Social Security, medicare and medicaid. The other point i want to make deals with this question of tax fairness and was raised by senator hassan very eloquently. We have seen some substantial evidence just in the last few weeks that donald trump is the tax chief. To me it is absurd for republicans in congress to tell working people they are the ones who ought to sacrifice in order to clean up american finances. Americans have not forgotten that in effect there was a physical time bomb put in place in 2017 when publicans passed these tax handouts to corporations and those tax handouts had a deficit finance price tag of 2 trillion so folks, that is what we are talking about here. And appropriately sobered how we can care for the needs and be fiscally responsible we were told that tax cut would pay for itself and weve seen the price tag of 2 trillion and obviously you then have people coming you got two medicaid, medicare and Social Security and that is a republican playbook we have seen too many times spent freely on defense contractors, corporate goodies, handouts to the top but once the recession arrived many cut programs that matter to working people and it seems to me that when you have millions of people out of work, a lot longer then we have seen before, we have got to make sure we are putting in place policies that keep it from happening again so there is a lot of work for the congress to do and i see colleagues here who worked very closely particularly chairman cassidy to try to find Common Ground on Prescription Drugs and during, i very much appreciate that in the next congress will have to keep medicare out of insolvency and bring down Prescription Drug costs and i am sure we will talk a little bit about the challenges of the Medicare Trust fund given the depth economy has taken and what is meant for those programs. Finally, i think we understand this is why i appreciate senator hassans comments is that we got to make important investment and do that in a way that is fiscally responsible and those investments are in infrastructure, roads and clean energy and broadband and those are challenges that cannot wait. We got heavy lifting to do and tax policy has always been a priority business for the finance committee. I will just say one member makes a lot more sense to crackdown on tats tax cheats rather than inflicting harsh cuts on americans. I look forward to working with my colleagues and appreciate this hearing and particularly to have our experts that work with often, slagle and jane did aro and they do it by the book and they give us good hard data and we appreciate them in their professionalism, thank you, mr. Chairman. I will date just a correcti correction, it is electionyear but to correct the record the President Trump is not proposed cuts on medicare or Social Security and that tax receives went up after the tax cut in jobs act. Mr. Chairman, i will not prolong this but i will give you, for the record, the tax reductions, excuse me, the reduction in funds for medicare and entitlement programs that i mentioned if we make that part of the record and i will include it. I would like that. I will make that the part of the president s public statements in regard to protecting those. One more thing, republicans did propose to continue the on affluent benefits while negotiating on a broader deal but that was not accepted by speaker pelosi. Our witnesses, mr. Slagle, is the tenth director of this congressional Budget Office in june 2019 and previously the professor of the university of Maryland School of Public Policy and visiting scholar at the American Enterprise institute and has taught up northwestern university, university of Chicago School of business and georgetown university. From 20062009 doctor slagle was a different secretary for Economic Policy at the treasury department. Hes also served as chief of staff and senior economist at the council of economic advisers in the white house and has an economist of the Federal Reserve board and the International Monetary fund. He is earned his phd in economics from Harvard University and a b in economics from princeton. While compared mr. Dara became the eighth comptroller general of the United States and head of the u. S. Government account Billing Office on december 22, 2010. When he was confirmed by the u. S. Senate. Hes been serving as acting comptroller general since march of 08. Hes held a number of Senior Leadership positions during his long career at gao dating back more than 45 years, oh my gosh, including chief operating officer and head of gao accounting information and event division. He has a bachelors degree in accounting in williamsport. Welcome and thank you both for joining and i will now turn to mr. Slagle for his fiveminute statement. Thank you, good afternoon chairman cassidy and Ranking Member. And members of the committee. Thank you for inviting me to testify about the outlook and it is a pleasure to testify. We benefit so immensely from the work of gao. The fiscal outlook is a tale of two horizons paid over the longerterm the nations fiscal challenges are daunting and at the same time the United States is not facing an immediate fiscal crisis. Low Interest Rates indicate the debt is manageable now and that fiscal policy could be used to address National Priorities if the congress chose to do so. But you know projections and Interest Rates remain low as the economy recovers from the effect of the pandemic partly because the Federal Reserve is working to keep them low. At the same time the federal debt is already high and projected to rise substantially reaching 195 of gdp by 2050 at the end of our thirtyyear longterm budget outlook. This far exceeds hundred 6 just after world war ii. Over the longer horizon action is needed to address the fiscal challenges. They began with a Strong Economy and labor markets but also a 1 trilliondollar projected budget deficit that was already high by historical standards. The pandemic change the situation dramatically. The deficit for the fiscal year just ended exceeded 3 trillion reflecting the budgetary effects of legislation enacted to address the pandemic and the resulting economic downturn. At 60 of gdp deficit relative to the size of the u. S. Economy was the largest since 1945. Our projections we see federal revenues rising from 16 gdp in 2019 to 19 gdp in 2050 while spending grows from 21 last year to 31 in 2050. That is the situation over the horizon. After the economy recovers from the effects of the pandemic rising interest costs, especially contribute to wider deficit along with Rising Health costs and other factors. Interest rates remain low while the economy recovers from the pandemic and that holds down projected borrowing costs but we still have continued deficits in those lead to rising debt then combined with rising Interest Rates after we recovered from the pandemic that drives up the cost of servicing the debt. The bottom line is that fiscal path over the coming decade is unsustainable because the cost of financing of the deficit and servicing the debt cannot consume an evergrowing proportion of our nations income. High in writing debt eventually will reduce business investment, slow Economic Growth and seems larger increment payments to u. S. Debt on any increase the risk of a fiscal crisis would raise Interest Rates rise abruptly with other disruptions occur. The Tipping Point is the fiscal crisis becomes likely or imminent there is identical or identifiable point at which interest costs is a percentage of gdp become unsustainable. The higher the debt, the greater the risk. One last point the status of the federal trust fund is one indication that the action may be needed to soon off productions of the Highway Trust Fund was enacted in this fiscal year 2021 medicare is exhausted in 2024, Social SecurityDisability Trust fund in 2026 and the main fund of Social Security old trust fund in 2031. The fiscal challenge is not over the horizon but really within our site in the budget window. Again, to summarize the current Interest Rates indicates we do not face an immediate fiscal crisis and we face considerable fiscal challenges over the longer term that will require fiscal adjustments after the economy has emerged from the pandemic. Thank you and look for two questions. Thank you, doctor slagle. Mr. Todaro. Thank you, mr. Chairman. And senator wyden for i appreciate the opportunity to appear today with philip slagle to talk about the physical outcome. Before the pandemic ive been concerned about federal government because we have become historically leveraged in debt by those historic norms. By the end of fiscal year 2019 that held by the public is a of gross domestic was 79 compared to 46 on average from 1946 so we entered the pandemic already accumulating debt at a rapid clip. The pandemic obviously has complicated this fiscal situation as the government stake in muchneeded action to address the Public Health emergency and a profound economic disruption that has occurred as a result of the pandemic but as we achieve and for the immediate future i believe we continue to be focused on Public Health needs and stabilizing and healing our economy ended as we come out of that situation and met Public Health goals and weve met economic goals and we have are on a better ride path we need to swiftly turn our attention to establish a plan to put the federal government on a more sustainable longterm path and ive been calling for such a plan since 2017 and i believe its very much needed in the plan would benefit by having some fiscal roles. Right now we have no fiscal policy as to how much debt we want to accumulate or believe that we can serve over a long period of time. While meeting our other important goals of serving our citizens, protecting vulnerable populations, promoting growth and we believe that a plan that has both fiscal rules, for example, debt to gdp target that we are shooting for everyone has mentioned so far that cbos estimate that could go up to 195 of gross domestic by 2050 but over the longer term it will keep going up. This will be unchecked and without a plan. That by definition is not a sustainable path. Swiftly i say for the same reasons that have been pointed out already the trust funds are going to force decisions. Highway trust fund being sported by the general appropriations and really is not on the user pay premise that it was founded on for a number of years now and the Medicare Fund as pointed out Hospital Trust fund will buy 2024 for cbo productions only have enough to pay 83 cents on the dollar. The Pension Benefit Guaranty Corporation which i havent mentioned yet is soon to be insolvent in a multi employer portion by 2026 and this puts 11 million americans at risk of potentially being failed because of their company goes bankrupt and they wont have enough funds to step in and provide them with adequate pension and the Social Security fund by 2031 will only have enough money to pay 75 cents on a dollar. None of this will happen because we are not going to allow these cuts to effect these programs but it indicates the magnitude of the changes that need to be put in place and the sooner we do that the better as been pointed out because it will have time to adjust. Right now compounding is working against thus as her debt becomes to cumulate and even at low Interest Rates the base of the debt continues to grow. Over time as pointed out by cbos production over the long run we have tremendous Interest Rates exposure and that can precipitate a lot of problems for us. Right now we are paying third at 76 billion dollars last year in interest costs and conceivably interest costs can get to be a trillion dollars over time without a plan. Weve outlined and issued reports about the how a plan can be constructed to have be aligned with the fiscal goals of the federal government and the integrated with the process to allow for flex abilities of emergencies and to be able to provide for checks and balances over time so that the rules are enforced when appropriate and when not appropriate allow for flexibilitys to me emergencies. Also, while these issues wont solve our fiscal problems alone without the fiscal policy changes there are a number of variations pointed out at gao that made contributions to making these adjustments are a lot. First would be addressing our tax gap. Last estimate is a net tax cap 381 billion a year on an annual basis. We are also, last year, continuing a trend and accelerating trend there was over 175 billion in improper payments made among 23 different federal programs of the agencies and this has been growing over time and these are payments that should not have been made or remade in the wrong amounts. There is over a trillion dollars in tax expenditures that are allowed every year without any regulatory review whether they are working effectively or not and they need to be considered. There is overlap and duplication in the federal government that could yield tens of billions of dollars in positional benefits and implementation of our recommendations so far has yielded 499 billion in financial benefits to the federal government and i think with additional things in the works it will be close to half a trillion dollars this year so while these things alone can make an important contribution they can also begin to enclose a much needed physical discipline and how we manage the countrys finances. We will have a plan in place to guide us as a nation and aggressively address these areas where there are benefits for the taking in the short term with greatly improve our position in prospect for putting the federal government on a more sustainable fiscal path. I appreciate the opportunity to be here today and im very pleased that you are holding a hearing on this essential topic on behalf of the eye would be happy to respond to questions. Thank you very much. Thank you for your testimony. Ive got to be in the session the entire time so maggie, if you are ready i will let you go first. There may be some who have to leave early and i dont mind deferring to colleagues to make their life more convenient if you are ready to go. I appreciate that very much mr. Chair. Let me just drop my questions for a second and i just want to start by thanking both our witnesses again for your testimony and for your work and mr. Chair, thank you for your courtesy. When we start with the question for doctor slagle. Cbos longterm budget outlook points out that shortterm increases in the National Debt could support the economy such as those we are in right now. Could you explain to the committee how especially given historically low Interest Rates providing fiscal support during covid19 could have a positive effect on the economy . Yes, i can. We would have a report on a website that goes through some of the different physical actions taken by the congress and look at the effectiveness of each one. The economy of course is right now operating far below potential in the unappointed rate much higher than was before the pandemic began but the fiscal action taken by the congress has supported spending by families and businesses including Small Businesses and kept the relationships between employees and Small Businesses together ando me it through and in all these ways from the demandside and the supplyside supporting the economy. Excellence. We all know ultimately we do need to address the National Debt but its also clear that in the short term our economy urgently needs additional support. Mr. Todaro, last year i led a bipartisan bill titled acting on the annual duplication report act of 2019 that would take action on several recommendations that the gao made to congress and the annual duplication fragmentation and overlap report. Two weeks ago i introduced a 2020 iteration of this bill again with the bipartisan support of some of my colleagues responding to this years gao report on tip location, fragmentation and overlap as well as opportunities to achieve financial benefits and government programs. Mr. Todaro, could you ask why and how adopting gaos recordation to reduce implementation, fragmentation and overlap would help improve the fiscal outlook . Yes. Since weve been doing that work over the decade weve had over a thousand recommendations to the congress and executive Branch Agency or 56 have been implemented and as i mentioned in my Opening Statement we are on track to see close to half a trillion dollars in financial benefits already being produced as a result of acting on our recommendation. Acting on open recommendations and save tens of billions of dollars in Additional Savings to the federal government and the two pieces of legislations that would go a long way to implement tennis and having the potential to yield billions of dollars. For example, they would allow the dod to capture the full cost of providing Foreign Military sales and right now the salaries and benefits of people who work on these Foreign Military sales to help sell u. S. Equipment to other countries they are costs arent included so the people buying this equipment and using the services of our military arent paying for the full cost of using those services and that would yield benefits. It would allow 17 million tax returns to have a scannable barcode that would allow the irs to be more effectively enforce the tax laws and a fair and equitable manner. They are also in require the navy to put more emphasis on operations and maintenance costs where they are requiring shipments paid 70 of the cost of these multibilliondollar enterprises are in operation of maintenance costs and we accept ships before they are finally completed and tested and then the operation and maintenance costs go up. There is a lot of recommendation and this is a good way to deal with it. Thank you for that. I appreciate it and look forward to working with you and others on it. I want to see if i could do one more question before my time is up to doctor slagle. In its longterm outlook report cbo considered how School Closures during cove 19 will have longterm effects on the workforce. Could you ask lane the importance of education for americas Economic Future and how cove 19 could affect the workforce in the long run . Yes, i can. It is something we worry a lot about in the nearterm and longterm. In the long term predicated growth is a key driver of our economic output and our trajectory in the School Closures are less effective or many children utterly ineffective School Education schooling. In the short term it seems to be effecting the most disadvantaged kids having the worst. I worry on those horizons. Thank you. I think to do some of these longerterm effects Congress Needs to dictate several leave relief dollars to help those students and continue to meet the needs of students and workers during these unprecedented circumstances bird thank you for your work and thank you mr. Chair for your courtesy. Senator, i apologize for not giving you a heads up. I had it typed but did not hit send. Senator scott, are you back on . Okay. Senator wyden. Mr. Chairman, i will just make a quick statement and then i have some questions. Weve got a huge crisis coming from medicare being with the insolvency of the Hospital Insurance trust fund and the budget experts have already projected it is soon to become insolvent in as little as three years. I am of the view that the problem that they are having or particularly due to the almanac economic downturn and rub against downplaying cove 19 and the Affordable Care act put in place policies to secure medicare and longterm and we did this by decreasing medicare spends an increasing how much money it takes in so this crisis is already serious will be compounded if the republicans are successful in getting the Affordable Care act. I just want to put on the record as i have indicated with the chairman of the budget that i will give the trump cuts and Entitlements Program that carrying down the aca will threaten their services of millions of americans. In queue for working with us so often in the past. I want to ask a question about on appointment insurance. Where is mr. Slagle . Is he up there. Oh, very good. I thank you know im the principal author of the expanded on appointment insurance and the extra 600 a week and the key workers and self employed independent contractors and the like. What would have happened in your view if these folks had not had those benefits because i listened to mr. Powell and others talk about how it would have been really a huge hit on the economy but i would be curious what your take is of what life wouldve been like for those folks in congress to act on that. I agree with that, tara powell. This is the other statements alluded to earlier that we have had some of the cbo analysis has been a letter to chairman grassley that without the extra benefits demand would have been weaker and the economy weaker as a result so the assistance until now and the economy as it reopens then as more of a push and pull between the added spending and the incentives to work but clearly until now the economy has ultimately be closed the was an important factor in sustaining demand. Very good. Let me ask you one other question. Worsening inequality also affects entitlement programs, particularly Social Security financing. My question to you mr. Director on this issue is how has stagnating middleclass wages since the 1980s impacted the longterm financing of Social Security in your view . Effects Social Security in a couple of ways and one is stagnated wages means lower revenues going into the Social Security trust fund. [inaudible] that affects the revenues going in and the key Revenue Source for Social Security is a slow wage growth and has a negative effect on the system. Thank you. We will want to work closely with you and chairman cassidy and senator haskin and colleagues because by my reading if you look at several decades of, in effect, rages stagnating and other income have gone through the roof while middleclass wages have generally been pretty stagnant and the result is Social Security takes left funding over time and we all understand the demographics that the program is basing so mr. Director, thank you for the answer to that and thank you for the answer to the Unemployment Insurance and i want to repeat for my colleagues that i thought the director and his team did particularly professional work on the Prescription Drug issue because nobody thought the Science Committee can produce a bill which had a fair amount of bipartisan support, including chairman cassidy and we took a fresh approach which was to say that we were going to reduce subsidies to those Drug Companies to engage in price gouging and we cannot have done it without the professionalism. Mr. Slagle and his team, we thank you for that. Thank you, mr. Chairman and i look for to hearing the rest of our colleagues. Is senator young on . Thank you so much spoon im sorry, senator carper is next. No worries. Tom. If you are in a hurry are not in a hurry. No, i will yield to the gentleman from delaware. Thanks so much. To our chair and remember thank you, more than you know. Ive often times describe myself as a recovering governor and before i would say i was a governor and i was a congressman and before that i was a treasurer, state treasurer the state of delaware 1976 we cannot ballot balance the budget for nothing and we were just a mess including the highest marginal income tax rate in the country, 19. 8 was our personal income tax, 19. 8 . Three, four, 56 years later we addressed all that and great leadership was the key. The key was great leadership in our governor was a republican moderate and had democrats and rob begins in the house and legislator who Work Together and the key is leadership it i want to thank the senator and for their [inaudible] i want to say to senator wyden, Ranking Member of the Financial Committee i think him and senator grassley to help produce a prescription bill that was actually a fiscally responsible and i think humane and in terms of economic regard to make sure we provide incentives for congressional and pharmaceuticals and that legislation unfortunately has not moved on and thats a good example and we need to do it. Turning to our Witnesses Today director slagle, general daddario were delighted that you are here. Youve been on my heroes for gao for 40 years or something in comptroller general and i love working with him and they report out in the beginning of every congress in january or february it was the administration and to the Congress Called high risk of wasting money and when i was chairman of the Homeland Security that was on our to do list and i hope you get that high risk from the general daddario in january and february we will be able to do that as well. Weve already heard jay powell the Federal Reserve chairman said in last couple of days and it makes sense and i hope that not just those in the congress but those in the administration and the profession and i want to thank senator cassidy for allowing me and a number of others to join in supporting legislation that he coauthored. Who is your democratic lead on that, mr. Chairman . Menendez. Yes, menendez was our democratic lead on the state to local aid bill. Thank you i want to thank you for that as well. The state and local governments are one area that continue to be under in normas an unprecedented strain and according to the department of labor state and local laws i think 180,000 and without federal support jobs will be lost. It means it means that fewer frontline workers like firefighters, police and as the pandemic continues to sleep there are communities who bus drivers and School Nurses as we try to open safely. The recent report by cbo [inaudible] state and local government is one of the most effective means of economics to meals. Let me ask you if i could the first question, could you tell us why state and local governments had [inaudible] yes, sir, senator carper. Our analysis of the assistant for state and local government enacts in the cares program found that those monies, by and large, were spent immediately, not every penny but by and large spent quickly and rapid and high large impact and additionally the money for the state and local governments handed off a reduced the tax increases and other spending cuts that state and local governments would have had to do so it had an important pact and sustaining command in that way as well. Thanks so much. I want to return and talk about improper payments and as long as i can see [inaudible] i think in 2019 agencies across the government made an estimated 175 billion in improper payments, so it wasnt that long ago that that number was under 100 billion and that number was under 75 billion but today we have over 75 billion in improper payments. Theyve issued over 100 billion in checks, 1200dollar checks and one was being your late mother and but given our fiscal condition we are in no position to continue payments in earlier this year legislation coauthored the colleague [inaudible] leanne from paul coauthored legislation conference of update to not getting ahead of myself but more recently but earlier this year the integrity information act was signed into law so conference of update about the improper payments law which would provide the agencies with tools they need to clear improper payments. To stop improper payments to deceased people is passed in a separate piece of legislation passed the senate and is now in the house cosponsored by senator paul and kennedy and this bill will more widely shared the debt data for so Security Administration to help prevent payments to deceased people. General, what actions do the executive branch and Congress Need to take to address this particular issue and that is sending payments to deceased people . First, senator carper, this was a grant needs to effectively and clement the payment integrity act of 2019 that you alluded to. This would require, im concerned that 175 billion is an understatement because there are several programs like temporary assistance for needy families where there are no estimates made at all. Also it would require more rigor and Risk Assessments because there are some program because of the Risk Assessment they dont make estimates either and i think that might not be appropriate and also improve the estimates which will allow for these areas to be able to detect what some of the root causes are for the problems so they get addressed. One of the reasons this is growing so fast is because the two largest areas of improper payments are in medicaid and medicare. Actually, the jump between 150175 billion in the past year or so has been largely due to medicaid for the First Time Since the Patient Protection act of looking at eligibility beneficiary determinations to provide their screening and make sure everyone is properly there. That is why i am very concerned because those are two of the fastestgrowing programs in the federal government and we need to get on top of that. There are some recommendations to be made and there could be additional prior authorizations in medicare that would make sure that the payments are appropriate and before there are being made that this has demonstrated to be effective and to not harm anybodys care and there should be more timely auditing of the Medicare Advantage program and medicaid the big growth has been in the Medicaid Managed Care and that has received virtually little scrutiny and i think that needs to be more rigorously pursued in that area with help of state auditors which ive been trying to work with the center for medicare and medicaid studies to get them more involved in this process over time. The legislation you mentioned to stop payments to the deceased people, if we could get treasury and more masterfile this could be done very easily which was or was done with the stimulus payments once they decided they werent going to go that route anymore but give them temporary access and stopped it immediately. Those are some of the areas. Senator, thank you. A clan to read that clock in the bottom very well so i think its running low. Now, senator young. Thank you, mr. Chairman. I think our witnesses for what you do and for your appearance for the committee today. To date the Paycheck Protection Program was most americans now know as ppp funded more than fivepoint to million loans for a total of 525 billion but the program closed with almost 135 billion of funds remaining. For the hardest hit businesses the ppp funds have run out and morons are going to be needed to weather this storm. The United States as a whole data suggests nearly a quarter of all Small Businesses remained closed. Let me say that again, data suggests that nearly one quarter of american Small Businesses remain closed. These closures on average can cause revenues to drop around 40 and even up to 70 in the hardest hit sectors. The hospitality sector. Some estimates indicate by june three months after the start of the show down more 400,000 businesses permanently close which is more then was typically lost during an entire year following the Great Recession and to ensure mobile businesses dont fall through the cracks and then we introduce the restart act with senator bennett and legislation would provide lowinterest longterm working Capital Loans to cover up to six months of payroll benefits and other fixed operating costs including rent and utilities break these loans would be eligible for forgiveness based on how much the revenues declined. So far the restart act is widely supported across a multitude of sectors including manufacturers retail minor league sports, hospitality and even live events. As we wait for a vaccine i still worry of a domino effect of sorts of lost jobs as well as lost services and lost products to say nothing of the lost debate of capacity and there could be financially catastrophic if Small Businesses are allowed to fail. Doctor slagle, regarding the budgetary effects, regardless of the cbo score do you believe it is necessary to provide additional stimulus like my restart proposal for the hardest hit businesses . Thank you, senator young. You put your finger on the challenge that the economy faces in the policymakers face that we cant freeze the economy where it was and there will be reallocation in the ppp as you said played an incredibly Important Role in supporting spending and Small Businesses, even to provide a buffer to slow down the upheaval and the restart act would extend that but the economy is still evolving and hopefully we will have scientific progress that will allow us to continue to reopen and the restart act, as you said, would provide a buffer and anything that i agree with here is you said its targeted and that the ppp was very broad and incredibly and that the fda, treasury did an incredible job in making that happen rapidly getting the money out and that what youre proposing is targeted with assistance going to the most in need of which continue to support the economy so cbo is ready to work with you and look forward to evaluating and including when the time comes. Thank you, doctor. The innovation effects, one could perhaps and i guess this is a bit of a leading question as i offer some examples you might also talk about the erosion of skills or, you know, what sorts of things ought my colleagues and i be thinking about when we contemplate the permanent closure of more Small Businesses . That the disruptive effect is playing out especially on Small Businesses and especially on workers at the bottom of the income distribution. You know, the unusual part of this pandemic recession is for the people at the bottom and the disruption that the restart is meant to shield against is hitting people at the bottom and Small Business especially. As you said, innovation, job creation and of course the support for local communities thats focused on Small Businesses, so restart would buffer against that, and just last thought, again, you said we will always give you the cost, but as much as possible, here to help provide information to the congress on other things like that, the benefits. Yes, sir. With time permits, im going to head down this road, doctor, and see where it leads. I have real concerns about state and local debt as well. Outside the federal budget, states and local governments owe over 3 trillion dollars, plus trillions more in unfunded state pension liabilities. Its clear that state and local Government Debt comprises a huge collective liability. However, that liability is of course spread across numerous municipalities making the actual burden of debt and risk of default less transparent. My home state of indiana was much more prepared than most states to weather this crisis, by utilizing its rainy day funds, and i have to say this is the rainiest of days, and weve been drawing that down. Due to the pandemic, debt has surged, for some states, and while its unlikely, theres still the possibility of defaults, plus corporate bonds, student loans, mortgages, and sba loans that could change cbos debt projections, doctor, can you elaborate on some of the consequences the federal government would face if state or local governments default on their debt obligations . Yes, sir, yes, senator. As you said, many states entered the pandemic in relatively good shape, with overall state funds at alltime high, if i remember right, 75 billion dollars or so, so states had some buffer. The federal government provided assistance. Revenues were coming in reasonably strongly. Property taxes are an important source of revenue and Property Values have not been as negatively affected in much of the country as the overall economy. Yet, still of course many state and local governments will have trouble. You know, if those are localized, then its suggested that it wont have an effect on the country as a whole, the federal government as a whole. We have seen the problems in illinois and puerto rico and other states and california for example. If the problem is broader, then there could be a more meaningful impact, but as long as it is localized and the state started in pretty good shape overall, that it shouldnt have a huge negative effect for the overall economy. Okay. Youre about 3 minutes over. Do you mind if we move along . We will have a second round. My apologies to my colleagues. Of course chairman i yield. Believe me, your questions were great, but i wanted to be lenient. There will be a second round and folks may want to do that. Yes. Are there any other of my colleagues on . If not, i will now go. Gentlemen, several questions, let me set it up like this. It seems as if at least you, doctor, are okay with and in fact even endorse another round of covid package of covid relief and talking anywhere from 1 to 2 trillion dollars, maybe more, and yet both of you express alarm regarding the debt and deficit, and you highlight the trust funds. So it tells me at least it implies to me and i would like both of you to affirm that the problem isnt so much the Discretionary Spending, if you will. Thats spending over which congress has control, but rather the so called mandatory spending, the trust Fund Spending which goes out the door without congress necessarily allocating because all of your testimony of alarm has centered around that, and your testimony of maybe we need to think about it, even though its deficit spending as centered around the Discretionary Spending. Doctor, can you address that observation . Yes, senator, i should start the cbo when giving analysis will never say this is the right policy or anything. Im not endorsing any particular policy. You know, even when saying, you know, what the beneficial effects would be of course is for the congress to decide. You know, as i started with and as you said, the deficit was large even before the pandemic, a trillion dollars a year, into the future, and those trends continue, right . We have an aging society, and we have healthcare costs going in excess of the you know, more rapidly than the overall economy, excess cost growth as we call it. Those are driving entitlement spending. That challenge was there before the pandemic. Its exacerbated by the pandemic, but it still remains. You know, just as you said. Now, would you agree with my observation . Absolutely. The primary drivers are entitlement programs as phil just alluded to, healthcare costs, and then that interest cost because of the growing debt let me ask you this. Based on that, ive read and been told and i know what im told, not necessarily what i know is that baby boomers becoming eligible for medicare and social at a rate of 10,000 a day is kind of driving this. The last boomer turns 82, the average age, there abouts in 2042, 2046, and that the boomers begin to die off im a boomer, so im speaking of myself somewhere in the mid 2030s, and that there might be some relief upon this demand for medicare and Social Security as that big population of boomers begins to decrease relative to the rest of the population. That in turn would give relief to the picture. Your thoughts on that . I dont think that will happen for the following reasons life spans are increasing. We have very little [inaudible]. And the number of people that will be continuing to be hitting medicare and Social Security will continue. Theres a chart in my written statement that shows that a thousand people a day going out till at least 2050 and it may go out beyond that. So i dont think we should have im a boomer too. Even though i plan to live forever, but i i want to say that i dont think the problems been accentuated by the boomers, but it is also coinciding with longer life spans and fewer children being born, and so thats also going to change the financing arrangements that weve had for these retirement systems, have been based upon the working population paying payroll taxes to pay the benefits of the senior citizens. Now, that worked when you had five, seven, ten people working for every one retired person. Right now you only have a little over maybe 2, maybe 2. 3 people working for every retired person, it is moving to 2 to 1. You are not going to be able to accumulate the type of balance that you had accumulated the Social Security fund over the past several decades, as a buffer to go into that period. So i dont think we should breathe a sigh of relief when the boomer gets through that period of time. Let me ask you this, going back to Discretionary Spending, versus mandatory, we are basically borrowing money some people call it free money. The Interest Rate is so low now. Theres been an argument for a large infrastructure package, both because it would stimulate employment along those who are associated with the service industry, construction, manufacturing, or mining, and also would take care of inefficiencies in our economy related to inadequate infrastructure. Now, again, different chat differentiating this sort of Discretionary Spending from mandatory spending, do you think that i will start with you, would a trillion dollars over ten year infrastructure package pose the same issues for accumulating debt and deficit as the baby boomers retiring as we just described, the so called mandatory spending . It wouldnt have the same long tail on it that those things would have, and hopefully there would be able to be some financing arrangement as there has been in the past, with the Highway Trust Fund was basically selffinancing, so you could have some selffinancing mechanisms also to help with the infrastructure package, but it would not pose the same issue. Just to emphasize the point, the budget control act of 2011 puts limits on Discretionary Spending. There were some on [inaudible]. It was an attempt to bring the deficit down. It helped a bit, but it is not Discretionary Spending is not the problem. The problem is the other areas. Would i feel better if we made the ten Year Investment in infrastructure if we had a longterm plan in place to address those issues so that theres not a tendency to make decisions on all of the above area where you then complicate things further, so if you had a good plan, thats why you need a plan, so you can make investments in infrastructure and national security, and you have flexibility to deal with emergencies. Right now we dont budget for natural disasters major natural disasters or economic downturns and all these numbers that cbo is generating, that phil and his fine professional team dont even consider all of these uncertainties and fiscal exposures that we have as a nation. Let me impose my discipline on myself for time. I will have a second round. I will ask you about the Disaster Relief fund because that does seem to be a prefinancing of natural disasters. Let me go back to my colleague with whom she and i will come up with a robust plan to address this debt and deficit. Senator . Thank you very much, senator cassidy. Thanks again to our witnesses. I want to just start by expressing my agreement and support of senator carpers comments about the importance of state and local aid and compliment senator cassidy who along with our colleague senator menendez introduced critical legislation on state and local aid. I want to add my comments before moving on to another question, which is simply that, that if we dont add and address the need for more state and local aid in which i hope will be another stimulus package, what i know is happening in my state is that revenues are going down, and that results in layoffs of critical front line workers including law enforcement, public safety, teachers, at a critical time. I also know how badly hit our local communities are, but a loss of commercial property taxes because while Residential Property taxes may not have been hit as hard, commercial property taxes and tax revenue that comes from large events, at our entertainment arenas, for instance, is really impacting our local communities significantly and will result in not only a critical reduction of services, at a time when we need them more than ever, but layoffs which obviously adds to a drag on the economy, not to mention human [inaudible]. I do hope we are able to invest in state and local need because it is needed and because the doctors report indicates that it is a very effective way in getting aid out there at a time we need it. Doctor, i wanted to ask you really drill down on this issue on how we go about addressing the debt. As i mentioned in my opening remarks, the difficulty of addressing the debt only compounds with time. This means after recovering from covid19, the sooner we can come together to address the debt, the better. So first, doctor, and then i move to the next guest. Can you explain addressing the debt sooner rather than later would mean we need a smaller amount of deficit reduction to reach our longterm objective . Yes, we have some information in our long term budget outlook report. The intuition is that the longer we wait, that means theres some generations or some people within a generation who dont share in the burden of the fiscal adjustment, and so thats why waiting means that the burden of the adjustment is concentrated on a smaller number of people and therefore a larger adjustment, a bigger burden on each generation that does have to pay for the adjustment. Thank you. In a recent report on the nations fiscal health, gao recommended that congress adopt a longterm fiscal plan with fiscal rules and budgetary targets. You began to reference this in your answer to the last set of questions. Can you outline some more of the key considerations in congress that congress should use in establishing a fiscal plan and how this plan would facilitate appropriately timed deficit reduction . The plan would benefit and the anchor of the plan would be a fiscal rule, which is designed, according to National Monetary fund, to be sustainable rule thats in place over a long period of time. Were not going to be able to address this issue its so big and so problematic in a short period of time. So you would have a debt to gdp ratio. Lets say that we want to say were not going to ever be in a position to owe more than our economy is producing, so we want to target 100 debt to gdp, we dont want to go above that, or if we do for a little bit, we want to bring it back down. We have to set a target. Right now there are no boundaries. It is what it is. We spend the money we need to. Secondly, the fiscal rule would then because you are putting it in place, you could then look at some targets. We need to look at revenues as well as mandatory spending and Discretionary Spending and tax expenditures. All are going to be needed to be adjusted to deal with the scope of the problem that we have right now. Then you would take this fiscal rule, you would have that would be our goal as a country, and these targets weve had for revenues and expenses, over a period of time is sort of interim benchmarks, and then we can move towards. You would integrate it with the budget process. You would have enforcement mechanisms. You would have independent people, like cbo to say, you know, were meeting our targets or meeting our goals, heres how we would need to adjust it. But we would have a plan. Right now we have no game plan. This basically sets out a game plan and provides some rules. Other countries do this, and its helped [inaudible] according to the imf to constrain their debt. It hasnt helped a lot to actually reduce from what it was but it constrains it from growing larger. Thats what we need. Im running over so im going to quickly i take it that the fiscal rule would also have appropriate escape clauses for a National Emergency or Something Like that, but again, it is a way of getting us to a plan with this rule in place and then being very specific about when we need to adjust it. Yes, that would be one of the design features, escape clauses and emergency clauses. For example, the European Union has these kinds of rules, and they have waived them for covid19 situation. So yes, definitely it would have escape clauses for emergencies. Thank you very much. And thank you for your indulgence, mr. Chair. Let me observe that was senator carper. I had been presiding in the senate, when hes given very good speeches about the need to truly finance infrastructure in a fiscally accountable way. Hats off to senator carper for being an advocate for fiscal responsibility for sometime. Senator carper . Can you hear me . Yes, sir. Great. Thanks for your time. Im a long time believer [inaudible]. As it turns out, we put unanimously transportation bill [inaudible]. Never came up for a vote on the senate floor. Finance committee didnt do their job. Commerce committee didnt do their job. Other committees of the jurisdiction didnt do their job, so we didnt have a bill on the floor which was unfortunate. The hardest part [inaudible]. [inaudible]. Ten years from now, most vehicles will be bought and sold in this country will be powered by batteries, electric vehicles. A lot of them will be powered by hydrogen. What i think we will do need to do in the longterm is move from auled aude. [inaudible]. That said, thats a story for another day. We talked a little bit about today. Taxes that are not being collected. My information here indicates that the irs is estimated tax [inaudible] this year. We have testimony before the finance committee where folks have come in, including former irs commissioners who said if you would if the congress, the administration would provide an extra dollar for the irs to do their job, they could reduce the deficit by maybe [inaudible]. I think the irs estimates they can generate 9 for every dollar that theyre invested in them, but we have had a lot of recommendations too about how they could use some of the information they have to evaluate their compliance programs to also leverage whatever resources congress decides to give to them. Yeah. [inaudible]. I remember one lady i mentioned to the group i said one way to reduce deficits is to increase revenues. [inaudible]. She also said i want to make sure other people pay their fair share in taxes. We were told that the president paid 750 last year on federal income taxes. Thats not the kind of example we need to set. Any other comments you want to make on the tax gap, what the congress should be doing to help the irs [inaudible]. Yes, there are a number of things that congress could do to help. One is to give the irs whats called math error authority where they have administrative records, they could correct the tax return rather than start an audit and go through things and then explain to the taxpayer what they did and then the taxpayer would have a right to appeal, but it would be short circuit, make irs more efficient and help ensure that things get right up front. Secondly there could be more third party reporting, which irs can use to compare the filings. This is particularly true for businesses. For example, on commercial real estate, in terms of repairs that could be reported by the service providers, same thing for services to corporations. Also congress can give irs the authority to regulate paid tax preparers. We have used irs data to indicate that particularly for earned income tax credits, where its about 17 billion dollars in improper payments there, that paid tax preparers actually make have a higher error rate than people that prepare their own taxes, in the earned income tax employment area as well. I know the state of oregon has this in place, and theyve found that it greatly benefitted their revenue collection agency. We recommend this to the irs. They did it in the past. But then the courts ruled they didnt have the authority to do it, so congress is really needs to give them the legislative authority to do this. I think it would be very effective. Those are the Things Congress could do. You have given us a great to do list. Earlier this year, the treasury inspector general, [inaudible]. Who did not file a complete tax return. 900,000. [inaudible]. Theres a great to do list here. God willing we will make it to the new calendar year. Hopefully we will have a new president , new congress, and we look forward to going to work with you and with the doctor as we tackle whats an enormous problem [inaudible]. Im a democrat who believes we have a fiscal responsibility [inaudible]. Thank you all. Thank you, senator carper. I think im the last questioner. I dont see todd young still on. Are you still there . Okay. Doctor, let me start with you, im getting a sense because both of you are speaking about the amount of money were putting towards Interest Payments increasing that you have an Interest Rate forecast that, you know, obviously Interest Rates are rising over time. Right now we have this incredibly low Interest Rate. What is your Interest Rate forecast . I presume at some point it must be rising because you have incorporated such a higher expense load relative to that. Yes, thats right. Essentially we have Interest Rates remaining low for the next couple of years and then starting to rise as the economy reaches its potential, meaning we get back to where we were before the pandemic in our projection in the middle of 2022, not next year, but the year after, but were still below potential because our potential has kept going. Thats more like 2028. As we approach 2028, when the labor market is, you know, back, fully back in our projection, thats when Interest Rates start to inflect upward. So if let me go to my next question. I want to build upon what i spoke of earlier about a large infrastructure package. We could actually therefore borrow the money at an extremely low Interest Rate to do an infrastructure package with minimal impact upon the amount of money being applied towards debt service. Now, does cbo have a Multiplier Effect that they commonly use for Infrastructure Investment . What impacts would a large infrastructure package have in term of the economy, etc. . We have the ability to do that. Thats a dynamic analysis which works on the spending side just like on the tax side that will target [inaudible]. It would increase gdp, increase revenues and the spending would cost less than the full amount, dynamic estimate. We have the ability to do that. We dont have a rule of thumb. We would look at the particulars of the legislation to do that to say therefore though that Interest Rates are being so low, obviously [inaudible]. Again, because Interest Rates are so low. Thats right. The longterm Interest Rate now is below our projected rate of inflation. That theres a negative real Interest Rate for a while. The challenge is that the primary deficit is still pretty wide, so our debt ratio keeps going up. As you said please. Im not an economist. I just read an article if that if your Interest Rate is less than your rate of inflation, that actually you can borrow to increase Growth Without economic consequence per se. Now, again, thats about as far as i understand that concept. But im sure you must be familiar with that idea. Any comments on that . No, its right. Its something that a former treasury secretary summers has made that point and former obama advisor jason furman has made the point recently. The challenge is making sure that the spending is effective. If Interest Rates are low and we just burn resources with ineffective investment, that doesnt improve our capacity. Thats the challenge. But the way you have put it is spot on. You know, just conditional on effective investment. Going back to an effective infrastructure package would meet that criteria . And by the way, you come from a more conservative background than furman and summers, but do you agree with their assertion, theyre left of center. Youre right of center, i gather. Is it fair to say that this analysis would find agreement on both sides of the political spectrum . I mean their analysis is spot on. Yeah, the challenge is that depending on how quickly we pay off the debt, at some point we will have to refinance, and so if, you know, if we borrow for ten years and then the eleventh year we havent paid it off and we have to refinance it at a higher rate, thats always the challenge. But of course i have to present, you know, the down sides, the other consideration, but thats part of my job. And you raised something earlier that we have not discussed that much, except for one hearing that we had in finance which was the Medicaid Managed Care with lack of scrutiny that for the first time theres more improper payments relative to medicaid, and this relates to eligibility determination. Again, im familiar with people in louisiana doing an analysis on that, but you suggest that it is pretty widespread, and as you said, now surpassing medicare in terms of improper payments. Will you elaborate on that please . Tell me where youre gathering your data. Thats what im really interested in. The estimates are coming from the center for medicaid and medicare studies. After the Affordable Care act was passed in 2014 or it became effective, they did not do any reviews of eligibility beneficiary determinations until they started about a year or so ago, and theyre doing 17 states at a time, so the First Tranche of 17 states error rates showed up in the 2019 estimates, and it increased the improper payments about 25 billion, i believe, somewhere around in that neighborhood. Those states pardon me . Those states, were they small or big states . Can you tell me some of those i dont know offhand. I can supply that for the record for sure. Thats but i think its a mixture of states. They still have 34 more states to go before they have one round of these reviews. That 25 billion, from the inception of obama care, or is that only for 2019 or 2018 . What is the time frame for that 25 billion . I believe its 2018 time frame. So its 25 billion in one year, and potentially we could multiply that times three, and we would come up with the improper eligibility by medicaid recipients you cant say that but you would like to be able to imply that. Thats the problem i have had is we dont know what it is. Managed care spending for medicaid is about 45, almost 50 percent. Thats been growing from when it first started it was more like 15 percent. And those managed care reviews arent being carried out at all. In fact, ive worked with the state auditor in louisiana, and weve been trying to work with the state Auditors Association to get the state auditors to do more like darryl is doing in louisiana. And were moving in that direction, but thats going to take some period of time because i think they could help address this issue and reduce the improper payments, if theyre given the Proper Authority and the proper data to do matching and to do provide some fiscal discipline. Are the states allocated to pay back the money the federal taxpayer puts up if they are notednot ed a if they are not auditing to ensure appropriate enrollment into Medicaid Programs . [inaudible] some of thats offset against their future spending. But my experience with my team is that it doesnt happen that often, that theres not that many penalties put on states in the Medicaid Program. So you could theoretically, but in reality it doesnt seem to be the case or practice . Thats correct. So really what the federal government picking up 90 percent, that means theres limited incentive for the state to go after these folks, only getting 10 of the investment so to speak . Thats correct. Although the Medicaid Program is the Fastest Growing program in the states budget as well. So there is some sort of incentive for them. In fact, you know, we were talking earlier about the state and local fiscal positions from the debt standpoint, we do a projection of the state and local fiscal sector like we do with the federal governments longterm fiscal path, the state and local sector as a whole is on the same path that the federal government is on unsustainable basis largely for the same reasons which is Rising Healthcare costs, not just for medicaid but for their own employees, both current employees and retirees. I would have thought for those folks it would have been unfunded crude liability and Pension Plans is that not the case . Pension plans is part of the problem, but thats more isolated in particular states. That have been taken different paths on that issue. The Healthcare Impact is across the board. If we can reduce healthcare costs, that would produce positive things for state and local government, obviously positive things for the average american and positive things for the federal [inaudible]. Healthcare is the key, is the key to fiscal sustainability. If we dont manage healthcare, because their costs are growing faster than the economy, even though theyve slowed a little bit more, and the cost per beneficiarys rising, with an aging population, if we dont do that, were only going to have relatively modest effects on this fiscal path that were on. Okay. Thats probably the best way to summarize this. The primary problem driving it for all levels of society down to the individual are healthcare costs, and i say that [inaudible]. Thank you, everybody. Maggie, i saw your light just lit up. Did you have one more comment . Yeah, well, i wanted to thank you mr. Chair for the hearing and to the witnesses again for excellent testimony, which reflects the longterm excellent work that you and your teams do, but i also was just going to thank you for raising the issue of health care costs, mr. Chair, and also reiterate what the senator said which is our entire finance committee passed out of committee a bipartisan Prescription Drug reduction bill, senator cassidy and i both voted in favor of it, and by estimates, it would reduce spending by about 100 billion dollars on Prescription Drugs, so there is some Common Ground to be had on certainly making sure that we lower the cost of Prescription Drugs. There is some Common Ground to be had as well in overseeing a medicaid expenditure. I will say that one of my experiences as governor when we expanded medicaid was talking to the number of people who got on medicaid, for instance, for Substance Abuse disorder and got treated and then got jobs and moved off of medicaid into private insurance in a situation they never would have had if they hadnt had the access to medicate to begin with. I look forward to studying this issue some more with you, senator cassidy because i think if we cant get a handle on healthcare costs, a lot of the rest of our discussions will be more marginal. Yes, i agree with that. Thank you. I would like to thank our witnesses, the Ranking Member, the rest of my colleagues for joining us this afternoon for a discussion on such an important issue. It was incredibly illuminating. I really thank our witnesses who provided a lot of good information. The numbers and implications are clear, the current course is not sustainable. Congress needs to start thinking about solutions, how to head off the negative consequences of inaction. Again, i thank the colleagues for being here. I look forward tont co i look forward to continued partnerships and commitment to find pragmatic and common sense solutions. There is a time period by which additional questions can be submitted. Im going to say we have five days arbitrarily. The hearing is now adjourned. Thanks. Thanks. The u. S. Supreme court has started a new term and today heard oral argument in Google V Oracle america a case concerning software code. Oracle claims that google illegally copied some of its code and google says it was too basic to be covered by copy right law. Listen to the argument at 8 00 eastern here on cspan 2. I honestly will tell you i dont think when the dust settles in this election, it is going to be whether america becomes more republican or more democrat, whether were more liberal or more conservative, more red or more blue. I think the choice in this election is whether america remains america. As joe biden has said, from the moment he entered this race, its about the soul of our nation, who we are, what we stand for and maybe most importantly who we want to be. Watch the Vice President ial debate between Vice President mike pence and senator Kamala Harris live tonight at 9 00 p. M. Eastern, from the university of utah in salt lake city. Watch the debates live on cspan. Listen live on the cspan radio app and go to cspan. Org debate for live or on demand streaming of cspans debate coverage. Theres also a link to each debate questionandanswer. See social media feeds on debate happenings and reactions and watch our president ial debate video from the cspan video library. The competition is on. Be a part of this years cspan video competition. 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