CBO Director Phillip Swagel Testifies In Front Of The Senate Budget Committee

5 months ago

The Senate Budget Committee held a hearing on Tuesday with CBO Director Phillip Swagel.

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Transcript

00:00:00I'm pleased that we are joined by Director Swagel today to discuss the federal government's

00:00:13fiscal trajectory.

00:00:16My Republican colleagues complain that I and my Democratic colleagues are unconcerned

00:00:19about our nation's fiscal situation because they can't acknowledge the well-documented

00:00:25fiscal dangers of climate havoc, and they won't fix our corrupted tax system to require

00:00:31billionaires and megacorporations to pay fair taxes.

00:00:35We can at least talk about health care delivery system reform as a remedy for our fiscal trajectory.

00:00:41One out of three ain't bad.

00:00:44As we've noted at prior hearings, more than $10 trillion, about 35% of our national debt,

00:00:51stems from two economic shocks to the economy.

00:00:54The 2008 financial crisis and the COVID pandemic.

00:00:59As we've heard over and over again at our hearings, the economic shocks from climate

00:01:04change may well be worse.

00:01:07I suspect that Director Swagel would be the first to agree that his 10-year baseline projections

00:01:11are shot if we experience another massive shock to the economy.

00:01:17Ignoring looming systemic economic shocks to the economy would be imprudent, even dangerous.

00:01:25Prior to the 2008 financial crisis, the committee held no hearings on brewing trouble in the

00:01:31mortgage markets, nor did this committee hold a single hearing on the economic risk from

00:01:37global pandemics.

00:01:39If this committee or any committee had warned effectively of those looming shocks and Congress

00:01:43had then acted to better regulate mortgage markets, to invest in vaccine development

00:01:48and pandemic preparedness, lives would have been saved and trillions in economic harm avoided.

00:01:55In the first hearing we held under my chairmanship, I spoke about science as the headlights for humanity.

00:02:02A well-run committee can shine the headlights of knowledge, including knowledge about climate

00:02:07havoc, into the future to head off dangers lurking there.

00:02:12Our national debt is not only the result of those two economic shocks, of course.

00:02:17It is also the result of repeated rounds of Republican tax cuts that primarily benefited

00:02:22giant corporations and very, very wealthy individuals.

00:02:26The Bush and Trump tax cuts skewed to the wealthy and big corporations have added another

00:02:31$10 trillion to the national debt.

00:02:35If not for those tax cuts, the debt-to-GDP ratio, our best fiscal safety metric, would

00:02:42be declining in perpetuity.

00:02:46Helping the wealthy avoid taxes is such an infatuation that House Republicans even brought

00:02:51the United States to the brink of default trying to prevent the IRS from cracking down

00:02:57on wealthy tax cheats.

00:03:00The third great driver of our fiscal perils is an aging population.

00:03:05As our population ages, we spend more on Social Security and Medicare.

00:03:10Add in the developed world's most inefficient healthcare, and you've got a huge fiscal cost.

00:03:16CBO has found that reforming how we pay for healthcare and increasing participation in

00:03:22accountable care organizations and other value-based care enterprises can save money without cutting

00:03:30benefits.

00:03:31Indeed, CBO found that actual and projected federal health spending over the 2010 to 2033

00:03:37period was $6.3 trillion, $6.3 trillion lower than predicted, which I attribute to improving

00:03:46quality and moving to value-based care.

00:03:50I am pleased to be working with Ranking Member Grassley and other Republicans on delivery

00:03:54system reform proposals to do more of that.

00:03:59Democrats have always pledged to protect and preserve Social Security and Medicare.

00:04:02For years, Republicans sought to cut both programs.

00:04:06Now they say they don't.

00:04:07If so, that is wonderful news, and I applaud it.

00:04:11If we all agree that we're not cutting Social Security and Medicare, and we all agree that

00:04:16their trust funds become cash-insolvent in approximately 10 years, there's only one solution

00:04:23left, raise new revenues to fund Social Security and Medicare.

00:04:28We can do this by decorrupting the tax code so that big corporations and billionaires

00:04:34don't pay less in taxes than nurses and firefighters.

00:04:37My Medicare and Social Security Fair Share Act will protect Social Security and Medicare

00:04:42forever, or at least for as far as actuarial science can see.

00:04:49Imagine if American families could erase from their list of worries, what if Social Security

00:04:53and Medicare won't be there for me?

00:04:57What a blessing that would be.

00:05:00For 18 months, we've heard a steady chorus of Republican voices expressing alarm about

00:05:04debt and deficits and calling for this committee to focus on its real job.

00:05:09It's hard to reconcile that with Republicans voting for the 2017 reconciliation bill that

00:05:14cut taxes for the wealthy and large corporations and blew a $2 trillion hole in the deficit.

00:05:20It is hard to reconcile that with Republican plans to extend those cuts and add almost

00:05:25$5 trillion more to the deficit.

00:05:28And it's hard to reconcile that with Republican calls to spend an extra $6 trillion on defense

00:05:35with no proposed offset.

00:05:38And what is the Republican plan for the looming insolvencies of the Social Security and Medicare

00:05:42trust funds?

00:05:45MAGA Republicans live in a fantasy world of a balanced budget with extended Trump tax

00:05:51cuts and funded Social Security, Medicare, defense, and veterans programs.

00:05:57Can't happen.

00:05:58CBO says it's arithmetically impossible, even if Republicans cut everything else to

00:06:05zero in the entire budget.

00:06:09To get real about debt and deficits, we have to avert climate-driven shocks and persistent

00:06:15climateflation.

00:06:17We have to decorrupt the tax code so that big corporations and billionaires are no longer

00:06:22a favored free-riding elite.

00:06:26And we have to bring down health care costs without cutting benefits with common-sense

00:06:30delivery system reforms, which is why I focus on those things.

00:06:36Senator Grassley.

00:06:37Before I read my statement, I want to comment on what you said about Social Security and

00:06:44Medicare.

00:06:45I'm not criticizing what you said.

00:06:47I'm going back to this comes up every day.

00:06:51Why come you guys can't do something about saving Social Security and Medicare?

00:06:57And I use history as an example.

00:07:02I always start out by saying, you know why nothing gets done in Washington, D.C. about

00:07:08Medicare and Social Security now?

00:07:10There's no Reagans and Tip O'Neills in this town anymore because they found where we're

00:07:16going to be in ten years on these two programs.

00:07:22They were right there in 1983 or 84 or whenever it was.

00:07:28And they raised taxes.

00:07:30They cut benefits.

00:07:32They changed formulas and probably did a whole lot of other things that I don't remember.

00:07:41And they probably thought they were doing something for 20 years, I tell my constituents.

00:07:47But they did something for 50 years now if we still go to 2033.

00:07:54And they did it because they got together and said, you know, these programs are I guess

00:08:04then they were only talking about Social Security.

00:08:07Social Security was so important.

00:08:08We can't let it go broke.

00:08:12And they built up a surplus that we're still using of trillions and trillions of dollars.

00:08:18And that's going to be spent down by 2033.

00:08:23And if we don't do something, Social Security is going to be cut.

00:08:28It's going to be cut by I guess 23% or something.

00:08:37So I guess I'm trying to if there's any comment that I'm trying to make to you, it is that

00:08:44they didn't just raise taxes.

00:08:47They got together in a program that was bipartisan and probably passed the Senate 90 to 10, and

00:08:53I voted for it.

00:08:55Well, Mr. Chairman, I thank you for agreeing to my request for today's hearing with Director

00:09:00Swigle.

00:09:02It's been nearly four years since the CBO Director last testified before the Senate

00:09:07Budget Committee on the nation's budget outlook.

00:09:11That's far too long for what's traditionally been a routine occurrence in the Budget Committee,

00:09:18particularly given the budget hole we've dug ourselves into.

00:09:23Federal Reserve Chairman Powell stated earlier this year that it's, quote, past time to get

00:09:29back to an adult conversation about elected officials, about getting the federal government

00:09:36back on a sustainable path, end of quotation.

00:09:41Today in the Budget Committee, that conversation has finally taken place.

00:09:46Director Swigle, thank you for coming.

00:09:48And I think you're going to tell each of us things that we'd rather not hear.

00:09:54But that's part and parcel of having what Powell called an adult conversation.

00:10:00So in moving beyond the partisan blame game of who's most at fault for our fiscal mess,

00:10:08President Biden tried to play this game at the recent presidential debate in an attempt

00:10:14to claim the mantle of fiscal responsibility.

00:10:18The reality is that President Biden has been dragged kicking and screaming to agree to

00:10:25even modest spending restraints as part of last year's Fiscal Responsibility Act.

00:10:32The fact is our nation's debt will soon top $35 trillion.

00:10:38Next year's interest payments will exceed $1 trillion.

00:10:42And in 10 years, Social Security will go broke if we don't take bipartisan action to save it.

00:10:49I shouldn't say go broke because you're still going to have the revenue coming in that'll

00:10:55pay 77% of what benefits are today.

00:10:59CBO has warned Congress for decades that we'd face a fiscal reckoning due to ballooning

00:11:06mandatory spending.

00:11:08That reckoning is now at our doorstep.

00:11:12Bipartisan action, rising debt will leave future generations facing higher interest

00:11:17rates, lower incomes, greater inflation, and the risk of full-blown fiscal crisis.

00:11:25Avoiding this requires a robust discussion of revenue and spending.

00:11:31As I've said in previous hearings, I have a record of going after genuine tech's loopholes

00:11:39and wasteful carve-outs, and I'm open to reviewing tax subsidies.

00:11:44Now a very good place to start is with those in the so-called Inflation Reduction Act,

00:11:50which CBO has said actually increases inflation.

00:11:55Ending the law's subsidies for luxury EVs and other regressive giveaways that have exploded

00:12:05in cost could net hundreds of billions of savings.

00:12:10Contrary to claims from the left, taxing the so-called rich is no silver bullet to our

00:12:18fiscal outlook.

00:12:21Even confiscating, I want to emphasize confiscating, not taxing, all income over $1 million wouldn't

00:12:31close our $2 trillion deficit.

00:12:35History proves that high tax rates fail to raise significant revenue.

00:12:40So I'm repeating something I said here a couple meetings ago.

00:12:45Taxpayers and workers and investors are smarter than we are in the United States Senate because

00:12:51we've had 93 marginal tax rates, then 70% marginal tax rates, 50%, 30%, back up to 40%,

00:13:01and you can go on and on.

00:13:03But regardless of the rate, we brought in about the same amount of revenue as you can

00:13:11see from this chart.

00:13:15So we ought to stop to think that we senators are not smarter than the taxpayers.

00:13:21Rather than punish success, tax reform should focus on incentivizing work, savings, and

00:13:28investment.

00:13:30And that's exactly what Federal Reserve Chairman Volcker advised Congress in the 1980s at

00:13:36a similar time of large deficits and inflation.

00:13:40It was a recipe for success then and can be a recipe for success at this point.

00:13:47Most importantly, we must have a frank discussion about Washington's spending addiction.

00:13:53Whereas revenues are in line with historical levels, federal spending relative to the size

00:14:00of our economy is at heights previously reserved for wars and recessions and still growing.

00:14:09Record spending is driving up unprecedented debt and deficits, which fuel more spending

00:14:15in the form of ballooning interest payments.

00:14:19Interest costs are rapidly becoming one of the largest line items in the federal budget.

00:14:26Next year, we'll see a new record as a share of gross share of our economy.

00:14:34No single chart can capture the size and scope of our fiscal mess, but the closest to it

00:14:41is a depiction of federal relative to the size, the debt relative to the size of our

00:14:47economy.

00:14:48We're on track to set a new record high by 2027, exceeding the World War II era record.

00:14:58While debt to GDP rate, while debt to GDP declined quickly after World War II, today

00:15:10our debt is infinitely projected to grow faster than the economy.

00:15:16And that's the definition of unsustainable.

00:15:19Yet President Biden continues to use his pen and phone to spend trillions, particularly

00:15:26on student loan bailouts and these unprecedented fiscal times.

00:15:31That's the height of recklessness.

00:15:34We must stop digging ourselves into an ever deeper budget hole.

00:15:41And I think the budget agreement reached between McCarthy and Biden a year ago starts

00:15:48us down that track, maybe not as aggressively as we should, but it's still a start.

00:15:55We must find common fiscal goals that can serve as a catalyst for that continuing that

00:16:01bipartisan action.

00:16:03Can we agree to debt to GDP can increase forever without consequences?

00:16:10Can we agree in a debt to GDP level that we mustn't cross?

00:16:16One last note, this week marks the 50th anniversary of the Congressional Budget Act, which created

00:16:23CBO and the Budget Committee.

00:16:26A lot has changed since 1974 from the way Congress operates to the size and scope of

00:16:34the federal budget.

00:16:36Updating the Budget Act for the fiscal 21st century is a shared goal worth continuing

00:16:47to work towards.

00:16:48So once again, thank you, Mr. Chairman, for this meeting, and welcome to you, Director

00:16:53Swagle.

00:16:55Thank you very much, Senator Grassley.

00:16:59Your mention of can we agree to a debt to GDP level provokes me to remember my work

00:17:05with Chairman Enzi to find a safe debt to GDP level, a glide slope to get there, and

00:17:13guardrails to assure that we're not cheating on it.

00:17:17And I think that that matrix still remains a smart one.

00:17:22Our witness today to speak about his agency's latest economic and budgetary projections

00:17:27is Dr. Philip Swagle, Director of the Congressional Budget Office.

00:17:31Prior to his appointment to lead CBO in 2019, Swagle was a member of the Council of Economic

00:17:36Advisors during the Bush administration and served as Assistant Secretary of the Treasury

00:17:40for Economic Policy from 2006 to 2009.

00:17:44Director Swagle, welcome.

00:17:46Please proceed with your statement.

00:17:48Your entire testimony will be made a matter of record.

00:17:53Thank you.

00:17:54Chairman Whitehouse, Ranking Member Grassley, and members of the committee, thank you for

00:17:58inviting me to testify about the budget and economic outlook.

00:18:01In the projections we released last month, the projected deficit grows from nearly $2

00:18:07trillion this year to $2.8 trillion in 2034.

00:18:14Measured in relation to economic output, deficits during the coming decades are about 70 percent

00:18:20larger than their historical average over the past 50 years.

00:18:24We project the deficit this year to equal 7 percent of GDP, with deficits projected

00:18:30to remain over 6 percent into the future.

00:18:35Such large deficits are historically unusual outside of a war, the financial crisis, or

00:18:40the pandemic.

00:18:43Net interest costs are a large and growing contributor to the deficit.

00:18:47By the end of the 10-year budget window, net interest costs are roughly one and a

00:18:51half times larger than either defense or non-defense discretionary spending.

00:18:56Also boosting deficits are two underlying trends, the aging of the population and growth

00:19:02in federal health care costs per beneficiary.

00:19:05Those trends both put upward pressure on mandatory spending.

00:19:10Measured in relation to economic output, federal debt held by the public rises from 99 percent

00:19:17in 2024 to 122 percent in 2034, and as you both said, that surpasses its historical peak.

00:19:26From 2024 to 2034, the 10-year budget window, the deficit is 11 percent larger than we projected

00:19:34in February, primarily because the appropriations enacted in March and April, including both

00:19:40the fiscal year 2024 appropriations and the $95 billion security supplemental, those get

00:19:47extended out in our budget projections by statute.

00:19:52The additional funding increases projected discretionary spending by $1.3 trillion, but

00:19:58of course the actual spending in the future is up to the decisions of future Congresses.

00:20:05Including the added debt service, legislative changes increase deficits by $1.6 trillion

00:20:12through 2034, and all changes increase projected deficits by $2.1 trillion.

00:20:19In our projections, a larger labor force stemming from the surge of immigration that began in

00:20:242021 reduces deficits by about $900 billion over the 2024 to 2034 period.

00:20:33Revenues are about $1.2 trillion greater than they otherwise would be because of higher

00:20:38individual income and payroll taxes paid by the larger labor force.

00:20:44Outlays would be $278 billion greater, of which $194 billion is greater spending, mostly

00:20:53for benefit programs, and $84 billion is higher interest payments.

00:20:58We estimate that the larger labor force from the immigration surge will lead GDP to be

00:21:03nearly $9 trillion greater than it would otherwise be.

00:21:07Now these effects of the immigration surge on the federal deficit do not include effects

00:21:13on discretionary spending.

00:21:15Those effects depend on the decisions that will be made by Congress in the future.

00:21:20We're working to provide additional information on the potential impacts of the immigration

00:21:24surge on discretionary appropriations.

00:21:27And the surge in immigration will also affect the budgets of state and local governments,

00:21:32and we are currently examining those effects, and those are not included in the budget update.

00:21:38Let me finish by just going back to the beginning to say that the fiscal outlook is daunting.

00:21:43The United States faces a budget trajectory with deficits of more than 6% of GDP into

00:21:49the future.

00:21:50Our projections suggest that changes in fiscal policy must be made to mitigate adverse consequences

00:21:57of high and rising debt.

00:21:59Let me stop there, and I'm happy to take your questions.

00:22:02Thanks very much, Director.

00:22:08The CBO, about two months ago, released new estimates that project that an extension of

00:22:20the 2017 Trump tax cuts would add $4.6 trillion to the debt over 10 years.

00:22:27Is that correct?

00:22:28Yes, that's correct.

00:22:31And does CBO believe that the original 2017 Trump tax cuts paid for themselves?

00:22:38And does any CBO data support that extension of these tax cuts would pay for themselves?

00:22:46No.

00:22:47There was an effect of the tax cuts on the economy and back to revenues, but by far it

00:22:53did not pay for itself, and the same would apply for the extension of the 2017 Act.

00:22:59CBO's long-term budget projections back in 2012 were the last time that CBO showed debt

00:23:08declining as a share of GDP.

00:23:11Since then, Congress has cut taxes numerous times, including extending most of the Bush

00:23:16tax cuts and then piling on the 2017 Trump tax cuts.

00:23:22Is it a fact, Director Swagel, that projected primary spending, that is federal non-interest

00:23:26spending, is now lower than it was projected to be in 2012?

00:23:32That's correct.

00:23:33And the interest payments have gone up, but as you said, the non-interest payments have

00:23:37gone down.

00:23:38So let me just, to put this into context, let's take a look at this graphic here, which

00:23:45shows from 1994 to 2054 how revenues and spending have worked.

00:23:53Social Security has gone up, and is that consistent with an aging population?

00:23:58That's right.

00:23:59That results from the aging population.

00:24:00And health care spending has gone up even more.

00:24:03Does that also relate to an aging population?

00:24:05Right.

00:24:06That's both the aging population and rapid growth in health costs.

00:24:10So other mandatory spending had a huge surge right here.

00:24:14Can you explain what that was?

00:24:16Was that COVID?

00:24:17That's COVID.

00:24:18And the spending, because of the Senate rules, the spending in the reconciliation bill, I'm

00:24:25sorry, the COVID spending and then the 2021 reconciliation spending was all mandatory.

00:24:31Yes.

00:24:32And then here's defense discretionary spending.

00:24:36And then this is non-defense discretionary spending, which, as you can see, has been

00:24:39fairly constant over all of those years.

00:24:44This is the place where our Republican friends want to focus all of their attention related

00:24:52to debt and deficits.

00:24:54But I think, as we can see, even if you zeroed that out, we still wouldn't get out of our

00:25:00problems.

00:25:01Correct?

00:25:02No.

00:25:03That's correct.

00:25:04And if discretionary spending was entirely eliminated, that wouldn't take the deficit

00:25:09to zero.

00:25:10Great.

00:25:11And then, as has been pointed out, interest costs are what are going up.

00:25:16That's the biggest number.

00:25:18And is it true that tax cuts have an effect on the interest obligations of the country?

00:25:26That's right.

00:25:27The rising interest payments, as you noted, reflect both higher interest rates and also

00:25:31more debt.

00:25:33And the tax cuts lead to less revenue, which mean more debt.

00:25:38Yep.

00:25:39So what I've added here, this is what our actual revenue has looked like.

00:25:46If the Bush tax cuts had not been extended back in 2012, here's what our revenue would

00:25:53look like.

00:25:54We'd be darn close to operating in an effective way.

00:26:00So you can ascribe an enormous amount of our problem to the extension of the Bush tax

00:26:07cuts.

00:26:08Are these numbers correct?

00:26:09Can you vouch for the extension of the Bush tax cuts having that much of an effect on

00:26:15revenues?

00:26:16You know, I'd have to look at it.

00:26:20From this distance, I can't see it.

00:26:22But certainly, the 2012 extension of the 2001 and 2003 tax acts had an effect on revenues,

00:26:29as you said.

00:26:30A pretty massive effect on debt and on deficits because of lost revenues, correct?

00:26:37That's right.

00:26:38Yes.

00:26:39And then one other one I wanted to show you.

00:26:44If you look at what's been added to the national debt, this is Trump time, $3.6 trillion was

00:26:53added.

00:26:55And that was COVID relief.

00:26:56So we can understand that was a little bit of an emergency.

00:27:00But $4.8 trillion was non-COVID added to the debt.

00:27:06By contrast, there's still $2.1 trillion left under Biden, but $2.2 trillion in non-COVID.

00:27:14So does the math add up that under Biden, the addition to the debt is less than half

00:27:24than under Trump?

00:27:25I mean, you know, I'd have to look at the numbers.

00:27:28But as you said, the debt, the dollars of debt and the debt ratio went way up, especially

00:27:33during the pandemic.

00:27:34But even before that, the debt ratio went up.

00:27:37Senator Grassley.

00:27:38Mr. Chairman, you referred to analysis claiming to compare Trump and Biden fiscal records.

00:27:49I've criticized both presidents for not doing enough to control spending and deficit.

00:27:54But I don't put much stock in a study of Biden's fiscal records that leaves out hundreds

00:28:01of billions of dollars on unlawful student loan giveaways or that stubbornly assumes

00:28:07Democrats' Inflation Enhancing Reconciliation Act is going to reduce deficits despite all

00:28:14the evidence to the contrary.

00:28:16I'm glad that your party is willing to at least moving away from the delusional claim

00:28:24that President Biden's agenda has reduced the deficit, even if the 4.3 trillion that

00:28:31they're now pointing to is a serious underestimate of how much Biden has added to the deficit.

00:28:40Mr. Schweigel, as I said earlier, I'm willing to consider putting certain tax breaks on

00:28:49the chopping block if it is part of a deal to rein in spending and deficits.

00:28:55But taxes on the so-called wealthy alone aren't enough to dig us out of the fiscal hole that

00:29:01we're in.

00:29:03Democrat proposals used to tax the rich either barely make a dent in the deficit or they're

00:29:10designed to sneakily tax a lot more than just the rich.

00:29:15So my question, has CBO analyzed any legislation or determined it would put the debt on a sustainable

00:29:27course just by increasing taxes on those over the 1%, at the top 1%?

00:29:34No, CBO has not analyzed any legislation that would do that.

00:29:38If you were to stabilize the debt solely by increasing the tax rate on incomes above

00:29:44400,000, how high would the rate have to be?

00:29:50We haven't done the analysis of how high, but it would have to be a substantial increase

00:29:54on such a narrow base.

00:29:58And wouldn't the tax rate required have significant behavioral effect and serious negative consequences

00:30:06for the economy?

00:30:07Yes.

00:30:08You know, much higher tax rate like that would have macroeconomic feedbacks that would affect

00:30:14growth and job creation.

00:30:17Recently the Wall Street Journal published an essay discussing historical examples of

00:30:22fiscal mismanaging contributing to the downfall of once great powers throughout history.

00:30:30Historian Neil Ferguson noted how the general rule of history has been that, and I quote

00:30:36him, any great power that spends more on debt service than on defense will not stay

00:30:44great for a long time, very long time, end of quote.

00:30:49According to CBO, we just crossed this fiscal Rubicon.

00:30:53The U.S. will spend more on interest than on defense this year and every year onward.

00:30:59In your view, do rising debt service costs pose a threat to economic stability?

00:31:07And what historical lessons can you inform our current fiscal situation?

00:31:13Yes.

00:31:14They do.

00:31:15And in a sense, that's the near term fiscal risk is the rising interest payments.

00:31:20Again, it's both higher interest rates and more debt leading to those higher interest

00:31:26payments, and that affects all the other choices that you as policymakers want.

00:31:30If you want more spending on something or tax relief on something, the rising interest

00:31:36payments crowd that out and then have effects on the private economy, that there's less,

00:31:42you know, fewer resources available for the private sector, less private investment, job

00:31:48creation, and so on.

00:31:50The Constitution gives the power of the purse to Congress, but the current administration

00:31:55has used rules, regulations, and other executive actions to make major policy changes with

00:32:03unprecedented consequences for the federal budget, and all of this without a single vote

00:32:08of Congress.

00:32:10How have executive actions changed CBO's budget projections since the agency's February 2021

00:32:20baseline?

00:32:21Yes, sir.

00:32:23So we track those, and those go into the baseline.

00:32:26I'll list a couple of the largest ones, the executive actions, and you mentioned student

00:32:30loans.

00:32:32That's a total of about $560 billion, so more than half a trillion dollars in additional

00:32:38outlays so far, and then there's sort of more court cases and more announcements, so that's

00:32:45as of, say, two weeks ago.

00:32:48So that's one.

00:32:49The second is the Thrifty Food Plan that redefined the basket used in the SNAP program.

00:32:56That along with higher food prices led to about $200 to $250 billion of higher costs.

00:33:02There are Medicaid executive actions to streamline enrollment.

00:33:08That was about $164 billion.

00:33:11There are others.

00:33:12The EPA's tailpipe rule will have costs as well, in the sense that interacts with the

00:33:18provisions in the Inflation Reduction Act that subsidize electric vehicles.

00:33:23The tailpipe rule will push consumers toward EVs.

00:33:27There's ACA regulations addressing the so-called family glitch, extending subsidies to DACA

00:33:33recipients, and more.

00:33:36I should mention that some of the administration's actions have reduced the deficit.

00:33:42They had a rule that changed the payments to Medicare Advantage plans, and that reduced

00:33:47the deficit.

00:33:48So it's a bit of both, but as you said, it's mainly on the outlay side.

00:33:55Senator Murray, Distinguished Chairman of Appropriations.

00:33:57Thank you, Chair Whitehouse.

00:33:59Really appreciate you holding this hearing.

00:34:01Director Swigle, good to see you again.

00:34:03Thank you to you and all your staff at CBO for the critical work you do for our Congress.

00:34:09You know, Mr. Chairman, my dad actually ran a five and nine store.

00:34:14If you nodded, then you just gave away your age, but he ran a five and dime store, and

00:34:20my mom worked as a bookkeeper when we were growing up, but you know, you don't have to

00:34:24run a cash register or be an accountant to understand the really basic fact that when

00:34:29it comes to our national budget, spending is just half of the equation.

00:34:34There is also revenue, and I mention this because when our Republican colleagues talk

00:34:39about debt and deficits, they tend to discuss only that one side of the ledger, which is

00:34:45spending.

00:34:46So I want to focus on something that goes overlooked, or rather goes unsaid, by my Republican

00:34:51colleagues, because while they love to talk about reining in spending, as the Chairman

00:34:56just talked about, which in my mind actually means the investments that we make for families

00:35:01and working people, I don't hear the same concern regarding the huge tax breaks that

00:35:06go to mostly billionaires.

00:35:09We need to get one thing clear.

00:35:11Despite all the bogeymen that Republicans like to point to driving the national debt,

00:35:16the reality is that the single biggest driver of our national debt since 2001 has been Republican

00:35:24tax cuts.

00:35:26The Trump and Bush tax cuts have cost our nation over $10 trillion and counting.

00:35:34What do Republicans want to do if they return to power?

00:35:36What's at the top of the Trump economic agenda?

00:35:39Do they want to solve the child care crisis?

00:35:42Do they want to extend health care credits that are saving millions of families thousands

00:35:46of dollars?

00:35:47Of course not.

00:35:48They want more tax cuts for the ultra-wealthy and biggest corporations.

00:35:53Republicans' big economic vision is to extend their horribly one-sided Trump tax cuts.

00:35:59If Republicans are so concerned about the national debt, why is it that every time they

00:36:05get the chance, they start giving away cash and writing tax loopholes for megacorporations?

00:36:11So we've got to get real.

00:36:13There's no reason that investors on Wall Street should pay less in taxes than a firefighter

00:36:18in Spokane, Washington, or a nurse in Seattle, or that companies making billions in profits

00:36:25should pay less than mom-and-pop shops in Washington state.

00:36:29And there's every reason for us to ask the wealthiest people in our country to pay their

00:36:34fair share so we can make this country stronger for everyone.

00:36:38So for parents back in Washington state, for working families, they don't want us to invest

00:36:42in the richest people in the world.

00:36:44They want us to invest in our roads and schools and health care and security and ending the

00:36:50child care crisis.

00:36:51Things that actually make their lives better.

00:36:53You have to be kind of out of touch to miss that.

00:36:56That is, for my colleagues to know, why Vice Chair Collins and I have both worked together

00:37:01to reach a bipartisan agreement to increase both defense and non-defense discretionary

00:37:07funding as part of our FY25 appropriations process so we can invest in our security and

00:37:15in our working families and our communities, not just to throw money away at billionaires.

00:37:21Now, Director, I have talked at length about the hardship and pain capping non-defense

00:37:27discretionary spending puts on Americans.

00:37:31Yet, Republicans only insist on those caps.

00:37:34They also put outsized focus on the spending as it relates to the deficit.

00:37:39Current NDD spending as a percentage of GDP has declined from the long-term average and

00:37:46NDD spending accounts for less than a single percent of the increase in spending since

00:37:53the start of the pandemic in 2019.

00:37:56Which are the spending levels Republicans want us to return to?

00:38:00Director Swigal, beyond emergency pandemic spending, what are the significant drivers

00:38:05behind our country's deficit over the last decade?

00:38:08Yeah, it's, I would point to three things.

00:38:12One is rising interest payments.

00:38:15Two is rising healthcare costs.

00:38:18And then three is rising spending on other benefit programs.

00:38:23Social Security is the largest of them.

00:38:24And so it's the aging of the population, it's healthcare cost growth, and it's interest

00:38:30costs.

00:38:32And revenue?

00:38:34And revenue is not kept up.

00:38:36You can see that in the charts put up by both the chair and the ranking member, that legislative

00:38:40action has made it so that rather than rising, revenue as a share of GDP has remained flat.

00:38:48So as spending has gone up, revenue is not kept up.

00:38:51Okay, and there was one legislative change since your last projection in February that

00:38:55affected revenue, the IRS rescissions.

00:38:58According to your report, these rescissions accounted for a $32 billion reduction in projected

00:39:05revenue.

00:39:06The IRS and Treasury project six-fold returns for every dollar spent on tax informant, yet

00:39:12we continue to hear from our Republican friends that we should target IRS funding as part

00:39:18of the increasing deficit.

00:39:19So last question, how does the rescinding funds provided to the IRS under the Inflation

00:39:25Reduction Act impact revenue and deficits?

00:39:29So in our calculations, a dollar that goes to the IRS results in an additional two dollars

00:39:36of revenue.

00:39:37So for a net of one.

00:39:38So the rescissions on net increase the deficit.

00:39:41Thank you, appreciate that.

00:39:44Senator Marshall is up now.

00:39:47Senator Padilla has to go and preside.

00:39:50So I think with Senator Lujan's permission, we will reverse.

00:39:56So the order will be Marshall, Padilla, the next Republican, and then Senator Lujan.

00:40:04I'm happy to yield to Senator Padilla if he needs to scoot.

00:40:09You want to go ahead, Alex?

00:40:14Oh, don't worry, you'll be next.

00:40:19That's kind of you.

00:40:20Thank you.

00:40:21Thank you both for your accommodation and your consideration.

00:40:31Thank you, Mr. Chair, for this opportunity.

00:40:32Mr. Director, how are you this morning?

00:40:35Yeah.

00:40:36Thank you very well.

00:40:37Good.

00:40:38Thank you for being here.

00:40:39I'm pleased to have this opportunity to talk to you about a subject that I've been familiar

00:40:44with for a long, long time.

00:40:47And I'm speaking specifically to the dynamic of immigration and its impact on our economy.

00:40:59Come from the state of California, not just the most populous state in the nation, the

00:41:02most diverse state in the nation, home to more immigrants than any state in the nation.

00:41:08And it has the largest economy of any state in the nation as well.

00:41:12So we know full well that immigration and the contributions of immigrants is critical

00:41:18to the economy and critical to the growth of the United States.

00:41:23And now, thanks to the hard work of the CBO, you've all crunched the numbers and now project

00:41:30that U.S. revenue will be $1.2 trillion higher over the next 10 years because of the impact

00:41:39of migrants and migrants in the workforce as we see it today.

00:41:46And I would imagine that given my Republican colleagues' obsession with our debt, that

00:41:53they would welcome the news that CBO also found that this increased immigration, migrants,

00:41:59and their impact on the workforce leads to lower deficits.

00:42:04So it seems like it's something that we ought to embrace.

00:42:07So would you please speak to how the CBO was able to quantify the economic benefits

00:42:12of immigration and what the impact would be on revenues to the Federal Treasury if more

00:42:19than 10 million undocumented immigrants, many of the workforce, were to be deported?

00:42:24Yes.

00:42:25So we haven't analyzed the deportation, but there's a sense in which it would be the opposite

00:42:33of the immigration increase that you mentioned.

00:42:36So we said there's about a $9 trillion increase in GDP from the immigrants coming in.

00:42:41They add to the labor force, they pay taxes, they fill jobs.

00:42:47And so deportation would in some sense reverse that, that there would be a big negative hit

00:42:52to GDP, the labor force would shrink, and revenue would go down.

00:42:58That seems pretty logical to me, so thank you for that.

00:43:01I know you're from the CBO, not the Department of Labor, but I also think if we look at the

00:43:07data that is out there, even with the level of migration we've seen in the course of the

00:43:13last decade, we are experiencing record sustained low levels of unemployment.

00:43:21And wages continue to rise.

00:43:24So for those concerned, those who spread the false rhetoric that immigrants are taking

00:43:29American jobs, or they're a downward force on wages, that has proven to be false.

00:43:39Do you have any data that would suggest otherwise?

00:43:41No, that's right.

00:43:43There's a sense in which the immigration surge explains how our economy continued to grow

00:43:48rapidly and create jobs, even when the labor market, say two years ago, looked to be tight.

00:43:54It's the added, the immigrants adding to the labor force, these are additional jobs and

00:43:58additional income.

00:43:59Right.

00:44:00So I also want to ask about a related dynamic that is a priority concern for this committee.

00:44:07We've, Senator Braun has joined us, and he's always one of the first, if not the first,

00:44:11to raise concerns about the debt.

00:44:14We're talking about the contributions of immigrants to the workforce and to the economy, and the

00:44:20net benefit that there's been on revenues, debt reduction, et cetera.

00:44:25But we also speak in this committee regularly about the solvency of our social safety net

00:44:31programs, particularly Social Security and Medicare, that between 2010 and 2020, the

00:44:36U.S. saw its lowest population growth of any decade since the 1930s.

00:44:42And it presents a huge challenge to those social safety net programs that rely on current

00:44:46workers to fund the benefits for America's retirees.

00:44:52And we know that immigrants help sustain the programs like Social Security and Medicare,

00:44:57even though they don't benefit from those programs themselves.

00:45:00In 2022 alone, immigrants paid over $570 billion in federal, state, and local taxes.

00:45:08So would you please discuss the impact on the solvency of our social safety net programs

00:45:14if due to potential change in our immigration policies, there's a, that we would realize

00:45:20a significant reduction in our workforce?

00:45:22Yeah.

00:45:23And so we looked carefully at the composition of the immigration surge, and they're very

00:45:28heavily skewed toward working age adults.

00:45:31It's, these are, immigrants have a high propensity to work, and they have a strong incentive

00:45:37to work on the books once they receive authorization, generally within six months.

00:45:43You know, many of them will face a, you know, a hearing in seven to 10 years, and working

00:45:48on the books will let them demonstrate attachment.

00:45:52So all of that means more revenue for Social Security, increases the financial, improves

00:45:58the financial situation of the Social Security system.

00:46:02And yeah, and that's, again, it's just like the overall revenue, some of it goes to Social

00:46:07Security.

00:46:08Okay.

00:46:09Couldn't have said it better myself.

00:46:10Thank you very much.

00:46:11Thank you, Mr. Chair.

00:46:12Thank you.

00:46:13Thank you, Senator Marshall, for your courtesy to Senator Padilla.

00:46:16It is now your floor.

00:46:18Thank you, Mr. Chairman, and welcome, Dr. Swiggled.

00:46:20If there's one thing clear from this meeting, it's that my friends across the aisle have

00:46:26promised they will raise your taxes, that that is their solution to everything is to

00:46:30raise your taxes.

00:46:32Folks, we don't have a taxing problem in this government.

00:46:36We have a spending problem.

00:46:39The tax, the Trump tax cuts demonstrated that if you lower taxes, it grows the economy and

00:46:46increases the tax revenue.

00:46:49It's a rising tide, raising all boats.

00:46:52I think it's quite evident.

00:46:53No one can argue that.

00:46:54It's unarguable.

00:46:57But what's not arguable is that, indeed, that these tax cuts, indeed, have worked in the

00:47:03past.

00:47:04Dr. Swiggled, let me ask you, do you ever review your work in the past?

00:47:10You go back and look at the last 10 years and say, what percentage were we off on our

00:47:14scores?

00:47:15We do.

00:47:17For major legislation, and analyze what we got right and what we got wrong.

00:47:21Over the last 10 years, what does your score sheet look like, speaking in general?

00:47:27We compare ourselves to other major forecasters, and we do pretty well.

00:47:32There's some things that we've...

00:47:33No, you don't do well.

00:47:34You just missed the deficit this year by half a trillion dollars.

00:47:39That's not doing well.

00:47:42Don't you think you're off 10, 20, 30, 40% on most of the big numbers?

00:47:47From February to June, the deficit went up by 27%, mainly because of actions taken by

00:47:52the administration.

00:47:53There's student loans, the FDIC, actions on Medicaid that we're providing you with the

00:47:59current law information.

00:48:00Through executive fiat, they added, goodness, three or four, goodness, I guess it's about

00:48:06a trillion dollars.

00:48:08That's right, between student loans and the other pieces, there's several hundred billion

00:48:14dollars of additional costs.

00:48:15Would you have the ability to score, if we did our job, if we followed the Budget Act

00:48:22of 1974 and all the additions, where the president submitted a budget on time, if we did a meaningful

00:48:29bipartisan Senate budget resolution, and we went back to regular order, and the House

00:48:35did their job, if we did a real budget, would that have impact on how much money we spend?

00:48:42Is that something you could help generate a CBO score for?

00:48:47We would certainly support the Congress in doing that.

00:48:51It's hard to say what the outcome would be.

00:48:55Regular order would certainly be a change, but I can't tell you what the fiscal outcome

00:49:01would be.

00:49:02It would be for the private sector to do a meaningful budget and then use that as the

00:49:05blueprint and not allow an administration to tack on, like you just mentioned, almost

00:49:10a trillion dollars of unsuspected spending through executive fiat, which is unconstitutional

00:49:15the way they did it.

00:49:18As we mentioned before, the 2024 budget deficit is going to be $2 trillion.

00:49:23We're going to spend $2 trillion more than we take in this year.

00:49:28The administration added $2.1 trillion with the American Rescue Plan, another $800 billion

00:49:33with the Inflation Stimulation Act.

00:49:36People call it the Inflation Reduction Act because it's actually inflationary, as well

00:49:39as over another trillion unilaterally, as you mentioned, through executive actions,

00:49:43the student loans, $400 billion.

00:49:46They redefined the Thrifty Plan with another $300 billion, and then they did some voodoo

00:49:53with the ACA and another $300 billion as well.

00:49:57I want to talk about SNAP for a second.

00:50:01We're in the middle of trying to write a farm bill, and I'm concerned about the politics

00:50:04at play in scoring a piece of legislation that's extremely important to everybody.

00:50:09You know, a farm bill, 85% of a farm bill is SNAP payments, nutritional programs.

00:50:14The largest part of the farm bill also has the highest fraud rate and the error rate.

00:50:20There's been an annual overpayment rate of 10%.

00:50:24Stopping the error rates, stopping the fraud, stopping the overpayments result in nearly

00:50:29$100 billion in savings to the SNAP program over the next 10 years.

00:50:34So if we get rid of the fraud and abuse and errors, it would save $100 billion over 10

00:50:39years.

00:50:40Do you believe that fixing the error rate in SNAP would be a cut to the program?

00:50:44In a sense, it would make sure that the beneficiaries who are supposed to get the benefits are getting

00:50:49them and, you know, not other people.

00:50:51Okay.

00:50:52The bipartisan farm bill that's passed out of the House Ag Committee has a provision

00:50:56in the nutrition title which preserves SNAP benefits and ensures that benefits can modestly

00:51:01increase with the cost of living.

00:51:03Now, my friends across the aisle in the Senate are calling these provisions the largest cut

00:51:08to SNAP in history.

00:51:10In your opinion, do you consider this a cut?

00:51:14So, you know, after we saw what the administration did with the changes to the Thrifty Food Plan,

00:51:20we then had to assume that in the future there could be such large increases again.

00:51:25And I said before that was about $200 to $250 billion of additional costs.

00:51:31And so that gets built into the baseline.

00:51:33What the House has done is scale that back.

00:51:35And so there's a sense in which they're preventing a future administration from doing the kind

00:51:40of increase that was done.

00:51:42But net net, at the end of the day, we're going to be spending more money on SNAP in

00:51:46the future than we are today.

00:51:48That's correct.

00:51:49Yeah.

00:51:50Thank you.

00:51:51I yield back.

00:51:52Thank you again for your courtesy, Senator Marshall.

00:51:53And thank you, Senator Lujan, for your courtesy to your colleague.

00:51:56You are recognized.

00:51:57Thank you very much, Mr. Chairman.

00:52:00Director, the Radiation Exposure Compensation Act.

00:52:05This program was created to provide compensation and justice to those Americans who suffered

00:52:10devastating health impacts of nuclear weapon development and testing.

00:52:16Despite being created 34 years ago, people in states like New Mexico, which is where

00:52:22the first nuclear bomb was tested without warning to people in these communities, were

00:52:29left out of the program.

00:52:30Even the author of this legislation, may he rest in peace, the former senator from Utah,

00:52:37Warren Hatch, he referenced this before he passed away about mistakes that were made

00:52:45in this legislation and how New Mexico is one of those mistakes not being included,

00:52:51not including post-1971 workers, which are uranium mine workers that worked in the mines

00:52:56after 1971, side by side with people that qualify for the program, doing the same jobs.

00:53:03These Americans, many of whom were the unwilling and unknowing victims of radiation exposure,

00:53:09have waited too long for justice.

00:53:11The Senate has now passed my bill to strengthen RICA with Senator Crapo and Senator Hawley

00:53:15twice, but we have yet to get a full analysis of the impact of the program.

00:53:21Meanwhile, the House has refused to act.

00:53:24As a result, the clock ticks on and Americans continue to wait.

00:53:28Those from New Mexico to Utah to Idaho and many other states have fought cancer.

00:53:35Too many have died and even watched family die alone, being ignored, all without recognition

00:53:47from the government that made them sick.

00:53:50Now, Dr. Hueso, as you work to get that full score, I would like you or your analysts and

00:53:57preferably all of us to get together in a room to meet with me and my staff and walk

00:54:04me through the state-by-state breakdown of who would benefit from this improved RICA

00:54:09program.

00:54:10Will you commit to securing that meeting?

00:54:13Yes, sir.

00:54:14It's because of the path that the legislation took to the Senate floor.

00:54:19As you said, you didn't get a full cost estimate from CBO.

00:54:22We've given some rough guidance on the cost, but you have my commitment that we'll come

00:54:26to you and take you through the estimate.

00:54:30A challenge for us is the state-by-state part, just because we're set up to do federal costs.

00:54:37Analyzing one state at a time is a challenge, but we will come and do as much as we can

00:54:42to make sure you get the information you need.

00:54:44Have you done state-by-state analysis before?

00:54:47Not of the RICA program.

00:54:49We have of some programs, but not of this one.

00:54:52Dr. Spiegel, have you conducted analysis for Wyoming?

00:54:56For, I'm sorry, say again?

00:54:57The state of Wyoming, as it pertains to RICA?

00:55:00Oh, no, we haven't.

00:55:01Yes, yes, the CBO has, and have you done it for New Mexico?

00:55:08Not separately, yes.

00:55:09So I've been told, because the mistake that was made by CBO with the initial scoring,

00:55:13I wasn't planning on getting into this, but if I'm going to, if there's going to be something

00:55:16included in the record as to what the capabilities are or are not, Wyoming and New Mexico had

00:55:21to be reviewed because there was a mistake of including analysis of Wyoming when Wyoming

00:55:26was not included in the original bill, and New Mexico was.

00:55:29And so CBO had to look at that initially, from its initial score to where we are.

00:55:35The score the CBO came out with, with the initial draft, was $160 billion, $150 billion.

00:55:42This program was started back in 1990.

00:55:46It's cost us a lot of money, $2.2 billion.

00:55:50It's hard for me to understand, without seeing disaggregated data, how the program grows

00:55:55exponentially from 2.2 over a 30-year period to 75% higher.

00:56:01So I think it's important for us to get there.

00:56:05I think the other offices would also be very interested in presenting the facts to the

00:56:11Congress, to my colleagues, to the American people about what this is and what this is

00:56:15not.

00:56:16I very much appreciate what the ranking member shared about Tip O'Neill and President Reagan.

00:56:23That was a time when people in this town could still stipulate the facts, and then they would

00:56:30negotiate.

00:56:32But they could stipulate to facts what the receipts were.

00:56:36And I just want to make sure that we have the correct receipts in this place so that

00:56:40we can have an honest conversation about the policy and get help to a whole bunch of people

00:56:44across America who this country owes a liability to, owes an apology to, and quite honestly

00:56:52cost them their lives in many instances and the cancer that they're still going through

00:56:55today.

00:56:56So I very much look forward to that.

00:56:58And Mr. Chairman, I have other questions.

00:56:59I'm going to submit them into the record and be respectful of my colleagues today as well.

00:57:04But very much appreciate the agreement to be able to secure a meeting and have a thorough

00:57:09conversation about this package, this legislation for myself, and there may be other offices

00:57:14that want to be included.

00:57:15So thank you.

00:57:16Thank you, Senator.

00:57:17Thank you, Senator Lujan.

00:57:18And if we can help facilitate that meeting, don't hesitate to ask.

00:57:21Senator Braun.

00:57:23Thank you, Mr. Chairman.

00:57:24And thank you for having the discussion on budget here today.

00:57:27Dr. Schwegel, you and I have had many conversations since I've been here five and a half years

00:57:33ago.

00:57:34And I look at your basic one-pager here, and some things stand out to me, and that

00:57:41is how stubborn revenue generation has been.

00:57:45You compile statistics that show that revenues from 94 to 23 have averaged 17.2 percent of

00:57:55GDP.

00:57:56Correct?

00:57:57That's right.

00:57:58And actually, at 23 and 24, 23 was lower, 24 is going to be slightly higher.

00:58:09But when you look at the stubbornness of that figure, and the fact in even your own projections,

00:58:17you see it staying flat generally around 18 percent.

00:58:22Is that what you've got here in terms of basing long-term forecasts on?

00:58:29That's right.

00:58:30And 23 was lower because there was some revenue that got pushed from 23 into 24, the disaster

00:58:36declarations, especially in California, for example.

00:58:39The corporate minimum tax wasn't implemented.

00:58:42So that's why 23 was a bit lower.

00:58:44But as you said...

00:58:45But it's been a stubborn range of between 17 and a half and 18 and a half.

00:58:49That's right.

00:58:50And most of the 18 and a half is projections into the future.

00:58:53So I want to then go to outlays.

00:58:58And for nearly 30 years, those were averaging around 21 percent of GDP.

00:59:05And those culminated in recent years in the trillion dollar structural deficits.

00:59:11Is that correct, give or take?

00:59:14That's right.

00:59:15Especially on the mandatory side.

00:59:16And now that has doubled to about two trillion, give or take, in the present.

00:59:21That's right.

00:59:22So it gets bleaker as you make projections into the future.

00:59:27And revenue has been stubbornly consistent regardless of tax rate.

00:59:33Is that correct?

00:59:35That's right.

00:59:36And there have been legislative changes as revenues have gone up that have taken them

00:59:42back down.

00:59:43So there is some legislation there.

00:59:44But generally that would mean once you cut taxes, you're depriving the Treasury in the

00:59:49short run.

00:59:50You might get a little better economic growth generally as you go into years two, three,

00:59:55and four.

00:59:56And the reverse is true, you know, when you raise taxes, correct?

01:00:01That's right.

01:00:02You're going to flush a little more into the Treasury.

01:00:03And then economic growth is going to go down a little bit each year.

01:00:07The fundamentals that basically drive our economy and our government generally.

01:00:14That's essentially what we've got in our projections as well.

01:00:16When you've got here looking at 2024, the snapshot of where we are currently, and you

01:00:25see that revenue is budging at most one point as a percentage of GDP, and you're taking

01:00:33spending up by four additional percentage points, correct?

01:00:42From 23, which is 23.1, to 27.3.

01:00:46I'm sorry, I just want to make sure.

01:00:5023.1.

01:00:51And 24 is what you're forecasting will be up on the outlay line.

01:00:58I'm sorry, I wonder if you, I'm sorry, since I'm the one who gave it.

01:01:04I'm talking about outlays on the chart you gave me.

01:01:08Yep, 24.2 in 2024.

01:01:12And then, what are you showing in 2054?

01:01:16I'm sorry, I gave you, I'm sorry, I gave you our long-term outlook.

01:01:22Yes.

01:01:23And I have our short-term outlook.

01:01:24Well, okay.

01:01:25So, but that's close.

01:01:26But you've got the numbers right.

01:01:27Yeah.

01:01:28So, in your opinion, how do we get things right-sized?

01:01:33Can we do it through revenue when history has shown we've never been able to?

01:01:40And the cutting taxes started back many, many years ago without adjusting spending.

01:01:47And to me, it looks like the data is all there, that if we don't want to keep borrowing from

01:01:52our kids and grandkids, that we've got to choose and prioritize what we're spending

01:01:58here that's going to match up with what revenues have shown that we can generate over a long

01:02:04period of time.

01:02:05Do you agree with that?

01:02:06Right.

01:02:07But that is the choice in front of policymakers, that the revenues and outlays at some point

01:02:11have to come closer together.

01:02:13That can be done, as you said, on the outlay side.

01:02:16In principle, it could be done on the revenue side if, you know, it's up to the Congress.

01:02:21You could have higher rates.

01:02:22And you always say that because yours is not to advise on policy, it's just to tell us

01:02:28the figures.

01:02:29The figures, that's right.

01:02:30And the figures are bleak.

01:02:33It is a daunting situation with rising debt.

01:02:35We'll settle for daunting.

01:02:37And then I want to circle back to what the chair said earlier.

01:02:42Shocks to our economy, which we had to navigate through in 08, 09.

01:02:49That was trivial dollar-wise compared to what we spent recently on COVID.

01:02:56You maybe can't measure the two, but that was roughly measured around a trillion.

01:03:00What we did was over four trillion.

01:03:02And then enterprised over the first two years of the Biden administration to add another

01:03:08roughly three trillion.

01:03:10So we're in a place where this, to me, looks like we end up with something like a chapter

01:03:1611 in the real world, which means sooner or later, you've got to get our spending in line

01:03:23with our revenue.

01:03:24I mentioned that coming in to this hearing, a lady working here in the Capitol carrying

01:03:31a box of files laughed out loud when I said that, and it was in agreement.

01:03:37And I think that's what the American public is doing.

01:03:39One final thing, because I don't see anybody else here, so I'd like to have a little latitude

01:03:44since I spent so much time on it.

01:03:47Healthcare is the place that we can, within our own means, take a broken industry and

01:03:55system that has no consumer involvement within it, no emphasis on prevention and wellness.

01:04:06And it's run by a very corporate system of healthcare that's even frustrating doctors

01:04:12and nurses to become a part of it.

01:04:15And that is doable.

01:04:17And unless we want government to even do more, I would ask that the healthcare industry embraces

01:04:24things like competition, transparency, engages every American in their own well-being so

01:04:33that you don't need to use the system as much.

01:04:36Because it is approaching 20% of our GDP, and in most other developed countries, it's

01:04:4210% to 13%.

01:04:45Would your opinion be that that would be the lowest hanging fruit of where, if we put policies

01:04:53into place, that can actually weigh in on our current chronic big deficit?

01:04:59Yeah.

01:05:00I'm going to switch metaphors.

01:05:02It's where the dollars are.

01:05:03It's the rising spending.

01:05:04And you could see that in the chairman's chart at the beginning, that healthcare spending

01:05:08is rising quickly.

01:05:10The good and the bad is that there's so many distortions in healthcare, as you said.

01:05:15It's hard to get at them.

01:05:17But there's so many dollars that even if you make modest progress in percentage terms,

01:05:22the dollar change can be quite large.

01:05:23So thanks for the latitude on time.

01:05:26Thanks for your answers.

01:05:27In summary, we've got to spend less than we take in.

01:05:32History shows that revenue is stubborn.

01:05:35History also shows that we used to have healthcare as a percentage of our GDP closer to 10%,

01:05:43not too many decades ago.

01:05:45And the rest of the world has figured out how to do that at better value.

01:05:49We need to start doing a few things that most Americans believe should be done, don't

01:05:55spend more than you take in, and if something's out of line in terms of cost, reform it.

01:06:00Thank you for being here today.

01:06:02Thank you, Mr. Chairman.

01:06:03Thank you very much, Senator Braun.

01:06:06I believe we're waiting one more colleague, so I'll take just an additional moment while

01:06:12we give him a chance to walk from his other hearing to this one and point out that, at

01:06:20least in our view, the net effect of the 2008 mortgage meltdown and the recession that followed

01:06:31ran around $5 trillion, and that the bulk of the effect was not spending but was lost

01:06:43revenue because of the shock to the economy.

01:06:46People simply weren't paying taxes because they weren't making money because the economy

01:06:52collapsed.

01:06:53Is that a pretty fair overview of how the 2008 mortgage meltdown hit the economy?

01:06:59Am I roughly in the right neighborhood with those numbers?

01:07:02Yeah, that's right.

01:07:03It had a big negative impact on activity, and then from there to revenue, and there

01:07:08was a legislative response, the TARP.

01:07:12A lot of that money came back as the assets that were purchased by the Treasury were sold

01:07:17back to the private sector.

01:07:20And while, as you pointed out in your exchange with Senator Braun, the growth in healthcare

01:07:26spending has been one of the primary drivers on the spending side, we do have the comparison

01:07:34with CBO's 2008 projections for where that spending would be and where it actually went,

01:07:44and it's $6.3 trillion lower than projected over that intervening time period.

01:07:53So while that healthcare spending number has gone up, something happened to keep it

01:08:05from going way more up, and thank you, Doctor, for your work trying to parse through the

01:08:13data to figure out exactly what it was that helped us save those $6.3 trillion without

01:08:19cutting benefits.

01:08:20Because if we can do more of that, that would be a very, very good thing.

01:08:24Senator Van Hollen, are you ready to roll?

01:08:27I'm ready to roll.

01:08:29Great.

01:08:30You're up then, followed by Senator Kennedy.

01:08:31All right.

01:08:32Well, thank you, Mr. Chairman.

01:08:33Thank you, Director Swagle.

01:08:34It's good to see you again.

01:08:37Let me just start on the revenue side, because I'm looking at the CBO projections, and I

01:08:44see that, you know, a number of months ago, you projected that the Trump tax cuts would

01:08:52add, well, this is back during that time, $4.6 trillion to the debt over the next 10

01:08:58years.

01:08:59I understand you had an earlier exchange with the chairman.

01:09:02The Trump tax cuts did not pay for themselves despite claims, right?

01:09:07That's correct.

01:09:08That's what we-

01:09:09And your projection is that if we just did a straight extension of the tax cuts, those

01:09:12would not pay for themselves either, would they?

01:09:15No, they wouldn't.

01:09:16So one of the arguments that was made at the time was that the trickle-down economics was

01:09:23going to work, right?

01:09:24I'm looking at the projections that were made by the Trump economic team.

01:09:29They predicted that that tax plan would generate 4% to 6% growth in GDP.

01:09:37But then I'm looking at the seven quarters that succeeded that.

01:09:42And so this is data before the COVID pandemic hit.

01:09:48And I'm seeing that growth actually during that period of time was not appreciably different

01:09:54than the growth during the prior seven quarters.

01:09:59There was a small bump in Q2 of 2018 to 3.5%, but that was the same as Q4 of 2017 before

01:10:10enactment of the Trump tax cut.

01:10:13So this whole theory of trickle-down economics was behind the claims that the tax cuts were

01:10:20going to pay for themselves, right?

01:10:23That would be the way that, in principle, a tax cut could pay for itself if it generates

01:10:29so much additional output that that comes back as revenue.

01:10:33And the analysis CBO did in 2018 was that there would be some impact, there'd be some

01:10:39impact on business investment, and then some additional revenue.

01:10:42It was about an 18% fiscal feedback, so something.

01:10:47And the challenge was that, as you said, we saw a little bit of a higher growth early

01:10:52in 2018.

01:10:53And then in the middle of 2018, tariffs were raised.

01:10:57And those looked to have affected business investment.

01:11:01And so in some sense, even before the pandemic, there were macro effects of the tax cut.

01:11:07Those got, in some sense, offset or hidden by trade-offs.

01:11:11And look, I looked at the CBO analysis, and I saw some of the feedback loop.

01:11:15And I think you attribute those primarily to some of the corporate tax cuts.

01:11:19But let me ask you, on the individual side, the claims that big tax, personal tax cuts

01:11:24for wealthy people was going to generate something like in the range of 4.6%, I mean, that was

01:11:30just ridiculous, right?

01:11:32CBO didn't have that, those kind of figures.

01:11:34You're being diplomatic.

01:11:37And of course, claims going forward, continuing that Trump tax cuts would pay for themselves,

01:11:43as you said, is absurd.

01:11:45I will point out that if you look at the analysis that were done by the Tax Policy Center, they

01:11:53point out that extending the Trump tax cuts would provide more than twice the benefit

01:11:57for the top 1% than for the entire bottom 60% as a percentage of their income.

01:12:05In real dollars, that translates to an average $48,000 tax cut for households in the top

01:12:111%, about $500 for those in the bottom 60%.

01:12:15So it makes no sense to add even more to our deficits to disproportionately benefit those

01:12:22at the very top.

01:12:23I will point out that President Biden has committed to making sure that any tax benefits

01:12:29that apply to people $400,000 and under will be maintained.

01:12:35But it does seem a total, a stupid and backwards policy to extend those that provided big breaks

01:12:44to the wealthy that did not have the so-called trickle-down growth benefit, but did add to

01:12:51the deficit.

01:12:52In my remaining time, I'd just like to ask you about the recent cuts to the IRS.

01:12:58As you know, as part of the budget deal last year, there was a $20 billion clawback.

01:13:04What is your best estimate of how much that will add to the deficit over time?

01:13:10So our calculations are that $1 of additional resources to the IRS generates about $2 of

01:13:16revenue, so a net of 1.

01:13:18So the rescission of funding to the IRS, that's why it increased the deficit in our projections,

01:13:25so roughly 2 to 1.

01:13:27So it was $20 billion cuts, so your estimate is that, what, it will lose $40 billion?

01:13:32About $40 billion in revenue.

01:13:35Thank you, Mr. Chairman.

01:13:36Thank you, Senator Van Hollen.

01:13:38Senator Kennedy of the great state of Louisiana.

01:13:42Thank you, Mr. Chairman, Mr. Director, welcome.

01:13:46Mr. Director, what's the national debt right now?

01:13:50Well, it's, we project at the end of this year, it's going to be over $28.1 trillion.

01:13:57$28 trillion.

01:14:00What percentage of GDP is that?

01:14:02It's just under 100%.

01:14:03Could you speak into the mic and repeat that?

01:14:06It's just under 100% of GDP.

01:14:08Okay.

01:14:09And for this current fiscal year, will we have spending deficits?

01:14:14Yes, sir, we're looking at about a $2 trillion deficit this year.

01:14:18And that means that we've spent $2 trillion more than we took in, right?

01:14:23That's right.

01:14:24So we've had to borrow money, right?

01:14:27That's right.

01:14:28That's right.

01:14:29The debt is going up.

01:14:30And so that money that we borrowed increases the amount of national debt, doesn't it?

01:14:36That's right.

01:14:37And it means more interest payments, which then goes back and means more debt.

01:14:41So there's a negative cycle attached to it.

01:14:44Okay.

01:14:45So our current national debt is over 100% of our economy.

01:14:50It's $28 trillion.

01:14:54Let's suppose that we think in 10-year windows, as you know, let's suppose nothing changes

01:15:00over the next 10 years, nothing.

01:15:04We don't renew the tax cuts.

01:15:08Nothing changes.

01:15:09What's the debt going to be 10 years from now?

01:15:12So our projection is then over $50 trillion or over 122% of GDP.

01:15:18Yeah.

01:15:19Well, damn, it looks to me like we better do something.

01:15:25I mean, we can sit here and debate the tax cuts.

01:15:29And you talk about the tax cuts don't work.

01:15:34I don't know how you know that because the pandemic skewed all economic results.

01:15:42But we better do something, huh?

01:15:43Do you think we can sustain the spending?

01:15:45No.

01:15:46The risks are mounting with higher interest payments and higher debt.

01:15:51And that's, as you said, that's why action must be taken.

01:15:54So what should we do?

01:15:57It's you know, the sooner Congress acts, the easier it will be.

01:16:01I get that.

01:16:02So what should we do?

01:16:06You know, I'm here to support you, but not to tell you what to do.

01:16:12I mean, reduce the deficit.

01:16:13You have choices.

01:16:14You can look at mandatory spending on the spending side as a driver.

01:16:19You have health care costs and Social Security on the revenue side.

01:16:24Well, let me stop you for a second.

01:16:26Everybody always says that mandatory spending is driving the costs.

01:16:32And they say, well, we've got to do something because the Social Security Trust Fund is

01:16:35going to run out and Social Security is going to be automatically cut.

01:16:41Look me in the eye and tell me you really think the United States Congress is going

01:16:47to allow Social Security to be cut.

01:16:51I would expect some action to be taken before that happens.

01:16:56If you think the United States Congress is going to sit here and allow Social Security

01:17:01to be cut, even if there's not a penny left in the trust fund, you've been dipping into

01:17:06your ketamine supply.

01:17:08It is not going to happen.

01:17:11We'll just go into the general fund and take the money, won't we?

01:17:14Right.

01:17:15And that would add to the deficit as compared to current law.

01:17:21So I get it.

01:17:25We make these distinctions between mandatory spending and discretionary spending, but it's

01:17:30really out of the same pot.

01:17:32That's right.

01:17:33There's just one general fund to the Treasury.

01:17:35OK.

01:17:36So one option is to reduce our spending, correct?

01:17:40That's right.

01:17:41What if we cut our spending one percent?

01:17:46One percent.

01:17:47What if we turned to every single department head in the federal government and said, next

01:17:53year you're going to cut your spending one percent?

01:17:56Not five percent, not four percent, one percent.

01:18:00Something families who are living under Bidenomics, which is defined as paying more to live worse,

01:18:09something families have to do every day.

01:18:11What would be the impact of a one percent cut by every budget officer?

01:18:17Yeah.

01:18:18So outlays next year are going to be just under $7 trillion.

01:18:21So one percent of that is $70 billion.

01:18:26We did two percent.

01:18:27What would be the impact?

01:18:29Yep.

01:18:30There'd be $140 billion.

01:18:31And that's the challenge, is that the deficit is so large that what you're saying makes

01:18:38a difference, but it's pretty modest relative to the size of the challenge.

01:18:41What do you think we would have to cut spending to get in control of our debt?

01:18:46Yeah.

01:18:47So if you just wanted to stabilize the debt, you know, make it so that the debt's at 100

01:18:53percent, it goes up not by too much, you'd have to cut and do it on the spending side.

01:18:58You're talking about about $5 trillion over 10 years.

01:19:01What percentage is that?

01:19:03Right.

01:19:04So that's, I mean, over 10 years.

01:19:06So spending, say spending is $7 trillion, multiply that by 10, so it's about $70 trillion,

01:19:12you know, a bit more.

01:19:13Give me a percentage.

01:19:14American people think in terms of percentage.

01:19:16No, that's right.

01:19:17So say you're talking about a roughly 7 to 8 percent reduction in spending.

01:19:25Overall?

01:19:26Overall.

01:19:27Just to stabilize the debt.

01:19:28You know, we'd still have a high debt.

01:19:30And then we could try to grow out of it.

01:19:34Yeah, positive growth would improve revenues and help the situation.

01:19:38I'm way over.

01:19:39I'm sorry, Mr. Chairman.

01:19:40I enjoyed talking to you, Mr. Corrector.

01:19:41Thank you, Senator Kennedy.

01:19:43Senator Johnson.

01:19:44Mr. Chairman, sorry I was absent until this point in time.

01:19:48I just have a very specific line of question here, Director Swagel.

01:19:53You know, your projections assume, obviously, the tax cuts expire, correct?

01:19:57That's correct.

01:19:59I think one of the real tragedies of that occurring is we're going to have an enormous

01:20:05disparity between C-corporations, which represent about 5 percent of American businesses, and

01:20:09all the other pastors.

01:20:13What I want to know, in your projections, because having been a pastor business myself,

01:20:18actually I've been part of the business of every different type of corporate structure,

01:20:24and quite honestly, during the tax reform of 2017-2018, I got letters from the AICPA

01:20:30saying this is exactly what would happen, is that particularly large pastor businesses,

01:20:35but this might happen with small pastor businesses as well, they're not going to be able to compete

01:20:41with that huge disparity between C-corps and pastors.

01:20:46So a lot of them will convert, particularly the big ones, will convert to C-corp status,

01:20:53which is going to be a much larger, not only marginal, but effective tax rate.

01:20:58In your projections, going out, do you take that in consideration?

01:21:03It's an issue we've been struggling with because, you know, we've modeled current law, our projections

01:21:08are current law, and we've been trying to think exactly about this.

01:21:12If you're an S-corp, there's uncertainty about what's going to happen at the end of 25.

01:21:17To what extent will S-corps make the switch now in advance of the expiration?

01:21:23So we have a little bit of that switching in our revenue modeling, but not the kind

01:21:28of full-fledged switching that you'd expect, say, in early 26.

01:21:34Would you agree with me, the rational choice for a business person, if you want to continue

01:21:39to compete, because let's face it, pastors compete with the corporations at the entity level.

01:21:46I know everything about double taxation, that type of thing, but I think it's about two-thirds

01:21:51of C-corp business income is never taxed, correct?

01:21:56You wear that figure?

01:21:57I don't know offhand, but there's lots of income that's retained.

01:22:00But, well, it's retained, but also a lot of C-corps are owned by non-taxable taxes.

01:22:07So again, it's hard to get that figure, but somewhere between two-thirds and three-quarters

01:22:10of C-corp income is never double taxed.

01:22:13So you're looking at an effective rate, we got it from JCT, of 10% for large corporations,

01:22:1914% for small C-corps.

01:22:22And large pastors, they're going to be up over 40%, aren't they?

01:22:25No, that's right, because the lower corporate rate from the 2017 act is permanent.

01:22:30So a large pastor is going to be paying a top marginal tax rate over 40%, competing

01:22:35against whether it's a large or small C-corp, somewhere with an effective tax rate of 10%

01:22:40to 14%.

01:22:41So the rational thing for a pastor would be, I can't compete, I'm going to convert to a

01:22:47C-corp status.

01:22:48Yes, no, that's exactly right.

01:22:51And we're just, we've been trying to figure out when that, you know, sort of that massive

01:22:55switch will happen, given the uncertainty about what's going to happen next year.

01:22:59So one of the reasons I'm bringing this up is I'm trying to get a score on what I'm proposing,

01:23:03which would be to equalize the tax treatment between American businesses.

01:23:09Or in other words, tax all business income at the ownership level.

01:23:12That's what pastors do.

01:23:16Trying to get that score is going to be difficult for me, because we're not really reflecting

01:23:21what's actually going to happen if we let those tax cuts expire.

01:23:26So is there any way I can get some sense of what that number is going to be if there's

01:23:32a massive shift, which I believe there would be, from large pastors, in particular, switching

01:23:37to C-corps?

01:23:38Okay.

01:23:39I'll tell you two things.

01:23:40So one is the formal estimate would come from JCT, you know, just because there'd be a change

01:23:45in the tax code.

01:23:47We have an excellent tax analysis division, and we could come talk to you about how our

01:23:52revenue projections would change.

01:23:54It wouldn't be, you know, the cost estimate that JCT would do, but we could talk you through

01:23:58how we would see it and what it would mean for revenue.

01:24:01Let's start with how you have accounted for that, because you've been thinking it through,

01:24:05you've made some provision for it.

01:24:07Let's take a look at that, and then, you know, kind of work with me on that.

01:24:10I'd appreciate it.

01:24:11Okay.

01:24:12Go ahead, Mr. Chairman.

01:24:13Thank you.

01:24:14Thanks very much.

01:24:17Two things I'll close with as we wrap up the hearing.

01:24:19One is that we've referred several times to the risk that the economy faces from climate

01:24:29shocks.

01:24:31The chief economist of Freddie Mac broke that out into weather, storms, sea level rise,

01:24:42make insurance harder and harder to predict, which makes insurance first more expensive

01:24:50and then unavailable.

01:24:53And once the insurance becomes unavailable, then you can't get a mortgage, because mortgage

01:24:59holders require insurance on the property.

01:25:03And once you can't get a mortgage on a property, your pool of buyers shrinks dramatically to

01:25:07those who've got the money to simply pay cash.

01:25:10So supply-demand drives prices down.

01:25:13It's not that complicated.

01:25:14No insurance, no mortgage, no mortgage, no buyers, no buyers, no good market.

01:25:19So the prospect of that creating a shock to the economy along the lines of the 2008 shock

01:25:26or worse, have been repeatedly raised in this committee.

01:25:30And I would just note today, the New York Times has an article about how climate change

01:25:36is blowing up property insurance markets.

01:25:40And it's not only happening in high-risk states like Florida, but the companies are actually

01:25:46raising rates in other areas to try to counterbalance for the risk that they're having to assume

01:25:53in these either wildfire-adjacent or coastal-adjacent markets that are getting increasingly hard

01:26:00to predict.

01:26:01And the last word on this came from the expert who spoke to the New York Times.

01:26:06And he said, I personally think we're in a lot of trouble.

01:26:12This should be ringing alarm bells for housing markets all over the country.

01:26:18We have tried to ring those alarm bells here in the Budget Committee before this blows

01:26:22up in our faces because of the role of the fossil fuel industry in fomenting all of

01:26:28this through its pollution and through its political mischief.

01:26:32We have a very hard time finding any bipartisanship on that.

01:26:35But the facts ought to be pretty obvious by now.

01:26:38So I would make that point because that came up today.

01:26:41And then I'd close with this graphic, which shows the increase in non-defense discretionary

01:26:52spending, which is my Republican friends' traditional spending target from 2019 to 2024

01:27:03as a percentage of GDP.

01:27:06So you move from a little over 3% of GDP to about 3.35% of GDP.

01:27:18So it's an increase of 7% from here to here.

01:27:24As you can see, it's visually a relatively small increase.

01:27:29And then when you dive into what that increase is made up of, 40% of it is made up of benefits

01:27:34for veterans.

01:27:36The PACT Act and things where we made things better for veterans, do they really want to

01:27:39get rid of that?

01:27:41I kind of doubt it.

01:27:43Health expenditure up 18%.

01:27:45Well, we have ways to get after that by improving the reimbursement system and doing more of

01:27:51what reduced the expense by $6.3 trillion against 2008 projections.

01:27:57Community development disaster relief.

01:28:01Most of that is FEMA.

01:28:03Do we really want to starve FEMA while we're having unprecedented levels of climate-driven

01:28:07catastrophes that require FEMA to come to people's rescue?

01:28:11I kind of doubt it.

01:28:12Ukraine and international spending, 12%.

01:28:16That's 12% of the 7%, by the way.

01:28:18It's not that big of a number, but it's 12%.

01:28:20Do we really want to leave Ukraine high and dry to the tender mercies of the pediatric

01:28:25hospital bombing monster, Putin?

01:28:28I kind of doubt it.

01:28:29And then there are the income security pieces down here.

01:28:3312%.

01:28:34So when people are talking about making very significant cuts to nondiscretionary spending,

01:28:39they are talking about digging into very basic programs and services for the American people,

01:28:45and we should be aware of that.

01:28:47We have a significant revenue problem.

01:28:51We have a very significant healthcare inefficiency problem.

01:28:57And we have a very significant climate risk problem.

01:29:01And if we can address those three problems, I think we'll be well on our way to solving

01:29:06the concerns that you have brought to our attention today, Dr. Swagel.

01:29:13So with that, I will conclude the hearing.

01:29:15If there are any further questions for the doctor that come in as – there's some questions

01:29:23Senator Lujan said he had.

01:29:28If there are any others, get them in by noon tomorrow, colleagues, staff.

01:29:34And we will ask Director Swagel to respond to those questions within seven days of his

01:29:39receipt of them.

01:29:40If you could do that, Dr. Swagel.

01:29:41We will do that, yes.

01:29:42That would be great.

01:29:43With no further business for the committee, the hearing is adjourned.

CBO Director Phillip Swagel Testifies In Front Of The Senate Budget Committee

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