[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

                             SECOND SESSION

                               __________

           HEARING HELD IN WASHINGTON, D.C., JANUARY 29, 2020

                               __________

                           Serial No. 116-20

                               __________

           Printed for the use of the Committee on the Budget
           
           
           
           
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]           



                       Available on the Internet:
                            www.govinfo.gov
                            
                            
                            
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             U.S. GOVERNMENT PUBLISHING OFFICE 
40-596                 WASHINGTON : 2020 
                             
                            
                            
                            
                        COMMITTEE ON THE BUDGET

                  JOHN A. YARMUTH, Kentucky, Chairman
SETH MOULTON, Massachusetts,         STEVE WOMACK, Arkansas,
  Vice Chairman                        Ranking Member
HAKEEM S. JEFFRIES, New York         ROB WOODALL, Georgia
BRIAN HIGGINS, New York              BILL JOHNSON, Ohio,
BRENDAN F. BOYLE, Pennsylvania         Vice Ranking Member
RO KHANNA, California                JASON SMITH, Missouri
ROSA L. DELAURO, Connecticut         BILL FLORES, Texas
LLOYD DOGGETT, Texas                 GEORGE HOLDING, North Carolina
DAVID E. PRICE, North Carolina       CHRIS STEWART, Utah
JANICE D. SCHAKOWSKY, Illinois       RALPH NORMAN, South Carolina
DANIEL T. KILDEE, Michigan           KEVIN HERN, Oklahoma
JIMMY PANETTA, California            CHIP ROY, Texas
JOSEPH D. MORELLE, New York          DANIEL MEUSER, Pennsylvania
STEVEN HORSFORD, Nevada              DAN CRENSHAW, Texas
ROBERT C. ``BOBBY'' SCOTT, Virginia  TIM BURCHETT, Tennessee
SHEILA JACKSON LEE, Texas
BARBARA LEE, California
PRAMILA JAYAPAL, Washington
ILHAN OMAR, Minnesota
ALBIO SIRES, New Jersey
SCOTT H. PETERS, California
JIM COOPER, Tennessee

                           Professional Staff

                      Ellen Balis, Staff Director
                  Becky Relic, Minority Staff Director
                  
                                CONTENTS

                                                                   Page
Hearing held in Washington D.C., January 29, 2020................     1

    Hon. John A. Yarmuth, Chairman, Committee on the Budget......     1
        Prepared statement of....................................     3
    Hon. Steve Womack, Ranking Member, Committee on the Budget...     5
        Prepared statement of....................................     7
    Phillip Swagel, Ph.D., Director of The Congressional Budget 
      Office.....................................................    11
        Prepared statement of....................................    13
    Hon. Robert C. ``Bobby'' Scott, Member, Committee on the 
      Budget, article submitted for the record...................    53
    Hon. Sheila Jackson Lee, Member, Committee on the Budget, 
      statement submitted for the record.........................    79
        Questions submitted for the record.......................    88
    Hon. Seth Moulton, Member, Committee on the Budget, questions 
      submitted for the record...................................    89
    Hon. Scott H. Peters, Member, Committee on the Budget, 
      questions submitted for the record.........................    90
    Answers to questions submitted for the record................    91


                   THE CONGRESSIONAL BUDGET OFFICE'S

                      BUDGET AND ECONOMIC OUTLOOK

                              ----------                              


                      WEDNESDAY, JANUARY 29, 2020

                          House of Representatives,
                                   Committee on the Budget,
                                                    Washington, DC.
    The Committee met, pursuant to notice, at 10 a.m., in room 
210, Cannon House Office Building, Hon. John A. Yarmuth 
[Chairman of the Committee] presiding.
    Present: Representatives Yarmuth, Moulton, Higgins, 
Doggett, Price, Schakowsky, Kildee, Panetta, Morelle, Horsford, 
Scott, Jackson Lee, Lee, Omar, Sires, Peters; Womack, Woodall, 
Johnson, Flores, Stewart, Norman, Hern, Roy, Meuser, Crenshaw, 
and Burchett.
    Chairman Yarmuth. The hearing will come to order. Good 
morning. And welcome to the Budget Committee's hearing on the 
Congressional Budget Office's Budget and Economic Outlook.
    I want to welcome our witness today, the Director of the 
Congressional Budget Office, Dr. Phillip Swagel. I thank you 
for taking time out of your schedule to be with us today. I 
will now yield myself five minutes for my opening statement.
    Good morning, once again. And once again welcome to Dr. 
Swagel who is testifying before our Committee for the first 
time as the Director of the Congressional Budget Office.
    I would also like to take a moment to thank Director Swagel 
and all the dedicated staff at CBO for their hard work and 
their commitment to being a non-partisan indispensable partner 
to Congress.
    In 2019 alone, CBO worked diligently to publish more than 
700 cost estimates and nearly 80 analytic reports, working 
papers, and testimoneys. While the compendium of CBO's work is 
invaluable to our work here in Congress, our annual hearing on 
the budget and economic outlook is always enlightening as we 
begin a new session of Congress.
    Yesterday, CBO released its report unveiling its 
projections for the next decade. Unfortunately, the report once 
again confirms that despite the economic expansion he 
inherited, the fiscal outlook has worsened since President 
Trump took office.
    Director Swagel, you project a deficit this year that is 
more than $1 trillion. And over the next decade, deficits are 
projected to rise. The national debt is expected to reach 98 
percent of GDP by 2030, the highest ratio since World War II.
    Under President Trump, deficits have risen to heights not 
usually seen outside of recessions and major world wars. They 
have increased every year, an unusual trend given that deficits 
tend to fall with the unemployment rate.
    In fact, the deficit in 2019 was the highest since 2012 
when we were recovering from the great recession and the 
unemployment rate was 8 percent, more than double the rate 
today. As a result of these deficits, the national debt has 
climbed higher and faster than CBO projected at the end of the 
Obama Administration.
    Now, on their face, these fiscal facts might not be so 
concerning if we were using whatever fiscal space we have to 
make critical investments while interest rates are low to 
address the multitude of deficits we face in the real economy--
crumbling infrastructure, skyrocketing healthcare costs, 
widening student achievement gaps, a warming climate, lower 
life expectancy.
    In light of these and other problems, it is difficult to 
escape the conclusion that we should be making bolder 
investments in American families and our nation's future. But 
unfortunately, that is not the reality.
    The reality is that President Trump drove up deficits to 
instead gift the wealthy and corporations with a $1.9 trillion 
dollar tax cut. At least we thought it would be only $1.9 
trillion. As we will learn today, it is substantially more than 
that.
    But that is $1.9 trillion that had little meaningful impact 
on the economy. $1.9 trillion that could have been, but was 
not, put toward making childcare more affordable, a college 
education more accessible, and retirement security more 
achievable for American families.
    Our economy and budget face difficult times ahead. An aging 
population and rising healthcare cost mean economic growth is 
projected to be slower and deficits are expected to be larger 
going forward.
    As we learned from our previous hearing, a warming climate 
will increasingly stress our nation's budget. Meanwhile, we 
will need to make investments in our infrastructure, education, 
and job training if we hope to compete in the global economy.
    CBO's report shows that there is a real need to address our 
fiscal issues over the next several decades. And the solution 
will require a balanced approach and a fair tax system.
    As Chairman of the Committee, I have stressed that we need 
to think seriously about severe and persistent deficits in the 
real economy, not just deficits in the budget. That doesn't 
mean that we can spend tax dollars without thought or 
discretion, but it does require that we use our nation's 
resources more wisely than this Administration has.
    It means prioritizing policies that will help modernize our 
economy, prepare our communities for the opportunities of the 
future, and help more American families get ahead in this 
economy.
    Director Swagel, thank you for being here, once again. And 
I look forward to hearing your testimony.
    [The prepared statement of Chairman Yarmuth follows:]
    
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    Chairman Yarmuth. I now yield five minutes to the Ranking 
Member for his opening statement.
    Mr. Womack. I thank the Chairman for holding this hearing. 
Director Swagel, thank you for your service. And we look 
forward to your testimony here today.
    I sure hope the country is paying attention to what is 
going to be discussed here today. As we are all aware, 
yesterday the CBO released its annual baseline confirming what 
we already know. Our country is on--on an unsustainable fiscal 
trajectory. Specifically, in fiscal 2020, CBO expects the 
deficit will be a trillion plus, an increase of $31 billion 
from last year.
    It should be deeply unsettling to all of us here in this 
room that Fiscal Year 2020 will be the first year since fiscal 
2012 that the deficit will eclipse a trillion. We are clearly 
headed in the wrong direction.
    Looking even further ahead, if we don't take action to get 
our fiscal house in order, the deficit will be a trillion 
dollars by Fiscal Year 2021 and rise to $1.7 plus trillion by 
fiscal 2030. Deficits will total $13 plus trillion over the 
budget window. This is unacceptable for this country.
    Our country's unsustainable deficits are driven by our out 
of control--largely by out of control mandatory spending, which 
includes daunting interest payments on our debt even at low 
rates. Mandatory spending currently accounts for about 70 
percent of the federal budget and by the end of the budget 
window, 76 percent.
    To put this in perspective, in the mid-1960's, just over a 
half century ago, spending in the mandatory columns accounted 
for just 34 percent.
    Because of the continued growth of our country's mandatory 
spending, federal spending will consume an ever-expanding share 
of economic resources. It will rise from 21 percent of GDP this 
year to 23.5 percent by 2030, vastly exceeding the 20.4 percent 
annual average of the past 50 years.
    Make no mistake, if we continue down this reckless path, 
CBO confirms that we will face the severe threat of a fiscal 
crisis, which will negatively impact every single American.
    While Washington undoubtedly has a spending problem, our 
revenue growth remains pretty strong. CBO estimates federal 
revenue in fiscal 2020 will increase by $170 billion from the 
previous year--that is a record--reaching $3.6 trillion. 
Revenue is projected to grow to $5.7 trillion in fiscal 2030. 
You ought to be able to run a country on that kind of money.
    To further underscore this remarkable growth, by fiscal 
2026 revenues will exceed the historic average for revenues as 
a percentage of GDP. This upwards trend continues through the 
end of the budget window. It is pretty clear that the 
government has a spending problem, not a revenue problem.
    While it is true that we are experiencing a period of 
historic economic prosperity and growth, the stark reality is 
that the consequences of our high and rising debt are severe. 
According to CBO's projections, the federal debt will grow 
faster than the economy in perpetuity, which of course is 
unsustainable.
    And this isn't just CBO's analysis. A few short months ago 
right here in this very room Federal Reserve Chairman Jay 
Powell testified before this Committee when he said our debt is 
growing faster than our economy by a margin. By definition that 
is unsustainable.
    There is no way around it. Either Congress will put the 
federal budget on a sustainable course, or a financial crisis 
will result. According to CBO, the current death path--debt 
path increases the risk of a fiscal crisis, that is a situation 
in which the interest rate on federal debt rises abruptly 
because investors have lost confidence in our U.S. Government's 
fiscal position.
    We have heard about the reality of our fiscal trajectory 
time and time again, and yet it still seems as though my 
colleagues on the other side of the aisle are not taking those 
warnings seriously.
    Policies promoted by congressional Democrats would increase 
mandatory spending by tens of trillions of dollars, thus 
drastically adding to the national debt. The most notable 
unrealistic policy proposals that come to mind include Medicare 
for All and the Green New Deal.
    It is critical that Congress come together to address our 
daunting fiscal outlook, and yet Democrats continue to promote 
outrageously expensive policies with no way to pay for them.
    Our dire fiscal situation underscores the pressing 
importance of budget resolutions which are supposed to come 
from this Committee as a long-term financial plan for the 
country. Under Democrat control, our Committee did not put a 
budget forward last year. And it doesn't appear as though we 
will do one this year.
    In every business, every city, every state, a budget--a 
budget is done. Yet in the greatest country in the history of 
the world, we are not doing a budget.
    It is my hope that after hearing from CBO Director Swagel 
today, eyes will be opened to the stark reality we face. We 
simply must start making tough budgetary decisions in order to 
put our country on a responsible fiscal path and deliver on our 
duty to the American people.
    [The prepared statement of Steve Womack follows:]
    
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    Mr. Womack. Thank you, Mr. Chairman. And I yield back my 
time.
    Chairman Yarmuth. Thank you for your opening statement. In 
the interest of time, if any other Members have opening 
statements, you may submit those statements in writing for the 
record.
    And now it is my great honor to introduce once again 
Director Phillip Swagel of CBO. Director Swagel, the floor is 
yours. You are recognized for five minutes. And I will be very 
liberal with the gavel so take what time you need.

      STATEMENT OF PHILLIP SWAGEL, PH.D., DIRECTOR OF THE 
                  CONGRESSIONAL BUDGET OFFICE

    Dr. Swagel. OK. Many thanks, Chairman Yarmuth and Ranking 
Member Womack. Thank you very much for inviting me to testify 
on CBO's budget and economic update.
    And thank you both for your guidance and support during 
these first seven months as director. And thank you to your 
staff as well, for helping make sure that we are focused on 
supporting the Congress and the priorities of the Congress.
    So I will start with an overview of our analysis of the 
budget and the economy. We project economic growth and job 
creation will continue over the coming decade, but also a 
worrisome trajectory for the federal budget.
    Not since World War II has the country seen deficits during 
times of low unemployment that are as large as those that we 
project. Nor in the past century has the United States 
experienced large deficits for as long as we project.
    So let me start with the good news on the economy. We 
project real GDP will expand at a solid 2.2 percent this year, 
driving continued job creation and a historically low 
unemployment rate.
    We anticipate that consumer spending supported by rising 
wages and household wealth will remain strong. We also expect 
business investment to rebound as several of the factors that 
weighed on businesses last year abate.
    So in our projections for the later years of the coming 
decade, GDP growth moderates and settles back to its maximum 
sustainable growth rate that we see as 1.7 percent.
    Now, that growth rate is lower than the historical average 
because of long term demographic trends. The United States is 
an aging society and that means the growth of our labor force 
will be slower in the future than it has been in the past. OK.
    Now, let met turn now to the challenging fiscal situation. 
In our projections, the federal budget deficit is $1 trillion 
this year and averages $1.3 trillion per year between 2021 and 
2030. The deficit widens from 4.6 percent to GDP in 2020 out to 
5.4 percent in 2030.
    Now, over the past 50 years, the average annual deficit 
equaled 3 percent of GDP and was generally much lower when the 
economy was strong.
    Now, revenues are growing. If current laws did not change, 
which is the basis of our projection, federal revenues would 
rise from 16.4 percent to GDP in 2020 to 18 percent in 2030. 
And those projections reflect a scheduled increase in 
individual income taxes at the end of 2025, among other changes 
that are in current law.
    The challenge is that spending is projected to grow more 
than revenues, widening the gap between spending and revenues. 
And our projection--federal outlays climb from 21 percent to 
GDP to 23.4 percent of GDP over the next decade. And that 
growth in outlays reflects mainly increased spending for 
mandatory programs and then also increased payments of interest 
on the federal debt.
    So the increase in mandatory outlays over the decade is 
from 12.9 percent to GDP to 15.2 percent of GDP. And again, 
that is attributable to the long-term demographic trend to the 
aging of the population.
    A second factor is rising healthcare costs. Now, you will 
see in our report, we have healthcare costs rising more slowly 
than has been the case in the past, but still rising faster 
than overall GDP. So those two trends, aging and healthcare 
cost, affect Social Security and Medicare in particular. And we 
see those trends persisting beyond the 10-year budget horizon.
    The increase in interest spending--in net interest outlays 
over our baseline, it is caused by both large deficits and also 
what we see as rising interest rates over the 10 years and 
beyond after a period in which interest rates have been very 
low.
    The result of all this is that federal debt held by the 
public will rise from $31.4 trillion at the end of 2020--I am 
sorry--federal debt held by the public will rise to $31.4 
trillion at the end of 2030. And that is an amount equal to 98 
percent of GDP.
    Now, at that point in 2030, debt would be higher as a 
percentage of GDP than at any point since just after World War 
II. And the debt would be more than double what it has averaged 
over the past 50 years.
    We project that--again, the gap between spending and 
revenue will continue to widen. And then eventually the debt in 
our long-term projections, 30 years hence, would reach 180 
percent of GDP by 2050. And that is well above the highest 
percentage ever recorded in the United States. And it would be 
headed higher after that.
    So that debt path would dampen economic output in the U.S. 
It would increase our interest payments to foreigners since we 
borrow from foreigners. It would also elevate the risk of 
negative economic effects, whether it is still moving or sudden 
such as a fiscal crisis.
    Now, to be sure interest rates remain low today. There is 
time to address our fiscal challenges. And fiscal policy could 
be used as a tool to address other challenges facing the nation 
if the Congress chooses to do so. But our debt is on an 
unsustainable path. And over time, we must address this fiscal 
challenge.
    So to conclude, the U.S. economy is doing well. We have low 
unemployment and rising wages that have drawn people off the 
sidelines and back into the labor force. But the economy's 
performance makes the large and growing deficit all the more 
noteworthy.
    Thank you very much.
    [The prepared statement of Phillip Swagel follows:]
    
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     Chairman Yarmuth. Thank you very much for your testimony. 
We will now begin our question and answer session.
    As a reminder, Members can submit written questions to be 
answered later in writing. Those questions and the witness' 
answers will be made part of the formal hearing record. Any 
Members who wish to submit questions for the record may do so 
within seven days.
    As we usually do, the Ranking Member and I will defer our 
questions until the end. So I now recognize Mr. Higgins of New 
York for five minutes.
    Mr. Higgins. Thank you, Mr. Chairman. I just--a couple of 
things. Since 2003 when the United States went into--invaded 
and occupied Iraq, at that time the United States economy was 
eight and a half times larger than that of China. Today China's 
economy is in some measures larger than the United States.
    And the difference is that the United States in some 
estimates spent $1.9 trillion in Iraq. That is $6,300 per 
person with a population of 327 million people. China on the 
other hand invested in the growth of their own economy, which 
catapulted them to a point where the Chinese economy grew by 
about 8.5 percent each year since 2003.
    The United States economy--I was just kind of adding it up. 
I didn't quite get there, but we are hovering about maybe 2 to 
2.4 percent.
    You know, we had a tax cut bill that was approved in 
December 2017. And the White House Counsel of Economic Advisors 
issued a report. And they said that each American household 
would realize an annual increase in household income because of 
this tax cut of between $4 and $9 thousand.
    Is there any evidence that, that has actually occurred?
    Dr. Swagel. We haven't tallied the dollars per household. 
We did a comprehensive analysis in April 2018.
    Mr. Higgins. Is there any evidence that it is close?
    Dr. Swagel. The tax cut has raised GDP and so we see the 
level of GDP is about 1 percent higher, but we haven't 
apportioned that per household.
    Mr. Higgins. What is the GDP growth right now?
    Mr. Higgins [continuing]. growth right now? [DELETE]??
    Dr. Swagel. We see GDP growth coming in this year at about 
2--well, 2.4 percent----
    Mr. Higgins. So----
    Dr. Swagel [continuing]. last year and 2.2 percent this 
year.
    Mr. Higgins. OK. 2.4 percent. So what you are saying is it 
would have been 1.4 percent without the tax cut?
    Dr. Swagel. We see the level of GDP is higher. The growth 
rate impact is maybe two or three tenths of a percent per year.
    Mr. Higgins. Well, that is different from 1 percent.
    Dr. Swagel. So the level of GDP is higher----
    Mr. Higgins. OK.
    Dr. Swagel [continuing]. but incomes are higher, but the 
growth rate is----
    Mr. Higgins. OK. I am confused. All right.
    Dr. Swagel. Yes, I apologize.
    Mr. Higgins. All right. But we were also told that we would 
expect to try to achieve annual economic growth, because of 
this tax cut bill, by 4 percent annually. Is there any evidence 
that we are close to that or within the foreseeable future can 
achieve that?
    Dr. Swagel. So we don't see that happening. In our 
projection, GDP growth goes down. I should say our GDP 
projection is well within the range of other forecasters.
    Mr. Higgins. Yes.
    Dr. Swagel. But the blue-chip economic forecast surveys 40 
or 50 leading economic forecasters----
    Mr. Higgins. Yes.
    Dr. Swagel [continuing]. and none see growth rising above 
2.5 percent.
    Mr. Higgins. OK. So the 4 percent annual economic growth is 
not achievable within the foreseeable future?
    Dr. Swagel. We don't see that happening. And our forecast, 
I think, is pretty----
    Mr. Higgins. OK. So the deficit projected for this year is 
a trillion dollars.
    Dr. Swagel. That is right.
    Mr. Higgins. OK. And we are anticipating annual budgetary 
deficits, not the debt----
    Dr. Swagel. Mm-hmm.
    Mr. Higgins [continuing]. to increase a trillion dollars 
each year into the foreseeable future?
    Dr. Swagel. That is right. So it is $1.1 trillion this year 
and rising over the decade.
    Mr. Higgins. OK. How much has the federal debt increased in 
the last three years? Dr. Swagel. In the last----
    Mr. Higgins. Three years.
    Dr. Swagel. I am sorry. In the last three years. I don't 
have the dollar figure.
    Mr. Higgins. It is $3 trillion .
    Dr. Swagel. OK. $3 trillion. Right.
    Mr. Higgins. It is $3 trillion.
    Dr. Swagel. So we got close to----
    Mr. Higgins. Yes, I am just--here is my point. Here is my 
point. When you divert nearly $2 trillion since 2003 to a 
foreign war that took a bad Sunni by the name of Saddam Hussein 
and put in a bad Shia by the name of Nouri al-Maliki who the 
United States gave him his first term. Iran gave him his second 
term.
    And today after losing 4,500 American soldiers and spending 
almost $2 trillion, Iraq is owned today by Iran. That is bad on 
its face. But in terms of the money that was diverted that 
otherwise could have been spent on the growth of the American 
economy, we have lost considerably.
    And I think--you know, when you look at deficit spending, a 
war obviously is not a good investment nor are tax cuts because 
tax cuts don't pay for themselves. The best-case scenario you 
can retrieve about 32 cents for every dollar that you give away 
in a tax cut.
    If you invest in education, you grow your economy, like 
China has done. If you invest in infrastructure, you grow your 
economy, like China has done. And if you invest in scientific 
research, you don't get beat by China when it comes to new 
technology like 5G, next generation.
    We are getting clobbered right now. And I would argue it is 
because we failed to invest in the right things toward the 
growth of the American economy.
    I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Ohio, Mr. Johnson, for five 
minutes.
    Mr. Johnson. Thank you, Mr. Chairman. As both you and our 
Republican lead here on the Committee, Mr. Womack, have pointed 
out, yesterday the Congressional Budget Office released its 
most recent baseline which reaffirmed what we already know.
    And some of what I am going to say is going to be 
repetitive because I don't think we can say it loudly enough 
nor often enough. The economy is strong. The federal deficit 
continues to grow an unsustainable rate. And mandatory spending 
is out of control.
    And I want to make sure that the record is straight and 
clear. Under the previous Administration, the national debt 
doubled in 10 years--eight years. I am sorry. Eight years of 
the last Administration.
    And much of the increase in mandatory spending that is out 
of control today is laws that went on the books and spending 
that went on the books--checks that we can't cash--in the 
previous administration.
    In Fiscal Year 2020, CBO expects the deficit will be $1.015 
trillion making Fiscal Year 2020 the first year since 2012 that 
the deficit will eclipse $1 trillion. Additionally, CBO 
estimates that the debt held by the public will reach $17.9 
trillion at the end of Fiscal Year 2020. That is 81 percent of 
GDP.
    And as our Republican lead, Mr. Womack, has pointed out, 
the outlook for mandatory spending is even more worrisome. This 
spending category currently accounts for 70 percent of the 
federal budget and is on track to reach 76 percent by 2030.
    There is no question that mandatory spending is the primary 
driver of our deficit. And yet congressional Democrats have 
introduced legislation and proposals like the Green New Deal or 
Medicare for All that would add trillions of dollars in 
additional mandatory spending.
    Ladies and gentlemen, now is the time for Congress to 
address our out of control mandatory spending and take action 
to put the federal budget on a sustainable course. And I would 
recommend we start in this very committee by doing a budget 
resolution.
    Dr. Swagel, how relevant is the Tax Cuts and Jobs Act to 
the fiscal imbalance? More specifically, where would our fiscal 
deficit be had we not passed the Tax Cuts and Jobs Act?
    Dr. Swagel. So this is in April 2018, CBO did a 
comprehensive analysis of the December 2017 tax cut. And we see 
that as adding about 1 percentage point of GDP to the deficit 
so--we cut taxes, lost revenue, increased growth that brought 
back some revenue, paid for roughly 20 percent of itself.
    So it is at 1 percentage point of GDP out of our--the 4.6 
percent deficit that we see this year. So if that gives you a 
sense of the effect of the 2017 tax cut relative to the 
overall----
    Mr. Johnson. Is it safe to say that without the Tax Cuts 
and Jobs Act, we would still be facing massive deficits over 
the next 10 years?
    Dr. Swagel. Yes. That is correct.
    Mr. Johnson. OK. Well, Dr. Swagel, the United States 
economy is undergoing the largest, longest economic expansion 
in American history. What impact has the Tax Cuts and Jobs Act 
had on our economy, especially when American families are 
keeping more of their hard-earned money as a result of the 
legislation?
    Dr. Swagel. OK. So in that April 2018 analysis, we saw the 
December 2017 Tax Act affecting business investment and 
consumer spending so supporting higher consumer spending as you 
said, families keeping more of their money. And then especially 
on business investment, the lower taxes on businesses would 
spur investment.
    And we saw what looked to be the response in the first half 
of 2018. Business investment was relatively strong. It has been 
difficult since then in some sense to disentangle the effects 
of the Tax Act from subsequent developments. Tariff policy in 
particular, starting around the middle of 2018 looks to have an 
effect on business investment.
    So it is a little hard to say exactly, you know, what is 
the Tax Act, what is other things, but that is how we saw it 
both supporting consumer spending and business investment.
    Mr. Johnson. OK. Well, you know, CBO projects that 
mandatory outlays for major healthcare programs will total $1.3 
trillion in Fiscal Year 2020 and almost double to $2.5 trillion 
by 2030. What are the greatest factors contributing to this 
massive growth in federal health spending?
    Dr. Swagel. So it is roughly divided in two. So half of it 
is just the aging of the population. We know an older 
population involves more health spending. And then the other 
half is the excess cost growth in healthcare. The healthcare 
costs are just rising faster than the overall economy and that 
is driving the higher spending as well.
    Mr. Johnson. OK. Thank you, Mr. Chairman. I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Texas, Mr. Doggett, for five 
minutes.
    Mr. Doggett. Thank you, Mr. Chairman, and thank you, 
Director. Well, here we are in the fourth year of the reign of 
the king of debt, self-styled. We now face more than a trillion 
dollar deficit this year and according to your report a 
trillion dollar deficits for as far as the eye can see in what 
you have described as I understand it, a totally unsustainable 
path; is that correct?
    Dr. Swagel. That is correct, sir.
    Mr. Doggett. And I guess the one thing we can be in 
complete agreement on from what you just said is that those 
Republican tax cuts that we were told were going to pay for 
themselves have not paid for themselves, have they?
    Dr. Swagel. We don't see the tax cut as----
    Mr. Doggett. Yes, sir. I believe you just said we think 
that it is from your analysis--your objective analysis that we 
got about 20 cents on the dollar for every dollar of tax cuts; 
is that right?
    Dr. Swagel. That is correct, sir.
    Mr. Doggett. Yes, sir. That is consistent with what all 
economists except for the true ideologues told us before this 
proposal was ever adopted.
    And if we have more of those same unpaid Republican tax 
cuts, which President Trump seems to feel he has to promote in 
order to get re-elected, it will make it even more 
unsustainable, won't it? If you have more tax cuts----
    Mr. Swagel. OK. I am sorry. That is right--definitely 
unsustainable, more tax cuts----
    Mr. Doggett. And we were also--the Republicans had the help 
of that great historic character, Rosy Scenario, in their work 
on this. They told us that at a minimum with this wonderful 
proposal, we would have 3 percent growth. I heard President 
Trump say why not 6 percent growth. You are just not being 
optimistic enough.
    But you have analyzed it, and what we can look forward to 
is less than--or about half of what Republicans told us we 
would get. Only 1.7 percent growth is your best analysis; is 
that right?
    Dr. Swagel. That is right. Over the long term.
    Mr. Doggett. Over the long term.
    Dr. Swagel. 1.7.
    Mr. Doggett. And so the same people that told us we can't 
afford more medical research. We can't afford better schools. 
We can't provide healthcare for more Americans. We can't meet 
our infrastructure needs with our crumbling roads. When it came 
to helping the very rich in this country and multinational 
corporations, they could not do enough.
    And I want to ask you about one specific area that I have 
been troubled with--was troubled when they hoisted it off on us 
and that is all the giveaways to the multinational corporations 
to just encourage them to move more jobs offshore and to have 
new investment offshore.
    You are familiar with the very appropriately named GILTI 
Provision in the Republican tax bill, aren't you--are you not?
    Mr. Swagel. Yes, I am.
    Mr. Doggett. And as I understand it that gives a 50 percent 
deductions for profits that multinationals earn overseas.
    And as if that half off deal--50 percent sale--that slashed 
the already very low corporate tax rate wasn't enough, up to a 
10 percent rate of a return on tangible investments for 
multinationals overseas would be exempt entirely from GILTI 
allowing a corporation to avoid even the low discounted rate 
that Republicans established on offshore profits.
    And as far as tangible investments are concerned isn't this 
when a corporation decides they would rather build their plant 
and get their equipment in some other country than in America, 
in other words not putting America first.
    Dr. Swagel. That is right. A tangible investment would be a 
factory or plant as you have----
    Mr. Doggett. So last year you came to us with your report 
and noted that the Republican tax bill contained provisions 
like GILTI that could be quote--could have an incentive affect 
to encourage the location of such assets abroad instead of 
making America first; isn't that right? That was in your 
report.
    Dr. Swagel. So the report talks about the overall impact of 
the 2017----
    Mr. Doggett. Yes.
    Dr. Swagel [continuing]. Tax Act as improving incentives to 
invest in the U.S. That particular provision as you said----
    Mr. Doggett. These international provisions----
    Dr. Swagel [continuing]. goes in the other directions.
    Mr. Doggett [continuing]. to encourage abroad. And----
    Dr. Swagel. The tangible----
    Mr. Doggett. And as if the provisions that these 
Republicans wrote weren't bad enough in incentivizing moving 
offshore, the Treasury Department has been working to make it a 
little worse.
    And I read your report this year to indicate that among the 
factors you look at are the regulations Treasury has written 
and those that have not yet gone into effect. And you say they 
add about another $110 billion to us over the next decade; is 
that right?
    Dr. Swagel. Yes. So we have been tracking the incoming data 
related to the 2017 Tax Act. We don't have all of it just 
because the----
    Mr. Doggett. Because it probably would be worse once they 
actually complete their work. We don't have all of them in 
effect. We only have part of them in effect--GILTI not 
completely in effect. Likewise, the high tax exclusion BEAT, 
another appropriately named provision in effect.
    My concern, Mr. Chairman, is that 90 corporate giants in 
this country paid zero--absolutely nothing--zilch--to 
contribute to the challenges that we face. And the Trump 
Treasury Department is only making it worse with their 
regulations.
    And thank you, Mr. Director and Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Utah, Mr. Stewart, for five 
minutes.
    Mr. Stewart. Thank you, Chairman. Director, thank you for 
being here. I am going to ask you a question I don't know if 
you are going to have the answer to it, but I think it would be 
appreciated.
    We are in a little bit of uncertainty with the coronavirus 
obviously in China and spreading to other parts of the world, a 
little bit here in the U.S. And it is clearlygoing to have an 
economic impact. Do you have any insights on that, that you 
could share with us?
    Dr. Swagel. Yes, of course. We have been tracking that. And 
we recognize that it will have economic impacts as you say. You 
know, we see them already with travel certainly. We recognize 
that the manufacturing in China looks to be disrupted. It is 
hard, of course, to know how long that will persist and 
ultimately what will be the effects.
    CBO in the past has done work on similar instances. Back in 
the days of the Avian Flu, the CBO did analysis. You know, I 
don't want to say it is going to be the same this time as then 
just because we don't--you know, we don't ultimately know. But 
we are watching it closely, and we will provide information to 
the Committee and to Members as we have more.
    Mr. Stewart. Let me ask you this, going back historically 
looking at as you have mentioned the Avian Flu or perhaps SARS, 
do we have an estimate of how much that impacted our economy at 
that time?
    Dr. Swagel. You know, I don't recall offhand. The Avian Flu 
in the end, it wasn't a gigantic impact in the U.S. It was, you 
know, more overseas and then it was tamped down. And the same 
with SARS--it affected China and others.
    We do have some evidence from disruptions here. So it is 
not an epidemic, but--the catastrophes along the Gulf Coast 
from the Hurricanes Katrina and Rita, you know, had massive 
effects on the localities. In the grand scheme of the overall 
U.S. economy, it was a negative and then we largely made it up.
    So--you know, it is something that is a strength of the 
U.S. economy is our resilience and our flexibility that we can 
bounce back from these sorts of things.
    Mr. Stewart. Well--and let's hope, of course, that this 
doesn't turn into anything more serious than what we have seen 
so far. And this would be just one of the impacts--the economic 
impacts on people.
    And we are starting to see some of that already, which begs 
the point, and that is when we have these deficits like we do, 
we have very little or at least much smaller margin for error--
our tool chest is limited in the sense of how we can respond to 
some of these emergencies and respond to the economic impacts 
of them.
    Boring down on that just a little bit, 2020 $170 billion = 
increase in revenue to the federal government; is that right?
    Dr. Swagel. I think that is right.
    Mr. Stewart. And do you have an estimate for 2021--increase 
in revenue?
    Dr. Swagel. An increase in revenue--sorry, I have it in 
front of me. I don't have 2021 in front of me.
    Mr. Stewart. OK.
    Dr. Swagel. I apologize. But revenues will continue to 
grow. We see them--revenues growing at a roughly 4 to 5 percent 
pace.
    Mr. Stewart. OK. That is a fairly remarkable statement. 
Revenues growing at 4 to 5 percent. $170 billion this year--
increase in revenue.
    And the point is, is that we don't have a revenue problem. 
We have got a deficit problem that is caused by spending. That 
is very, very clear. And the mandatory spending on this is, you 
know, the key to that.
    I mean 70 percent of the federal deficit is--I am sorry--
the federal budget is attributable to mandatory spending. We 
all know that. And I just hope someone has the courage at some 
point to really take that on because to date we haven't.
    But my question to you then is this, anticipating by 2050 
when we look at something like 180 percent of GDP in federal 
debt, much of that owned by not U.S. citizens but by foreign 
entities and organizations and businesses, what does that mean? 
And what are the national security implications of having that 
much debt owned by foreign entities?
    Dr. Swagel. OK. So I would first start where you started 
that in a sense it reduces our room--our fiscal room to 
maneuver.
    That if the debt is high--if--investors beliefs about the 
United States change and that leads to higher interest rates, 
will the negative impact of higher interest rates on our fiscal 
situations will ramp up much more quickly--in the sense that it 
could make policymakers hesitant to use fiscal policy as 
necessary whether for national security purposes or economic 
purposes or anything.
    Mr. Stewart. Is it plausible to think that someone--I mean 
we hear this scenario where someone actually--a national 
actually holds us hostage because of the debt that is owed to 
them. Is that a realistic or plausible, you know, potential 
that could happen.
    Dr. Swagel. You know, in principle it is possible. A 
challenge in some sense is the codependence say between us and 
China. China and Japan are the two largest holders of U.S. 
debt. Japan is a touch above China now.
    But in some sense, China if they were to try to hold us 
hostage, this sense in which we are in this together that if 
they, you know, did something that impaired U.S. Treasury 
Bonds, they would be taking a big hit as well.
    Mr. Stewart. Yes.
    Dr. Swagel. So----
    Mr. Stewart. Yes, it is----
    Dr. Swagel [continuing]. it could happen.
    Mr. Stewart. It is a two-way street. And that is actually 
the point I wanted to make. I mean the idea of holding us 
hostage is probably exaggerated. The ability to influence our 
decisions and our policy though, absolutely not. Would you 
agree?
    Dr. Swagel. That is right.
    Mr. Stewart. Absolutely not an exaggerated threat?
    Dr. Swagel. That is right we increasingly depend on the 
rest of the world to finance our spending.
    Mr. Stewart. Yes.
    Dr. Swagel. That is absolutely right.
    Mr. Stewart. Chairman, I yield back. Thank you.
    Chairman Yarmuth. Thank you. The gentleman's time has 
expired. I now recognize the gentleman from North Carolina, Mr. 
Price, for five minutes.
    Mr. Price. Thank you, Mr. Chairman and welcome to our 
witness. And thank you for your good work and your testimony. 
We often hear contrary views about the deficit and the debt 
from our Republican friends and all around, I suppose. We have 
heard some of that this morning.
    We all remember Dick Cheney said memorably, deficits don't 
matter. They seem especially not to matter when they are 
created by tax cuts for the wealthy or when they are created by 
defense spending. But then on the other hand, we hear the sky 
is falling. The sky is falling. We can't go on like this. We 
have heard a lot of that this morning.
    So I hope you can--you have already done some of this, and 
I hope you can continue to give us some perspective on this. 
Our deficit is now 4.6 percent GDP. Our debt is 81 percent of 
GDP. Both our rising.
    Dr. Swagel. Mm-hmm.
    Mr. Price. They are high by historic standards, 
particularly in a time of economic growth and prosperity. They 
are getting higher. We don't seem to be able to envision a 
grand bargain such as we had back in the 90's because of 
frankly Republican dogmatism on taxes.
    You know, everything has to be on the table. Those budget 
deals of 1990, 1993, 1997, everything was on the table. There 
was a political price to be paid, but nonetheless, I think a 
lot of us feel like those are some of the best votes we ever 
cast where we had four years, not just of balance budgets but 
of paying off $400 billion of the national debt.
    Those seem to be out of reach now, those kinds of grand 
bargains. President Obama tried mightily; John Boehner too, but 
it just hasn't come together and doesn't seem likely to.
    So how should we look at this? What is sustainable? What 
would you say the economic consensus is as to what is 
sustainable? Is there a consensus? What would the range of that 
be? And then what should we aim for in terms of what is 
sometimes called fiscal space----
    Dr. Swagel. Mm-hmm.
    Mr. Price [continuing]. to anticipate what might happen in 
the economy. To undertake aggressive countercyclical measures 
in the event of a severe downturn. So I assume when we talk 
about what is sustainable, we are thinking about that as well 
as some abstract number that the economists might think 
represents a tipping point.
    Dr. Swagel. OK. No. And something you have put your finger 
on the key questions for looking at fiscal policy into the 
future. We know that markets today are not concerned, right?
    I mean I have sat here, and I have told you the fiscal 
situation is unsustainable, but interest rates remain low in 
the United States. The United States has the ability to 
undertake fiscal policy today, you know, for whatever purpose, 
you know, for stimulus, for infrastructure, for whatever that 
Congress decides to do.
    And it is not that--in some sense that is the difficulty is 
that the challenge is not immediate, but as you have said we 
know it is rising. And the challenge is knowing well what is 
the end point, right? At what point is the debt level on the 
tipping point of not being sustainable.
    And there is not--unfortunately there is not an answer in 
the economic literature. At one point people said maybe it was 
like 70 percent debt to GDP. And of course we see that. You 
know, you see our numbers, and we are going above that without 
a problem. And so I don't know. That is the challenge.
    I--last thought is the worry I have is that when we get 
there--when we reach the fiscal--the end of fiscal space as you 
put it, it will happen quickly and market participants will 
lose their confidence in the U.S. quickly and it will be too 
late. It will be too late to address it without difficult 
changes.
    Mr. Price. Well, and that scenario you described could 
happen at the time of a severe downturn.
    Dr. Swagel. That is right.
    Mr. Price. We seem to be chugging right along----
    Dr. Swagel. And then----
    Mr. Price [continuing]. doing just fine and then all of a 
sudden----
    Dr. Swagel. That is right.
    Mr. Price. It is not that we reached a tipping point. It is 
that we need substantial resources for a major--countercyclical 
measures whether they be on the tax side or on the spending 
side and the resources simply aren't there without just an 
enormous increase in debt.
    Dr. Swagel. That is right. And we don't know. In the last 
crisis 10 years ago where the U.S. was able to fund, right, the 
ARRA and TARP and all of the--you know, so all the crisis era 
programs without a problem.
    We saw it with the China situation, U.S. interest rates 
went down, right. So a problem in the rest of the world, people 
look at the U.S. as safe. And, you know, so we still have that 
status. The challenge is keeping it.
    Mr. Price. Thank you. Thank you, Mr. Chairman.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Texas, Mr. Roy, for five minutes.
    Mr. Roy. I thank the Chairman. Appreciate you being here 
for testifying today. A couple questions.
    Dr. Swagel. Mm-hmm.
    Mr. Roy. Did this Democrat led Congress pass a budget this 
last year?
    Dr. Swagel. A budget resolution----
    Mr. Roy. Yes.
    Dr. Swagel. Budget----
    Mr. Roy. Budget resolution.
    Dr. Swagel. No, I don't believe so. No.
    Mr. Roy. OK. Has this Democrat lead Congress passed any 
reforms that will significantly reduce mandatory spending in 
the last year in this Congress?
    Dr. Swagel. No.
    Mr. Roy. No. A lot of blame is being directed at the 
President. What--where are spending bills--where do they 
originate?
    Dr. Swagel. The spending bills----
    Mr. Roy. Do they originate in the House of Representatives, 
appropriations----
    Dr. Swagel. Yes.
    Mr. Roy [continuing]. spending bills? Yes.
    Dr. Swagel. Yes. I mean that is----
    Mr. Roy. Yes.
    Dr. Swagel [continuing]. tax and spending----
    Mr. Roy. It is a Democrat led----
    Dr. Swagel [continuing]. Congress.
    Mr. Roy [continuing]. House of Representatives. Yes. Did 
the House take up and pass the President's suggested spending 
levels? When the President sent over suggested spending levels, 
did this House take up those levels or did they spend at a 
higher level?
    Dr. Swagel. I don't believe they spent--that the Congress 
spent what the President sent over.
    Mr. Roy. Right. I think they spent perhaps more than what 
the President suggested.
    Dr. Swagel. OK. Yes, I have to admit I am not up to date on 
the----
    Mr. Roy. Right.
    Dr. Swagel [continuing]. President's spending suggestions, 
but I suspect the answer is yes.
    Mr. Roy. Mm-hmm. Did this Democrat led Congress vote to 
raise the spending caps last July?
    Dr. Swagel. Yes. And our baseline reflects those higher 
spending caps.
    Mr. Roy. Mm-hmm. Did this Democrat led Congress vote for 
appropriations just this past December that will spend at those 
higher cap levels?
    Dr. Swagel. Yes. That is correct. And again----
    Mr. Roy. Yes.
    Dr. Swagel [continuing]. that is in our baseline.
    Mr. Roy. Right. So it strikes me as interesting to hear a 
lot of finger pointing going at the President about the, you 
know, record debt levels and so forth over the last several 
years.
    Of course, the questions always go back to the tax cut of 
2017. One of my colleagues has rightfully raised the questions 
here about the percentage. I have heard the--my colleague from 
Texas talking about getting 20 cents back on the dollar.
    One question I have for you as a practical matter, are you 
all going to do another assessment of the 2017 Tax bill from--
just, you know, you did one in the spring of 2018. Are you 
going to do an update or no?
    Dr. Swagel. You know, we are not--we are tracking it and 
that the challenge is disentangling, you know, what is the 
2017----
    Mr. Roy. Other policies.
    Dr. Swagel [continuing]. Act from everything else since 
then. But we will keep tracking the--you know, as we can--for 
example, the International Tax Provisions that we can track 
some of that.
    Mr. Roy. Has--it true that our federal receipts revenue to 
the federal Treasury since roughly World War II is tracked 
somewhere between sort of 14 percent to 20 percent on average?
    Dr. Swagel. That is right. The 50 year average is 17.4 
percent----
    Mr. Roy. Right.
    Dr. Swagel [continuing]. of GDP.
    Mr. Roy. And it is ranged between those rough ranges, 
right? And we are somewhere in that kind of middle range, maybe 
just below 17 right now----
    Dr. Swagel. We are a little bit below that.
    Mr. Roy [continuing]. 16s.
    Dr. Swagel. And we are going up in--over the next decade, 
we are going to have 17.4 percent----
    Mr. Roy. Right.
    Dr. Swagel [continuing]. revenue to GDP.
    Mr. Roy. So we are tracking roughly at the same 15 year 
level of our overall revenues to the Treasury as a percentage 
of our GDP.
    Dr. Swagel. Of our economy. Right.
    Mr. Roy. Right.
    Dr. Swagel. And in dollars it is going up as the economy 
gets larger.
    Mr. Roy. So it is safe to say that--you know, without 
getting into the politics of it that the main driver of our 
current imbalance is a massively growing amount of spending and 
that is obviously heavily tracking mandatory spending that is 
driving a lot of that, correct?
    Dr. Swagel. Right. And so there is the gap, right. Revenue 
is at the 50 year--it is going to be at the 50 year historic 
level and spending is higher. And that gap is the deficit.
    Mr. Roy. So while we are looking at--and we can have 
debates about tax policy and, you know, the importance of tax 
policy for jobs and having money in the people's pockets and 
creating wealth and opportunity and stimulus versus, you know, 
what that may or may not mean for the net change to revenue 
into the Treasury. And we can have that debate.
    The fact is spending is being driven by mandatory spending 
that is, you know, going to be 80 percent of the increase of 
our debt over the next decade is going to be Medicare, Social 
Security, and the interest; is that correct?
    Dr. Swagel. That is correct.
    Mr. Roy. And--dr. Swagel. Those three mainly.
    Mr. Roy. And right now this body, this Committee, this 
House has got no proposals that it is putting forward to deal 
with those issues and solve those problems that we are dealing 
with. And one last question, when is Medicare part A going to 
be insolvent?
    Dr. Swagel. It is--in our projection it is 2025.
    Mr. Roy. And when is Social Security going to be insolvent?
    Dr. Swagel Right. So we have it at 2032----
    Mr. Roy. 2032.
    Dr. Swagel [continuing]. for Social Security.
    Mr. Roy. Thank you, sir. Thank you for your time.
    Dr. Swagel. OK. Very good. And actually I should just add, 
you know, in our baseline even when those trust funds become 
insolvent, we have--in our baseline the spending continues 
because we are directed to do that by the budget law.
    Mr. Roy. Yes, sir. Thank you.
    Chairman Yarmuth. Gentleman's time has expired. I now 
recognize the gentlelady from Illinois, Ms. Schakowsky, for 
five minutes.
    Ms. Schakowsky. Climate change, I see, is the greatest 
challenge facing humanity today. And across the globe we see 
near apocalyptic events like the continent-wide fires in 
Australia, flooding in Venice. In the United States, we are 
seeing catastrophic flooding, severe storms, wildfires, and 
devastating drought.
    In Chicago where I am from, we have seen the lake at levels 
that we haven't seen before threatening the shoreline across 
the area. And the Great Lakes generate $16 billion every year 
in tourism revenue. So the climate crisis could have disastrous 
economic effects for our region and really for the country, if 
not the world--certainly the world.
    In 2019 alone, the United States was impacted by 14 
separate billion dollar disasters. If we do not take immediate 
action, the future economic and social cost of climate change 
will be breathtakingly high.
    And so I want to ask you, Director--and thank you for being 
here--how are these climate related natural disasters and 
severe storms expected to affect the federal budget and 
economic outlook going forward, especially noting that we are 
predicting to see increased number of billion dollar disasters 
in the near future?
    Dr. Swagel. OK. It is an issue that we are looking at 
carefully. And in some sense in two levels--one is to say what 
are the effects on the micro level in the economic baseline, 
the fiscal baseline, so it is flood insurance program, military 
instillations, and other things are affected. And so we are 
looking at that.
    Those are implicitly--they are in our baseline, but we 
don't have a particular estimate of, you know, flood insurance 
spending will go up by a certain amount because of climate. But 
we are working to understand that.
    The bigger challenge as you say is the overall--the macro 
picture where we know that climate change will have an effect 
on the overall economy and therefore on federal revenue and 
federal spending. And that we are also working to understand 
that.
    It might not show up in a big way, you know, in the next 
year or even in the next 10 years, but we know is we look at a 
30 year horizon. The overall U.S. economy will be affected.
    Ms. Schakowsky. I am really shocked that--for you say 
though that it may not show up in the next decade because it is 
showing up right now. Given our current economic conditions of 
persistently low interest rates and low inflation rates, would 
you agree that it is sound fiscal policy for the government to 
invest in a clean economy now?
    Dr. Swagel. OK. And I should actually make clear in terms 
of the showing up is saying, you know, will--the level of GDP 
be different near for the level of revenue is of course showing 
up as economic impacts, just trying to trace them through--
precisely through the budget is----
    Ms. Schakowsky. And I would--you could also talk to the 
farmers. We were over a month late getting into the field in 
Illinois. The economic impacts are so obvious.
    Dr. Swagel. Mm-hmm. And so it is an issue that--an area--I 
am sorry--where CBO did a lot of work back in--it was 2013, I 
think, when the Waxman-Markey legislation--the cap and trade 
legislation was being debated. We haven't worked on that 
basically a lot since. And we are starting that up again. So we 
will have more to say.
    On the investment part--I am sorry--I didn't answer the 
second part of your question. That is something we are also 
again starting to look at is to connect those policy levers to 
the economy and to the baseline.
    Ms. Schakowsky. Yes. I mean I would hope that CBO could 
actually help Congress analyze these situations and help us 
come up with long term plans on how we deal with that.
    I mean I--again, it is just surprising to me that while you 
are beginning to look at that and trying to understand that, 
that this is a major force in our country today that I think is 
changing the economics in so many ways.
    Dr. Swagel. That is right. And substance we know that, that 
we need to do our work, so we are ready to support the 
Congress. And that is what we are doing. First, on the baseline 
the usual--what does it mean the budget.
    And then over the coming months to understand better how 
various policy levers will affect climate and then affect the 
economy and so on.
    Ms. Schakowsky. You know, I mean I think the question of 
what kind of investments are smart for our economy for--to make 
us more resilient. I think that you have a big role to play and 
I hope you will. And I yield back.
    Dr. Swagel. OK. Thank you.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
recognize the gentleman from Texas, Mr. Flores, for five 
minutes.
    Mr. Flores. Thank you, Mr. Chairman and Director Swagel. We 
really appreciate you being here. This hearing today is 
incredibly important. The testimony we are hearing today 
clearly lays out that our--one of our country's biggest 
challenge is our growing deficits and growing debt are 
unsustainable.
    Our growing deficit and debt--excuse me--debt and deficit 
represent a huge tax and fiscal obligation for future 
generations. Those generations are going to face daunting 
challenges of lower economic growth opportunities and massive 
tax increases.
    The tragedy of today's hearing is that the majority of this 
Committee and the House of Representative has buried its head 
in the sand and is failing the govern by passing a budget to 
clearly share its priorities with the American people.
    Do they have a budget to address the country's fiscal 
challenges? No. Do they have a budget which shows the true cost 
to their socialist projects like the Green New Deal, Medicare 
for All, free college programs that will explode the deficits 
and debt by over $100 trillion? No. Do they have any kind of 
budget? No.
    Even worse to deflect from their failure to govern by 
passing a budget, they try to blame deficits on pro-growth tax 
reforms that went into effect two years ago, the tax reform 
that is helping to grow our economy, the tax reform that has 
grown the federal deficit--federal revenues to record levels, 
the tax reform that has created millions of jobs, the tax 
reform that has reduced unemployment, the tax reform that has 
lifted millions of families out of poverty, the tax reform that 
has helped grow incomes for lower income American families by a 
significantly higher rates than other income groups.
    So in light of this foggy rhetoric by the majority, it is 
important to address the issues that we face today. In order to 
do this, let us look at a few issues.
    So Director Swagel, I want to ask about what part that tax 
reform plays in federal debts and deficits? So what is the 
total amount of expected federal revenues over the next 10 
years? $48 trillion?
    Dr. Swagel. That is right.
    Mr. Flores. OK.
    Dr. Swagel. Yes.
    Mr. Flores. And what is the total revenue impact based on 
CBO's estimates of tax reform over the next 10 years? Is it 
$1.9 trillion?
    Dr. Swagel. That is right, the loss over----
    Mr. Flores. OK.
    Dr. Swagel [continuing]. 10 years is----
    Mr. Flores. And so a little simple math here shows that the 
percentage of tax reform impact compared to total revenues is 4 
percent. That means 96 percent of federal revenues were 
unaffected. So tax reform is clearly not the big issue. And so 
what are the projected deficits over the next 10 years? About 
$13.1 trillion, right?
    Dr. Swagel. Yes.
    Mr. Flores. And so if you divide $13.1 trillion by $1.9 
trillion you see that the total impact of tax reform on the 
deficits over the next 10 years is about 14 percent. That means 
86 percent of federal deficits is because of something else. 
And so let's bring--let's look at this slide. This is CBO slide 
seven.
    [Slide.]
    
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    Mr. Flores. And this shows that revenues are growing faster 
than the rate of the economy, correct?
    Dr. Swagel. Mm-hmm.
    Mr. Flores. OK.
    Dr. Swagel. That is right.
    Mr. Flores. That is good. That means deficits should be 
reduced.
    Dr. Swagel. Mm-hmm.
    Mr. Flores. We go to the next slide, it shows the 
discretionary spending is growing at a rate slower than the 
rate of the economy--growth of the economy, right, and GDP?
    [Slide.]
    
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    Dr. Swagel. That is right.
    Mr. Flores. OK. That is good. OK. This brings us to the key 
issue. The two areas that are growing faster than the rate of 
growth and the economy are mandatory expenditures and net 
interest.
    Now, so those are the issues that need to be addressed. So 
historically speaking if revenues grow faster than economy and 
expenditures grow slower than the rate of the economy, then our 
debts and deficits should be reduced, right?
    Dr. Swagel. That is right.
    Mr. Flores. OK. I am saying this. I am a CPA, former chief 
financial officer, former CEO. So I look at--I try to analyze 
this from a business perspective. So if we really want to get 
our arms around this, what is in the mandatory spending 
category that is blowing things up?
    Well, let me ask you one other question. So what are 
revenues in the last year of your projections for 2030? It is 
like $5.7 trillion, I think.
    Dr. Swagel. Yes. It is--I am sorry. I am just going to 
look. As a percentage of GDP, it is----
    Mr. Flores. No, just in dollars.
    Dr. Swagel. In dollars--yes, $5.7 and a half----
    Mr. Flores. OK. And what are total mandatory expenditures 
in that same year?
    Dr. Swagel. It is about $4.9 trillion.
    Mr. Flores. OK. I would say it was $5.7 which leaves----
    Dr. Swagel. Yes. Yes. Mandatory is in 2030 is like $4.9 
trillion.
    Mr. Flores. OK. And then----
    Dr. Swagel. Yes.
    Mr. Flores [continuing]. when you add debt to it----
    Dr. Swagel. And then----
    Mr. Flores [continuing]. the net interest?
    Dr. Swagel. Right. Net interest is another $800 billion----
    Mr. Flores. OK. So $5.73----
    Dr. Swagel. $5.7--exactly----
    Mr. Flores. OK. All right.
    Dr. Swagel. Between the two.
    Mr. Flores. I have been studying the numbers.
    Dr. Swagel. Yes.
    Mr. Flores. So that means that mandatory expenditures and 
net interest on that will absorb one hundred percent of total 
revenues. That means there is no money left for anything else, 
for the FBI, for national security----
    Dr. Swagel. Mm-hmm.
    Mr. Flores [continuing]. for border security, for anything 
else, right?
    Dr. Swagel. That is----
    Mr. Flores. OK.
    Dr. Swagel. That is.
    Mr. Flores. So really what this says is that we as Congress 
need to address the big issues here that nobody wants to 
address.
    And I--it is my hope that the majority will work with the 
minority that Republicans, Democrats will sit down together, 
address these challenges head on so that we can balance the 
budget and take care of future generations. Thank you. I yield 
back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Michigan, Mr. Kildee, for five 
minutes.
    Mr. Kildee. Thank you, Mr. Chairman and thank you Director 
Swagel for being here. One area that I have been very 
interested in is understanding how investments or policy 
impacts the economy through the externalities that they 
generate. And obviously in some cases we measure that; in some 
cases, we don't.
    And I am not talking about those benefits that are promised 
that are difficult to measure or that some claim, like when--in 
the case of the Tax Cuts and Jobs Act are taking place when we 
know that, that particular policy is only returning 20 cents on 
the dollar of investment. That is something that both sides 
seem to readily acknowledge, not good math, not supporting that 
policy at all.
    But specifically, I would like to get your thoughts on the 
impact of another set of policies and the external benefits 
that would be derived. And that has to do with infrastructure 
spending.
    According to the Economic Policy Institute, the rate of 
return on infrastructure is tremendous. Lots and lots of 
economic studies have pointed this out. In 2010 you may be 
familiar with the work that Moody's Analytics did looking at 
fiscal stimulus for a whole variety of governmental activities, 
tax cuts, increases in SNAP program spending, but specifically 
infrastructure work.
    Their analysis determine that for every dollar of 
infrastructure investment there is a return of a $1.57 to the 
economy. It is a big difference between getting 20 cents back 
on the dollar and getting a $1.57 back on the dollar.
    I know you may not specifically project or measure that, 
but it is your assessment that infrastructure spending would 
have a net positive impact on the economy and on our fiscal 
condition?
    Dr. Swagel. So certainly on the economy and infrastructure 
investment if well done has the ability to improve GDP and have 
the kind of positive external effects that you mentioned that 
would have feedback to the budget.
    You know, the challenge is the precise infrastructure that 
is done. I think we all know, right, there is--you know, the 
high-speed rail in the middle of nowhere. And there is the sort 
of, you know, fixing the bridge that is key. And we have----
    Mr. Kildee. Right, but if we are talking about the kind of 
investments that would clearly be tied to efficiencies in 
delivering products to market----
    Dr. Swagel. Mm-hmm.
    Mr. Kildee [continuing]. particularly when it--when we talk 
about supporting the American manufacturer in our very, you 
know, steep global competition that we are facing, 
understanding what our competitors are doing. China, for 
example, is spending ten times what we are as a percentage of 
GDP.
    It does seem to me do we not only good fiscal policy but 
good policy in general for us to make these sorts of 
significant investments. And then we get the additional 
reward----
    Dr. Swagel. Mm-hmm.
    Mr. Kildee [continuing]. of significant return to the 
economy. Is that your--do you share that general view?
    Dr. Swagel. I do. And as you said, it is very important 
that there are going to be things that cost money but have a 
huge impact on the economy in the substance that, you know, if 
costs money sometimes it is worth it. That it is not--it is not 
the only standard.
    Mr. Kildee. Right. I could just then return to a point that 
was made by one of my colleagues on the other side about this 
issue of our deficits and debt.
    Dr. Swagel. Mm-hmm.
    Mr. Kildee. The point was made that well 14 percent of 
projected deficits are attributable to the Tax Cuts and Job 
Act, in other words that bill--that legislation made our 
situation worse, no question about that. The solution that is 
being suggested over and over again is to do deal with so 
called mandatory spending.
    What percentage of the mandatory spending is constituted of 
Social Security, Medicare, Medicaid roughly? You don't have to 
give me precise.
    Dr. Swagel. It is by far the largest part. I don't have----
    Mr. Kildee. So----
    Dr. Swagel [continuing]. number, but it is by far the 
largest----
    Mr. Kildee. I think we need to be clear on what is being 
said. We are not--the discussion is it is OK to give tax cuts 
to benefit the people at the very top, but you have to offset 
that by cutting Social Security and Medicare and Medicaid.
    Because if the real interest is in reforming those 
programs, we are all ears. In fact, we have legislation--one of 
my colleagues said there is no plan from Democrats.
    We have a plan on Social Security with 208 Democratic 
sponsors that would deal with Social Security and make it 
stable as far as the eye could see. We invite our Republican 
colleagues to join us in that. And if they have suggestions on 
how we might improve that legislation, we are all ears.
    But to take the President's proposal to cut Medicare and 
the President's proposal to cut Social Security and call that 
reform by placing it on the backs of the people who can least 
afford it but happily celebrate and throw parties and parades 
for tax policy that gave the wealthiest people in this country 
massive breaks at the cost of everyone else and then say well 
it only added to 14 percent of our fiscal problem is not a very 
good argument.
    So I appreciate your time here. I have gone over time. And 
I yield back.
    Dr. Swagel. Mr. Chairman, can I revise----
    Chairman Yarmuth. Please respond, sir.
    Dr. Swagel [continuing]. one sentence. I am not responding. 
It is just when I refer to high speed rail, I realize saying in 
the middle of nowhere is a poor way of putting it. And so I 
really had in mind investment projects that have--you know, a 
low return and not trying to, you know, say a bad thing about 
any particular part of the country.
    Chairman Yarmuth. All right. Thank you for that 
clarification. I now recognize the gentleman from Georgia, Mr. 
Woodall, for five minutes.
    Mr. Woodall. Thank you, Mr. Chairman. When I flee to the 
family farm, it is in the middle of nowhere, and I go for 
precisely that reason----
    Dr. Swagel. That is----
    Mr. Woodall [continuing]. so I took no offense to that. I 
don't want high speed rail in my backyard there. I am listening 
to the finger pointing going back and forth. I want to confess. 
I have been nine years. A lot of this is my fault. And I 
appreciate the work CBO has done during that time.
    To work with such great men and women on both sides of the 
aisle and having not been able to make more of an impact is 
incredibly disappointing to me, but there was a time when we 
passed that 74 Budget Act and constituted this Committee that 
we said we are tired of taking orders from the White House. We 
are tired of OMB running the show, and we need to create an 
institution that will put us on equal footing.
    And what has transpired over those past 40 years is we have 
dwarfed OMB. And there is not a President of either 
administration that isn't playing with the OMB numbers. And 
America looks to you all as the fair arbiter in that space. I 
thank you for taking on that responsibility.
    I want to look up here at the--at your slide. Tell me what 
is reflected there in 2009, 2010 in that giant spike in 
mandatory spending as a percent of GDP?
    [Slide.]
    
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    Dr. Swagel. So it was both--of course GDP was going down 
because we were in a recession, and then there was a variety of 
mandatory expenditures that went up, increased transfers and 
other things and the Affordable Care Act created a new category 
of mandatory spending.
    Mr. Woodall. And so as the economy has not just recovered 
but begun to expand, I would expect to see all of the crisis 
response----
    Dr. Swagel. Mm-hmm.
    Mr. Woodall [continuing]. go away and in fact begin to 
trend the other direction. I don't see that. I see a systemic 
increase of several percentage points there. Is that the 
Affordable Care Act in its entirety? Am I looking at something 
else there?
    Dr. Swagel. No, it is not--I mean that the increase in 
mandatory spending at the higher level, it is a mix of the new 
legislation and then the trend of--the two trends I mentioned, 
the aging and the excess cost growth in healthcare. So it is a 
mix of those.
    Mr. Woodall. Mr. Kildee was talking about investment and 
transportation. I appreciate your distinction between 
investment and smart investment. If I could get more projects 
out the road--out the door faster, we could seek those benefits 
and find them faster.
    He mentioned the figure of about $1.50 for every dollar 
invested. You are projecting trillion dollar deficits. If I 
then find $2 trillion in new revenue, would you--and we spent 
it all in new transportation projects, would you expect us then 
to be able to have a zero deficit that following year because 
that $2 trillion would yield the additional trillion that we 
needed?
    Dr. Swagel. No. I wouldn't expect----
    Mr. Woodall. Wouldn't.
    Dr. Swagel [continuing]. that. And sometimes--right--that 
would be like a PAYGO there might be some benefit, but it 
wouldn't reduce the existing deficit.
    Mr. Woodall. So let's look at the trend lines there with 
discretionary and net interests. It looks like what you are 
suggesting is--we argue so much about how to invest in schools 
and how to invest in roads and how to invest in basic science.
    It looks like you are saying because of the debts that we 
have incurred on both sides of the aisle that we are going to 
be spending almost half as much paying our creditors as we 
spend on all investment in America combined?
    Dr. Swagel. That is right. The discretionary spending 
includes all--essentially all federal investment.
    Mr. Woodall. Have any Members of Congress come to you in 
your capacity as our budget analysist to say I am excited about 
this figure and how can we make sure that net interest payments 
rise even higher to replace and crowd out what would have been 
investment?
    Dr. Swagel. No, sir.
    Mr. Woodall. I am looking at POLITICO. They keep of the 
track of the Presidential candidates. I was disappointed in the 
Republicans last cycle because no one campaigned on balancing 
the budget.
    They say of the 27 Democratic Members who have been in the 
Presidential election mix so far including past and former 
Members of this Committee, absolutely none has taken a position 
on debt. That of all the questions asked, we are not talking 
about debt.
    Here you are looking at this. I would have a tough time 
getting out of bed every morning if I had your job, but because 
it--there is doom and gloom out there on the horizon, not that 
we can't solve problems, but that for whatever reason we 
haven't been able to come together to do that in quite some 
time.
    What is it that you see as a professional economic 
analysist----
    Dr. Swagel. Mm-hmm.
    Mr. Woodall [continuing]. that I need to see to help me 
understand why this isn't captivating the American people in a 
way that pushes the key leaders on both sides of the aisle to 
complete--not only not to address it, but to completely ignore 
it in our campaign seasons?
    Dr. Swagel. So I look at the vertical dash line of today 
and then look at the net interest. And substance that is the 
challenge is that interest rates are low and interest rates 
have remained low.
    And the cost of financing our debt has been modest, you 
know, even as our debt has increased. And that is the challenge 
is getting a start on addressing the situation over time. It is 
not--it doesn't have to be done this second. It is not an 
emergency, but it is a long-term challenge. And that is the 
challenge of starting.
    Mr. Woodall. We are only one major crisis away than, Mr. 
Chairman, from getting our Presidential candidates and 
Presidents to focus on this issue. Thank you, Mr. Chairman.
    Chairman Yarmuth. Thank you. The gentleman's time has 
expired. I now recognize the Vice Chairman of the Committee, 
the gentleman from Massachusetts, Mr. Moulton, for five 
minutes.
    Mr. Moulton. Thank you, Mr. Chairman. And I also want to 
thank my colleague Mr. Woodall because I would like to pick 
off--pick up exactly where you left off because I do care about 
the debt. Director Swagel, do you care about the debt?
    Dr. Swagel. I do. Yes.
    Mr. Moulton. It sounds like Mr. Woodall cares about the 
debt as well. And so if you get a chance to see the President, 
you can tell him that at least the three of us provide an 
answer to his question that he asked recently at a private 
fundraiser where he said, ``Who the hell cares about the 
debt?'' It is good to know there is at least three of us in 
answer to the President's question.
    You know, as a candidate, President Trump said that he 
would--he could eliminate the national debt quickly. Of course, 
as President, he has added $3 trillion to the debt during his 
first three years in office. So are we on track to eliminate 
the national debt?
    Dr. Swagel. No, we are not.
    Mr. Moulton. Despite the President's claims as a candidate, 
you stated that and I quote ``Not since World War II has the 
country seen deficits during times of low employment that are 
as large as those that we project nor in the past century has 
it experienced large deficits for as long as we project'' end 
quote.
    What single law signed by President Trump is the single 
largest contributor to the deficit and debt growth over a 10-
year period?
    Dr. Swagel. Well, that would be the December 2017 Tax Act.
    Mr. Moulton. The Tax Cut and Jobs Act in other words as the 
President refers to it. So I would like to now shift taking 
that line of questioning and move over to where Mr. Price left 
off because he talked about what happens when the debt to GDP 
ratio gets to a point where it is unsustainable.
    And you said that there will be a tipping point where that 
happens, although it is hard to predict exactly where that 
tipping point is. You then said that the effects will be felt 
very quickly. Mr. Director, what are those effects? What sort 
of effects could we expect to see?
    Dr. Swagel. So when we reach that point, we would--if the 
fiscal crisis happens, it would come about as investors lose 
faith in the willingness or the ability of the United States to 
repay our debt without giving rise to high inflation--borrowing 
dollars so of course we can always print more dollars. That 
would lead to inflation and so on.
    So we would have higher interest rates, higher inflation. 
The higher interest rates and inflation would lead to negative 
impacts on consumer spending, business investment, and 
therefore the overall economy.
    Mr. Moulton. And so would we likely see a major recession? 
I mean what--how would this play out----
    Dr. Swagel. Mm-hmm.
    Mr. Moulton [continuing]. in the lives of ordinary 
Americans?
    Dr. Swagel. That is right. It would--has the potential to 
be a sever negative economic impact with job creation slowing 
or going negative, output slowing or going negative. And again 
I am not--that is not in our projection. And I am not say that 
is happening 10 years or even 30 years. It is just the 
potential is there with our rising debt.
    Mr. Moulton. But as Mr. Woodall said, it is that crisis 
that we might have to reach before more people other than the 
three of us in America apparently care about the debt to answer 
the President's question?
    Dr. Swagel. In a sense that is the challenge for 
policymakers is starting and someone taking the first step. 
That is----
    Mr. Moulton. And if--since we don't know when this tipping 
point would occur--I mean if it were to happen soon----
    Dr. Swagel. Mm-hmm.
    Mr. Moulton [continuing]. do we have a lot of space in 
fiscal or monetary policy to react quickly and to avert a 
crisis?
    Dr. Swagel. You know, that is where we look at financial 
markets today, and we see interest rates are low. And that is 
in our baseline. We have marked down our interest rate 
projection. That suggests we do have the space today if there 
is some problem today whether it is economic or national 
security, we have the fiscal ability of the Congress chooses to 
respond.
    Mr. Moulton. And how should the Congress respond in that--
in the event of such a crisis.
    Dr. Swagel. Of course you won't get policy suggestions from 
CBO, but you will get an analysis. So if there is, you know, an 
economic crisis and you tell us to analyze, you know, this 
spending or this tax cut or whatever, we will give you our best 
analysis.
    Mr. Moulton. Is your--in your best analysis, has creating 
such large debt during a time of low unemployment been good 
policy?
    Dr. Swagel. You know, it is the noteworthy thing about the 
economic and budget situation today is that the deficit is 
wide, and the debt is rising when the economy is this strong. 
And so it is unusual and it--and so it makes the challenge we 
face yet larger.
    Mr. Moulton. Would you say that unusual is a euphemism for 
bad?
    Dr. Swagel. I was thinking of well, President Kennedy----
    Mr. Moulton. Perhaps terrible.
    Dr. Swagel. Well, I was thinking of President Kennedy, his 
inaugural address, right, was fix the roof while the sun is 
shining. In a sense that is the challenge is to figure out how 
to do that on the fiscal side.
    Mr. Moulton. And that is obviously what we are failing to 
do. Thank you. Mr. Chairman, I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Tennessee, Mr. Burchett, for five 
minutes.
    Mr. Burchett. Thank you, Mr. Chairman, Ranking Member. I 
won't bore you with questions that have already been asked so I 
will try to put it down a little bit on my level so that at 
least I will understand your answer. And I appreciate you, 
brother. I appreciate you being here.
    Your report stated that the deficit to reach a trillion 
dollars and that debt is held by the public, and it has risen 
to 81 percent of the GDP.
    Dr. Swagel. Mm-hmm.
    Mr. Burchett. That number as you reported is projected to 
rise to 98 percent by 2030 and by 180 percent by 2050. I think 
that is ridiculous. It is clear to me that we lack discipline 
when it comes to responsibly spending hard earned taxpayer 
dollars.
    I am always--I hate it when either side tries to belittle 
small business or anything else and tells them how they need to 
better manage their money when we--I mean we give--we make 
drunken sailors look good. I know Crenshaw is a sailor, but he 
is not a drunk so I can say that--but Dr. Swagel, how can 
Congress scale back our irresponsible spending habit without 
having a devastating effect on the economy?
    Dr. Swagel. In a sense the fiscal space that we are--that 
several of your colleagues have discussed means that we have 
the ability to do this over time. Right. That it doesn't have 
to be a wrenching change in--you know, whether on the spending 
side or on the revenue side that we can address this over time.
    And in a sense, the sooner we act as a nation--again, it 
doesn't have to be tomorrow, but the sooner we act the more 
manageable will be the changes and the less the disruption to 
our economy and to small businesses and others as you say.
    Mr. Burchett. OK. Thank you very much. I will yield back 
the rest of my time. And I won't bother you with running down 
my friends across the aisle or any of my predecessors so I will 
just leave it at that.
    Chairman Yarmuth. The----
    Mr. Burchett. I will save that for another day.
    Chairman Yarmuth. The gentleman yields back. I now 
recognize the gentleman from California, Mr. Panetta, for five 
minutes.
    Mr. Panetta. Thank you, Mr. Chairman, Ranking Member 
Womack. And thank you, Director, for being here. And thank you 
for your service. And I guess thank you for giving us this 
report--this information, which is actually a pretty stark 
warning, a warning that as you have said deficits are pretty 
much growing beyond our control.
    But what puts the fear in me is that deficits are growing 
beyond our will to control it. It is almost like we have gotten 
to a point where we have given up. It is what it feels like. 
And that is why we are returning to trillion dollar deficits 
for the first time since 2012.
    Our national debt is expected to surpass $31 million by the 
end of 2030. And the debt service will take up a larger share 
of the federal spending leaving less for everything else that 
we have talked about. And of course it is going to lead to 
higher risk, of fiscal crises, crises and hamper our ability to 
respond to those types of crises.
    Yet we are hearing a range of perspectives on our debt and 
deficits that we are in a debt emergency, and we have to 
dramatically cut spending today or that it is a long term issue 
and really not something we need to deal with right now. I 
don't agree with either of those.
    I do agree with the fact that we need to start developing a 
plan to combat long-term deficit growth because I think as we 
are seeing the truth is that neither party, Democrats or 
Republicans, are doing anything right now to get our fiscal 
house in order unfortunately.
    It doesn't mean we have to forgo important investments. OK. 
We understand that. We don't have to forgo infrastructure or 
students or families. But it is clear that our debt will make 
it harder to continue making these types of worthy investments.
    And it means that we will need to be fiscally responsible 
when it comes to our spending and, yes, raise the revenue to do 
it. It means that we will need a plan to control healthcare 
costs and prescription drug prices.
    We will need legislation like the Social Security Act, 
Social Security 2100 act and restore solvency to our Social 
Security trust funds. And, yes, we will need to repeal 
provisions of the 2017 tax law which are contributing to our 
current deficit without providing the growth we needed to 
offset it and ensure that the wealthy are paying their fair 
share.
    And I appreciate what Professor Price said that everything 
does need to be on the table when addressing this issue when it 
comes to our deficit. And that includes us--this Committee--
putting things on the table. It includes this Committee having 
a role to play.
    And I do believe that this Committee can begin by getting 
back to passing budget resolutions and discussing ways to 
reform the budget process. I am hopeful that we in this 
Committee will take a serious look not just as the drivers of 
the deficit but also explore ways to ensure a fiscally sound 
policy in the future.
    Now, with that being said, Director, what do you feel this 
Committee can do to reduce future deficit spending?
    Dr. Swagel. Of course I have to start by saying, right, we 
will support you. We will give you the analysis. We won't give 
you the policies. But you have put your finger on the 
challenge.
    And can I just add one, you know, small dimension to it 
which in a sense--imagine a policy of PAYGO, right, which would 
be a step, you know, in the direction of fiscal responsibility. 
But there is also a sense in which by taking off pay floors--by 
taking them off the table and spending them, well that doesn't 
address the existing challenge.
    And this always makes it more difficult because then other 
things have to be done whether spending or revenue to address 
the challenge. And sometimes that is--that is how difficult it 
is that PAYGO is not enough. And in some ways, it makes it more 
difficult--you know, again without evaluating the merits or 
demerits of any particular project.
    Mr. Panetta. Understood. In your analysis--so I will make 
it easier for you to answer. In your analysis would this 
Committee passing a budget resolution or trying to reform the 
budget process would that help?
    Dr. Swagel. I mean that wouldn't show up directly in the 
baseline. And of course that would change the way we work. And 
we would work however the Congress directs us to----
    Mr. Panetta. On that note what do you think of biennial 
budgeting to reduce deficits?
    Dr. Swagel. I mean----
    Mr. Panetta. Or biennial appropriating.
    Dr. Swagel. Right. So I have not looked at that. We haven't 
looked at it since I have been director. You know, I recognize 
this was the advantages and disadvantages of--giving the 
Congress, you know, more time and space to in some sense I 
think further down the road. And of course the disadvantages of 
less control in a sense.
    Mr. Panetta. Understood. Thank you. I appreciate your 
service. And thanks again, Mr. Chairman. I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Oklahoma, Mr. Hern, for five 
minutes.
    Mr. Hern. Thank you, Mr. Chairman and Ranking Member. 
Director, thank you for being here. I want to give you a shout 
out for you and your team and the work you do to produce tools 
that we can do our work better. I would encourage all of my 
colleagues to go review your website. You have a tremendous 
amount of information on there.
    Dr. Swagel. Thank you.
    Mr. Hern. I spent some late nights reading a lot of your 
outlooks, not yours personally, but your----
    Dr. Swagel. Mm-hmm.
    Mr. Hern [continuing]. your group from all the way back in 
2000. So it is interesting to see the predictions of the--
various policies. You know, it is interesting that we take in 
$3.6 trillion which is the highest we have ever taken in as a 
country. And we still can't seem to get our budgets balanced. 
Most American people if not all find that just impossible to 
even comprehend.
    We do have a problem that we need to get after. We have--it 
is going to run amuck if you will. You know, it is when you 
look at China and Japan own probably more than half of our 
foreign that--between the two of them. And it kind of 
vacillates back and forth between where they are at. One likes 
us; the other not so much. It is very troubling.
    I go back and remember in July 17 when General Mad Dog 
Mattis testified before Congress. He said the national debt is 
the biggest national security threat we must face. As President 
Eisenhower noted the foundation of military strength is our 
economic strength.
    In four short years, however, we will be paying more on 
interest on our debt that will be a bigger bill than we pay for 
our national defense. Much of that interest will be money that 
is destined to leave America for overseas. If we refuse to 
reduce our debt or pay down our deficit, what is the impact of 
the national security of future generations who will inherit 
the irresponsible debt and taxes to service it.
    No nation in history has maintained its military power if 
it failed to keep its fiscal house in order. So this is not a 
Republican issue. This is not a Democrat issue. This is a 
national security issue. We must come together to mitigate this 
threat.
    You know, many would say that we have created the greatest 
Ponzi scheme by taking economic opportunity away from future 
generations to pay for our insatiable appetite to spend today. 
Director Swagel, would you agree that this is could become a 
national security threat if we don't get this house in order?
    Dr. Swagel. Yes, sir. I agree and agree with General 
Mattis. And we saw that in the chart that was put up before--
discretionary spending--it doesn't have to be squeezed, but as 
revenue--as there is equals mandatory and net interest 
payments, discretionary inevitably will be squeezed.
    Mr. Hern. So Director Swagel, in your analysis would you 
agree that Republicans and Democrats are responsible for this. 
I mean if you go back to President Bush, he doubled the debt 
from $5 to $10 trillion, Obama from $10 to $20 trillion. 
Certainly, President Trump is on a pathway to double it from 
$20 to $40 trillion. But we have equal responsibility.
    And there is a lot of politics that come into the budget 
process which it shouldn't. We have--this is a numbers game, 
right? I mean it is really about balancing our budget, 
revenues, expenses not exceeding revenues, and getting after 
it. We saw that it can be done back in 1997, 1998, 1999, 2000.
    American citizens look at us as failing to do our basic job 
of creating a budget and living within our means. Nobody 
understands it is one of the highest percentages in surveys 
that are done--why can't you do your job? Mr. Swagel, could 
you--you are student of your job.
    Dr. Swagel. Mm-hmm.
    Mr. Hern. Could you describe to us the purpose of the 
Congressional Budget Act of 1974?
    Dr. Swagel. So it was referred to earlier in some sense to 
give the Congress the tools and the information that the 
executive had already with OMB. And so that is our job, you 
know, first and foremost is to provide the Congress with 
support on the budget and the--you know, the numbers and the 
analysis.
    So you have the report we did today that gives you that 
information. And then when there is legislation, we will work 
and do our best to provide the Congress with cost estimates.
    Mr. Hern. Director, I am sorry. I am just----
    Dr. Swagel. No, please.
    Mr. Hern [continuing]. running out of time. But it also 
laid out a format by which would get the President's budget, 
the House and the Senate's budget. We would reconcile the 
budgets.
    Dr. Swagel. Mm-hmm.
    Mr. Hern. And the President's is really pretty much a 
policy guideline. It wasn't legislative edict. And that we 
would create a budget. We would authorize the moneys, 302s and 
302bs, and all these things. And we would have a budget 
produced so that we knew what our spending was going to be on 
October 1; is that correct?
    Dr. Swagel. That is correct.
    Mr. Hern. How many times has that been done since 1974?
    Dr. Swagel. Boy.
    Mr. Hern. Let me help you, four times.
    Dr. Swagel. Four times. OK.
    Mr. Hern. Do you know when the last time was--it was done?
    Dr. Swagel. I don't know.
    Mr. Hern. 1996. So the--Congress has failed. This Committee 
has failed to do its job and get--the House on both sides of 
the aisle have failed to get that done in the last 30--24 
years. Twenty-four years, we have not done our job.
    So we have together to get a budget. There is no body in 
this room personally or if you are a businessperson that runs a 
business or your personal life without a budget. And we 
shouldn't come in here and be political. And I get that done as 
well.
    Again, I applaud you for the work you do and staying out of 
the policy world, but we need to collect them to come and do 
our job. This is not the President's fault. This is not the 
Senate's fault. We have to originate a budget out of here. And 
we have to come together, get the leaders of our respective 
Houses--majority get that done.
    So Mr. Chairman, I appreciate it. I yield back.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Virginia, Mr. Scott, for five 
minutes.
    Mr. Scott. Thank you, Mr. Chairman. Mr. Chairman, it is not 
equal blame. We have a chart that is coming up that just 
reminds people. It is all the Houses fault. No, before you can 
spend, you have to pass the House and the Senate and be signed 
by the President. The President has outsized power on this.
    And we will notice that from Nixon and Ford all the way 
through President Trump, every Republican President has come in 
and made the budget deficit worse. And since Carter every 
Democratic President has come in and made the deficit position 
better without exception.
    The next chart shows that the $1.5 trillion dollar tax cut 
plus interest brings it up to closer to $2 trillion. When 
President Obama's economic plan was passed it was at the top of 
the unemployment. And you can see that there--it reduced the 
unemployment rate. And when a plan twice as big came in, you 
don't see a wrinkle in the trend line.
    The next is in the jobs. We will notice this is in 
October--the last 33 months of the Trump Administration--first 
33 months--189 thousand jobs a month, 240--224 thousand jobs 
under Obama--again, not a wrinkle.
    [Charts.]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
      
    In terms of economy by the Dow, Dow has gone up 
significantly more under Obama than under Trump. And Mr. 
Chairman, I would ask unanimous consent to introduce into the 
record an article in Fortune magazine entitled ``The S&P 500 is 
at an all-time high, but markets still performed far better 
under Obama than Trump.''
    Chairman Yarmuth. Without objection, so ordered.
    [The information referred to follows:]
    
[GRAPHIC(S) NOT AVAILABLE IN TIFF FORMAT]    
   
    Mr. Scott. Thank you. Mr. Swagel, we have heard a lot of 
comment about bills that have been introduced on the Democratic 
side without a comment that under the Democratic protocol 
anything would have to be paid for before it got passed.
    Let me talk about an unpaid for a tax cut that actually 
passed under the Republicans. You mentioned that there were 
investment as--of the benefits of that tax cut where 80 percent 
of the benefits went to the top 1 percent incorporations.
    How much of those benefits to corporations were invested in 
stock buy backs and dividends compared to increased jobs and 
higher salaries?
    Dr. Swagel. So we don't have a precise parsing of what went 
into, you know as you said, buy backs and investment. We do see 
an investment response, but we don't--we can't divvy that up--
--
    Mr. Scott. Isn't it true that a substantial portion went to 
stock buy backs and dividends?
    Dr. Swagel. So we have tracked that, that corporations have 
returned capital to their shareholders including through stock 
buy backs.
    Mr. Scott. OK. And that--that is not like more jobs and 
higher salaries. Can you comment on the projected interest we 
are going to be paying in 2030 at the rate we are going 
compared to discretionary spending?
    Dr. Swagel. And we saw that on the chart that the net 
interest at the end of our budget window will be nearly half of 
discretionary spending.
    Mr. Scott. That would be more than non-defense 
discretionary spending in total?
    Dr. Swagel. It would be certainly more than defense 
discretionary spending. That is right.
    Mr. Scott. And at the end--in 2001 there was a projection--
you weren't here then but under--when President Clinton left 
office, we were supposed to pay off the entire debt held by the 
public by 2008; is that right?
    Dr. Swagel. Yes, I do--I wasn't here, but I do remember 
that.
    Mr. Scott. Which means that we would be paying zero 
interest, not more than the entire non-defense discretionary 
spending?
    Dr. Swagel. That is right. And of course, there is the 
recession and subsequent legislation that have changed that. 
That was the estimate.
    Mr. Scott. Well, yes, we messed it up because we passed two 
tax cuts without paying for it, prescription drug benefit 
without paying for it--for two wars without paying it. And all 
of a sudden guess what, we are back in the ditch. None of that 
paid for.
    Under the Democratic leadership, we had PAYGO. If you want 
a new plan, you got to pay for it. Can you say a word about 
what income inequality does to our budget--to your budget 
projections?
    Dr. Swagel. So income inequality is part of our budget. It 
affects both spending and revenue. And so rising inequality in 
some sense affects what is happening at the bottom of the 
distribution with more entitlement spending. And that flows 
through into the fiscal situation.
    It poses a challenge for the long-term budget that we know 
that increasing inequality has particular effects on families, 
on children, and in some sense on the intergenerational 
transmission of poverty to the future, which again feeds back 
to the economy.
    So in some sense--I am sorry. I am--I will bring this 
together. There is both the immediate impacts on the, you know, 
spending programs from inequality and then I have in mind the 
longer-term impacts on what does it mean for us as a nation and 
our growth trajectory.
    Mr. Scott. And the more inequality, the worse it is for the 
budget?
    Dr. Swagel. That is a good question. I don't know actually 
because----
    Mr. Scott. Well--that is what you just said. I mean----
    Dr. Swagel. You know, the challenges that--because of the 
progressive nature of tax system that, you know, income at the 
top is taxed by more than income at the bottom. So I can't in 
my head say offhand. So that is why I am--I am not sure, but I 
know it is an economic challenge if--if I can't parse out the 
fiscal impact right away.
    Chairman Yarmuth. The gentleman's time is expired. I now 
recognize the gentleman from Pennsylvania, Mr. Meuser, for five 
minutes.
    Mr. Meuser. Thank you, Mr. Chairman. Dr. Swagel, do you 
agree our labor market is strong, our unemployment rate is at 
historic lows of 3.5 percent, wages are rising? Despite this 
extremely robust economy, our country is still on very 
concerning financial path due to excessive spending habits?
    Dr. Swagel. Yes. So as you said, the economy has pretty 
good growth, and the unemployment rate is low, and the labor 
market is strong with rising wages throughout the distribution 
and especially strong wage growth at the bottom of the 
distribution even--as we said before, the deficit remains wide 
even as the economy looks to be in pretty good shape.
    Mr. Meuser. Revenues are up 5 percent, 2019; projected the 
same in 2020. Spending is up quite a bit more in 2019 and 
projected for 2020. And is--spending is dramatically projected 
to increase over the next 10 years. But revenues are up 5 
percent.
    I was a former revenues secretary for the Commonwealth of 
Pennsylvania. The best growth year in revenues we ever had was 
2.9 percent. We ended up having quite a surplus without tax 
increases. So 5 percent increase in revenues after----
    Dr. Swagel. Mm-hmm.
    Mr. Meuser [continuing]. the Trump Jobs Act and Tax Cuts is 
still a very healthy revenue growth rate, would you say, 
compared to other countries?
    Dr. Swagel. It is a good question. I don't know about 
compared to other countries, but it is--I mean revenues are 
growing as you said by 5 percent. And at the end of our 
projection, we are going to be right back to the historical 
average for revenues as a shared GDP.
    Mr. Meuser. So I am going to continue. The federal budget 
cumulative deficit is projected as you have said at 1 trillion 
in 2020. That is an increase of $31 billion from 19 to 20. It 
is not an increase from year to year of $1 trillion as some 
people try to make it out or maybe misunderstand.
    Dr. Swagel. Mm-hmm.
    Mr. Meuser. Now, let's just compare to the Obama 
Administration strictly for the purpose of comparing. 
Revenues--let's use 2015, the heyday when the Obama economy was 
at its best. Revenues were at 5 percent growth, same as they 
are now. That is after the Obama tax increases. They were at 5 
percent growth.
    Mandatory spending, however, that year did go up $200 
billion--$200 billion year to year. That is more than this 
year. And discretionary was flat largely due to sequester-ship 
and some can claim the good work of Republican Congress.
    So the point is we have without casting blame we have a 
mandatory spending problem. And trying to place blame on a tax 
cut--OK--is truly intellectual dishonesty, would you agree?
    Dr. Swagel. And so the way that I would analyze it is to 
say this year--you know, once the tax cut is a share of GDP, 1, 
1.2 percent just for this year. It is 1 percent over 10 years, 
but just this year say 1.2. And the deficit we project this 
year is 4.6. So that is--this year as you are focusing, 1.2 
percentage points out of 4.6 would be the part I would allocate 
to the December 2017----
    Mr. Meuser. OK.
    Dr. Swagel [continuing]. Tax Act.
    Mr. Meuser. But we have created millions of jobs, 7.3 
million over the last three years. If you factor in 
approximately $9,000 at an average family tax rate federal 
revenue that is $63 billion right there. Add in what the 
savings is from entitlements that is well over a $100 billion.
    And it is impossible--let's face it, it is impossible to 
measure the--for instance the small business tax cut where you 
give approximately 20 percent tax rate cut to a small business 
who then adds an employee and that continues compound the 
following year because business increasing.
    And then with trade agreements they are actually picking up 
added market share in other nations and in other states and 
throughout the world. Over a five-year period, how can that--
that new revenue that comes in be calculated?
    Dr. Swagel. Mm-hmm.
    Mr. Meuser. Right? I mean that is what has made--put 
America on the fast track from 1945 to 1990 versus Europe, for 
instance. We grew our economy 40 percent plus, where the 
European's economies were because we were in--in more of a 
competitive--we created a more competitive environment for our 
businesses. Even though we reduced our corporate tax rates to 
21 percent, Ireland is far less than us----
    Dr. Swagel. Mm-hmm.
    Mr. Meuser [continuing]. 12.5 percent. The UK is 19 
percent. Wouldn't you agree that competitive tax rates are 
essential to the long-term growth of our economy?
    And we owe it to the people of America not to accumulate 
their money, those tax dollars, but provide it back to them so 
they can spend rather than the federal government spend it for 
them. And we should at the same time focus on more fiscal 
responsibility when it comes to spending.
    Dr. Swagel. OK. So we--our analysis of the December 2017 
Tax Act looked at the effect on the attractiveness of the U.S. 
for global investment, the competitiveness.
    At least we--our analysis said that the overall tax act, 
including all of the international provisions and the domestic, 
the lower corporate rate, made the United States a more 
attractive place for global investment. You know, that is based 
on our analysis. That is what I would--that is----
    Mr. Meuser. Thank you, Mr. Chairman. My apologies for going 
over my time.
    Chairman Yarmuth. All right. The gentleman's time has 
expired. I now recognize the gentlelady from California, Ms. 
Lee, for five minutes.
    Ms. Lee. Thank you very much. Thank you for being here. And 
thank you, Mr. Chairman. Let me say this first of all. I am 
glad you are here. And looking at a lot of the economic data, 
you lay out the numbers----
    Dr. Swagel. Mm-hmm.
    Ms. Lee [continuing]. and the projections, but I don't see 
any--much reference to the issue of race and gender.
    Dr. Swagel. Mm-hmm.
    Ms. Lee. And the data is not just disaggregated at all. And 
so I am trying to unpeel this onion a little bit as it relates 
to communities of color, African American, Latino, and the 
Asian-Pacific American, and Native communities.
    Because it is no secret that economic inequality 
disproportionately impacts women and communities of color, but 
I can't find any of the data in here as to the impact.
    So we have a couple of numbers and references I would like 
to ask you about. Latino, Black, and indigenous households, 
they each make $20,000 less than white households. Women bring 
home about $200 less a week than men.
    So I am not sure if you have done any economic outlook, 
surveys, assessments, data collection that will impact to tell 
us how the economic outlook really addresses income inequality 
for woman and communities of color----
    Dr. Swagel. Mm-hmm.
    Ms. Lee [continuing]. specifically and what the economic 
case for reducing high levels of inequality for a specific 
population what that looks like. Second, this CBO report that 
was issued last month, it projected that income inequality will 
be greater in 2021 than it was in 2016. And it shows that 
federal tax and transfer policies will be less effective in 
reducing inequality in 2021 than five years before. And so I am 
wondering how the tax--the 2017 Tax Law plays a role in that?
    And then the final question again related to these two is 
that the economic--well, unemployment forecast. First of all, 
the unemployment rate for African Americans still is double 
that of their white--our white counterparts. And so how do you 
lay that out in terms of what that means as it relates to wage 
growth----
    Dr. Swagel. Mm-hmm. OK. OK.
    Ms. Lee [continuing]. going forward and how you close that 
gap?
    Dr. Swagel. OK.
    Ms. Lee. Because many--because I know this unemployment 
rate also reflects--even though it is double that of our white 
counterparts----
    Dr. Swagel. Mm-hmm.
    Mr. Lee [continuing]. people of color, American Americans 
are working two and three and four jobs just to be able to 
barely survive.
    Dr. Swagel. Mm-hmm.
    Mr. Lee. And I don't see any of this noted in any of these 
reports that you issued.
    Dr. Swagel. OK. No very good. I will say a few words on a 
couple of these topics. And in some substance, you have put 
your finger on this report that this is CBO with our budget 
blinders on. And we focus, as you said, very narrowly.
    And I am the first to say that the budget is important. 
That is what--we are here to support the Committee and the 
Congress, but by far it doesn't address every important issue 
facing the nation and the Congress by far. So I am the first to 
agree with you.
    On income distribution, we have done important work at the 
Congressional Budget Office. You mentioned the report looking 
at the change in the distribution from 2016 to 2021. That looks 
at the effect of the tax and transfer system in affecting 
distribution.
    And the taxes and transfers do reduce and mitigate 
inequality, but what we show in that report is that our 
projection is that they will do less to attenuate inequality, 
both the transfer system and the tax system. And this is the 
characteristics of the 2017 Tax Act. And as the economy 
improves means tested transfers will tend to fall away.
    So there is some good news that stronger growth at the 
bottom of the distribution means people are getting fewer 
benefits, but it means the transfer system is doing less. And 
we are doing other work on distribution where I would be happy 
to come and talk to you, talk to your staff about what we have 
in training over the coming year.
    We should come talk to you also about work we could do that 
is focused on the communities of color as you say. We have 
some. We are working housing where affordable housing is a 
particular challenge. We have work on healthcare.
    We don't--I am trying to think of what we have in the 
pipeline that is public. I can't think of anything in 
particular focused on the communities you say, and that is--it 
is a gap.
    Ms. Lee. Well----
    Dr. Swagel [continuing]. so----
    Ms. Lee [continuing]. I would like to suggest that either 
we have a hearing on this issue or have a meeting or something 
to drill down because--thank you for being so candid and so 
honest because I think we are leaving out--there is a gap----
    Dr. Swagel. Yes.
    Ms. Lee [continuing]. that we need to understand and fill. 
If we truly are going to close the racial inequality gap and 
there is a huge gap based on race and income. And we can't 
ignore that if we really want to ensure economic equality for 
all in our country.
    Dr. Swagel. Can I add one--just one more sentence here?
    Chairman Yarmuth. Please go ahead.
    Dr. Swagel. Which is in some substance that is the--that is 
the striking thing about the economic situation today--I talked 
about the budget, but the economy is doing pretty well. The 
unemployment rate is low.
    And yet there are tens of millions of American adults, not 
to mention children, on the sidelines not employed. We know 
there is challenges of homelessness of addiction. There is 
issues with opioids, mental illness.
    There is a lot of challenges that affect the bottom of the 
distribution. We have not looked that, but that is--if that 
support the Committee, we certainly could.
    Ms. Lee. Yes. Because a lot of those challenge though are 
directly related to economic inequality and the lack of a 
decent wage and affordable healthcare and adequate housing. And 
so--it is not--these challenges aren't separate from economic 
growth or economic inequality.
    Dr. Swagel. OK. And we have the expertise to take this on 
so----
    Chairman Yarmuth. Great. Wonderful. We will----
    Ms. Lee. Thank you.
    Chairman Yarmuth. We will followup on that.
    Ms. Lee. Thank you.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
recognize the gentleman from South Carolina, Mr. Norman, for 
five minutes.
    Mr. Norman. Thank you, Mr. Chairman. Thank you, Director 
Swagel for coming. You know, I know in South Carolina our--my 
constituents, they don't--you know, they are not worried about 
10 year budgets. They are not worried about 10 year 
projections. They just want to fix the spending problem.
    We don't have an income problem. We have a spending 
problem. I think that you would agree to that. In the private 
sector when you have a problem in your particular business, 
whatever that is, you deal with it at that time and it involves 
cuts and it involves a realistic look at where you are.
    You said earlier the CBO was--provides a roadmap to the 
policies that the House of Representatives as it relates to a 
budget comes up with. You evaluate where we are.
    Dr. Swagel. That is right.
    Mr. Norman. It doesn't take a rocket scientist to know that 
we have got a financial cliff that you have eluded to. Social 
Security, I think is insolvent in 2035. Medicare--Social 
Security in 2032.
    Dr. Swagel. 2032. That is right.
    Mr. Norman. Medicare, 2025.
    Dr. Swagel. That is right.
    Mr. Norman. Two countries, basically China and Japan, own 
60 percent of our--41 percent of our debt. China is not so much 
a friend for our way of life or militarily. What is it going to 
take to rattle the changes of this--of I guess young people. I 
mean a lot of them I see here today to put pressure on Congress 
to make some meaningful inroads into the problem we have got 
right now, which is spending?
    Dr. Swagel. Mm-hmm.
    Mr. Norman. Let me just tell you, you alluded to it is 
going to take a financial crisis. Define for me what that 
financial crisis is and how it will get people activated to 
know it affects their pocketbook.
    Dr. Swagel. OK. And I certainly hope it doesn't take a 
crisis and that is--as I think has been said a couple times 
that is the challenge of acting that there is a problem that is 
decades in the making and decades in solving and making--taking 
he first step.
    When interest rates are low as they are today, the cost of 
not acting is pretty modest. And so it might be that we--until 
interest rates starting inflecting upward that it is difficult 
to garner support for the difficult decisions involved.
    Mr. Norman. Yes, but the issue with it--if rates tick up, 
you are going to trigger inflation.
    Dr. Swagel. In some sense, that--those would be the dangers 
of higher interest rates, inflation, the sort of negative 
economic impacts.
    And it doesn't--I mean I worry about a crisis, you know, 
again not today, not--you know, not even within our 10 years, 
but over the oncoming decades there could be slower moving 
negative impacts if interest rates move up some, not to crisis, 
but some. Inflation moves up.
    The fiscal space as it has been alluded to several times 
diminishes. That would have a slower moving but certainly 
negative impact on the nation as well.
    Mr. Norman. And it can't really get any lower. The rates 
are very low as they sit right now. And really the only issue 
we face is most likely they are going up which is going to 
trigger inflation which is going to trigger--it is going to 
affect people's pocketbooks.
    Dr. Swagel. That is right. The challenge--I mean there is 
both the good and the bad. And by far the good is that the 
United States is still the economy that around world people 
want to be in and want to invest in. People want dollar assets. 
We are the safe currency. When there is a problem around the 
world, people want dollars. People want Treasury bonds.
    Mr. Norman. And the trainloads of people, they are not 
going to Cuba. They are coming to America.
    Dr. Swagel. Right.
    Mr. Norman. The train loads of people are not going to 
Venezuela. They are coming to America. They are coming here for 
a reason because it represents freedom and it represents a 
lifestyle that they have not seen anywhere and any other 
country.
    Thank you for what you are doing. I hope you can 
concentrate on things that make a real difference and urge to 
the best of your ability for us to have a spine and to really 
have some financial accountability like we do in a small 
business. Thank you so much.
    Dr. Swagel. Thank you.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Nevada, Mr. Horsford, for five 
minutes.
    Mr. Horsford. Thank you very much, Mr. Chairman. And thank 
you, Director, for being here. Federal Chairman Powell cited 
income inequality as the biggest economic challenge facing the 
United States in the next 10 years. And I want to build off of 
my colleague, Congresswoman Lee and Congressman's Scott's 
questions around this.
    According to the Brookings Institution, a recent report 53 
million American workers, 44 percent of the entire work force 
of our country earn barely enough to live with the median 
annual income of $18,000 a year. Are you aware of that?
    Dr. Swagel. I haven't seen that number, but in some sense a 
reflection of the inequality in income in our society.
    Mr. Horsford. And so when we reference this unemployment 
rate in your budget and economic outlook----
    Dr. Swagel. Mm-hmm.
    Mr. Horsford [continuing]. it is imperative to this point. 
And thank you for agreeing to work with our Committee because 
income inequality is a top issue that we are trying to address 
throughout all of our policies.
    And so when my colleagues on the other side prioritize tax 
cuts and we are prioritizing closing income inequality for the 
American people that is the choice that we are trying to make 
in our policy. And we look forward to working with you.
    I want to ask about the tax cuts bill. The tax cuts for 
small businesses and middle-class families were those permanent 
or temporary?
    Dr. Swagel. On the personal side, essentially all the 
personal provisions expire in 2025 and that would include the 
small business--the S corporations, the path through entities--
at the end of 2025 those would expire.
    Mr. Horsford. And the tax cuts for big corporations and the 
very wealthy, those are permanent, correct?
    Dr. Swagel. The corporate tax cut that was a permanent. The 
corporate tax provisions were permanent.
    Mr. Horsford. So maybe we should refer to this as the 
Trump's billionaire and big corporation tax cut and not an 
America tax cut because it really doesn't help the average 
small business owner, the average person--those 53 million 
Americans that I just referenced who make $18,000 a year who 
represent 44 percent of our economy.
    So the issue of income inequality is very important. And 
another area that is very important to me personally is making 
sure that we are providing investments for skills training, 
expanding our work force, and creating job opportunities.
    It is going to be real hard to move those 53 million people 
into better paying jobs if they don't have the skills, the work 
force, the education, and the training to pursue those jobs. 
And we are now investing less in work force training than we 
have historically.
    Another area that I believe--so do you believe that we 
still have room to invest in our nation's future around 
training and work force despite some of these economic 
projections?
    Dr. Swagel. That is right that--the budget challenge is 
there, but it is not immediate, and that Congress has the 
ability to undertake initiatives such as you have set out.
    Mr. Horsford. So if we prioritize American workers, those 
who are struggling the most over big corporations than maybe we 
can improve those economic outlooks for those individuals that 
all of represent regardless of what part of the country.
    Let me turn to another area which you have talked about 
which is your report on lowering prescription drug costs.
    Dr. Swagel. Mm-hmm.
    Mr. Horsford. As you know, the House has passed H.R. 3, the 
Elijah E. Cummings, Lowering Drug Costs Now Act. This 
legislation empowers the Secretary of Health and Human Services 
to directly negotiate to lower the price of drugs. And it 
requires companies to pay rebates if price increases faster 
than inflation.
    Based on CBO's analysis of H.R. 3, how can this legislation 
achieve lower drug prices and reduce federal spending over the 
next 10 years?
    Dr. Swagel. So as you said, it requires the Secretary to 
negotiate with drug companies. We modeled that negotiation 
process and found that it would reduce drug prices and lead to 
federal savings on the order of $500 billion dollars over 10 
years. And then those----
    Mr. Horsford. $500 billion?
    Dr. Swagel [continuing]. billion dollars. Yes, sir. Over 10 
years. And then in H.R. 3, those resources are then used to 
expand dental, vision, hearing coverage to provide some money 
for opioid treatment, for research at NIH, and so on. So it is 
used in a variety of ways.
    Mr. Horsford. So we take those savings by allowing Medicare 
to negotiate with drug companies, and we invest in increased 
services to Medicare beneficiaries thereby shoring up their 
care and their healthcare?
    Dr. Swagel. That is--that is what our estimate of H.R. 3 
shows----
    Mr. Horsford. Thank you very much. Mr. Chairman, those are 
the priorities that I am continuing to fight for, not big 
corporate tax breaks that add more to our deficit and do not 
improve our economic outlook in the long term. Thank you.
    Chairman Yarmuth. The gentleman's time has expired. I now 
recognize the gentleman from Texas, Mr. Crenshaw, for five 
minutes.
    Mr. Crenshaw. Thank you, Mr. Chairman. And thank you for 
being here. I am glad--I am going to pick up on H.R. 3. What 
else did CBO say about H.R. 3 about how many fewer cures there 
would be because of those price controls? It is not a 
negotiation. Let's not call it. We know it is not. It is a 
formal for price controls on drug prices. So what did CBO say 
that would do to innovation?
    Dr. Swagel. Right. So we also carefully modeled that as 
well using the economic research literature and showed that 
over the ensuing several decades something on the order of 30 
fewer drugs would be produced, about----
    Mr. Crenshaw. Yes.
    Dr. Swagel [continuing]. 10th of production.
    Mr. Crenshaw. So we can afford the drugs, but they won't 
exist so it doesn't really matter if you can afford them 
because they won't exist. That is not a really good tradeoff.
    So we are back at this conversation about the debt. And it 
is a good conversation to have. I am glad we are--we continue 
to have these kinds of hearings. $23 trillion in debt. And then 
we come here, and we argue incessantly about what is causing it 
whether it is mandatory spending, a lack of revenue, or 
discretionary spending.
    It seems to be a pretty broad agreement that discretionary 
spending is going down as a share of GDP. We don't hear a whole 
lot of that in this room. What we do hear is--are two potential 
causes, mandatory spending and Trump's tax cuts--the tax cuts 
for the rich as my colleagues call them.
    Well, they weren't just for the rich, of course. They were 
for everybody. When a corporation gets a tax cut, they can do 
things like contribute to the highest growth that we have seen 
a long time and the lowest income workers' wages, things like 
that--things like business investment.
    So of course that kind of rhetoric is unhelpful and untrue, 
but we also found just by some graphs that we have seen today 
was--and from the CBO's own reporting is that revenue as a 
share of GDP will be increasing and continue to increase in 
line with more or less what is historical averages as a share 
of GDP for revenue.
    So what is skyrocketing? It is mandatory spending, Social 
Security, Medicare, and Medicaid and interest on the debt. And 
that is what we need to be having a conversation on. And that 
has come up, of course.
    And so let's talk about that because there seems to be some 
agreement. But then that agreement quickly falls away into 
disingenuous rhetoric. Every time we talk about reasonable 
reforms to these programs, my colleagues accuse us of cutting 
them.
    There was a colleague from Michigan earlier who just 
couldn't help himself, had to talk about how we planned to cut 
Medicare and Medicaid. It is not true. I don't know what these 
proposals--what they are talking about--or Social Security.
    Reforms are absolutely needed, but the Democrats plan at 
reform--and when they refer to Social Security 2100, they want 
to raise taxes via payroll taxes and then increase benefits to 
seniors.
    So you want to take money from millennials and Gen Z, and 
you want to transfer that directly to people who have had their 
entire lives to save and build businesses. We talk a lot about 
some of the issues--the economic issues facing this country.
    My generation is facing those issues with rising housing 
costs, things like that, that are making it more difficult for 
millennials to prosper than prior generations, would you agree 
with that general assessment?
    Dr. Swagel. I do. Yes.
    Mr. Crenshaw. And do you think it is economically efficient 
to have a wealth transfer from the young to the old? Is that 
the most efficient?
    Dr. Swagel. Yes, it is--in some ways the issue of the 
fairness is the difficult one. And you put your finger right on 
it with the Social Security. And that is what our analysis of 
the 2100 Act shows as well that the people closest to 
retirement would come off the best.
    Mr. Crenshaw. And what is the best indicator of wealth as 
far as immutable characteristics? Is it gender? Is it race? Or 
is it age?
    Dr. Swagel. Wealth certainly increases with age. You know, 
education is tightly connected to income which over time 
connects to wealth. And that in some sense to build wealth, we 
want to build skills and education.
    Mr. Crenshaw. Yes. And I will answer it for you. Age is by 
far the best indicator. Like if you are older than me, there is 
a really good chance you have more wealth----
    Dr. Swagel. Mm-hmm.
    Mr. Crenshaw [continuing]. right, just from a probability 
standpoint. So we are never saying we want to cut senior's 
benefits. That is not what we are saying. But we do have to 
slow the growth.
    And what is my generation have to give? Well, maybe I 
should retire later. I am going to live longer. These are 
reasonable discussions to have. But taxing my generation when 
we are already facing things like higher housing costs and 
other issues that is deeply immoral.
    It is also counterproductive when we are talking about 
growth. Maybe you could help me with this one. If we are 
concerned about the debt, should we do pro-growth policies or 
anti-growth policies? I mean if we reduced--if we implemented 
policies that reduced our GDP growth, could we ever have a 
chance of solving our debt crisis?
    Dr. Swagel. It would make it more difficult, you know, both 
having a low growth environment and the debt relative to GDP 
would go up if the denominator is smaller. That is for sure.
    Mr. Crenshaw. Well, I am out of time, but I had a lot of 
followups. Thank you, Mr. Chairman.
    Chairman Yarmuth. OK. The gentleman time has expired. I now 
recognize the gentlelady from Texas, Ms. Jackson Lee, for----
    Ms. Jackson Lee. I thank you, Mr. Chairman and to the 
Ranking Member for holding this hearing and as likewise all of 
my good colleagues with their different perspectives. I am sure 
my good friend from Texas is not suggesting that we wage a 
generational warfare.
    It is clear, however, that the issue of the discretionary, 
non-discretionary spending is one that I have seen millennials 
and Generation X and other really comprehend as an important 
contribution to the actual survival of this nation. So let me 
just say that the President's proposed budget projects Fiscal 
Year 2020 revenues of $3.645 trillion, outlays of $4.76 
trillion----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----leaving a deficit of $1.101 trillion. 
Over the last--next 10 years, the President's proposed--
proposes budgets that would cumulatively increase the national 
debt by $7 trillion and does not even come close to ever 
balancing. America's top 10 percent now average more than nine 
times as much income as the bottom 90 percent. Now, I will 
suggest to you--to the director----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----entrepreneurial millennials and other 
are in the bottom 90 percent. They are not benefiting, and they 
are not in the top 10 percent----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----most often, would you say that 
millennials are not in the top 10 percent income----
    Dr. Swagel. Yes, in general that is for sure. Correct.
    Ms. Jackson Lee. In general. I know that the nation's top 
0.1 percent are taking in over 198 times the income of the 
bottom 90 percent. Does that seem like reasonable numbers that 
you----
    Dr. Swagel. I----
    Ms. Jackson Lee.----contended?
    Dr. Swagel. So I am sorry. I don't have the precise 
numbers, but certainly that disparity----
    Ms. Jackson Lee. It is enormously----
    Dr. Swagel [continuing]. in broad terms is right?
    Ms. Jackson Lee.----different----
    Dr. Swagel. Right.
    Ms. Jackson Lee.----from the bottom.
    Dr. Swagel. Absolutely.
    Ms. Jackson Lee. And that has continued under the 
leadership of this administration. So from my perspective we 
are going the complete wrong way. That is mine. But let me pose 
some questions. I talk fast because I am trying to get your 
answers in.
    Anyhow, by the Joint Economic Committee, let me show people 
that under President Obama we were doing 227 jobs per month 
average than under this President, 191K jobs month per average. 
Good. He inherited the excellence of the work that was done by 
President Obama and the Democratic Congress. Unemployment rate, 
we came in bad shape. Do you remember those years?
    You might not have been in, but `09--you remember the 
debacle that we were engaged in? We were literally going on the 
flat earth and coming down. Obama than rose--or raised----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----those numbers.
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee. And might I just get a yes to say that I 
didn't write these.
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee. This is Joint Economic Committee. Does 
that look pretty accurate? That it went up and then sort of 
continued. Does that look right, Mr. Director?
    Dr. Swagel. Absolutely. That is----
    Ms. Jackson Lee. All right. I just want you to be on the 
record. And of course, you can see that is Obama and then there 
is Trump.
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee. So fiscal policies that take into 
consideration debt and also providing for those who are need is 
important. Medium income, we were not doing well, and then we 
managed to keep going up----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----and blue went all the way up under 
Obama, and then we had another President come in and take the 
credit. That is my words, but I just want to note that you saw 
the blue going up or holding steady----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----during those years from 2010 on to 
2016; is that accurate?
    Dr. Swagel. Yes. That looks accurate. We have seen rising 
incomes----
    Ms. Jackson Lee. Yes.
    Dr. Swagel [continuing]. over the past few years.
    Ms. Jackson Lee. So let me find out the present situation 
that we are in. What is the status of Medicaid, Social 
Security, and Medicare? What is the status----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----and then let me add this other 
question.
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee. What would be the value of adding to our 
portfolio, building up on affordable housing----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----building up on public housing? That is 
one of the elements of the millennials doing that. And if you 
can--I have another question--and I am at 1:04----
    Dr. Swagel. OK.
    Ms. Jackson Lee. 1:03. Go ahead.
    Dr. Swagel. Sure. And I will be fast. The challenges you 
have pointed at are the ones facing millennials and young 
people, affordable housing, in some sense, education, how to 
get on the rising ladder.
    Housing is one that is particularly pernicious because 
zoning regulations--it is not a federal issue. It is a state 
one, but it prices people out of the market. And there is some 
local initiatives they are trying to get.
    There is a St. Paul, Minnesota, for example, has an 
initiative to get at this. It is not--it is too soon to know 
whether it is working, but that--but we are looking at that to 
say what are the policies that will get at the challenges 
facing younger----
    Ms. Jackson Lee. So likely to say to answer those concerns 
about millennials, a federal embrace dealing with affordable 
housing and public housing----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----would be a very important asset for 
them?
    Dr. Swagel. It could be. Of course, the particular program 
would--you know would be important.
    Ms. Jackson Lee. As well as the fact that continuing to 
have tax cuts for the rich doesn't help them either?
    Dr. Swagel. It is a bigger question, of course. Right, it 
affects the overall economy and then it affects different 
people differently.
    Ms. Jackson Lee. Let me just pose this question for the 
record. Have you ever--the CBO was started in 1974.
    Dr. Swagel. Yes.
    Ms. Jackson Lee. That is just a few short years ago. Have 
you ever thought of the question of the African American 
community in particular and the long-term impact--maybe this 
will be your research? I will get back with you on this--of the 
unpaid history of slavery so that the CBO would consider a 
question of reparations in terms of a commission----
    Dr. Swagel. Mm-hmm.
    Ms. Jackson Lee.----that would even study what that long-
term impact is in light of the sharp disparities in the African 
American community and immigrant community in particular now 
into the 21st Century. Have you ever thought about that, Mr. 
Director?
    Dr. Swagel. I don't think we have. I don't--you know, I 
don't know all of the work that has been done before me, but I 
will go back and find out and we will tell you.
    Ms. Jackson Lee. I will engage on that and my word to you 
is that there may be a connection----
    Dr. Swagel. OK.
    Ms. Jackson Lee.----with the sharp disparities that you see 
in the African American population--is that----
    Dr. Swagel. We will certainly look at that.
    Ms. Jackson Lee. All right.
    Dr. Swagel. Absolutely.
    Ms. Jackson Lee. Thank you so very much, Mr. Chairman. I 
will yield back.
    Chairman Yarmuth. The gentlelady's time has expired. I now 
recognize the gentlelady from Minnesota, Ms. Omar, for five 
minutes.
    Ms. Omar. Thank you, Chairman. As you might have noticed, 
there is a lot of anxiety that is expressed by many of my 
colleagues when it comes to the income inequality and the 
disparities that continue to persist in or communities and in 
our country.
    We know that over the last 50 years, income inequality has 
gotten significantly worse. We know that wages have grown 
stagnant and the richest Americans are the only ones that have 
been able to reap the benefits of the economic growth that we 
have seen in the country. In your report last month, you 
projected that income inequality will be greater in 2021 than 
it was in 2016.
    Dr. Swagel. Yes.
    Ms. Omar. And so I wanted to see if you can give us an idea 
of how do the growing levels of income inequality affect 
consumption? And how would this affect the budget outlooks that 
you have?
    Dr. Swagel. Yes. Absolutely. And what you said is correct 
about our report. We show greater inequality in 2021. That has 
different effects on the economy and the budget. The budget is 
a little difficult to parse out, just because the progressive 
nature of our tax code means that income at the top is taxed 
more than income at the bottom.
    So I can't--I can't off the top of my head say what it 
means for the fiscal situation. And of course, there is 
negatives, right? Inequality means more spending on transfers 
and things like that.
    For the economy, it is a challenge and it is an important 
long-term challenge. That we know that inequality doesn't have 
just these short-term affects, but overtime it means a weaker 
economy and a weaker society. The children of, you know, 
families at the bottom have more difficult situations and worse 
trajectories.
    Ms. Omar. Mm-hmm.
    Dr. Swagel. And that in some sense is an intergenerational 
transmission of inequality and of poverty that is a key 
challenge for the nation.
    Ms. Omar. Yes. And as a millennial--speaking of 
millennials, I am the sponsor of a bill to cancel out student 
debt.
    Dr. Swagel. Mm-hmm.
    Ms. Omar. And I recently saw that one of the ways that we 
can increase income inequality by like 50 percent was getting 
rid of student debt. What are other ways that we can increase--
decrease income inequality----
    Dr. Swagel. Mm-hmm.
    Ms. Omar [continuing]. and increase the ability for 
millennials to be able to have the ability to have an input in 
our economy?
    Dr. Swagel. OK. So I would look in some sense at the short 
term and the longer term. The short term that the tax and 
transfer system effects in inequality--the taxes and transfer 
reduce inequality, but as you pointed out in 2021 less than in 
the--in 2016. So more could be done in the short term with 
either taxes or transfers.
    Over a longer horizon, the challenges are in some sense 
more difficult and slower. Education would be a key one. And 
then all the challenges that in some sense help people use 
their education for their future, housing, transportation, 
child care, elder care, all the things that would make it 
possible for people at the bottom to work and to have a rising 
wage profile.
    Ms. Omar. And then the ability to stimulate the economy----
    Dr. Swagel. Exactly. Exactly.
    Ms. Omar. It was really unfortunate to see many of my 
colleagues using this hearing to be able to go after Social 
Security, Medicare, Medicaid and to advocate for us to utilize 
our resources in putting more money in the pockets of the 
wealthy. I know that we have a national debt problem.
    Dr. Swagel. Mm-hmm.
    Ms. Omar. And if we are not being creative in the ways that 
we are prioritizing our resources, we will continue to be in 
trouble. And so there is an opportunity for us to create a 
priority where we are lifting people up in order for us to 
avoid the kind of crisis that we can foresee. So thank you for 
being here.
    Dr. Swagel. Thank you.
    Ms. Omar. Thank you for having this hearing, Chairman.
    Chairman Yarmuth. The gentlelady's time has expired. And 
now the moment we have all been waiting, the Ranking Member is 
recognized for 10 minutes.
    Dr. Swagel. I have to admit I forgot--you had said at the 
beginning that you would go last, and I have to admit I forgot 
that until just now so----
    A Voice. You were looking forward to leaving.
    Mr. Womack. Well, thank you, Mr. Chairman again for having 
the hearing. Dr. Swagel, thank you so much for your willingness 
to do this work of the Congressional Budget Office.
    And let me be the first here today to point out this staff 
over here--these reliable people that occupy the floor over 
there in the Ford building that do such a great job. And we are 
just honored to have you and doing this work.
    I know you get maligned sometimes. And if Members of 
Congress don't agree with whatever you produce, you know, you 
take all the arrows. But I for one, and I know I speak for my 
Chairman here, we just appreciate the work of the CBO.
    As I was sitting here, it was apparent to me that you are 
kind of like the creamy part of the cookie getting squeezed by 
both sides.
    Dr. Swagel. I see. I see.
    Mr. Womack. And I love Oreos so--but your willingness to do 
that a bit unfair. There is enough stink on this deficit and 
debt issue to go around this room and around the Congress and 
around previous Congresses and previous Presidents, left and 
right. We have all on both sides of the aisle failed and on the 
Congress side in our Article I responsibility, and we continue 
to do that.
    But it is not my point necessarily to sit up here and throw 
arrows at the other side. There is a plenty of things that we 
have done over time that have contributed to this problem. But 
deficit and debt has been the constant theme in this hearing 
today.
    And there is a lot of things contributing to it to include 
the fact that when our friends on the other side took control 
of the House of Representatives a little over a year ago, they 
said they were going to reinstitute PAYGO. And PAYGO has been 
waived now how many times----
    Dr. Swagel. I----
    Mr. Womack [continuing]. Mr. Director?
    Dr. Swagel. I don't know, but----
    Mr. Womack. Let me help you.
    Dr. Swagel. I signed the cost estimates and I see its----
    Mr. Womack. Twenty-four.
    Dr. Swagel. Yes.
    Mr. Womack. Twenty-four times. And here just a moment ago 
in this very hearing with deficit and debt being the central 
theme of what we are talking about here today, here is one of 
our colleagues on the other side that is talking about a bill 
that she has sponsored to just basically allow the taxpayers to 
pay all the student debt. You know how much that is?
    Dr. Swagel. It is multiple tens of billions at least, if 
not hundreds of billions.
    Mr. Womack. It is a pretty sizable bubble.
    Dr. Swagel. Yes.
    Mr. Womack. Would that help or hurt the deficit and the 
debt situation that we have today?
    Dr. Swagel. It would make it much larger.
    Mr. Womack. It would make it a lot larger--exponentially 
larger. So the point of my remarks here is to call on the 
Congress to do its job. And that begins with doing a budget 
resolution and putting the entire package on the table. It is 
not just discretionary spending.
    As I said in my opening today, in 1965 discretionary 
spending was about 34 percent or about 6--mandatory spending 
was about 34 percent of the federal pie. Today it is about 70 
percent, so it is double that.
    And that is what is squeezing all of the opportunities for 
this Congress to fund the national priorities to include 
national security which I would argue is--it is in the 
Constitution, so we have to do that.
    We can debate how much, but our ability to make--to fund 
transformative research, to do all of the things that the 
Congress would like to do is dependent on us being able to 
solve for this whole deficit and debt issue.
    And--so mandatory spending as a percentage of GDP continues 
to grow higher. Discretionary spending as a percentage of GDP 
continues to go lower. And I don't think you need a better 
metric than that to explain as old Willie Sutton said when he 
was robbing those banks back in the 1950's, you got to go where 
the money is.
    And the money is on the mandatory side of spending. So I 
just want to make sure that, that point is in the record. And 
obviously the Tax Cuts and Jobs Act has been a central focus of 
some of the arrows thrown our way here.
    And I am not going to delve too deeply into that, but to 
say that--you have to--in terms of economic productivity, you 
got to put a lot of things in that basket to include regulatory 
programs, policy issues voted on by Congress, taxes, and on and 
on and on.
    So unfortunately, we are in an extremely good position 
right now with the economy growing the way it is. But relative 
to the Tax Cuts and Job Act, I want you to comment specifically 
on what it has done to impact in my judgment positively on the 
entitlement programs that we pay into. So can you explain very 
briefly how the creation of new jobs----
    Dr. Swagel. Mm-hmm.
    Mr. Womack [continuing]. has allowed for us to buy a little 
bit more time in these social safety net programs because they 
are the ones paying into them.
    Dr. Swagel. Yes. And we see that in a variety of ways. I 
will just--I will start with one particular one and that is on 
disability. The disability trust fund a couple years ago was 
projected to expire--expire if you want to run out within the 
next few years.
    And now it has been pushed back. It is outside of our 
budget window. It is outside the 10-year window. And that is 
because disability claims--the rate has gone down.
    The number might be up, but the rate has gone down is 
probably a reflection of the strong economy that has drawn 
people back in. So in some sense where these kinds of micro 
effects and then of course the stronger economy leads to higher 
wages and more contributions to the various programs, trust 
funds as well.
    Mr. Womack. What about low income workers?
    Dr. Swagel. So we have seen particularly strong wage growth 
at the bottom of the distribution. And then we have seen----
    Mr. Womack. Woah. Woah.
    Dr. Swagel. Yes.
    Mr. Womack. Wait a minute. Wait a minute. I believe I have 
heard from more than one of my colleagues on the other side 
that it only helped the millionaires and the billionaires. I am 
hearing the CBO Director say that maybe the lowest quintile of 
workers are benefiting?
    Dr. Swagel. We are seeing the strong job market. One 
particularly noteworthy aspect of it is at the bottom, the 
strong wage growth. There is different measures, but we are 
seeing wages rise, you know, at various times, different 
measures--anywhere from 4 percent to 5 percent, which we 
haven't--you know, we haven't seen in sometime.
    Mr. Womack. Yes, well, I make my point. And I am going to 
yield here back to the Chairman here in just a minute. I just 
want to make this last comment that there is a reason why we 
are in this fix right now.
    And we can blame it on taxes. And we can blame it on a lot 
of other things. I certainly think that the metrics show that 
spending is out of control particularly when you look at the 
revenues of the federal government being within that like--what 
did you say--30 or 40 or 50 year average.
    Dr. Swagel. Mm-hmm.
    Mr. Womack. And that spending is outside that window on 
the--particularly on the mandatory side. It is possible maybe 
that we have overpromised our country to its people.
    Dr. Swagel. And that is one of the challenges that we face 
that is something one of my predecessors, Doug Elmendorf used 
to focus on as well is that the tension between what we are 
willing to pay and what we as a society expect out of our 
government. And that is the challenge.
    Mr. Womack. So most politicians don't like to raise taxes. 
And most politicians don't like to cut benefits that have 
currently accrued a certain people, but at the end of the day 
when you have a trillion dollar deficit as far as the eye can 
see, something has got to give.
    And if there is one part of that equation that seems to be 
growing exponentially out of control which is now commanding 70 
percent of all federal spending--mandatory spending--it tells 
me that we have got to muster the courage and the will as a 
Congress to put those solutions on the table, have a robust 
debate on them, and do--make the decisions today that can save 
these programs and future generations.
    And let me just add, Mr. Chairman--if the whole plan was to 
cut Medicare as has been advanced by some critics, then the 
best thing to do is do nothing because it gets cut on its own 
in about five or six short years.
    Dr. Swagel. That is right.
    Mr. Womack. If the plan is to cut Social Security, then the 
best plan would be to do nothing because in 2032 or 2033 which 
is before my youngest grandson is even going to have a driver's 
license, the program is going to get cut on its own.
    The fact is Republicans and Democrats have to start 
behaving more like Americans in deciding what we have got to do 
now to solve the problems today rather than kick those--that 
can down the road and put it on future generations. And with 
that I will yield back my time.
    Chairman Yarmuth. I thank the Ranking Member. I now yield 
myself 10 minutes. And I would like to begin also--thank you, 
Dr. Swagel for your time and your responsiveness.
    And as I mentioned in my opening statement, thanks again to 
all the great people doing the work at--important work at CBO. 
I am going to address this at a later date more extensively but 
since my colleagues continually bring up the fact that we have 
not passed a budget resolution, which is true, and by the way 
the Republican Senate has not passed a budget resolution either 
and doesn't intend to.
    But we did pass a budget last year. We passed a two-year 
budget, the bipartisan budget act of 2019. We headed off a 
threat of austerity cuts that were in the budget act of 2011. 
And I think we set the stage for some strategic investments in 
our nation's future.
    So, you know, my question would be to those who worry about 
the fact that we haven't passed a budget resolution, how would 
the world be different if we had from what it is today. And now 
again I am going to address that at a further date. But I want 
to continue the discussion of mandatory spending because I take 
a little bit of a different perspective on it.
    There is no question that it is the biggest driver of our 
deficit right now all the mandatory spending categories, but we 
tend to forget that mandatory spending goes into the economy. 
And Medicare and Medicaid, it supports our hospitals. It pays 
our nurses. It pays our doctors. It pays pharmacies.
    It does a lot of things that would have to be done at 
some--in some other way if we didn't--if it weren't--the money 
didn't come through the government. We know that is roughly 18 
percent. All healthcare spending is 18 percent of the economy.
    In my district, for instance, Humana is based in my 
district. They have one of the biggest Medicare advantage 
providers. It is about 65 percent of their revenue and most of 
their profit. They employ 12,000 people in my district. So it 
is not that money that is thrown away. This is money that goes 
into the economy.
    And I am going to get to a point. But say as some people 
might prescribe, and I know in the President's budget and prior 
Republican budget there was a notion to cut Medicaid by 30 
percent and so forth. If you were to cut mandatory spending by 
30 percent, what would that do to the economy?
    Dr. Swagel. Right. So there would be the--the negative 
impacts that you have highlighted, the sort of near term--you 
know, it is like the opposite of a Keynesian stimulus. It would 
be taking support out of the economy.
    That would be offset to some extent by a lower interest 
rates and, you know, sort of the opposite of the crowding out 
we might expect with budget deficits. But a large abrupt change 
like that would certainly have a negative effect in the near 
term.
    Chairman Yarmuth. All right. So when you look at the 
biggest problems with those mandatory programs, the way I look 
at it, people are living longer.
    Dr. Swagel. Mm-hmm.
    Chairman Yarmuth. More people are living longer because we 
have got the baby boomers who are now in retirement age. And 
the structure of the programs was established at a time when 
the demographic situation was much different, and the 
employment situation was much different.
    So when Social Security was created, the average life 
expectancy was right at 62, as I recall, so on average nobody 
got their benefits. There were 13 people working for every 
beneficiary.
    Now, that number is around two and dropping. And the age--
average life expectancy is much higher. And the tax rates were 
set at a time when if you are at 65 now and you are going to 
receive on an average $11,000 or $12,000 worth of benefits a 
year, healthcare benefits. That is what the average expenditure 
per person is, you didn't pay anything near that over your 
working life.
    So when we talk about reforming the mandatory programs, one 
area we can't do anything about--we are not going to have mass 
euthanasia in the country, and we don't want to do that.
    So we are talking about the structure. That is what 
Simpson-Bowels tried to get at some years ago and politically 
that was untenable.
    But just to put that in perspective, it is not just--it is 
not simple, saying we are going to do something about mandatory 
spending in this country, because it is an essential part of 
the economy and the life of many of our citizens. I also want 
to address the issue of the income growth level. And I have a 
question here.
    Dr. Swagel. Mm-hmm.
    Chairman Yarmuth. The figures are the lower quintile of the 
population has seen their incomes rise at a very high rate. Of 
course, they are starting from a very low rate.
    And my question is have you been able to ascertain whether 
that growth had--what component of that growth was due to tax 
cuts and demand--versus just demand--natural demand for labor 
and shortage in labor in those categories and also the fact 
that a lot of jurisdictions around the country, state and 
localities, have raised their minimum wage.
    Dr. Swagel. Right. Right. So we have not parsed that out. 
We know the overall strong economy has created labor shortages 
that--you know, in a good way drive up wages for the benefit of 
workers. We can't parse out how much is the tax cut. And it 
varies by locality as well as does the minimum wage.
    So we haven't parsed out how much is the increases in 
minimum wage and what is going on at the bottom. I think we 
know that it is real. In some sense, a strong economy is 
driving incomes at the bottom, but we can't--we just can't 
parse out the different factors.
    Chairman Yarmuth. Have you done any work as to what a raise 
in the national minimum wage--an increase in the national 
minimum wage would mean to the economy and to the deficit if 
you raised it to $12 or 15?
    Dr. Swagel. We have not. We have done an analysis on the 
impact on employment and on poverty and things like that. And 
there is some, you know, good and bad that would, you know, 
bring us, you know, several million people out of poverty, 
probably reduce employment by several million jobs--you know, 
so some back and forth.
    We haven't done the kind of dynamic--or the macro analysis 
that you are point at. It is something we have been thinking 
about, but, you know, that kind of dynamic analysis is very 
intensive in our resources. And we just haven't--we haven't 
gotten there yet.
    Chairman Yarmuth. Well, I think we are going to need to do 
that because eventually we are going to raise the minimum 
wage----
    Dr. Swagel. Yes. OK.
    Chairman Yarmuth [continuing]. the national level at some 
point. We have heard the word sustainable from both sides 
throughout this hearing today and sustainable is not a precise 
term. I don't think it is a precise term.
    We had a hearing not too long ago with four economists and 
the issue of, you know, what is a sustainable debt level, how 
much does debt matter, was--made it clear that nobody really 
knows what sustainable means.
    But does putting on--take your concept--whatever it is--of 
sustainability. Does putting our budget on a sustainable path 
require balancing the budget?
    Dr. Swagel. No, it doesn't. It means bringing the deficit 
down low enough so that the debt level doesn't continue to 
rise. And that does not require a balanced budget because as 
long as GDP is growing, we can run a deficit without increasing 
the debt to GDP level which is probably what matters. That is 
the best measure for capacity.
    Chairman Yarmuth. Two specific things that were in your 
report that I want to just mention. One is that you said--you 
calculated the loss in corporate revenue. You have revised your 
estimate as to how much corporate tax revenue will be lost 
under the 17 Act.
    Dr. Swagel. That is right.
    Chairman Yarmuth. Is that right? Would you tell us what 
that was?
    Dr. Swagel. It is about $110 billion over 10 years. And 
that it is partly from changes in the data that--the 
macroeconomic data on, you know, what of our overall GDP is 
wages and what is corporate profits was changed in a way that 
looks like there is more wages and less profits--corporate 
profits are the base for the corporate tax. So just knowing 
there is less corporate profits means our estimate of future 
revenue will be lower.
    And then there is some on the international side that Mr. 
Doggett alluded to where the guidance from the Administration, 
the IRS, and the Treasury. And so it was more taxpayer friendly 
than had been anticipated in our initial estimates.
    Chairman Yarmuth. Thanks. And finally, you made a 
calculation as to what effect on the average citizen the tariff 
policy of this Administration or the tariff actions--I should 
say--of this Administration have made--their disposable income.
    Dr. Swagel. We have. Yes.
    Chairman Yarmuth. What was that number?
    Dr. Swagel. So we see that as this year 2020 the tariffs 
put in place since 2018 are costing each American family about 
$1,277. So this comes from higher prices feeding into the 
economy is the equivalent of taking away $1,277.
    Chairman Yarmuth. Well, the Chinese did not pay for the 
tariffs?
    Dr. Swagel. The impacts are many, but that is the impact on 
the American family.
    Chairman Yarmuth. Well, I thank you. I am going to 
surrender a few seconds of my time. And once again thank you 
for your----
    Dr. Swagel. Thank you.
    Chairman Yarmuth [continuing]. your candor and your 
responsiveness and your time and your work on an ongoing basis.
    So unless there is any further business, this hearing 
stands adjourned.
    Dr. Swagel. OK. Thank you.
    [Whereupon, the hearing was adjourned at 12:35 p.m.]
    
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