Transcript: Q&A w/ Sen. Jeff Sessions on the CBO’s 2014-2024 budget & economic outlook

Partial transcript of Q&A with Sen. Jeff Sessions (R-Alabama) on the Congressional Budget Office’s (CBO) 2014-2024 federal budget and economic outlook. The Senate Budget Committee hearing was held on Feb. 11, 2014:

Sen. Jeff Sessions (R-Alabama):
…I think I understand, Mr. Elmendorf, your comments about the Affordable Care Act and hours lost and reduced. I would note that from my perspective that what you’ve indicated is the act has a tendency to incentivize people not to work. And what we need in this country in my opinion is incentives to work and that will help us be more productive, and we’ve got to create systems – I think – that help people work even longer and reduce the amount they’re drawing down in their retirement benefits, extending and increasing their Social Security benefits if they can work longer and we should be looking to do that.

Douglas Elmendorf, Director of the Congressional Budget Office:
We’ve done analysis of the effects on the federal budget and on the economy of raising the eligibility age of some programs to encourage people to work longer, sir.

Sen. Jeff Sessions (R-Alabama):
I think we’ve got to talk about that and you note that the big programs are the ones that are drawing a larger percentage of the taxpayers’ revenue each year, are leading us in accelerating our debt course. I would just have to say, colleagues, we’re not going to be able to fix that and address it effectively if the President of the United States will not look the American people in the eye and tell them we have a problem that needs to be fixed. I wish it were different but he has not done that and we’re not going to be able to achieve progress unless he does.

Just looking at your estimate of interest costs that we’ll be paying each year is rather stunning. Do you recall what the interest payment total last year was? About $240 or $250 [billion]? That we actually paid out of our Treasury?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, so last year, there were $221 billion in net interests, Senator.

Sen. Jeff Sessions (R-Alabama):
And you project last year – last May – you projected the 10-year – 10 years from now, we would be paying $823 billion. This year, you project 10 years from today, we’ll be paying $880 billion in one year. Each of those one year in interest on the debt, which is over $500 billion more than we’re now paying each year on the debt.

And where does this money come from? That’s the question I think the American people need to think to ask. It’s going to come out of programs that people from both parties believe in, want to support, want to see growth, and they’re not going to be able to grow because we’re going to have this huge increase in interest – the largest and fastest increase in part of our budget, would you not agree?

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

Sen. Jeff Sessions (R-Alabama):
Now, you projected that – a couple of years ago, I believe, that if interest rates increased 1% that would add a $1 trillion extra interest cost to the budget. This year, I believe, you’re saying that if interest rates increased 1%, it would add $1.5 trillion to the cost – to our budget cost. Is that correct?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator. If interest rates were just 1% higher throughout the coming decade, we estimate that would add about $1.5 trillion to the federal deficit.

Sen. Jeff Sessions (R-Alabama):
And I teased you a little bit about missing some of your growth projections, but nobody knows for sure what interest rates will be four, five, six, eight years from now. Do they? You just make the best estimates you can.

Douglas Elmendorf, Director of the Congressional Budget Office:
That’s right, Senator. And your critique of our past economic forecasts was quite correct. We missed the extent to which this recovery would be very slow. We had built in a slow recovery by the standards of the post-war U.S. period but not slow enough. And I think the people who have looked more carefully at financial crises in other countries for longer periods of time and said, “No, no, this kind of crisis takes a long time to recover from”, were more right than we were.

Sen. Jeff Sessions (R-Alabama):
Just briefly – since we can’t, in my opinion, continue to borrow to spend more to stimulate the economy, if we had a separate tax code with a lower top marginal rate for corporate rate, would that help growth – be positive for growth?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator. In a tax reform that broaden the base and brought down rates in either the corporate or individual sides or both would be positive for economic growth. How much difference it would make would depend on the specific – [interrupted]

Sen. Jeff Sessions (R-Alabama):
If we could identify regulations that were unnecessary and eliminate those, would that allow more growth to occur?

Douglas Elmendorf, Director of the Congressional Budget Office:
It might, Senator. But again, the effects would depend very much on – [interrupted]

Sen. Jeff Sessions (R-Alabama):
If experts tell us that regulations are adversely impacting growth, I would think so. If we produce more American energy and imported less, would that help growth in America?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, Senator, I think it would. And we’re doing a – we’re in the process of working an analysis now of the effects of fracking on the U.S. economy, on the budget – [interrupted]

Sen. Jeff Sessions (R-Alabama):
And if we could reform our 80 or so means tested social programs and to focus more on incentivizing and training people to work and to move out into the employment field, would that improve America’s GDP growth?

Douglas Elmendorf, Director of the Congressional Budget Office:
Yes, I think it would, Senator. Again, the effects would depend very much on the specific changes.

Sen. Jeff Sessions (R-Alabama):
And if we have a leaner and more productive government, just the money that came into this United States government we got more for it for our citizens, would that be good for growth?

Douglas Elmendorf, Director of the Congressional Budget Office:
Well, getting more effective government services or more benefits per dollar of tax revenue would be good for people by receiving more benefits or services. It would depend on a lot of the timing of the changes and the nature of the changes.

Sen. Jeff Sessions (R-Alabama):
And if we brought our deficits under control, would that create more confidence and more growth in the future?

Douglas Elmendorf, Director of the Congressional Budget Office:
Reductions in the long-term projected deficits would be good for the economy in the long-term and we think in terms of people’s confidence today, Senator.

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