Thank you, mr. Chairman. To other members of the committee, i appreciate the opportunity to be heard today to discuss the cbs outlook for the budget and economy over the next 10 years. Our Analysis Shows the country continues to face very large, economic and budget challenges. Let me discuss the economy first and then ill turn to the budget. We anticipate Economic Growth will remain slow this year because the gradual improvement we see an underlying economic factors will be offset by tightening the federal fiscal policies scheduled under current law. The cuts in federal spending scheduled to take effect next month lemine reduce spending by households in the government. We protect inflationadjusted gdp will increase by about 1. 5 in 2013 but it would increase roughly 1. 5 Percentage Points faster were it not for the fiscal tightening. Under current law then, we expect the Unemployment Rate will stay above 7. 5 through next year. That would make 2014 the sixth Consecutive Year with unemployment so high, the longest such period since the 1930s. We expect the growth of the gdp will pick up after this year to about 3. 5 per year in and 2014 in the following few years. The gap between the nations gdp and what it is capable of producing on a sustained basis that economist referred to as potential gdp will still not close quickly. Undercurrent while we expect output to remain below its potential level until 2017, nearly a decade after the recession started in December December 2007. The nation has paid and will continue to pay a big price for the recession. We estimate the total loss in output relative to the economys potential between 2007 and 2017 will be nearly equivalent to half of the total output produced in the country last year. Let me turn then to the budget. Under current law the federal budget deficit will shrink in 2013 for the fourth year in a row, an estimated 845 billion would be the first in five years below a trillion dollars and at 5. 25 of gdp only half as large relative to the size of the economy as the deficit was in 2009. Our projections based on current law show deficits continuing to fall over the next few years before turning up again in the second half of the decade. Totaling nearly 7 trillion over a decade as a whole. Federal revenues are projected to reach 19 of gdp in 2015 and beyond. Because of both the expanding economy and schedule changes in tax rolls, that 19 figure compared to an average of 18 over the past 40 years. At the same time federal spending will fall relative to the size of the economy over the next several years and then rise again. The decline can be traced to caps on discretionary funding in the drop off in spending that tends to an economy is weak. But later in the decade a return of Interest Rates to a more normal level will push up Interest Payments to their higher share of gdp and years and throughout the decades the aging of the population, significant expansion of federal Health Health care programs and Rising Health care costs per person will push up spending on the largest federal programs. By 2023 spending reaches about 23 of gdp in our production compared to the 40 year average of 21 . Projected debt by the public will reach 76 of gdp this year, the largest percentage since 1950. And under current laws we project the debt in 2023 will be 77 of gdp, far higher than the 39 average over the past four years and will be on an upward path. Such high and rising debt relative to the size of economies is significant concern for several reasons. First, high debt means the crowding out of Capital Investment will be greater, that you will have less flexibility to use tax and spending policies to respond to unexpected challenges like a recession or a war and that there will be a heightened risk of a fiscal crisis in which the government would be unable to borrow at affordable Interest Rates. Second, debt would be the margin of current laws were modified to delay or undo certain schedule changes in policies. For example if lawmakers eliminate the automatic spending cuts scheduled to take effect in march if they prevent a sharp reduction scheduled to occur next january and extended the tax provisions scheduled to expire and if no offsetting changes are made, then budget deficits will be substantially larger than our baseline projections and debt held by the public would raise 280 of gdp rather than a 77 under current law. Third, debt might also be larger in our project projections because the original gap would reduce such spending to just 5. 8 of gdp in 20203 a smaller share than for any year in the past 15. Because the allocation of discretionary funding is determined as you know your annual appropriation acts, you and your colleagues have not yet decided for specific Government Services and benefits will be constrained or cut to meet those tasks and doing so might be quite difficult. Fourth projections for the 10 year. Covered in this report do not reflect longterm budget pressures. Because of the retirement of the baby boom generation and the Rising Health care costs a wide gap exists between the future costs of the benefits of services that people are accustomed to receiving from the federal government especially Unemployment Benefits for Older Americans and the tax revenues that people have been sending to the government. It is possible to keep tax revenues at a historical average percentage of gdp but only by making substantial cuts relative to current policy in the large benefit programs that gave the broad group of people at some point in their lives. Alternatively its possible to give the policies for those large benefit programs unchanged but only by raising taxes substantially for a broad segment of the population. Deciding out what combination of policy changes to make to resolve the budget imbalance would allow for gradual implementation of those changes which would give households and businesses time to adjust their behavior. Thank you. Thank you dr. Elmendorf. Let me get into the debt itself. We have the state of the Union Address last night and as we all do we go to the microphones and give our playbyplay analysis of what we thought of the speech and what we liked him what we didnt like. One thing stood out that gave me a real cause for concern and i heard it in mr. Van hollens Opening Statement which gives me very big con cause for concern. The notion that we have our degout 2. 5 trillion of deficit reduction taking taken care of and in the bank with not much farther to go to finish the job, this calculation, this 2. 5 trillion in Debt Reduction does not count the spending that took place during that time. It doesnt count the stimulus spending of 831 billion doesnt account for publicly held debt has doubled from 36 of gdp to 73 in 2012. 77 by 20203. I guess you know alternative alternate fiscal scenario meaning doc fix and all the other things you think congress will do based on reasonable assumptions. Total debt is already above 100 of gdp. If you could ring up chart one, heres the question i have. The green is what you said revenues are historic leg. About 18. 2 in the blue line and of all the tax increases the president has endorsed the loophole closers mr. Van hollen talks about is the fiscal cliff deal enacted a good portion of blue. The revenues and the red are your projections of where spending is going. So even if we got every tax increase that the president has called for we are not even scratching the surface. We are not even getting close to fixing this problem and so the concern i have is a couple of things. What happens if we dont get this under control . What does the debt crisis look like . What happens to a nation if our debt continues on this burden and if we dont ask later in the surround . What happens and thats question number one in question number two and im going to ask you this in writing, give me some different Interest Rate scenarios. What happens if they rise faster than youre projecting . What happens to our ability to control our fiscal situation what happens to our economy . Quickly clarify two points monday said so people understand we have not yet updated our longterm budget projections and i presume this slide is our new projections for the coming decade and your extrapolation beyond that it is certainly is a case in our longterm outlook last year and i presume our longterm outlook this year thats been a particularly on the Large Health CareHealth Care Programs and Social Security will continue to rise in the share of economy of her time driven most importantly by the aging of our population and the rising number of eligible beneficiaries and also due to other factors as well. The second to clarify is the alternative fiscal scenario would not be a projection of what you and your colleagues will do great as you know its a projection of what current policies would cost and we all presume you will make some changes in policies over the decades but its an additional benchmark that many of you have found helpful in the past in our standard presentation of what would happen under current law. You have a new asf day fund. To understand their basic projections follow current law. For example now the tax provisions scheduled to expire the end of this year many of which are routinely extended. Our current law projection assumes they will expire and owned alternative scenario we extend the expiring tax provisions. Current law includes a cut in the doc fix at the end of this year. We have routinely pushed off the dead and made changes in policy along the way. It continues to extrapolate the current payment rates and current law includes a sequester and many members of congress have argued that they would like to do Something Different instead of that so our alternative scenario takes away the sequester but we have replaced the original cap in august of 2011. Under the alternative scenario total debt crisis by 2. 5 chilean dollars more over the coming decade than under the current law baseline projections. Mr. Chairman u. S. What happens if the debt rises and stays high and prices and there are some costs that i think are quite predictable and other risks that are created. Over time, not under the current Economic Conditions but under the conditions we expect later in the decade of nearly full employment in the economy, at that point in time that large amount of debt will crowd out some private new investment that would raise wages and income and the higher the debt is, the more that investment is likely to be crowded out and the greater depressing effect on wages and incomes. We report those estimates to you. There are also risks that are involved. Some countries that have had very high levels of debt and have not communicated and not persuaded their potential lenders that they have a plan for getting the debt under control have faced a fiscal crisis which we defined at is the point in which the government is able to borrow at an affordable rate. Currently there government is not in a position in treasury Interest Rates are extraordinarily low. Our projection calls for a normalization of Interest Rate as the economy strengthens as the Federal Reserve stops pushing so hard to keep Interest Rates low. We have a normalization of Interest Rates and our basic projections but with the debt high and rising there is a greater risk that potential buyers of government that will get spooked and will be unwilling to do so at the regular level of Interest Rate. If Interest Rates were a percentagpercentag e point higher than we project over the entire decade, then the federal interest costs would be about 1. 1 trillion higher. If Interest Rates were percentage point lower than we project in Interest Payments would be about 1. 1 trillion lower. The point is that given the large amount of debt for government has and will have under current law in the coming decade, fairly Small Movement in Interest Rates would have a fairly large effect on government just rates. [inaudible] stay where projecting shortterm Interest Rates rise to about 4 and longerterm 10 year treasury note rates rise to 5. 25 . Those rates after adjusting for inflation are are a little above inflationadjusted Interest Rates over the past several decades. Reflecting in our view the effects of the higher level of debt relative to mr. Van hollen and i are limiting ourselves to 10 minutes. I will be brief only to say that it seems we have this window that is narrowing on us. As you mention americas right now now with respect to the bond market support in the port in the storm, the safe haven. That gives us a privilege and that gives us time that if we frittered this time away, if we dont deal with the core problem which is spending no matter what you try to do on revenues, then we will have lost this opportunity we have to get our fiscal house in order while we have low Interest Rates. The other problem as we see it is growth. If we keep chasing higher spending with higher taxes we will sacrifice growth. The best way is to get people back to work, good jobs with good wages, paying taxes and getting spending under control. And so when we talk about taxes and tax reform something we will discuss here, loopholes are part of tax reform. Most loosed loopholes that we are proposed for years is that necessary pay for to get the tax rate down to have a globally competitive tax code to help as this is create jobs and get people back to work. If we use loopholes to chase higher spending and we are forgoing tax reform and missing our opportunity for Economic Growth. That i just want to make clear for the record because i think well hear a lot of clinical record to rhetoric to the contrary. Mr. Van hollen for his 10 minutes. Thank you mr. Chairman welcome to dr. Elmendorf. First is a little bit on they math. The chairman pointed out that while we will have 1. 5 trillion in cuts over the the the next 10 years as approval of the spending caps, there were some other one time spending measures including the spending measures of the payroll tax cut which is the biggest single item in that issue and there was actually agreement that given tough Economic Times it was important to provide a payroll tax relief and i actually think we should have phase that out rather than having gone cold turkey. The point is a big chunk of that number has to do with loss in revenue from a payroll tax cut that was supported by a great majority in this body. As i said in my opening remarks, i think our overall objective here in the short ,com,com ma medium and long term is to expand the economy, growing jobs and having a strong middle class so its absolutely true especially as the economy recovers you continue to have high deficits and you will squeeze out that upward pressure on Interest Rates. In order to make sure we have good longterm Economic Growth we have to grapple with the deficit. That brings us back to the question of how we deal with the deficit and his doctor elmendorf pointed out you can do it into categorical ways. One is you can save you will do it all in cuts and as you pointed out you can do it all in revenue. Both of those we can argue the two bad results. Cutting as dr. Elmendorf says means undermining important commitments that we have made when it comes to Retirement Health and security for our seniors sook again the question is how we deal with those deficits. Let me get back to the sequester issue that is looming right now. Could you tell me dr. Elmendorf in terms of the negative Economic Impact and the sequester,. 6 , what does that translate into in terms of loss in jobs . Our estimate is that the sequester alone will reduce gdp growth this year by 0. 6 Percentage Points lowering the level of gdp at the end of the year by the 0. 6 . We think that would reduce the level of employment at the end of the year by about 750,000 jobs. 750 dozen jobs between now and the end of this calendar year 2013 right . Yes. That as is a whole lot of jobs obviously and we should be working overtime to prevent that kind of job loss. If you were to replace the deficit reduction through that Austerity Program the sequester, with a plan that accomplish the same amount of deficit reduction spread over the 10 year period you would not have that big hit on jobs, isnt that right . Thats right congressmen. We have also heard a lot about the impact is the result of the defense cuts and i should point out is not the congressional budget analysis in our analysis and the republican leader mr. Cantor had exactly right on the floor of the house when he said that we allow the sequester to take place quote unemployment would soar unquote and it would set back progress in the economy and he cited an estimate that the sequester would cost 200,000 jobs in the state of virginia alone. That was the sequester for this whole year. We were able to prevent the sequester for the first two months to a balanced approach i should say. That should be the model Going Forward and the model that we have apply to prevent the sequester now. Just to be clear since theres been a lot of attention focused on the jobs lost because of defense cuts, the cuts were a resul