Please take your seats. Im delighted to introduce todays luncheon speaker keith hall. We are extremely pleased that keith is willing to take time out of his demanding schedule to join us today. As you know, keith is currently the director of the Congressional Budget Office. All of us recognize that the Congressional Budget Office has a vital role to play providing congress with expert unbiased analysis on the impact of legislation. Charged with the challenging task of scoring complex bills on health care, taxes and many other policy issues, often under tight time frames, the cbo has a wellearned reputation for objectivity and professionalism. Running the cbo takes a great many stills including leading a diverse team of analysts and meeting Rigorous Research standards and unvarnished to lawmakers on both sides of the aisle. Fortunately, keith hall is ideally suited to such a role. One of the most experienced government economists and Public Servants youll ever meet with more than 25 years in a series of demanding jobs in the public sector. Keiths most prominent positions have included commissioner of the bureau of labor statistics. Chief economist for the council of economic advisors and chief economist for the commerce department. He is no stranger to the task leading with sensitive and complex economic and social policy issues. For longterm budget outlook. Ill try not to depress you too much but the longterm budget outlook is just a depressing topic. First of all cbo was greater by the congressional budget and control act of 1974. We were set up to be an objective and impartial agency that is strictly nonpartisan, and we provide analysis of budgetary and economic issues. The director, towards that goal, the director is appointed joined by the speaker of the house and the president pro tem of the senate. Cbo has about 235 employees, hired solely on the basis of competence and without regard to political affiliation. Most have advanced degrees, 80 of our folks at an advanced degree, either a phd or a masters degree. Have a lot of expertise. One of the things that you cant do when youre at cbo is you cant offer opinions on policy issues. Because we want about the appearance of impartiality and we are worried about being able to work impartially and objectively in our work. Towards that goal, we do a number of things to try to ensure that we are nonpartisan and objective. We use a lot of outside experts. For example, when we are looking at legislation we always ask the Congressional Committee what research do want us to look at, what david you wanted to look at it. Then we start with what i would like to think of as our due diligence. We talked of outside experts, talk to people, we use her own expertise and we come a into her own conclusions and use of data to provide estimates. When we write something it has extensive internal review. Its never just a Single Person or a small group. It has been extensively reviewed for our analytical work, we actually send things out to external professionals to review like it would be a journal. We try very hard to get a variety of opinions on things. We send it to a variety of folks. We try to clergy present, reveal literature, sometimes will publish our literature review on certain topics. We try to document our models as well as we can. We do a fair amount of presentation on our models. We even write working papers, describing our analysis. Ill give you a for example. A couple of years ago we did an analysis of what would happen if the aca was fully repealed, and we did for the first time a dynamic analysis, not only what would happen if we just repealed but what would be the effect of gdp growth and have that feedback into the effect. And so that involved a fairly complicated labor market model. We published the labor market model and explain how we arrived at our results. We have a panel of economic advisers that meets twice a year, and its the first panel. If you get on a website you can see he was involved in it. They willing to not only devote their time to talk to us during Panel Meetings but we now have the phone numbers and their emails, and we use them to help us not only sometimes, it on things. They help us connect with researchers around. And we have a panel of health advisers, a similar panel that meets once a year to talk about healthcare issues and our modeling of healthcare. And our role is, is we really part of the budget process. We are treating part of the budget process, congress. In fact, the budget process starts with a cbo publication. In late january we produced our economic and budget forecast, then your budget forecast. That becomes a baseline on the budget over the next ten years that weve been used to analyze new legislation, how would legislation affect this ten year budget forecast, will it impact of things. We update that in the spring. We update that often in the summer. We update the Economic Forecast. We also produce longterm budget projections which ill be talking about in a minute so we take our tenure budget forecast and Economic Forecast and extend that out 30 years. We want to make sure that theres an understanding of things. And we produce cost estimates. We have that tenure forecast, the tenure budget and Economic Forecast as a baseline but when we get new legislation, we will estimate the budgetary effects off that baseline. If you look at it slightly you think all we do is healthcare, but last year we produced 676 different cost estimates on things. And some of them are really easy admittedly, a change in the name of a Federal Building is probably not that hard, but healthcare is really hard and we have a lot of topics cover which we do a lot of things. We also provide an analysis to the president s budget. I think thats the most recent big report that we have produced. That owing to get the president s budget and the president S Executive Branch analysis of the likely impact of the budget over the next ten years, we do an independent analysis of that. We also do scorekeeping for inactive legislation, Health Congress keep track of things. Then we provide analytic reports, 60, 70 reported here. Can be a lot of things. One things comes to mind, for example, is because it was heavily involved in a lot of analysis of research, we have produced an analysis of the likely impact of a minimum wage. When it was, when was the proposal was like 10 minimum wage. That was a really challenging thing for us because theyre so much literature on that, involved a lot of the reading of literature and going to the literature ecosystem which literature that the quality is not the same. It wasnt just an accounting but it was going and seeing what we thought was the best literature and was most informative and doing the work like that. Thats always a challenge. The longterm budget outlook, this is where i turned really pessimistic for you. When we are doing a projection we doing even if it is a tenure or longer projection we are telling congress that under current law this is where we see the budget heading over the next ten years. Its based on Economic Forecast. And one of the things thats really clear for a long time is that if current laws governing taxes and spending dont change, a condition the federal budget will worsen over the next ten years, pretty significantly. In particular, growth in federal spending will continue to outpace growth in federal revenues. Both are going to increase over the next ten years, the next 30 years but spending will help paste it to even larger federal deficits. Right now the deficit is roughly 3 of gdp. In ten years it will be about 5 of gdp. In 30 years there will be about 10 of gdp. Put that in perspective, discretion spending is about 5 of gdp, all of Discretionary Spending. So were talking about a defict that is now getting quite large. And youll see a nice graphical view here of what the story is. You see revenues are increasing over time. They start at a level tha that s higher than a 50 year average, already at a historical high level right now. And spending which is high relative to historical levels, and increasing but increasing faster than revenues are. And heres the most depressing crap i think i have here for you. Heres the acute relating to it. Right now the debt is about 75 of gdp, one of the things youll notice is in 2007 it was at a high level, about 35 of gdp, and it doubled in about five years. The accumulated debt. One of the things that were benefiting from right now is low Interest Rates. Over the next ten years the biggest impact is going to be from Rising Interest Rates to more normal levels, and were going to see a big increase in the debt from about 75 of gdp to about almost 90 of gdp. If if you look at the alltime record after world war ii, a little over 100 of gdp. Under current law will blow that away. Were going to get up to Something Like 150 of gdp. A natural question is, how sure are we of this, whats the level of uncertainty in this. One of the things is what it is a look at some of the key variables like Interest Rates and productivity and see a much they have varied historically over the past 50 years, and then there is those going forward. And when we do that we get at that in 30 years the ranges between 85 of gdp and 244 of gdp. So as we always do, that estimate we offer, the one at 50 , we think its just as likely to hire the net as it is low the network we try to offer the median value. In particular, federal spending is projected to rise noticeably from Social Security, Major Health Care programs, and interest on the governments that. The first two things Social Security and Major Health Care programs governments debt. This is a problem that weve seen coming for decades. Its going to happen, its coming. One of the things thats going to be important about this, a component of federal spending, is if you look at the relative categories of spending, Major Health Care programs, spinning of that as a percent of gdp growing significantly over the next 30 years. Social security is going significantly. And net interest is growing pretty significantly. In fact, you see just paying off the interest on the debt is heading up there, like six or 7 . I like to point out again right now, total Discretionary Spending, defense and nondefense, is about 5 5 of gd. You are looking at net interesting and much bigger component and Discretionary Spending eventually. Big part of that of course is net interest if the Interest Rate is going back to normal levels but also its this continued accumulation of debt from the aging population. One category is not increasing. Other noninterest spending. Everything outside of this is decreasing as a share of gdp. In fact, after the end of 30 years other noninterest spending, Discretionary Spending and other nonDiscretionary Spending will be at its lowest level in 70 years. So when you hear talk about things like investment in infrastructure, defense spending in anything like child attrition, veterans benefit, all those are out of this discretionary, and under current law thats actually declining over time. So we have sort of a different kind of crowding out there if you think about it. Federal revenues will also increase under current law. They wont increase as much as spending. The only category thats going to increase over the next 30 years is individual income tax. Everything else is going to decline under current law, as a share of gdp. The primary increase in individual income tax is real bracket creep. The fact that real incomes tend to go faster than gdp. And again you have to now sort of imagine its under current law, so current law means that congress doesnt get it and change tax brackets, doesnt increase discretion spending for infrastructure spending. You dont have any of that happening which could happen of course. Theres once aspect of this which is not current law. And thats the trust funds. Congress asked us when we do this work to not assume that the trust funds just run out of money, but that the government continues to pay al all of the benefits, the full benefits going forward. So one of the things youre going to see, this is a really good grasp on that, projections of Social Security revenues and outlays, you see the dark line on outlays goes up to a certain point and then suddenly goes down. Those are the trust funds running out. And so under our forecast at 150 of gdp debt hitting that, thats the daschle and outlays with scheduled benefits. And if for some Reason Congress did make any changes, then we flip to were outlays with payable benefits, we would only be able to pay about 70 of whats out in payable benefits if congress did nothing. Our numbers compared to the trustees numbers, they are a little bit different. We have lower revenue than they do going forward. We are about 6 lower. We have higher cost than they do. We have about 7 higher costs. One of the things we do is because the update our tenyear forecast, maybe three times eu, we update a longrun forecast once a year, so do make changes based on what was happening in the near term as well as the longterm. We see that under current law the combined trust funds would be exhausted in 2030. I think the trustees have it in 2034. That represents a little bit of minor differences. We have the Di Trust Fund exhausted in 2023. The o afi one in 203 2031 so agn where a little bit different. And here we see the exhaustion of combined trust funds in our forecasts. And tand casey our 75 year actul balance. So we see the balance is now about negative 1. 5 of gdp. We just adjusted that. It give used to be about 1. 6 . Ill tell you why we change that. Ill give in events, weve been doing a lot of thinking about Labor Force Participation. Thats been a challenging thing because weve had a real change in Labor Force Participation and weve done a fair amount of work breaking it out by hm by demographic to understand that better. Clearly part of whats happening with the Group Session without the sort of permanent loss of labor force going forward. Of course as im sure you all probably know, cohort, a cohort analysis of the Labor Force Participation is really important. The baby boomers are heading into better than anybody has in the past in terms of Labor Force Participation or everybody else is lagging behind the baby boomers. So you have the younger cohorts, they are all at a lower Labor Force Participation then the baby boomers were at their age. Ethically one of the challenges going forward. The second thing is income inequality. Theres been a trend of rising income inequality up to now, and we are forecasting that trend as sort of continual as a trend. That has an impact of course in the tax max, Social Security. Its one of our differences between the trustees is they assumed reasonably theyre just different assumptions, they soon that the income inequality is now flat and will go on flat from now on from this current level. So we lose some revenues with our rising income inequality. So as i said our two changed rejections is our Labor Force Participation. Weve actually just raised that a little bit. Also our projection of a share of earnings that are taxable for Social Security has changed. Those things have both added a little bit to the 75 year balance, and thats worked against a few things. Lower projected productivity. Productivity is a hard thing to project, by the way. And lower projected Interest Rates. Primarily we are seeing the Federal Reserve changing the pattern of Interest Rate changes. Again, whats going to be a longterm Interest Rate is hard to project. Changes in demographics, weve made some changes lately. That hasnt been terribly significant going forward. So we reject the larger deficits in social securities announces as does the trustees. They see the 75 year actuarial balance of being negative 1 of gdp. About half a percentage point smaller than ours, not a huge difference but a difference. Again, a lot of that is actually gdp growth, projected gdp growth going forward. And a projected shortfall between income and cost. Thats a little bit different. They see it at about 1. 5 . We see that 1. 5 , about four percentage point smaller face it at 1. 5, we see it at 1. 9 . Different projections of factors that influence things, taxable earnings. We see lower Interest Rates. We have slower Economic Growth. In fact, we see potential Economic Growth settling in at about 1. 8, 1. 9 of gdp. And that one comes from if you want to see a simple recipe, look at productivity, labor force growth. We have labor growth challenge with aging baby boomers. We just adjusted our forecasted immigration, for example. We dont see immigration increasing very much. And then we see the productivity returning to somewhat like a normal level, but not at the very high levels that existed at one point back in the 70s or Something Like that. Our use of research and data, we do look at a broad range of evidence. We look at studies, look at Historical Data for federal programs. Every year in fact, we do an analysis of federal programs to see if theyre behaving the way we forecast and adjust our forecast every year. We do read a lot of research. One of the things we started to do lately, which i really like, is we started to look at some the areas we dont know much about, whats going to happen in things. When we think theres a gap in research. So we started to put up occasional blocks we talk about a topic that we have trouble with because there isnt just Much Research on it, and hope would be folks look at our blog and see some areas that we think are gaps. If you want to be helpful, look at our blog. This is something we started talking bit about with our Economic Advisory panel, encouraging graduate students that if there was some topics, they can talk with us. We had some areas where some research would be really helpful. We often deduct her own original research. These are our analytical papers. Like i say, we produce 60, 70 of those of you. We try to make them on topix congress is interested in. One of our challenges really is in our Research Papers whenever make recommendations. In fact, we just dont recommendations, period. But we will offer up here are a number of options, policy proposals related to topic and we will do an analysis for each of those proposals. This is sort of the classic econ 101. Positive versus normative analysis. We do positive analysis. If you do this, this is the like result. If you Something Else this is the likely result. We work very hard on that. Sometimes you specialized data. Our longterm models o are estimate using Social Security administrative data, National Survey data, do a lot of work like that. And this is supposed to encourage you need to do research, this slide. Here are some topics, for example. With estimated things like marital transitions for individuals in our longterm model, characteristics of women who have babies and given years, characteristics of workers claiming benefits at various ages. Actually this is the slide i was thinking of. Of earnings inequality and Labor Force Participation is still really important to us. Still trying to forecast that. Other research areas, employersponsored health insurance, whats likely to happen with that, especially insurance, whats likely to happen with that, especially with healthcare changes. And state decisions regarding medicaid programs. Thats been a particular chums was because now were trying to not just forecast the economy and forecast individual behavior. Were trying to now forecast states savior about their willingness to have medicaid expansion. It gets to be a challenge. I didnt give you the really hard sell on the longterm budget outlook. I couldve been a lot more time really depressing you, but i made it easy for you. Do you all have any questions you want to ask . Do we need to have people come up . They need a lot of instruction. . If you questions please come up to the microphone and say who you are. Retirement income journal. Theres a whole school of economists who feel that when you present that tower of red ink that youre only presenting half of the countries Balance Sheet and that there is an equal and opposite level of access on the other side of the Balance Sheet in the private sector. So that if you look at that debt as say the countries, so you could look at that debt as a very different thing, almost like maybe the market capitalization, which, i mean you could say that antrle stock price is depressing because it forces of them now, they will never be able to sell enough products over enorich time to justify paying back everybody here but anyway, thats probably not a good comparisome a number of people have pointed out that the situation is not really d3 we because on the other side of the Balance Sheet its just, it looks bad because youre just looking at half of it. One of the things thats important probably about what we are doing is you look at the debt draft as a share of gdp, every year we update this. It gets worse because there are two things. Its had a really high level and its going up at a very fast rate. We are not looking at assets. We look at the gforcesernments ability to pay. We put a share of gdp to give you some idea of the size of the economy that matches it. Actually a lot of people give us our time because i dont have all of the continued obligations of the government beyond 30 years. Even thorich we give you a snapshot, there are obligations that go beyond that that are not in there as well. There are other things we could do. [inaudible] . ane to things, glad i came. The topic generally i wanted to ask you about was immigr i can give you some idea of what weve done with respect to growing immigration. The last few years under the Previous Administration they had proposals on immigration, on expanding immigration. We did some analysis of the likely impact of that and the impact, dynamic impact as well as gdp growth. We can get some idea what we see with that come of increasing immigration from current levels. We havent anything about sort of idly changing it. We have done analysis of president obamas proposals on increasing immigration. We may do the reverse if needed. My name is david hart. I do tax returns for individuals. My question relates to the Affordable Care act replacement. In the most recent analysis you have indicated that i believe 20 Million People will lose their health care. How many, as a result of repeal and replace, how many speedy you can see the rest