Transcript: Q&A w/ Rep. Kathy Castor on the CBO’s 2014 budget & economic outlook

Partial transcript of Q&A with Rep. Kathy Castor (D-Florida) 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. Kathy Castor (D-Florida):
…There is some good news because we have made progress on job growth but we have to do more. The economy now has added private sector jobs for 46 consecutive months and a total of 8.2 million jobs have been added over that period. And this is reflective of what I hear at home in Florida where small businesses are doing better. It’s been a very, very difficult climb from out of the great recession that kind of hit us earlier in housing in 2007. But here we are in 2014 and businesses are hiring again and the economy looks better.

Except we have this intractable problem – it’s kind of a jobs crisis. And the CBO’s report demonstrates that the outlook for job creation remains weak.

And then we’re dealing with the retirement of the baby boomers. That’s why every time there’s an announcement on jobs numbers every month, the unemployment rate is going down but yet people are retiring and dropping out of the workforce.

So, we’re going to have to be much more strategic in how government partners with business to create jobs, and that’s why it was very concerning to me the part of your report that highlighted Congress’s eroding commitment to scientific research, education. You say now that that kind of discretionary spending that has really – that provides the jobs of the future is at – is going to be at its lowest level in 40 years. Could you expand upon that and take us through some of the areas, whether it’s R&D education and tell us where that weakness is?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Congresswoman. So, we wrote a report in the fall about the fact that federal investment and how the amount of federal investment has changed over time. And I think roughly speaking about half of non-defense discretionary spending can be viewed as an investment in physical capital – like highways and bridges – in human capital as economists call – in education and training of workers – and in research and development.

And that non-defense discretionary spending will under current law – under the caps – fall to a share of GDP that’s lower than at any point in the 50 years for which the data on that sort of spending has been collected in that way.

So, we don’t know – and what the Congress doesn’t know is just how the money under those caps will be allocated to different activities. So, we can’t do a projection of research spending and research investment spending directly. But that sort of spending has remained about half of that total amount of non-defense discretionary spending over time, and if that share is maintained in the future, then the federal government will be doing less investing relative to the size of the economy by the second half of this decade than it’s done at any point in my lifetime.

Rep. Kathy Castor (D-Florida):
So that’s education…?

Douglas Elmendorf, Director of the Congressional Budget Office:
Education. It is investment in physical infrastructure like road and highways. It is investment in research and development.

Rep. Kathy Castor (D-Florida):
So that’s the National Institutes of Health – NIH, National Cancer Institute, medical research, scientific research?

Douglas Elmendorf, Director of the Congressional Budget Office:
They’re all in that category, Congresswoman. Yes.

Rep. Kathy Castor (D-Florida):
And infrastructure and defense as well?

Douglas Elmendorf, Director of the Congressional Budget Office:
So defense discretionary spending is also on track to fall to a lower share of the economy than has been at any point in the last 50 years. And again, how those cutbacks are allocated between the research done by the Defense Department and other things that the department does is something that Congress will need to decide in future appropriations bills.

Rep. Kathy Castor (D-Florida):
So, a lot of folks are relieved that the sequester has been replaced here in the short-term for a couple of years, and you know, they tend to focus on the crisis that’s right in front of them. But the challenge in looking ahead in the next decade is going to be how we maintain these investments in what makes America great – in education, in research, in developmental medical research, and infrastructure.

And that’s why I do think it’s important for us to work together as we learn that the aging population is going to be a challenge, a fundamental budget challenge…


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