[inaudible conversations] welcome. Committee will come to order. Committee on the Budget Hearing today on the congressional budget offices budget and Economic Outlook will commence. Well hear testimony from director swagel through the congressional budget office. Welcome. Without like to yield myself such time as a may consume. We are talking about fisa mac this week, which is an issue of National Security. And want to quote admiral mullen, at a hearing defense hearing where when asked what the biggest threat to nationals could do was come his response was the biggest threat to National Security is our National Debt. Jerome powell the fed chairman who probably is loath to opine on fiscal policy in the 60 minutes interview said the National Debt, our fiscal path, is completely unsustainable, and its an urgent matter that we must address. I think thats significant. Thats some backdrop to the budget baseline update on february. Was recently in may of 23 and then this recent update here in february. Bottom line is, on valentines day when you think about how much we love our significant others, one could ask how much do we love the country . How much do we love our childrens future in the country . Well, as shakespeare said, let me count the ways. Maybe the ways were not letting our country, 2,020,000,000,000,000 in debt for the next ten years. 34 trillion record, record high to 54 trillion. Clearly the mandatory spending is driving this. Demographics but also inflation. Inflation is significant. We will dig into that because of the costofliving adjustments in these entitlement programs we are spending a lot more money. Not to mention the 10,000 baby boomers retiring today. That adds to this unsustainable fiscal path. Interest costs, interests, Interest Rates are recently in record highs, and interest expense on the debt is exploding. In fact, the revision from may to february, just months, was 125 billion in additional cost to service the debt. Thats more than Homeland Security department. Thats more than the budget of commerce and education. The debt or the interest on the debt rather is now higher than when we spent on all of National Defense. If the 870 billion rejections come true. Some particularly upwards of 1 trillion. Of the the 20 trillion in additional debt, because of the current policies and programs in the federal government, we are going to see over 60 of all of that cost in interest alone. Not anything to address the solvency of our Senior Safety nets, not anything to help ensure our soldiers and sailors are safe and successful in the most important job to provide a common defense. Not a dollar or dying to infrastructure. Just hang china, japan, and other bondholders of u. S. Treasuries has of our massive deficit spending and debt appetite, which is 1. 7 trillion the annual deficit last year, which is more than the entire discretionary budget that we are fighting over. And often between my own party. So theres great concern, and yet theres a Silver Lining in your report. Im anxious to more about it, dr. Swagel. You mentioned that one bright spot is that the deficit spending is actually gone down yearoveryear in the short run. It is eclipsed by the growth in mandatory and interest in the ten year but yearoveryear spending goes down because republicans decided to use basically the action forcing mechanism in moment of the debt ceiling to bring my democratic colleagues to the table and negotiate a spending cap deal. That fra spending cap those bipartisan that we passed and the president signed into law will save 1. 6 trillion over ten years. So as moodys and fitch mention in the report, as he downgraded our Credit Rating and, and our outlook, we need to do more fra deals the reduce spending, but we need to focus on mandatory programs. By the way, in ten years mandatory spending, or the spending which is on autopilot, goes from under 75 of the total budget of the United States, to 80 or 79 , 9 , almost 80 of the entire budget. So we have a bipartisan Fiscal Commission, dr. Swagel, that would focus on the longterm unfunded liabilities that would address what fitch enmity suggested that we have a longterm plan and that were both parties at the table to address it. If we can keep doing the fra, modest improvements on the controlling spending on discretionary and get serious about reining in this runaway spending on the mandatory side, we might say this country. We might give Jerome Powell something to be more confident and sanguine about with respect to americas fiscal future. Again, thanks to come. We appreciate your time. And insights. Without i yield to my Ranking Member for as much time as he may consume. Thank you, mr. Chairman. Welcome back, dr. Swagel. There is no debate, none whatsoever. Americas economy is a strongest in the world, and in the of other developed nations. No economy on earth has recovered more quickly and more strongly than that of the American Economy. Here are the facts to back that up. There have been just under 15 million jobs created since President Biden took office. In fact, we may very well hit the 15 million mark next month. More jobs created in this president ial term than any other Previous Term in history. The threemonth average job growth is 289,000 jobs a month. The Unemployment Rate at 3. 7 has now been under 4 for the last two years, historic. This economy now has, to those who spread the false claim that we are just regaining the jobs lost during covid, consider this fact. The Economy Today has 5. 4 million more jobs than before covid. In 2023, gdp growth was 2. 5 yearoveryear. And on inflation, which is ravaged every single economy on earth as we came back from covid, inflation here in the United States has fallen from the peak of 9 last summer to now only 3 . And finally, Consumer Confidence which was one area that was until recently lagging, Consumer Confidence has turned around, and now hit a twoyear high. None of this was achieved by accident. It happened because with our nation was struggling, democrats and this administration worked together to take action to rescue our economy, invest in working families, rebuild our infrastructure, and bring manufacturing back to america. So lets make sure as we move forward we dont do anything that risks these historic economic gains. Now, transitioning, dr. Swagel, to what we will hear from you in terms of next year projection and perhaps longer term the next year, we do of course in the longterm have our challenges. Every single nation in western civilization is having to do with the fact that our population, or i should say the percentage of those who are older, is increasing. And that does put certain physical demands on our entitlement programs. But i remind people fiscal remind people who sometimes forget when we say entitlements, these are earned benefits, Social Security, medicare. These are programs that workers paid into over a lifetime of work. As we are looking to address in the longterm the challenges we have with both trust funds, we must do nothing whatsoever that would imperil those programs, or pushed through devastating cuts that are absolutely unwarranted and unjustified. So, dr. Swagel, i will, many more things i could send this topic but i will posit there and i look forward to you hearing from her testimony. Thank you thank you, mr. Chairman. You back. Thank you. Mr. Boyle if any of the member has an Opening Statement i hold the record open to the end of the day to accommodate those members who may not have prepared written statement. I would like to recognize director swagel now, and thank you again for his time. I yield the floor to you for five minutes. Thank you, chairman arrington, Ranking Member boyle, members of the committee. Thank you for inviting me to testify about the Economic Outlook. I will talk first about the federal budget and then briefly discussed economics. In the budget projections we released last week the deficit grows at 2. 6 trillion in 2034. Measured in relation to economic output, deficits during the coming decade are about 50 larger than their historical average over the past 50 years. Net interest costs are a major contributor to the deficit. They are equal to about threequarters of the increase in the deficit from 2024 to 2034. Why the end of that tenure period net interest cost of roughly 1. 5 times larger than either defense or nondefense Discretionary Spending. Also boosting deficits are two familiar underlying trends, the aging of the population and growth in federal Health Care Costs per beneficiary. Those trends put upward pressure on mandatory spending. Measured in relation to economic output, federal debt held by the public prizes from 99 in 2024 to 116 in 2034, surpassing its historical peak, yet continues to rise reaching 172 of gdp 30 years out. From 2024 to 2033, the deficit is about 7 smaller than we projected last year, primarily as a result of the fiscal responsibility act of 2023 and the subsequent continuing resolution. Together, those laws those laws reduce the growth of Discretionary Spending including the effects of debt service, lets set of changes in total reduce deficits i 2. 6 trillion over trillion dollars over the next ten years. Thats all that much is that of changes. In our projections, the deficit also smaller than it was last year because economic output is greater, partly as a result of more people working. The labor force in 2033 is larger by 5. 2 Million People, mostly because of higher net integration. As a result of those changes in the labor force we estimate that from 2023 to 2034 gdp will be about 7 trillion larger and revenues will be higher by about 1 trillion that wouldve been other. Immigration is also so she would increase spending and with many other effects and we continue to assess the implications of immigration for revenues. The two key factors partially offset the deficit reduction compared to last years projections, the first is that net interest cost rise as result of higher Interest Rates. And then second, is that the cost of the energyrelated tax provisions are much higher than the staff of the joint committee on taxation originally projected. Those costs reflect new emission standards, Market Development and actions taken by the administration to government the tax provision. Our next update to this budget projections will come this spring and will incorporate the actual data about 2023 budget outcome that typically accompany the release of the president s budget, as well as other new information including about any new rules, any new administrative actions that have come into place since early january when we finalize the projections im talking about today. To keep you informed on a regular basis about the status of the deficit we issue the Monthly Budget review showing federal spending and revenue totals for the previous month and the fiscal year to date. Let me briefly turned to the economic projections. The u. S. Economy grew faster in 2023 that it did in 2022 even as inflation slowed to reduce the Economic Growth slowing 2024 with slightly higher unemployment, and continued lower inflation. We expect the Federal Reserve to eventually respond by reducing Interest Rates starting around the middle of the calendar year. Since february 2023 when we last published our full Economic Forecast forecast we have lowered our projections of Economic Growth and inflation for this year, in part because last year was so strong. We expect Interest Rates to be a bit higher over the next couple of years then we projected last year in 2027 are projections were similar. Let me stop their unhappy to be an happy to take questions. Thank you, dr. Swagel. Now begin with the question and answer session. I give myself five minutes. So when i think about whats happening with the cost of living in this country, i see it as an imbalance between supply and demand. I just want to make sure as an economist you understand it the same way. We had an administration, policies of this administration that squeezed supply with higher taxes, with higher and more regulations, higher costs, and with paying people more than they made in the previous job for for a long time which created a labor shortage. We still have lower job Participation Rate than we did prior to covid. Thats the supplyside squeeze. On the demand, overstimulating the man we flooded the market with federal money. Started with the trillion dollars in socalled covid relief. We had the trillion from prior code relief unspent. The irony was supposed to be deficit reducing, or at least pay for itself. Now i think you update is it will cost 300 billion in additional deficit spending. Add the total debt, do debt since this resin has been in office, is 6 trillion. So youve got squeeze in supply and overstatement to man. You have record fortyyear inflation. Is that how you see it and is that an accurate depiction of what has brought us to the recent inflationary environment . Thats consistent with the way we look at inflation, that imbalance between the net and the supply constraint. Is inflation causing an increase in mandatory spending because earned benefit programs and other mandatory spending programs are going up because there is a cola or an index for and thats causing tens of billions of dollars in increased cost to the taxpayers and in our budget forecast . Yes, thats right. Inflation was that into the mandatory spending and it also enters the interest goes with high inflation translates into higher Interest Rates speed is why our interest going up . Are interested going up to try to tamp down on inflation by causing growth to receive so that we can pull off this costofliving crisis . Isnt interest, art interest hikes directly related to inflation, which are directly related to the overspending and the squeezing of the supplyside . Is that a fair characterization. I think thats right that the fed respond with high Interest Rates by taking action that high inflation come sorry. By raising interface. I try to become about to blend blame the president for everything, my democratic colleagues for everything, but it think there failed economic policies and their unbridled spending has put us in a situation where we had to bring these costs down. Lets talk about the interest for a minute. Prior to President Biden taking office, your projections over the ten years for interest expense related to servicing the debt was about 4. 5 trillion. Today, its over 12 trillion. I think that the interest costs for the year the president took office was about 340 billion. Today, your new projection is, as i said, higher than the expense of the National Defense of the greatest country and military in the world, 870 billion. Is that a fair depiction of our Balance Sheet and some of the sector . Absolutely. You said, interest costs are not about defense spending. So republicans were much maligned for pushing back on the debt ceiling. It was, to me, a flashing red light, if not yellow, saying your debt is now at the highest levels, debt to gdp. The path isnt sustainable. The unfindable i believe 30 years of 120 trillion. We were accused of being reckless for saying wait a minute, we have an opportunity to have a conversation, republicans led the debt ceiling negotiations. As a result we got the fra deal. Some of us including the thought it should be more aggressive at reducing spending on the discretionary side. But regardless, the bipartisan outcome was a reset of the baseline and Slower Growth in discretion, sega 1. 6 trillion or is that a fair characterization. Was right and thats what you see in our projection, the change in the deficit, lord death of his is coming from the legislative action. Well, my time is expired so i will now yield to my Ranking Member for five minutes for his questions. Thank you, mr. Chairman. Its a story in my district yesterday. I appreciate you not blaming President Biden for that snowstorm. In the litany of things that democrats and the president are sometimes blame for. One thing i think that the president and democrats in congress can be credited for is this remarkable economy that i talked about in my Opening Statement. Approximately one year ago probably the last time, well, you were last year last week, but you also hear about a year ago sitting at the table. Everything you could read from bloomberg to forbes to down the line was projecting a recession. Literally one headline from about a year ago said 100 chance of a recession. Did we end up having a recession this past year. Was no. It doesnt look like it. And i would say our Economic Forecast is consistent with that come with a sort of what people think of as a soft landing. It has been a remarkable economy and Economic Growth. Isnt there an