Tax returns will help unravel this puzzle, but only b available to some so the last few years, weve seen this tax rate really defined as the tax collection divided by profit has been low. We think there will be some recovery in that for the longer term average because we are making an edgeucated guess thats whats happened in the last few years is because of circumstanceses of the last few years, so there will be rebound over the next few years. The same time, theres a different thing going on which is that companies are trying to find ways to reduce the Corporate Taxes they pay. Some of what theyre doing inviolas them moving business income from the corporate sector to the noncorporate sector. Out of C Corporations and into s corporations. Weve written about that before. Theres been an ongoing downward trend in the share of business income thats taxed at the corporate level. We think that will continue. The second factor we described with a set of efforts by companies to increase the amount of Corporate Income shifted out of the country. Recorded as having it earned as a different country and subject to much less u. S. Tack. There are various ways to do that. We talk about transfer pricing and inversions. Corporate inversions are part of the half of the erosion of corporate pace and that factor is at work in reducing receipts over the coming decade. But that is off set in part over the next few years by an increase in the rebound in the tax rate. There are other factors that we dont have firm handle on because we dont have the detailed tax statement. More over, we have all of that that corporate profits will decline as a share of income linger in the decade because Rising Interest Rates will increase their Interest Payments and because faster compensation growth pushes up the labor share of income will push down the corporate share and that factor, which affects the denominator, the economic profits, we think that, those factors will push economic profits down to gdp and that will also push county Corporate Tax revenue. I will check with focuses who are experts to make sure i got that right or right enough. Okay. Other questions. Where the ceiling was before it was suspended, since the issue before it was suspended. So when this happens in mid march, the debt ceiling will be set dwaul to the outstanding limb. The treasury will immediate lyly in mid march be unable to increase its net borrowing. Then at that point we presume it will deploy its customary set of quote explosion nar measures to obtain funds. And we think those measures will be effective through september or october. Of this year. And at which point, we think they will have exhausted their extraordinary measures. Shortly after that, then the treasury will have run down its cash balance and be unable to meet all of its obligations in a timely way unless some other action is taken. That projection in september or october is of course uncertain. It depends on in flows and outflows of money over the next eight or nine months. As you know from previous rounds of this, projecting the cash flows is a very uncertain business, so we will continue to keep the congress apprised, but were not likely to know more precisely when the treasury will run out of extraordinary measures or out of cash until we get close to those events occurring. You go over the major factors causing the debts so fall over the next couple of years then start rising again. The deficits . The deficit. So talk about the patterns. So, we think that the dollar amount of the federal deficits will be as i said, 468 billion this year 467 blg next fiscal year and will then start to rise. Expressed as a share of gdp. The deficit will remain about 2. 5 . Through 2018 is. And will then rise beyond that. Rising from about 2. 5 in 2018 to 3 in 2019 and then 4 by 20 2025. That results from a combination of factors i talked about earlier on. Part of what happens is the tax revenues rise a good deal in 2016, 2015. Because of the expiration of some tax provisions in the improving economy. So, tax revenues that we think will be 17. 7 in gdp this year we project to be 18. 4 of gdp next year, so theres an increase in tax revenues, market increase, even relative to the size of economy. But after 2016 tax revenues remain about the same relative to the size of the economy nrt rest of the decade, so the attached revenues move up quickly in 2016 but then are about flat to the share of gdp. On the outerly side, there are these various cross currents. Retirement of baby boomers is xersing this tremendous upward pressure on spending for Social Security and medicare and medicaid throughout the decade. Theyll be more than onethird more people receiving medicare and Social Security benefits at the end of the decade than receiving it today. That goes on all the time and pushes up total spending by the federal government. But at the same time, there are, well, the other thing pushing spending up is rising Interest Payments. We think Interest Rates will move up a fair bit over the next few years but the governments interest costs respond slowly to that because the government doesnt roll over all of its debt in any one year. So, the average Interest Rate thats paid on treasury debt responds gradually to market Interest Rates. We actually report in table 1. 3 on some page of the report, i dont have the page number, the average Interest Rate and debt held by the public, which rises throughout the decade, so we have these ageing baby boomers Rising Health care costs per person the expansion Health Care Subsidy all those things are pushing spending up throughout the decade, but the other hand there are declines in spending relative to gdp for defense purposes. And for all other nondefense purposes. Nondefense Discretionary Spending like Highway Infrastructure rnd support education and training support Health Research and many other things and in the nonSocial Security programs like snap and ssi and so on. So the specific pattern that was from year to year results in this whole combination of factors. The underlying thing is that we have a handful of very large programs that provide benefits to Older Americans. With a rising number of Older Americans and rising cost of Health Care Look for them to be much more expensive. So, by 2025 one quarter of total projected spending and so the other biggest pieces are made care, Interest Payments just those four things alone. Social security, medicare Interest Payments on the debt and defense spending those four items together represent twothirds of federal, total federal spending in 2025. So, the growth of federal spending is isnot coming from a growth across the board. Its really coming from growth in a handful of very large programs. But the other parts of the budget as i said earlier and we show in a report are getting small besides the gdp and that dance some of the effects of the growing spending on those items i just highlighted. So, the combination of these factors, but the trend is for rising deficits for reasons that are very well understood and have been predicted by analysts. Literally for decades. Yes. With reuters, just wondering if you could clarify your status here. Are you a contender bringing this down with my current status is to be the director of cbo. My the term ended on january 3rd, but under the budget act of 1974 directors can continue to serve until after their terms have expired until new directors are appointed and i like the job a lot, so im continuing to serve and i expect to do that. Unless and until a new director is appointed and whether a different director will be appointed and if so o, who that will be and when that will occur, i dont know. And im not going to be the first person to know or the first person to tell you. I think thats, that decision rests with budget committees and leadership of the house and senate. I think they will spaek to the matter when they want to speak to them. Liz farmer. Can you talk about your estimate that by 2039, public debt will exceed 30 of gdp and you said the last time that happened was just after world war ii. Can you talk about that concern . . This is a projection of our from last summer. When we look out 25 years in some senses, then even longer. We said that we thought that under current laws that debt would exceed 100 of gdp. The projection in this report of debt relative to gdp at the end of the decade is quite close to the projection we used last summer in building a longer the term projections. So, we have not ruled anything since last summer that would change your view that unless some significant changes are made or tax policies or both, that debt will exceed 100 of gdp within 25 years and be on an upward trajectory at that point in time. The only time before in our history where our publicly held debt has been around 100 of gdp was right at the end of the Second World War. What was different then was that the debt ran up sharply during the Second World War. But then starteded to come down relative to gdp. That was not particularly because of find that picture, not particularly because of large surpluses were run, but because as you mentioned, gdp grew rapidly and the budget was close to being in balance. The reason for the run up in debt was a particular one time event,s cost of fighting the war. The run up weve seen over the past half dozen years is heavily because of the financial crisis and recession. So, those are we hope onetime events, but but behind that is this ongoing and highly anticipated event of the retirement of the baby boom generation and moving into the large number of americans to an age where where the federal government provides significant benefits and also underlying this is the rising cost of health care per person, which has been less over the past half dozen years and had been projected before that, but none is less, we think best projection is continued growth in Health Care Cost for beneficiary, so, with many more people for Social Security and medicare and certain benefits in medicaid as time goes on and with the cost of Health Care Benefits rising, we now face a structural of longterm structural challenge that is quite different from situations facing the end of the Second World War and the fact that debt doesnt rise very much relative to gdp over the next decade does not mean it doesnt, that this doesnt have significant costs. It does. With debt this high relative to the size of the economy, there will be significant Interest Payments when Interest Rates rebound. There will be crowding out of Capital Investment as time goes on. There was a reduced flexibility for policymakers to respond to future financial crisis or recessions or International Events and theres a heightened risk of a fiscal crisis. So even if date were stable at 70 in gdp, there would be significant costs. More over, because of these underlying force we dont think the debt will be stable. Another point worth emphasize, even the reason that debt only rises a little bit relative to size of the economy over the coming decade, despite the demographic changes and Rising Health care costs is really because there is set now into current law a very sharp reduction in spending for everything apart from Social Security and Major Health Care programs compared to the historical experience. Nondefense Discretionary Spending, whole collection of programs proepuates money each year is is about the same percentage of gdp this year than it was 50 years ago and this spending has fluctuated relative to the size of the economy over time, but is showing no trend over 50 years. But under current law, given the caps on discretionary funding it will fall to a lower percentage of gdp than we have seen and turns out those are available that way before 50 years ago. Defense spending is a little more complicated. It has trended down relative to the size of the economy over the last 50 years, although not over the last 20. It fell a fair bit. In the end of the 80s or 90s or 2000s. But it has really stabilized this year of gdp over the last 20 years. What you think the need for that spending will be Going Forward depends on what world you think you should play in International Events. But defense spending is on track to fall to a lower small number relative to the size of the economy than it has been at any point which we have the data. So theres this sharp shift underway under current law in what the federal government spends its money on and because of the appripriations process occurs one year at a time, the caps have been set without any decisions being made about exactly which programs or which Services Wont be provided in the future that would have been provided under the historical experience with those government programs. And we highlight that issue in our report. As a risk Going Forward. That the caps have been set, that the decisions about what will be cut and not be cut, have not yet been made. Other questions . Can you go back and just talk a little bit more about interest spending projections, although its lower than in the past higher than it is today and just wondering whether you consider the possibility that Interest Rates have declined. And are going to be lower in the future than anybody would have predicted four or five years ago, today, what that should be. As i mentioned, we expect Interest Rates will rise considerably from the current levels, but we dont think they will rise up to the levels they were at. Over the past few decades. A rekha pitchlation of these arts in the argument. Weve done this thinking about what would be relative in the future, during a period of reasonable stability in the economy and relative to that period, we think that inflation adjusted treasury Interest Rates will be about three quarters of a percentage point lower in the future than theyve been in the past and that three quarter of a percentage point difference is pretty substantial. We project that nominal tenyear treasury note rates will be 4. 6 by the end of the decade. With c p pi inflation of 2. 4 that means an inflation adjusted tenyear rate of 2. 2 . That compares to about 3 for real treasury tenure rate from 1990 to 2007 period. So weve made a substantial downward adjustment and that adjustment is the next effect of a number of factors. We list four going in different directions. The four we list pushing down Interest Rates relative to the history are number one slower froet of the labor force. Two, Slower Growth of productivity. And both of those factors we think lower Interest Rates because they basically effect larger product of capital in the production process. We think that the greater income quality is pushing you have saving, which tendses to lower Interest Rates and we think there will be a greater risk premium on private securities, which is to say theyll be held down because of a greater demand for safe assets. Those four factors alone would have argued for a larger reduction. On the other side, four other factors we think will push up Interest Rates one of those is greater federal debt. Another one is slightly smaller capital inflows from overseas. Third is fewer people in their prime saving years. Just another way of saying baby boomers are moving to oler ages. So fewer people in their prime saving years. And fourth, a higher capital share of income argues for higher return to capital that compete with capital for investors. So, as best we can judge the four factors pushing down rates relative to this experience will be more powerful than those pushing up rates by a good deal. Thats why weve made this a downward revision relative to history, but none the less we think rates will move up a good deal from now. And that is consistent we think with what expectations of participants and Financial Markets and consistent with our own modeling of demand for funds as the economy strengthens. So, and again, these are changes we made last summer and the budget outlook and incorporated into is our august projections. We made a further projection basically because of a decline in Interest Rates in other countries. That makes u. S. Assets a little bit more attractive and we think pulls more money into this country. This is no doubt one of the sources of great uncertainty in our projections and we offer an appendic appendix to the report rules of them to how it would be different if Economic Projections were different. Rules of thumb for faster or slow Slower Growth of real gdp, for higher or lower inflation and Interest Rates and not surprisingly surprisingly, budget outcomes are quite sensitive to Interest Rates. Thats more true than say a decade ago because debt i