A. M. Eastern tuesday morning. Join the discussion. Next a hearing on the u. S. Economic outlook with keith hall, director of the Congressional Budget Office that provides analysis. This is two hours. Welcome to the committee on the Budget Hearing on the Congressional Budget Offices and outlook. I want to thank everyone for being here this morning. Were holding the hearing to discuss the congressional economic outlook, which gives us a tenyear projection of our spending, our National Debt and how the economy is going to perform over the next decade. The report forms the corner stone of the work at the House Budget Committee and i want to thank everyone at the cbo for hard work in producing this report. Id also like to welcome the cdo director, keith hall, director hall, i do appreciate you taking the t time to testify today and lookak forward to your insight we discuss this report. Thei discussion we will have today is a serious one because we face enormous fiscal and economicwe challenges. Deficits are rising again and Economic Growth continues to be subpar and policies encourage moreic spending, more debt and moreor government. Numbers were reviewing today affect the ability for every o american to buy groceri, obtain a loan, start a Small Business a or get a good returnn the retirement plan. We know this to be the case because the report is t tellings of what would happen if we kept president obamas policies in pla place. Without any changes to the currentt law, the deficit would raise from 587 billion in fiscal year 2016 to 1. 4 trillion in fiscal year 2027 and during that same time period, the National Debt will jump to 30 trillion. Thats 93,000 for every american and for a lot of folks, thats about what it costs to buy a home. This ever t increasing debt spil will hamper Economic Growth and consign thene country to a lowe standard of living. As a grandmother, i want my grandchildren to have every opportunity i that i did but on the current path owning a home and sending kids to college is becoming harder and harder. Much isg this is spending for medicare, medicaidve and Social Security for the next decade. Programs are going to fail our seniors who have worked hard and paid into them for their entire lives. To compound these problems, Economic Growth is set to average at a morbid 1. 9 , well below, well below the historic average of just over 3 . Slow economic great hurts our countryer in multiple ways. It means less jobs and smaller paychecks and less Financial Security for those americans who haveur a job. Andct more than 5 million americans are working part time because they cant g find a fulltime job. We haveco people in industries o want to contribute to the economy but they are being let down by the o rules and regulations coming out of washingto washington. Its been the decline in the labor t work force participatio rate off those of prime working age. I worked att this job for seven years and im a hard worker an have never tired never tried for any government assistance. Im positive ill a have job soon but ive been without a paycheck for months now and if i what to wait anymore, ill have no money a for all tilties or support for me, my wife and 7yearold. Now its pretty clear that chris isis exactly the type of work there makes our economy the best in the world and he is a good husband and b father who wants take care of his family. And its on jury to give him thatat opportunity a. Job is so much more than how we put gas in ourps car. It gives people a sense of purpose. It helps to build communities. Andd it can break sieblg ls of poverty and they know thest dignity of work. We can choose to get our fiscal house under control and get the economy growing again to work for men and women of the country and here at the House Budget Committee, that is exactly what we intend to do. Director hall, thank you for look forward to your testimony to hold the federal government accountable, grow ourt economy and serve the American People and with that, a yield to my Ranking Member. Thank you, dr. Hall for appearing for us today to outline the economic and budget outlook. Were a few years away from increased deficits and debt driven by the increased health care and retirement costs of an older population. Your report outlines our circumstances as a new Administration Takes office. Total deficits over ten years are essentially the same as you projected in august. You project this years deficit to be lower than last year and is next years to be lower still and as your report says the economy is currently on solid ground. Thats a much better starting um arlyly to be point than president obama faced eight years ago. President obama inherited a s th country in freefall. The country was in the midst of the deepest recession in generations losing nearly 800,000 jobs per month. In its january 2009 outlook cbo was projecting a deficit of mors than 1 trillion and the economy was projected to shrink by 2. 2 g that turned out to be optimistic. In contrast President Trump is inheriting a healthy economy. The economy has added 15. 8 million private sector jobs ioea since 2010. The Unemployment Rate is less than half its 2009 peak, and the budget deficit has fallen by more than 800 billion, a nearly 2 3 reduction as a share of the economy. No this years cbo report projects that the economy will grow at a 2. 3 rate. Job creation will also grow at a steady rate, and deficit will shrink over the next two years. What a difference eight years makes. President obamas economic agends is also paying dividends on many other fronts. Tens of millions of americans now have the economic r economi security that comes with having Health Coverage and thereby being freed from fears of an accident or illness sending them into bankruptcy. The stock market has tripled in value. The Auto Industry has recovered from a neardeath experience. Manufacturing has added jobs foy the First Time Since the 1990s. And wages have begun to grow ate a healthy pace. Ca o the financial industry is better capitalized and more secure with stronger protections for consumers. Re weve dramatically reduced our dependence on foreign oil and increased our production of p renewable energy. Nd housing prices have largely recovered and millions of n homeowners are no longer underwater on their mortgages. I could go on and on and i c probably should because i know my colleagues on the other side of the aisle will present an alternative reality. Im dealing in facts, and the fact is this congress and the e new Trump Administration are getting ready to take our country down a far different path. Republican leadership is movinge to repeal the Affordable Care act with no plan to replace it. 32 Million People will lose Health Coverage. Premiums will double. And we will return to the days when Insurance Companies decide who lives and who dies. Oe pleal House Republicans are planning deep tax cuts and a rollback of financial protections. Recent republican president s have tried this approach. Each time it resulted in skyrocketing deficits, a recession, and ultimately a financial crisis, the most blde recent of which brought our country to the brink of total collapse. I was briefed by paulson and bernanke in 2008. I know how close our nation camr to having the lights go out. The American People cannot afford for us to make those same mistakes again. Finally, i want to raise the issue of immigration. Its been heartwrenching to see the Immediate Impact of the president s executive order yonn during the past week. It is discouraging that the first immigration action of this white house separated families,e vilified the innocent, and will fail to make our nation safer by every logical measure. That being said, i was a member of the gang of eight in 2013. Four democrats and four republicans. We drafted comprehensive Immigration Reform legislation that we were confident had the bipartisan votes to pass the house. Fianhe i the only thing missing was the political will of Republican Leadership to bring it to the floor. Beyond addressing humanitarian and security needs, cbo has repeatedly told us that comprehensive Immigration Reform would mean a larger economy and a smaller budget deficit. It is my hope that my colleagues across the aisle will recognize these facts and enact the Immigration Reform we so desperately need. We cant solve the challenges we face as a nation, whether its immigration, health care, the ei economy, or passing a congressional budget without acknowledging what got us here and continuing on that path. To return to where we were and abandon all the progress we have made would be devastating not just for American Families todae but for generations to come. With that director hall i look forward to your testimony. I yield back. Thank you, mr. Yarmouth. In the interests of time if any other members have opening to w statements i ask you to submit them for the record. I would like now to recognize the director of the cbo, dr. T keith hall. Mr. Hall, thank you again for your time today and the committee has received your written statement and it will be made part of the formal hearingo record. E you have five minutes to deliver your opening remarks. Chairman blank, Ranking Member yarmouth and the rest of the committee thank you, for inviting me to testify. I would discuss a few highlights of our updated budget and d Economic Projections that were released last week. After my brief remarks i would be happy to take your questions. The Economic Forecast that underlies cbos budget projections indicates that in haha. Ri is gross domestic predict will expand at an average annual pace of 2. 1 over the next two years. If current laws remain generallc unchanged. After rising last year at an annual rate of 1. 8 . En we expect that growth to boost employment, virtually eliminate the remaining slack in the a economy and dropt Unemployment Rate to 4. 4 by the Fourth Quarter of 2018. Further ahead according to cbos projections gdp election panned at an average annual rate of 1. 9 over the second half of the coming decade. That growth rate represents a significant slowdown from the average over the 1980s, 1990s, and early 2000s. Mainly because of the Slower Growth projected for the nations sly of labor, which largely results from ongoing retirement of baby boomers and the relative stability in the Labor Force Participation rate among working women. As slack diminishes over the next two years we expect the rate of inflation to rise to the Federal Reserves goal of 2 and to stay there on average. Nt ha we also anticipate that the Federal Reserve will slowly raise the target for federal funds and that Interest Rates over the next few years will be significantly higher than they t are now. E cbos current economic se projections differ from those they published in august 2016. Ow the agency now expects gdp in 2016 to be modestly lower than it projected last summer. It also expects lower Interest Rates in the next five years but projects a higher rate of Labor Force Participation throughout e the next decade than it projected in august. In fiscal year 2016 for the First Time Since 2009 the federal budget deficit increasen in relation to gdp. Cbo projects that over the next ten years if current laws remain generally unchanged budget deficits would follow an upward trajectory. F the results are three main trends. H first strong growth in spending for retirement and health care a programs targeted to older people, especially Social Security and medicare. Second, rise in Interest Payments on the governments debt. And third, modest growth and revenue collections. By the end of the period the accumulating deficits would drive up debt held by the public from its already high level. Moreover, three decades from now if current laws remain in place, that debt would be nearly twice as hay relative to gdp as it is this year and would reach a higher percentage than any previously recorded. Such high and rising debt would have serious negative consequences for the budget and the nation including an increased risk of a fiscal crisis. Our estimate of the deficit for 2017 is lower than our august estimate primarily because we ro now expect lower mandatory spending. The current projection of the cumulative deficit for the 2017 to 2026 period, however, is about the same as we published in august. Im often asked specifically about our projections for medicaid and federal substance did for Health Insurance purchased through the marketplaces established by thef ow Affordable Care act. By cbos estimates an average of 12 Million People under the age of 65 will have Health Insurance in any given month in 2017 as a result of the expansion of medicaid under the aca. In addition cbo and the staff of the joint committee on taxation estimate this year 9 Million People per month will receive subsidies for nongroup coverage purchased through the marketplaces. An additional 1 Million People ere projected to be covered by unsubsidized insurance purchasen through the marketplaces. We estimate that 27 Million People under the age of 65 will be uninsured on average in 2017. Cbo and jct currently estimate that in 2017 federal spending for people made eligible by medicaid covered by the aca will be 70 billion and that net subsidies for coverage obtaineda through the marketplaces will be 45 billion. B for the entire tenyear period,d 2018 to 2027 if current laws remain in place those two types of costs would total 1. 9 trillion. It is important to note that cbos baseline is not intended d to be a forecast of what will happen. Rather its meant to provide a neutral benchmark that policy makers can use to assess the potential effects of policy decisions. Cbos budget and Economic Projections are predicated on the assumptions that the laws currently governing federal taxes and spending generally remain in place for the entire projection period. Even if that occurred and thereh were no changes in those laws b before the end of the period it would still not be possible to predict budgetary and economic outcomes precisely because many other factors run certain. Our goal is to construct budget and economic projection thats fall in the middle of the distribution of possible outcomes given both the fiscal policy and body of current law and the availability of economic and other data. Id now be happy to answer your questions. Thank you, mr. Hall. Now we will begin the question and answer session. If i could ask the staff to bring up figure one for my first question. Mr. Hall, cbos Economic Forecast has been trending sharply downward in the recent o years and roughly five years ago cbo was expecting real gdp growth to average around 3 over the tenyear budget horizon. Close to that longterm average growth rate that weve seen here in the u. S. That figure has been dropping consistently. And in this latest forecast its down to just 1. 9 . So it seems that cbo is expecting that the u. S. Economy will experience a protracted economic malaise for at least the next decade under current e ecies. Wo two questions i have for youn first of all, what are the reasons for cbo to keep ratcheting down its projections for the gdp growth . And secondly, how will this much lower expected growth path affect our federal budget . The look forward over the next ten years, we do expect the slack in the economy to be swe virtually eliminated over the next two years. So were beyond what we think is the potential growth of gdp. Mi and whats constraining the ea potential growth of gdp as we forecast is Something Like 1. 8 , 1. 9 . Its a combination of a more slowly growing labor force. A lot of that is aging 1. Population as baby boomers retire. Not all of it, however. And slower productivity growth. M since the end of the recession productivity growth has only been. 8 . Less than 1 productivity growth. T we expect that will go up by the end of the period, Something Like 1. 3 . But thats still lower than it has been in the past. So in fact, if you sort of take that labor force of growing. 5 , productivity growing 1. 3 , add inse together, that 1. 3 , 1. 9 is about our Economic Forecast. So the challenges are a slower growing labor force and slower growing productivity Going Forward. And again, we have this issue with bab