year 2035 and clearly demonstrates on our current trajectory we are on an unsustainable path with respect to the debt. it indicates we need to move forward on two fronts in my view. first, we have got to act now to keep our economy into higher gear to put more americans back to work. there are a number of steps we can take to do that but an earlier cbo study also indicated that one way we can do that is to replace the sequester that's in place right now which you indicated earlier would cost us hundreds of thousands of jobs between now and this time next year. that is a self-inflicted wound. that is a wound that this country cannot afford. more people could be put into work if we take care of that issue. democrats in in the the house have not tried eight times simply to get a vote on a plan to replace the sequester. this congress we have not seen a single plan by a republican colleagues to do that so let's work together to replace the same amount of deficit reduction or more without the self-inflicted wound of hundreds of thousands fewer jobs. we can do that now. we also should act now to put in place a plan to address the long term deficit challenge and in my view we should adopt the kind of frameworks recommended by every bipartisan group that has looked at this issue in recent times. not adopt every particular recommendation but the overall framework in terms of making cuts but also cuts to tax breaks for very wealthy individuals and special interest. the house democratic budget and the president budget and all those budgets take that balanced approach. we had hoped that we would be able to go to a budget conference to try and resolve some of the differences between the house republican budget and our budget. that is the way you deal with the long-term challenge. we have tried time and again to have conferees appointed and obviously the clock has been run out and the speaker refused to even allow us to go to conference to try and reach a compromise and negotiate these issues. so let's move forward. unfortunately right now in the house we are focused on something very different in solving this long-term challenge. we have got before is now a proposal that would shut down the government if we don't shut down the affordable care at. the affordable care act which is already providing help -- health and health protection to millions of americans and will provide millions more with access to affordable health care in the days to come. but right now the position our republican colleagues unfortunately have taken the is shut down the government and we will conquers the goal of shutting down the affordable care act and what is more troubling is it appears they're going to double down on the strategy with respect to the debt ceiling with respect to whether or not this country pays its bills on time and they are going to say that where we are not going to pay our bills on time in united states of america unless we shut down the affordable care act for one year that is a responsible and reckless given the impact that not paying our bills could have on the economy. finally mr. chairman i just have to point out the congressional budget office has pointed out the affordable care act will actually reduce the deficit by billions of dollars over the next 10 years and even more over the next 20 years. so to tie the deep funding of the affordable care act to the debt ceiling is to say well we are going to attack something that will increase the debt to a provision on the debt ceiling and this was recognized by our republican colleagues in their budget. many people forgotten when they look at the republican budget only balances in 10 years because they kept major parts of the affordable care act and they kept all the medicare savings in the same level of revenues is the affordable care act in their budget. you don't have to take my word for it. here's a quote from the heritage foundation. quayle perhaps the biggest shortcoming of this house republican budget is he keeps the tax increases associated with obamacare and in fact the budget would not be in balance balance -- the republicrepublic an budget would not be in balance in 10 years if not for the savings from the affordable care act and you have the same amount of revenues. it's saying two things at once trying to say you will balance your budget and you are going to get rid of obamacare. when you rely on obamacare to balance your budget so let's focus on the real issues here mr. chairman and the issues and support and i appreciate your time and again welcome. >> clearly we see things differently. dr. elmendorf the floor is yours. >> thank you mr. chairman congressman van hollen and all the members of the committee i'm pleased to be back with you again today. the bottom line of cbo's long-term budget outlook this year is the same as it was last year. the federal budget is on a course that cannot he sustained indefinitely. in our extended waistline which largely follows current law we projected federal debt held by the public would rise from 73% of gdp today already very high by historical standards to 100% of gdp in 25 years. even without accounting for the harmful effects of rising debt. the deficit has shrunk dramatically during the past few years from nearly 10% of gdp in 200924% this year and we expect under current law the deficit will decline further in the next few years to about 2% of gdp. after that respite however the deficit would begin growing again. federal spending would be pushed up by rising interest payments on the federal debt and the growing costs for social security and the major health care programs. medicare medicaid and subsidies provided for the insurance exchanges. interest payments on the debt would rise as interest rates rebound at current and usually low levels in particular with debt so large we increase interest rates we expect would have a large effect on interest payments by the federal government. projected spending for social security increases to gdp in our extended baseline principally because the retirement of the baby boom generation which would increase the number of people eligible for social security by more than one third during the next 10 years alone. spending for the major health care programs would increase for three reasons. first because of the retirement of the baby boomers. second because of rising health care health care costs per person and third because of the expansion of federal the federal subsidies for health insurance. meanwhile projected federal spending for all other programs put together declined sharply relative to gdp in our extended baseline. this category all other spending has averaged 11% of gdp during the past four years. it is currently about 10% of gdp a little below the 40 year average and it would fall to about 7% of gdp by the end of the decade in 2038. by 2020 under current law federal spending apart from social security with a major health care programs in interest payments would be a smaller percentage of gdp than at any time since the 1930s. thus the upward pressure on federal spending relative to the size of the economy does not come from general growth in the size of government but instead from growth of a handful of large programs social security medicare and medicaid and from rising interest costs on the federal debt. federal revenues will also increase over time under current law but more gradually than federal spending. revenues would average 17.5% of gdp during the past four years. they are now lower but will rise to 18.5% by 2023 and nearly 20% by 2038 under our extended baseline. the gap between federal spending and revenues would widen steadily after 2015. by 2038 under our extended baseline the deficit would be 6.5% gdp and federal debt held by the public would be 100% of gdp before we account for the economic effects of the increasing debt. that would be more than any year except 1945 and 1946. with such large deficits that would be growing faster than gdp a path that could not be sustained indefinitely. in our report we protect how the economic consequences of the policies that underlie the extended baseline would affect the long-term budget outlook. the growth in debt would reduce the nation's output and raise interest rates relative to what they would otherwise be in the long run which in turn would lead to wider budget deficits. with those included debt under the extended baseline would rise to 180% of gdp in 2038. debt that is so large relative to our annual output would in the long term reduce output and income relative to what they would be if it were closer to the historical average percentage of gdp. debt that is so large will also require higher interest payments would reduce your flexibility to use policies respond to unexpected developments and increase the risk of a fiscal crisis. in addition addition or porsches the effects of of the alternatives that's a fiscal policies some that would produce larger deficits and some that will produce smaller deficits in the report examines the uncertainty of long-term budgets objections which is an out -- under a wide range of assumptions about key factors that budget isism on an unsustainable path. as lawmakers consider changes in policies that would put the federal budget on a more sustainable course he will face choices about the magnitude of deficit reduction the policies to use in the deficits and the timing of deficit reduction. economic analysis does not say what the optimal amount of federal debt is nor what the right amounts of federal spending and revenues are but a significant reduction in debt from its current gdp would require substantial changes in tax policies spending policies or both. as an illustration applied to bring debt down to 31% of gdp in 2038 a little below its 40 year average using policies that phased in over the next decade to having to enact a combination of increases in revenues and cuts in spending relative to the current law totaling $4 trillion during the coming decade. inciting have quickly to reduce the deficit he faced difficult trade-offs again. waiting to cut federal spending or increase taxes would lead to greater accumulation of debt and increase the size of the policy adjustments needed to achieve any debt target. however implementing spending cuts or tax increases quickly would weaken the economic expansion. the negative short-term effects of deficit reduction on output and employment would be especially now -- large now because output is below its sustainable level holding interest rates close to zero and cannot lower them further to offset the changes in taxing and spending policies. thank you very much. i'm happy to answer your questions. >> let me start on the big picture here. we haven't solved the problem. revenues are projected to go to 19.5% of gdp far higher than our average so the revenues are rising that spending is taking off at an unsustainable trajectory, correct? >> the combination of the revenue path and spending path is not sustainable whether you choose to adjust one line of the other. >> what i find interesting the report is the main drivers of these outlays that are going up so fast or the health care programs particularly the new one the affordable care act in the first 10 years. that is the great contributor and i find your shadowbox 1.1 is interesting. you bring it down to an aging excess cost growth in the medicaid expansion in exchange subsidies so it's not just the fact that baby boomers are retiring. that is the big contributor but it's also the fact that health costs are running faster than anything else and when you add more programs that exacerbate those that invites her biggest driver of our debt, correct? >> the one amendment that would make his health spending has outpaced gdp for sometime as you know and that's lowered gdp recently but nonetheless growing relative to gdp. >> what i find really interesting in this report is when you had an economic analysis to its correct me if i'm wrong but you're basically saying if we get a fiscal package in place now that let's say take the $4 trillion number that means we will have lower interest rates which will help the economy which will grow gdp which will lower our debts so that his economic stimulus using a term that my friends use 101 meaning a bigger debt package lower interest rates faster growth lower debt durden. then lowered marginal income tax rates i find is a very interesting aspect of her and now sits. what you are saying is if we keep high marginal income tax rates that will slow down our economy. if we lower our budgeting and tax rates albeit on a revenue basis that will accelerate economic growth. that will help grow gdp and give us a smaller debt limit in the future. >> i think that's right mr. chairman. the one thing i would add putting the package and place gives people confidence that future deficits will be smaller and hold down interest rates today and boost the economy. that's a slight different point than i made my opening remarks about implementing the tax increases or spending cuts today. that part alone would slow the economy. >> you're basically making a timing point. >> sofer make keynesian perspective doing something that is a shock now from a keynesian perspective a big spending cut or a big tax increase that is immediate will put us in in the wrong section but if we put in place a long-term debt reduction plan dealing with these primary drivers of debt which are clearly the health care programs and if we have tax reform that lovers are marginal tax rates that will help us in a couple of great ways. it will help us lower interest rates and grow the economy and lower tax rates while the grow the economy which means we can get this thing under control even with the retirement of the baby boom population. is that basically what i'm getting out of this click status of point we are trying to make here. this is where we want to go. the reason this debt limit fight is coming is because when we have had great fiscal bipartisan agreements in the past whether it was reagan or whether was pushed with democrats in the senate whether it was gingrich and clinton or bca and bowles-simpson these things were part of debt limit agreements. they have always been that forcing actions that got us agreements and what we are getting here is if we put together a package now before the federal reserve normalizes and before the federal -- we will put the nation in a very good position. but if we miss this moment, if we just kick the can because we keep fighting each other then we will not get this opportunity. the federal reserve will start tapering. it's not if its plan. interest rates will go up and shame on us because the whole we will have to dig ourselves out of 10 will be that much deeper. so it is so clearly in our interest as a country -- this is not a republican democrat during. this is a math thing. what we are seeing here is these health care programs are the primary drivers of our debt. this is why we are focused on these health care programs. this is also why we are focused on tax reform. but we are getting is if we keep high marginal tax rates we hurt businesses and be heard job growth we slow down the economy we are defeating the potential. if we lower our marginal taxes we have more economic investment , we have more entrepreneurship. small businesses can compete. the top effective marginal tax rate is 24.6%. businesses in america don't file their taxes as corporations. they filed their taxes as subchapter s corporations llc's sole proprietorships partnerships. the international average tax reduction is 25%. most other industriaindustria l nations don't attack themselves like we do ours. they don't have a pastor regime like we have. they just have business tax rates and they are on average 25%. ours is 35 and it's the highest in the corporate world. the other 80% go as high as almost 45%. we are really hurting ourselves with these high tax rates so what we are getting here is that the lower tax rates and believe me there's a way to do this without losing revenue, lower our tax rates we can get faster economic growth. if we take advantage of the moment we are in the low interest-rate moment we are and which we will not last that much longer and get fiscal consolidation back on spending and entitlement reform we will do our country a big favor. we will do our children a big favor because we will bank debt reduction in economic growth at a time where it makes the most bang for the buck in the most difference. if we don't take advantage of this moment this is why we are focused on the debt limit and why we are focused on the issues then shame on us because the whole we will have to dig ourselves out of will be that much deeper and i reserve the balance of my time. >> mr. van hollen. >> thank you mr. chairman. the whole purpose of the budget law which establishes a process where the house in the senate pass budgets and then go to congress is to try and work out these big issues on the budget deficit not just for this year but for future years and the law requires that the conference committee between the house and senate report by april 15 and get our republican colleagues have prevented us from going to congress and instead gone for a strategy where they drive this country right up against the debt limit, create huge uncertainties and in that context try and make huge demands. if you read the papers today they say okay the united states will pay its bills but only if you adopt the entire house republican agenda anti-environmental laws getting rid of the affordable care act for a year. that's the responsible way to do it, the way the law describes and unfortunately mr. mr. chairman the speaker absolutely refused to go to conference to work on these issues for a number of years. here is where we agree. it's about math. it is about math and every bipartisan group that is looked at her long-term deficit challenge has said you have to look at both sides of the budget you have to look at the spending side and we have to deal with the long-term pieces and by the way mr. chairman we did include in your budget for medicare savings that we achieved without diminishing quality. after your presidential candidate demagogue against those for months on the campaign trail but you recognize in your report to help reduce the deficit and affect the republican budget wouldn't allen's and 10 years without them so we understand we have to have savings on the health care side in a responsible way but we also recognize the simple math tells you the other side of the equation needs to be looked at as well. revenue and dr. on the door if you pointed out the fact which is if you keep running high deficits and debt as the economy improves that will crowd out private investment and that will increase interest rates and that would slow down economic growth. and you said in the next 10 year period we reduce the projected deficit by $2 trillion than in 2035 we would have a debt-to-gdp ratio where we are today, go right? >> yes that's right. >> you a thinker that you can achieve that 2 trillion-dollar deficit reduction through cuts or through revenue or through a combination isn't that right? >> yes congressman. >> if you want to illuminate that drag on economic growth the key point in your report is that we have to reduce the deficit. it's up to policymakers to decide what makes and we totally agree mr. chairman that we need to. just as the cbo has said that we think we need to have a balanced approach because if you do it only by cutting on the health care side you are going to be asking medicare beneficiaries whose median income is $23,000 and for many of them they can get half of that income from social security you are going to be asking them to take a big hit when you are not asking people earning a billion dollars to eliminate some of their deductions or you were not going to ask big oil companies to get rid of their special interest tax rates which is why we have argued just like every bipartisan commission that you have to do a combination of things in that simple math. you have to do something on the revenue side and you have to do something on the spending side trade dr. elmendorf as i look at your analysis here and you bukett to 2035 and you compare this year's projection to the previous current law projections in fact the biggest driver in increased deficits in the out-years is the fact that we change the tax laws to less revenue will be coming, isn't that the case? >> yes congressman. >> the recently deficit is much higher on this report that in previous reports is because we changed the tax law and revenue so our point is the point i think the overwhelming majority of the american people support which is to tackle this challenge you need to address both pieces of this ongoing- >> can i ask you a question about that? >> are you suggesting we should raise the income tax on middle income taxpayers? >> actually know mr. chairman. in fact your tax point is exactly that because you say you're going to get the top rate down to 25%. you say you are going to do it in a revenue-neutral manner which according to lots of analysis means you have to come up with $4 trillion even while you're providing oaks at the top with a big tax cut in the way he will have to make it up mathematically is to increase the burden on lower income folks. if it's not the case we would love to see your tax plan. it's in been in the republican budget for three years now. let's see it. just like are the last three we have been talking about repealing replace on health care. we have had 42 votes on repeal and not a single house republican plan has been voted onto come up with a different system. so let me ask you this mr. elmendorf. we need to look at the long-term but we also should make sure we get the economy moving more quickly. several months ago we asked you the cbo that if you were to get rid of the fiscal year 2013 sequester and the fiscal year 2014 sequester how many jobs would we save? we are obviously now not able to take back the year 2013 despite our efforts to try and replace that sequester so just for this fiscal year 2014 if the sequester remains in place what is your best estimate as to how many fewer jobs will have this country but at this time next year? 100,000? 200,000? what is your estimate? >> congressman if the congress were to move discretionary funding backup to the original under the budget control act in turn office sequestration for 2014 we think that what had half a% to the level of gdp at the end of 2014 and it would add about 600,000 jobs until the end of 2014. the midpoint of ranges we often present as economic ranges to show the effects of gdp would be between two tenths of her% and 810 of a% of the gdp of 2014 and the midpoint at half a% and on full employment would be between 200,000 jobs in the ilya and jobs and a point of 600,000 full-time jobs. >> just so i understand your best estimate as to how many fewer jobs who would have in this country to keep the sequester in place between now and this time next year is 600,000? >> yes that's right congressman's. just for the benefit of our colleagues the last three months we have seen around 500,000 fewer jobs so you are talking about keeping the sequester in place that wipes out more than the number of jobs that were created in the last three months? that is an unnecessary self-inflicted wound so mr. chairman i would just again asked that the majority in this house allow us a simple vote on our plan to replace the sequester to save over 600,000 jobs to end the being medical way of essence whether it biosciences or infrastructure which clearly is having a negative impact on the economy and on the country going forward. mr. elmendorf let me just add in the last minute here if we were to actually not pay our bills, if the united states government for two laps on its full faith and credit could you discuss what potential negative impacts it would be on economy? >> congressman defaulting on any application of the u.s. government would be a dangerous gamble. in a very uncertain world one thing that everyone has been able to count on is the u.s. government will pay its bills on time. the benefit checks for older americans for needy americans will go out on time. the grants will be paid when they are scheduled. the bills that small and large businesses submit to the federal government in exchange for the goods and services the government buys will be paid on time and the principle and interest payments on the federal debt will be made on time. if the confidence and the reliability of those payments were to be cast into doubt then the consequences for the budget for the u.s. economy for the u.s. and global financial systems would be large and lasting and very damaging. >> thank you dr. elmendorf and i noticed that you said default on any application because some of our colleagues have this debt prayer decision bill bill would call it the pay china first bill which says you don't have to pay our troops in the field. you don't have to pay doctors on medicare that you paid on holders including the government of china but what you are saying is default on any application would send a very bad signal. >> yes congressman. it's hard for congress to know exactly what happened and in my few defaulting on some application would be different than defaulting on others but we don't have a basis for analyzing that is fortunately we have not had a lot of experience with the government defaulting. given how much money the federal government owes to stop paying what is owed is a very risky strategy. >> thank you. i will reclaim the balance of my remaining time. trying to just put this all in perspective and not trying to pick a fight here. i'm just trying to clarify our goals and intentions. if the minority could've been willing to limiting their motions to instruct conferees to two which was the offer given in the senate we could have gone to conference. nobody wanted that. >> i have never heard that offer until this moment. >> that is not the case. so the point we are trying to make is the point i'm trying to make is having endless motions to instruct would have done more to divide this congress, more to prevent good legitimate serious reforms for making it into that budget agreement. when we have actually gotten bipartisan budget agreement in this country especially as a divided government such as the one we have right now it is usually accompanying the debt. we now get a report a fresh one from cbo which by the way says that there are better medicare reforms that can lower beneficiary and government cost. that's a pretty interesting report in and report in an wonderful anybody has read that. it came out about a week ago. we hear that if we lower our marginal tax rates it's good for growth and good for debt reduction so the problem is can people agreed that it's not just rich guys we are rich guys we are hitting. it's successful small businesses who are the job creators that help grow the economy that is getting caught up in this and lowering those tax rates is good for jobs investment, good for the debt and if we get fiscal consolidation meaning entitlement reforms that are the drivers of our dead health care programs that too will help us get our debt under control grow our economy and lead the next generation better off. the final point is the window of opportunity is narrowing because interest rates are not going to be where they are for much longer. >> thank you mr. chairman. i want to welcome you back to the committee. i think if one is looking at this country and watching this on c-span today they are scratching their head and trying to figure out why there is agreement that the ground level that there is a debt but why we can't come to any more agreement than that. i really am surprised at the ranking member in his conversation about the affordable care act in their focus on it paid and it's appropriate because it's a concern to the american people. thousands of stories of calamity across this country already because of obamacare. full-time workers being shoved into part-time status destroying families. amazing that this would be tolerated at the administration and her friends on the other side of the aisle. hundreds of thousands of families with members of their families being tossed off their current health coverage because of the affordable care act. huge numbers of doctors and as a physician i can tell you huge numbers of doctors that are no longer able to participate in the program so i would urge my colleagues to listen to their constituents. also i'm surprised by the amnesia that i seem to hear from the other side. this is the president sequester. we on our side try to pass a piece of legislation that would more properly prioritize the spending but that -- the administration was not willing to take that in the full faith and credit that we passively consuming -- last week. i want to read your report because i find it very fascinating. this is the picture that you all chose to demonstrate the challenge that we have ended up going line is the increase in debt over relatively short. of time not that all of us can remember in our lifetimes up here. would you call that a large and growing debt? >> absolutely. >> on page three you state the harmful effects of a large and growing debt and i want to draw our attention to one sentence there. at some point investors with a large debt began to doubt the governments willingness or ability to pay u.s. debt obligations. that is a calamitous event is it not? >> yacht yes congressman it would be. >> if we are both sides of the aisle are trying to look at the tea leaves and see how close we are to that point are the things we can look at the syndicator's? >> congressman as we say in the report there is no way to predict when the country would reach a fiscal crisis because those events are rare and has not occurred in this country and you cannot on some particular amount of debt without the confidence in the ability of the government to manage its finances. we don't know when we might reach that point in this country. one indicator would be rising interest rates. on the other hand when countries encounter fiscal crises there if all potent than borrowing at fairly low interest rates for a long enough time to instill some confidence, some false confidence in the path they are on and then rates can rise very sharply with very little warning so this event may not have the leading indicators that one would hope for. >> we are still in that window where we can turn things around around and move in the right direction. >> absolutely. >> it at some point that window closes. >> yes it would. >> i want to shift to page 88 in a report that talks about the long-run effects of fiscal policies for smaller deficits and a couple of graphs. you stated in your comments that increasing debt decreases income >> yes. >> the graph on the bottom here demonstrates and i will turn to the scenario where they're at $4 trillion of deficit reduction over a 10 year. knack of time and you have debt and deficit decreasing and incomes increasing. is that correct? >> that's right congressman. >> can you help us understand the correlation between those two? >> overtime as the government or is more money it is reducing the funds that are available to private investors and thus reducing the amount of capital investment. the capital investment together with education makes workers more productive and leads to higher income so there's less investment is less productivity growth less increase in wages and incomes over time. >> the budget that house republicans adopted have a debt reduction over a 10 year. knack of time of? >> i think for $5 trillion. >> if you want to get on the path that decreases dead in increases income the house republicans budget is an example of one. >> yes it is an example of one. >> thank you. i yield back. >> mr. yarmuth. >> thank you mr. chairman and mr. elmendorf. it's a pleasure to see you read of the last couple of months i've talked to a large number of medical researchers both in my district and elsewhere who have reached near panic over the effects of sequester on the projects that they have been working on and very concerned about the long-term effects of sequestration on their work. but at the same time they have given us some encouraging news. essentially every researcher i've talked to believes that within the next 10 years we will have a disruptive change in the medical field one or more and buy disruptive change them aiming curing cancer curing diabetes some major consequence to the medical field and subsequently to the burden of the health care costs in the country. have you at cbo given any thought or attention as to what curing diabetes -- i think the estimates are around $150 billion a year spent systemwide what that kind of a disruptive change would mean on the projections in the long-term health care costs to the taxpayer? >> congressman our basic long-term projections don't try to guess what particular sorts of changes might occur in health care delivery. we have a gradual slowing of the extra cost growth over time in response to rising pressures of cost. we don't try to figure out the path for particular sorts of diseases were treatments for them. whether curing a disease would help the federal budget or not is actually not very clear. it would be great for people's lives obviously but the effects on the budget are complicated. when you look at the effects of raising the cigarette tax that would make people healthier and fewer people would smoke and they would live longer. the federal budget has awed cross currents. people live longer in the collect social security benefits for longer. that's also good for society but a not be good for the federal budget so for individual diseases and individual approaches with different sorts of effect on the federal budget. we have not run any of those in grade detail except the- >> let's look at it in different way. talk about the fact that $4 trillion in the reduction of spending or a combination of production and spending would bring the death of a percentage of gdp below historic ranges. we are talking basically about $400 billion a year? >> yes, that's right. >> occurred levels. what would be the impact on the economy of taking $400 billion out of the economy say in the health care arena? $400 million a year? >> if one takes it out of the economy right away especially and are these economic circumstances it would weaken the economy and reduce the number of jobs. that is why many people who have constructed different policies producing deficits have focused on phasing in those policies over time. there are pros and cons of how quickly one faces and policies. i think the general agreement that making decisions soon is good. the sooner you make a decision the more time you give people time to plan for adjustments and policies. >> the chairman of the committee talked about in stated as apparently a better of irrefutable faith that cutting marginal tax rates creates wealth and reduces the deficit and so forth. did we try that in 2001 and 2003 >> congressman i think the economic statement i should say carefully is reducing marginal tax rates while maintaining the same ruppel -- level level of revenue said that this would not be affected would be good for the economy. if one loses tax rates and loses revenue through that process the effects of economy depend on the magnitudes involved because the larger deficits are bad for the economy and the lower deficits are good for economy. >> we did reduce marginal tax rates in 2001 in 2003 and we did not see a reduction in the deficit over the years is that correct? >> congressman there are so many things have gone in the economy and the budget to drive broader set of evidence. >> i heal the last 25 seconds. nevermind i will just yield back the balance of my time. >> thank you for coming to testify. viewers are watched this can probably see the difference of opinion. whether we are in financial difficulties are not in looking at the issue of health care we see a discrepancy on that view to appreciate that you were here in the report as well as we dig down into some of the numbers. in the report i believe air bread that the balance of the trust fund under medicare would fall from 229 billion at the end of fiscal year 2012 to 31 billion at the end of fiscal year 23. is that correct? >> yes congressman. >> then you go on to say the cbo concludes the long-term budget is under the extended baseline the trust fund would be exhausted just beyond the coming decade. is that correct? >> yes congressman's. >> i don't know if my constituents rate this report or not- >> i hope they do congressman. >> yeah i hope they do. it's a little dry but it's important that they do get your message and they do get your numbers and that is why they are asking us what are we doing to try to fix this? you use the word exhaustive but what they are asking me is what are we going to do to prevent and cropsey or a better way to describe exhausted i think. can you tell them i'll be the practical implications for seniors in my district and across the country as well as if we get to the point where part a is exhausted or bankrupted? >> as you no congressman the payments for hospitals through medicaremedicare, out of the hospital insurance trust fund. if that trust fund were exhausted in than the amount paid to hospitals for treating medicare beneficiaries would be limited in the amount of grenades as they come in and that would be less than needed to meet all the bills. >> what is the dash two senior at home if that happens? >> so far they have not let them run out of money but if congress were were to stem by then hospitals would not get the payments written down in current law. i don't now which hospitals would be paid or which wouldn't or what patients would not get paid. we have no way to know. >> the bottom line is doctors potentially would not be paid in hospitals potentially would not be paid. >> hospitals would not get the full payments under current law that's right congress men. >> also in the report says the federal government's health care spending will grow considerably in 2014 unless changes are made way of the affordable health care or the growth projections for health care spending as a result of the affordable health care at as a% of gdp as well. >> congressman all told the federal spending on the major health care programs is about 4.5% of gdp now and i think you will be a% by 2038. those 25 years there are substantial portions of rising health care costs in the coverage of the affordable care act. >> spending is going to go up and services would be going down an article in "the wall street journal" recently about the price of the premiums people would be paying in my home state of new jersey premiums would increase from $162 per month to $219 per month around 35% roughly increase in premiums under the affordable health care act if we continue on right now. as for his increase of premiums have you looked at what premiums would be increasing under the affordable health care act? >> uri congressman the fall of 2000 we did an analysis of what the version of the affordable care act and play the time we did opinion. we have not updated that and we of course following the news and will factor them into a next baseline projections that we haven't done that particular analysis. >> you expect the affordable care act would increase premiums for people? >> let me explain clearly there were number of factors that would increase pain is the most important of which in our estimation is the insurance policy we are required to cover a larger share of the total services. that means premiums would be higher but out-of-pocket payments would be lower. >> that's part of the affordable health care act. >> because of the affordable care act standing -- setting standards covered by insurance policies but the increase in premium is a reduction of out-of-pocket costs would be offsetting for the average beneficiary. some would pay more and someone pay less but there are other reasons but premiums would go up. >> my time is up. i think you've. >> mr. pascrell. >> thank you mr. chairman. mr. chairman i'm glad that you are the chairman here. i would rather have chris of course but i don't want to believe, i really don't want to believe a debt this obsession with the debt -- no one in this room denies just looking at the pictures that we have it yet and we need to address it. the question is how do we address it? we don't address it by making it worse by folks that look back at 2009 and the seed the great deficit that exists in 2009. no business was investing no capital. the government has to do something. as they have done 25 times in the 20th century whenever we had a recession or depression so i'd like to put things in context. i'm counting on you. so you won't allow this issue to be a stalking horse for continuing the struggle to slash the social safety net and pad the pockets of other people. i am counting on it. i can't put it any clearer than that. we are talking about this budget >> can i ask? do you honestly think that is what we are trying to do? >> no i said we are counting on you. >> you are addressing me. do you honestly think that is what we are trying to do? >> i think that is one of the reasons why we have a problem today. i don't think that's your motivation. whom i to question your motivation because i don't think that is where you are at so i'm counting on you. on page 103 the very large change between this year and last year and correct me if i'm wrong, the projected federal debt stems primarily from changes in tax law that have sharply reduced revenue and future revenues. that's on page 103. in this report the largest reason for the deficit would be bigger than the previous estimate that we have had is that the tax deal we had at the beginning of this year, talk about amnesia, that is very interesting to examine. how much bigger mr. elmendorf with the deficit have been if we had extended the tax cuts of 2001 and 2003 for every one as my friend suggested on the other side? how much bigger with the deficit since they are so concerned about this deficit and debt, how much bigger would it be? >> it would he substantially larger congressman. i don't have a numerical estimate. >> substantially larger? >> yes congressman. >> and then what have we got? so in just one year the projections for the future growth in our health care system went down by almost 10%. i have read parts of this report. that is what what you say comes at great? >> we brought down the estimate comes a yes. >> all the other years before that since 1995 going back to 1990 those costs went up. now maybe it just happened by chance. maybe we woke up one morning and said insurance companies felt great and said we want increased insurance premiums as much as we did last year. do you know that's not how it happened? i know that's not how it happened. i think everybody in this room knows that's how it happened. so it's clear it had much more to do that this is a very significant accomplishment because so much of this deficit is dependent upon as the chairman rightly pointed out health care costs. the purpose of the aca, one of its purposes was to bring down the health care costs. dr. elmendorf on page 58 of your report you make some projections regarding federal noninterest spending including discretionary spending which we know is coming down. the president lowered it by half. the reason he lowered if i have someone said this morning how can you -- when he increased it so much in 2009? >> mr. mcclintock. >> thank you mr. chairman. dr. on the door if i keep hearing the propositipropositi on that in order to reduce the deficit we either have to raise taxes or cut spending but as if taxes and deficits are opposites. it seems to me they are the state -- two sides of the same coin that deficits are taxes. they are just future taxes and the only difference between a deficit and a tax is the timing of the attacks. >> congressman deficit -- the accumulation of debt that comes from a deficit could be addressed later bias tax increase or spending cut later. >> but you are applying future taxes. the taxes and deficits are the only two possible ways to pay for spending. >> yes congressman that's right. >> so it seems to me then the critical issue before us is the level of spending because the level of spending automatically sets the combined level of future taxes and not the other way around. >> it can affect future spending as well but i take your point that the only way to pay for spending is to collect the revenue or borrow the money. >> the the article in "the wall street journal" noted that the european experiences and those nations that have restrainerestrained spending increases relative to gdp overall had higher economic growth than those that did not. is that your observation? >> congressman it depends on on the time period and the sets of policies. the companies in europe that have had more restrained fiscal policies in the past two years have not had good economic growth. >> when you say restrained fiscal policy taxes and spending. what "the wall street journal" article is referring to specifically is filled levels of spending relative to gdp and i they found a remarkable correlation between restrained and increases in spending relative to gdp and economic growth. >> congressman i think the way the economist with the québec question is to look at the effects of the tax code of the country. >> their point is it's the spending that seems to be directly correlated to growth. the greater restraint in spending the greater overall economic growth these nations have had. you mentioned timing. just looking at the recent history of this country coolidge truman kennedy reagan and clinton all cut spending relative to gdp. hoover fdr johnson and bush all increase spending relative to gdp. the economy seemed to do better under the former policies than the latter. >> congressman president hoover for example and not to defend his economic policies exactly the gdp started to fall. spending rose as a shortage of gdp typically. >> he increased spending 60% during his four years in office a rather breathtaking amount. >> depends on explicit decisions about spending. >> but even factoring that out in nominal terms a 60% increase in a federal spending in four years is breathtaking it didn't seem to jumpstart the economy. >> most economists think that especially fiscal policy and the depression many of the larger deficits was good for the economy during the depression. most economists think a lower taxes and higher spending in the downturn were good for the economy in the longer-term effects. >> understand that and that's an example of what i like to call mcclintock's -- but let me go on to response you made to the ranking member who asked you about the debt limit. did i understand you correctly to say that you see no distinction to credit markets between the government defaulting on actual debt owed to the public and delaying payments? >> defaulting on in the application of u.s. government is a dangerous gamble. >> do believe the credit markets have it is sanctioned in delaying payments of routine outpatient? >> outpatient? >> as the congressman might be the financial system and the economy would respond differently to default but the economist not have the basis for making analytic predictions. >> one subject very briefly. student loans. $1 trillion of debt owed to the federal government increasing default rates. the amount we are putting in seems to be driving a huge increase in tuition. tuition is up four times tuition rate and health care up twice the rate of inflation when you talk about affordable health prices. are we heading toward a student loan default double? >> we haven't studied that congressman. >> just want to keep everybody on time. ms. castor. >> thank you very much mr. chairman. good morning dr. elmendorf thank you for being here and thank you for the work that went into the 2013 long-term budget outlook. i'm very concerned with the economic damage being caused by the sequester and you previously responded to ranking member of van hollen by saying -- did you say if we keep the sequester in place that could cost our country 600,000 jobs? >> yes relative to the alternatialternati ve moving discretionary funding back up to the original caps and not having the sequester take effect. >> and that would take to do you say at half point away from gross domestic product? >> a half a% of gross domestic product by the end of 2014. >> back home in florida my community the type of jobs we are talking about i think we have already seen some very harmful impacts. our premier cancer research center in tampa is the moffitt cancer center. before the sequester they had 120 researchers working to find a cure for cancer. they are down to 100 researchers the air force base macdill ill for space is one of our largest community economic drivers. they are furloughing dental health counselors among others. we all agreed that that part of the budget is shrinking but the sequester does not give us the lot of room to maneuver on where we want those cuts to take place. law enforcement job losses and cuts to the courts very significant cutbacks in education. and then when the republicans adopted the cr last week it became crystal clear i think that they intend to march forward with those sequester cuts. you know then i look at your report and its apparent those kind of expenditures aren't the drivers of the long-term debt. it's what america is investing right now in innovation or infrastructure or education. are those the drivers of the debt and deficit? .. has been an investment of some sort. >> we have a real mismatch here now on what the republicans have enacted, and have set north debate. just lack week on the cr, the debt reduction strategy is. you want to continue the sequester, meanwhile, these cbo report said that long-term driver of the debt and deficit and aging population, we have the most significant reform in medicare. look at the affordable care act, a lot of those reforms. taking medicare from -- change the model. we need to sit down and negotiate. the republican's rei few sal to negotiate on the budget for the past four months has lead to the mismatch in policy. i talk to many of you -- my republican degrees who say i'm sorry we want the sequester. we want the cuts. i hope you study the cbo and understand it's not the investment in innovation, education, infrastructure, in america that are driving the long-term. i'll yield back. >> thank you. thank you for being here as well. let me balance a couple of issues. social security disability sergeant s -- ssdi. somewhat your status. >> so the disability ?urn trust fund will be exhausted in a few years. i think in 2015 or 2016, i'm told. >> three years. >> yes, congressman. >> what is the status of that? >> the trust fund and the payment that would not be enough to cover the payments. >> does it change as far as the program what has brought about that moment? and they changed 2016. did it used to be 2020? have you been to be determine the history of it? >> the date -- our projection has moved around over time. as you may know, congressman, the disability insurance role has increased remarkably over the past few decades. we have cone a number of reports trying snow you the source of the increase and give you policy options for addressing it. last few years, pushed up in particular, i think people who had trouble finding -- had some disability have lost their job and have trouble finding their job and applied for disability insurance. >> are you aware of congress implementing any policy option you have recommended in the past? >> no, congressman. >> do you think it would be time? >> i hope you will find the option useful for you as you decide. >> at some point, when we begin to solve some of these issues, let's say is it the first entitlement of reaching solve sincerity level? >> that's a few of the benefit programs have trust funds. in imprementing any of the policy options how many years it would take to bring some talk stability to that? >> i'm try to ask is it taking three years before insolve yent. would it buy us another year depending what it would be. would it take several years to build it up? >> in principle, of course, you can make sharp changes overnight. >> we can add deaf set dollars and continue to put that way. >> principle you could cut benefit a lot for existing beneficiary. i think in practice the point you make is congress general making changes phased in over time. that emphasizes the importance of deciding as soon as possible what changes you want to make. if you want to phase them in, and you need forestall the exhaustion of the trust fund or increase in debt, it's more important to make decisions and start the process right away. >> okay. on page 64 of the report, you make a remarkable statement about the tax revenue going up. you say you projected it's going up because of the growth in real income. the interaction of the tax system with inflation would push a greater proportion of income in to higher tax brackets and certain tax increases enact the affordable care act would generate increases amount of revenue. is it similar to what we face with a -- we have a number grow -- it is similar not as traumatic as the enact the temporary changes so it's larger and larger to the current law got larger and larger. >> is there a -- it may occur again at some point. it's in the alternative fiscal scenario would be an extension of -- the discussion to build an alternative fiscal scenario that congress will not allow more people to be trapped in the taxes in the days ahead? sustain or hard to sustain. one of the things it ?kdz holding tax revenue at the lower level indefinitelily rather than rising. and in the congress intended to act cut taxes who -- page 88 you talk about the deaf set that comes down. requiring more and more it's less money that goes to capital investment. so that slows the economy down some. what is interesting to me about it the assumption that is private dollars going investment has a greater increase on the economy than government dollars taking that quote, unquote, investing that in the economy. >> i think our view, congressman, would be that investment is good things for the economy. a lot of investment, of course, most occurs in the private sector. there can be government investment that pay large dividends over time. we haven't modeled that specific analysis. >> thank you. >> thank you, mr. chairman. always good to have an economist here. >> thank you, congressman. >> i put a chart up on the screen, because i want everybody to see. it's one of your charts, and in late 2010 the bolls simpson called for roughly -- health care savings in the original proposal. since that time, our cbo has reduced medicare and medicaid projections by roughly $1 trillion quite accurate. we are actually reducing it certainly questionable whether it's going to be the major cost of our deficit in the future, isn't it? >> congressman, our projection of the growth in health care spending have come down. nonetheless, as you know, in our current projection it's the largest factor leading to higher spending and deficit over time. we showed in the report the sennivity analysis to the projection of health care spending growth that shows even if growth is a good deal lower than we project it would rise relative to gdp. >> people living too long, is that what you're saying? >> i wouldn't say too many. a lot of people living longer, than increases the number of beneficiary of medicare and medicaid. as you know, a large share of the medicaid dollars go to older americans particularly for longer term care. >> we cut off the spending at the federal level for the people who reason -- people on the program. how will the care be paid for? will they simply not have care? >> ting depends on what you did, congressman, but as you know, many older americans don't have substantial financial resources. if they suddenly face a large burden and purchase health care, that would effect the care they could buy on the other necessities they could -- >> they turn to the children. >> yes, congressman. that's possible too. >> as it was before 1964 in this country, when old people didn't have health insurance, they turn to their kid. that's what my grandmother did. she came and lived with us. we paid her bills. that's what went on before the program. what they're talking about when they want to cut medicare spending they're saying we're going cut what the government -- people. they can find whenever they want after that. they can go to their children or go out on the streets or not have the care. >> congressman, i can't speak 0 to what the they are ought to do. >> toints look at your chart on page 10. it's really, since we're blue skying by 75 years. i want to look at the chart and ask you a question we're not making investment now. if you look at the civil war lincoln started the checks. that locked like reckless spenting to me. why would do you it when you have a spike. then you come to the second world war and we come out of that and have the g. i. bill and fha and vha and the federal highway system on eisenhower. all reckless spending by our predecessor at the time. now wasn't the country didn't go to default to disappear from the face of the earth? because of the reckless spending done by the presidents? the g.i. bill of rights. where did the money come from? >> federal government raised tax revenue equal to the spending that was doing. >> well, they raised the tax revenue that did this. they were investing in the people. is that what created "the greatest generation"? >> i think they played some role. i don't know how important they were relative to other factors. >> where did they get the money for the highway system? >> thank you. >> thank you, mr. chairman, director. thank you for joining us again today. >> congressman. >> a couple of comments came from other side we need to correct. [inaudible conversations] >> madam, this is my time. i didn't interrupt you. the other comments have to do -- he said that we have done nothing about the sequester, unfortunately he's incorrect. we have tried in the house to replace the sequester more on the thought. but the other comments about -- >> gentleman yield on that? >> that's not what i said. >> yes, you did. >> you said taken aca on the congress. the ore thing i would like to say the comment about republicans talk about shutting down government are incorrect. savings. we weakening people -- let's talk about taxes for a minute. if the government has a pots, or a law that increases health care premiums by 15 to 20% per year, is that good or bad for employment and economic growth? congressman, i think it depends on the policy! the employers in my district are telling me it's bad. they are telling me what happened in the past and what is going happen in the future. what if we had a policy that causes employers to reduce the number of full-time employees to less than 30 hours per week. is that good or bad for employment. >> affordable care act does include some incentive for employerses to move forward i'm employment part-time employment. they say it's bad for employment. how about a federal regulation that cause the increase is it god for the economy and gdp growth? >> it tends to slow the economy. >> i yield back. >> good to see you again. let me me ask you a couple of questions. last week, as we know, house republicans said about $0 billion from s.n.a.p. funding, many of us believe it's morally wrong and deeply troubled. especially considering nearly one in five children in america suffer from food insecurity, and nearly half of recipient are children. $40 billion in cuts so many are struggling to stay afloat. it's unconsciousble and wrong. for throwing hungry children, family, and seniors off. i can't -- any compelling economic either given that every one dollar in s.n.a.p. benefits, i believe it's a $1.70 generated in economic activity. i have to ask you, in term of the economic benefit to s.n.a.p. spending, does cbo estimate the current economic impact of the type of cut in basic nutrition on the health care costs has to do with the public option. i believe in 2011, cbo and the joint committee on taxation estimated a public option would reduce the deficit by about *e8d billion between 2012 and 2021. it if the affordable care act at passing saved about $140 billion, and now it was cost about 109 billion to repeal. what do you think from a fiscal point of view a public option would achieve in term of had we included them in the exchange. what would be the downside or upside physically of the public option. >> congressman, on your first question about s.n.a.p. our estimate of legislation that passed the house was reduce the number of people receiving s.n.a.p. benefits by about $4 million in 2014 and $2 million in 2023. we have said a number of times in the past that people receiving the benefit or other benefit of the sort have a high propensity to consume, spend the money they receive, and thus provide them with more money tend to be short term boost for the economy and taking money away from them would tend to be a short term drag on the economy. we have not done the economic analysis. on your second question about publicology, -- option you reported correctly the estimate from the last volume. we think that including about $90 over ten years. have not -- we have no reason to think that it would be markedly different today. thank you, mr. chairman. >> thank you, mr. chairman. good to see you. i want to go down and unpack the idea that the sequester is hurting the economy, and killing jobs and so forth. do government jobs better the economy? >> yes, congressman. because the government pays people for working. they then earn money they spend by buying refrigerator and car and clothes and other things. where do they get the money to pay the initial person? >> well, where does the government get the money to pay you? and me? >> under the current circumstance, as you know, any extra spend -- if you raise it the government borrows the money. where does the government get the money to pay you, me, and the hundreds of thousand of other workers that you say if were laid off would hurt the economy? it raises some of the money through tax revenue. which is a confiscation of the property. >> fine. we take money from the private sector to fund the job of the government like you and me. right? you raise revenue and borrow. >> about 40% is borrowed from people that don't yet exist. you probably run a lot more in the morning than i do. you'll probably live longer fop run the government to pay people for the who work the government jobs question take from somewhere else. the private sector. that is less property less money; right that they have to grow the economy. how much how much does the economy grow bring paying the people in the government jobs? >> congressman, you say that government jobs help the economy. to what extent? >> i'm not sure what the policy experiment you had in mind is. no government or -- >> no. i'm asking a question. you said the economy grows with government jobs. to what extend. how much? how do you quantify that? >> it depends on the economic circumstance. on a economy where there's a demand for good and service. essentially all the productive capacity or true in the this country in 2007, for example, then additional government jobs is likely to come out of a job in the private sector. which has been the case in 2009, 2010,2011, 2013. additional borrowing spent to higher government employees or provide benefits will increase the output in employment and economy. it was widely help you along -- >> if that's the case, why don't we tax everyone 100% and borrow more so we can grow the economy. that's a sure fire way. the taxes we have in the country today. where we are now. rarely 100% borrow more temporarily. >> no congressman, tax rate of 100%, as you well know, i don't believe -- >> private sector to fund governments you grow the economy. we established we have a different set of opinion. i don't well know. but you well know that you -- because of what you said you grow the economy with all of these government jobs. i'm trying to quantify that what you mean and understand why we should do more of this borrowing. more of the confiscation of the people's property in the form of taxes to better ourselves to just get ourselves right out of the hole. >> on the second point. >> it was a survey leading economist across the country. the quantify indication i can give you is the one i started with in response to the question. not continuing with the sequestration for 2014. >> i would say it's no the the problem. >> mr. jeffreys. >> under the eight years of clinton administration, the so-called confiscation tax rate was 39.6%; is that correct? >> that was the top tax bracket. >> and right under this confiscation rate approximately 20 million job were created. is that correct? >> i don't remember the number, congressman. it was quite a few. it was a tremendous economic boom. >> the eight years of the bush amount i correct that the so-called top confiscation rate was dropped 35%; is that correct? >> yes, congressman. >> and we lost approximately 600,000 jobs during the eight year period; is that right? >> i don't remember the exact number. >> okay. >> as it relates to a statement that was made earlier by one of our colleagues suggested that american people looking at the hearing might come to the conclusion would be perplexed at our inability to move forward with the reservation i think we agree it's a long-term deficit and debt problem that we need to confront. i would certainly agree with ranking member and his observation, perhaps the problem is that we reached the proceed ural integrity of the. budget process. that the house passed the budget, the senate passed the budget, and the next step in the process is to move forward with conference committee. the mass there are radio54 democrats and independent in the senate. he did win with 51% of the vote. only the second president since, eisenhower, i believe, with two consecutive popular vote margin. we're in a divided government context. we should move forward. we can work out and perhaps try to find common growth from those days. >> you stated, i think, in your testimony it would be large lasting and damaging. >> they are unsure. they could be large lasting and damaging. that's why i think it's a dangerous gamble to default on an obligation. it was a risky strategy to stop paying what the united states government owes; true? >> yes, congressman. >> part of the -- the default on the debt it would -- investors in the belief that the united states has the ability to manage its economic affair; is that right? >> yes, congressman. >> one of the reasons why some of the other european countries which many of our colleagues to love to allude to find themselves in a situation -- there was an erosion in confidence and the ability for those countries like greece to manage their economic affairs; correct? >> yes. and so erosion leads to an increase quite possibly in our debt burden able the increase in the debt burden worsens our long-term budget outlook; is that right? >> yes. >> that's part of the reason i think will be irresponsible to simply attempt to hold host substantial the full, faith, and credit of the united states of america in the context of us paying our bills as we confront. i hope the congress will come together and stop playing partisan politics to the serious issue. one last question in the remanage time i have. bowled it be fair to say that the increw largely benefit low-wage workers. >> yes, congressman. >> and they are most likely to immediately spend the increase income; is that right? >> that's right, congressman. there are people who work and receive a higher wage would have higher income. they likely to spend. as you know, there are higher minimum wage reduce the number of people who have jobs. >> right. the increase spending and encream consumer demand would ultimately lead to economic growth; is that correct? diswhrurnd the current economic condition. the increase for the demand for goods and service would boost output and the number of job. >> thank you, i yield back. >> thank you. >> thank you, mr. chairman. good morning. >> good morning, congressman. >> thank you for being here. i want to change the direction a little bit to social security. your report, i think, the social security trust fund actually going insole vent in 2031 now? >> becoming exhausted in 031. yes. it seems like the three years science i've been here the window keeps getting shorter and shorter. some would say that we should wait until we goat 2031 and address it. because congress seems to react better to crises than fiscal management. is it more expense toif address it then, or more expensive to address it now? is there a cost to waiting? >> there is certainly a cost to waiting, congressman. >> so the longer one waits to make changers. the more abruptly they need take effect. for social security right now, the age for retirement benefit is working the way up. as part of the agreement. the congress and president reached in the early '80s. and include phasing phasing in increasing retirement age. the longer one waits to address the imbalance of social security under the federal government as a budget as a whole. the less time they have to phase any changes that your colleague agree to. >> when you start your first run or first incident over at cbo, back in the early 1990s, '93 or '94. were they talked about social security then? >> it was postthe reform. were they also seeing the trend then? >> yes, it was very much on the radar of analysts, in fact. later in the 1990s there was a lot of discussion among policy make per. the aging of the u.s. population is has been predicted for decades now. i recall alice the first director giving a talk in the 1990s talking about how what that far away. and nonetheless, it's now passed and changed. >> we're 20 year past the date. still no fix in site. i'm assume that the fix -- at least in the three years i've been looking at this. i've been in congress. the fixes seem to be relatively well -- and cbo spoken of them and other members of congress. would you agree with that? >> we published a report that had a long list of changes. the effect that people generation different next levels. i think the menu of possibility is well known. but people -- collectively individuals. >> we need to do that and forced in to doing it in a crisis or going to do it thoughtfully and ahead of time. and do that way. since to a certain degree economists are professional speculators i say that with a little bit of tongue in cheek. i like you to -- how you might see the financial markets, the ratings agency and the american people responding to a congress that with fore thought and thoughtfulness actually reform these programs to save and protect them. it could have a positive effect on the confidence of business and household in a way that provide the substantial economic boost. how to quantify that effect, i think people now are very uncertain what federal policy would be. very skeptical of whether the problem will be addressed in a timely way. if they were, it would come as a -- to a way that wash good for the economy. >> and very good for the economy and good for the american people, that's probably good for politicians i guess. and i would encourage this body, both of us, republican and democrats alike and get serious about doing these things. my excess is that political dysfunction is also a drag on the economy. would you agree to that? >> yes, comab. we think that uncertainty about where federal policy are going one of the factors that has lead to slow growth in the past few years. not the prin. factor but attack or it. we can't deal with the immediate. we have the g.o.p. induce the question that is having a dag -- drag on the economy. as you pointed out. instead of being in our district this week we are held hostage back here to get rid of the affordable care act one more time. some of the projection in the future. specifically on the affordable care act, you know, taking the coverage provision and other provisions of the affordable care act together with the medicare provision and other revenue provision. what is your estimate of the effect of the entire affordable care act on the deficit. what would be the impact if we repealed the affordable care act on the deficit? >> we estimated the fraskt reduced budget deficit and repealed the affordable care act would increase it. >> what kind of level are we talking about? >> over the next ten years, on the order of $100 billion. then on the next ten years, fraction of a percent of gdp. >> two specific questions specifically how you determine some of the projections that you said that health care costs are growing much more slowly in the last five years. since the last four you have that projection in there. i'm wondering how many years -- how much frequency do you need see in reduction of the health care cost before you change the per-capita-income. the growth estimate. trying to get a picture what it take for do you change the course a little bit. so we can look at different number in the future, maybe. >> we have already changed course to a significant extent. relative to our projections in 2010, actual spending for medicaid and medicare have fallen about 5% below what we thought they would be. we have lowered our production by the rest of the dedicate. they are 15% roughly below what we project a few years ago. we have extrapolated some of the slow growth rates. we have terne it going forward. we think it's appropriate because the -- different sector of the health care world. that's lasted for a half a dozen years or so. the past episodes have been followed by pickups in health cost growth. the underlying driver is the development of new proceed your and technology is continuing. we don't think it's appropriate to take the last half and extrapolate those out for decades to come. so what we have done is bring down the the long down a little bit. for a number of years and a return close to previous growth rate but for a significantly lower level of federal health care spending. what it be more significant a decade of reduced spending. would it have a different impact? >> i think the longer the period lasts and the more we can learn about it. we did a detailed am sis of the slow down in medicare cost growth the less than think people a month ago. and the conclusion that the weak economy does not seem to have been a factor in holding down medicare growth spending growth, and thus the improvement in the economy won't necessarily undot slower spending growth. let me do the research. i have one more question and a minute left. on the social security deficit increase expecting -- life expectancy. can you break down the projected shortfall due to people who are 50 and over versus, you know, the children and grandchildren. i know, that i think a lot of people make a certain assumption. but is going to have a continued -- is there a break down that you -- >> we have not broken the shortfall by generation per se. we have a figure in the report that shows the taxes and benefits for different people born in different decades. and for most people, born in the on arch across the '40s, '50s, 'out60s. they have payroll lifetime. but the social security system started by paying benefits by paying collection to the people that paid in. the system wasn't there when they were working. it created essentially an ongoing debt in a way. that's what the future generations will have to deal with. >> thank you. >> mr. williams. >> thank you, doctor, for being here today. i appreciate it. i'm a small business owner. 73-year family business. myself 42 years. i've been a borrow her automatic my life. i can tell -- the economy come back and -- it's not done well as evidence of the high unemployment rate. we don't have unemployment. for people like me are concerned where we are on taxes. where are we on health care? we're afraid to hire anybody. and put the risk we don't know what kind of return we get. all that being said, i'm of the age i remember i borrowed money in 1980 at 20%. now i'm able to borrow it at 0%. we know which is better than the other. i can tell you there's a lot of industries that have seen costs go up since time or seven times since 1980. and, you know, rates back then were 20% and the lifetime 6% rate is a pretty good rate. it the problem is with the cost being up so much 6% of $60 ,000 would be more than say 20% of $10,000. we have a problem they're developing. i think it's a real concern. the rates can skill small business growth and business. it can ill kill -- it's just nobody is thinking of that. i know, you talked about rates going go up because of this mismanagement of our many cases of our huge deficit don't run up and not want to cut cost. ic and you hope agree of the answer is lower rates. lower rates jen rate cash to grow and spend. if you just -- if you have a lower rate you have more cash. and businesses don't save money. they invest. i believe tax cuts are revenue permanently. we hear the other side talk about revenue. they talk about tax increase in being of revenue. it will vently burden small business to where they don't exist anymore. they have to play defense. tax cuts, i think, we try to -- stimulus. none of it works. the tax cuts. the tax cuts are real revenue as tax increase i think are temporary. do you think the solution with higher interest rates would be lower to tax rate for all taxpayers. across the board, which i think would mean more jobs have seen that in the history of our country. mean more jobs, and reduce unemployment and create less dependence on the federal government. >> congressman, if marginal tax rates were lower, and but the other change were made in the tax code. the -- that would be good for the economy. the tax rates are lower and nothing else is done so the total tax revenue fall adds well. we think it would. then the reduction in tax rates by itself is good for the economy. the extra borrowing would be bad for the economy. it would increte both of the effect. so what depend not just on the tax rate matter but so does the overall amount the government is borrowing over time. >> if we took people off the -- if we reduced unemployment from 7.5% to maybe 10 or 15. it if we reduce it down. less small business owners like me and main stream hire people. that's more revenue. it's real money. yes. >> absolutely. stronger economic growth can make great deal of difference in the -- the gap between spending and rev gnaw project here. what policy you can implement that spur growth and again, i think on the current economic condition tabs cuts or government spend increase can spur growth. over time, one wants to bring the budget to keep dpret rising rapidly in order to keep it going. >> we have one of the highest tax rates in the america in the world right now. that seem to be working. >> the corporate tax rate in this country is higher than -- in other countries. other -- total amount of tax revenue we collect as a shared gdp is smaller in the country than most developed cubs. >> i think we need remind people in my belief that the tax codes are real revenue. tax increases are temporary put a burden on small business. mr. chairman, i yield back. >> mr. >> thank you, mr. chairman. thank you. thank you for the excellent report and being here today. you said in your testimony that our nondefense discretionary spending will be at level of not seen since the '30s; stherkt? >> yes. the focus of your report is that health care and social security and interest are debt service are the three principle driver of our debt. yes. that's right. >> and one would think we should be putting together a plan to protect and strengthen the programs to ensure they're being administrated in a cost-effective and efficient way and plan to pay for them. that would be done in the context of develop of a budget. >> right. >> it could be, congressman. >> and it would be helpful if we a budget conference committee report. i hope the report underscores the surge sincerity adopting a budget and addressing the issue. i hope you'll mail a cop copy of this to the speaker of the house with the conference kyi is the next step because we can't do a budget conference without him. but i want to specifically ask about two issue that you focus on in the report that the first is that as you know, we passed a continuing resolution that partially defund and now effort to pass the resolution to completely defund the affordable care act. and will also the continuing resolution double down on sequestration. and as i look for your report, what struck me if your testimony again today affirmed it. you continually said rising cost of health care as one of the single biggest driver of the long-term debt. you go on to say the increase in health care has declined. you expect -- it's going to continue for some time; correct? >> yes, congressman. and so it's hard to understand if the affordable care act is contributing to deficit reduction why the strategy my good friend open the other side of the aisle to repeal this deficit reduction tool of the affordable care act in an effort to reduce the deficit. am i missing something? >> i can't and won't speak to the motivation of -- >> okay. the affordable care act if were appealed would substantially add to the deficit. >> we estimate that repeal the affordable care act would increase the debt sit over the next decade and the long emerging it . >> that's because we're built in to a series of payment reform and demonstration project and competition that create additional pressure lower cost. >> because the spending cut and tax increases in the legislation and enacted slightly outweighed the cost of the coverage of expansion and the factors run in reverse if the law were repealed. >> with respect to sequestration, you testified in your report confirmed that the paint then of sequestration will result in substantial job losses woat in the current year and in the next fiscal year. >> yes, compared with a policy that relax that restraint on spending. >> and restore spending back to the presequestration level. what is the impact of that on the deficit? both in the short term and long-term? >> well, with a stronger economic growth, would reduce the deficit. i don't want to leave the impression we think that relaxing the sequestration would pay for it. like cuts in tax rates, that can be good for the economy. not so good that the extra revenue offset the cost of the tax cut. >> but your report reveals in the long-term the replacement of sequestration with a balanced approach will lead to a stronger economy and a reduction of the dedeficit. >> if the -- if the extra costs of sequestration were offset entirely by other policy the that at some point in the future would raise taxes or cut spending. one scrolled stronger growth in the near term with better economic condition in the long-term. >> and reduction in the deficit. the two sort of policies that we have heard so much from our friend on the other side of the aisle, you know, maintaining sequestration or making it worse or repealing the affordable care act both of those things taken together in term of a long-term impact will increase the deficit? >> i want to be careful. i think it depends -- the combination of policies. so again, in the short term, -- >> i'm asking about the long. it '04 or next year implement them in the years after that. yes, sir? >> thank you, mr. chairman. starting on pain 2. you have talked about how the driver of our debt is and social security had health care programs and interests and the bottom graph on seems to bear it out. equal on what we're spending for all other not. >> that's right. a little higher -- yes. >> then what i follow the graph out 202038. i see that the three things that are driving our debt continue to get worse while other noninterest spending goes down. so again, my quick observation in math by 2038 is that social security, health care programs, and interest are about double. yes, i think that's right. that turn over to page 10, the page 10. show the historical percentage of ged pressuring. i see five significant spikes. the revolutionary war debt, civil war debt, world war i and world war ii. and then the spike that i see going onioned 2030. what keeps me awaking at night is to see that our debt is growing not to pay the cost of defending freedom, but pay to pay for benefit for ourselves. the thing that keeps me awaking is seeing my grandson or granddaughter sitting in this chair in 2038, and having a repeat of the 1941. we have find ourselves so much in debt we cannot afford pay to defend ourselves. is that a vailed fear? >> i think that's a valid fear, congressman. if we say in the report is a number of indications one of the risks of -- deaf sit high you and your colleagues lose the ability to respond to unexpected development economic crises, rewards, in a way you have the stoobility respond is debt started at a lower point. >> and this week we're debating debt ceiling. and as i see, the debt ceiling that we place upon ourself is an artificial debt ceiling. i think it's a valuable in the debt ceil tag allow us to have it. but the real debt ceiling that any family, any business, or any government when we get to the point we can no longer find people to lend us money at the rate we pay. as i see the spike going to 38, it puts in the issue quickly. it puts in a position in the event of unplanned catastrophe such as '41 come upon us. >> yes, congressman. that's right. >> we talk in the report about how it sort of run up in debt we're projecting doesn't have a precedent in the history. you noted but they've been under particular circumstance and reversed. and this would be unpress debited. and reduce our ability to project what would happen. the interest rate on the condition. we need that. note that. if we one has a high debt and what hits depression or war. the country would be in a tight box with nothing but poor options. that's why analysts think it's far, far better to take the action that sooner rather than later. >> we have labeled the generation of the 1940 as "the greatest generation." but in my opinion, equal care of greatness is their commitment to repay the debt that was incurred to defend freedom. it appear my generation is incurring debt to fund our own excesses and -- willing topaz it on to our grandchildren. it's simply not acceptable. >> thank you. >> there we go. thank you, mr. chairman. it's been an interesting discussion. it's even been breasting we've had a few practitioners of political ideology interrupting and disagreeing with and attempting to reeducate our independent ph.d. nonpartisan economists. i think those watching had an interesting window in to some of the force that are taken us to the brink of a government shut down in that discussion. i am, of course, sobered by the mountain of debt that are projecting we're grappling with. i think everyone in this institution should be, and i know democrats very sobered by it. in fact, we may even be more dismayed. we have gone in a short period of time from 2001 when following eight years of the clinton administration, your office was projecting we would be enjoying multitrillion-dollar surpluses at this very point in time. to this mountain of debt that you're now projecting. we certainly have more discussion about how we got here. it seems to me putting a couple of war on the national cd,ing taxes -- and a lot to do with that. in any event, it also seemses to me that we have four issues that are immediately facing this house that could have either a positive or a negative effect on this situation depending how we resolve them. the first of which is the sequester, i want to just understand that your testimony, i believe you said, in continuing the sequestration which is what our republican colleagues are suggesting in dwowrt would eliminate $6 00,000 jobs and reduce gdp by as much as a half percent. is that correct? >> those are estimate for the end of 2014, yes, congressman. >> thank you. and with respect to the debt limit, i think you were completely unequivalent in stating that a default of any kind could have cans cat trofng effects on our economy and the recovery. >> i said a default on any obligation the federal government scrolled effect on a large -- and damaging to our economy and financial system and the federal budget. >> that's a second big issue facing us right now in congress the third is the affordable care act. which will inevitably -- try to repeal it. just to be clear the affordable care act is a net budget saver; correct? >> that's our estimate, congressman, yes. >> repealing it would make things worse. >> yes, congressman. and finally, we should be talking about -- we're not, we should be talking about comp hennive ill gracious reform along the -- senate advanced. what would be the net effect on the fiscal challenges be if we could pass a bipartisan comprehensive immigration reform like the one that came out of the senate. >> congressman, we estimated that the proposal that was approved in the senate would improve the budget balance. would improve the increase output in the economy over this coming decade and beyond. >> thank you very much for your testimony. again, there is no dispute that we face a serious challenge here. but rather than exchanging rhetoric about it, we have four things that have just highlighted that are spending before the house that we can do we can do to make it better or worse. i think your testimony has been illuminating in that regard. thank you, doctor. >> i yield back. >> thank you, mr. chairman. >> mr. rice. >> thank you, mr. chairman. thank you for being here today. your study -- you said eariereased taxes are a drag on gdp; stherkt? >> higher tax rates for any given level of revenue. i think as a shared gdp consumer spending is two-thirds of the. >> and taxes take away from that; correct? >> what are taxes? how do you define taxes? >> is the government exact? >> the federal budget revenue are money collected through the sovereign power of the government. >> i want to look a little bit of expanded view of taxes too. is there something that makes action by the government. for example, if we have -- we have a war on goal is that effect consumer spending? >> yes. yes, higher prices for energy. one of the things that causing the swing in consumer spending. >> if we require people to buy insurance and the premium go up. does that affect consumer spending? >> congressman. depends else happens. the -- [inaudible] >> congressman, yes. some of the increase in premium under the affordable care act we project come -- in out of pocket payment. and affect how much people have at the end of the month. what was the premium. above 90%. i don't know that's what the article said. and if interest rates go up. that's another factor because we can't get the budget. that's another factor that were -- consumers pockets and less consumer spending; right? >> yes. >> and the way -- really there are taxes disguised. they're the result of government action. increased insurance premium, increased utility bill and increased taxes with -- and the bawct taxes increase. they lead to lower bank account and lower economic activity. >> the problem that you and your colleague face that is a cut in government benefit takes money out of consumers budgets an increase of taxes takes money out of consumers budgets. the amount of taxes collected and benefit come to the clouder alignment. you don't very well a choice in raising taxes or cutting spending. >> you said earlier that our average tax collection projected five years out under current law is higher than they have been in the past. average. >> yes. that's right. >> is there -- and i just want a quick answer. subpoena there a sweet spot, you know, you get diminishing return with tax rates? that, you know, some kind of a analysis that shouldn't go over. you have substantially decrease that. >> as tax rates rise, they will have incrementally bigger negative effects on output. we're already at the average, aren't we? >> congressman, i think not. when they try to estimate. each increase in tax rate will have negative effect of the economy. total tax revenue will go up. >> i don't mean to cut you off. we are run out of time. tacking with the increase ?urn and utility bill and interest rates. it seems like we rick people dry. the second thing, you analyzed the effect of sequester on jobs. if -- have any job killing it and costing it. and do a analysis of this in 2010, congressman. and the estimate that the affordable care act would reduce the level of employment in the country by about a half percent by the point at which the law was fully phased in. that was worth e qvc throant 800,000 jobs. which one is the wig e job killer. obamacare or sequester? >> the effect of affordable care act on employment in 2018 or so is about 800,000 job. the effect of the sequester for the coming year we think is about 600,000. >> i want to tell you, i'm getting hundreds of calling from my office that are not about sequester. they're about obamacare. >> thank you. thrg millions of dollar being spent. it hasn't been fully implemented yet. i think americans are reacting to the air waives because they're getting scared to believing that obamacare is something they should be afraid of. one of the thing i like to point out before i got involved in being elected official. i was former business owner. i know, what it's like to be a business taxpayer but a domestic employer as well. and one of the things that i would like to point out, for the record as well, congressman made a statement about increasing taxes up to 100% of income basically describing and there was no democrat the second that potion. i think we show a lot of strength here. >> that was a joke. anyway. thank you very much. when it come to immigration reform, my colleague, congressman huffman touched on that. i would like to expand on that. will it benefit american employers if a comprehensive immigration reform, for example, we have one on the substantial that the senate passed. that version -- would it benefit domestic employers? >> we didn't study the effect on employers, per se, congressman. we look at the effect of employment and so on. >> so we concluded that relative to the current law enacting the senate bill would increase a size of labor force and employment. would increase average wages and 2025 and later than raise product pivot. >> is that one corner of america. would that be pretty much in many, many, many part of america? >> it would be disproportionately in places that they come to live and work. we didn't try to do an analysis at the regional or metropolitan. >> it would are a positive effect based on your number in california? >> we didn't do e mate for particular states. it would tend to have a larger effect would be in places that attract more immigrants. >> when you look at the tech industry being large in california and ag industry being large in california, i think your numbers probably conclusion of your number came from by and large community like that. >> but to my next point. i think a lot of americans think that comp hennive immigration reform would benefit foreign-born individuals should we pass something, for example, like the senate bill that passed the senate but not getting a hearing in the house. it would benefit just foreign born people in the country? would it benefit american born individuals, economically and foreign born individuals? >> ex-- it's not exclusive to foreign born individual. it would benefit some people who would live in this country anyway. we have not done the full analysis divided among individuals and native-born individuals. but the effect would spill over. some of the effect are negative as we noted on the unemployment rate would be slightly high over the next 2020. in the longer rut would be good for people. but the specific effect depending on the people's situations. so let me ask the question then a little bit more specifically. a comp hennive immigration reform law like the one they senate passed which i would ape siewm has been analyzed by you and your people. that would only benefit foreign born individuals in the country or benefit -- it would benefit at -- at least some native born. the an is both will -- >> both growns benefit over time, congressman. >> got it. the reason i ask the question. i think a lot of people in the country believe that the debate on immigration reform has no net economic effect to americans and that just simply not true. another thing i would like point out is when it comes to american corporations that have much of their employment over seas. does have a tend to have a direct benefit to house hold with income with blue collar workers in this country. when american corporation hire people exeskly in the country. does it will have a net positive event on the household? >> yes, congressman. >> thank you. i yield back my time. >>. >> thank you, mr. chairman. i appreciate my colleagues' discussion about the immigration. i would say we reframe that debate instead of asking what is good for immigrant. asking what is good for america. we may end up with the same conclusion either way. i appreciate what he had to say. i'm glad the house is doing it in a step by step loss with the jew -- judiciary committee. what is good for america. the an has been robust is good for america. rescuing social security from bankruptcy if we look at that. you may not be prepared to talk about it. have economic conditions changed in the last two years the report would need to be updated? how do able it would be by pulling off them we have to pull on to make the changes today take it off the table adds they worry for generations to come. they took a big step in a bipartisan way to do that. i feel we have the opportunity in divided government today to do that. i appreciate the foundation work you have done there. folk ask me why we talk about health care and the time of budget deficit and budget crisis. what the connection is. i think federal health care cost as being one of the largest driver of federal spending long-term. is that -- >> yes. absolutely. >> yes. when we talk about whether the affordable care act is helping our hurting you've said several time it's a net positive on budget deficit. i'm looking page 25 of the report. you may not have it handy. it's a chart that talks about projected growth in federal health care spending. and looking out over the next ten years, you divide major growth in the three different category. you talk about the aging of the population, obviously. a we get old programs. and what does to divide and health care for person outpacing the growth of spending of gdp. >> then you talk about the medicaid expansion and exchange sub i did. if i'm reading the chart you say for the next ten years, health care is already one of the largest drivers of spending in it country. federal spending. you were say that the medicaid expain exchange subsidizes are going to be responsible for 35% of the increase over the next ten years. am i reading it right? >> that's right, congressman. the connection between budgets and the affordable care act is not only have we identified federal health care spending as a single largest driver of debt and deficit as we look over the hierdz, but 53% 53% of total cost. you say that the affordable care act alone is going double frat in federal health care program over the next ten years? not in a way we break out. am i reading it right? if 53% of the total projected cost over the next ten years and associated with the affordable care act affordable care act costs would be half the growth would be half. >> in the ab sen of the insurance coverage provision of the affordable care act maintaining the medicare spending reduction in that act. then federal health care spending would be the great deal -- >> when you talk about the affordable care act as reducing deficit. you're not saying the law in the affordable care act that the health care changes are reducing deficit. you're saying because the affordable care act cut $600 billion. the affordable care act raises over a trillion dollars in tax you're saying because of all of noninsurance-related things that the affordable care act does. that is why it has an effect. if we were do do all of the same things irrespective of the merit. we would just back off the deficit reduction rather than spending it on new program. i know, that's not an economist question. it's more of rhetorical question. i appreciate what you have done here to get your work on social security is the foundation that really does offer an opportunity for success in a bipartisan way. i thank you. >> thank you, chairman ryan. i will appreciate the opportunity here, chairman, not -- he's getting cranky. i'll try to s brief as i can. prior to obamacare, what are health care costs going ?up. >> they have risen, per person have risen faster than gdp per person for decade in this country. that growth rate has slowed over the past half dozen years or so across the federal program and in the private sector as well. the role of the affordable care act in the slowdown observed so far is not clear to us. as you know the affordable care act with a number of provision that slow it over time. i remember congress in 2002 in the number one issue for businesses and families is health care. health care costs. i don't know what it's going to be. it keep going up. it's a major problem. we have a problem and we ended up solving it alone. we county have much help from the other side. we adopted several position like the individual mandate. i my question was to get everybody recognize it's been a big problem. we are seeing things start slow down. and a lot of people who had preexisting condition and couldn't get health care able to do that. if you had a young kid with cancer, they would not meet their lifetime cap and get thrown out. they will now be able to get the care. it we have -- look forward to improve as we go. i would like to make a couple of comment in the last few minute. we have one gentleman make a statement about the huge debt issues. sort of civil war world war ii, and another point in history but then for forgotten to mention the two wars that we put on the credit card that friday on the other side primarily initiate it. prescription drug bill not paid for. no negotiation in china drive down prices. so i just think it's important as we have the discussion today have the point in history are where the debt limit ran up. all of a sudden president obama got if and there's a debt that came. not looking baaing to the past candidate. my friend who is a friend, and i like him a lot, was talking about public investment. we can't -- the problem we're having today is the whole narrative in washington, d.c., is every single dollar the government spends is that. it it's bad, t coming out of the pocket of the private sector. t dealing and taking money from private citizen. that fames to recognize over the course of our history as country the significant public inviement made that lead to economic growth. as i was will being to him make his argument, i'm thinking about local politics and city of youngstown or ak rein when they put public money to an industrial park. public suer, roads, public sidewalks. invest and great an -- they come in and create the investment. but for the investment by the pub throik say it's where we want to go that private inviement wouldn't have a chab to grow. and they grow overtime. same with the interstate highway system and nasa. the huge investment we made in nasa that many people thought were foolish. the telecommunications and all kind of other things. the deafen spending. the oil cooling in and out of the port guard bade public viement in the yet navy. hundred and hundred of billions dlaf are. they rein vestments we make. investment research and development like my friend was talking about that eventually will lead to growth. look what is going on in silicon valley because of the investment on the public side. i know, we have the deficit. you know we have deficit. we need to curve these in the long-term. we can't sacrifice investment. we were lucky enough to get president obama out of the manufacturing initiative. we got continue to invie in. we have to make sure our school have three dimensional printers to make sure the robotic. they get jazzed up about engineering. i want public investment. not the be all, end all. the mix recognizing the complexity of our economy. >> thank you. >> thank you, sir. you want to save the best for l.a. we women are accustom to that around here. [laughter] absolutely! >> i finally -- agreement with the gentlelady from tennessee. >> e were at the same briefing we anded out of this committee for. i told her it was a long queue. i want to go back thank you for the report, and i enjoyed glimpsing through this and looking at the impact you have on health care expenditure. and i didn't -- in looking at your footnote. i don't see where you pull data from any domestic flame may have yielded with a window in insight. you have care in my state of tennessee. you have romney care in montana. did you look at in the escalation of the cost of the program of the administrative and beneficiary cost of the program? because it's closest thing we have got to what obamacare is. and just for the committee -- it was the test case for hill health care back in the '90s in tennessee. and eventually it became 35.r. of the budget. it tripled in cost after five years in implementation. if our governor in democrat governor did a good job. he had to come in and remove 300,000 people from the program in reshape the 1115 waiver program from chiropractic mf in order to dreatsz it. did you have any evaluate data from them? >> come, i'm not personally knowledgeable about the tennessee. but when we done our estimate and over the past several years of the affordable care act, we have drawn on the experience that state have had and that private insurers have had. a very large research literature. >> you did looked at that. >> in forming our estimate. >> yes. that you're looking at the additional taxes, and components the revenue side to try to make that an affordable program. it would end up doing what the other programs did. which dprapsed under the own weight. let me ask you another question. i -- you know, i have two grandson. a 5-year-old and 4-year-old. and it is just really painful to me to look at what is happening with our nation's debt. and the closer we goat that 100% of gdp and i had looked at francis public debt. they are at 91 -- 95.1 percent of the gdp. and they're looking at the tax pause. if you all taken a look at what is happening with some of these countries and look at the steps that congress would to take if at that point to return our nation to a path of prosperity. how we back away from this debt? are you looking and making the expectations the only way we can do it would be higher taxes or increasing existing taxes? >> i think, congresswoman, you and your colleague have a choice of raising taxes substantially, cutting federal spending substantially, or combination of those two. >> promoting the spending. >> i understand qualm. that's for you not e. we are currently producing a large volume of budget option. we do every couple of years. >> if we -- >> cutting spending -- >>let say we do what frank does and looking at a 1% corporate tax. what kind of does it have on the economy? >> congressman. i can't do e mate of that sort in my head. and as you know, other countries are starting with different economic systems. very different level of taxes. and spending. so we would try learn what other countries experience. t hard apply directly to the country. it's different. >> okay. let talk about scwe rationer. like the it% as cro the board cut. don't like the threat on the military. i think they are harmful. however, according to your report if congress reverse the cut the nation's debt would reach nearly 10eu89% by 203. what do you think we tell me what you think. is it safe to say it's presenting our long-term debt from doubling? when you consider if we keep current law and we do not make any changes that are public debt would reach 100% of the gdp? congresswoman, the alternative fiscal scenario you're referring to incorporate a seventy changing real toif current law. one of which is taking away the sequestration and going back to the original cap on descreg their funding from the budget control act. it change a big difference in the tax policy and other aspect of spending pot. i don't know how big it would be at sequester and scwe ration by i.t. certainly it's true if any spending were increased or tax were cutting with reallitive to the current law that underlie the projection and no other change were made. the debt would be higher an the problem would be bigger and arrive faster. >> thank you. >> thank you, mr. chairman. thank you directorring for beer hoo. and i'm actually going do a couple of things. i know, most of the question have been asked. is all the fiscal condition of the united states and the federal budget, the deficit and the debt are stark and striking and require us to do something. because incredibly serious. and i think there is a member on the committee who isn't clear about that from the report and who wasn't clear before the report. and isn't looking forward to the kind of budget option we need to undertake. but i would like to go to two other planning issues. i'm actually with all due respect to my colleague. she's correct about how talk about the care and it's model as state look at way to do something different about the medicare program and the population. the trick for states in the regard they get a loan. there were no -- way to impact ped care. they have no way to impact chiropractic measuring s rule on hospital and hospital reimburrment. the problem is that it can be unsustainable. and so quickly there have no no partnership on the ped candidate side from the federal government to be as robust as it is today. to really deal with the growing uninsured population. and so they don't work. or they haven't worked successfully. solet start with that and actually kind of see some their hospital corporation or in new mexico and the big supporter of the aca and medicaid expanding the rural hospital will go belly up in the current path we are on in health care. i want to reassess and make sure i am getting it right. the affordable care act expanded coverage has raised revenue and reduce spending for medicare. >>y? >> i want to know what the impact of continuing that kind of a plan approach reducing and raising have on the federal deficit over the next 3525 year. glul at proi have taken together with the frabt and in our estimate reduce deficit over the next ten year and beyond and the second decade real toif what happened under prior law. >> perfect. given that scenario, and in my state, that's been hugely helpful. we were economic outlook up and downing medicaid. we have a republican governor doing that. we have a shop exchange. we have some federal partnership recognizing that is the kind of plan approach we want to a fledging state budget. an economy, arguably is one of the worst economy in the country with negative job growth. we understand that is going to be some plan approach to resolving the problem in the short term and the long-term. we aring the debt and growing the economy so we can manage them effective will i. here as we are many have said crieding in to the debt ceiling. and recognizing we have a short term issue that we have got address. what is the bank account on our economy if we work to address that? and make sthiewrt full faith and credit of the united -- i know you creasessed it several time today. but it is the issue of the hour what happens to our economy again if we fail? >> we think that default on any obligation of the u government would be a dangerous gamble. they can't predict what would happen. fortunately, we don't have a lot of experience with that in the country. but the confidence in the federal government paying it bills on a timly basis a bedrock of our economy and financial system meaning both the economy financial system in it country an the economy financial system around the world. and is that confidence were broken, then the con qen could be harmful. and for the financial system for the flow of credit, payment recknism for the economy and ultimately for the federal budget. if interest rate on federal debt were to be pushed up higher than we think they rise anyway because a loss of confidence. that would raise interest pate. the the set so large now and in our projection remain large for indefinitelily, then the increase interest rate given the size of the debt can be costly. it if were interest rate were percentage point higher than we project over the next decade it would raise ininterest paints by about $1 trillion. >> that's going have, i would assume, the same effect on spaws. and also listening to the sequester comment. i share those. while we have an obligation and have been cutting the federal budget and being clear about our obligation to do that, the scwer that lead to particularly in the military an inability to do that innovation and research and have it tran late to economic growth in the economy. .. >> we are talking about the research and development. half of overall discretionary spending and the defense and nondefense pieces remains as internal law and the composition of those that has been historically, been federal investments will decline as a share of gdp. >> thank you, mr. chairman for your letter queue. >> thank you very much. thank you for your testimony, thank you for the support and we will see this weekend. >> thank you, mr. chairman. >> the meeting is adjourned. [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] [inaudible conversations] >> coming up on c-span, the mayors of new orleans and philadelphia talk about gun violence in u.s. cities. later, it debate on federal funding, and a newborn medical screening program is discussed. >> next week on "washington journal", defunding the new health care law and the possibility of a government shutdown. you can call in with your questions and comments to republican senator tom coburn of oklahoma. a member of the finance committee. and senator bernie sanders, member of the budget committee. "washington journal" is live every day at 7:00 a.m. eastern. >> and conversation on gun violence in u.s. cities. we will hear from philadelphia mayor michael nutter and mitch landrieu. the national press club host of this one-hour event. >> good afternoon, welcome to the national press club. i am a reporter for bloomberg news and the 106 president of the national press club. we are the worlds program committed to our future in journalism, while fostering a free press worldwide. for more it information, please visit our website at the be ww.press.org. to donate to the programs offered to the public, or national press club journalism institute, please visit press.org backslash institute. on behalf of our members worldwide, i would like to welcome her speakers today and those of you in the audience. our head table includes guests of our speakers, as well as working journalists who our club members. i would note the general members of the public are attending, so it is not necessarily lack of eight journalistic objectivity. i would also like to welcome our c-span public radio audiences. you can follow using the hash tag #npclunch. now it is time to introduce our head table guests. stand briefly as your name is announced. from your right, jeffrey ballou, a news editor for al jazeera media network and a member of the national press club board of governor. carolyn coleman, director of federal relations for the national league of cities. doctor william see bell, the president and ceo of casey family programs. it and a former national press club president and the vice-chairman of the speakers committee. getting of our speaker for just a moment, alison fitzgerald, project manager for the center for public integrity and the chairman of the national press club speakers committee. speaking of our other speaker, bob cardinal carter and communications and the speaker that organize today's luncheon. and kenneth poland junior, the united states attorney for the eastern district of louisiana. and the washington bureau chief for time warner cable, jennifer. and matt freedman, a video producer for the associated press. [applause] [applause] our guest today say that one of the greatest epidemics facing our country is the death of african-american, men and boys come at the hands of other african-american men and boys. philadelphia mayor michael nutter and philadelphia's mayor mitch landrieu are here to talk about their initiative to reduce violent crime in the cities. mitch landrieu hails from a rich tradition of louisiana politicians. from the state, father moon was a one-time mayor of new orleans and secretary of housing and urban development. mayor landrieu also served as lieutenant governor of louisiana for two terms, including when hurricane katrina slammed into the state. no stranger to washington, he attended catholic university here. he created a public and private partnership called the new orleans business alliance that helped to spur growth in the city and now new orleans is one of the fastest-growing cities in the nation. mayor nutter has been mayor since 2000 and philadelphia come after serving as a member of the city council. he has supported making certain neighborhoods in philadelphia crime emergency designations. and he has also developed a number of economic initiatives and educational reforms. he grew up in the western section of the city and graduated from the university of pennsylvania. the mayors are here today to talk about their perspectives on the role of the federal government nonprofits. business leaders and communities and creating safe neighborhoods where individuals and families can thrive. please help me give a warm national press club welcome to mitch landrieu and philadelphia mayor michael nutter. [applause] [applause] >> good afternoon to all of you. the mayor and i come here to talk about an urgent national issue. young african-american men are being killed at alarming numbers in america. across america, it is a constant drumbeat of death of shooters and murder and day after day. we are losing a whole generation of promise. but the response to this daily carnage has been eerily quiet. we are numb to the violence and known to the dreadful consequences. the problem is so complex and painful that we are overwhelmed, and we often look away. maybe we are scared, but if we speak up and get involved, we will end up in the crosshairs or perhaps we have bought into the evil notion that the lives of young african-american men are somehow less valuable than the rest of us. we have all heard of before, just thugs killing thugs, there is nothing you can do about it. but this is a lie. every life is precious. these young men were not predestined to the state. we may never know what instances have might have been. lester 193 people, our fellow citizens were murdered in my city of new orleans. we have tragic stories in wake of destruction including young african-american men, many of whom knew each other. the sugar often becomes the victim tomorrow and so many caught in the crossfire of hell. this follows on us and we drown in the sire of them suffering the consequences where they are from let's talk about some of the recent victims. michael randel, tillman hawkins, billy mccormack. christine george. and her two children, to reset and leonard. we look at the circumstances with eyes wide open, and we are here to say that we are not afraid because we have great faith in american people. there is nothing broken here that can't be fixed. there is no problem here that cannot be solved. but the challenge of murder is wide and deep and must be addressed probably as an issue of public health with close connections to economics and education, poverty, law enforcement, and yes, american culture. here's the point. now is the time for federal and state, is based not-for-profit space not-for-profit to turn the tide. it is time to recognize her own personal responsibility and to improve our communities and change the culture of violence. we need everyone on board, every parent and grandparent, every pastor, every coach and friend and neighbor. this violence will not stop until we all get involved. we may not all be at fault, we all have a responsibility to take on this fight is to find an answer. we are not all at fault. but we are all responsible. as doctor king wrote, we are tied together in a single part of destiny. it affects all indirectly. young black men are dying in america. does america notice? last year our fellow citizens were murdered in my city of philadelphia. 331 tragic stories in the wake of destruction and heartbreak. generally 75 to 80% of the victims and perpetrators. many very young. each violent act tears at our nation's soul is in each murder leaves a wide wake of destruction on the long line of victims. a child who loses a father, a mother whose heart is broken in a family left alone. and in a downward spiral of violence, begets violence. today's victim picks up a gun and tomorrow to victims, a perpetrator and the victim. murder doesn't just happen. this is fed by poverty and hopelessness. for many that is a deck stacked against them from day one. inadequate health care, no jobs. poor schools. the cycle of poverty is chewing up another generation and spits out the results for all of us who see criminals terrorize communities descended hard-working people struggle to hold the line. indeed, during these past decades i have seen a change where i grew up in the sense of community has diminished. and we shared a collective responsibility together. now, not that communal fellowship does not seem to exist. now the mindset is it is not my business or my fault. so do the expectations of those that live there and from this downward slide comes the various bills that we face today, including the spirit of murder. it is not too late, we must change. every life is precious. this is a national problem with national implications that deserves everyone doing their part, local and state and federal governments, teachers and pastors, friends and neighbors. now is the time to say what needs to be said. to do what needs to be done, period no more nice talk or happy talk or talking to be talking. only result and actions. if we do not have the urgency to stand up now and say enough is enough, then when? >> we are running out of time. if we do not have the urgency to stand up now and say it enough, then when? every minute we wait may cost us a life. before, an average of 40 citizens will be killed, and the average american neighborhood today. america cannot be strong abroad. if we are weak at home. i think in our neighborhoods and poorly economically and for the good of this nation's strength and security we must do more. each generation comes from this point. each generation makes a choice. each generation for a moment rids that arc of history and bends it one way or the other. during the march on washington 50 million years ago, 50 million children took that turn and demanded that america live the creed creed and sacred promise of our life and liberty and the pursuit of happiness injustice was all. in a million ways since that moment in 1963, america has moved along. but somewhere along the way, something has gone terribly wrong. congressman john lewis said we did not get arrested and go to jail. we did not see the marks for young men to continue to kill each other. doctor king did not take a bullet and congressman lewis did not take a beating for this drumbeat of death and violence to become a way of life. i want you to consider this. from 1980 through 2012, 626,000 people, american citizens, a disproportionate number an african-american man are murdered on the streets of america. that is more americans that were lost during world war i, world war ii, korea, vietnam. the persian gulf war, the war in iraq, the war in afghanistan. combined. so, it is clear that the catastrophic death remain strange fruit from the same of hatred and injustice and a quality of this nation's original saying. as william faulkner noted for us, the past is never dead. it is not even past. we have come far, but what will it take for our nation to take on these burning issues today? fifty years ago, it was the bombing of the 16th street baptist church and the death of little kids that galvanized the nation. today in the shadow of the recent attack, not much has changed. just last week in chicago 13 people were shot, including a 3-year-old. in the mid-middle of innocent children doesn't seem to spur us to act. indeed it was early, this month in new orleans when he was shot and killed as she was held in her babysitter's arms. days later, another woman was sluggish was on the couch in her living room in the middle of the night. including his grandma's car and a bullet meant for in other in the head killing him. they have a long line of individuals, breanna alan cumming age five, edward barton, kendall and kelsey fulton. fifty years ago the nation wept for cynthia wesley, carole robinson and denise mcnair. the four little girls killed by the ku klux klan at the 16th street baptist church. today, the same young faces and the same innocence lost. the same potential snuffed out, not so much as a whisper. and this cannot stand. it is time for the nation to finish the work of abraham douglas and abraham lincoln and martin luther king. the current situation to violence in america is perfectly captured by a federal report from the national commission of civil disorders. this blue-ribbon commission created by the president reports that our nation is moving into societies. one black and white and separate and unequal. and that the violence is foreshadowed by an accumulation of unresolved grievances and by widespread dissatisfaction. the commission's recommendations are straightforward and basic. better housing for black men and women outside of the areas, investment in public education. new major public works projects that include job training. and a stronger safety net. these recommendations resonate and this is our reality today. but this report was not written about today's situation. it was written in 1967, 46 years ago. by a group better known as the turner commission, which was created by president lyndon johnson in response to the writing in detroit and los angeles and chicago. in 1967, the federal government, just as some in government do today, largely ignore the truth and the commission's recommendation. now our problems are difficult and bigger to resolve. black men are becoming an endangered species, dead or dying. no education, money, health care, or stability in the pressure of poverty takes a toll and becomes despair, hate, it grows in the violence spread it grows like a virus. it often ends in tragedy, bloods in the street. we justify this with deception. not my problem, not my neighborhood, not my children and dogs killing thugs and there's nothing we can do about it. let me be clear poverty is not an excuse for violence but it is a major explanation for the many negative life-changing circumstances and outcomes in america. >> but there is something that we can do. there is something that we must do. here is the truth on the issue of violence. as a society, we have lost our way, like a fine choking a plan, it tightens the grip on the situation. we have implemented a cutting-edge murder reduction strategy called for life. it is smart, holistic and it hits the streets. prevention and helping our young people and families succeed is the name of the game. so we support innovative reforms in our schools and a recreation department and we launched the innovative cease-fire initiative to help to mediate conflicts and stop the cycle of violence. earlier this week we kicked off season five of midnight basketball where every saturday night how this came from high crime areas and we connect them to their jobs or whatever else they need so that they can get out of the life and into the real game that matters. but step one is to stop the bleeding. to stop the shooting. we have to stop the shooting first. so we are focused on enforcement and beat up on homicide and we have gotten the precise with us and focus on games, established a new multi-unit dating agency, including u.s. attorney for the east that is with us today. >> to fight the scourge of murder we have sent a message through those terrorizing our neighborhood, or else we are coming for you. and all of the people that you hang out with. we are making progress. last year murder and violent crime is on the ride and train rides. but overall murder was down and out is down 25% compared to this time last year. our progress is promising. but it is really just a drop in the bucket against this tighter wave of trouble pulling away. the pledge of allegiance asserts that we are one nation, indivisible, with liberty and justice for all. indivisible means one. it means not capable of being divided. that is what it means to be an american. we have a shared destiny whether you live in north philly come in the south side of chicago, new orleans, southeastern dc, or right here in this very spot. therein lies part of the message for today, preventing murder and stopping violent crime must become a national priority to be faced together as one nation indivisible. so we come to you, mayor nutter and i come to you as generals in wartime and we are telling you that we need a surge on the streets of america. local and state and federal government each need to do their part. churches and schools, friends and neighbors, mothers and fathers, they each need to do their part. washington is broken. it is time for our country to do what is difficult for the sake of doing what is right. >> in 2012, three out of every four philadelphia homicide victims are african-american men. that is 236 people. last year in 2012, 193 murders in new orleans. 419 in new york city, 127 in memphis. 331 in philadelphia. 113 in st. louis, 218 in baltimore. 386 in detroit. on average, 40 people lost everyday to this crisis. this crisis of murder. a body count higher than 9/11 every 2.5 months. if you think about this, if the ku klux clan came to villanelle healthier, if they kill black man, the city would be on lockdown. the national transportation safety board would result in safety. if many white kids were killed, there would be hell to pay. and if international terrorists killed anyone of any race, we would hunt them down for decades and bring them to justice no matter the cost or the time, we would just do it. and yeah, 236 african-american men murdered in one sitting, not one word. no hearings on the hill, no investigations, the specialist committees or nothing but signs. on september 11, the united states suffered a horrific attack with our country and citizens. the 9/11 commission was created a year later. eighty top-notch staffers and a budget of $50 million, a commission of over a year and a half interviewed immigrants and left no stone unturned. a final report with dozens of recommendations. .. here is the point. it as more thans, if something is a priority like national security after 9/11. we find a solution, or we make one. here is the crisis. thousand black, men, and boys and many other americans die ever year and evidence in ur

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