[House Hearing, 116 Congress]
[From the U.S. Government Publishing Office]


                   THE CONGRESSIONAL BUDGET OFFICE'S
                      BUDGET AND ECONOMIC OUTLOOK

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

                                HEARING

                               BEFORE THE

                        COMMITTEE ON THE BUDGET
                        HOUSE OF REPRESENTATIVES

                     ONE HUNDRED SIXTEENTH CONGRESS

                             FIRST SESSION

                               __________

           HEARING HELD IN WASHINGTON, D.C., JANUARY 29, 2019

                               __________

                            Serial No. 116-1

                               __________

           Printed for the use of the Committee on the Budget
           
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                        COMMITTEE ON THE BUDGET

                  JOHN A. YARMUTH, Kentucky, Chairman
SETH MOULTON, Massachusetts,         STEVE WOMACK, Arkansas,
  Vice Chairman                        Ranking Minority Member
HAKEEM JEFFRIES, New York            ROB WOODALL, Georgia
BRIAN HIGGINS, New York              BILL JOHNSON, Ohio,
BRENDAN BOYLE, Pennsylvania            Vice Ranking Minority Member
RO KHANNA, California                JASON SMITH, Missouri
ROSA L. DELAURO, Connecticut         BILL FLORES, Texas
LLOYD DOGGETT, Texas                 GEORGE HOLDING, North Carolina
DAVID PRICE, North Carolina          CHRIS STEWART, Utah
JAN SCHAKOWSKY, Illinois             RALPH NORMAN, South Carolina
DANIEL KILDEE, Michigan              CHIP ROY, Texas
JIMMY PANETTA, California            DANIEL MEUSER, Pennsylvania
JOSEPH MORELLE, New York             WILLIAM TIMMONS, South Carolina
STEVEN HORSFORD, Nevada              DAN CRENSHAW, Texas
ROBERT C. SCOTT, Virginia            KEVIN HERN, Oklahoma
SHEILA JACKSON LEE, Texas            TIM BURCHETT, Tennessee
BARBARA LEE, California
PRAMILA JAYAPAL, Washington
ILHAN OMAR, Minnesota
ALBIO SIRES, New Jersey
SCOTT PETERS, California
JIM COOPER, Tennessee

                           Professional Staff

                      Ellen Balis, Staff Director
                  Dan Keniry, Minority Staff Director
                                
                                
                                CONTENTS

                                                                   Page
Hearing held in Washington D.C., January 29, 2019................     1

    Hon. John A. Yarmuth, Chairman, Committee on the Budget......     1
        Prepared statement of....................................     4
    Hon. Steve Womack, Ranking Member, Committee on the Budget...     8
        Prepared statement of....................................     9
    Keith Hall, Ph.D., Director, Congressional Budget Office.....    11
        Prepared statement of....................................    13
        Visual Summary submitted for the record..................    18
    Hon. Janice D. Schakowsky, Member, Committee on the Budget, 
      letter and response submitted for the record...............    34
    Hon. Robert C. Scott, Member, Committee on the Budget, fact 
      sheet submitted for the record.............................    66
    Hon. Chip Roy, Member, Committee on the Budget, question 
      submitted for the record...................................    68
    Hon. Janice D. Schakowsky, Member, Committee on the Budget, 
      questions submitted for the record.........................    69
    Answers to questions submitted for the record................    70

 
     THE CONGRESSIONAL BUDGET OFFICE'S BUDGET AND ECONOMIC OUTLOOK

                              ----------                              


                       TUESDAY, JANUARY 29, 2019

                          House of Representatives,
                                   Committee on the Budget,
                                                   Washington, D.C.
    The committee met, pursuant to call, at 9:45 a.m., in Room 
1334, Longworth House Office Building, Hon. John Yarmuth 
[Chairman of the Committee] presiding.
    Present: Representatives Yarmuth, Higgins, Khanna, DeLauro, 
Doggett, Price, Schakowsky, Kildee, Morelle, Scott, Jayapal, 
Omar, Lee, Boyle, Horsford, Womack, Johnson, Holding, Stewart, 
Norman, Roy, Meuser, Timmons, Crenshaw, Hern, Burchett, 
Woodall, and Smith.
    Chairman Yarmuth. So we will now proceed immediately to the 
CBO budget. We are going to now proceed immediately to the CBO 
Budget and Economic Outlook hearing. We invite Dr. Hall to join 
us at the witness table. Welcome, Dr. Hall.
    I now yield myself 5 minutes for the opening statement. Oh, 
yes. I've gotten to use the gavel. The hearing will come to 
order. Once again, welcome, Director Hall. Thank you for 
joining us today and for all of the work you and everyone at 
CBO has done to update the baseline and economic outlook that 
will help guide our work this year. Since today was supposed to 
be the original day of the President's State of the Union 
address, let's start by acknowledging what should be obvious: 
The State of our Union is unsustainable. Deficit projections 
over the next decade are unrivaled by any time in our Nation's 
history, save for World War II and the immediate aftermath of 
the Great Recession. Only this time, we weren't responding to 
an emergency; we created one. We are not in this situation 
because we were forced to make a tough choice to save the 
American people.
    No, we are facing this bleak fiscal reality because this 
President, and the so-called fiscal conservatives in his party, 
chose to squander our Nation's wealth and solvency, to 
exacerbate record income inequality, to take resources from 
those in need so they could bolster the already wealthy with 
reckless tax cuts for millionaires and multinational 
corporations.
    Director Hall, you project a deficit this year that is $118 
billion higher than last year. Average deficits over the next 
decade are projected to rise. The national debt is expected to 
reach 93 percent of GDP by 2029 before rising to an 
unprecedented 150 percent of GDP in 2049. This is despite the 
fact that the economy is undergoing the second longest 
expansion on record, 114 months of economic growth since 2009.
    Beginning under President Obama, we have had 99 months of 
uninterrupted job creation with unemployment falling to 
historic lows. But despite all this good news, our fiscal 
future is getting darker, not brighter, and the reason is 
clear.
    Just over a year ago, Congress passed a tax bill that 
showered the bulk of its benefits on corporations and the 
wealthy. My Republican colleagues didn't mind that our economy 
was healthy and the wealthy were doing just fine. They promised 
these tax cuts would trickle down to everyone else, unleashing 
miraculous economic growth and long overdue raises for workers. 
Even better, we would get all of this for free. The reality: a 
burst of welcome, but very brief economic growth, followed by 
greater income inequality, and exploding deficits.
    This outcome was not a surprise. Republicans have cut taxes 
and sent deficits soaring time and time again. But this time 
around, they hit a new record. Corporations took the tax cuts 
handed to them and bought back more than $1 trillion worth of 
their own stock. Not $1 trillion worth of worker bonuses, or $1 
trillion for raises when wages have been stagnant for decades, 
not even $1 trillion of new investment to expand business 
operations.
    In last year's report, CBO put the cost of the tax law at 
$1.9 trillion over 10 years even after accounting for 
macroeconomic effects. Those numbers indicated that had we not 
passed it, the deficit outlook would have improved 
considerably, and the economy would likely be stronger. In 
fact, your report, Director Hall, confirmed that the tax cuts 
will reduce our economic growth rates by the end of the decade. 
This new forecast further confirms that inescapable reality.
    And we know how this story continues. My friends on the 
other side of the aisle will point to Social Security, Medicare 
and Medicaid as the culprits of the deficit. They will call for 
deep cuts to these and other vital programs in order to reduce 
the deficit they exploded. They will call for a balanced budget 
and ignore the role their tax cuts played in damaging the 
fiscal outlook.
    Make no mistake: as this and previous CBO reports have 
warned, we face serious challenges, serious fiscal challenges 
going forward. From caring for an aging population to 
mitigating the financial costs of a warming climate, to making 
the investments we need to compete in a global economy and help 
American families succeed, the Federal budget will be 
increasingly strained.
    These are the real problems that demand real solutions, and 
they will require a fair and responsible approach that includes 
revenue, that tackles the causes of high healthcare costs, and 
that improves efficiency of Federal spending without harming 
seniors' retirement security or imposing more burdens on 
struggling families.
    Returning us to a sustainable fiscal trajectory will 
require smarter use of the Nation's fiscal resources, and that 
is what I hope to do this year as Chairman of the Committee. I 
want our committee to help shine a bright spotlight on the 
reality of the situation we face, to fully vet the choices we 
have, and then set the stage to make the most responsible 
decisions as a Congress.
    Director Hall, thank you for helping us begin that 
conversation. I look forward to hearing your testimony, and I 
now yield to the Ranking Member for his opening statement.
    [The prepared statement of Chairman Yarmuth follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Mr. Womack. I thank the gentleman. Good morning, and thanks 
to everyone for being here as we discuss the CBO's annual 
budget and economic outlook report. The goal of today's hearing 
is to analyze the CBO's latest baseline projections. These 
findings shed light on our Nation's current fiscal challenges 
and guide us in mapping out a sustainable path for the future. 
This year's baseline brings daunting news with deficits 
projected to be $1.37 trillion by 2029 and debt reaching almost 
$34 trillion. While these numbers paint a sobering picture, it 
does not have to be America's future. Without question, we must 
create a new path forward.
    Mandatory spending is clearly driving up deficits and debt. 
Our Nation's fiscal trajectory will remain unchanged if we 
don't address this sobering fact. And this is not only my 
deduction. CBO has stated in the past that revenue alone will 
not solve this problem.
    In his testimony last year, Director Hall said that 
increases in entitlement spending are the largest drivers of 
the increase in the deficit going forward. Unfortunately, it 
seems that my colleagues on the other side of the aisle don't 
recognize the severity of this problem, or if they do, I 
haven't seen their plan to fix it.
    So my question is pretty simple: What is your plan? I am 
curious to learn how can you reconcile your desire for 
astronomical spending increases with a need to address the 
issue of our ballooning national debt. Medicare for all, free 
college, and other initiatives touted by my Democratic 
colleagues will exacerbate our Nation's fiscal problems.
    Rather than encouraging spending that will financially 
drive our country to the ground, Congress needs to face 
mandatory spending head on. Here is the reality: Our largest 
entitlement programs are facing insolvency. If we do nothing, 
they go under. Let me say that again. If we do nothing, if we 
maintain the status quo, they fail.
    Now instead of fixing these programs, the new majority 
wants to expand them. This is irresponsible. We are facing a 
sovereign debt crisis that we know is coming. So again I ask, 
what is your plan? I assume it is to raise taxes. I have heard 
some would like to raise individual rates to 70 percent, 
possibly increase the corporate rate from 21 to 28 percent. Is 
that the plan, to drastically increase taxes to pay for out-of-
control spending? Let me be clear, we cannot tax our way out of 
this problem.
    Again, as CBO previously outlined, the biggest budget 
challenges lie in mandatory spending. If we don't address these 
drivers of debt, our march towards fiscal insolvency will not 
stop. My guess is that Director Hall will reiterate this point 
in this morning's hearing, as well as the fact that revenue 
isn't the solution. We need to work together to confront our 
growing debt burden and mandatory spending issues.
    So I ask one last time, do you think the deficit and debt 
projection released by the CBO is concerning? If you do, and I 
hope you do, what is your plan to address these issues?
    We have a moral obligation to future generations to get our 
fiscal house in order. I hope all committee members agree with 
that. I look forward to productive conversations today with Dr. 
Hall and my colleagues. Thank you, and with that, I yield back 
to the distinguished Chairman.
    [The prepared statement of Steve Womack follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you, Mr. Womack. And now it is my 
great honor to formally introduce, once again, Director Keith 
Hall of CBO. And, Director Hall, the floor is yours. You are 
recognized for 5 minutes.

STATEMENT OF KEITH HALL, PH.D., DIRECTOR, CONGRESSIONAL BUDGET 
                             OFFICE

    Mr. Hall. Thank you. Chairman Yarmuth, Ranking Member 
Womack, and members of the committee, thank you for inviting me 
to testify about the Congressional Budget Office's most recent 
analysis of the outlook for the budget and the economy.
    I would like to draw your attention to important 
information in that report about the amount of debt that the 
Federal Government will incur if we continue on the current 
budgetary path. I want to focus on four questions.
    The first question: What does CBO project? Let me highlight 
a few key numbers. At the end of 2018, the amount of debt held 
by the public was equal to 78 percent of gross domestic 
product. In CBO's projections, debt equals 93 percent of GDP by 
2029, and about 150 percent of GDP in 30 years. Even at its 
highest point ever, just after World War II, debt was far less 
than that, at just 106 percent of GDP.
    Second question: Why does debt become so large in CBO's 
projections? I hopefully--we used something new this time. You 
can see the answer in the summary of the report. We have given 
you a handout that has a visual summary. Hopefully you have got 
that in front of you. I am going to refer to a couple of 
pictures. I apologize if you don't have it, or I apologize for 
it being difficult to see. This year, we summarized it in some 
charts to try to be helpful. The figure on the bottom of the 
first page indicates why debt is growing. Federal spending and 
revenues both grow through 2029, yet the gap between them 
persists.
    Third question: What would happen if the economy grew more 
quickly? If GDP grew more quickly than it does in CBO's 
projections, revenues will increase more than spending would, 
and deficits would be smaller than projected. If economic 
growth was fast enough, deficits could actually shrink and debt 
could stabilize, or even fall as a percentage of GDP rather 
than continuing to grow. But such an outcome is unlikely.
    In 2018, the real growth rate of the economy, that is 
growth with the effects of inflation removed, was 3.1 percent, 
the highest rate since 2005. Nevertheless, the deficit equaled 
3.8 percent of GDP, and debt increased as a percentage of GDP. 
Furthermore, this year, the boost that recent tax legislation 
gave to business investment wanes in CBO's projections. Also, 
Federal purchases dropped sharply under current law starting in 
the fourth quarter of the year. As a result, economic growth is 
projected to slow in 2019.
    Over the longer term, output growth is projected to be 
lower than its long-term historical average because the working 
age population is expected to grow more slowly than it did in 
the past. Real GDP grows by an average of 1.8 percent per year 
in CBO's 10-year projection. In short, the economy isn't likely 
to grow quickly enough to shrink the budget deficit.
    We have posted an interactive workbook on our website that 
lets you specify different economic scenarios and see the 
results. For example, if productivity growth turned out to be 
half a percentage point higher in every year than CBO projects, 
real GDP would grow by 2.4 percent per year over the coming 
decade instead of 1.8 percent. Deficits would average 3.7 
percent of GDP instead of 4.4 percent of GDP, and debt would 
stabilize at roughly 80 percent of GDP by 2029. Such economic 
growth is possible, but it is not likely under current law in 
our assessment.
    CBO aims for its projections to be in the middle of the 
potential outcomes, so there is about the same chance that 
productivity growth could turn out to be half a percentage 
point lower than our projection. If that happens, real GDP 
growth could average 1.1 percent over the decade and average 
deficits would be 5.2 percent of GDP. Debt would swell even 
more than it does in our current projections.
    Fourth question: What are the consequences of high and 
rising debt? If debt rose to the amounts that CBO projects, 
there would be troubling consequences.
    First, as interest rates continue to rise towards levels 
more typical than today's, Federal spending on interest 
payments would increase, surpassing the entire amount of 
defense spending by 2025 in our projections, for example.
    Second, because Federal borrowing reduces national savings 
over time, the Nation's capital stock would ultimately be 
smaller and productivity and total wages would be lower than 
would be the case if debt were smaller.
    Third, lawmakers would have less flexibility than otherwise 
to use tax-and-spend policies to respond to unexpected 
challenges.
    And fourth, the likelihood of a fiscal crisis in the United 
States would increase.
    In closing, I will emphasize that debt is on an 
unsustainable course in CBO's projections. To put it on a 
sustainable one, lawmakers will have to make significant 
changes to tax and spending policies.
    I am happy to answer your questions.
    [The prepared statement of Keith Hall follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Chairman Yarmuth. Thank you very much, Director Hall. I 
appreciate your testimony. Pursuant to the policy that the 
Ranking Member and I actually used in the last Congress, we are 
both going to defer our questioning until after all of our 
members have been recognized. So in light of that, I now 
recognize Mr. Khanna of California for 5 minutes.
    Mr. Khanna. Thank you, Chairman Yarmuth. Thank you, 
Director Hall, for your work and leadership. You are a 
distinguished economist, and I hope this Congress, everyone on 
both sides of the aisle will recognize that.
    Your report stated that the tax bill paid for about 30 
percent of itself rather than 100 percent of itself, the tax 
bill that the Republicans passed last Congress. Would that 
suggest that any person who claims that the tax bill was going 
to pay for itself is wrong?
    Mr. Hall. Well, obviously projecting the future you can be 
wrong, we can be wrong. We did a really careful analysis of the 
tax bill. We looked at research. We tried to base it on real 
data, real evidence. And our estimate did, in fact, show that 
the GDP benefits of the tax bill would increase revenues, but 
not enough to fully cover the bill. As you said, it covers 
about 30 percent of the tax bill with respect to the deficit.
    Mr. Khanna. Director Hall, I am not suggesting that you are 
wrong, I am suggesting that people around the President when 
they claim that this tax cut is going to pay for itself with 
the magical 4 percent or 5 percent growth, is it fair now that 
we can say they are just--that is economic nonsense?
    Mr. Hall. Well, that is certainly a much bigger effect than 
we would estimate. It is well outside our forecast for the 
effects of the tax bill.
    Mr. Khanna. And one of the things--I mean, you are 
obviously a distinguished economist. I don't have a Ph.D., but 
as I understand it, on the other side, they always talk about 
these deficits. Now, correct me if I'm wrong, this is a bit of 
a simplistic theory, but does this make economic sense?
    My understanding is that when Bill Clinton left the 
presidency, we had budget surpluses. And then three things 
happened: George Bush passed large tax cuts to the very 
wealthy; Trump passed large tax cuts to the very wealthy, and 
we got into a lot of foreign wars. If none of those three 
things had happened, would we still have budget surpluses?
    Mr. Hall. The answer, I think, is no. We had really 
unexpectedly strong productivity growth during that time 
period. Also, it was also a time period where the labor force 
was growing much quicker than in the past, and that was 
particularly because of women entering the labor force in 
greater numbers. So women's labor force participation sort of 
closed a gap at that time period. So we had much stronger labor 
force growth. We had unexpectedly big productivity. Neither of 
those things we are projecting going forward.
    Mr. Khanna. What do you think accounted for the strong 
labor force growth and productivity, other than you said women 
entering in the 1990s accounted for that?
    Mr. Hall. Well, it wasn't women entering the labor force, 
it was also the baby boomers were in sort of in their prime 
working ages during that time period. They still sort of are, 
but near the end. So the aging population, at some point, is 
going to start working against us. And so we see, for example, 
the labor force growing much slower now from this sort of 
demographic handicap going forward than happened in the late 
1990s.
    Productivity is harder to project. You know, we see 
productivity heading back to somewhere near its normal range. 
Productivity has been very low the last 7 or 8 years, the past 
decade, and it has been unexplained, unexplainable. So we sort 
of have hopes on the productivity. Also, it is really hard to 
forecast productivity going forward.
    Mr. Khanna. You said that it wouldn't have wiped out all of 
the debt. Do you have a rough estimate if we didn't have the 
Bush tax cuts and Trump tax cuts, and we didn't have a 
perpetual war in Afghanistan and Iraq, how much money we would 
have saved?
    Mr. Hall. We haven't done that sort of analysis.
    Mr. Khanna. Could we do that analysis?
    Mr. Hall. We could look at it to get a feel for what 
difference it would make. A lot of things have changed since 
then, as well, but we could take a look a little bit, give you 
some idea.
    Mr. Khanna. And my final question is about the shutdown. 
Your office estimated that it cost us about .2 percent the 
first year. We have the President going on television saying, 
well, we may have a shutdown again. And as someone who studied 
rational expectations knows that investors and people take into 
account what we can expect. Do you think when he does that, he 
is hurting confidence in the markets and hurting our economy 
because people don't know what to expect?
    Mr. Hall. Well, when we did our estimate of the shutdown, 
we essentially didn't take that into account, we just looked at 
the effect of having the labor force idle for a while, and then 
the add-on effects. But there is certainly other effects that 
you mentioned that we think were getting stronger as the 
shutdown continued, and we think if the shutdown were to recur 
and continue for a while, we would have some additional 
changes.
    You know, one of the things I think that is 
underappreciated is, we would have a higher risk for low 
probability/high cost events happening, at from security. We 
would also have a lack of economic data that would, over time, 
could possibly lead to households and businesses holding back 
because of business confidence and because of consumer 
confidence. Federal permits and certifications, at some point, 
that is going to start to have an effect perhaps on business 
investment.
    So there are these additional impacts that could occur if 
the shutdown recurs and it gets harder, not to mention it is 
really hard to measure, but the impact on the morale of the 
Federal workforce. The ability to hire high quality workers 
could be impacted--and contractors. Contractors could actually 
cost us more money going forward.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Ohio, Mr. Johnson, for 5 minutes.
    Mr. Johnson. Thank you, Mr. Chairman, and I, too, look 
forward to serving with you and our colleagues to address our 
Nation's spending and budget issues.
    Director Hall, you have previously told our committee here 
that tax increases will not come close to covering this 
Nation's ballooning deficits, and it is clear from your newly 
released report that that fact remains true even today. Yet 
even in light of our inability to cover existing deficits, my 
Democratic colleagues are proposing massive new spending 
programs, which would dramatically increase our future deficit.
    Take a look, if you would, at this series of charts behind 
me, which shows existing projected deficit down at the bottom 
in navy blue. Under your current baseline, if Congress was to 
do nothing for the next 10 years, that is, pass no laws, enact 
no new revenue or spending, the result would be a deficit of 
$1.43 trillion by fiscal year 2028. That is a lot of money. But 
it is dwarfed by the spending my Democratic colleagues would 
enact on top of it.
    For example, if we add expanded Federal housing, the 
deficit would be $1.48 trillion in 2028, an increase of $50 
billion from the baseline. Pile on the expanded opportunity 
credits, expansion of the earned income tax credit, and 
universal child care, and you are looking at a deficit of $1.92 
trillion in 2028. Then we get to the really expensive part of 
their proposals, free college for all, establishment of the 
LIFT credit and a guaranteed Federal job results in a deficit 
approximately $3 trillion by 2028.
    Finally, there is the pinnacle of budget busting proposals, 
Medicare for All, which, with an estimated 2028 deficit of 
$6.78 trillion required us to break the scale on the chart just 
to fit it all on one page.
    So my question to you, Director Hall, given that our 
revenues can't come close to covering our existing deficit, how 
then should we cover the deficit created by these new spending 
programs?
    Mr. Hall. Well, I will start with the track that CBO has 
always taken is we don't make policy recommendations, but I 
will say that some pretty big changes would need to be made in 
tax policy or spending policy or both things.
    Mr. Johnson. Like a good lawyer then, I will rephrase my 
question.
    Mr. Hall. Okay.
    Mr. Johnson. Under current law, can we cover these massive 
increases in spending with current law?
    Mr. Hall. Under current law----
    Mr. Johnson. Given the assumptions that you made----
    Mr. Hall. Right.
    Mr. Johnson.----in your proposal--I am sorry, in your 
report, would we come even close to covering these massive new 
spending programs and reduce the deficit?
    Mr. Hall. No, no. Under current law, without these programs 
we are heading towards 93 percent of GDP, almost 100 percent of 
GDP in just 10 years. That is a pretty big challenge.
    Mr. Johnson. And if I read your report correctly, I would 
have to pull it out to look at the exact number, but by 2028, 
we are looking at a deficit that exceeds the highest peak in 
American history, which was right after World War II, correct, 
if we keep going in the direction that we are going.
    Mr. Hall. Right. If we keep going, the highest peak was 
about 106 percent of GDP.
    Mr. Johnson. Right.
    Mr. Hall. So it is not far from the 93 percent.
    Mr. Johnson. And these are going to take them--these 
programs, if enacted, would take it so much higher than even 
that.
    Mr. Hall. That is likely correct, although we would have to 
look at the programs carefully to have an estimate.
    Mr. Johnson. Well, these are huge numbers, and they can, 
you know, sound very abstract if you don't study this stuff 
every day. What are the concrete impacts of unsustainably 
increasing deficits on average Americans?
    Mr. Hall. Well, one of the problems I would like to point 
out about the deficit is, I didn't highlight, is when it is 
occurring. Every time we go through a business cycle--I don't 
know if the graphs, if you all did get the graphs, but if you 
look at the debt the cycle of the debt going up and down, after 
every recession, deficits and the debt go way up. And for 
example, in the Great Recession debt was about 35 percent of 
GDP. When the Great Recession was over it doubled, the debt 
doubled to about 75 percent. Right now we are starting at 93 
percent, right, so one of the big impacts is the risk going 
forward.
    If you go through another business cycle, have another 
recession, debt is going to be piled up on top of 93 percent 
debt, and that is going to get to a very high level.
    Another thing is the deficit, the borrowing, raises the 
cost of capital to the private sector. So the cost of capital 
goes up, the cost of business investment goes up, and there is 
less in the private sector. So productivity is lower, which 
means wages are lower.
    So it is a drag on productivity, it is a drag on wages, and 
it is a drag on GDP growth going forward. Those are two of the 
effects that I think are very straightforward and very clear.
    Mr. Johnson. Mr. Chairman, it sounds like all the work that 
we have done to increase wages for the American people under 
these scenarios with this massive debt added on, we would be 
depressing wages for the American people, and thank you for 
indulging the extra time. I yield back.
    Chairman Yarmuth. Absolutely. The gentleman's time has 
expired. I now recognize the gentlelady from Connecticut, Ms. 
DeLauro, 5 minutes.
    Ms. DeLauro. Thank you very much, Mr. Chairman. I am 
delighted to be back on the Budget Committee, and welcome, 
Director Hall. It is always good to hear from you, and thank 
you for your thoughtfulness.
    My questions have to do with healthcare. New polling from 
Gallup suggests that the U.S. uninsured rate has risen to a 4-
year high. At the same time, the Trump administration has 
repeatedly taken steps to sabotage our Nation's healthcare 
system by weakening consumer protections and causing premiums 
to skyrocket.
    First question here is how does CBO estimate the effects of 
this Trump administration's sabotage on enrollment and spending 
in the marketplaces? I will ask the follow-up.
    Mr. Hall. Okay.
    Ms. DeLauro. CMS has also approved unlawful Medicaid work 
requirements in seven States, despite mounting evidence that 
they cause significant harm. Arkansas, the first State to 
implement the work requirements, and the State reports that 
more than 18,000 people have lost coverage since they were 
implemented last June. That is about 23 percent of those 
subject to the requirement.
    What have you learned from the Arkansas experience that 
informs CBO's estimates of the number of people who will lose 
coverage due to Medicaid work requirements?
    So enrollment--sabotage in enrollment and spending in the 
marketplace, the effects of your calculating those effects, and 
the Arkansas experience.
    Mr. Hall. Okay. Let me start with the rule changes. We, of 
course, have been studying the effects of the rule changes on 
healthcare coverage. As it turns out, some of the rule changes 
encourage enrollment, some discourage enrollment. So it is not 
really clear yet what the net effect is going to be. So we will 
continue to sort of watch that effect.
    The information that you mentioned, the Gallup poll, is 
maybe an indication that coverage is going down, but let me 
just say that that is a private poll, it doesn't meet the usual 
standards of a Federal Government poll. It doesn't have the 
sample size and et cetera, so we wait for a poll that is done 
by the CDC to get those numbers.
    We do expect enrollment to drop, though. We expect it to 
drop in 2019 because of the elimination of the penalty in the 
individual mandate. So we wouldn't be surprised to see the 
enrollment start to drop. It is just too early to tell if it is 
really dropping in 2018 yet.
    Ms. DeLauro. I would be very, very interested in following 
that up with you, because we look at the reduction and the 
cost-sharing payments in addition to looking at the cutback in 
navigators, in enrollment times, in periods of time, thereby 
circumscribing the effort to be able to enroll people to expand 
the opportunity, so I would love to have a continued dialogue, 
the Arkansas experience and Medicaid work requirements.
    Mr. Hall. That is another one we are watching the effect. 
We don't understand what the effect is going to be. So we will 
watch the Arkansas experience. Every year we change our 
forecast of enrollment, and it will be based in part on that 
experience to see how that affects things. But, of course, you 
are right in the sense that that could change enrollment over 
time.
    Ms. DeLauro. 18,000 people have lost coverage already, so. 
Thank you.
    Let me just, on the shutdown, we talked about $11 billion 
short term, $3 billion long term. The President has talked 
about another multiweek shutdown, and, you know, the question, 
I think, has been asked about what that effect would be, but 
people are very, very uncertain at the moment, and they will 
not be spending in the next 3 weeks, so it is not a 5-week 
shutdown, it is going forward. And we also have created a 
climate of instability, and there is caution, whether it is 
businesses, et cetera, but I am talking about individuals' 
caution about spending. Does that have an economic effect, in 
your view, and because it goes beyond the Federal workforce, 
and what kind of an economic effect, in your view, will that 
have? What is the economic effect?
    Mr. Hall. Sure. Well, we certainly do think that those 
things would have an economic effect, and would potentially 
slow down economic growth. We just weren't able to sort of 
measure that over just a 5-week period, but I do think that 
that is right that those things were getting to be more 
important, and those things might affect economic growth more 
in the future. This increased uncertainty, to the degree it 
impacts household and business decisions can slow down things. 
Reducing the efficiency of government is never a good thing. So 
I think all those things are things that have a potential 
impact. We just weren't able to really get our hands and 
measure those yet.
    Ms. DeLauro. Will you be doing that?
    Mr. Hall. If the shutdown recurs, we would be happy to take 
a look at that.
    Ms. DeLauro. Well, but you are looking at--it is beyond 5 
weeks.
    Mr. Hall. Oh, I see.
    Ms. DeLauro. You have a longer lasting period of 
uncertainty----
    Mr. Hall. Right.
    Ms. DeLauro.----and instability----
    Mr. Hall. Right.
    Ms. DeLauro.----that is really captured in the public, and 
the data shows that in terms of people who rely on their 
paychecks, it is paycheck to paycheck.
    Mr. Hall. We will certainly look at the data and look to 
see if there is more an effect there that is measurable.
    Ms. DeLauro. Okay, what I would love to do is to be able to 
follow up with you on measurability. Thank you very much.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
recognize the gentleman from Utah, Mr. Stewart, for 5 minutes.
    Mr. Stewart. Thank you, Mr. Chairman, and to the Chairman 
and Ranking Member, as the new member of the committee 
representing Appropriations, I am honored to work with you and 
look forward to doing something productive, I hope. And, Mr. 
Hall, you and I have several things in common. You have a Ph.D. 
in economics. I took Econ 101 when I was a freshman. Actually, 
I have a degree in economics, as well, although not an advanced 
degree. I read your computational partial equilibrium modeling. 
I don't know what that is. It sounds very cool, though. And one 
other thing we have in common is I think you are serious about 
the deficit and recognize the problem. You must feel like a 
lone man in the wilderness, and I am sure that frustrates you 
because it is an enormous challenge. I would argue is, if not 
the most, it is one of the two most single greatest challenges 
facing our future. It is the reason I ran in 2012 was because 
of our debt and our spending.
    And just very quickly, because I want to ask you a question 
many of us have been kind of torn by this, because I also work 
on the Intel Committee. I am a former Air Force pilot. I 
recognize national security is a concern, but I try to balance 
these two all the time.
    And it is interesting to my colleagues on the committee as 
well to hear how, you know, in just a few minutes, we become 
tribal on this. You know, one side wants to blame tax cuts, the 
other side wants to blame spending, and at the end of the day, 
after all the politics and pontificating, the thing about 
economics is there is a number, and the number is pretty 
obvious, and you can also understand where that number came 
from. And I hope as a committee, we can make serious and 
sincere efforts to try to address it, because if we don't, then 
we are in a world of hurt, and we mess up our children's 
future, and there is just no question about that, which brings 
me to my question to you. And that is, I love the part of your 
written testimony here.
    What are the consequences of high debt, because most 
Americans, if they don't understand what are the consequences, 
then they go what difference does it make? I have been hearing 
about this for a long time, and my life seems to be okay. What 
difference does it make?
    To go through them quickly, I want you to emphasize the 
last one, increased interest payments. Obvious, you have talked 
about that. Decrease in national savings. Again, obvious how 
that impacts people. A decrease in flexibility of government, 
of Congress, to address those problems. That should be 
important to all of us here.
    And then the last, the fourth one is the likelihood of a 
fiscal crisis. I would like you, if you could, to give us kind 
of your worst-case scenario, because I know you have to work 
within the margins of we think it might be this, but tell us 
what happens, worst-case scenario, what does this mean to 
people so that maybe we can get their attention and why we need 
to address it?
    Mr. Hall. Well, sure. I think one of the things that we try 
to do is try to give you some feel for the uncertainty in our 
forecast, what a reasonable range is for the outcomes. You 
know, for example, in the near term over the next 10 years, we 
see deficits being at something over 4 percent. Not hard to 
imagine deficits becoming 6 \1/2\ percent, getting larger, and 
that is without a recession going forward. That sort of effect 
would raise the debt after 10 years from 93 percent of GDP to a 
record, could be 120 percent after just 10 years, something 
like that. I don't have the numbers right in front of me, but 
we try to do some of that, and again, that is without a fiscal 
crisis. We aren't forecasting a fiscal crisis, but the one 
thing we do know is the chances of that happening increase.
    Mr. Stewart. So I am going to narrow your response if I 
could, because seeing your clock, you only have a few minutes. 
Talk to me about the word you just said, a ``fiscal crisis.'' 
Help people understand what that means. I know you are not 
projecting that.
    Mr. Hall. Right.
    Mr. Stewart. I know, you know, heaven help us, we all want 
to avoid that. But if it isn't avoided, what does that mean to 
people? Talk to me about what that means to people.
    Mr. Hall. The most important part of that is that the 
borrowing cost to the Federal Government goes up. Because of a 
lack of trust or whatever if people start asking for premium to 
lend the government money to run the government, interest rates 
could be much higher than we project at the moment.
    I will give you a--for example, if interest rates--we think 
interest rates will go up to around 3.7 percent, 10-year 
treasuries. That a pretty low historical level. If they went up 
a whole percentage point higher than that, we are talking about 
an extra $2 trillion in debt, if they go up an extra--you know, 
a debt crisis would be more than a percentage point. If it is 2 
percentage points higher, we are talking about $4 trillion in 
extra debt over the next 10 years. So the debt of the Federal 
Government gets to be really significant, and the basic punch 
line is, in that case, if you want to fix that, now you are 
talking about really draconian measures. You are talking about 
really decreasing spending or really increasing tax revenues or 
both things if you let this get out of hand.
    Mr. Stewart. And we are out of time, so I will just 
conclude with this: I appreciate your answer, although it 
frustrated me just a little because most Americans, once again, 
well, what does that mean to me? I remember at the end of Jimmy 
Carter, and I am not blaming Jimmy Carter, it just happens to 
be that was the time, but we were borrowing money at 20 percent 
at that time. And that is the thing I want to talk about. This 
is what it means to you. Borrowing money at 20 percent, a 20 
percent mortgage, an 18 percent mortgage, a 21 percent car 
loan, those are the numbers we need to be talking about with 
people so they understand this matters to me. Thank you, sir.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from North Carolina, Mr. Price.
    Mr. Price. Thank you, Mr. Chairman. I also am happy to be 
back on the committee after a number of years away. I 
appreciate your leadership, Mr. Womack. I look forward to 
working with all of you. And thank you, Director, for a helpful 
report.
    I want to revisit your line of questioning with Mr. Khanna 
having to do with not so ancient history of the 1990s and those 
years when we saw budget surpluses and actually paid off 
something like $400 billion of the national debt, I believe. 
You talked about the factors that had produced a strong economy 
in those years, and, of course, that tends to address the 
budget deficit in a positive way, but those were also the years 
of comprehensive budget agreements. There were comprehensive 
agreements in 1990 and 1997 on a bipartisan basis. There was an 
important agreement in 1993 with democratic heavy lifting 
alone. And if Mr. Stewart is worried about tribalism, those 
were not tribal agreements, they were--in the sense that they 
offended everybody. Something in those agreements for everybody 
to hate because they did raise some taxes, they did restrain 
some mandatory spending, and they did impose some discipline on 
discretionary spending across the board.
    Yet, I think the consensus of economic opinion is that they 
are at least an important ingredient in the discipline that was 
achieved and the period of surpluses that we enjoyed.
    Now, we are far from that now. We are far from that 
economically, we are far from it politically. We have had, from 
our Republican friends, $1.5 trillion in tax cuts, mainly 
benefiting the wealthiest people, and groups in this society, 
totally unpaid for. Restraint, the only restraint that seems to 
be proposed these days is on domestic discretionary spending, 
leaving the rest of the budget aside. That strikes me as a 
lose-lose proposition. You are not really addressing the 
overall fiscal crisis with constraining only domestic 
discretionary spending, but at the same time, you are starving 
our country of needed investments.
    So, all that by way of asking you, what should we be 
looking for in the way of a comprehensive approach to this, is 
sometimes we call it a grand bargain. Is that still the best 
bet if our politics could ever come around to achieving that? 
Are there any different ingredients that would need to be 
achieved?
    So I am interested in the impact of such comprehensive 
budget policies in the past, and what the implications are for 
the dilemma that you very well outlined.
    Mr. Hall. Well, I want to steer a little clear of 
recommending policy changes, so I will try to talk generally 
about this. The debt problem now is really large, and under 
current laws we are going, it is going to be a bigger and 
bigger problem, so the longer we wait, the more draconian the 
measures would have to be to fix it.
    So one of the things that is an important thing is to think 
about something early. And second is, the debt is at a high 
level, so you need something big to change. You talked about 
discretionary spending. One of the reasons that I often make 
the point about just the net interest costs of the current debt 
is on its way to exceed all of defense spending, and it is on 
its way, after 30 years, of maybe exceeding all of 
discretionary spending, just the interest cost, that is not 
fixing the problem, that is just holding it still. So the 
problem is getting much bigger than discretionary spending, for 
example.
    So if you have to think about things, you need to think 
big, and you think in terms of revenues, you need to think in 
terms of spending. One or the other, or both things, are 
perfectly fine. I think it is helpful. This is--I don't want to 
make recommendations, but having some sort of plan, I think, 
would be a good signal.
    Mr. Price. Well, what quickly can you say about the history 
of this? Were those three agreements an important ingredient of 
the fiscal discipline achieved in the 1990s?
    Mr. Hall. Those things all contributed. I haven't done a 
detailed analysis of that, but I do want to point out that that 
was a different time than now. All right. There were a couple 
things we had going for us that we don't have going for us now. 
One was that productivity surge, and the other was a more 
quickly growing labor force.
    Heading forward, you know, unless we have an unexpected 
surge in productivity, or I don't know what would happen on the 
labor force side. We have an aging workforce. Those things are 
going to be big drags going forward, and it is going to make it 
more difficult to deal with this than perhaps was the time in 
the late 1990s.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Texas, Mr. Crenshaw, for 5 
minutes.
    Mr. Crenshaw. Thank you for being here. I appreciate what 
the CBO does. You have the most difficult job imaginable, which 
is giving apolitical advice to Congress. I can't even imagine 
that. The reason we are here, I believe, is because we have a 
fundamental difference in questions of why deficits exist, 
whether it is spending or too little taxes, and--but it is 
really a fundamental question of why government exists in the 
first place.
    If you believe government exists to sustain itself and fund 
pet projects for politicians, well, then it, therefore, makes 
sense to simply tax the people in order to fund that. If you 
believe that government exists to protect inalienable rights 
and freedoms, well, then we have a difference of opinion. And 
so the question then becomes, okay, and as my colleagues have 
pointed out, you know, what has actually caused these deficits? 
So we are going to go through some numbers specifically on the 
tax cuts from last year. According to CBO's projections right 
now, the debt in 2029 is projected to be $33.7 trillion, 
correct?
    Mr. Hall. That sounds right.
    Mr. Crenshaw. The tax cuts cost $1.5 trillion, and was that 
with or without dynamic scoring?
    Mr. Hall. Well, it was $1.9 trillion with everything 
included with dynamic scoring.
    Mr. Crenshaw. Okay. Well, let's just leave it at 1.5 then. 
It is the----
    Mr. Hall. Yeah. That just doesn't include the extra 
interest cost of the debt.
    Mr. Crenshaw. Okay. So 33.7 minus 1.5 is 32.2. So without 
the tax cuts, our debt in 10 years would still be $32 trillion. 
With the tax cuts, it would be $33 trillion. It is not a huge 
difference.
    The tax cuts also did what they were designed to do. They 
have increased job growth. They have increased wages. And it is 
also worth highlighting, and according to the graph you gave 
us, revenues continue to increase every year. Do you know off 
the top of your head what they are projected to increase just 
next year? This is government revenue.
    Mr. Hall. Right. I don't off the top of my head.
    Mr. Crenshaw. Okay. It is over $100 billion increase from 
the year before.
    Also worth noting, according to this graph you gave us, as 
a percentage of GDP, meaning relative to the size of the 
economy, revenues have basically stayed around the same. In 
fact, they have been on an upward trajectory, again, with the 
tax cuts. The government continues to make more money as a 
percentage of GDP. Is that correct?
    Mr. Hall. That is right, although I will caution, a little 
bit of that is the expiration of the reduction in individual 
income taxes. So that----
    Mr. Crenshaw. Right. Yeah, if politicians decide to 
increase people's taxes,
    Mr. Hall. That is right.
    Mr. Crenshaw. Correct. So when my colleagues say that it is 
absolutely clear that tax cuts from last year are the only 
reason that we have these deficits, is that really true?
    Mr. Hall. Deficits are much larger.
    Mr. Crenshaw. Okay, that is what I figured. So it brings us 
to our next issue then, which is mandatory spending. It is true 
that 70 percent of our spending in government is mandatory 
side, right?
    Mr. Hall. Yes.
    Mr. Crenshaw. And it is also accurate that mandatory 
spending on health programs alone will double from $1.3 
trillion in 2019 to $2.4 trillion in 2029?
    Mr. Hall. Yes.
    Mr. Crenshaw. That is according to your estimates. So in 
the little time we have, the CBO does analysis on certain 
policy considerations. You are not recommending policies, but 
you do do analysis on certain policy recommendations. When it 
comes to mandatory spending programs like Medicare and Social 
Security, what are some of the top recommendations that you all 
analyze?
    Mr. Hall. Well, I will tell you, I will point you to a 
report that we recently finished, Options to Reduce the 
Deficit. It is a rather big volume. It is about 120 different 
options that Congress could take, all of which would reduce the 
deficit on the spending side, revenue side. We give you actual 
estimates. You get some idea of how much bang for the buck you 
would get.
    Mr. Crenshaw. My last question, how much would you have to 
raise taxes--without changing spending, how much would you have 
to raise taxes in order to not even balance our budget but get 
our deficits on par with our growth, meaning that debt-to-GDP 
ratio would actually stay the same?
    Mr. Hall. I think if you raised everybody's taxes, all the 
tax rates by about 10 percentage points, 10 percent, that would 
generate enough revenue to reduce the deficit down to about 
zero, not fixing the debt.
    Mr. Crenshaw. Okay. Ten percent, which would be a pretty 
enormous raise----
    Mr. Hall. It would.
    Mr. Crenshaw.----for quite a lot of people.
    And what is the main--what is the best indicator of your 
wealth in a group of people? Would you say it is age? Would age 
be a good indicator of wealth if you had a random group of 
people?
    Mr. Hall. Well, sure, age is definitely associated.
    Mr. Crenshaw. My last closing comment in this amount of 
time would be to say that what we are talking about when we are 
talking about expanding entitlement programs is taxing the poor 
to pay for the rich. That is what we are actually talking 
about, because you are taxing people of my generation to pay 
for people who have their entire lives to save, and we have to 
question whether that is fair.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentlelady from Illinois, Ms. 
Schakowsky.
    Ms. Schakowsky. Thank you, Mr. Chairman, Ranking Member, 
and Mr. Hall for being here.
    You know, one of the things that the shutdown I think 
illustrated, many people think about Federal jobs as middle-
class jobs. And what we actually saw was that these are workers 
who live paycheck to paycheck, and a couple of them gone means 
that they are in serious sometimes crisis, going to food 
pantries. But it also reflects, I think, what the majority of 
workers face. We find out, there has been research that even a 
$500 accident or something happening, that most families can't 
afford that.
    One of the benefits that was promised in the tax cuts or 
projected in the tax cuts was that it would spur rapid wage 
growth for workers. But it actually appears that instead of 
delivering raises for workers, that corporations use their 
windfall to enrich their shareholders through stock buybacks. 
In fact, 2018 set a record, with companies spending more than 
$1 trillion on buybacks.
    And so my question to you is, how do these buybacks affect 
the economy? And do you see their effect in your most recent 
estimates of economic growth? And do those buybacks actually 
then interfere with wage growth?
    Mr. Hall. Well, let me first say we expected stock 
buybacks. It was part of our forecast. And what we have seen 
happen so far is not at all inconsistent with what we expected. 
So buybacks actually aren't bigger than we thought they would 
be.
    Ms. Schakowsky. No, I just want to say I am not surprised 
either about the buybacks.
    Mr. Hall. I am warming up here to get to your question.
    Ms. Schakowsky. Okay.
    Mr. Hall. The wage impact of that is less clear to us, 
whether the stock buybacks will impact wage growth or not. And 
we think the labor market is tightening up and we think wages 
are starting to rise and we think they will rise in the future. 
You know, it is hard to say what the effect of stock buybacks, 
if that has had or that is going to have an effect on wage 
growth.
    Ms. Schakowsky. Did you expect any higher wage growth as a 
result of the tax cuts?
    Mr. Hall. I think we did in the long run, because the tax 
cuts lowered the cost of capital, lowered the cost of work. So 
we did expect more people to reenter the labor market like has 
perhaps been happening. We expected higher investment. We 
thought that would raise wages some. We did forecast that. But 
we expect that over 10 years.
    Ms. Schakowsky. Another claim was that the Republican tax 
bill would increase investment, which in the case of an 
industry like Pharma, like the pharmaceutical companies, could, 
in theory, lead to lower costs for consumers. And we would all 
agree that that would be a good thing.
    But last summer, I wrote to the CEO of Eli Lilly, and 
actually of some other companies as well, asking him about the 
impact on consumers' out-of-pocket cost for different drugs. 
And their response left a lot to be desired.
    And, Mr. Chairman, I ask unanimous consent to submit for 
the record my letter as well as the response from Eli Lilly.
    Chairman Yarmuth. Without objection.
    [The information follows:]
    [GRAPHICS NOT AVAILABLE IN TIFF FORMAT]
    
    Ms. Schakowsky. So my question to you, Mr. Hall, is have 
you analyzed the impact of pharmaceutical companies' decision 
to invest in buybacks rather than lowering out-of-pocket costs 
for consumers on the trajectory of our out-of-pocket healthcare 
spending for middle class Americans?
    Mr. Hall. Well, we do keep track of pharmaceutical prices 
and we do try to monitor, and we have done some looking at 
that.
    Relying on my memory now is not very good, but we can 
follow up and talk to you about what we see with the 
pharmaceutical prices and talk about what we think could be an 
impact going forward, if you like.
    Ms. Schakowsky. In general, did you see that we had any 
lowering of consumer prices as a result of the tax cuts that 
many big industries enjoyed with the tax cut?
    Mr. Hall. I think that is something that right now would be 
impossible to tell in such a short time period. And it would 
require us to do a little more research than we have done.
    Ms. Schakowsky. I think I don't have time for a third 
question. Thank you, Mr. Hall.
    Chairman Yarmuth. The gentlelady's time has expired.
    I now recognize the gentleman from Oklahoma, Mr. Hern, 5 
minutes.
    Mr. Hern. Director Hall, it is great to be here. It is 
great to be a freshman, with all the challenges we have ahead 
of us here. As a small business owner for over 34 years in 
various industries, having the privilege of serving as the CFO 
for a large franchise group, all over the country I have seen 
the problems we have across the country and the various issues 
we have when intrusion in the job creators and trying to put 
people to work. So I have been on the other side of these 
policies that I am going to venture now to create or to unwind, 
if you will.
    You know, if I ran my businesses like we run the Federal 
Government, we would be out of business a long time ago. And so 
I would have to assume that in that realm, it is not like a 
business, but it is about how we get after growing and 
stimulating our economy and controlling spending. It is math. 
You are a math guy. I happened many years ago to get an MBA 
from the University of Arkansas, so I am familiar with that 
area, familiar with the economics. There is no other solution. 
No matter how much we try to color it up, we have to get after 
both.
    Much has been made about the 1996 welfare to work. Not much 
has been made about that, but a lot has been talked about the 
results of that act that President Clinton signed when we had a 
Republican House and Republican Senate. And the results of that 
were is that we encouraged people that were able-bodied to go 
back to work into a growing workforce, job market, and we saw 
budget surpluses in 1997, 1998, 1999 and 2000. We had a tech 
burst in 2000 that caused that to start unwinding a little bit, 
because we were focused on one industry.
    We did have labor participation hit 67 percent, the highest 
in recorded history that we know of. Today, we are at 4 percent 
less than that, roughly, 63 percent. We are pretty much maxed 
out on who can go to work in this economy. We have an aging 
population. We have employment rates that are considered beyond 
full, that I question whether they are looked at the same way 
as they were 50 years ago.
    The mandatory spending levels are growing at a rate that is 
unsustainable. The amount of money that we all appropriate and 
argue over and fuss over up here is diminishing quite rapidly 
as compared to the GDP, so that we are only after just a small 
portion of our budget that we are talking about. The rest of it 
is on auto pilot.
    The fertility rates in this country to maintain a 
population that will keep this country as we know it today is 
woefully low. It is below the 2.1 percent.
    So with all that said and the dire note that you made that 
the interest rate very quickly is going to--or the interest on 
our debt is going to surpass our ability to protect ourself or 
the money we spend to protect ourself, I am always looking at 
this is what we know. And you have the ability to look at 
various things, because at the end of the day, it is just math 
and behavior.
    What are some of the ideas--and you alluded to the 120 
different options we have to change some of our trajectory. But 
in my short period of time that is left here, could you share 
with us just a couple of things that are imminent or does that 
get into the policy side?
    Mr. Hall. Imminent as in which----
    Mr. Hern. What we could change. As an example----
    Mr. Hall. Sure.
    Mr. Hern.----what would be the impact--there has been much 
said about the $15 an hour minimum wage. What would that do to 
us both in the short term and long term? There has been much 
made about legal immigration. How much legal immigration do we 
need to get us back on--to make up for the 2.1 differential?
    Mr. Hall. Well, with respect to minimum wage, we would have 
to see a proposal. We have certainly been thinking about that. 
We did an analysis in 2014 of a 10 percent minimum wage. We are 
thinking about the 15 that has been talked about. So I don't 
want to guess as to what the numbers are going to look like in 
something like that.
    And I am sorry, the other thing was the----
    Mr. Hern. How much legal immigration do we need to add to 
replace our aging workforce so that we can sustain our 
mandatory spending levels?
    Mr. Hall. Yeah. I don't know the answer to that one. You 
know, generally, if you increase immigration, first of all, the 
impact depends upon what kind of immigration you are talking 
about. It is not just any immigration that it is all the same. 
It differs a little bit. If you talk about it broadly, if you 
increase the labor force, you increase GDP, because you have a 
bigger labor force. But it does matter what kind of immigration 
you have and that sort of thing. So it is hard for me to give 
you some idea of what would fix things.
    Mr. Hern. But as it relates to immigration, it would be 
some combination of skill versus wages for those skills across 
the entire spectrum, correct?
    Mr. Hall. Right. Yeah. The research suggests that the 
higher skilled immigrants actually can raise productivity in an 
economy. The lower skilled more basic ones probably don't as 
much, and they actually probably crowd out wage increases for 
the lower skilled folks who are here now.
    Mr. Hern. And also would crowd out the ability for younger 
Americans to get that first-time job to start learning the 
process of work?
    Mr. Hall. Right, right. That is actually one of the 
concerns if you look at labor force participation by age right 
now. Once you get the baby boomers, past the baby boomers, the 
rates are still pretty low even today, lower than they were for 
the baby boomers.
    Mr. Hern. Thank you. I could spend like 4 or 5 more days 
asking you questions, but thank you so much for your time, and 
thank you for the difficult job that you have.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from New York, Mr. Morelle.
    Mr. Morelle. Thank you, Mr. Chairman. First of all, 
congratulations, and thank you for the opportunity to serve on 
this committee.
    Dr. Hall, thank you for your testimony. I appreciated the 
materials that were sent over. I only had a brief chance to 
look at them since you released them yesterday, but I am 
anxious to pore through them.
    But I had a couple of very basic questions. The first is--
and I have asked a number of people this and I have a hard time 
getting an answer, maybe you could take a whack at it--what, in 
your opinion, should the optimal debt level be as a percentage 
of GDP?
    Mr. Hall. Well, CBO has very intentionally avoided making 
recommendations like that, what is the optimal debt level. We 
wouldn't offer an opinion on that. We can give you some idea of 
where the debt level is, what some changes, that if you 
suggested some changes being made, we could tell you what it 
would likely be as a result, but I wouldn't want to tell you 
what I think the optimal is.
    Mr. Morelle. It is hard to figure out from a policy point 
of view where you want to be when the folks that you rely on 
have a difficult time coming to it. Obviously, you are 
concerned about the increasing debt as a percentage of GDP, but 
it is curious just because it is hard to guide your thinking 
when you don't know where the target is. But I may want to 
pursue that line of questioning with you further offline.
    I did want to--first of all, thanks for the report, which 
was very helpful. And as I pored through it in the last day and 
a half, much like I think my colleague Mr. Hern expressed, I 
see this, in part, as something of a function of demographics. 
And I have been thinking about the U.S. population.
    So the percentage of people over the next 10, 20 years and 
beyond that are in the workforce as a percentage of all 
Americans versus the number of retirees is clearly changing, 
and that is driving a fair amount of this. Am I reading that 
effectively the right way?
    Mr. Hall. That is right. Yes.
    Mr. Morelle. And also, Mr. Hern mentioned fertility rates 
and the replacement of workers. So as I think about this, if 
you have enough people in the workforce who are working as a 
percentage of the number of people retired, then essentially 
part of your problem goes away. Even the mandatory spending 
just becomes a fixed number. If you could maintain the 
percentages that had been in force 30 years ago, you would have 
a much different picture, wouldn't you?
    Mr. Hall. Yes.
    Mr. Morelle. And that is what is driving a lot of this.
    Mr. Hall. Yes.
    Mr. Morelle. Which does lead us to have the conversation 
about immigration, because it is clear that, given the 
incumbent population, we don't have enough people and the 
fertility rate is not enough, as I understand it from reading.
    So that does--in terms of the imperatives around debt and 
debt burden in the out years, immigration policy will play a 
very significant role in how we address debt. Is that correct?
    Mr. Hall. That is right, to the degree it affects the labor 
force. And labor force is an important sort of part of the 
recipe for growth and revenues and budget spending.
    Mr. Morelle. I do want to come back to you at some point 
about that. I am also inclined to be concerned about the impact 
that climate change is having on debt loads.
    And one of the things that I thought about a couple months 
ago when we were doing an orientation for freshmen members and 
we were talking about debt, it occurs to me that unanticipated 
international engagements, unanticipated natural disasters, 
which are certainly occurring at a higher rate with concerns by 
the scientific community and many of us about climate impacts, 
that those will have a much greater impact, and we are going to 
be in a much more precarious position related to how much we 
can address those through debt because of the situation we find 
ourselves in. And to me, those are two very, very grave dangers 
looking forward.
    Do you factor that in here?
    Mr. Hall. Yes, it is implicitly in there. That is right. 
And I can give an add. We have done some work, for example, of 
we do have a nice piece on the impact of increased hurricane 
frequency because of climate change. It will give you some idea 
of how much we think that will impact the economy and the 
budget going forward.
    Mr. Morelle. Yeah. And the last point, I just wanted, I 
think I am reading this right in terms of the charts. I looked 
at 1969 and 2029, and it is hard to tell exactly on the charts 
with these numbers, but it looks to me, though, outlays in 1969 
were about 18 \3/4\ percent of GDP. In 2029, they are expected 
to be 23 percent, whereas revenue has actually dropped as a 
percent of GDP over that period of time.
    But even if you look at just today, those outlays have gone 
from 18 \3/4\ to about 20 percent, in looking at your line; 
whereas, on the revenue side, 18 \3/4\ to about 17 percent. So 
I want to come back at some point to talk about the immigration 
policy and having more people in the workforce, and appreciate 
all your great work, sir.
    Mr. Hall. Sure.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Tennessee, Mr. Burchett.
    Mr. Burchett. Thank you, Mr. Chairman. It is Burchett, 
Birch like the tree and et like I just et lunch. Thank you so 
much. I appreciate that. Thank you, Ranking Member, for your 
indulgence.
    Chairman Yarmuth. Thank you very much for you so graciously 
were willing to defer to your senior colleagues, and they said 
they wanted me to----
    Mr. Burchett. Yes, sir. Well, thank you. I appreciate that.
    As a freshman, I would like to say I still don't have a 
door on my bathroom, but I understand that Mr. Hall has little 
or nothing to do with that, so I will not bring that up during 
our conversation. Although my daughter did say I could put a 
curtain across there, and I told her, I said, baby, this isn't 
church camp, we got to have a little more prestige here in the 
United States Congress.
    Dr. Hall, I want to thank you so much for indulging us with 
your questions, and I want to ask you a question about tariffs. 
It seems the President mentioned tariffs and, you know, the 
dark clouds are looming. But I remembered I think it was either 
my first or second sophomore year in college in the eighties 
that we were one of the--well, the only American motorcycle 
manufacturer was about to go out of business because the 
Japanese were, in fact, dumping motorcycles, and it was 
primarily 1,000 cc bikes and above, onto the market for cheaper 
than they could actually produce them. And then they would 
drive everybody else out of business and then they would jack 
the prices up.
    And I have noticed that we are now exporting to China rice 
now. It seems that some of these talks of tariffs have brought 
some of our sometimes friends and sometimes enemies to the 
table. And I wonder if you could comment on that and the 
effects that that has on our economy.
    Mr. Hall. Sure. Sure. Let me say how tariffs are working 
into our forecast here. Right now, tariffs imposed are 
impacting about 11 percent of imports. We think that that is 
reducing GDP by maybe a tenth of a percent, on average, over 
the next 10 years. But it is generating about $34 billion in 
customs duties next year.
    So we have assumed that those stay in place forever or they 
stay in place for the time period. We have not assumed the 
scheduled tariff increases, that those occur yet, because the 
President seems to have a lot of discretion on that. So we are 
going to wait to see if actually that, in fact, gets done.
    The effect of just tariffs themselves are kind of like any 
other tax. It is a tax on imports. It is a tax paid by domestic 
importers. And then they burden, the price can be borne by 
foreign producers, U.S. businesses, U.S. consumers, that sort 
of thing. And then you have the retaliations probably affecting 
exports.
    So those are all sort of the direct effects. It is not the 
strategic aspects of the tariffs, which I think is a bit of 
what you are talking about. But we have talked about that, and 
I would say the effects are--the kinds of effects are well-
known. The actual numbers are a little bit hard to come by, 
because it is hard to know how much will be passed forward and 
not passed forward.
    Mr. Burchett. Sort of an aftereffect. I mean, you see it 
after it is already done and then you come back and tell us, 
and then----
    Mr. Hall. That is right. That is right.
    Mr. Burchett. All right. Another question I had is, at 
least in Tennessee, the tax cuts are working. Revenue is 
growing. If you want a job, you can find a job in Tennessee. 
And it seems obvious that the increased mandatory spending is 
the problem. In fact, our Ranking Member speaks very eloquently 
on this. I am not quite at that level.
    But, in your opinion, what is the source of that problem?
    Mr. Hall. The mandatory spending I think is relatively 
clear. We have an aging population, and there is no way around 
that. That is driving a lot of, including the healthcare costs. 
And even the aging population aside, we have rising healthcare 
costs that rise faster than GDP. They have for a long time. We 
think they are going to continue to rise faster. It is those 
two things that are really driving this big increase in the 
deficit in spending going forward.
    Mr. Burchett. All right. I have one more question, if that 
would be all right. Mandatory spending programs, it seems like 
they are approaching unsustainable levels. And could you share 
your thoughts on being a little more fiscally responsible with 
those programs? I realize you have to be careful about 
opinions. I understand that.
    Mr. Hall. Yeah. Sorry if it sounds--but read our book, our 
Options to Reduce the Deficit. We really do have a number of 
options there.
    Mr. Burchett. Is this like in college where I have to buy 
the professor's book that actually is teaching the class?
    Mr. Hall. That is right. And we are happy to follow up and 
talk about any of those things and how, you know, the scale and 
that sort of thing.
    Mr. Burchett. I will warn you about that. My buddy Sheddy 
Ward found a bunch of those at the used book store, and he went 
and bought them and sold them back to the University of 
Tennessee at the full cost. So just remember that.
    Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentlelady from California, Ms. Lee, 5 
minutes.
    Ms. Lee. Thank you very much. Thank you, Mr. Chairman, for 
this hearing. Thank you, Ranking Member Womack, and good to be 
back on the committee.
    Thank you, Director Hall, for being here. Let me ask a 
couple questions and following up, really, from Mr. Hern's line 
of questioning from a different perspective.
    First of all, we know that Americans not only need jobs, 
but they need to be paid a living wage to lift themselves and 
their families out of poverty. Unfortunately, wages have 
remained very stagnant, with the Federal minimum wage still at 
$7.25 an hour. Yet the cost of living has increased, on 
average, I think it is by about 12 percent. Now, at the same 
time, the value of the minimum wage has fallen by 20 percent 
and there is not a single county in the country where a minimum 
wage matches the local cost of living.
    And so let me ask you, in terms of just economic impacts, 
what would raising the Federal minimum wage to a living wage, 
so people can take care of their families, what type of impact 
would that have on economic growth and the budget outlook?
    Secondly, let me just ask you--I want to ask my questions 
in one block--in terms of just strong wage gains. I don't see 
any predicament--or prediction, excuse me, for unemployment in 
communities of color, which at least, and I just have to say in 
the African American community is still double that of White 
unemployment. It is 6.6 percent in the Black community. In my 
home State, the unemployment rate among African Americans is at 
10.7 percent.
    So how do you address this disparity in unemployment rates, 
which are very large in the African American community, as well 
as the impact of a living wage on economic growth and the 
outlook for our budget?
    Mr. Hall. Sure. I need to be a little careful in talking 
about minimum wage, because, you know, we would need to see 
exactly what the minimum wage was if there was a proposal and 
work through the impacts.
    On the most basic level, right, raising the minimum wage 
raises the cost of hiring somebody. So one of the really key 
things is, does that discourage employment or not? So a 
relatively modest increase in minimum wage will have less 
likelihood of that if a very large one could have a labor 
market impact like that. But if it does not discourage 
employment, then, of course, wages go up and you have----
    Ms. Lee. So we don't know historically if it has or has not 
encouraged or discouraged employment?
    Mr. Hall. Well, I think we did a report on raising the 
minimum wage 10 percent in 2014, and we did talk about the 
effect, especially on low-skill workers, as having an effect on 
lowering employment in some places. A lot of that depends upon 
local cost of living, local wages, that sort of thing.
    So the result is almost mixed by part of the country, 
because, you know, if local wages are already pretty close to 
minimum wage, then that is much less of an impact, both good 
and bad. If it is well off that, then the impact really depends 
a lot on the labor market.
    We really do look carefully at the literature and see what 
sort of reaction in the past has happened. For example, if we 
were to look at minimum wages now, we would look at the recent 
experience at the State level, sort of see how those impacted 
employment and et cetera.
    But the concern on it would be the low-skilled end of 
things, because those would be the people who would be most 
likely to be adversely affected, but also they are the ones you 
are looking to help at the same time. I am trying to give you--
I am trying to give you a bit of a wishy-washy answer on 
purpose.
    Ms. Lee. Yes, I understand that, but also I do understand 
that the 12 percent cost of living increase, you would look at 
that as compared to the Federal minimum wage. We have got to 
figure out how to address that, because people shouldn't have 
to live at $7.25 per hour with a 12 percent cost of living 
increase throughout the country.
    Mr. Hall. Yeah. And with the differential unemployment 
rates, you know, that is a tough one that has been around for a 
long time. One of the things that really has always jumped out 
at me is when we go into recession, the people who are most 
hurt are people who already have high unemployment rates. So 
you actually see, for example, the African American 
unemployment rate really increasing during recessions, more so 
than for other groups.
    Ms. Lee. But, Director Hall, I want to know, though, how 
you see this gap being closed because, again, 6.6, 7 percent 
unemployment rate in the African American community, in my 
State 10.7 percent in the golden State of California, that is 
unacceptable. And so we have got to come up with a specific 
strategy as it relates to communities of color, the African 
American and Latino community, in terms of how to begin to 
close that gap.
    Mr. Hall. I will beg off, because we don't make policy 
recommendations.
    Ms. Lee. I understand that. But you can tell us what some 
of the economic assumptions are and how we could begin to look 
at policy recommendations.
    Mr. Hall. We are happy to talk about what we think would be 
the effect of particular policy proposals. That is sort of what 
we do.
    Ms. Lee. But you couldn't tell us what----
    Chairman Yarmuth. The gentlelady's time has expired.
    Ms. Lee.----policy proposals make sense or not?
    Mr. Hall. No, I would back off from doing that. Happy to 
follow up and talk about some of the proposals, if you like.
    Ms. Lee. Okay. Thank you very much.
    Thank you, Mr. Chairman.
    Chairman Yarmuth. Absolutely. The gentlelady's time has 
expired.
    I now recognize the gentleman from Pennsylvania, Mr. 
Meuser.
    Mr. Meuser. Thank you, Chairman. Thank you, Ranking Member 
Womack.
    Chairman Yarmuth. Microphone.
    Mr. Meuser. Maybe I am not the only one making a rookie 
mistake. All right. My first hearing with the Budget Committee, 
I am very happy to be here. I hope our work on this committee 
results in a more balanced, effective budget for the people and 
the taxpayers that are counting on us to bring accountability 
and return on investment of their money.
    Dr. Hall, you have undoubtedly heard the saying, we don't 
have a revenue problem, we have a spending problem. I served as 
secretary of Department of Revenue in Pennsylvania, and I 
always felt that the statement beared a lot of truth, and I 
also know that job creation and wage increases was the best 
revenue generator.
    Currently, our national unemployment rate is 3.9 percent. 
Two years ago, it was 4.7 percent. This is an increase of 4.8 
million jobs across the country. Can you provide an estimate of 
the revenue increase of a .8 percent decrease in the 
unemployment rate?
    Mr. Hall. We would have to think about that. We could 
probably work through something with that.
    Mr. Meuser. And on wages as well. Do you have an estimate 
of what the wages increase were over the last 2 years or just 
over the last year?
    Mr. Hall. Well, wages have been surprisingly unexplainably 
flat, and they are starting to rise now. The labor market is 
generally getting tight, and we do forecast that wage growth is 
actually going to continue and strengthen going forward. We 
don't have sort of a budgetary impact of that sort.
    Mr. Meuser. That is what I expect as well. And was it in 
the neighborhood of about 4 percent over the last 6 to 8 months 
or two or three quarters?
    Mr. Hall. I would have to check. That number is not----
    Mr. Meuser. And I would also be curious as to what your 
revenue numbers show for new revenue coming from wages, if that 
was something that we could get.
    Mr. Hall. Yes, we can follow up and probably give you a 
feel for that.
    Mr. Meuser. Great. I mean, that certainly provides some 
guidance as to what needs to be focused on in order to best 
raise revenues, of course.
    The GDP has improved over the last 2 years. 2017, we were 
at 2.3 percent. 2018, we were at 3.1, 3.2. What is projected 
for 2019, GDP?
    Mr. Hall. We have it slowing a bit to 2.3 percent.
    Mr. Meuser. Okay. So what would you estimate--and it may be 
in your summary here--the level of revenue increase for a 1 
percent increase in GDP?
    Mr. Hall. We would have to look that up. You know, we have 
some--those interactions we have got, you can vary 
productivity, and that is pretty close to varying GDP and that 
will give you some idea of the budgetary impact of that.
    Mr. Meuser. All right. Well, it is fair to say we have a 
strong economy, we are growing jobs, and we are increasing 
revenue. What was the percentage of revenue increase over the 
past 2 years or even just the past year, in 2018 or 2017?
    Mr. Hall. Yeah, I don't know offhand. I am sorry.
    Mr. Meuser. All right. What I have what is projected for 
2019 is 5.6 percent. That is very high. When I was revenue 
secretary a 4-year period, we grew revenues by about 10.5 
percent in the Commonwealth of Pennsylvania. That is 2.5, 2.6 
percent a year. So we are projected to grow revenues next year 
by $186 billion or 5.6 percent. That is strong. Would you 
agree?
    Mr. Hall. Yes. Is that from our numbers?
    Mr. Meuser. It is.
    Mr. Hall. Oh, okay. Then I will stand by those.
    Mr. Meuser. Now, the percentage of spending increases over 
the past 2 years was my next question, but we will forego that. 
And we do have a projected revenue in 2019 of 7.4 percent or 
$304 billion. That is extraordinarily high, 7.4 percent 
increase in spending. In fact, I was surprised to see that. The 
most that we ever had when I served as revenue secretary for 
the sixth largest State and the 19th largest economy in the 
world was about 4 percent, which, frankly, was about a point 
and a half too high, since we had to have a balanced budget.
    So I would just add, based upon these numbers, and if you 
go back 5 years, where our spending levels were in 2013, in 
2013, our spending levels were equivalent to where they were in 
2018. So I look at that--and not to mention the fact that prior 
to 2013, we had 4 years of the largest unprecedented level of 
spending, as you are well aware, $5.4 trillion over a 4-year 
period. And yet, even that, even with that prior, the 2013 
levels of spending are equivalent now to where our revenue 
levels were.
    And it is data like this that tells me that--look, we 
always want to try to increase revenues. We want the strongest 
economy and the most competitive tax rates that has the largest 
max/min possible, but we really have continue to have a huge 
spending problem.
    So clearly, these numbers show that. And what we are 
hearing today, I am looking at things like this with enormous 
levels of spending, with no chance that a higher rate of taxes 
unless it was near 100 percent would cure. Would you agree that 
we largely have a--one side of the ledger is more of a problem 
than the other, meaning spending?
    Mr. Hall. I would try to avoid, in a sense, taking sides. 
You know, obviously, one needs either less spending or more 
revenue or both to fix this problem.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Virginia, Mr. Scott.
    Mr. Scott. Thank you. Thank you, Mr. Chairman.
    Mr. Hall, I appreciate your presence. And I remember in the 
opening comments we were challenged to state what our plan was. 
And I can tell you that our plan is to resort to PAYGO, where 
you don't have $1.5 trillion in unpaid-for tax cuts. In fact, 
if you go back, as Mr. Connor was asking, to 2000, when we had 
a significant surplus--I remember in 2001, after President 
Clinton left office, Chairman Greenspan was peppered with 
questions at a hearing as to what would happen when there is no 
government debt, because we were projected at that time to pay 
off the entire debt held by the public by 2008 and by 2013 
return all the money to the trust funds. But we had massive tax 
cuts, fought two wars without paying for it, passed a 
prescription drug benefit without paying for it, violating the 
PAYGO principle, and all of a sudden we are back heavily in the 
ditch.
    If we had paid for everything we have done since 2000 and 
hadn't cut taxes without paying for them, we would be in a lot 
better shape than we are now.
    One question I had, have you been following the multi-
pension employer crisis?
    Mr. Hall. Yes. We do have some work on that, yes.
    Mr. Scott. We have noticed that if these pension funds--
well, there is an old saying, if you don't change directions, 
you are going to end up where you are headed. We are headed to 
many of these funds going bankrupt, taking down people's 
pensions and taking down a lot of businesses.
    Have you calculated what impact that would have on the 
Federal budget, in terms of increased food stamps, Medicaid, 
lower taxes?
    Mr. Hall. I am not sure. We have a report on it. I would 
have to take a look at that. We can get you that report. I am 
not sure if that would be in there or not. I think we do talk 
about some proposals to help fix the problem, at least.
    Mr. Scott. The proposals to fix the problem, best we can 
determine are actually cheaper than letting the problem occur. 
So that doing nothing is about the stupidest thing that we can 
do, because the effect on the budget would be profound. And 
there are a lot of suggested proposals that are cheaper than to 
the hit on the Federal budget ignoring all of the pain and 
suffering.
    Can you tell me a little bit about what the effect 
immigration has on Social Security, immigration policy?
    Mr. Hall. Sure. Sure. We would have to--changes in policy, 
we would have to know what the change is and do an evaluation 
of that, that sort of thing. Immigration, I think right now we 
have settled into something like a little under 1 million legal 
immigrants a year coming in. That contributes to the labor 
force growth. I don't know that we have done anything in 
particular about what if that immigration didn't happen.
    Mr. Scott. If you have people coming in working, they would 
be contributing to Social Security.
    Mr. Hall. Right.
    Mr. Scott. And that would actually help the Social Security 
crisis. Is that right?
    Mr. Hall. Yes, I think we have done some work on that. I am 
not remembering exactly what we found. If I could follow up 
with you, I could give you some idea of what we found with the 
effects of that.
    Mr. Scott. You indicated that the tax cut was helping to 
pay for itself. I understand that the later years in this 
decade, the tax cut actually is a drain on revenues. Is that 
right?
    Mr. Hall. Well, our analysis is that the tax bill does 
leave GDP over 10 years at a higher level, on average. It is 
about seven-tenths higher, the level, on average, through the 
decade. So there is that going forward. I am not sure about the 
pay-for aspect at the end. I would have to take a look.
    Mr. Scott. I thought in your testimony you said it actually 
had a drag on the economy in the last few years.
    Mr. Hall. Well, no, no. The lower taxes on investment in 
particular probably is helping economic growth in the near 
term. I think perhaps the part that I referred to was the end 
of the stimulus from the tax bill going away is going to leave 
us with slower growth in the next couple of years. So that is 
the drag, I think.
    Mr. Scott. Right. Slower growth because of the tax cut?
    Mr. Hall. Right. The stimulus effects will wear off.
    Mr. Scott. And there will be slower growth because of the 
tax cut?
    Mr. Hall. Right.
    Mr. Scott. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Georgia, Mr. Woodall.
    Mr. Woodall. Thank you, Mr. Chairman. Thank you for holding 
the hearing. You have always been one of my top two choices to 
chair this committee, and I am glad to see you in that chair 
today.
    Mr. Hall, you were talking about inexplicably flat wage 
growth. I am not an economist; I am a lawyer. Help me to 
understand what we call wage growth. I think about when we went 
into the Great Recession and folks who would have been working 
in a top financial institution in my community were now working 
the customer service desk at Macy's. They were making the top 
wage there at the Macy's customer service desk, but they were 
making substantially less than they were making in the 
financial services industry.
    Does that count as a wage drop? Is that reflected in wage 
growth statistics when you move from one job type to another?
    Mr. Hall. It does. It depends a little bit on which measure 
you are talking about. Something simple like just wages, it 
doesn't capture that very well. One of the things that we look 
at is something called the Employment Cost Index, which sort of 
holds the composition of the labor force constant and look at 
how wages drop.
    So different wage measures tell you different things. Some 
of them include full compensation. Some don't include all the 
compensation. So there are a lot of measures that sort of can 
tell you sometimes a little bit different pictures of things.
    Mr. Woodall. Because when we look at the who is quitting 
their job index, more Americans leaving the job they had to 
pursue new opportunities, it just stands to reason to me that 
if more Americans are taking advantage of a superior 
opportunity, more Americans are acting in their own economic 
self-interest, we should see a positive bump in those 
remuneration measurements somewhere, but we are not, as you 
pointed out, in wage growth. Help me to understand why.
    Mr. Hall. Sure. Well, we are not really sure, because we 
didn't expect this. And I think the profession didn't expect 
wages to take quite so long to get going. But they are starting 
to get going now. We have seen some growth.
    The ECI in particular, I mentioned, was one that we look 
at. And we think that it is going to continue going forward, 
because the labor market is still pretty tight. We still think 
the unemployment rate, even though it is very low, we still 
think it can go down from here. So we do think it is going to 
increase going forward.
    Mr. Woodall. Thinking about Mr. Scott's question about 
long-term economic growth, as long as I have been on this 
committee and as long as you've been in your position, you have 
come and made that same testimony. There are things we can do 
early that will benefit us early, but they will cost us later, 
or there are things we can do that will cost us early that will 
benefit us later. We are always in that tradeoff.
    I look at the long-term growth numbers, your projections 
this year from the 2017 projections 2 years ago, and we are 
about one-tenth of a percentage point off in long-term growth 
from your projections 2 years ago in the out years, but we are 
a trillion dollars higher in GDP 10 years out from there. We 
have had growth in these near-term years 50 percent higher than 
what you would have anticipated 2 years ago.
    What is the long-term measure that we look at to say, yes, 
there is a tradeoff between what we do early and what we do 
late, but it is worth it? What do the economists look at to say 
it is worth it?
    Mr. Hall. Well, one of the ways to think about it is we 
have really kind of two distinct models that we use to forecast 
growth. One is a demand side model. It sort of looks in detail 
about where we are now and where we are going that has all the 
detail about, you know, consumer behavior and investment and 
that sort of thing. But we also have a second model, which is 
our long-term model, which is a supply side model. And it 
generates something we call potential GDP, potential growth, 
which is that supply side. And that is the one that tells you 
where we are going, we think, in the long run. So we then focus 
on things like labor force growth and productivity and capital 
investment and that sort of thing. And those are the things 
that are going to be the big determinants of long-run growth 
and long-run prosperity.
    Mr. Woodall. And you use the term ``long-run'' to describe 
what time window?
    Mr. Hall. Yeah, by long-run, I really kind of mean--I kind 
of mean once the economy reaches its potential. You know, what 
is--by potential, I mean the supply side constraint on where we 
can go. We only have so many workers. We only have so much 
capital. That is sort of what I mean by the long-run, when that 
constraint becomes binding.
    Mr. Woodall. So as I look at the projections you have made 
this year versus those you have made prior to the tax cuts, I 
see a larger GDP than you had expected in the 10-year window--
--
    Mr. Hall. Right.
    Mr. Woodall.----suggesting cumulative growth greater than 
you had expected in the 10-year window.
    I recognize the concerns that folks have about we are 
trading away prosperity tomorrow for prosperity today, but it 
seems like we have increased prosperity relative to your 
expectations just 2 years ago over the entire 10-year window.
    Mr. Hall. Well, when we looked at the effect of the tax 
cut, we expected the tax cut raised GDP last year by about 
three-tenths of a percentage point. So it did have an impact on 
growth there. We think the impact continues going forward so 
that, on average over 10 years, we think the GDP level will be 
seven-tenths of a percentage point higher. So we do think we 
have a bigger economy this next 10 years because of the tax 
cut.
    Chairman Yarmuth. The gentleman's time has expired.
    Mr. Woodall. Thank you, Mr. Chairman.
    Chairman Yarmuth. I now recognize the gentleman from 
Pennsylvania, Mr. Boyle.
    Mr. Boyle. Thank you. And congratulations, Mr. Chairman.
    Thank you, first and foremost, for the work that the CBO 
does. Especially at this point in history of this institution, 
the history of our country, to have public servants who are 
attempting to call the balls and strikes is an incredibly 
important public service. I want to say thank you to you and 
everyone who works at CBO.
    With respect to the deficits, it appears that the latest 
projection is that the deficit will reach just under $1 
trillion in this fiscal year and then exceed $1 trillion for a 
number of years to come. The deficit has spiked dramatically 
this past year, specifically because of a GOP tax cut that 
wasn't paid for.
    Can you cite for me--and I should add, we are approximately 
9 years into this economic expansion. Can you cite for me any 
other time in American history during an economic expansion 
where you have seen such a dramatic increase in the deficit?
    Mr. Hall. No, not really. And, in fact, the visual summary 
that I handed out, if you sort of look at that visual summary, 
you sort of get to see deficits historically.
    And one of the interesting things to me is if you look at 
this and look at, gee, 1980 was a recession, we saw a deficit 
spike. 1990, they spiked. 2001, they spiked. 2008, they spiked. 
And now they are not spiking, but they are at a really high 
level for such a low unemployment rate and for such strong 
growth. That is different.
    Mr. Boyle. Yes. And given the previous examples you cited, 
and you can go back even before 1980 and it would show the same 
thing----
    Mr. Hall. Right.
    Mr. Boyle.----typically, budget deficits dramatically 
increase when there is a recession.
    Mr. Hall. Yes.
    Mr. Boyle. So when inevitably this economic expansion ends 
and there is another recession, what would you expect to happen 
to this already large budget deficit?
    Mr. Hall. We think the deficit would likely increase. Now, 
we do, in the long run when we do forecast, we do have a little 
bit lower growth in there because we think, okay, there might 
be a recession in there. And so growth, on average, is lower 
than we would forecast without a recession. So there is a 
recession sort of in there over 10 years, but it is not 
actually visible. But you are absolutely right, if we did hit a 
recession, we would expect the deficits to spike more than 
where they are now, which is already a high level.
    Mr. Boyle. Let me just shift quickly to the longest 
government shutdown in American history. I was struck by the 
fact that the equity markets reacted almost not at all to this 
and to the effect on first quarter growth, presumably under the 
belief that anything we lost in the first quarter will then 
just be added back on in the second quarter. It is hard for me 
to understand how that squares with so many contractors who now 
will permanently lose the pay that they lost over the last 
month.
    Can you help me try to understand that? And do you agree 
with what seems to be the perception out there that this 
government shutdown, as awful as it was, somehow we would make 
back up the revenue and growth that was lost?
    Mr. Hall. Well, first of all, when we did our estimate, we 
do think that Federal spending--that Federal agencies will 
spend their appropriations. So their spending stopped, but they 
will continue and they will spend all the money. And we think 
that people who were not paid for a while, they will get back 
maybe to normal patterns.
    Part of what is not captured by that is the distributional 
effects, right. So we are looking at the effect over in the 
context of the entire economy, which is really huge; but if you 
look at the impact on just Federal workers, it is much higher. 
If you look at the impact on private contractors, it is higher. 
And some of that effect is going to be permanent for those 
contractors. Even if the Federal Government goes ahead and 
spends the money, they aren't necessarily going to spend it the 
same way that they did before.
    So there is that distributional effect. And we also don't 
see it entirely recovering. We think that, on the whole, we 
will see some recovery over the next three quarters, but we 
will still be--GDP output will still be short about $3 billion. 
You won't make up for that government output.
    Mr. Boyle. So just to underscore that point, we won't be, 
as you put it, entirely whole, and that is $3 billion that we 
lost because of this government shutdown?
    Mr. Hall. That is our estimate, yes.
    Mr. Boyle. Thank you.
    Thank you, Mr. Chairman.
    Chairman Yarmuth. Thank you. The gentleman's time has 
expired.
    I now recognize the gentleman from Missouri, Mr. Smith.
    Mr. Smith. Thank you, Mr. Chair. Mr. Hall, great to have 
you today. In 2016, I believe the yearly GDP was 1.5 percent. 
In 2017, it was 2.3 percent. And it is estimated 2018 is going 
to be 3.3 percent. So definitely, why would you say that it 
went from 1.5 in 2016, 2.3 in 2017, and now 3.3 in 2018?
    Mr. Hall. Well, part of it is the continued recovery from 
the Great Recession. The recovery was really quite slow. But we 
do think a lot of it was the stimulus from the Tax Act. We do 
think that that has had an impact and there has been a bit of 
stimulus out there.
    Mr. Smith. So what happened in 2003--I mean 2017? Because 
the Tax Act was passed in December of 2017.
    Mr. Hall. Right. We just sort of had a strengthening 
economy. You know, it is quite possible----
    Mr. Smith. Could it have been President Trump's regulatory 
relief?
    Mr. Hall. That may have had an impact. You know, it may 
have been--I do think there were probably some signs that 
people anticipated a Tax Act coming up.
    Mr. Smith. Or optimism by consumers?
    Mr. Hall. That is quite possible, yes.
    Mr. Smith. Because of President Trump's policies?
    Mr. Hall. Well, I would say anticipation of a Tax Act.
    Mr. Smith. Of his policies, because he pushed tax reform, 
right?
    Mr. Hall. Right.
    Mr. Smith. Okay. Also, we have heard some discussion in 
here earlier that said that tax revenues are up for last year. 
Is that correct?
    Mr. Hall. I believe that is true, yes.
    Mr. Smith. So after passage of the Tax Cut and Jobs Act, 
what did we lose in revenue? Because the prior discussion from 
the gentleman from Pennsylvania said we have the highest 
deficit now because of the tax cut. So how much did we lose 
last year because of the tax cuts?
    Mr. Hall. I would have to look. I would have to look that 
up.
    Mr. Smith. I think that is a pretty important issue. You 
made that--you know, you didn't counter that statement.
    Mr. Hall. Right.
    Mr. Smith. So I would like that number of how much revenue 
we lost.
    Mr. Hall. Okay. I can give you some idea. We will follow 
up. But if you look at the second graph on the visual summary, 
you will see that the revenues as a share of GDP sort of fell 
below 50-year averages. That is, in part, because of the Tax 
Act.
    Mr. Smith. What your report did say--and correct me if I am 
wrong--that because of the Tax Cut and Jobs Act, we added 
900,000 new jobs. Is that correct?
    Mr. Hall. That is right, over a 10-year period----
    Mr. Smith. Over a 10-year period.
    Mr. Hall. That is right.
    Mr. Smith. And also, your report says that wages raised by 
$1.2 trillion over 10 years?
    Mr. Hall. I don't know that number in my head, but if it is 
our estimate.
    Mr. Smith. Those were the numbers that you gave us in 
spring of last year, and they also are in this report.
    Mr. Hall. Well, we still stand by those numbers. We are 
still happy with the estimate.
    Mr. Smith. So that is good, because that is a highlight. 
And I think that we need to talk about wages increasing instead 
of your statement just earlier saying that they have been flat.
    Also, in your report in spring, and you just highlighted 
again, you said that the Tax Cut and Jobs Act will create $1.7 
trillion in GDP. Is that correct?
    Mr. Hall. What's that?
    Mr. Smith. Over 10 years.
    Mr. Hall. Over 10 years? I am not sure of that raw number. 
I have got the seven-tenths of a percent higher, on average, 
over 10 years. That may work out to be that number.
    Mr. Smith. Yes, seven-tenths over 10 years. Those were the 
numbers you gave us on the Ways and Means Committee, so I just 
wanted to highlight it. It shows the successes of the Tax Cut 
and Jobs Act, of how it is growing the economy and how we are 
affected.
    I clearly believe that your report highlights that the 
policy that was pushed by President Trump and the Republican 
House and Senate for tax cuts clearly has showed a growth in 
the economy.
    And also, you made a statement earlier that you said that 
the economy would slow down at the expiration of the Tax Cut 
and Jobs Act, correct?
    Mr. Hall. Of the individual income tax rates, if they go 
back up.
    Mr. Smith. When they expire in a couple years?
    Mr. Hall. Yes.
    Mr. Smith. So you are basically testifying that by 
increasing taxes will slow the economy, correct?
    Mr. Hall. That is right.
    Mr. Smith. No further questions.
    Chairman Yarmuth. The gentleman's time has expired.
    I now recognize the gentleman from Nevada, Mr. Horsford.
    Mr. Horsford. Thank you very much, Mr. Chairman. I am 
looking forward to serving with you and the other members of 
the committee.
    Dr. Hall, I would like to ask you to expand on your 
office's report on the economic effects of the recent partial 
government shutdown. I would specifically like to focus on the 
economic impact of missed pay by Federal workers. There are 
3,520 Federal employees in Nevada who were furloughed or forced 
to work without pay during the 35-day government shutdown. That 
is 35 days of money that they could not buy groceries, repair 
their cars, pay for childcare, or other contributions to 
Nevada's economy.
    In total, Nevada has 19,117 Federal employees, and those 
are employees who are impacted by President Trump's recent 
executive order, which will prohibit them from receiving their 
scheduled pay increases this year.
    Mr. Hall. Let me give you just a little context. There were 
12 departments or agencies affected by the partial shutdown, 
which is not trivial. It impacted about 800,000 people, which 
is about 40 percent of the Federal workforce.
    And you are right, the lack of pay was something to the 
tune of $9 billion that those workers didn't get for that time 
period. And we think the effects, of course, are really strong 
on those workers. It is also there is an indirect effect of 
their spending patterns change for a while. So you have impact 
on the rest of the economy as well.
    Mr. Horsford. So in addition to the impact from the 
shutdown, will the CBO release any kind of estimate on the 
public and private sector revenue loss as a result of the 
freeze in pay for these workers, both in Nevada and across the 
country?
    Mr. Hall. Yeah. We haven't looked at the freeze in pay 
part, and I don't know that we have any plans to look at that.
    Mr. Horsford. Can I ask why not, since that is such a big 
part of the economic stimulus, both in the public and private 
sector?
    Mr. Hall. Sure. It is not something we would normally--in a 
sense, we will take it on board when we look at our forecast, 
budget forecast going forward. You know, we will update this in 
the spring. So we will take that into account.
    It is a little different for us to actually get down and do 
sort of a real detailed analysis on the impact of just that, 
but that is something that we will take on board and look at 
when we look at Federal spending and then the economic growth 
aspects.
    Mr. Horsford. I think it is incredibly important. As you 
note, $9 billion of lost economic activity just in 35 days from 
people being furloughed.
    Mr. Hall. Right.
    Mr. Horsford. The impact of people not receiving, you know, 
a pay increase of 2.9 percent in their pay is quite a 
significant loss, both in the public and the private sector. 
And that has lost again an ability for people to meet their 
individual needs, family needs, community needs. And I think 
that, for whatever reason, there has not been enough discussion 
about the fact that Congress appropriated those funds for that 
pay increase and that the President unilaterally froze those 
pay increases. So I would like to request your office to 
provide that information once it is available.
    Mr. Hall. Okay. We will circle around and talk about it, if 
you like.
    Mr. Horsford. Thank you, Mr. Chairman. I yield back.
    Chairman Yarmuth. The gentleman's time has expired.
    It is now my honor to yield for the first time to the 
Ranking Member, Mr. Womack, for 10 minutes.
    Mr. Womack. Thank you very much to the chair, and thank 
you, Director Hall, for your continued work at CBO. And I think 
we have had a pretty good discussion today on your economic 
outlook, and there have been a lot of, I think, really 
substantive questions raised here. I will try to amplify on 
some of those.
    It is obvious to--my friends on the other side have 
targeted the corporate tax rate. They believe cutting the 
corporate tax rate down to 21 percent was ill-advised, and I 
think the plan right now is to move it to 28 percent. Can you 
give me a quick assessment as to what CBO thinks would happen 
in the event that the corporate rate went from 21 to 28 
percent?
    Mr. Hall. Sure. I suppose without doing the estimate, I 
suppose we would see sort of the inverse of what we saw from 
having it lowered to begin with. It would likely have an impact 
on investment and lower levels investment, meaning lower 
capital stock. So we might take a hit on--GDP might take a hit 
actually in wage growth a little bit from having that increase.
    Mr. Womack. Without a model in front of you, what kind of a 
hit on GDP?
    Mr. Hall. It is hard--it is hard to know. I don't want to 
sort of guess on that. We would have to do some thinking on it. 
You know, I don't know that we separated out the effect of 
lowering the corporate tax rate to begin with really separated 
that out really carefully. I would have to take look and see 
what we have done.
    Mr. Womack. Well, I know the Tax Cuts & Jobs Act has been 
assailed by my friends on the other side quite frequently. 
Economic growth of 3.1 percent in 2018, best since 2005. 
Unemployment projected to be 3 \1/2\ percent in 2019, the 
lowest since the 1960s. I think it would be a stretch to say 
that the effects of the Tax Cuts & Jobs Act did not have an 
impact on those two statistics. Would that be correct?
    Mr. Hall. Well, that is right, and I think that was 
actually in our original forecast. I really do think we 
suggested that GDP was going to be at three-tenths higher in 
2018, so some of that we think is from the Tax Act and the same 
with the wage growth.
    Mr. Womack. So assuming that is correct that the growth 
rate and the unemployment rate coming down are--have been 
impacted by the Tax Cuts & Jobs Act, then is it fair to say 
that the Tax Cuts & Jobs Act from that standpoint, growth in 
the economy, lower unemployment is, in fact, working?
    Mr. Hall. Well, I think--let me put it this way, I don't 
want to sort of take sides, but I think it is----
    Mr. Womack. Well, I am not asking you to take sides. I am 
just simply asking the CBO director to opine whether the 
effects--based on your modeling, whether the effects of the Tax 
Cuts & Jobs Act--we can set aside the argument of does it pay 
for itself. I mean, that is an entirely different subject, 
because you have to look at tax rates instead of in a vacuum as 
a total package. I mean, we have got deregulation that is 
happening. That is having an impact on the confidence of the 
job creator out here. That is just one example of many. We have 
got portfolios that are going up on the stock exchange where a 
whole lot of people have their 401(k)'s, et cetera, invested, 
and so that is a consideration. We have some companies that are 
investing in healthcare now for their employees as a result of 
the Tax Cuts & Jobs Act that had not been previously provided.
    So using the metrics CBO has given us growth in the 
economy, low unemployment. Again I ask, is it fair to say that 
from those standpoints the Tax Cuts & Jobs Act is working?
    Mr. Hall. I think we stand by our estimate, and I think our 
estimate is consistent with that, that there would be stimulus 
effect, there would be higher growth. There would be an 
increase in labor force participation from the Tax Act. And so 
far after a year, I think our estimate is looking pretty good.
    Mr. Womack. So then would the inverse be true that if you 
raise the corporate rate from 21 to 28 percent and allow the 
individual rates to expire in whatever that eighth year is from 
the inception of the Tax Cuts & Jobs Act, that it would have an 
impact?
    Mr. Hall. I think it would have an impact, and some of that 
would be on investment and capital stock and growth.
    Mr. Womack. I want to pivot now to mandatory spending. We 
have talked a lot about it. It is one of my chief concerns, 
because as you have already said today in your testimony and 
has been covered in your economic outlook, as a percentage of 
GDP, as a percentage of GDP, mandatory spending in your 10-year 
window in your analysis goes higher and discretionary spending 
as a percentage of GDP goes lower.
    In your opinion as a director, is there a better argument 
or a better example of what the--on the spending side; we can 
set revenues aside, but on the spending side is there a better 
example to illustrate the point that this country has a 
spending problem and it is not discretionary, it is mandatory?
    Mr. Hall. Well, I won't offer an opinion on what the 
biggest problem is, but it is certainly true I think 
discretionary spending right now is at a low level 
historically. You know, the lowest level I think ever 
historically is about 6 percent of GDP. We are at 6.3 percent, 
and we are heading for only 5 percent. So discretionary 
spending is heading towards its lowest level ever. Mandatory 
spending is growing, and it is growing towards its highest 
level. I don't think we are going to hit it in 10 years, but we 
are going to get pretty close. We are talking about having it 
get up to about 15 percent of GDP. So that is making a big 
contribution to the deficit.
    Mr. Womack. In my opening, I asked my friends on the other 
side what is your plan based on the notion that deficits and 
debt just continue to be piled on to future generations, and 
that given what I just said about the percentage of GDP tied up 
in mandatory versus the declining side on the discretionary, I 
am not real--I am not real confident that there is a plan out 
there, except maybe to try to tax our way out of it. By itself, 
are taxes going to solve the problem?
    Mr. Hall. Taxes or spending or both. Obviously----
    Mr. Womack. Now, wait a minute, Director Hall. The question 
is can we reasonably--you are an economist. Can we reasonably 
tax our way out of this problem?
    Mr. Hall. Well, the problem is what is reasonable. We can 
give you some idea of the effect of raising taxes, how much 
revenue that would generate. You know, in our options we have 
the effect of raising--this is something that is worth looking 
at a little bit--of raising all tax rates 1 percent and give 
you some idea. So if you put in maybe a 10 percent raise in all 
tax rates, you get something where the deficit starts to close, 
it gets pretty much to being closed. I am not sure that solves 
the problem, because closing the deficit problem means, okay, 
now you have got the hold over debt problem to solve. So the 
tax change would have to be pretty large to overall fix the 
problem by itself.
    Mr. Womack. We have been beat up on our side of the aisle 
because in our budget resolution last year, we did some 
reconciliation numbers and we had some proposals that we were 
ready to present to deal with mandatory spending, particularly 
on the Medicare side, which is growing, as you have already 
said, faster--healthcare costs, growing faster than the growth 
of the economy and that that program is exceedingly expensive. 
If we don't do anything, if we just let things go as they are 
present, status quo, what happens to part A?
    Mr. Hall. It becomes a bigger and bigger part of our 
budget.
    Mr. Womack. Is there an insolvency date?
    Mr. Hall. Certainly the trust fund dates, we estimate 
those. I don't happen to have that in front of me, but it would 
come up.
    Mr. Womack. 2026?
    Mr. Hall. Yes, that sounds right.
    Mr. Womack. What about Social Security?
    Mr. Hall. Same deal.
    Mr. Womack. 2033 maybe, 2032, 2033, 2034. DI, faster than 
that, but on--but at the end of the day, the point I am trying 
to make is that if we do nothing, if we just allow status quo, 
that these programs become insolvent on their own. So I think 
it begs that we do something, and that is where I think we are 
getting not necessarily crickets, but we just don't have a plan 
from the other side that is purposed in addressing the true 
drivers of the deficit and the debt, and it is not that we tax 
too little, it is that we have promised way too much, and these 
programs are running out of control and becoming so expensive 
that they are unsustainable in the long term.
    And I know my time is out. I am not going to take any more 
time than my 10 minutes, and I yield back to the distinguished 
Chairman.
    Chairman Yarmuth. Thank you very much, Ranking Member.
    I now yield 5 minutes to the gentlelady from Washington, 
Ms. Jayapal.
    Ms. Jayapal. Thank you so much, Mr. Chairman. It feels good 
to say that.
    Welcome back, Mr. Hall. We appreciate your being here. If 
we are concerned about deficits, then let me just remind my 
colleagues that the Republican majority passed a $1.9 trillion 
tax giveaway to giant corporations and the wealthiest 
Americans. It included provisions that slashed the corporate 
rates, so the largest companies got giant windfalls; cut the 
top marginal tax rate for the richest Americans so that 83 
percent of the benefits of the cuts went to the top 1 percent 
of taxpayers; and there were additional handouts for the 
wealthiest Americans, like the $40 billion that were showered 
on the owners of so-called passthrough businesses.
    Let's start with Treasury Secretary Steve Mnuchin's 
promises, because there were a lot of promises made about how 
the tax plan was going to benefit workers. And so, Mr. Hall, as 
the director of the CBO, you studied the tax plan and the 
budgetary effects of the legislation. Steve Mnuchin said that, 
quote, not only will this tax plan pay for itself, it will also 
pay down debt. So let me just ask you if the tax bill lived up 
to Steve Mnuchin's promise. Did the tax bill pay for itself? 
Just a yes or no is perfectly fine.
    Mr. Hall. No.
    Ms. Jayapal. It did not pay for itself.
    Now, let's look at whether the tax plan delivered for 
workers. Shortly after he signed the bill, President Trump said 
that corporations were, quote, already giving billions and 
billions of dollars away to their workers. He was referring to 
the bonus pay that some companies announced shortly after the 
bill became law.
    Mr. Hall, based on your understanding of how bonus 
compensation has changed since the bill passed, how much did 
the average American make in bonus pay as a result of the tax 
bill?
    Mr. Hall. I don't know.
    Ms. Jayapal. Well, I happened to do a little research into 
this topic for this hearing, and according to a recent study 
from the Economic Policy Institute based on 2018 data from the 
Bureau of Labor Statistics, after adjusting for inflation, the 
average worker got an increase of only 2 cents per hour. 
Workers literally got pennies.
    So Republicans passed a $1.9 trillion tax plan, the money 
didn't go to workers, and it didn't go to paying down the debt. 
So where did it go?
    For one, companies spent $1 trillion on corporate stock 
buybacks last year alone. That is companies using their profits 
to buy back their own stock, rather than paying their workers, 
investing in research and development, or making capital 
investments. And I think that is just a very important backdrop 
to have as we look at the economy and the effects of the 
Republicans deficit spending that simply benefited the 
wealthiest individuals.
    You spent some time in your summary talking about 
immigration, and I believe that you looked at current 
immigration policy and you calculated that net immigration 
flows would grow by an average of 2 percent per year. Is that 
correct?
    Mr. Hall. Yes.
    Ms. Jayapal. And so when you look at current immigration 
policy, did you not factor in the President's proposal and 
Republicans proposal last year that would dramatically restrict 
legal immigration to this country?
    Mr. Hall. We did a current law estimate, so when we talk 
about it, we talk about it in terms of current law.
    Ms. Jayapal. Right. So if the President's proposal were to 
go through or Republicans proposal restricting legal 
immigration, it would have dramatic effects on our economy and 
on our ability to continue to grow and our labor flows being 
supported.
    Mr. Hall. We would have to look at that specific proposal 
and do an analysis of it. I wouldn't want to offer an opinion 
now.
    Ms. Jayapal. And, Mr. Hall, do you know that we have a near 
stagnant native born population if you look at our economy?
    Mr. Hall. I haven't looked at that, but I am not surprised.
    Ms. Jayapal. You trust me. Thank you. I appreciate that 
very much.
    Let me ask you about one of my favorite topics, which is 
the Social Security contributions of undocumented immigrants. 
Do you know, if all undocumented immigrants were deported 
today, how much next year's Social Security trust funds would 
be reduced for benefit payments?
    Mr. Hall. Yeah, I don't offhand.
    Ms. Jayapal. Let me tell you how much that is according to 
a marketplace report that just came out. Approximately $13 
billion less for benefit payments for existing Social Security 
recipients. And in 2016 alone, there were $13 billion paid into 
the retirement trust fund and $3 billion to Medicare. And so I 
just would like the American people to understand the 
tremendous contributions that immigrants, both documented and 
undocumented, make to our economy.
    Mr. Hall, thank you so much for your presence, and I yield 
back, Mr. Chairman.
    Chairman Yarmuth. The gentlelady's time is expired.
    I now yield 5 minutes to the gentleman from Texas, Mr. Roy.
    Mr. Roy. Thank you, Mr. Chairman. I appreciate it.
    Thank you for being here and testifying with us here today. 
I just have got one quick question. As a Texan, as a former 
first assistant attorney general in Texas, you are aware that 
there is a large case pending, Texas v. The United States, 
involving ObamaCare regarding the constitutionality of that 
act, which would have huge implications for Medicaid for future 
mandatory spending. Did this case affect the development of the 
baseline or any projections with regard to the economy in 
future mandatory spending in you all's calculations?
    Mr. Hall. It did not. Our practice is on something like 
this is you wait till the appeals court deals with it before we 
think about taking it on board.
    Mr. Roy. Okay. Thank you.
    No further questions, Mr. Chairman.
    Chairman Yarmuth. I thank the gentleman.
    I now yield myself 10 minutes. Director Hall, thanks once 
again for taking all of our questions and your statement and 
your work.
    I want to return to the issue of tax cuts for a second. 
Your report says and your testimony said that you estimate that 
about 30 percent of the tax cuts in the 2017 act were paid for. 
They paid for--30 percent of it paid for itself, but left 70 
percent. Would you actually define what that means if only 30 
percent of the tax cuts were paid for, explain what that means?
    Mr. Hall. Sure, sure. I am not doing anything really 
sophisticated. We made an estimate of the tax cuts without 
taking the economic growth aspects into account, and we found 
that the tax bill would increase the revenue--the deficit by 
about $2.3 trillion. Then we took the growth effects into 
account, which are generally positive, you have higher growth, 
higher employment, and we found that the net effect would be 
$1.9 trillion. So that difference between those two things sort 
of gives you an idea of how much it pays for itself.
    If it had gone down to zero, for example, from $2.3 
trillion down to zero, that would have been 100 percent paid 
for. If it went down to 1.9, that is about 30 percent of the 
cost. That is how I got that number.
    Chairman Yarmuth. All right. And you said earlier, I 
believe you said that you did not break out those percentages 
for corporate tax cuts versus individual tax cuts. Is that 
correct?
    Mr. Hall. That is right.
    Chairman Yarmuth. Just an overall figure.
    Do you have any sense of whether individual tax cuts paid 
back a higher percentage or a lower percentage of corporate 
rates did one or the other?
    Mr. Hall. I don't know offhand. We might be able to look at 
it later and give you an idea of what we think and what we did.
    Chairman Yarmuth. But the bottom line is that of the $1.9 
trillion over 10 years, most of that was a cost to the 
taxpayers in terms of reduced revenue and increased deficits 
and not an increase to the taxpayers benefit.
    Mr. Hall. That is right. And by the way, after a year after 
that estimate, we are still comfortable with that estimate. 
Things have come in about as we expected, so we would still say 
that it is about a $1.9 trillion increase in the deficit over 
the next decade.
    Chairman Yarmuth. All right. So is it not logical to say 
that increasing the corporate tax rate, if only 30 percent of 
it was paid for, would improve the deficit situation by some 
percentage?
    Mr. Hall. We would have to look at that. I don't want to--I 
don't want to kind of try to guess on something like that.
    Chairman Yarmuth. What factors would make that not logical?
    Mr. Hall. Well, on the plus side, of course, is to the 
degree it increases investment, you have an increase in the 
capital stock when you lower corporate taxes. That is sort of 
on the positive side, the marginal costs. But the question is 
does it increase it enough that it stimulates enough growth 
that it pays for itself? So in the reverse, you have kind of 
got raising corporate taxes, will it discourage enough 
investment and lower the capital stock enough that it doesn't 
increase revenue. We would have to work that through.
    Chairman Yarmuth. Okay. I would like to see that, that 
analysis.
    We have a date approaching, I believe it is in March, when 
the statutory debt ceiling arrives, and while we may have some 
fudge room in terms of being able to pay debt--pay obligations 
of the government past that, we still face that crisis once 
again. What would be the consequences of not addressing the 
debt ceiling in a timely manner?
    Mr. Hall. I guess the thing we would worry about is 
ultimately you worry about the believability of Federal debt, 
whether or not you affect the rating of the U.S. as a borrower, 
that sort of thing, I suppose. I don't know that we have ever 
really projected what the impact would be if you missed that 
deadline.
    Chairman Yarmuth. All right. Well, I hope we don't have to.
    Going to healthcare for a second. We saw the projections in 
your report. I think in Medicare you are projecting about a 7 
percent growth over the window, the 10 years. And that is based 
on current law, right? So if we were to--and I don't know, I 
can't remember exactly what the 120 suggestions were from last 
year, but if we were, for instance, able to, through policy, to 
change the law and reduce prescription drug prices by 20 
percent, you could have a considerable impact on that growth 
rate. Is that not correct?
    Mr. Hall. That is probably correct. We would have--again, 
we would have to sort of look at that and try to noodle it 
through.
    Chairman Yarmuth. But current law does not--I mean, were 
there any suggestions, by the way, in terms of healthcare 
policy that you made in that 120 that would help reduce the 
growth rate? I mean, I understand part of it is demographics.
    Mr. Hall. Right, right. You know, I haven't refreshed my 
memory on that. Odds are we have got some things in there, 
because we made an effort to use proposals from committees, the 
things that they thought were interesting, so we tried to find 
interesting things.
    Chairman Yarmuth. Right. When I read through your report 
and your testimony, one of the things that I thought was 
particularly frightening was all the different ways in which 
the situation could get worse, and not just through policy but 
through economic factors, through all sorts of things. Would 
you say that the odds of the situation getting worse are 
higher, lower, or you can't tell, than that they might get 
better?
    Mr. Hall. We actually really tried really hard to make 
those equal, that we are in the middle. We think there is 
likely things are worse, and it is just as likely things are 
better, to give you some idea as part of our effort to sort of 
be objective on this. So we think we are in the middle.
    Chairman Yarmuth. And what are the possibilities--what are 
the worst possibilities that might occur over the next 10 
years, either policy wise--I know we are talking about the 
expiration of the tax cuts in a few years. I know that is a big 
factor. What would be the worst scenarios?
    Mr. Hall. Well, I would focus on nonpolicy things. I think 
our forecast with the interest rates included. Interest rates 
are really hard to forecast and interest rates have a really 
big impact on this. And because we have a large debt and the 
cost of borrowing is a big part of the Federal budget now, and 
so higher or lower interest rates makes a pretty big impact on 
this. So I would say that is one of the big important items.
    Chairman Yarmuth. Again, one final question, and that is we 
have talked about this innumerable times over the years, but 
how much does uncertainty as to probabilities grow the farther 
we go into the budget window, and obviously past that you have 
got a 2049 projection as to overall debt?
    Mr. Hall. The uncertainty clearly in our forecast clearly 
increases pretty significantly the further we go into the 
future. You know, we have done some analysis of how accurate we 
are in projecting, and as you might expect, we are generally 
more accurate a year or two than we are 5 years down the line, 
so that is an important thing. We try to give you a feel for 
that sometimes in our uncertainty chapter of how much that 
grows, you know, 10 years out.
    Chairman Yarmuth. Has uncertainty increased over the last 
few decades or is it about the same? It seems to me there is a 
lot--the world is changing a lot more quickly than it used to.
    Mr. Hall. I am not so sure it is in our report so much, but 
it really does seem like that the level of policy uncertainty 
these days is higher than it has been, and that adds to, I 
think, to the uncertainty that we may not have captured.
    Chairman Yarmuth. All right. Well, I have no further 
questions. Once again, thank you so much.
    Mr. Scott. Mr. Chairman?
    Chairman Yarmuth. Oh, I am sorry.
    Mr. Scott. Unanimous consent request.
    Chairman Yarmuth. Go right ahead. The gentleman is 
recognized.
    Mr. Scott. Mr. Chairman, I ask unanimous consent that a 
fact sheet prepared by the Committee on Education and Labor on 
the multiemployer crisis, the cost and consequences of inaction 
pointing out that the PBGC may collapse and the revenues will 
go down, increased safety net spending will go up, costs as 
much as $275 billion over 10 years if we do nothing. I would 
like this entered for the record.
    Chairman Yarmuth. Without objection. So done.
    [The information follows:]
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    Chairman Yarmuth. I want to thank Director Hall once again 
for being with us today. Please be advised members can submit 
written questions to be answered later in writing. Those 
questions and your answers will be made part of the formal 
hearing record. Any members that wish to submit questions for 
the record may do so within 7 days.
    Without objection, this hearing is adjourned.
    [Whereupon, at 11:59 a.m., the committee was adjourned.]
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