Time for bills to pass before january 15th and a funding level for fiscal year 15 so that we avoid another dysfunctional, unrealistic budget and appropriations process in just a few months. As noted in the letter if our appropriations chairs. There is also bipartisan demand for us to end the sequester. As mr. Rogers has said, sequestration, and i quote, is unrealistic, ill conceived, discretionary cuts must be brought to an end. As cbo has repeatedly noted the sequester will cost our economy an estimated 800,000 more jobs in 2014 alone. So i think it bears repeating, could you please share cbos analysis on the jefr all impact of sequestration on job and Economic Growth for 2013 and what you think the impact will be for 2014 if sequestration remains in place . So congresswoman, i think the things that let me quote from a letter we wrote to congressman van holland a couple months ago. We said that if the automatic spending reductions specified in the budget control act including both the effects on discretionairy spending and the mandatory spending, those reductions were eliminated that would increase real gdp by. 6 by the Fourth Quarter of 2014 and would raise full time equivalent employment by 800,000 people by the Fourth Quarter of 2014. I thank you very much. And i really thank you for your testimony today. This just amplifies the stakes of our conference committees work. I hope that our committee will really begin working in earnest toward an agreement in the coming days to prevent the economic damage that partisan politics and the sequester could cause in the coming months. Thank you, mr. Chairman. Thank you. Lets go with right next to you, congressman cole. Thank you very much, mr. Chairman. I want to assure you that my grend and i d good friend and i did not coordinate our roshgz. I was going to ask that letter be placed in the record. Im glad my friend has already done it. So please make that for both of us. Speaking order was just random. Just a couple points and then a question. I want to quote from that letter. It does make a couple important statements. We ask that Budget Committee endeavor to agree on a common overall discretionairy number by november 22nd. November 22 is nine days away. And we dont have any schedule meetings between the 22nd and december 2nd. So this is a matter of some urgency. So our colleagues on the appropriation committees which includes my friend miss loy and myself have the opportunity to get about the business of arriving at real spending bills. This is a bigger and littler problem than what were faced with. He has given us a wonderful presentation of longterm debt. We dont disagree with any of that. He is right. We need to address it. On the other hand, the more immediate problem, the two bodies are 90 billion apart. We ought to be able to give the appropriation a number for both fiscal year 14. I would hope fiscal year 15 as well. So they can have an uninterrupted stretch of time to deal with the budget. Let me ask you this question. I would ask you if you could, you may not be able to do this off the top of your head, proubbly cant, are there enough savings in the three budgets to bridge the gap between the house and the Senate Budget . Which is again, only 90 billion and over a twoyear period i think the two chairman have said they can deal with 125 billion worth of spending. Again, not a lot out of almost 7 trillion. I think there are proposals for spending cuts in the two budgets that overlap but i cant list them. I dont know what the magnitude is. Could you just prepare for us for future reference a list of those sorts of cuts so we have the options really that all sides have agreed on to one agree or another in that area. We can try. Budget resolutions is not pieces of legislation that we attach costs to. There are plans of the Budget Committees that they build using information from us. But i can see if we can, if we can be helpful to you in that. I would appreciate that. Thank you very much. We have all looked at each others budgets and look where the overlaps occur. That is the discussion were having. Just if we had that at the disposal for all the members. I think question put the appropriators to work. Thank you. Senator coons. Im deeply concerned about whats reflected in your chart that while short term unemployment has come back down, long term unemployment remains very high and is persistent and woringly so in terms of the human cost and the long term cost for our economy. You testified before that not all cuts are the same. And that there are some ways in which we are cutting that are hurting our long term competitiveness. They produce longer term reductions in our capacity and that we should be prioritizing things that will accelerate growth, that we should not be simply trying to get through this difficult fiscal time in a way that focuses on austerity. We should be investing in a way that sustains growth. What types of policies in your view could both help accelerate growth and do so in a way that would deal with long term unemployment . And what are the budget airy implications for long term unemployment . The first part of your question, senator, of all nondefense Discretionary Spending, half represents investment of some sort about 20 of nondefense Discretionary Spending is investment in physical capital such as highways. Another 15 is goes for education and training. Over all, we think the investments build a stronger economy in the future and cutbacks in those investments would reduce output and kmk in the future. But i think it is also important to say that different pieces of those elements of spending may be much more effective than others in terms of long term growth. We said that this is about research. Federal spending and support of basic research has an average has a significantly positive return. We also noted that gross generalization is difficult to apply as guidance for decisions across budget functions, agencies budgets and appropriations subcommittee jurisdictions. So there is some evidence that we generated for other federal investments. It is nothing like a comprehensive evaluation of where in that large nondefense pool the money should be devoted. On the question of long term unemployment, this is very damaging. Obviously for the people involved, many of whom have very little source of support for an extended period of time. But whatever savings people may have to get through a short unemployment spell is much more likely to be exhausted if one is unemployed for half a year or a year or longer. But also has beyond the personal effects important economic effects over time. Some people who are unemployed for a long time simply give up looking for work. Some people find their way into disability insurance. The applications for the Social Security program have gone up rapidly over the past few years. People go into that program very rarely come back out of it into the labor force. Technical skills and connections to the workforce, connections to people who are working. So it poses a very large risk. Of there being some set of people that will not find their way back to work at all or find their way to the productive sort of work that they were in before they lost their jobs. Are therein vestments in skills training and in the Manufacturing Sector if particular that strike you because of that combination of factors . I dont have a simple report to that. We reviewed the number on a large number of different ways of trying to help people get back into the labor force. A number of the programs have been successful on a small scale and have not been tried on a large scale. Its a hard thing to do. I want to zis courage people from doing it. I dont have a short, crisp answer. But we would be happy to sit down with you and talk about the elements in that report and help you help you construct poll i that area. I dont know how we can hear that since sequestration is working. Weve heard arguments for raising taxes. You cant raise taxes high enough to satisfy the appetite of washington spending money. The tax code is a mess. But closing tax loopholes to spend more is not going to have long range good results because you get the higher level of expenditure and keep it there. Closing loopholes for tax reform is what is needed and i support that. Id like to give a caution to rumors that there is compromise on sequestration so we can spend more on defense. Since the economy is so bad and since jobs are whats on everybodys mind and what we ought to be working on, i hope we keep in mind that economic strength of our nation is a necessary precondition to our military strength. Xpri compromising on sequester is shortsighted and is and hopefully those suggestions that you hear primarily out of the house of representatives wont be pursued. If they are pursued, i think its shortsighted from the standpoint of the cooperation that you have to have on hill between people the same Political Party its kind of like feeding Senate Republicans to the wolves. I hope you remember to keep our eye on the ball. We can be the Sleeping Giant that admiral warned the japanese warlords about. Dont attack the United States. We have to have a Strong Economy in order to have a strong defense. I yield. Senator nelson is not here. Lets go to senator warner. Thank you, doctor. I have actually two questions. First of all, i just a question. As i understand under the Affordable Care act there is a threeyear assumption of 100 pay of the medicaid expansion. I wonder if that assumption carried out throughout your budget outlook or your assumption assumes that that share will be reduced, number one. And secondly, as i look at your budget outlook, where i see the real significant issues in terms of getting our fiscal house in order, the trustees have said medicare goes bankrupt in 2026. The Disability Fund you referenced, 2016. And is there a way for us to address our longterm fiscal outlook if we dont reform those programs or also are we able to even sustain them for the beneficials that rely on them . Senator, your first question, our baseline projections follow current law in which the federal share of medicaid costs for the additional populations under the Affordable Care act declines from 90 over a few years later. Our projections incorporate that and that feature current law. So just to be clear, if after three years the states come to us and say we want you to continue to pay 100 , that is not accounted for in this fiscal outlook . Thats right. We would provide a cost estimate for that legislation. It would show additional cost for the federal government. With regard to obviously important programs, i think, to all of us but also a big challenge we face. Yes. So on your second question, as my charts showed, the rise in spending for Social Security and medicare under current law relative to the sides of the economy is quite large. And that will require one of three possible or a combination of three possible courses of action. You could raise revenues above the historical share of gdp. Or you could cut all other federal programs, the combination of all other federal programs below the benefits and services that we have become accustomed to. Its not an analytic matter to say which is better or worse. The analytic point is you dont have a choice about doing at least one of those things and can you do one or two or three of them if you choose to. But at least one of those things will have to change. You also pointed out were going to be at historical highs for revenues. At some point its a negative impact on Economic Growth. So revenues will be a historically high share of gdp. This will be at historically low share of gdp. But the movements as we think theyll play out under current law is not enough together to support the extra costs for Social Security and medicare relative to their history. And thats why more has to be done. Senator warner and then well go with congressman black. I think getting something done for a year or two will have a positive infect on the marketplace and upon the Economic Growth and replacing some of the worst sequestration i think is a worthy goal being kind of virginia being ground zero. And i wondered whether, let me get this out, i believe we are now imposing upon the economy a debt ceiling tax that youll see a spike in Interest Rates every time you see a debt ceiling date come about. Id be curious to know whether the cbos done any estimate of what kind of cost that bear would have on the debt ceiling taxes coming around february 7th. Delayed maintenance of our construction is a tax because at some point it will have to be replaced. And id love to know whether theres been any analysis made on that subject. And third, i know senator portman and i have gone around and around on this. And this was just raised by percent of revenues. I would simply point out one of the reasons why we have a 17 trillion dollar debt is that based upon historic revenue numbers weve never weve always been at an annual deficit. The only times weve had a surplus within the last 30 years is when revenues have been between 19. 5 and 21 . Anything at the lower rates, well be in deficit. I will simply say even with entitlement reform, and stroingly believe in entitlement reform, i guess i question on a Going Forward basis and even look at your numbers with revenues that i at a higher rate that still below 19 were still in that gap. Two questions. One, because of the demographic bulge, its hard to imagine how youre going to be able to drive the spend down to the numbers that could be dealt with on dmind of historic revenue basis. And last point, it seems to me that one thing that we may not have factored in, i dont know if you did any analysis, is that not just in america but across the world we have seen a dramatic shift from the private sector to the Public Sector in both the areas of workforce training and particularly the area of research and development. There is no longer bell lab and more and more Corporate America and korncorporations around the world are accepting the Public Sector to pick up the r d costs. Can you see to that as well . Yes. On your first point about Interest Rates. I would say we think we have it fully in our projection. You suggested that maybe we had not been fully taken onboard. Our numbers, we think it is fully taken onboard. We have built in a substantial increase and normalization in Interest Rates to a level that is consistent with the historical experience but a little higher because theyll be more federal debt relative to gdp under current law. We have not tried to quantify. That on your point of instra structure, weve done work on highways and drawing on work the highway frel administration. It says in order to maintain the current functionality of highways, more would need to be spent than is being spent under current law. And using a building off the cost benefit analysis that the federal Highway Administration did that amount of spending and they would exceed the costs would be much higher than the amount under current law. You asked about the difficulty of whatever reforms were made to Social Security and medicare and keeping costs back where they used to be and i think thats i think youre right, senator. Over the past 40 years, Social Security and medicare represented outlays for the program were 6 of gdp. By 2038 under current law, outlets will be about 11 of gdp. So the cut if spending that will be required on the programs that will be required to bring them back to the historic am average will be a cut of almost one half. We dont have anything that would accomplish that. As i said to start with, there is no particular reason why those programs should go back to the historical share of gdp given that many more people and much larger share of the population is eligible for them. On the other hand, if one does not restrain the programs, then significant changes need to be ma made. Is there anything else youd like, senator . R d, were in the process of producing a chart book of federal investments and some of the private sector investments as well. In terms of development, there is often a great deal and growth in private Sector Development but in the more basic forms of research. That is the sort of output for the economy that the private sector will tend not to do enough of. That is really a responsibility for the federal government to support that sort of basic research. Ill run through the list of those of you who know will know. Thank you, mr. Chairman. In listening you to, it really is striking to me we have a short term challenge that is different than long term in some ways. And the good news is weve actually begun to tackle long term and have been put in place the yearly deficit coming down by half. Good news. You talk about growing the economy and being smart not reckless in what were doing. When we look at that, it seems to me a good way of summing up is youre not going to get out of debt with more than 11 Million People out of work. A number of us are talking about the economy. Im wondering if you might just talk a little bit more in terms of the short term how were smart about growing the economy. The Manufacturing Institute says there are 600,000 manufacturing jobs unfilled right now because skills are different than the jobs available. And National SkillCoalition Says about 300,000 people are going to be turned away from Training Programs because of the sequester cuts. So we have got inability, if we continue down this road to provide training whether its the 20 to 25yearold that you talked about where we have a 12. 5 unemployment or others. I mean were if we dont do this right, if