[Senate Hearing 114-459]
[From the U.S. Government Publishing Office]










                                                        S. Hrg. 114-459

                   UNDERSTANDING AMERICA'S LONG	TERM
                             FISCAL PICTURE

=======================================================================

                                HEARING

                               before the

                              COMMITTEE ON
               HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS
                          UNITED STATES SENATE

                    ONE HUNDRED FOURTEENTH CONGRESS


                             FIRST SESSION

                               __________

                              JULY 9, 2015

                               __________

        Available via the World Wide Web: http://www.fdsys.gov/

                       Printed for the use of the
        Committee on Homeland Security and Governmental Affairs





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        COMMITTEE ON HOMELAND SECURITY AND GOVERNMENTAL AFFAIRS

                    RON JOHNSON, Wisconsin Chairman
JOHN McCAIN, Arizona                 THOMAS R. CARPER, Delaware
ROB PORTMAN, Ohio                    CLAIRE McCASKILL, Missouri
RAND PAUL, Kentucky                  JON TESTER, Montana
JAMES LANKFORD, Oklahoma             TAMMY BALDWIN, Wisconsin
MICHAEL B. ENZI, Wyoming             HEIDI HEITKAMP, North Dakota
KELLY AYOTTE, New Hampshire          CORY A. BOOKER, New Jersey
JONI ERNST, Iowa                     GARY C. PETERS, Michigan
BEN SASSE, Nebraska

                    Keith B. Ashdown, Staff Director
                   Satya P. Thallam, Chief Economist
              Gabrielle A. Batkin, Minority Staff Director
           John P. Kilvington, Minority Deputy Staff Director
     Troy H. Cribb, Minority Chief Counsel for Governmental Affairs
             Katherine C. Sybenga, Minority Senior Counsel
                     Laura W. Kilbride, Chief Clerk
                   Lauren M. Corcoran, Hearing Clerk
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                   
                            C O N T E N T S

                                 ------                                
Opening statements:
                                                                   Page
    Senator Johnson..............................................     1
    Senator Carper...............................................     3
    Senator Enzi.................................................    12
    Senator Tester...............................................    14
    Senator McCaskill............................................    20
Prepared statements:
    Senator Johnson..............................................    31
    Senator Carper...............................................    33

                                WITNESS
                         Thursday, July 9, 2015

Hon. Keith Hall, Ph.D., Director, Congressional Budget Office
    Testimony....................................................     6
    Prepared statement...........................................    35

                                APPENDIX

Chart referenced by Senator Johnson..............................    47
Chart referenced by Senator Johnson..............................    48
Chart referenced by Senator Johnson..............................    49
Chart referenced by Senator Johnson..............................    50
Chart referenced by Senator Johnson..............................    51
Chart submitted by Dr. Hall......................................    52
 
            UNDERSTANDING AMERICA'S LONG-TERM FISCAL PICTURE

                              ----------                              


                         THURSDAY, JULY 9, 2015

                                     U.S. Senate,  
                           Committee on Homeland Security  
                                  and Governmental Affairs,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10:03 a.m., in 
room SD-342, Dirksen Senate Office Building, Hon. Ron Johnson, 
Chairman of the Committee, presiding.
    Present: Senators Johnson, Lankford, Enzi, Ernst, Sasse, 
Carper, McCaskill, Tester, Booker, and Peters.

             OPENING STATEMENT OF CHAIRMAN JOHNSON

    Chairman Johnson. Good morning. This Committee hearing will 
come to order.
    I want to welcome the Director of the Congressional Budget 
Office (CBO), Dr. Keith Hall, here today and certainly thank 
you for your time and your appearance and your thoughtful 
testimony.
    The issues we are going to deal with in this hearing are 
difficult. I was speaking to the Director ahead of time. How do 
you convey to the American public the depth of the problem so 
that we collectively can take the first step in solving any 
problem, which is admitting we have got it? I have done a lot 
of problem solving in my manufacturing background and you have 
to first lay out the reality, understand the definition of the 
problem, describe it properly, but you really have to take that 
first step and admit we have really got a problem, if you have 
any hope of solving them.
    This Committee has a mission statement, and I do not think 
we can repeat it enough. It is to enhance the economic and 
national security of America. And, I think this hearing is 
going to address both of those components, because I believe, 
and I agree with the former Chairman of the Joint Chiefs of 
Staff, Admiral Mike Mullen, when he said the greatest threat to 
our national security is literally our debt and deficit, and we 
are going to be talking about our deficit now.
    I would define the problem we are facing in terms of our 
debt and deficit not as a 10-year budget window problem, which 
is so much of what we are always grappling here with our 
budgets, it is the 10-year budget window. What we really have 
is we have a 30-year demographic problem here. We have all the 
Baby Boom generation people like Senator Carper and myself. We 
have white hair. Yours is not quite as white as mine----
    Senator Carper. It is getting close. That is OK. At least 
we still have hair. There you go. [Laughter.]
    Chairman Johnson. We are retiring at the rate of 10,000 
people per day. We have made all these promises to the Baby 
Boom generation and we really do not have a way to pay for 
them. We have to step up to the plate and admit that.
    Part of the problem is we are not admitting it as political 
leadership, and I have to repeat this story because it is 
pretty relevant. I was in the White House. To President Obama's 
credit, he did go out to dinner with a number of us, and 
partly, maybe largely because of my prodding, I asked the 
President, well, if you are serious about making a dent in our 
debt and deficit, make your White House staff available to us. 
Let us start working. Let us try and find those areas of 
agreement, which is what we are trying to do in this Committee. 
Do not worry about things that divide us. Concentrate on the 
areas of agreement. I know Senator Enzi is a pro at that in 
terms of legislation. What can we agree on?
    And, so, I brought my accounting skills. I brought that 
problem definition skill. So, we were in the White House for a 
2-hour meeting and President Obama came in for the last half 
and, of course, he wanted everything on the table. I said, fair 
enough, Mr. President. If you want everything on the table, 
here is how you do it, and I slid in front of him a chart\1\ 
that looks something similar to this, 30 years by decade. Here 
is the size of the deficit. Use your bully pulpit. Take the 
truth to the American public. Make sure the American people 
understand the depth of the problem so that, collectively, we 
can take that first step in solving any problem, which is 
admitting we have one.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 48.
---------------------------------------------------------------------------
    You know what he said to me? He said, ``Ron, we cannot show 
the American public numbers that big. If we do, they will get 
scared. They will give up hope.'' And, he says, ``Besides, Ron, 
we cannot do all the work. We have to leave some work for 
future Presidents, future Congresses.'' That is not leadership. 
That is an abdication of leadership.
    So, again, the purpose of this hearing is to show the 
American people the truth. And, what we need to do, as much as 
I appreciate all the work CBO has done, their long-term 
projections--and again, let us stipulate, these are 
projections. It is hard to fully understand and predict out 
into the future. But, we can take a look at projections and we 
can compare those to previous history. And, as much as I 
understand the relevance and the necessity of looking at these 
things as a percentage of gross domestic product (GDP), the 
problem is, most people do not deal in percentages. We deal 
with dollars. That is how we pay for things. So, dollars are 
more relevant.
    And, so, I want to continue to work with Director Hall and 
the CBO and the economists there of trying to figure out a way 
to present the reality, the depth of the problem, to the 
American people so they understand it.
    I have a lot of charts and graphs. We developed a one-page 
income statement, which is on the chart\2\ right now, that 
pretty well lays it out. I mean, by the way, that is the 
purpose of any income statement. Describe reality, but describe 
reality for the purpose of directing action. This one-page 
income statement does that.
---------------------------------------------------------------------------
    \2\ The chart referenced by Senator Johnson appears in the Appendix 
on page 47.
---------------------------------------------------------------------------
    In one page, it shows pretty much the financial situation 
of America on an income basis, and it shows that Social 
Security will pay out about $14 trillion more in benefits than 
it takes in the payroll tax over the next 30 years. Medicare 
pays out about $34 trillion more. And then the rest of the $103 
trillion deficit over 30 years which we are going to be talking 
about today is interest on the debt. Three elements--Social 
Security deficit, Medicare deficit, and interest on the debt--
drive that $103 trillion unsustainable deficit. We need to 
understand that.
    But, let me just throw out one more little factoid here 
that I think, hopefully, will grab the attention of the 
audience, of the Members of the Committee, and hopefully the 
American public. We are all witnessing pretty much the collapse 
of Greece's welfare system, how unsustainable that model is. 
And, again, we hear this all the time. I have been here now 
4\1/2\ years and I have heard witness after witness talk about 
how our current fiscal situation in America is unsustainable. 
Let us just do a comparison.
    We calculated this number as of the end of the first 
quarter, so they are comparable between Greece and America. 
Today, or at the end of March, in America, every American's 
share of our current Federal debt as of March 31, 2015--every 
American's share, my share, my kid's share, my grandchild's 
share--is $56,710. By comparison, the share of every Greek's 
share of their debt in Greece is $30,786. So, Americans, on an 
individual basis, our share of our Federal debt is almost 
double what Greeks' share is of their Federal debt.
    Now, why do we not have the riots in the streets? Why do we 
not have a financial crisis today, like Greece has? Well, 
because we are the world's reserve currency and we can 
effectively print money to fund this debt. Greece's creditors 
have run out of patience. At some point in time, America's 
creditors are going to run out of patience. They are going to 
look at America and say, you are not very serious in coming to 
terms with the debt and deficit. We are not going to loan you 
any more money. Or, we are certainly not going to loan it at 
that interest rate. And, at that point, interest rates spike. 
For every one percent increase in interest rates, that is $180 
billion more that is added to our interest payments.
    That is what we are dealing with. That is what we have to 
try and convey. That is what we have to admit.
    So, again, I would ask unanimous consent to enter my 
opening statement into the record.\1\
---------------------------------------------------------------------------
    \1\ The prepared statement of Senator Johnson appears in the 
Appendix on page 31.
---------------------------------------------------------------------------
    With that, I will turn it over to Senator Carper for his 
comments.

              OPENING STATEMENT OF SENATOR CARPER

    Senator Carper. Thanks, Mr. Chairman.
    I, too, would welcome Dr. Hall. Thanks. It is very nice to 
see you again.
    And, I would ask that my full statement be made a part of 
the record.\2\
---------------------------------------------------------------------------
    \2\ The prepared statement of Senator Carper appears in the 
Appendix on page 33.
---------------------------------------------------------------------------
    I just want to respond and maybe add a couple of thoughts 
for us to keep in mind. Harry Truman used to say the only thing 
that is new in the world is history we never learned or forgot, 
and I want us just to go back in time a little bit. It is not 
that long ago we actually had four balanced budgets in a row, 
and we had a Republican Congress and we had a Democratic 
President, Bill Clinton. And, when he left office, he turned 
over a surplus and we had the strongest economy on earth. We 
were flying high.
    Eight years later, the next administration turned over an 
economy that was going down and some were afraid we were going 
to go down for the count. The week that this President, the 
current President, this Vice President, were sworn into office, 
that one week alone, we lost 600--628,000 people signed up for 
unemployment insurance. Think about that, 628,000. Two-and-a-
half million people lost their jobs in the last 6 months of 
2008. Another 2.5 million lost their jobs in the first 6 months 
of 2009. The budget deficit that year was $1.4 trillion.
    And, we have slowly but surely climbed out of here, and it 
is not just because of this administration, it is not because 
of the Congress. It is a lot of factors, and I hope--Presidents 
get blamed for stuff when it goes badly. They also sometimes 
get credit when things go well. But, we are in a hell of a lot 
better shape than we were, I think, 6\1/2\ years ago.
    The deficit for this year is--when the deficit hit $1.4 
trillion, it was about 10 percent of GDP. Ten percent, that is 
a lot. It is still about 3 percent of GDP. We think that is a 
lot.
    I am an old State Treasurer. I was Treasurer of Delaware 
when we had the worst credit rating in America. We were tied 
for dead last with Puerto Rico. We were in such bad shape that 
we would sell tax-exempt revenue anticipation notes--just to 
meet payroll and make our pension payments. We were the best in 
the country in overestimating revenues and underestimating 
spending. That is how we got to have the worst credit rating in 
the country. So, I bring sort of the thinking of an old State 
Treasurer and an old Governor to these jobs.
    I think there are, like, three things--let us just think of 
a pie chart of how we spend money in the Federal Government. 
Over half of it, entitlement spending. Over half of it is 
entitlement spending. About 5 to 10 percent is debt service. 
The biggest part of what is left is defense spending, and then 
the remainder is non-defense discretionary spending. We could 
wipe out entirely non-defense discretionary spending and we 
would still have a deficit. So, we have got some work to do 
here.
    The Bowles-Simpson Commission said there are really maybe 
three things we need to focus on, and one of those is 
entitlement spending that does not savage old people or poor 
people, but actually finds a way to save money in these 
programs, make sure they are going to be around for our kids 
and our grandchildren, and that is our challenge, and I think 
we have to be up to that. We cannot walk away from that.
    I think we are chipping away at the growth in health care 
costs, which used to be going up by 18 percent of GDP. We are 
down now about 17.5 percent. We are trending down in terms of 
health care costs as a percent of GDP. We have to continue to 
bring that down--find out what works, do more of that. So, 
entitlement reform, No. 1.
    No. 2, tax reform. Bowles-Simpson says broaden the base. 
Let us lower the rates. Whatever revenues we generate, we make 
sure that some of that goes for deficit reduction. I think that 
makes a lot of sense.
    And, the last thing that they said to do was to look at 
everything that we do, everything we do in government and say, 
how do we get a better result for less money, every single 
thing.
    I am sure everybody on the Committee remembers something 
that one of our constituents said to us, maybe at a hearing, 
maybe at home, that we just have never forgotten. I will never 
forget a town hall meeting when I was a Congressman. I used to 
do a lot of town hall meetings then. A woman said to me, ``I do 
not mind paying taxes, I just do not want you to waste my 
money.'' That is what she said. ``I do not mind paying taxes, I 
just do not want you to waste my money.''
    One of the reasons I want to be on this Committee is 
because we really focus on finding ways not to waste people's 
money, not to waste taxpayers' money.
    So, I am delighted that you are here, Dr. Hall.
    Let me say maybe one last thing. The idea of budgeting 
for--we used to budget for, like, year to year to year to year, 
and then maybe 5-year budgets and 10-year budgets, now we look 
out as far as 20 years. If you actually look out 20 years and 
look how much money we will actually save by implementing most 
of the Affordable Care Act (ACA), we save hundreds of billions 
of dollars over the next 20 years, even more than that. If we 
could somehow figure out how to do something close to 
comprehensive immigration reform, we would save hundreds of 
billions of dollars and our GDP would grow, as well.
    And, the last thing I would say is this. If we can somehow 
put our heads together and put our heads around a way to fully 
fund a 6-year transportation plan, robust 6-year transportation 

plan--McKinsey Global Institute just gave us these numbers. 
Here is what they said. One-point-eight million new jobs 
created and GDP to grow by 1.5 percent a year annually and that 
is worth doing, and it is also worth paying for, as well.
    I will leave it at that. We are glad you are here and look 
forward to hearing from you.
    I am going to be in and out. We are working in Finance on 
transportation funding right now, so I need to be in and out, 
so I apologize for that. But, thanks for joining us.
    Chairman Johnson. Good luck to you in those endeavors.
    So, it is the tradition of this Committee to swear in 
witnesses, so if you would please rise and raise your hand.
    Do you swear the testimony you will give before this 
Committee will be the truth, the whole truth, and nothing but 
the truth, so help you, God?
    Mr. Hall. I do.
    Chairman Johnson. Thank you. Please be seated.
    Our sole witness today is Dr. Keith Hall. He is Director of 
the Congressional Budget Office. On April 1, he became the 
Director. He has previously served as Chief Economist at the 
International Trade Commission, a Senior Research Fellow at the 
Mercatus Center at George Mason University, Commissioner of the 
Bureau of Labor Statistics, Chief Economist for the White House 
Council of Economic Advisors, and Assistant Professor at the 
University of Arkansas. Dr. Hall.

  TESTIMONY OF THE HONORABLE KEITH HALL, PH.D.,\1\ DIRECTOR, 
                  CONGRESSIONAL BUDGET OFFICE

    Mr. Hall. Thank you. Chairman Johnson, Senator Carper, and 
Members of the Committee, thank you for the opportunity to 
testify on the Congressional Budget Office's recently released 
assessment of the long-term outlook for the Federal budget.
---------------------------------------------------------------------------
    \1\ The prepared statement of Mr. Hall appears in the Appendix on 
page 35.
---------------------------------------------------------------------------
    CBO has frequently expressed concerns about the likelihood 
that, under current law, the Federal Government's debt will 
rise over the next few decades to a level rarely seen in U.S. 
history and we are pleased to provide some analysis that will 
help this Committee focus attention on that worrisome prospect.
    Let me first talk about that projected increase in debt. 
CBO's long-term outlook for the Federal budget has changed 
little since last year. If current laws remain generally 
unchanged in the future, we expect that Federal debt held by 
the public will decline slightly relative to GDP over the next 
few years as the economy continues to move toward greater 
recovery from the Great Recession.
    After that, however, the effects of our aging population 
and rising health care costs will become more apparent and 
growing budget deficits will push debt back to and above its 
current high level. The deficit will grow from less than 3 
percent of GDP this year to more than 6 percent of GDP in 2040. 
At that point, the already high Federal debt held by the public 
would have risen above 100 percent of GDP.
    When making comparisons between amounts of debt in 
different years, CBO typically expresses debt as a percentage 
of GDP. Although that measure is not perfect, there are other 
ways of putting the amount of debt into perspective. This has 
the advantage of giving some indication of the ability of the 
United States to reduce or eliminate debt in the future. It 
accounts for changes in price levels, population, output, and 
income over time, all of which are important in assessing the 
sustainability of the budget. Just as a household's income and 
assets are a measure of how much debt it can reasonably bear, 
GDP broadly conveys the means available to finance debt held by 
the public.
    I should reiterate that CBO made these projections under 
the assumption that current law remain the same. In that case, 
rising incomes would push tax revenues to a level that is high 
by historical standards relative to GDP. Also, spending for 
programs other than Social Security and the major health care 
programs would be quite low by historical standards relative to 
GDP. If the law did change in a way that kept revenues and 
spending for those programs close to their historical averages, 
the result would be even higher Federal debt.
    Though the long-term outlook has worsened dramatically 
since 2007--in that year, CBO projected that the Federal debt 
would be below its historical average in each of the next 25 
years if current laws at that time had remained unchanged. But 
then some major changes came along, specifically the Great 
Recession and some significant alterations to tax and spending 
laws.
    In 2009 to 2012, budget deficits were the largest relative 
to the size of the economy in any year since 1946, causing the 
government's debt to soar. The total amount of Federal debt 
held by the public nearly doubled during that period and is now 
about $13 trillion. That is equivalent to about 74 percent of 
the economy's annual output, a higher percentage than at any 
point in U.S. history except a brief period around World War 
II.
    Under current law, debt is projected to rise continuously 
relative to the size of the economy in the long run. That path 
could not be sustained indefinitely. Investors would eventually 
begin to doubt the ability of the government to cut spending or 
raise revenues by enough to pay its debt obligations. Such a 
fiscal crisis would present policymakers with extremely 
difficult choices and would probably have a substantial 
negative impact on the country.
    Unfortunately, there is no way to predict with any 
confidence whether or when a fiscal crisis might occur in the 
United States. In particular, there is no identifiable tipping 
point in the debt-to-GDP ratio to indicate that a crisis is 
likely or imminent. All else being equal, however, the larger a 
government's debt, the greater the risk of a fiscal crisis.
    Of course, budgetary outcomes are uncertain. Under current 
law, unexpected changes in the economy, demographics, or other 
factors could probably lead to outcomes different from those 
that we have projected. Nonetheless, our analysis shows that 
under a wide range of possible outcomes, tax and spending 
policies under current laws will probably leave the Federal 
debt in 2040 at a much higher level than it is now, which is 
already elevated by historical standards.
    So, how large would policy changes need to be to lower the 
trajectory of Federal debt? To put the Federal debt on a 
sustainable path for the long term, lawmakers would have to 
make significant changes to tax and spending policies by 
reducing spending for the large benefit programs below the 
projected amounts, letting revenues rise more than they would 
under current law, or adopting some combination of these 
approaches. The size of such changes would depend upon the 
amount of Federal debt that lawmakers considered appropriate.
    Just holding Federal debt at its current high level of 74 
percent of GDP until 2040 would require significant changes in 
tax and spending policies. A combination of increases in 
Federal tax revenues and cuts in non-interest Federal spending 
relative to current law of about 1.1 percent of GDP in each 
year for 25 years would be needed. In 2016, this would be a 
spending and/or a tax revenue increase totaling about $210 
billion, and more than that for each year after that.
    Many combinations of policies could be adopted to meet such 
a goal. We have illustrated some of those in one of our figures 
from the written testimony that has been distributed to you. 
For example, if those changes came from increases of equal 
percentage in all types of revenues, they would represent an 
increase of 6 percent relative to current law for each year 
between 2016 and 2040. In 2016, for example, an average middle-
income household would have to pay $750 more in taxes, and more 
than that each year afterwards.
    Or, if the cuts came from cuts of equal percentage in all 
types of non-interest spending, that spending each year would 
have to be 5.5 percent less than projected. If the reduction 
was applied across the board to all types of non-interest 
spending, an average 65-year-old in the middle of the earnings 
income who retires in 2016 would see a reduction of about 
$1,050 in his or her initial annual Social Security benefits, 
more than that in each year afterwards.
    The more ambitious goal of returning public debt by 2040 to 
its average level over the past half-century, which is 38 
percent of GDP, would require more than that. This would 
require a revenue increase and/or interest spending decrease 
totaling 2.6 percent of GDP every year. This means an average 
middle-income household would have to pay $1,700 more in 
Federal taxes in 2016 and larger amounts in subsequent years. 
Or, by cutting non-interest spending across the board, average 
Social Security benefits for a 65-year-old in the middle of the 
earnings distribution would have to drop by $2,400 in 2016 and 
by larger amounts in later years.
    Regardless of the chosen goal for Federal debt, you as 
lawmakers would face tradeoffs when deciding how quickly to 
carry out policies. The sooner significant deficit reduction 
was implemented, the smaller the government's accumulated debt 
would be, the smaller the policy changes would be needed to 
achieve the particular long-term outcome, and the less 
uncertainty there would be about what policies could be 
adopted.
    Even if policy changes to shrink deficits in the long term 
were not implemented for several years, making decisions about 
them sooner rather than later would tend to increase output and 
employment in the next few years. Such decisions could hold 
down long-term interest rates, reduce uncertainty, and enhance 
businesses' and consumers' confidence.
    Thank you.
    Chairman Johnson. Thank you, Director Hall. Again, thank 
you for appearing and thank you and your staff at CBO for all 
your hard work.
    I think the question is, how do we grab the American 
people's attention with numbers, with financial data. I am an 
accountant, you are an economist. I like numbers. You like 
percentages. It is a difficult problem. It is something I have 
been grappling with for, literally, 4\1/2\ years.
    One of my attempts in this was really with a couple 
amendments that I offered that were adopted unanimously in our 
budget process this year. The guts of it says the Congressional 
Budget Office shall provide a projection of Federal revenues, 
outlays, and deficits for the 30-year period beginning with the 
budget year expressed in terms of dollars.
    This is kind of what I had in mind, and I want to keep 
working with you. I would really prefer this was a 
Congressional Budget Office chart so that we did not have to 
take the detailed information and try and grapple with it and 
come up with our interpretation, so it was incredibly 
authoritative, because this is extremely important, that we 
have a nonpartisan organization, an agency like yourselves, 
that definitively say, this is what this projection results in, 
in dollar terms, because, again, people do not pay for their 
electricity bill and food in percentages. They use dollars. So, 
Americans understand dollars.
    Let us start here, and this is your alternate fiscal 
scenario, done by decade. I think this lays it out pretty 
simply, and coming from the business side, I like the KISS 
principle, keep it simple. First decade, about $10 trillion of 
projected deficit, according to your alternate fiscal scenario. 
The second decade, $28 trillion. The third decade, $66 
trillion, for a whopping total over the next 30 years, 
projected deficit by your alternate fiscal scenario of $103 
trillion.
    Now, again, we are becoming immune to these massive 
numbers. Who can really understand them? So, I have added to 
this chart\1\ the dollar value of all private assets. The net 
asset base of America is $116 trillion. That is what we are 
looking at over the next 30 years.
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    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 48.
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    Now, I want to talk--let us take that one down and put up 
the next chart,\2\ because this is where I will convert to 
percentages on a relative basis, and it is really going to be 
the base of my first question. The numbers you were talking 
about in your testimony, it was really based off your baseline, 
correct, your baseline projection. I am showing the alternate 
fiscal scenario.
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    \2\ The chart referenced by Senator Johnson appears in the Appendix 
on page 49.
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    For me to take a look at projections--this is what I did in 
business, I would do my budgeting process--I would always take 
a look at history. Are these numbers relevant? Do they compare 
to history? So, what I have done--again, trying to keep it as 
simple as possible--I have laid out percentage of GDP for these 
spending categories the prior 30 years, from 1985 to 2014. Then 
I have CBO's baseline projection. And the third column is CBO's 
alternate fiscal scenario.
    So, let us just--again, trying to keep it simple--
entitlements, total entitlements, Social Security and health 
care, the last 30 years, about 7.7 percent of GDP, and under 
both scenarios, that is expected to rise to 13.1 percent. Now, 
that is--health care is the more difficult one to really 
project. Social Security is pretty darn close, right? I mean, 
we know because of demographics, actuarial math, that type of 
thing, we have a pretty good handle on Social Security over the 
next 30 years coming in with about a $14 trillion deficit in 
terms of what we pay out in benefits versus the payroll tax, is 
that correct?
    Mr. Hall. That is right. Health care definitely has more 
uncertainty.
    Chairman Johnson. But, again, so--but, this does show the 
dramatic increase, 7.7 percent to 13.1.
    Now, on defense, the last 30 years, on average, we spent 
about 4.2 percent, and this includes the 1990s where we really 
went pretty low historically as a percentage of GDP. According 
to your baseline, CBO's baseline says over the next 30 years, 
we will spend about 2.6 percent of GDP. The alternate fiscal 
scenario is 3.4. So, I guess when I take a look at this, 
understanding the problems in the world, OK, the threats to our 
national security, I look at that and I go, that is probably 
not realistic that we are going to be able to get away with 
spending only 2.6 or only 3.4 when historically we spent about 
4.2 percent. I mean, would you disagree with that?
    Mr. Hall. Well, our numbers came from averages, right, so 
the 2.6 percent is under current law and the bigger number was 
something close to long-term averages. But, you are exactly 
right that one of the uncertainties that are there in our 
forecast is something like a major war, another recession, 
something like that that would make the picture of the deficit 
look much worse.
    Chairman Johnson. Even 4.2, you take a look at the last 50 
years, what we had during the Korean War, I think we were at 10 
percent. During the 1970s and 1980s, I think we were 8 and 7 
percent. We are at historically low percentages of GDP spending 
already on defense.
    Let us go on to all other spending in the Federal 
Government. Over the last 30 years, it has been about 6.2 
percent of GDP. Your baseline says it will drop down to 4.6 
percent. Your alternate fiscal scenario is 5.9 percent, OK. And 
then interest, again, it is the plug figure, and it depends on 
what we think interest rates will be, and nobody really knows 
that.
    But, I guess the point I am trying to make, if you are 
really looking at how realistic are these projections, baseline 
versus alternate fiscal scenario, it kind of gives you a range 
of projections, I mean, I would look at this, and one of the 
reasons I use alternate fiscal scenario, I would say of the 
more likely scenario based on 30 years' prior history, I would 
just kind of look at alternate fiscal scenario. You could maybe 
even make an argument that that might still be low as projected 
deficits. Would you comment on that.
    Mr. Hall. Well, we wanted to be careful about predicting 
what Congress was going to do.
    Chairman Johnson. I understand.
    Mr. Hall. So, the regular baseline is under current law, 
but our alternate fiscal scenario is trying to look at the way 
that Congress has behaved in the past. And, so, we did make an 
effort to do that----
    Chairman Johnson. Oh, I know, and Congress is very 
difficult to predict----
    Mr. Hall. Yes.
    Chairman Johnson [continuing]. Other than we will continue 
to be somewhat dysfunctional.
    Let me go, with my remaining seconds here, let me go with 
the last point. No, first of all, leave on--I want to talk 
about revenues, because the last 30 years, on average, we have 
generated about 17.2 percent of GDP in terms of revenue of the 
Federal Government. Now, if you go back 50 years, it has 
probably been more around 18.1 percent. So, your baseline shows 
about 19 percent average over 30 years. The alternate fiscal 
scenario is really pretty much about that 50-year average.
    Now, let us go to the last chart\1\ here. This is a chart 
that shows what percentage of GDP we have raised in revenue 
comparable to the top marginal tax rate. How much are we going 
to try and punish success and how effective are we at punishing 
success and dramatically increasing the percentage of revenue 
we raise as a percentage of GDP? You can see, going back to the 
late 1950s when we had a top marginal tax rate of 91 percent--
now, I think that would give pleasure to a fair amount of 
people who would like to do that, let us stick it to the rich 
guys. We still only had about 18.1 percent average. Look how 
steady that is, regardless of the top marginal tax rate--at 91 
percent, at 70 percent, or 50 percent, or 28 percent, or 39.6 
percent.
---------------------------------------------------------------------------
    \1\ The chart referenced by Senator Johnson appears in the Appendix 
on page 50.
---------------------------------------------------------------------------
    So, I guess I want you to comment on our ability as a 
Federal Government to try and punish success and do it 
successfully so that we actually increase revenue to the 
Federal Government, because to me, it is somewhat of a fool's 
errand, and when you start dramatically increasing marginal tax 
rates, I would say you dramatically increase the disincentives 
for people to take the kind of risk taking that actually helps 
grow our economy.
    Mr. Hall. Well, I do not want to comment too much about 
specific tax policy things, but you are absolutely right that 
tax revenue has been fairly much around 18, 19 percent. There 
has only been a brief time where it was as high as 19 percent, 
to where we projected under our extended scenario, under 
current law. So, that is one of the things that I think is a 
caution, is under our, just our regular extended scenario, tax 
revenues get to a historically high level and we still have a 
really significant problem 25 years down the line.
    Chairman Johnson. Does this chart not basically show that, 
yes, we can attempt to increase revenue as a percentage of GDP 
by increasing marginal tax rates, but people change their 
behavior. I mean, this kind of gets back to the static versus 
dynamic scoring debate----
    Mr. Hall. Right.
    Chairman Johnson [continuing]. That I think this is a 
pretty darn good argument that if we are going to change tax 
policy, we really do need to understand the dynamic effect of 
those tax policies on people's behavior, and in some way, 
shape, or form--and trust me, there is a real complexity here 
in terms of deductions and what type of income, which I think 
is kind of silly, too, to have different rates on different 
types of income, income is income from my standpoint--we should 
dramatically simplify our tax code and I think you might have a 
little more responsiveness if it were not so complex.
    But, anyway, it is just very difficult to really take more 
than 18 percent away from the American public, is that not kind 
of--is that not what that chart pretty well shows?
    Mr. Hall. Historically, yes. It just has not been done. And 
let me just say, too, in part of our forecast, we do have a 
dynamic component in our economic forecast that underlies this 
and we do have some dynamic effect of the tax rate being to an 
historically high level. So, that actually does impact economic 
growth.
    Chairman Johnson. OK. Well, thank you.
    Our next questioner is another accountant, Senator Enzi.

               OPENING STATEMENT OF SENATOR ENZI

    Senator Enzi. Thank you, Mr. Chairman. I appreciate you 
doing this hearing. I know from experience that solving 
problems early is usually less expensive than solving problems 
late.
    I used to be the Mayor of Gillette and we had some 
infrastructure problems that we needed to solve and that 
required us to have some debt. I had to appear before Standard 
and Poors (S&P) and Moody's and answer how I was going to pay 
off this debt, and I was kind of stunned by some of the 
questions because they were all about our retirement system. We 
were a very young community, so we had everybody at the 
beginning of their retirement cycle, but what I discovered is 
that the questioners were on a panel to save New York City, 
which had a policy of pensions of full retirement at a very 
young age.
    Currently, Greece and other countries across Europe are 
experiencing economic crises that are due to their pension and 
entitlement promises that they cannot afford. Given CBO's long-
term outlook on the challenges we face, are there any lessons 
that we can draw from their problem in a short amount of time?
    Mr. Hall. Yes. Actually, I do think there is a very 
important lesson. Greece is going through a very difficult 
experience, and I think the main thing we ought to take from 
this is that it is extremely difficult to make fiscal policy 
decisions under the pressure of a financial crisis. So, this is 
my ``hurry up and make decisions.'' If you wait until the debt 
gets very large in the United States and we get something close 
to a fiscal crisis, then it is very difficult to find fiscal 
policy decisions that will solve your problem.
    Senator Enzi. In your testimony, you mentioned that Social 
Security would have to be, I think it was a $1,050 reduction in 
payments, and then more each year. Could you expound on that a 
little bit more.
    Mr. Hall. Sure. What we did was we figured out a fixed 
percentage of savings we would need to have from spending on 
Social Security, and the reason that it comes out to that, we 
were trying to look at something like an average person, what 
are the costs in 2016, and that number would go up. That is a 
yearly number, and it would go up based basically on GDP 
growth. If GDP growth went up, that number would go up and 
incomes went up. So, that was an effort just to give you some 
idea of a nice, simple impact on average people.
    Senator Enzi. But you meant that it would be just a few 
additional dollars each year, not a total $1,050 additional 
reduction?
    Mr. Hall. Oh, right. Yes, that is right.
    Senator Enzi. I am trying to----
    Mr. Hall. That is right.
    Senator Enzi. Because, otherwise, pretty quickly, people 
would be at zero.
    Mr. Hall. Oh, right. Right. Yes. No, that is a fixed 
amount, in percentage terms, anyway.
    Senator Enzi. What effect do you think that the collapse of 
Greece, if they do not meet their Sunday deadline, will have on 
interest rates for us? Will that make us a more secure country 
or will people worry about putting their money anywhere as far 
as buying bonds?
    Mr. Hall. Well, so far, the Greek crisis has not had a lot 
of effect, but probably the biggest effect is going to be 
through the exchange rate, and it would probably modestly 
affect our trade balance with the Eurozone. And, if Greece were 
to--so, I think in that respect, it would be fairly minimal. 
But, if they were to exit the Eurozone, I think we might get a 
bit more of effect, where the dollar would appreciate a bit 
further, Treasury rates would actually fall a little bit, and 
U.S. equity prices might fall a little bit if they actually 
pull out of the Euro.
    Senator Enzi. Because I keep worrying what will happen with 
our budget if the interest rate goes to a norm for the United 
States instead of hovering around the less than 2 percent that 
we are at now, which costs us $235 billion a year.
    Mr. Hall. Right.
    Senator Enzi. If that more than doubles, we will be 
spending more on that than we will be on national defense or 
all of the rest of the spending that we do that we have control 
over. There is a whole lot that you point out that we do not 
have control over.
    Now, former Canadian Prime Minister Paul Martin told the 
Budget Committee a year ago that the No. 1 problem facing 
Canada during their fiscal crisis in the 1990s was interest 
payments on the debt. According to Martin, the problem was that 
the Canadian people would not believe that writing checks to 
pay interest would hurt as much as writing checks to the 
government to pay for health care or for living expenses.
    Dr. Hall, what is the CBO's long-term outlook for interest 
payments on the debt in the country, and how does this compare 
to the amount that we will be spending on health care, for 
example?
    Mr. Hall. Sure. Well, this year, we forecast that our 
payment, the interest payments on the debt are equal to about 
1.3 percent of GDP. And in 25 years, under current law, that is 
going to go all the way up to about 4.3 percent of GDP. So, 
that is a pretty significant increase. And, of course, that is 
going to be sensitive to exactly how much interest rates go up 
over time.
    Also, right now, net Federal health care spending is about 
5.2 percent of GDP and it will go up to about 8 percent. So, in 
25 years, our interest payments will be about 4.3 percent. Our 
Federal health care spending will be about 8 percent.
    But, let me just point out one thing, though, that between 
2015 and 2040, our health care spending is going to go up by 
about, by our forecast, by about 2.8 percentage points. I know 
I am using a lot of percentages. I apologize. But, interest is 
going to go up by 3 percentage points of GDP. So, actually, the 
increase in the cost of interest will be more than the increase 
in the cost of health care under our projection.
    Senator Enzi. But 12.3 percent of GDP between the two will 
be a considerable amount.
    Mr. Hall. Yes.
    Senator Enzi. Now, you have also projected--CBO has 
projected for many years--and I realize you have only been 
there a short time, we appreciate all your efforts during that 
time--but CBO has projected for many years dramatically 
increasing outlays for federally funded retirement programs. I 
keep going back to the retirement programs. Indeed, CBO has 
also argued that revenues will be woefully insufficient to pay 
for these programs, which means that the government's borrowing 
requirement will be dramatically increased, as well.
    You suggested recently in testimony before the Budget 
Committee that this public sector borrowing will crowd out 
private borrowing, which will slow the pace of economic growth. 
Will this slower pace of growth also reduce worker 
productivity? Could this reduction in worker productivity 
result in slower wage and slower growth and fewer job 
opportunities?
    Mr. Hall. Yes, it will, and in our forecast, there is an 
interesting little rule of thumb. For each dollar that the 
deficit rises, domestic investment falls by between 15 and 50 
cents. So, there is a pretty big impact. And the effect of that 
deficit on investment, because it crowds out private 
investment--people's savings get pulled into funding the 
government rather than funding the making of goods and 
services--will lead to a smaller capital stock in the economy, 
less investment, which makes workers less productive and then 
decreases wages as a result, and we do have some estimates of 
the amount of income, the average income, how much lower it is 
because of the borrowing.
    Senator Enzi. Can you repeat that very first part? For each 
dollar----
    Mr. Hall. Yes. For each dollar that the deficit rises, 
domestic investment falls by between 15 cents and 50 cents.
    Senator Enzi. Thank you. My time has expired.
    Chairman Johnson. First of all, Dr. Hall, no need to 
apologize for using percentages. This is incredibly complex, 
there is no doubt about it, and that is what we are trying to 
do, is work with you to try and simplify it as much as possible 
so we all can understand it.
    But, I will make a commitment, by the way. This is just a 
first in a series of hearings. This is the overall macro look 
at the budget, trying to come up with some method of 
simplifying it. We are going to drill down into Social 
Security, a special hearing on that. We will do it on Medicare. 
We will probably talk about interest and the effect on the 
economy from that standpoint, as well.
    So, this is just the first in a series of hearings we are 
going to certainly have under my Chairmanship because this is 
so incredibly important and because it is complex. It is one of 
the reasons I do not think we have grabbed the American 
public's attention, which is what we need to do if they are 
going to, like I say, admit we have the problem to put pressure 
on us to fix it. Senator Tester.

              OPENING STATEMENT OF SENATOR TESTER

    Senator Tester. Thank you, Mr. Chairman. Thank you for 
holding this hearing. Thank you, Dr. Hall, for your testimony.
    As I look out into the crowd, there are a ton of young 
folks here. Are you guys all interns? Raise your hand if you 
are an intern.
    [Show of hands.]
    That is good. Well, I appreciate you being here, because, 
quite frankly, this conversation we are having today impacts 
you, actually, more than it impacts me, because you will be 
around a lot longer, I hope, and it is good to have you all 
here.
    Dr. Hall, you talked about the Great Recession and you 
talked about what transpired, and in that Great Recession that 
we had, when I got here in January 2007, and I think in about 
June 2007, I got notification from the Treasury Secretary that 
we were on the edge of a financial meltdown, or shortly 
thereafter. But, since that time, when our revenues have 
dropped and the safety nets like unemployment insurance kicked 
in, which caused our debt to explode, we have reduced our 
cumulative deficits by about $4.5 trillion since 2010.
    And, before that, as the Ranking Member had pointed out, we 
did have a balanced budget situation in the 1990s, which was 
followed by Vice President Cheney, I believe, saying the debt 
does not matter, which was followed by a tax cut and a war, all 
put on the credit card at the same time. That is when the 
economy was booming.
    And, so, to have the debt that we have today, with the 
economic downturn and some of the policies that were put in 
effect 10 or 12 years ago, should be no surprise to anybody. I 
am going to leave this Committee and go to an Appropriations 
Subcommittee in a second--we had a Defense Appropriations 
Committee where we used an overseas contingency account gimmick 
to take and put $40 billion additional dollars into that 
account all on the credit card and nobody is asking anything 
about it.
    Why? Because it is about war, and we can fight wars all 
over the world and that is OK. We do not need to have France's 
help, or England's help, or Australia's help, or any of our 
allies' help. We will do it all on the taxpayers of this 
country.
    So, if we want to deal with the debt and the deficit, we 
can talk about Social Security and we can talk about Medicare, 
and we need to, but if we do not talk about what we are doing 
with foreign policy in this country and how we are going to 
deal with infrastructure, highway infrastructure that is worn 
out that will leave the kids in this audience--and if you are 
under 30, I will call you a kid--with the lack of ability to 
have a 21st century economy, or many of you are probably going 
to college and you know you are going to walk out the door with 
$40,000 or $50,000 in debt and you are not going to be able to 
buy a house. That is a negative impact on the economy. Or, the 
fact we do not have an immigration bill and we are not funding 
research and development, so we are funneling all those jobs to 
India and Brazil and China and other places around the world.
    So, debt and deficit is important, Mr. Chairman, and if we 
do not take a look at a lot of the policies that get us here, I 
will tell you what Mr. Bernanke told me when he left office at 
the Fed. When I said, is the most important thing we are 
looking at the debt, and he said, no, the most important thing 
you need to look at is handing the people in this audience, the 
next generation, a 21st Century economy, because if you do not, 
you will never pay that debt down. We are not handing these 
folks a 21st Century economy because we are saddling them with 
so much debt, personal debt right out of the chute.
    We can solve this problem. It is going to take a lot of 
tough decisions. I think there are people around this dais that 
are willing to do it, and I think there are people in the 
Senate that are willing to do it, and I also think there are a 
lot of folks in the Senate that would rather play politics with 
this than get to the point, and that is the point I want to 
make.
    The question I have for you, Dr. Hall, is this. You talked 
about the debt. You talked about projections on the debt. Can 
we tackle this effort by spending cuts alone?
    Mr. Hall. Well, I want to avoid that issue because it is 
not my job, in a sense. It is your decision to----
    Senator Tester. I know that.
    Mr. Hall [continuing]. Obviously, it would be----
    Senator Tester. I just want your estimation. You do not 
need to get political. You can just say yes or no, and if they 
beat you up for it, they will beat you up for it regardless, 
so--these are good people. They will not do that.
    Mr. Hall. Well, actually, the scenarios I just gave you 
were ways to hit targets totally by spending and totally by 
revenue. So, I did give you sort of the two extremes there.
    Senator Tester. All right. And you are not on this side of 
the dais, but if you were on this side of the dais, would you 
be looking at both or would you just be looking at spending 
cuts or tax increases?
    Mr. Hall. Well, again, it is--as a CBO Director, it is not 
my job to recommend policy. I will talk to you about the 
possible impact of specific things, and we actually have a 
document or two giving you some options and what the likely 
effects would be on how to improve the budget situation.
    Senator Tester. Well, I appreciate that, although I was 
hoping for a better answer, a more direct answer, but that is 
the way it is.
    I want to just say that I think the debt is very important 
to handle. I think the American people are very concerned about 
this. I hear about it every time I go home. Every time I go 
home, I hear about this. And, I think that if we are able to 
work together, as I said earlier, in a bipartisan way, we can 
come to solutions. But, it is going to require some revenue and 
it is going to require some cuts. So far, we have been cutting 
to the tune of four in dollars in cuts for every one dollar in 
increased revenue. I, quite frankly, do not think that is 
sustainable for a 21st Century economy.
    Thank you, Mr. Chairman. Thank you, Dr. Hall.
    Chairman Johnson. Thank you, Senator Tester.
    I do want to respond a little bit. If you want a 21st 
Century economy, there are some pretty easy elements that we 
need to concentrate on. For example, let us not artificially 
drive up the cost of energy. If you want to manufacture things, 
you need power. Cheap power is better than expensive power. Let 
us reduce the regulatory burden instead of dramatically 
increase it, and let us simplify our tax system so we have pro-
growth policies. Even with meager economic growth, we have 
increased revenue to the Federal Government since 2009 by more 
than $900 billion, with meager economic growth.
    Second point, the total cost of the wars since 2001 is 
probably under $2 trillion----
    Senator Tester. You are not taking into account----
    Chairman Johnson. I am saying in terms of the effect on the 
budget deficit today. Less than $2 trillion. We have increased 
our debt by almost $8 trillion in just 6 years. So, yes, the 
wars are part of it, certainly not the answer. And in terms of 
infrastructure spending, totally agree. We should dramatically 
increase what we are spending on infrastructure for a 21st 
Century economy. The shortfall in the Highway Trust Fund is 
about $15 billion per year in an almost 4,000-billion-dollar-a-
year budget. Can we not find $15 billion of lower-priority 
spending and let us spend it on a higher priority? So, that 
would be my response to that.
    Senator Tester. My response to that would be we just came 
through the worst recession since the 1930s and that is what 
caused that $6 billion to go up, income going down, expenses to 
go up. The other thing is, is we just had a hearing here 
yesterday with a gentleman from your State that raised 
chickens, poultry industry. Is that low priority spending? It 
depends on whose ox is being gored here.
    Chairman Johnson. And we are going to work to make sure 
that we take care of that situation, as well. That is why we 
had the hearing.
    Senator Tester. Oh, I know. But, what I am saying is, is 
that it was important, and the fact is that somebody living in 
the middle of downtown Miami might say, the subsidies we give 
to crop insurance is just not important.
    Chairman Johnson. No, again, I was not saying that was 
lower priority. We can find $15 billion of lower priority 
spending.
    I believe it is Senator Ernst.
    Senator Ernst. I am not able to stay.
    Chairman Johnson. Sorry about that. Senator Booker.
    Senator Booker. I am on the same thing, sir, so 
unfortunately, I have to go.
    Chairman Johnson. Senator Carper. I have plenty of 
questions, so----
    Senator Carper. Dr. Hall, the first question I have for you 
is how is it going?
    Mr. Hall. It is going well. If you mean the budget, it is 
concerning.
    Chairman Johnson. It is a mess.
    Senator Carper. People ask me, not all the time, but quite 
a bit, what keeps me up at night, and I am the senior Democrat 
on this Committee and we focus a lot on cyber attacks and all 
kinds of attacks on our country, lone wolves. Those are the 
kind of things that keep me up at night.
    Same question for you. What keeps you up at night, at least 
on the professional side?
    Mr. Hall. Oh, on the professional side, it is sort of my 
job, is making sure that you have the information you need, 
Congress has the information it needs to make some tough 
decisions every day.
    Senator Carper. I have a couple of questions that I want to 
read, and then a couple of questions I just want to, like, ask 
off the top of my head. I will take this one that my staff has 
been good enough to provide for me.
    But, if you go back a couple of years--I want to ask about 
long-term forecasts. It is important for us to, of course, plan 
for the future and make sure the policies that we put in place, 
they make sense and they are affordable, not just for now, but 
for the long run.
    But, if someone in 1985 attempted to project our economic 
and Federal budget outlook like this year, in 2015, I think 
even the best models could never have accounted for so many 
factors that have since played a part. We had no idea in 1985, 
for example, that the Internet would exist, that what happened 
on 9/11 would come about, the war in Afghanistan, two wars in 
Iraq, the rise of China and India, the 2008 financial crisis, 
the Great Recession would happen. A projection made in 1985 
would have failed even to account for the savings and loan 
crisis that began the following year that some of us lived 
through.
    My question would be, how do we strike the right balance 
here? Knowing that there are so many unknowns, how do we strike 
the right balance?
    Mr. Hall. Well, that is difficult, and, I think one of the 
things that we strive to do is give you our best estimate. We 
all know it is probably not going to be right, but we also try 
to give you some idea of what sort of uncertainty is there.
    For example, in the long-term budget outlook report, we go 
through some scenarios where we change the mortality rate, 
where we change productivity, it is higher or lower than it has 
been historically. We change ranges of interest rates and et 
cetera to give you some idea of what sort of range of outcomes 
you really could have 25 years from now, besides our point 
estimate. And, that is to make exactly this point, that things 
change. It is very hard to predict the outcomes.
    But, I think one of the things that we are in a position of 
saying, though, is under almost any reasonable sort of 
scenario, the Federal debt 25 years from now is going to be at 
a very high level and we are headed on a path where it will be 
unsustainable under just about any of these scenarios under 
current law, no matter what reasonably happens to productivity 
or reasonably happens to interest rates, and that is part of 
our message today.
    Senator Carper. OK. Thanks. I think we would all agree that 
some level of debt is reasonable and running a deficit is 
sometimes necessary. I always--the two most common words we 
hear about, in times of war, in an economic recession to try to 
prime the pump and get the economy moving. How would you 
explain to the American people the difference between, say, 
reasonable debt and unreasonable debt--or unreasonably high 
levels of debt?
    Mr. Hall. Sure. Well, it is a complicated thing. It is one 
of the reasons that it is so hard to talk about this. And, I 
would suggest they think about themselves, they think about 
businesses. is it OK for a household to run debt? Well, yes. 
How much debt is too much debt? It is not easy to say. It 
depends upon how big the household is, what the household's 
prospects are. But, at some point, if a household or a business 
works up debt, it gets to a level where there is a real concern 
that it is not sustainable. But, that is sort of a way to think 
about it.
    So, there is no easy, hard and fast rule about how much 
debt is too much debt because you cannot say that. You cannot 
look at Starbucks and say, how much debt is too much debt for 
Starbucks, because you have to look at a lot of things and 
investors have to make a decision. That is sort of the same 
thing here for the United States. There is nothing wrong with a 
running debt, but at some point, you have to think about is the 
debt too much? Is it getting to where it is going to be very 
difficult to pay it back over time, and I think that is what we 
are pointing out, is that we are getting to a level where it is 
getting very high and it is going to be very difficult to pay 
it back if we keep our current trends.
    Senator Carper. I am not going to be able to make a perfect 
analogy here, but I am going to try. Say you have, on the one 
hand, you have a family, and they are trying to decide what to 
spend their money on, and if they do not have enough to--for 
example, one of the spouses or both the spouses want to go back 
to school, and maybe one spouse will work full time the other 
spouse go back to school and get a better education, be able to 
get a better job, or maybe they want their kids to be able to 
go to school finish school and be more--not just more 
productive, but actually be able to raise their income, too, or 
maybe have a choice to want to be able to get to work and you 
have to go work someplace where you cannot take transit, so 
maybe you invest in a car.
    Those are investments that are designed to enable a family 
to increase their income. But, when you think about the Federal 
Government spending money--and the family, they could decide to 
spend their money to go on a vacation to Hawaii instead of 
investing in the kinds of things we talked about. In the 
Federal Government, we can invest in things that actually 
enhance our long-term economic growth or not, and one of the 
things I focus on a lot, as my colleagues know, is making sure 
we are making smart investments in transportation 
infrastructure, because there is a big payoff there. What are 
some things that we ought to be investing in? What are some 
things that we ought to be investing in that maybe we are doing 
enough of, or maybe not enough of, that will help grow our 
economy?
    Mr. Hall. Well, I am in a position where I cannot give 
policy advice, but it is certainly true that the type of 
spending the government had has an impact. One of the things 
that I think is very interesting about our long-term budget 
outlook is that if you look under current law and go forward, 
spending on everything else besides the Social Security and 
health care goes down to a low level, and it is still 
unsustainable.
    So, my point is that, to a large degree, the big problems 
here are crowding out perhaps the sort of spending that you are 
talking about, which can help support economic growth. So, that 
is sort of part of the message here, I think, that spending on 
things like that can be worthwhile, but you have to consider, 
especially if you are going to pay for it with debt, is it 
going to have an impact on the economy that you want it to have 
if you are paying it with debt versus something else.
    Senator Carper. All right. Good. Thanks.
    Chairman Johnson. Senator McCaskill.

             OPENING STATEMENT OF SENATOR MCCASKILL

    Senator McCaskill. Thank you.
    I do think it is frustrating, because I think there are a 
lot of misconceptions in America about the budget process and 
the difference between a deficit and a debt----
    Mr. Hall. Right.
    Senator McCaskill [continuing]. And the difference between 
austerity and stimulus from an economic perspective. There were 
a lot of hysterics around the stimulus, but if we look at the 
data, I think you would agree, Doctor, that the data show the 
countries that engaged in stimulus did a much better job of 
navigating out of the hole than those countries that went with 
an austerity program. Would that be an accurate description of 
the growth in the various nations, based on the policies they 
embraced after we fell off the cliff?
    Mr. Hall. Well, CBO has weighed in, and there is a 
consensus in the economics profession that the stimulus did 
have an effect on economic growth----
    Senator McCaskill. A positive effect.
    Mr. Hall. Yes.
    Senator McCaskill. But, it is counterintuitive that, when 
the government is in a bad place because of an economic 
downturn, that it spends more money, I mean, because all of us 
in our homes----
    Mr. Hall. Right.
    Senator McCaskill [continuing]. If you are having a bad 
time, you spend less money. So, it is one of those things that 
is frustrating, because I think it is complicated----
    Mr. Hall. Right.
    Senator McCaskill [continuing]. For people to step back and 
realize that stimulative spending is, in fact, a positive for 
the economy, and, in fact, I think that you would agree, there 
is a robust debate among the economic community now as to 
whether or not the stimulus was large enough.
    Mr. Hall. Right. Yes, that is true, and let me sort of 
pivot back to the budget issue, in my mind. The debt has gotten 
so large, and under current law it is going to get so large, 
our ability to respond to a future crisis like this is going to 
be very limited because we have worked up so much debt. And 
that is one of the concerns, I think, about having such a large 
debt, is this sort of uncertainty and what could happen with 
the economy, what could happen with a number of things. So, 
there is risk involved with having debt this high.
    Senator McCaskill. So, on the debt, one of the frustrating 
things as we look at public policy is that we look at the 
scoring and we try to figure out what it is going to cost. But, 
you all, for a lot of legitimate and valid reasons, do not ever 
score the positives of policies--for example, prevention. There 
is no question that several things contribute to lower health 
care costs, including spending more money on activities that 
help prevent illness. But, of course, that is never scored.
    Another example would be what we save by having everyone 
have some skin in the game. By that, I mean the Cadillac 
policies where nobody has to go in their pocket for anything 
and they see their health care as free, as opposed to people 
who have deductibles and copays, what impact that has on, 
ultimately, the amount of what health care costs are in this 
country.
    I mean, those are two examples. I could give you a lot of 
other examples. Could you speak to the failure to quantify the 
money we save with public policy that prevents the spending of 
money and to calculating only how much money we are spending.
    Mr. Hall. Well, when we score things, we do try to take 
that into account when there is sufficient evidence, where 
there is some good research and we can----
    Senator McCaskill. Give me an example of where you have.
    Mr. Hall. I can tell you on something we are working on. We 
have not gotten there yet, but we are looking very hard at the 
issue of obesity. We have been asked to look at the effects of 
obesity on health and et cetera going forward. That has turned 
out to be a very difficult thing to sort of quantify, as to 
whether that has an effect that is measurable in a budget. But, 
that is something, actually, where----
    Senator McCaskill. But, we know it does.
    Mr. Hall. Well----
    Senator McCaskill. It is just quantifying it is hard, 
right?
    Mr. Hall. Quantifying it is hard, and the research is not 
as straightforward as you might hope. But, we are working on 
that. We may get there----
    Senator McCaskill. Not if you take into account the onset 
of adult diabetes and what we are spending. I mean, all you 
have to do is turn on the TV. Every third ad is for a blood 
monitor, all of which we are paying for, right?
    Mr. Hall. Right. And, like I say, if we can work out some 
solid estimates and solid evidence that that is actually true, 
then that will play into what we do.
    Senator McCaskill. So, can you give me an example where CBO 
has taken into account money that we will save by preventing 
certain activities or changing people's behavior?
    Mr. Hall. Can I get back with you on that? I am sure we can 
dig up something----
    Senator McCaskill. Because I have always been told, ``well, 
we cannot--that does not count'', and certainly on the health 
care bill----
    Mr. Hall. Right.
    Senator McCaskill [continuing]. They did not count anything 
for the prevention, and there is obviously a lot of prevention 
now that is occurring, because people are not having to go in 
their pocket for prevention. They are able to go and get 
avasectomy----
    Mr. Hall. Well, we are happy to write up something on our 
views on that.
    Senator McCaskill [continuing]. Mammograms and so forth----
    Mr. Hall. Right.
    Senator McCaskill [continuing]. Without having to pay for 
them, and I do not think that that was ever taken into account, 
even though the health care bill did say it was going to bring 
down the deficit, and it has, has it not?
    Mr. Hall. Well, yes, our forecast is--that is right, that 
the ACA, on the whole, does do that.
    Senator McCaskill. OK. Great. Thank you, Mr. Chairman.
    Chairman Johnson. Thanks, Senator McCaskill.
    I do want to address a little bit in terms of stimulus. 
What you spend money on is pretty important, correct?
    Mr. Hall. Yes.
    Chairman Johnson. I mean, there is no doubt that if you 
spend a lot of money, that is going to stimulate the economy. 
But, if you spend it on consumption versus, let us say, 
infrastructure----
    Mr. Hall. Right.
    Chairman Johnson. Do you know, out of the $800-whatever 
billion stimulus how much of that was actually spent on 
something we would consider infrastructure--highways, bridges, 
that type of thing--versus just getting pumped into, for 
example, city and State Governments?
    Mr. Hall. I do not know that.
    Chairman Johnson. It is pretty small, though, is it not?
    Mr. Hall. I do not----
    Chairman Johnson. The best estimate I have been able to get 
out of staff is about $50 billion into what I would consider 
infrastructure.
    Mr. Hall. Right.
    Chairman Johnson. I want to go back to debt burden and how 
much you can really carry, because you are right. It totally 
depends on the circumstance. In a growing organization, you 
take on a lot more debt because you are going to be a lot 
bigger in, 5, 10, 15 years. Does it not really come down to 
debt service, though, in terms of whether you can afford it, 
and is that not what we are facing right here, is because we 
are at such historically low interest rates, we are not really 
feeling the full economic brunt of this enormous increase into 
our debt, where we are keeping those interest rates 
artificially low and we are able to service for the time being, 
but at some point in time, that is going to stop, correct?
    Mr. Hall. That is right, and that is in our 25-year 
forecast. We do have interest rates moving back to more 
historic levels.
    Chairman Johnson. To what level?
    Mr. Hall. I think we have the Treasury 10-year at something 
like 2.3 percent. I would have to look that up to make sure.
    Chairman Johnson. OK. I think right now, as Senator Enzi 
was saying, I think our total borrowing cost is about under 2 
percent. Historically, what we were looking at is about 5.3 
percent, overall average interest rate that the Federal 
Government is paying on its debt.
    Mr. Hall. Right.
    Chairman Johnson. So, I think your estimate is about 4.7 
percent, so still under that 50-, 60-year average.
    Mr. Hall. Oh, right. Yes. The 4.7 percent is the net 
interest----
    Chairman Johnson. Right.
    Mr. Hall [continuing]. Is 4.7 percent of GDP----
    Chairman Johnson. But, basically nominal. That includes 
inflation, that type of thing.
    Mr. Hall. Correct. That is right.
    Chairman Johnson. OK. One thing you do not include in your 
forecast is another recession, correct?
    Mr. Hall. That is right.
    Chairman Johnson. I just had staff quickly give me a note 
on how frequently we have recessions, and dating back to the 
1960s, it is about a 9-year, then 3-year, 5-year, 10-year, 10-
year, 8-year interval. As an economist, that is about right. 
Every 10 years or less, we are having another recession, 
correct?
    Mr. Hall. That is right.
    Chairman Johnson. So, again, your long-term projections, I 
understand you cannot project out a recession, but we can, 
based on the past, you can pretty well assume that there will 
be recessions, maybe three or four or more of those over the 
next 30 years.
    Mr. Hall. Unfortunately, that is probably----
    Chairman Johnson. And that will make the numbers, the $103 
trillion, even worse.
    Mr. Hall. Well, that is right. We try to work in the long-
run averages through a recession. So, you get some idea of a 
recession and then recovery, what it averages through that. 
But, there certainly is risk if there is a recession.
    Chairman Johnson. And, as Senator Enzi was alluding to, as 
well, part of the problem we have in terms of getting this 
under control is so much of the Federal budget is on automatic 
pilot, that we really only appropriate about a trillion dollars 
out of what is approaching a $4 trillion budget, is that not 
correct?
    Mr. Hall. Yes.
    Chairman Johnson. And, so, we do not have a whole lot of 
room to maneuver on an annual basis in terms of adjusting those 
things because these are programs that are termed entitlement 
programs, and if you qualify, it gets automatically spent.
    Mr. Hall. Yes.
    Chairman Johnson. I want to talk a little bit about the 
difference between total debt and debt held by the public. What 
is excluded from debt held by the public versus total debt, 
which right now is over $18 trillion total debt?
    Mr. Hall. Right. The idea here is that debt that is held by 
other parts of government is not included in debt held by the 
public, and the reason, at least, we focus on debt held by the 
public is this is the stuff that has economic impact. One part 
of the government owing money to another part of the government 
does not really impact the economy like owing to----
    Chairman Johnson. It is not external debt, but it is a debt 
of the--for example, the biggest element of that is really 
Social Security Trust Fund, correct?
    Mr. Hall. Yes.
    Chairman Johnson. And that is about $2.77 trillion worth, 
correct?
    Mr. Hall. I think that is right, yes.
    Chairman Johnson. Now, to the Trust Fund, that Trust Fund 
holds about $2.77 trillion of U.S. Government bonds, correct?
    Mr. Hall. I think so.
    Chairman Johnson. So, again, that is an asset to the Trust 
Fund, right? But, what is a U.S. Government bond--what is it 
called to the Treasury? A liability, correct?
    Mr. Hall. Right.
    Chairman Johnson. Now, coming from the business world, if 
you are talking about one overall organization like the Federal 
Government, you would consolidate the books. So, when you 
consolidate the books of the Federal Government and you look at 
a $2.77 trillion asset in the Trust Fund versus a $2.77 
trillion liability in Treasury, what does that net out to? Can 
you say it?
    Mr. Hall. Can you run it by me once more----
    Chairman Johnson. OK. A $2.77 trillion asset in the Trust 
Fund of U.S. Government bonds is a $2.77 trillion liability to 
Treasury----
    Mr. Hall. It zeroes out, yes.
    Chairman Johnson. It nets to----
    Mr. Hall. Zero.
    Chairman Johnson. Zero. So, the Trust Fund, the Social 
Security Trust Fund, in terms of a financial value to the 
Federal Government, is equal to zero, correct?
    Mr. Hall. Right. Yes.
    Chairman Johnson. It is just an accounting convention. It 
is a bookkeeping----
    Mr. Hall. Right.
    Chairman Johnson. OK. So, I want to just go through what 
happens now that we are actually paying out more in benefits 
that we are taking in the payroll tax. What is currently 
happening is the interest on those bonds are still being paid 
into the Trust Fund and the interest is covering the deficits 
currently. But, in a few years, the interest payments will no 
longer cover the expanding deficit in Social Security. So, the 
Social Security Trust Fund is going to have to start cashing 
those bonds in to the Treasury, correct?
    Mr. Hall. Yes.
    Chairman Johnson. So, they will take a bond, maybe $100 
billion if that is the shortfall, give it to the Treasury, the 
Treasury will give them $100 billion to pay out benefits. But, 
how does the Treasury get that $100 billion?
    Mr. Hall. They borrow it from somebody else.
    Chairman Johnson. They borrow it. So, I guess, from my 
standpoint, the debt held within these agencies is an 
obligation. I realize we do not recognize it as such because, I 
think by Federal law, we really do not have to--we are really 
not obligated to make Social Security payments. Social Security 
is really not a pre-funded retirement fund.
    Mr. Hall. Right.
    Chairman Johnson. We did not really take those funds in and 
put those into an account for an individual taxpayer, correct? 
We brought that money in. We spent it. And in its place, we 
issued a U.S. Government bond. In a previous hearing, we 
actually had the Trust Fund. We have a picture of it. We did 
not bring it today. It is a four-drawer file in Parkersburg, 
West Virginia. That is what politicians from both parties are 
telling the American people, looking them straight in the eye 
and lying to them, saying that that is going to fund Social 
Security deficits for the next 20 or so years. It does not do 
that, does it?
    Mr. Hall. No.
    Chairman Johnson. No. So, the Trust Fund is a fiction. By 
and large, the Trust Fund is a fiction. It has no financial 
value to the Federal Government.
    Now, had we--just real quick--had the Federal Government 
actually taken those surpluses and invested those in assets 
outside the Federal Government, for example, maybe a Dow Jones 
stock index fund, those would be a real hard asset that then 
the Trust Fund could actually cash those in and a different 
entity could have paid that and that actually would be funding 
benefits. But, that is not what happened, right?
    Mr. Hall. Right.
    Chairman Johnson. We took the money and we spent it. It is 
gone. And all we have in place of it is a piece of paper that 
basically says, $2.77 trillion. OK. We will be exploring this 
in far greater detail in a future hearing. Senator Carper.
    Senator Carper. Thank you.
    I want to go back to the analogy of the family trying to 
figure out how to spend their money. Say you have a family that 
is renting. They were trying to decide whether to buy or just 
to continue to pay rent payments, and mortgage payments are 
maybe attractive--or mortgage rates are attractive, so they are 
tempted to actually buy a house, and they finally decide maybe 
that is in their best long-term interest.
    We rent a lot of space, as you know, in the Federal 
Government--a lot of space--and we sometimes wonder, well, 
maybe should we just go ahead and buy something or build 
something? Would we be better off? Would the taxpayers 
ultimately be better off? And, I think there is a lot of reason 
to say, yes, we would, and it is just not my conjecture, but 
folks a whole lot smarter than me.
    I think it was the Government Accountability Office (GAO) 
who--or maybe it was the General Services Administration 
(GSA)--but on the issue of Homeland Security, Department of 
Homeland Security continuing to rent space all over kingdom 
come. They rent a lot of space, and, it is a big agency, huge, 
dozens of agencies that are part of it. They are far-flung 
across this area and, really, across the world. But, they are 
trying to consolidate in one area, not all the Department, but 
big pieces of the Department. Former Secretaries Tom Ridge, 
Judge Chertoff, Janet Napolitano, all said in terms of actually 
managing the Department, it makes a whole lot of sense.
    But, we are also told by GSA that if they do that 
consolidation and we build, that over the next 30 years, we 
will save taxpayers over a billion dollars. But, yet, we 
continue to rent space, lease space as opposed to buying or 
building.
    What can we do in order to better ensure we make smarter 
decisions when it comes to acquiring space, paying for space? 
What do we need to do on our legislative side? My sense is that 
your hands are tied because when we try to buy or build, it 
does not score well because we have to account for everything 
up front as opposed to paying for renting something for 30, 40 
years. What can we do to help make sure we just use some common 
sense here?
    Mr. Hall. Well, I suppose it is making the decision about 
it, obviously. It is understanding what the cost and what the 
extra cost, or not extra cost will be of buying versus renting, 
that sort of thing.
    Obviously, in terms of scoring something like that, that is 
something that we do routinely. We do not constrain anybody in 
that. We just are trying to be clear what is going to be the 
impact of spending on something like that.
    Senator Carper. Well, the way that the scoring occurs now, 
when the agency can clearly demonstrate--GSA said an agency can 
clearly demonstrate that a lot of money is going to be saved 
for taxpayers if we buy or build as opposed to continue 
renting, but yet we continue to rent or lease. Is there 
something that we need to do at the legislative branch in order 
to make sure we use some common sense, or enable you and your 
folks to use some common sense here?
    Mr. Hall. I do not think I have any advice on that, to be 
honest. It is something, I suppose, if you are interested in us 
following up on something like that, on likely the scoring 
impact of that sort of thing, we can talk about that in a Q and 
A afterwards, if you would like.
    Senator Carper. Good. All right. Well, this is one I have 
been interested in for a while, so I will look forward to that 
conversation.
    Senator McCaskill was over here talking about prevention 
and that sort of thing. Major health care cost drivers, there 
are a lot of them, but among those major drivers are obesity. 
Among the drivers are dementia. I think we have about five 
million people that are suffering from Alzheimer's disease, 
dementia today. That number is expected to grow. I used to 
think the drivers in Medicaid were, like, women and children. 
As it turns out, I am told maybe three-quarters of what we 
spend in Medicaid these days are for folks, older people in 
nursing homes, a lot of whom have dementia.
    Another health care cost driver is end-of-life care. We 
spend a huge amount, as you know, in the last 6 months of our 
lives. In some cases, people maybe do one of these advanced 
care directives or, stipulating what kind of care they would 
like to have in the last months or years of their life and they 
find that if they are in, like, a hospital, then they are fine, 
but if they get transferred to a different facility, there is 
no portability of that directive.
    I work out. I love to work out every day of my life, 
almost, and one of the places I work out is the YMCA back in 
Delaware, and there is a woman who works out there from time to 
time and I was talking to her. She is in great shape. I think 
she is in her 50s. She is in terrific shape. I asked her if her 
parents were also, like, really in good physical shape, and she 
said that they are deceased. I said, really? What happened? And 
she said her mom died of colorectal cancer, and I said, how 
old, and she said, like, in her 50s. And, I said, why? She 
said, she just did not want to get those screenings. They just 
did not like to do them. They were just uncomfortable, 
unpleasant, and she would rather than do that just take her 
chances. She died, a miserable death, too, I might add.
    One of the things we did in the Affordable Care Act is we 
basically tried to make sure people get their screenings, 
whether it is colorectal, whether it is prostate, whether it is 
breast, but I do not know that we always score those, and in 
the end, we know we save a lot of money. But, the score is not 
encouraging for us to do what in the end saves money.
    Could you just comment on what we need to do to change 
that?
    Mr. Hall. Well, actually, if you like, I think I mentioned 
this to Senator McCaskill, that if you like, we can followup 
with some description of how we score things like that and what 
sort of process we go through in looking at how to score 
something like that.
    Senator Carper. OK. The last one I would ask, just briefly, 
GAO has finally put on their High-Risk List the issue of 
climate change. They pointed out that enhancing resilience in 
communities may carry some up-front costs but could reduce the 
damages in the future by a lot. How should CBO factor into its 
analysis the growing costs of climate change to the economy and 
the Federal budget?
    Mr. Hall. We actually have done a little work on that.
    Senator Carper. Have you?
    Mr. Hall. Yes, we have. We have looked at estimates of 
increased hurricanes and drawn that sort of a trend and it does 
have an impact on GDP. It is not a big impact on GDP. In fact, 
I think we have a little discussion, actually, in this report 
on that. And, the reason it does not have a big budgetary 
impact, of course, is because the shared economy that is spread 
along the coast is not that big and the ag effects can be kind 
of mixed, because you can actually have an agricultural boost 
somewhere else where you have it on a negative.
    But, we do have that--we do have some discussion on that, 
and we are, in fact, doing some more detailed work on the 
impact of increased hurricanes and maybe rising sea level. So, 
we will actually have some work on that pretty soon.
    Senator Carper. Good. Well, we look forward to that. Thank 
you.
    Thanks very much, Mr. Chairman.
    Chairman Johnson. Thank you, Senator Carper.
    By the way, to both you and Senator McCaskill, if you are 
looking for an ally, there is a concept out there, the cure 
strategy, which I think is exactly the direction we should be 
going on.
    As a fiscal conservative, I think it is money really well 
spent to try and cure diseases, and what I would love to do is 
get a commitment of CBO to really take a look at some of the 
projections, for example, on how much we are going to be 
spending on Alzheimer's if we do not come up with a cure. What 
is the current cost of just diabetes, those types of things.
    I think it is kind of hard to--in my guess, it would be 
very difficult to project prevention, and say, if you do this--
but we can certainly have a pretty good hard number on what we 
are spending treating diabetes, what we are spending treating 
Alzheimer's, and then do the demographic projection in terms of 
how many, with the aging population, what that is going to 
cost. I know the Alzheimer's Association has done those types 
of things. So, I think those are extremely good numbers and the 
types of information you would need to help direct action, 
which kind of gets us back to the point we were making in this 
Committee.
    It is really about how do we simplify how we project, how 
we communicate those projections. It is about providing 
information, not relying on demagoguery anymore, because the 
only way we are going to solve these problems is, again, lay 
out the information, lay out the facts, have a very unbiased, 
nonpartisan intermediary, arbitrator of the information so that 
we are not sitting and battling over, well, this is my figure, 
that is your figure, but we can kind of come together and go, 
OK, let us at least first agree on the figures as best we can, 
understand what underlies them.
    So, again, I am hoping that, we have reported a lot of 
pieces of legislation. We have come to CBO in the past looking 
for scores. I know you are busy. I am hoping you are valuing 
this, and I hope you understand the direction I am trying to go 
here. Let us simplify things. Let us get information to the 
American public. Let us get information to policymakers so that 
we are on the same page.
    So, I certainly am looking for a commitment out of CBO to, 
with what limited resources you have, and on a prioritized 
basis--and we are not going to overburden you. I am very 
sympathetic from that standpoint. But, I really would like a 
little bit more help in terms of getting scores on some of 
these things and work with you to, again, prioritize what our 
requests are. Is that fair enough?
    Mr. Hall. Sure. Yes.
    Chairman Johnson. Just two quick final questions. I want to 
go back a little bit on debt and serviceability of it. Do you 
have any sense--if you do not, let me know and we will submit 
it as a question to the record--what our current maturity level 
is of our current Federal debt versus prior years and what the 
recommendation would be going forward of trying to extend that, 
take advantage of these low interest rates? Can you comment on 
that?
    Mr. Hall. I cannot, but I am happy to followup.
    Chairman Johnson. OK. I think that is pretty important. I 
would like to see where we used to be, where we are today, 
because my sense is we have really shortened that maturity time 
period pretty dramatically to take advantage of these very low 
short-term interest rates when what we maybe ought to be doing 
is really trying to go as long as possible without driving up 
the interest rates themselves by having a great deal of demand.
    The other thing, again, this might be picked up in our 
follow-on hearing on Social Security, but do you know what 
current law is when we no longer have those bonds and that 
accounting convention runs out with Social Security benefits? 
Do you know what actually happens according to current law if 
we do not do something?
    Mr. Hall. Uh----
    Chairman Johnson. We are facing that with the Social 
Security Disability Trust Fund----
    Mr. Hall. Right.
    Chairman Johnson [continuing]. In the next year or two, 
correct?
    Mr. Hall. That is right. Yes, that is right. The Disability 
one is pretty quick. It is fiscal year (FY) 2017. No, I do not 
know what the current law is on that. I think we sort of assume 
that money is put in there----
    Chairman Johnson. Something is going to happen. I have 
heard, and again, it is very difficult for us--I have heard 
that, basically, what ends up happening by current law is 
benefits would be reduced to equal the revenue generation, but 
I cannot get a real handle on that, so I cannot say that 
definitively at all, but if you could check on that, we are 
going to certainly bring in some experts on Social Security to 
find out what is the law if we just put our heads in the sand 
on this, which is something I do not recommend we do.
    But, again, Dr. Hall, I really do appreciate your 
testimony, the time you have taken today, and I really, in all 
sincerity, I want to work with you, because your agency is so 
critically important to get that information out there for the 
American public to understand the depth of these issues, 
because, as Senator Enzi was saying, the sooner you address 
these problems, the less painful the solutions will be.
    So, with that in mind, this hearing record will remain open 
for 15 days, until July 24, at 5 p.m., for the submission of 
statements and questions for the record.
    This hearing is adjourned.
    [Whereupon, at 11:26 a.m., the Committee was adjourned.]

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