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>> good. okay. thank you, everyone. and thank you for joining us here in person at the congressional budget office. i will talk first about the federal budget and discuss the economy. so in the projections that we released today, the deficit grows from $1.6 trillion in 2024 to $2.6 trillion in 2034 and measured in relation to the economic output the deficits during that period are about 50% larger than their historical average over the past 50 years and that interest costs are a major contributor to the deficit and their growth is either will to three quarters of the increase of the deficit from 2024 through 2034 and, initially the costs are similar to the amounts of discretionary spending both for defense and nondefense activities and by the end of the period at $1.6 trillion

interest outlays are roughly 1.5 times larger than either defense or nondefense spending. also boosting deficits are two underlying trends with the aging of the population and growth in federal health spending per beneficiary. those put upward pressure on mandatory spending. and measuring in relation to economic output the federal debt held by the public rises from 99% in 2024 to 116% in 2034 surpassing its historical peak and the debt ratio continues to rise reaching 172% by 2054. and from 2024 through 2033 the deficit is smaller than we projected last year primarily as a result of the physical -- fiscal responsibility act of

2023 and the subsequent continuing resolutions and together those laws reduce the growth of discretionary spending including the effects on debt service legislative changes reduced deficits by $2.6 trillion over the next 10 years. in our projections, the deficit is smaller than it was last year because economic output is greater partly because a result of more people working in the labor force in 2033 is larger by 5.2 million people mostly because of higher net immigration and more workers mean more output which in turn leads to additional tax revenue and as a result of those changes in the labor force, we do estimate that from 2023 through 2034 that the gdp will be greater by about $7 trillion and revenues will be greater by about $1 trillion than they would have been otherwise.

we are continuing to assess the implications of immigration for revenues and spending and in particular we are analyzing the immigration legislation considered in the senate. and two key factors partially offset that deficit reduction relative to last year's projections. the first is that interests costs rise as a result of higher interest rates and second the cost of energy related tax revisions are much higher than the staff of the joint committee on taxation originally projected and those costs reflect new emission standards, market developments and actions taken by the administration to implement the tax provisions. and turning to the economic projections, the united states economy grew faster in 2023 than it did in 2022 even as inflation slowed economic growth is projected to slow in 2024 amid increased unemployment and lower inflation.

they expect the federal reserve to respond by reducing interest rates starting in the middle of the calendar year and in our projections, economic growth rebounds in 2025 and moderates in later years. since february 2023, when they published their last full economic forecast, the agency lowered its projections of growth and inflation is measured by the price index for 2024. and they also expect interest rates to be higher from 2024 through 2027 then he projected last year. after 2027, the current and previous economic forecast for economic growth are generally similar to the previous projections. and let me stop here and i am happy to take questions and i would be grateful if you could say your name and news

organization when you ask a question. >> so let's talk about the deficits that will be down and mainly because of deferred? >> that is the biggest contributor of reducing deficits and is offset by a range of other things that technicals such as the tax provisions from the 2022 reconciliation legislation which leads to a higher deficit and there is a range of changes in each direction and there's a full discussion in chapter 3 of the report which starts with the figure on 76 and goes through all of the gory

details. >> i noticed that in 2017 it was mentioned 20 times in the report and mainly connected to references that it expires and the deficit will go down and revenues go up which i assume is the opposite. >> that is correct. you can see those effects in our revenue figures from 2025 through 2026 and the revenue share gdp goes up and a little bit less than that and it is attributable mainly to the expiration of the personal parts of that tax act. >> so here good to see you again. i wonder if you could take us through the clean energy tax credit adjustments and you have

like a $428 billion figure which includes, i think, the epa and new estimates of gas tax revenue from the epa changes. can you break out what the inflation reduction act part of this is and how much are those estimates higher than what they came out with when that bill was passed. >> i am just flipping pages and you will see on page 86 of the report it is box 31 and it isn't quite -- it is almost two full pages that goes through some of the details. the challenge here is it is a new baseline as compared to the baseline in which the 2022 act was estimated against originally by gct. and that was two baselines ago. and that was estimated and it

makes it difficult to have apples to apples comparison. and i can discuss key components and the biggest single one is the epa rule. this is an epa rule that so far has been proposed that would take effect with the 2027 model year. in our baseline, that is in at half strength and in a sense which is the normal procedure for a rule that has been proposed but not yet finalized and that would be two main things for the budget and there would be one main driving one main force, the shift of producers and consumers more heavily towards contributed goals. that will affect the cost of the tax credits. and that will affect the excess tax for fuel.

that's the biggest one. the biggest single piece. >> there was 150 something. >> yes. there's lots of things going on. we can circle back to the figures. john mcclellan may jump in, as well. on the tv side, the other thing that happened is the mentation of the ev tax credit was different than when they expected it was not embodied originally. and that has to do with some of the leasing provisions and the limitations for the tax credit that apply in the legislation for an individual buying a

vehicle. the treasury implemented that in a way that if someone the vehicle instead, a greater use of the increased tax credit and cost. then the market developments. this is the battery industry and especially the wind and solar industry that has expanded more than was embodied in the original tax it. that is an additional cost of the provisions. i know you asked about some of the numbers. without the help as well? >> i don't know if it is possible that to back out epa part from the inflation reduction act part. >> john, do you want to go through some of this? >> aggregate costs are related

for the period of about two thirds of that on the revenue side. getting those out of the budget. that includes productions that excise taxes and changes to individual corporate taxes from the claimant of the credits. so when we do baseline update we consider all these factors at once. here we have difficulty disentangling that because this is epa reg, all of the makers say they will promote out for the speed of adoption more quickly than they would have otherwise. that versus what would have happened so we don't separately identify that for the pieces that are due to just how technology is moving in the industry and the tweaks to the implementation guide. as a whole, $224 billion of the

rapidly than anticipated previously was the issue of speculation. >> on the other side, manufacturing credits, that's a separate piece that's -- it's about 428 billion? >> correct. how many ev's were sold. thinking about how many are sold in each year and that because of this it creates the claiming and the credits in the '22 reconciliation act as well as the efficiency will be which is what drives excise taxes. is to disentangle that versus epa rags versus everything that has changed in the economy in the last year plus since her last estimate of those provisions. >> yeah. you saw some of this is on the revenue side and some is on the

out side which is an additional complication. >> just to follow some of that, i know you can't really compare baseline to baseline but there is an order of magnitude that is roughly the credits are roughly double what the original estimate was. >> i think it's a fair care reservation. thinking about the tax expenditure and get your dentist. that they are twice as large now as they were at the time. >> what you said with the halfway prevention. if you and the administration between now and february analyzed the role that there will be another adjustment that would increase the deficit.

as the next administration burned to come in and undo that rule? >> the opposite effect. so hopefully everyone got that. he didn't, we can go through again. but that could show up in different ways. for example if there was legislation say, tomorrow, to undo the rule, the savings would be the half. you know. it's only halfway in the baseline. only half of the cost are in the baseline so mixing it would have savings equal to have the cost. finalized in the legislation to repeal it and helpful savings. >> are there other rotation regulations that are significant -- >> i can't think offhand. others that are --

>> the nature of implementing the lot is there. in and of themselves, they don't have a notable impact on the baseline. maybe the market reactions to those, but the epa, it's in its nature somewhat different than the other implementation regulations. >> good. yeah. >> thank you for doing this. can you talk about cost and the driving force behind that? i'm not sure i quite understand. are you sort of -- we have this pump up in interest rates that sort of had an impact. now interest rates have come back down a bit trey wright? it doesn't look like after we fished through that that your sort of project in the long run but the rates will be different. so i guess what i'm saying is

there's all this chatter about the term premium and that the term premium had gone up. you don't seem to say that this episode will lead us to conclude that in the future maybe it will be more elevated than we might have thought before this episode. does that make sense? >> no. i got it. hope everyone else got it. he will speak to the question. if anything is unclear we can come back to it. we do have higher interest rates in the forecast embodied in these projections than we did in our previous budget rejections. and as you said, that's got a big impact on net interest outlays. the increase in net interest outlays, you can think of that is two thirds resulting from higher rates and one third resulting from the larger

amount of debt. there's a lengthy footnote in the work that goes through that calculation of the two thirds and one third. if you look at our economic chapter, this is chapter 2, hopefully very handy for everyone by the numbers document. see that we do not get paid by the click for this, but i hope everyone including our viewers on c-span will download it and let edit. very handy. a handy document. so you can see that we do have higher rate. the profile is at the beginning of this year, we had the 10 year and then it rises over the course of the year. the forecast that we made back in the beginning of december at the beginning of our budget up date is not exact the perfect

but it seems pretty good for the interest rate right now. they have essentially two things going on. part of it is a modest increase in the term premium over the near-term horizon. even as the fed and our projections have paused with interest rate hikes. the short end of the curve. starts to lower the fed fund rate around the middle of the year. the first rate cut in our forecast was in may. we had a total of three of them this year. even short-term rates are coming to, we have longer-term rates going up modestly stole over '24 and '25. heart of the term premium and just more debt, driving rates up and as inflation continues

to moderate back down to the fed target, we see the large rate coming down. and you're right. just to go back to the question that you asked, you are right that our long-term rate is still pretty moderate. >> you haven't really changed that. >> our long-term -- that's a fair way of looking at it. yeah? >> from the financial times. i was just intrigued by the astounding figures on immigration and just how much that has contributed to your projections. to what degree is this kind of top supply if you like, kind of post-pandemic jump that would continue into the future years projections and also just you know, you touched on the

immigration bill going through the senate, but just ahead of any publication or any find. what would be a well-designed immigration bill from a fiscal perspective? >> very good. let me take those in turn. so in chapter 2 of the report, there is a long box on the impact of immigration on the economy and then from the budget. from there to the budget. as claire said, it is a salient impact in our economic rejections and then from there to our budget rejections. as i said in a statement the labor force is larger by 5.2 million people by the end of the 10 year window. everyone is flipping. it's on page 50 and 51. it's boxed 2-1 and uke see into the chart that i put up on the

screen on page 51, showing the change in the labor force from what we have last year and reflecting mainly on immigration. so there's a couple things. one is the effect of it on the economy and the budget. the economic impact is the largest impact of the increased labor force. there's more people, more workers. a larger economy. and from there, it has budgetary effects. of course, immigration has many effect. social effect. there is security effect, many things like that. and of course, being cbo, we are focused on the economic and budgetary if asked. i am not saying those are the only affect us. i recognize all of the other affects. sometimes, some of the biggest fiscal of facts might be on those other levels of

government and the state and local government, you know, around the country, would have fiscal effect. then there would be effect of discretionary spending since much of the activity in the federal government that responds to the immigration surge is discretionary spending, so we don't project that out. on the revenue side, the calculation we did was that those additional workers would raise the amount of gdp by 7 trillion as i said and that turns into roughly $2 billion of additional revenue. and i think the next piece of the question was the projection of the surge going through 2026. we had it starting in '22. it's very difficult to know

sitting here today how long will this last, how long will the immigrations surge last? we don't know. it's a key source of uncertainty in our projections. we had it going through '26 and tapering back down and going roughly to our pre-surge rate of population growth. it's something we are just going to follow. and see what happens over the next several years. and of course, if there were a change in legislation, that would be looked at, as well. i think i answered the questions as i remember and i apologize if i did not answer everything. >> they were talking about clearly it is a big team of the moment. immigration legislation. what would a well-designed immigration bowel -- bill look

like from a fiscal perspective? >> it's a challenging question for cbo as we steer clear and answer to congress. this is really for founding the agency. we are in our 49th year that we would find that budget and economic analysis. not well-designed. i will tell you something else is done and i apologize with that preface. apologize with some of the analysis we have done and are doing -- i think this will answer your question. first you see embodied in our work is the number of people. we've also looked at the composition of recent immigrants. it's very difficult to know with precision who are the people coming across the border now? but we do have information on who are the recent immigrants and what are their ages for what are their skills

and so on. we use that information to model the anomic and budgetary impact. that's in part how we came to the conclusion about this change in the labor force by seeing such a disproportionate share of immigrants that are of working age. steam up to age 54. so that is one. looked at the education. the composition of the workers. we've taken that and said okay, what kind of deals do they bring and what does it mean for renovation, for entrepreneurship in the founding of new businesses and what does that mean for their

initial wages, and what does it mean for productivity in the u.s.? you will see in the boxes that initially the new immigrants would go into sect as of the economy with a relatively low productivity. and over time, as their skills arise, they would shift and some of that is in effect in lowering average product committee would unwind. that in turn would translate into wages. that's the kind of analysis we are doing. to come back and connect your question, if the congress has immigration legislation, whether it's discussed in the senate now or something else, it changes the comic -- composition of immigrants, the cbo would be in the position to provide the economic and budgetary analysis. yeah, please. >> i want to make sure i understand they do take account

of the revenue affect of the growth and revenues, but you don't take account of this the discretionary spending. obviously, state and local is different. >> okay, i can go through that again. the state and local, we know it's there. that's outside of our purview. the discretionary spending, again, we know that it's there and the surge immigration has an effect on discretionary ending. for future years, we don't -- for two years, the cbo just project discretionary spending in a mechanical way. the statutes that discretionary spending goes up with them elation. it could be that if the surge continues, then policymakers might devote additional

resources and we would not have that in our projections. then on the mandatory side, we would analyze that as well. many of the immigrants coming and receive work authorization. somebody who comes in with pearl would receive work authorization generally around six months or so after they come in with pearl. they could fit into the social said the system and contribute. then, of course, there would be benefits. benefits side of that would be outside of the window. somebody not close to retirement. we would have the revenues up front where that would be an hour projections already. this is not legal immigration

obviously. so they are getting work permits after some period of time. >> it's a mix because someone who comes in with pearl becomes eligible to work authorization within a year generally. the six month mark. so then in the labor force, you know, et cetera. somebody who comes in not through parole through some other channel, it just depends on the specifics of the discussion here. also in the demographic report that we released in january is a discretion of immigration. we were just track different channels. this is termed that the border patrol uses. a got away somebody who comes in and is not in contact with the u.s. authorities. they generally would not

receive work authorization. unless they make a claim in the interior. then there would just be a differential effect on mandatory spending. they would. we would see, we look at people like that and understand that many of them would work, just without authorization. you have to look at the different revenue of acts of that. there is the revenue affect of state and local revenues and state and local spending. at the state and local level and seattle's taxes. >> is there any way to gauge the percentage of illegals that are in this search? what percentage of those people are illegal?

>> we have a breakdown in the chapter that goes through the different -- i'm sorry. demographic report from january has a break down of the different categories. in our projections. in the demographic report is the input to this. that has the breakdown between the different categories. >> caitlin with politico. obviously, we know you're not in the business of common sense of civic legislative proposals but already republicans have taken some of these figures and that you know, this is why we want to create a fiscal commission. this is why we are pushing for this in the up fiscal '24 government funding package. can you just comment on the trajectory of where you the deficits and debt going? i know they are smaller than they were compared to projections last year. can you comment on that, maybe the efficacy of creating something like it to school commission as opposed to taking

other action? >> yes, of course. it seems to me that the first message of the projections is the familiar line that the fiscal trajectory is daunting. and you can see in the deficit shirt behind me, if i flip to the next one, you know, of course, the debt is rising. it doesn't get better at the end of our 30 year window. on the other hand, it's a little less bad than it was in our projections last year. that the effect of the fiscal responsibility act of 2023 and the subsequent continuing resolutions that in a sense implemented that. so you know, it's a little bit of -- it's not enough to solve the problem to remove the fiscal danger, but it was enough to be meaningful and to

show up. that's the way i think of the situation now. in terms of a fiscal commission, we see that and of course, we work through the budget committees in the house and senate and the house budget committee number of is, you know >> considering that legislation. and wherever congress goes, we would support that. the agency has done that in the past. we will have to get that for you. the picture of the binder of cbo analysis for past fiscal commissions. when it comes the right time for that story, we will finds that and try to get it to illustrate. we would never tell the congress to do this or do that. the sense is, you know, it could be that our 2022 deficit option for the deficit report might be helpful for congress as they consider options.

just one last thing and i will stop. no, we do the deficit options report every two years and so we would do another one this year. so hopefully that will be help will to you, as well. >> i see you poked up the estimates from a year ago. i can't quite tell what's left in that bucket. potentially claims that were filed before and now some post january 31st. how much is out there? i will say a word and will go back to john. it's a really difficult issue because we don't have the real- time information on the backlog of claims and then if any claims are withdrawn during the period in which the irs halted this processing. that is the challenge.

if we have numbers, which i actually do not know offhand. >> we increase our projections as we anticipate under current law that there would be additional things. that was created in november. we didn't know it was sitting on the uses of paper at irs. we don't know what future claims would be. from what irs released in the wall, with anticipated going forward, there will be much stricter's many of those claims going forward. as a result, a lot of times in the pipeline and the smaller share of them would be paid that the process and the work is reflected in the joint committee asked mets. has more recent information that what was available as a

cbo. probably reflect, you know -- it's fair to say there's actually more things in the pipeline then in november. some of the certainty as to how successful irs will be in evaluating which claims are adjudicated and which ones are not. grade. good. thank you very much. we are here to be help will. so if you have for the westerns, let us know and we will come back to you and i owe you a photo. so whenever you're ready. it's nice to see everyone in person also. thanks so much.

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