The Congressional Budget Office’s director, Phillip Swagel, is testifying in front of the House Budget Committee on Wednesday this week. Here are a few questions I would like to ask him if I could.
Our spending as a share of GDP now looks permanently higher than it used to be. Nearly all of the rise in borrowing over the past 15 years has been because of higher spending and not because of lower revenue. Now that we are through our most recent recession, spending is still higher than it used to be, and CBO’s projections show that rising deficits are from this spending growth. Revenue is growing, too, but spending is growing faster. Somewhere along the way, after the pandemic, we committed to higher spending without a real public debate about whether we wanted government to represent a higher share of the economy. Given CBO’s projections of current law, do we have a permanently bigger government now than we had in the past? If so, does Swagel know which policy changes have most contributed to this growth?
Alternatively, what role does he think recessions and other emergencies have played in the permanent expansion of government?
The flip side of this question would be whether he believes that the growth of government and increased deficits make it harder to respond to emergencies. More broadly, can he discuss the long-term implications of the current deficit levels and growing national debt?
My colleague Charles Blahous suggested asking the CBO director whether legislators could close a substantial portion of the long-term fiscal gap merely by restoring Social Security and Medicare to long-term solvency. I am not sure how many members of Congress would be willing to ask this question, but I think it is worth asking.
Moreover, which of the statutory constraints on CBO modeling does the agency believe are in need of updating to make its baseline and cost estimates more realistic?
CBO includes in its projections tax hikes and spending cuts that won’t happen, but it doesn’t do this when it models the impact of Social Security and Medicare trust funds drying out. In this case, CBO assumes that general revenues will be used to pay all the benefits. I would ask him if he thinks this exception should be lifted.
Can the director explain the role that immigration has played in the agency’s most recent projections? Here is a great post by EPIC’s Bill Beach for those of you who are interested.
How do technological advancements and automation factor into CBO’s projections of productivity and employment, and how is CBO thinking about the role played by AI in these issues?
Finally, I would ask him about interest rates and inflation. CBO has forecast a yearslong increase in interest rates — even when assuming 2 percent inflation. Does the director think it realistic to expect the debt to grow to 180 percent of GDP in 30 years, and primary deficit to rise and stay elevated for decades, while inflation stays effectively flat?