Transcript: Q&A w/ Rep. Chris Van Hollen on the CBO’s 2014 budget & economic outlook

Partial transcript of Q&A with Rep. Chris Van Hollen (D-Maryland) on the Congressional Budget Office’s (CBO) 2014 federal budget and economic outlook. The House Budget Committee hearing was held on Feb. 5, 2014:

Rep. Chris Van Hollen (D-Maryland):
…Just a quick comment on the Fed. As the Federal Reserve pointed out, the fact that Congress created a fiscal drag on the economy made things worse and the Fed did take some accommodating actions. But their message to Congress was sequesters do a harm, it’s hurting economic growth, it’s hurting job growth, and it continues to do so to this day. This refusal to take actions on investments in infrastructure and in basic foundations of our national economy in many areas.

There’s been a lot of talk about the report and what you said about the Affordable Care Act. I just want to go through a couple of things.

You found, did you not, that the premiums offered in the exchange would actually be going down 15% compared to your earlier projections. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, for 2014.

Rep. Chris Van Hollen (D-Maryland):
And on page 125, you point out that there’s “no compelling evidence that part-time employment has increased as a result of the Affordable Care Act”. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right, Congressman.

Rep. Chris Van Hollen (D-Maryland):
And because we’ve heard a lot of statements about how people are being forced into part-time work by the Affordable Care Act, I want to make it clear one of the findings of CBO is there is no compelling evidence that that’s the case.

Second, there’s nothing in this report that changes CBO’s earlier assessment that over the 10-year window and, in fact, over the longer-term window the net effects of the Affordable Care Act is actually to reduce our national deficits. Isn’t that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
That’s right, Congressman.

Rep. Chris Van Hollen (D-Maryland):
All right. Doesn’t reducing our national deficit, especially as the economy kicks into higher gear, mean stronger economic growth?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congressman.

Rep. Chris Van Hollen (D-Maryland):
All right. So, as a result of the deficit reduction impact of the Affordable Care Act in 2017 and beyond, the Affordable Care Act will actually help spur economic growth.

Now, I want to talk about what we’re doing focusing right now. Because on page 125, the CBO talks about the impact on the labor market on labor demand today. And it says, and I quote, “on balance, the CBO estimates that the ACA will boost overall demand for goods and services over the next few years.” And then you go on to say, the “net increase in demand for goods and services will in turn boost demand for labor over the next few years.” That’s a conclusion you make right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
So, when you boost demand for labor in this kind of economy, you actually reduce the unemployment rate because those people looking for work can find more work. Right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
So, I just – for all the media who shot across the headlines this idea that somehow the Affordable Care Act was going to hurt jobs – I just want it to be very clear that the Director of the Congressional Budget Office says for this year and the next couple of years actually it will help reduce unemployment. More people who are looking for work will find work as a result of the Affordable Care Act.

So, in fact, Dr. Elmendorf, if you were to repeal the Affordable Care Act, your projected unemployment rate for this year would go up, right?

Douglas Elmendorf, Director of the Congressional Budget Office:
So, Mr. Congressman, let me be clear. We’ve not broken down the sizes of the various pieces that we talk about in this act. So I don’t have any estimates of the effects of the particular channel you point to. But the channel you point to is in fact something that we think spurs employment and reduces unemployment over the next few years.

Rep. Chris Van Hollen (D-Maryland):
Right. Okay. So, I think, you know, it is a factor and as a result if you repeal the Affordable Care Act you will, at least in the near term, increase the unemployment rate because there will be less demand or jobs. And over the longer term, because the Affordable Care Act reduces the deficit, you will actually spur economic growth as the economy continues to recover.

Now, I think it’s really important that that information gets out there because as the media themselves have confessed they bought hook, line, and sinker some of the talking points from our Republican colleagues. And unfortunately, misrepresentations go around the world three times before the truth begins to catch up. But maybe it will begin to catch up at this point.

Now, in terms of the long-term deficits and debt, as the Chairman indicated and as your report indicated, as you go out in the future we will see rising deficits. It is important to point out your findings show that right now our deficits are dropping and will continue to drop for the next couple of years but as more baby boomers retire and more people in Medicare and Social Security spending will slowly go up, isn’t that right, Doctor?

Douglas Elmendorf, Director of the Congressional Budget Office:
That’s right. There will be one-third more people collecting Social Security, Medicare benefits a decade from now than are doing so today. Whatever the benefit it is per person, multiply that amount by a much larger number of people, the overall costs of those programs will rise very sharply.

Rep. Chris Van Hollen (D-Maryland):
That’s right. And we’re talking about tens of millions of people. I believe it’s in the range of additional 30 plus million people on Medicare. And just so people who are following this understand. This is not because we’re increasing the Medicare benefits. This is just more people coming into the system. This is a demographic change. Is that right, Dr. Elmendorf?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
And so that’s a big driver. Now, our Republican colleagues say those deficits concern them. However, they’re only willing to look at the spending side of the equation. Meaning, if you want to address those spending, it means that you’ve got to reduce the benefits from Social Security or Medicare somehow if we’re looking at those two pieces. Right, Dr. Elmendorf?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes. Unless one is willing to contract the rest of the government to below where it was as a share of the economy in 1940, then one needs to focus on those handful of large programs that are getting more expensive if one wants to cut spending.

Rep. Chris Van Hollen (D-Maryland):
And as you’ve pointed out in this report, it’s been very clear we have squeezed those so-called discretionary spending programs to the lowest point in recorded budget history. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
We’ll have after a few years from now after the current caps are in full force.

Rep. Chris Van Hollen (D-Maryland):
So our Republican colleagues’ solution is simply to look at squeezing those benefits, which help millions of Americans, including a lot of middle-income struggling seniors. And they’ve refused to look at the revenue side of the equation. It is their position that you cannot close a single tax loophole for the purpose of reducing the deficit. Right? That’s the Grover Norquist pledge. You can’t close one loophole in the taxes for oil and gas company or hedge funds in order to help reduce the deficit.

And my question, Dr. Elmendorf, is if you go back a little way in history when was the last time we actually had a balanced budget?

Douglas Elmendorf, Director of the Congressional Budget Office:
In 2000 or 2001, Congressman.

Rep. Chris Van Hollen (D-Maryland):
2001. And in fact, the last time we had a balanced budget for a very long period of time were the years 1998, 1999, 2000, 2001. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
And just so everyone understands, for decades before that, we were running deficits and obviously since 2001 we were running deficits. Now, Dr. Elmendorf, if you look at the revenues as a percentage of GDP during that period of time, they are higher in each of those years than they are today. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right, Congressman.

Rep. Chris Van Hollen (D-Maryland):
And they are higher, are they not, in each of those years than they will be as a percentage of the economy 10 years from now?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
In fact, my calculation is that the average amount of revenue as a percentage of GDP when we last balanced the budget was 19% of GDP. During those four years, the average amount of revenue coming in was 19% of GDP.

Now, you have just testified that the main reason that we’re going to see an increase in the deficit in the out-years is because we have tens of millions more Americans on programs like Social Security and Medicare, right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes.

Rep. Chris Van Hollen (D-Maryland):
So, it’s our Republican colleagues’ position that we can somehow deal with that huge increase in the number of Americans on Social Security and Medicare with less revenue as a percentage of GDP than we have when we last balanced the budget in 1998 – 2001 when we had a lot fewer Americans on Social Security and Medicare. And that is the problem, Mr. Chairman, a lot of our Democratic colleagues have. You take the position that you won’t close a single tax break for the purpose of reducing the deficit. You say you care a lot about the deficit. You recognize that you’ve got tens of millions more Americans on Social Security and Medicare, but you still want the government to operate on less revenue as a percentage of GDP than the last time we had a balanced budget when we didn’t have all of those tens of millions of Americans on Social Security and Medicare. So, the only solution that our Republican colleagues are proposing, unless they want to cut even more deeply in our defense and scientific research and infrastructure, is to simply cut those other programs.

And the irony here is the Affordable Care Act actually was able to reduce the Medicare spending by reforming it instead of cutting it. We – as a result of the Affordable Care Act, Dr. Elmendorf, we are seeing reduced Medicare costs, isn’t that the case?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, that’s right.

Rep. Chris Van Hollen (D-Maryland):
In fact, that’s a significant part of the reduction in the deficit over a period of time. Is that right?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes.

Rep. Chris Van Hollen (D-Maryland):
In fact, our Republican colleagues after initially lambasting that, demagoguing that, they included that provision in their own budgets so they would achieve those deficit savings. So we were actually able to achieve Medicare savings without hurting beneficiaries, and that is the model we will continue to look at and combined with closing tax breaks for special interests in order to meet these long-term challenges.

But our immediate challenge is to put people back to work. And that’s why we need to adopt our infrastructure investment plan, pass the minimum wage, and for the folks who are still out there hurting, we should extend emergency unemployment insurance. And we certainly, Mr. Chairman, should not mess around with whether or not we pay our bills on time.

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