We couldnt have had it in a more to say a more formal setting because it may been better attended. Im not sure any hearing we have had would be any more important in the spirit her witnesses will be the director of the Congressional Budget Office and jeans are darl who is the comptroller general of the United States in the head of the u. S. Government Accountability Office. With that i will make my Opening Statement and turned to Maggie Hassan my Ranking Member and then i think Ranking Member wise and for the entire committee for statement you would like to make as well. Again thank you all for being here. Im grateful to all who are joining us via the internet. Today we will address the topic a with refer to shy away from addressing her nations run away debt and deficit could when it comes to our Health Care Choices arent so easy. We exercise we want to relax and eat healthily when we preferred a splurge. These promote health and fitness and is worthwhile for her overall wellbeing. Similarly if you want to be strong as a nation we have to monitor fiscal position and keep revenues unfortunately we become the fiscally soft and flabby and the analogy to our own budget health. The debt is rise to 100 of gdp by 2023 which will be the highest in our nations history. They also project debt held by the public will be equal to 195 of gdp in 2050 if all goes well. And that is if all goes well. Meanwhile the highways of medicare and Social Security trust fund are on the drive path to insult the city insolvency. Cbos longterm report says just to get back to 2019 levels by 2050 we must have spending cuts and tax increases amounting to 2700. Person. Year and the longer we wait the worse it gets. This will not be an easy thing. The current coronavirus pandemic reminds us we live in an unpredictable world. Even our countries relatively short history we have seen powerful nations most recently the soviet union the first nation with a satellite the first nation to put a satellite in space back will collapse in 30 years. On that timeframe of the longterm cbo report i am not saying that the United States is like the soviet union or it will lead to a downfall. And instead im that the unthinkable happens all the time and we should not be so eric and 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. We have used this power to maintain a long period of relative global peace. As part of our success we have enjoyed the benefits of their prosperous economy and a dominant role in foreign affairs. We cant take this for granted. One way we show complacency is by spending without thinking for the future which our inheritance and to face threats we need to stay strong and i think we all agree that our children and grandchildren 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. I and others have advocated for an additional fiscal stimulus. Our failure to pass another relief package is much more to do with politics than a willingness to spend. Whether or not they really package gets passed we will spend trillions in Coronavirus Relief this year and number so massive we can hardly fathom it and its unpaid for it. The disagreement on exactly how much should be by congress is not saying efficient. When it comes to our current fiscal situation theres enough blame for all. I hope this wont go into conversation which is not a particularly productive. Nothing will be done without collaboration. As has been said so many times during this Coronavirus Crisis we are all in it together and when it comes to solving our debt and deficit making sure trust funds remain strong in there for those who need them we are truly all in it together. Polling suggests that people want to reign in the National Debt but i think we all know that addressing the issue there are tough tradeoffs. Theres no easy answer something that Congress Must lead on to do its job. The first problem some have argued deficits dont matter and i disagree and i think history disagrees. I hope to hear details from the witnesses about the scope of aware up against in 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 Statement. Well thank you senator cassidy, thank you to directors slagle and comptroller general so darl for testifying today and for the work your entire team does for our country. This subcommittee is charged with promoting fiscal responsibility and Economic Growth because of course the two go handinhand predestination we must be concerned about the growth of the National Debt. Hits and if not handled carefully could threaten to slow the economy and jeopardize their ability to make key decisions in everything from innovation to National Security. The first at improving our nations fiscal outlook is improving any Economic Outlook of families businesses communities and states that have been hit hard by the covid19 virus. Yesterday Federal Reserve chair powell warned that quote too little support would lead to a weak recovery with unnecessary hardships for households and businesses matt. Providing assistance to families who cant make ends meet and helping hardhit this is a stay afloat is not only the right thing to do, its all go also the fiscally responsible thing to do. It will help ensure that families can pay their rent and buy groceries at their local store and Small Businesses can continue to employ their workers which will help keep local economies moving and improve our nations Economic Outlook. The second step to getting our nations fiscal house in order after the recovery from covid19 is for congress to implement commonsense bipartisan measures that promote fiscal responsibility and reduce the National Debt. As recommended by gao we need to address the socalled tax gap which comes from corporations and millionaires avoiding taxes by underreporting income to the treasury. We need to revisit the partisan tax giveaways that were jammed through congress in 2017 in order to ensure that major corporations are paying their fair share in taxes. And we need to eliminate waste, fraud and abuse across the federal government. One of my Top Priorities is the Ranking Member of the Homeland Security and Governmental Affairs subcommittee on federal spending oversight. In seeking a bipartisan path to improving our fiscal standing Congress Must also strengthen and protect Social Security and medicare while making it absolutely clear that seniors will receive the full benefits that they have earned over a lifetime of work. Overall it is clear that once we have recovered from covid19 the sooner we address the National Debt the better. As shown by cbo and gao the difficulties of addressing the baseball outlook only compound over time making it all the more pressing that we Work Together in a bipartisan way to get through the crisis and then develop fiscally responsible longterm plans. Senator cassidy and look forward to working with you and the other members of the finance committee and i took forward to hearing from direct your slagle and comptroller general zardaro on ways to control her baseball outlook. Senate thank you senator hassan i think rookie member biden would like to speak. Thank you very much mr. Chairman and i see we have been joined by her colleague senator scott and also senator carper. We have a good contention of finance operators alike to 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 opportunities for fresh approaches that create incentives to hold down the subsidies when theres pricegouging. Eugene zardaro has done good professional work and we are so appreciative of him. Chairman cassidy Ranking Member hassan im glad you have put this hearing together. Senator hassan has in my view been the Gold Standard for elected officials in showing that you can care deeply about the human needs of our people and do it in a fiscally responsible way. The two are not mutually exclusive. You can do both and i so appreciate her leadership and i agree with so much of which she has said then for her or Opening Statement but im joining you from my dining room table in southeast portland this morning and i hope that everybody participating and watching is healthy and safe. I would like to make just a few key points mr. Chairman and i will put my full statement in the record. Without the okay with you mr. Chairman . Very good. First apropos of senator hassans point i think Jerome Powells statement yesterday ought to be required reading every Single Member of congress because he laid out so clearly and in an objective way back by the nonpartisan fact urban approach that they have at the fed what is at stake here so i think he summed up my view very clearly and i think obviously if you walked 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 the discussion in the years ahead. I will just say when you set aside all the fiscal lingo this is a debate about whether congress ought to lock in Social Security medicare and medicaid down the road. This is a far right republican agenda behind a bunch of vague buzzwords for the purse i think its a recipe for a nightmare and middleclass households. The country has only recovered half the jobs lost since the pandemic it. 600dollar enhanced unemployment bill that we worked so hard for will allow millions of families in america to make rent and buy groceries and also as has now been reported will do an awful lot to keep the economy afloat. It has expired now. Republicans blocked the extension for permanent job losses and corporate layoffs are stacking up and im concerned this report i just saw people jumping out of the workforce because they thought there was an opportunity for them to get ahead. The patchwork of policies holds back an avalanche and millions of americans lost their health care when they lost their job. Over the months of september alone, just one month colleagues, nearly a million women dropped out of the workforce which is why i have been looking at those numbers with such care. The economy has still got a lot of open wounds here and yet a lot of people on the far right and conservative republicans say cut, and apparently those are the folks who dont want another Major Economic rescue package and i think we need one. I think we need to make sure if you are laid off through no fault of your own that you have an opportunity to make rent and pay groceries and get the Unemployment Benefits. You arent using them to buy a bunch of fancy scars from europe. I think thats why the safety net is so important and why we should oppose cuts to programs like Social Security medicare and medicaid. The other point i just want to make raised by senator hassan very eloquently, we have seen substantial evidence just in the last few weeks that donald trump is a tax cheat so to me it is absurd for republicans in congress to tell working people they are the ones what the sacrifice in order to clean up americas finances. Americans have not forgotten that in effect there was a fiscal time bomb put in place in 2017 when republicans passed that tax handouts for corporations. Those tax handouts had a a 2 trillion. Thats what we are talking about here, and appropriately so. How we can care for the needs of people and be fiscally responsible. We were told that tax that would pay for itself and we have seen a price tag of 2 trillion hand obviously that had people, and say we acted Medicare Medicaid and Social Security. Thats the republican playbook we have seen too many times corporate goodies defense contractors and handouts to the top and once the recession arrives you strike programs that are for the middleclass and hardworking people. It seems to me when you have million of people out of work a lot longer than we have seen before we have got to make sure we are putting in place policies that keep it from happening again. Theres a lot of work for the congress to do. I see colleagues who have worked very closely particularly chairman cassidy to find Common Ground on Prescription Drugs and i very much appreciate that for the next congress is going to have to keep medicare out of his solvency and bring down Prescription Drug prices and im sure we will talk about some of the challenges to the Medicare Trust fund given the this hit that the economy is taken and what its meant to the program. Finally i think we understand this is why appreciate senator hassans comments, we have got to make some important investments and do that in a way thats fiscally responsible. That is infrastructure roads, ports and clean energy and broadband. Those are challenges that cannot wait. We have a lot of heavy lifting to do. Tax policy has always been priority business for the finance committee. I will just say one member makes a lot more sense to crack down on tax cheats like donald trump rather than inflicting harsh cuts on working americans but i look forward to working with my colleagues and i appreciate this hearing and particularly to have our experts bill slagle and gene zardaro here. They do it at the look and they give us good hard work and we appreciate their professionalism. Thank you mr. Chairman. It is an Election Year but to correct the record President Trump has not oppose cuts on either medicare or Social Security. Mr. Chairman i will not prolong this. I will give you for the record that tax reduction funds for medicare and entitlement or grams and we can make that part of the record and i will include it. I will make part of the record they president s statement in regards to protecting those state funds. With that said the Unemployment Benefits negotiating a deal but that was not accepted by speaker pelosi. Mr. Slagle became the 10th director of the Congressional Budget Office in june of 2019. Previously professor at the university of Maryland School of Public Policy scholar at the American Enterprise institute. He has taught at northwestern university, the university of chicagos school of business and george time georgetown university. Dr. Sim seven has served as senior economist at the council of economic advisers at the white house and an economist at the Federal Reserve warned in the International Monetary fund. He has earned his ph. D. In economics from Harvard University and his a. B. In economics from mr. Zardaro became the eight comptroller general of United States and Accountability Office on december 22 of 2010. When he was confirmed by the u. S. Senate. He has served as acting comptroller general since march of 08 and mr. Zardaro has held a number of leadership positions during his long career gao dating back more than 45 years including chief operating officer and head of gao Information Management division. He has pulled bashurs degree in accounting. Welcome mr. Navarro and i will turn to mr. Swegle for his fiveminute statement. Thank you and good after chairman cassidy ranked member hassan and members of the committee thank you for inviting me to testify and its a pleasure to testify with gene dardaro. We benefit immensely from the work of gao. The fiscal outlook is a tale of two horizons. No longer turn the nations fiscal challenges are daunting. At the time the United States is not facing an immediate fiscal crisis. The debt is manageable for now and fiscal policy could be used to address National Priorities if the congress chose to do so. In our projections Interest Rates remain low as the economy recovers from the effects of the pandemic because the Federal Reserve is working to keep them low. At the same time the federal debt is already high and reaching 195 of gdp by 2050 at the end of far longterm budget outlook. The previous was 106 recorded after world war ii. Action is needed to address the nations fiscal challenges but this year in 2020 we begin with a Strong Economy and labor market and a 1 trilliondollar projected budget deficit that was already high by historical standards and the pandemic change the situation dramatically. The deficit for the fiscal year that just ended exceeded 3 trillion reflecting the budgetary effects of legislation to address the pandemic and the resulting economic downturn and 60 of gdp relative to the size of the u. S. Economy since 1945. In our projections we see federal revenues rising from 16 of gdp in 2019 to 19 of gdp in 2050 while spending rose from 21 of gdp last year to 31 of gdp and 2017. That is the situation. After the economy recovers from the effects of the pandemic rising interest costs especially and ship it to wider with Rising Health costs and other factors. Interest rates remain low while the economy recovers and the pandemic and that holds down projected borrowing costs but we still have deficits in those lead to rising debts and combined with rising Interest Rates after recover from the pandemic that drives up the cost of service. The bottom line is the fiscal path over the coming decades is unsustainable because the cost of financing and servicing the debt does not consume an evergrowing force never nations income. The high rising debt will reduce Business Investments slow Economic Growth to foreign holders of u. S. Debt and increases the risk of a fiscal crisis with Interest Rates rising abruptly when disruptions occur. Is there a Tipping Point at which a fiscal crisis becomes imminent and in identifiable point that it would become unsustainable. The higher the debt the greater the risk and one last point the status of the federal trust fund is one indication that action may be needed soon. Our projection for the Highway Trust Fund in his fiscal year 2021 medicares trust fund will be exhausted in 2024 and Social SecurityDisability Trust fund in 2026 and Social Security the oldage and Survivors Trust fund in 2031. The fiscal challenges not over the horizon and within the budget went up to summarize the current low Interest Rates we do not face an immediate fiscal crisis we face considerable fiscal challenges over the longer term that will require fiscal adjustments under after the economy has emerged from effects of the pant pandemic. Thank you and i look forward to questions. Thank you dr. Swegle. Mr. Dardaro. Senate thank you very much Ranking Member cassidy and senator hassan. I appreciate the opportunity to appear today with philip swegle. Before the pandemic ive been concerned about the federal government because we have the compass darkly leveraged to debt by those historic norms. By the end of fiscal year 2019 the debt held by the public as a of domestic roderick was 79 compared to 46 on average from 1946 so we entered the pandemic already accumulating debt. The pandemic obviously has complicated this fiscal situation as the government has taken much needed action to address the Public Health emergency and profound economic disruption that has occurred as a result of the pandemic. As we achieve and for the immediate future we continue to be focused on the Public Health needs and stabilizing and healing our economy. As we come out of this situation we met public thresholds and we met economic goals. We need to swiftly turn our attention to establishing a plan to put the federal government on a more sustainable longterm path. In calling for such a plan in 2017 i believe it is very much needed. The plan would benefit by having fiscal policy and right now we have a fiscal policy as to how much debt we want to accumulate or believe that we can service over long period of time. While keeping our goals of serving her citizens protecting the liberal populations promoting Economic Growth and we believe that plan has fiscal roles for example at the gdp that we are shooting for. The cbos estimate is that it could go up to 195 of Gross Domestic Product like 2050 but over the longer term it will keep going up unchecked and without a plan. That is not a sustainable path. Swiftly i savor the same reasons that have been pointed out already the trust funds are going to force decisions. Highway trust fund is being supported by general corporations is not the user. Premise that it was founded on from a number of years ago. The Medicare Fund as pointed out the Hospital Trust fund will by 2024 according to cbos projections only be enough to pay 83 cents on the dollar of payments. The Pension Benefit Guaranty Corporation which i dont think its been mentioned yet is going to be insolvent and the multiemployer portion by 2026. This puts 11 million americans at risk potentially failing because their company goes bankrupt and the government wont have enough to step in and provide inadequate pension. The Social Security fund by 2031 will only have enough money to pay 75 cents on the dollar. None of this will happen because we are going to allow these cuts to affect these programs but it indicates the changes that need to be put in place and the sooner we do that the better as its been pointed out because it left time to adjust. Right now we are working against those of third debt begins to accumulate and even at low Interest Rates the debt continues to grow. Over time as pointed out by cbos projections over the long run we have tremendous Interest Rate exposure and that can precipitate a lot of troubles. Right now we are we are paying 376 billion in interest costs and conceivably interest costs can be a trillion dollars in time without a plan. We have outlined their report about how plan could be constructed to be aligned with the fiscal rules of the federal government and to be integrated with the budget process to allow flexibilities in emergencies and to be able to provide for checks and balances over time so the rules are enforced when appropriate and when not appropriate allow for flexibility and emergencies. Also while these issues wont solve our fiscal problems alone without the fiscal policy changes there a number of areas pointed out that the gao to make contributions to these adjustments making it a lot easier. The first are the last estimate the tax gap was. Nady billion dollars a year on an annual basis and also continuing a trend and accelerating trend there was over 175 billion payments among 23 different agencies. This has been growing over time and they were made in the wrong amounts. Theres over trillion dollars in tax expenditures that are allowed every year without any review. There is overlap and duplication of the federal government and tens of billions of dollars in additional implementations of our recommendations so far have yielded four and 29 billion in financial benefits to the federal government and with additional things in the works it will do, have to trillion dollars this year. While they make an important contribution they can close the much needed fiscal discipline in how we manage the countrys finances. We 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 would greatly improve our position and prospects 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 were holding a hearing on this essential process and im happy to refund his respond to questions. Thank you very much and thank you both for your testimony. I have got to be in session the entire time so if you are ready ill let you go first or someone who may have to leave early and i dont mind making your life more convenient if youre ready to go. I appreciate that very much mr. Chair and let me just draw up my questions for a second and i just want to start a thanking both of our witnesses again for your testimony and for your work and mr. Chair thank you for your courtesy. Let me start with the question to dr. Swegle for the longterm budget outlook points out shortterm National Debt is important during challenging times such as we are in right now. Can you explain to the committee how given historically low Interest Rates providing fiscal support during covid19 can have a positive effect on the economy . Guess i can. We report on our web site that goes to some of the different actions taken by congress and looks at the effectiveness. The economy of course is operating under the Unemployment Rate much higher than it was before the pandemic began. The fiscal action taken by the congress has supported businesses including small distances and test the relationship between employees and Small Businesses helping those businesses make it through. Both the demand side and the supporting the economy. Thank you. We all know ultimately we need to address the National Debt but its also clear in the short term are economy urgently needs support. Mr. Dodaro last year that a bipartisan bill titled the annual duplication report act of 2019 to take action on several recommendations the gao made to congress an annual duplication fragmentation and overlap report. Two weeks ago i introduced the 2020 duration of this bill again with bipartisan support by some of my colleagues responded to this years gao report as well as opportunities to achieve financial benefits in government programs. Mr. Dodaro can explain how adopting gaos recommendation to reduce duplication fragmentation and overlap can help improve the fiscal outlook . Yes. Since we have been doing that work over the last decade we have made over 1000 recommendations to the congress and executive ranch agencies and over 56 have been implemented and as i mentioned in my Opening Statement we are on track to see close to have to trillion dollars as a result of acting on our recommendations. Acting on recommendations we save tens of billions of dollars in Additional Savings to the federal government. The pieces of legislation that you mentioned would go a long ways to implementing this and have the potential to yield billions of dollars. For example they would allow capturing the full cost of providing sales. People who work on these help sell u. S. Equipment to other countries and the people buying the equipment using services of our military arent paying the cost of using those services. That would yield benefits. It would allow 17 million tax returns that come in to have a scannable barcode that would allow us to more effectively enforce the tax laws and more equitable and fair manner. Would require the navy to put more emphasis on operations by requiring ships. 70 of the cost are in the operations of Maintenance Cost and we accept ships before they are completed and tested and the operation and Maintenance Costs go up over time so there are a lot of recommendations and this is a good dated a good way to deal with it. Thank you very much and i appreciated and i look forward to working with ui. I want to see if i can get in one more question before my time is up to dr. Swegle. In the longterm outlook cbo considers how School Closures during covid19 will have longterm effects on the workforce. Can you explain the importance of education for americas Economic Future and how covid19 x. The workforce in the long run . As i can its something i worry about in the nearterm and longterm. The longterm positivity growth is the key driver for economic output and our trajectory and School Closures are ineffective schooling could i worry about them in the long term in the short term the most disadvantaged kids come out the worst so i worry about it. I think some of these longer term effects continued to meet the needs of students during be some presented circumstances and thank you mr. Chairs for your consideration. Is senator scott back on . Are right senator biden. Mr. Chairman and colleagues im going to mecca quick statement and then i have some questions. We have got a huge crisis coming with medicare with the insolvency of the Hospital Insurance trust fund and the budget experts have already projected its due to become insolvent in as little as three years. I am of the view the problems they are having are particularly due to the economic downturn and the republicans downplaying of covid19. Affordable care act put in place policies to secure the longterm future in they did this by increasing much the much medicare spends an increasing how much money takes them so this crisis that is already series is going to be compounded if republicans are successful in getting the Affordable Care act. I want to put on the record as indicated with the chairman of the budget that tearing down the aca is going to threaten Health Care Service for millions of americans. Dr. Swegle thank you for working with us often in the past and i want to ask you about Unemployment Insurance. Im here starr. I am the principle author of the expanded Unemployment Insurance that ran for four months through july 31 in the coverage for gig workers and selfemployed independent contractors and the like. What would have happened in your view if these folks had not had those benefits because i have listened to mr. Powell and others talk about how it would have been really a huge hit on the economy. I would be curious what your take is on what life would have been like if congress hadnt acted on that. I agree with that chairman powell and the other statements alluded to earlier as well. The cbo analysis in a letter to chairman grassley said without the extra benefits the demand would have been weaker in the economy weaker and as a result as the economy reopens theres more of a push and pull between the added spending and the incentive to work but clearly until now as the economy was closed it was an important factor. Very good. Let me ask you one other question because inequality also affects programs particularly Social Security financing. My question to you mr. Director on this issue is how has stagnating middle class wages since the 1980s impacted the longterm financing of Social Security in your view . It affects Social Security and a couple of ways. An important one is stagnant wages means lower revenues going into the Social Security trust fund. More wages are but the tax maximum and that affects their revenues going and and a key Revenue Source for Social Security has a negative effect on the system. Thank you. Well want to work closely with you and senator cassidy and senator hassan and my colleagues because by my reading if you look at several decades with wages stagnating wages have gone through the roof while middleclass wages have been stagnant and the result is so security takes in less and less funding over time and we have a demographic tsunami that the program is facing. Mr. Director thank you for the answer to that and the answer to the Unemployment Insurance and im going to repeat for my colleagues i thought the direction the team did professional work on the Prescription Drug issue but no one thought the Senate Finance committee could produce a bill that has a fair amount of bipartisan support including chairman cassidy and we took a fresh of perch which was to say we were going to reduce subsidies to those Drug Companies engage in proust dowd pricegouging and we could have done it without dr. Swegle his team. Thank you mr. Chairman i look forward to hearing from your colleagues. Thank you so much. Im sorry senator carper is next. If you youre in a hurry im not in a hurry. I will yield to the gentleman from delaware. Excellent. To her chair and Ranking Member i thank you more than enough for holding this hearing. Oftentimes before i was a governor and was a congressman i was a state treasure in 1976. They couldnt balance a budget and we were just a mess. We have the highest marginal income tax rate of country 19. 8 personal income tax at 19. 8 . Years later tina what was the key . Great leadership are the key was great leadership. We had the democrats and republicans in the legislature who Work Together to work on a physically fiscally responsive fiscally responsible course. I want to thank you today. I also want to say to senator biden i thank him and senator grassley for helping us produce and put out a prescription bill that was actually fiscally responsible and i think you made and in terms of Economic Development making sure we build the right incentives for investments in pharmaceuticals and that legislation i think is a good example of the stuff we need to be doing. In talking to her witness today general dodaro we are delighted to have you here. Jane dodaro has been one of my heroes for 40 years or so. By the comptroller general and i love working with him. In the beginning of january and the end of february the reports and to the congress. When i was chairman of the Homeland Security that was what we would do and would do in the hope of me get the highrisk list from general dodaro his folks and genuine worry we will use it as well. We have heard jay powell or Federal Reserve chairman said the last couple of days and i hope not just that we in the congress would help the will make attempts. I want to thank senator cassidy for allowing me in a number of others to join in supporting legislation that he has coauthored and who is the democratically found that mr. Chairman on the next covid package . Menendez was the democratic lead on the state and local lead hill. I want to thank you for that as well. Our state and local governments are one area that continued to be under enormous and unprecedented strain. According to the department of labor state and local in september alone 180,000 jobs and without additional federal support more jobs are going to be lost. It needs fewer frontline workers like firefighters and ems Workers Police as the pandemic suites there are communities of teachers and bus drivers and janitors in the school, School Nurses try to open safely. The cbo report confirmed something that i know from experience that state and local government is the most important economic stimulus. The same local government especially with the cares program. Those monies by a large would be spent immediately. Not every penny but they largely spent very quickly and very rapid and high large impact. Additionally the money in this government reduced the tax increases in the spending cuts the state and local governments would have to do. So it had an important demand in that as well. Inc. Is much. Lets talk a little bit more about payments. It and ask you, i think it was actually the year 2019. They made an estimated 535 billion, about 151 billion in 2018. Once again, they were under hundred billion. Wasnt that long ago in the run actually under 75 million. As part of the cares act. As you know, you go over a billion dollars with them checks, and one of them as i recalled was your late mother. So given our current Fiscal Division we are in no position to have these kind of error in payments in earlier this year legislation. In my colleagues from louisiana. [inaudible]. And also rand paul, comprehensive updates to and im getting ahead of myself. More recently, earlier this year, so they called another one signed into law. An update which will divide a variety of issues with the tools they need. And further, and passed a separate issues and legislation is such that passing in the senate. And cosponsore cosponsy senator paul now the house now. This bill will more widely share the depth of the data and the Social Security administration. To help and prevent things. What actions did you get to branching congress to do immediate terms to address this particular issue. Sending payments out. Will first, senator carper, i think they need to effectively do the and have the payment integrity of 2019 i think you alluded to. This would require and i would find that hundred 75 million is an understatement because there are several programs like temporary citizens for need. Where there are no estimates made. And also it would require more regular in these assessments because there are some programs because of the risk assessment, they dont have a provider. That might not be appropriate and also include the estimates to allow for these areas to be able to detect was some of the root causes are. In one of the reasons this is growing so fast is because the two largest areas with the proper payments medicaid and medicare. And actually jump 150 and 175 billion last year. So its been largely due to medicaid and for the First Time Since the Patient Protection act. Gene dodaro and the beneficiaries and determinations to make sure everybody is properly there. And so that is why am very concerned because those are the two of the fastestgrowing programs. We need to get on top of that. It is some recommendations we made that could be some additional prior authorizations and medicare. That would make sure that the payments are appropriate and before them being made. And as demonstrated to be effective. It would not harm anybody scare. There should be more timely auditing on the medicare manage programs. In medicaid, the big growth in the Medicaid Managed Care, and that is received in virtually little scrutiny. And i think that needs to be more rigorously pursued in that area with the help of the state auditors. Trying to work with the center for medicaid and medicare studies to get the more involved in this process of over time. The legislation that you mentioned to stop payments to deceased people. If we could get treasury in the proper, a more complete master file, this could be done very easily. And it was done with the stimulus payments was they decided they were not going to go it root anymore. They are given temporary access to this file in a spot that the immediate areas. Thank you very much sir. I cannot read that clock very well at the bottom. It so i think it may have run long. Now senator young. It. Thank you mr. Chairman. And i think our witnesses for what you do and for your appearance today. To date, the Paycheck Protection Program that most americans now know with the ppe funded more than 5. 2 million loans. For total of 525 billion. The program closed the most 135 billion fund its remaining. The hardest hit businesses the ppe funds run out and more funds are going to be needed to weather this storm. In the United States as a whole data suggest that nearly one quarter of all Small Businesses remain closed. The missing that again. Data suggest the nearly one quarter of americans Small Businesses remain closed. Disclosures on average have caused revenues to drop around 40 percent and even up to 70 percent. In the hardest hit sectors. For example, the hospitality sector. Some estimates indicate that by june, the three months after the start of the shutdown, more than 400,000 businesses permanently closed. Which is more than what was typically lost during an entire year following the great recession. To ensure more businesses do not fall through the cracks, i have introduced the restart act senator bennett are legislation, would provide a low interest longterm working Capital Loans to cover of the six months of payroll benefits and other operating costs including rent and utilities. In these would be eligible for forgiveness based on how much the revenues declined. And so far the restart act is widely supported across a multitude of sectors including the manufacturing and retail, minor league sports, hospitality, even live events. If we wait for a vaccine. As the worry of a domino effect of sorts of lost jobs. As well as Loss Services and lost projects to say nothing of the lost innovative capacity they could be financially catastrophic if Small Businesses are allowed to fail. Doctor swingle, regardless of the effects in the scores, do you believe it is necessary to provide additional like mine restart proposal for the hardest hit businesses. Phillip swagel thank you senator young. You put your your finger on this. The policymakers face this challenge because we cant reach the economy where it was. There will be reallocation but the ppe as you said, plays an incredibly important role. And especially supporting Small Businesses. And above for tips on down this of people. And as you said it would extend that that the economy is still evolving. And hopefully we will allow reopening. The restart as you said, would provide further buffer to anything i just like ruth you hear that their targeted. The cdp was very broad and incredibly rapid. The treasury so that in rapidly getting the money out. And with your which are proposed is what youre targeting to and we will continue to support the economy. So we are ready to work with you and look forward to evaluate it. Including cost estimate when the time comes. Thank you doctor slagle remember a full for you and your team i want you to know that for unit we ask you to live by these rules and after your analysis, of course you did that. And of course a followup generally speaking could you quantify or perhaps you would like to quantitatively characterize the direct and indirect Economic Impact of permanent closure more Small Business i spoke to for example the animation effects. One could perhaps and i guess this is a bit of a leading question. If i offer examples might also talk about the erosion of skills. What sorts of things on my colleagues and i be thinking about when i contemplate the permanent closure of more Small Businesses. Phillip swagel this effect is essentially on the Small Businesses in the workers at the bottom of the income distribution. The unusual part of this pandemic recession is this skewness of where people at the bottom the destruction of restart is meant to shield against is hitting people at the vitamin Small Businesses especially. In the animation and job creation of courses support for local communities that have the Small Businesses. The restart would help them with that. My last thought. And again you said, were always going to see the cost but is much as possible, we are here to help get that information to congress of the benefits and other things. It through. I would have known one fundamental. Into bartley least whatever concerns about the speed of the local debt as well. Thats on the federal budget state and local government oh over 3 trillion plus trillions more liability. Square this debt provides a huge elective fighting and the liabilities spread across numerous municipalities financial burden of the debt is less transparent. My home state of indiana which much more prepared to weather this crisis by using the rainy day fund. And i have to say this is been radiused of days. We would bring it down. Due to the pandemic, the search for some states. While its unlikely, there still a possibility of default. Student loans, mortgages and fda loans. They could change the projections. Can you elaborate and some of the consequences of the federal government or the state or local governments default on their debt obligations. Phillip swagel yes are you senator. And the pandemic, if an inch in the relatively good state, then the defendant an alltime high. Around 75 billion or so. So states have buffer. Revenues have to be coming in recently in the property taxes are important as well. In the values have not been really affected and much of the country of the overall economy. And of course any governmental have trouble summer localized and they suggested they would not have a sector of the country that the hope of the country as a whole, can we sing the problems in illinois and other states as well. If the problem is broader than there could be a more meaningful impact. But as long as his localized and its. Good shape overall, then it shouldnt have a real negative effect overall economy. So youre about three minutes over. Do you mind if we move on to a second round. My apologies to my colleagues. Of course yield. Your questions are great and there would be a second round and folks may want to do that. Are there any other my colleagues. If not, i will no go. Several questions. Let me set it up like this. It seems as if at least for you doctor swagel. Youre okay effect even endorsed another round of the covid19 relief. Anywhere from one to 2 trillion and maybe more and yet both of you expressed alone the deficits. And you highlight the trust funds. So it tells me early soon applies to me and would like to have both of you affirm that the problem is not so much the Discretionary Spending if you will. s what congress has control the rent is the socalled mandatory spending which congress is not necessarily allocating. As a follow her testimony of alarmist underground that in your testimony may we need to think about it even though it is deficits, that is around the Discretionary Spending. Phillip swagel we will give you our analysis to say this is the right policy. Im not endorsing any particular policy. Even when saying with the beneficial effects would be. As i started with and as you said, the deficit was large even between the pandemic. Trillion dollars year. Those trends continue. And without the cost going in excess and more rapidly in the overall economy. And those are driving entitlement spending. The challenge was there before the pandemic. But is exasperated by the pandemic but is still remained. Just as you say. Would you agree with that. Gene dodaro absolutely the primary drivers for the entitlement programs that feel just deluded to the healthcare cost and the interest cost because of the growing debt. [inaudible]. Based on that. Beginning eligible and the rate of 10000 a day, is kind of driving this. Last bloomer turns 82. The average age for thereabouts. In 2046. That the boomers begin to die and im a boomer so im speaking of myself. In my be some relief on this demand on Social Security that big population of boomers begins to decrease. That in turn would give more money. I dont think that will happen for the following reasons. Lifespans are increasing. We have very little rates. Number of people who will continue to be any minute minute karen Social Security will continue. As a chart in my written statement. So about a thousand people a day going out and go out beyond it. Im a boomer to. In though i plan to live forever. I want to say i dont think the problem has been brought on by the boomers rated but also coinciding with longer lifespans and fewer children being born. So also going to change the financing arrangements that we have had for these systems have been based upon the working population paying payroll taxes to the senior citizens. For everyone retired person, we have 7210 people working. Right now we only have about 2. 3 people working forever retired person. So not going to be able to accumulate the type of balance you had accumulated over the past several decades. So dont think we should revisit sigh of relief in the boomers is in that period of time. What about discretionary wrist mandatory. Were basically borrowing free money. The Interest Rate is been so low now theres been argument for a large infrastructure package. Stimulate employment construction manufacturing and mining. Also take care of inefficiencies in our economy to an inadequate infrastructure. Do you think, when a trillion dollars over ten years infrastructure package close the same of the baby boomers retiring, the socalled mandatory spending. It would have same longtail on it. Hopefully there would be some financing arrangements is or has been in the past. The Highway Trust Funds. If you have some self financing it is exalted to help with the infrastructure package. But it would not pose the same issue. Its as we emphasize the point of the budget control act of 2011 with limits on Discretionary Spending. There is some on medicare. Very little though. And it was attempt to bring the deficit back. It helped a bit. But that Discretionary Spending is on the problem. The problem are the other areas. Some i would feel better if we made the ten Year Investment in infrastructure preventive longterm plan in place to address this position so theres not a tendency to make decisions on all of the above area or even complicate things. So if you had a good plan, this Training Plan so you can make investments in infrastructure and National Security and have flexibility to deal with emergencies. Right now we dont budget for natural major disasters or economic downturns in all of these buffers that the ceos are generating. Mentoring consider all of these other uncertainties and expose the fiscal exposures that we have a nation. I have a second round and ill ask you about the Disaster Relief fund. Because of this seemed to be a financing of financial disasters. Were going to come up with a robust plan to address this deficit. Speedo thank you so much senator cassie and thank you again to all of our witnesses. Want to start by stressing my agreement to any support of senator carpers comment regarding state and local aid. In complement others on state and local aid. I just want to add my comments before moving on to another question. If we do not add an address the need for more state and local aid and what i hope will be another stimulus package, i dont is is happening in my state is that revenues are going down. That resulted in layoffs of critical frontline workers including Law Enforcement and Public Safety teachers at a critical time. I also know about the hitter local communities are by the loss of commercial property taxes because while our Residential Property taxes may not have been hit as hard, commercial property taxes and tax revenues that comes from large events and or entertainment arenas for instance, is really impacting our local community significantly. Will result in critical Production Services at a time when we need them more than ever but the layoffs which obviously adds to a drag on the economy not to mention human misery. So i do hope we are able to invest in state and local aid because it is needed and because as doctor swagels report indicates a very effective way of getting aid out there when we need it. And i wanted to ask you, about really drilling down on this issue of how we got about addressing the debt. As i mentioned in my opening remarks, the difficulty of addressing the deadly compounds with time. After recovering from covid19, the sooner we can come together to address the debt, the better. Can you explain how addressing the debt sooner rather than later would mean that we need small amount of reaching our longterm objective. Phillip swagel yes. We have, the longer we wait, some people within the generation and those of you who do not share in the burden of this fiscal adjustment. So by waiting, and means that the burning of the adjustment is compensated or concentrated a smaller number of people there for a larger adjustment or bigger burden on his generation and is have to pay for the adjustment. Sen. Maggie hassan thank you. On a recent report, gao admitted that congress adopt budgetary targets. And you began to the last. [inaudible]. Can you outline more of the considerations in congress that congress should use in establishing a fiscal plan and how this plan would facilitate appropriate time deficit reduction. The plan would benefit and the anchor of the plan would be a fiscal rule which is designed according to a National Monetary fund to be a sustainable rule that is in place over a long period of time. Radically be able to address this issue so big and problematic in a short period of time so youd have a debt to gdp ratio. Lets say that we want to or not ever going to be in a position to know more than our economy is producing. So we want to target 100 percent of that gdp. We dont want to go about that or if we do for a little bit, we want to bring it back down. So we have to send targets. I know, there are no boundaries. So it is what it is. We spend money we need and secondly, the fiscal rule within the because you are putting that in place that we could then look at targets. We need to look at revenues as well as mandatory spending and Discretionary Spending and tax planning. 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 role and that would be our goal as a country and these targets, and the expenditures over a period of time, sort of interim benchmarks and then we can move towards if you integrated with another process. He would have enforcement mechanisms. Have independent people, to say they were meeting our targets are our goals. Heres how we can adjusted. We have a plan. Right now we have no game plan. This basically sets out a game plan and provides some roles. Other countries do this. And to can strained and it hasnt helped people to effectively reduce it for what it was but it can constrain it from growing larger. Thats really what we need. Sen. Maggie hassan im running over so i take it that the fiscal rules would also as appropriate escape clauses for National Emergency or Something Like that. But again, getting us to a plan to get this rule in place and then be very specific about when we need to adjust it. Yes. Thats one of the design features of this emergency calls for example the European Union has these kind of roles and they relate them to the covid19 situations. So yes, they would definitely have the escape clauses for the emergency. Sen. Maggie hassan thank you very much and thank you for your indulgence mr. Chair. Let me observe the senator carper residing in the senate. Hes given very good speeches about the need to finance the infrastructure. Thank you for me in an advocate for the fiscal response ability for some time. Thank you for this time. Sen. Tom carper im a longtime believer. [inaudible]. I think five Years Service with the transportation were supporting for the votes. Financial data into the job, congress didnt do the job. And other communities in jurisdictions, wouldnt do their jobs. So this is unfortunate. [inaudible]. They turns out in this country, 20 25 years. In about half the work they work that when we were in the public the years ago. Can make great progress. [inaudible]. Linkedin years from now, i think it will be electric vehicles and by hydrogen and fuel cells to move large cargo. But when i think were going to need to do is move to a vehicle model approach and actually. [inaudible]. And use low carbon emissions. That said, when we talk about a little bit today, the taxes not being collected. The information here in the case, the irs and tax cap, several billion dollars this year 440 billion and weve had testimony before the finance committees with a included bigger issues. When they say if the administration and the irs you allow them to do their jobs, you can reduce the deficit by 85 down 10. For every dollar that we have in the irs, we have an additional marginal or how much would they be able to save. [inaudible]. Friday. I think the irs and they can generate 9 for extra money invested in that spring but we had a lot of recommendations also 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. Sen. Tom carper every now and then, people we go through an exercise in figure out how to deal with that. In one leading the group. [inaudible]. I dont mind paying extra taxes. I just want to lose my money. I will always money either. She also said, on make sure we have a plan. In the New York Times last week, 750, not million, 750 last year on federal income taxes. Any other comments you unmake on the tax gap. When congress how we can help the irs and work with you. Yes there is a number of things that congress can do to help and one is to give your authority. Were they have administrative, they could correct tax return rather than start an audit and go through things and then explain to the taxpayer what they did. Then the taxpayer would have a right to appeal. But it was in shortcircuit, to the irs more efficient and help ensure that things get paid up front. And secondly there could be more thirdparty reporting crated the use the comparative filings critically for the businesses. For example, the commercial real estate and in terms of repairs if they can be reported by the service providers. The same thing for the corporations argued and also congress could give irs the authority to regulate paid tax preparers. Eventually his irs data to indicate that vertically for earning from the fast credit, 17 billions dollars payments there. They actually make or have a higher and people can prepare their own taxes. And i know that the state of oregon has us in place. And they greatly benefited their revenue collection agency. We recommend this to the irs and weve done in the past. But during the course really, they didnt have the authority to do it so congress is really in need to give them legislative authority to do this for you think it would be very effective. So this is think the congress could do. What youve given us great information. Earlier this in the treasury then Inspector General and taxi ministration down the irs, audits 900,000 he did not file complete tax returns. In 2014. 900,000. Resulting in over 45 billion. [inaudible]. The calendar year, and congress and wanting to work with you. And working with the doctor. Theres an enormous challenge and what we can do as much as possible. And be sensitive to the needs of others. [inaudible]. We believe we have fiscal responsibility. In an obligation. We look forward to working with you all and thank you all. Thank you senator carper. I thank you so the last question. Is todd young still on. Okay. Let me start with you doctor. Im getting a sense because both of you are speaking about the amount of money they were putting towards Interest Payments and increasing that you have an Interest Rate forecast that obviously the Interest Rates are rising at times it right now were an incredibly low interest. What is your forecast. At some point, must be rising. Because you incorporated a higher expense relative to that. Phillip swagel yes thats right parking it we have Interest Rates remaining loving next couple of years and is starting to rise as the economy reaches potential. Any would get back to where we were before the pandemic. In a projection in the middle of 2022. The next year with director. Mr. Potential and it has kept going. So thats in 2028. As we approach 2028, and getting us back are fully back in our transaction and thats when Interest Rates start to spike upwards. Let me go to my next question. What a build on what i spoke on earlier. A larger infrastructure package. We can actually therefore borrow the money in an extremely low Interest Rate to do an infrastructure package small with minimum impact with the amount of money being applied towards a debt service. De of a Multiplier Effect that the economy uses for infrastructure investments. Phillip swagel what it does have in terms of economic tax receipts reduce insufficiencies of the economy we have the ability to do that. Its a dynamic analysis which from the side of the tax side. Let well targeted in fact the well structured program. Increase gdp and revenues. And then that cost less than the full amount. Thats a dynamic incident. We have the ability to do that. We dont have a rule of thumb. Though we would look at the particular legislation to do that. And essay though, therefore that industries being so low, obviously your more likely describing it opposed to the principal interest. Because the Interest Rates are so low. Thats exactly right. In longterm Interest Rate right now is below the projected rate of inflation so its a negative real Interest Rate for a while. And of course the challenge is the primary deficit is still. Wide. So the net keeps going up. , not an economist but if you are Interest Rate is less than your rate of inflation, that actually you can to borrow to increase without economic consequences per se. Now again is about as far as i understand that but again, sure you must be familiar with that idea. Phillip swagel is right for unit that point is been made by others as well. And recently was made the point, the challenges of being effective. It they burned resources within an effective investment. It and doesnt improve our capacity so that is the challenge. With the way you put it is spot on. Its conditional on effective investment. So going back to an effective infrastructure package. By the weight you come from a more conservative background credit do you agree that your left of center right of center i gather. Is it fair to say that this analysis would find an agreement of both sides of the political spectrum prayed. Phillip swagel yes their analysis is spot on. Yet the challenges depending on how quickly we pay off the debt, is something we have to refinance. So if we borrow for ten years and in the 11th year you havent paid it off than we have to refinance it at a higher rate. Thats always the challenge. I have to present the downsides. You are the other considerations. With that is part of my job. You said something earlier that would not discuss that much. Except that one hearing we had which was the Medicaid Managed Care was scrutiny and for the time, theres more improper payments relative to medicaid and relates to eligibility determination. And again unfamiliar with the analysis on that. But you suggest that is. Widespread and as you said, now surpassing medicare in terms of improper payments would you elaborate in the place. Tell me what you gather in your data from. Thats what am more interested in. Phillip swagel the estimates are coming from the center of medicaid and medicare studies. And at the Affordable Care act was passed in 2014 and became effective. They did not do any reviews of ineligibility beneficiary determination until they started about a year or so ago. Theyre doing 17 states at a time rated so in 17 states, the error showed up in your 2019 estimates credited in an increased improper payments by about 25 billion or somewhere around that neighborhood. The states, with a small states of big states. Can you tell me about that. I dont know offhand. I can supply that to the record for sure. But i think it is a mixture of states. They still have 34 more states to go. Before they have learned about these reviews. With the exception of the obama care is only for 2019 euros and 2018. What is the timeframe that 25 billion. I believe it is in 2018. His. Simply 5 billion in one yea years potentially we could multiply that times the rate we come up with the end improper eligibility of medicaid recipients. Given the fact that there 75 billion. He cant say but you might be able to apply that. Right. But we dont know what it is. Thats a problem that i have. We dont know what it is. In managed care spending for medicare or medicaid excuse me. Its about 45 are almost 50 percent. That is been growing. It was more like 15 percent. And so the managed care reviews are not being carried out at all. Effective work with the state auditor in louisiana. Weve been trying to work with the state Auditors Association and cms to get state auditors to do our flight was doing in louisiana. We are moving in the direction but that will take some period of time. And i think that they could help address this issue and reduce the improper panel spread the given the proper authority. In the proper data to do the matching. Are this detail and delegated to pay back the federal debt if theyre not auditing to ensuring into the Medicaid Programs. I dont think, i think if there not paying properly. And some of that is offsetting is the future spending. My experience is that it doesnt happen that often. Theres not that any penalties put on states into the Medicaid Program. City could theory theoretically but in reality doesnt seem to be the case. That is correct. So really what the federal government picking up 90 percent. The state to go after these folks. Only getting 10 percent of the investment so to speak. That is correct although, the Medicaid Program is the Fastest Growing program the states budget as well. So there is some sort of incentive for them. In fact were talking earlier about the state and local fiscal positions on the depth standpoint. We do a projection of the state and local School Sector like we do in the federal government fiscal path. The state and local sector as a whole and on the same path is the federal government unsustainable bases largely the same reason which is Rising Healthcare costs. Not just for medicaid but for their own employees. Both current employees and retirees. What he thought for those folks it wouldve been an engine plant help plan. Wealth Pension Plans for the problem. Thats actually more isolated in particular states. That is taken different paths on that issue. The Healthcare Impact is across the board. So if you can reduce healthcare costs it would reduce positive things for the average american and positive things for the federal as well. Healthcare is the most, it will it is the key. On to the fiscal sustainability. If we dont manage healthcare because the cost is a growing faster than the economy. Even though there slow. And the cost for the beneficiary rising. Within aging population. If we dont do that, where only going up relatively modest effects on this fiscal path. That is a problem in the best way to summarize this. The primary problem driving this to all levels of society give the individual. An essay that is a physician. Thank you everybody. And i cellulite just lit up. Do have a question. Yes. Just wanted to thank you mr. Chair for the hearing and to the witnesses again for excellent testimony which reflects longterm excellent work that you have done for you but i also was just going to thank you for raising the issue of healthcare cost mr. Chair. And also reiterate was senator white and sandwiches the entire finance committee passed out of committee a bipartisan drug reduction mill and we both voted in favor of it. By estimates, it would reduce spending by about a hundred billion dollars on Prescription Drugs. Southerners, granted be had. Making sure that we lower the cost of Prescription Drugs. We had this and overseeing medicaid expenditures. I will say that when my experiences as governor when we expanded medicaid was talking to the number of people who got a medicaid for Substance Use disorder and got treated and then got jobs and moved off of medicaid into private insurance. In a situation that we never wouldve had if they didnt have the access medicaid to begin with. So i look forward to setting this issue more. Because i do think if we cant get a handle on healthcare cost him a lot of the rest of our discussions will be more marginal. It. Yes, i agree with that. Thank you everybody would like to think up with is the Ranking Member peskin the restaurant calling for joining us afternoon for discussion. It was incredibly illuminating. So really think are witnesses to provide a lot of good information. The numbers and implications are clear. The current courses is not sustainable. Congress needs to think about solutions and how to head off the negative consequences of an action. I think the callings for being here and i look forward to continued partnership and commitment to find pragmatic and common sense solutions. There is a time. By which additional questions can be submitted. , might closing remarks, im going to say five days in the hearing is now one hour. My name is Vivian Schiller and on the executive director of aspen digital which is a program of the aspen institute. Welcome to those of you are joining us on zoom, and also through viewers are watching us