Expected to grow modestly this year and a solid pace through the next few years. Although real adjusted inflation grew weekly in early 2015, the economy now appears to be on firmer ground and we expect the pace of Economic Activity to pick up over the next calendar year and the next few years. After that, we expect to see moderate to constrained early growth in the workforce. Real gdp will grow by 2 this calendar year, by 3. 1 in 2016, and by 2. 7 in 2017. Above its potential or maximum sustainable rate over that time frame. The economy will grow at an average rate of 2. 2 , equal to its real growth rate. This will be driven by consumer spending, business investment, and residential investment. Over the next few years, the faster pace in growth output is expected to reduce the quantity of underused resource, or slack, in the economy. The estimate was about 3. 4 in 2014. Cbo next to narrow that gap to its historical average by the end of 2017. Although labor Market Conditions continue to improve significantly, in the first half of 2015 there is still significant slack in the labor market. Key measures include the Labor Force Participation rate that remains about 1 below its potential rate, the employment rate, which is 0. 5 higher than it was the beginning of the session, and the share of those super for parttime over fulltime work, which is about 1 higher than the last session. The direct consequence is that wages continue to grow more slowly than they did before the recession. We expect that as slack diminishes, increased competition for fewer available workers will lead forms firms to increase wages more rapidly to attract available workers. We project further hiring will reduce unemployment further to 5. 0 in the First Quarter of 2017. Currently however, most of the labor force slack that can be seen is in the low Labor Force Participation rate. We estimate that the Current Employment shortfall with the number of people who would be employed if the Unemployment Rate equaled its rate in 20 in 2007 is about 2. 7 5 million people. People. The Unemployment Rate accounts for only about one fourth of that amount. The depressed employment rate accounts for the other three fourths. That development will slow the longterm decline in Labor Force Participation, which is attributable to the underlying demographic trends and federal policies, but it will also slow the following Unemployment Rate. Over the next few years, depressed slack in the economy will put pressure on upward Interest Rates. Nevertheless, cbo expects the rate of inflation as measured by the price index for personal expenditures to remain the same through 2017. An outcome that is consistent with some remaining, but diminishing slack in the economy and widely held expectations for slowly rising inflation. Interest rates have been through have been near zero through 2009 will rise to 3. 4 by the end of 2019. The rate in 10 year treasury notes, cbo expects, will rise to two point to 4. 2 by the end of 2019. Those rates rise with the increase in the federal funds rate and the improving economic conditions. We are now happy to take questions. If you could say your name and or news organization. And your news organization. How do you account for the 60 billion or so drop in the deficit beyond that revenue is hard . And why is revenue hard, as thought back in the spring, and also your projection on when treasury will run out of room for extraordinary measures, the difference between what you set now and you said earlier. Keith the tax revenues have been higher than anticipated, and we now forecast about 70 billion in tax revenue this year. The Slower Growth will go away. We expect about 10 billion in revenue, so we did that net increase of 60 billion. Why . Keith it is not because of the Slower Growth. It just seems to be that tax and this higher forecast of revenues in our estimation is pushed back until we run out of money between mid november and keith it is actually from both corporations and individuals. Both were higher than expected. John nicholson with bloomberg be in it. With bloomberg bna. In recent days, we have seen the stock markets particularly going through some troubles. To what extent in the event since july 7, where would it shape the forecast now and what would you expect to see on paper now . Keith Economic Growth has been stronger than we thought since july 7. If we were to change things, probably stronger growth for this year and then a little weaker for the next two years. With respect to the stock market, im not sure we would change anything yet. Fluctuations in equity markets are fairly common. They affect Something Like when julian dollars worth of wealth one trillion dollars worth of wealth that has been lost up to yesterday. But that does not translate into change behavior by either consumers or businesses right away. How much are you worried about those gyrations at best . At this point keith at this point . Keith economic fundamentals, at least so far, have not been changed. I dont feel too worried about it. Steve with tax notes. The report make the comment that tax revenues are lower because expired tax revisions did not get renewed at the end of last year. As you know, congress is you need to think about extending those provisions again will stop again. Can you make the case by passing and you have done it here several times that the section 19 business expansion, that has been renewed and will bring the debit closer. There is more spending and the limit will be closer than estimated in november. Keith that is right, we expect that the spending provision will not be renewed. And if it is, obviously will have an effect on revenues. [inaudible] sooner . Keith im not sure, to be honest. We would have to sit down and count. I have to be honest. Federal Health Care Spending, it has been growing faster than the economy, of course. Do you see any differences in that trend . Do you see a faster rate of growth for federal Health Care Spending, or do you see . It slowing down at all any changes see it slowing down at all . Any changes . Keith we do not have some of the data yet. We will probably have that by the and in the year. We do expect premiums to rise anyway. And the uptake in exchanges is always a big unknown in our forecast to my because we do not have any experience with that yet. Just to followup looking at the larger picture, there has been in the past several years a slowing in the growth rate in the federal Health Care Spending. The question is, will that continue or will the growth rate return to a faster pace . Do you have any better sense for that growth rate is headed at this point . Keith it is certainly part of our forecast that spending on health care will increase significantly Going Forward. It has been a longterm trend, and then of course, the effect of the subsidies is a big unknown in the exchanges. We do expect that Health Care Spending is going to continue to rise. Any differences in your projections between now and march traceable to the Health Care Law . Keith no, it is pretty close to the same right now. On your revision of the increase and potential Labor Force Participation, what drove you guys to make that change . Has there been any interplay with the afford care act on your projections with Labor Force Participation . And could it inform any thinking about slower wage gains so far over the past 18 months or so . Keith i think our notion of a slightly higher Labor Force Participation in part comes from the pattern. We find people returning to the labor force a little bit faster than we would have anticipated. It makes us think that the cyclical impact of the labor force is bigger than we thought before. That is the main reason. I dont know that we have seen any impact on the Labor Force Participation from the aca. It is hard to know how much that is going to affect things. Certainly, you want to keep monitoring it and get an idea of what the impact would be. One of the big issues is that the employer mandate is only partially kicked in this year and we have more to kick in later. We will have to see what impact that has. On Interest Rates, in your changes from the market a sign from the market baseline, you indicate 3 million plus downgrade in Interest Payments. Can you explain that . Talk about why that is, because i thought you made a decision on lower than historic rates previously. What new information is there that is lower, or is that just fluctuations in the forecast . And how does this play into the idea that our interest will become such a big word and that we will have trouble in five or 10 or 30 years paying our continued interest . Keith the change in the Interest Rate forecast really came from a look at the Financial Markets and the expectations in the Financial Markets. We are beginning to expect a little lower growth in Interest Rates than we did. We made an adjustment for that. But we still anticipate a rise in Interest Rates, a significant rise in Interest Rates. In fact, the picture is still up there. We will also have a very large increase in Interest Payments as Interest Rates go up. On the Interest Rate question, or related i guess, there is a line about no expectation for a cola for Interest Rate inflation. Do you have new data on disability and when that will be exhausted in your estimates . Keith the Social Security is set by law to follow the consumer index. I forget exactly, but its a one or two your time change. Or two year change. The way it looks now, there will just not be much inflation on the cpi to give much of an index on Social Security. That is what we anticipate. And the other part, im sorry . On Disability Insurance. Keith i dont recall what it was last time, but i know we talked about it in our longterm budget outlook. But i dont recall. If they havent already, democrats will probably use this report to say, look, no need to cut spending. Republicans will argue longterm we need to do something about it. Who is right . [laughter] keith this doesnt change our longterm projection, or even our 10 year projection. The pattern is very much like it was in march, very much like it was in january. Under current law, the growth in debt is not sustainable. At some point it will get to a very high level. Obviously, you cannot predict tipping points, but at some point this becomes a problem. The wave is going, it is not just that the debt gets to a high level, i think Something Like 70 of gdp by 2025. But there is also the trend. 70 and growing. That factors into things as well. This is an unsustainable path here for the federal debt. Does your point take into account any kind of economic boost from cutting taxes . In other words, do we use dynamic scoring to indicate revenues would not be as low as previous they suggested . Keith implicitly there is dynamic analysis in this work all the time. It is sort of been nothing new in the Economic Force that we rely on, the current law that we rely on, and part of the fact part of this is the growing debt probably having some effect on crowding out investment and slowing Economic Growth going forth. Speaking of dynamic, since you brought it up, you guys just recently issued your dynamic estimate of a particular bill, the extenders back in early august. I wonder you could give us the aspects of how that decision was made in terms of the formatting, the table and so on. And also, how much of that was made in discussion with the budget committees, particularly the Senate Budget committee . Keith they certainly requested the estimate and i believe it was large enough for the automatic dynamic analysis to begin. We did that analysis along with jct. Part of the analysis is figuring out how to effectively communicate the impact. We did our analysis on that particular tax extension relief act of 2015. We estimated it would increase the deficit by 87 billion over a tenyear timeframe. We also put in the estimate that without the macroeconomic effects, you can see where those effects are. In terms of the fort amounting, was that the formatting, what was was that decision made here . Keith oh, it was our decision. We also anticipate it will improve the quality of our estimates to be able to improve that include that. There was perhaps an issue of our estimates not being centered without having the the macroeconomic effects included. That is probably true to an extent, but there is always uncertainty in terms of forecasting the effects. We are kind of used to the idea of uncertainty in our macro forecast. You mentioned center. Could you go over that issue again . Keith sure, the tax extension the tax relief extension act is a good example. The increasing deficits with by about 97 billion, but you expect the lower income tax rate will have some sort of macroeconomic effect, reducing a little crowding out and such. We anticipate an increase deficit by less than that, by about 87 billion. We had a shift of about 10 billion to our point estimate to the impact, if that makes sense. How much of a challenge has it been to i mean, it is easier probably to do a range of dynamic estimate. You estimate a range of the dynamic impact of inflation as opposed to a single number. Has it been a challenge or an issue to do a single number rather than a range . Keith in my mind it really happened in, because we are asked for our best estimate. We could put a range around estimates without macro effects just like we can with one with a macro effect. I think we are doing a good job to give a pointed estimate. This is our best estimate. But it is also probably true to communicate the uncertainty in the range. We can do that at least wanted to play. It is hard to do it numerically we can at least do that qualitatively. It is hard to do it numerically. Was the range what you expected, or more than you expected . Keith i think it was pretty much what we expected. I did not sit down and try to predict it, but we have been using the macroeconomic effects for a while now and we have the models down, so we have a feel for what that will look like. As estimates continue forward, it is important to be transparent on the modelers so we can get some discussion about how we do the estimates and maybe we can improve that over time. How much more uncertain is this tax extenders bill, how much more uncertain is this dynamic score of 87 billion than the standard score of 97 billion . Because we hear the score is less certain. This is only a 10 billion difference. What would your thoughts be . Keith on the difficulty with the macroeconomic effects and really, almost all of our estimates, is that there is an unknown thing there. We all know how accurate it is, what the ranges. When we do our forecast, especially Something Like the longrun forecast, we will do a parameter of values to give you a feel for the accurate a. But that is not released this is the goal standard error that is not really a statistical standard error or Something Like that. Hopefully over time we will get a better notion of that and be able to begin communicating that a bit better Going Forward, what the likely range will be. Do the tax cuts pay for themselves . Keith no, the evidence is that the tax cuts do not pay for themselves. And you so and our models show that in the tax extension relief act. We are hoping the estimate is more centered now, that we are going to get into the right that the point estimate is being more accurate. There has been uncertainty lately. Not to be a pessimist, but we do have a fed at the zero lower around. We do have an historically high and growing amount of debt to gdp. What are the risks to these two conditions should there be a global recession, which is presumably not unthinkable given what we are seeing in some of these markets. Keith im not sure the markets are suggesting anything about a global recession as of yet. As long as the longterm economic fundamentals remain and change, then this is not some we should worry about stop and what i have seen what we should worry about. And what ive seen from the fed is that the fluctuations in the equity markets, thats not the same thing. That is one of the reasons why we are concerned about the growing debt, because as debt continues to grow in handcuffs the government if we go into another recession about what they can do policy wise to work through it. We lose flexibility. And to give you an idea of how important that is, i will repeat something that you probably know. But keep in mind the jet to the debt to gdp ratio in 2007 was Something Like 30 of gdp. We are now up to 74 and that is a huge change. That is a difficult thing. Starting at 74 would be a difficult thing to do with another downturn like that. There was something in the changes about between march and last week about the 200 million in related health care. 200 billion related to health care. It was reclassified in march and then reclassified again this time. Can you walk us through . Keith i think it was a technical change, but the fact that it was in our forecast in march makes it a change that affected our esti