During a House Appropriations Committee hearing earlier this month, Rep. Nick Lalota (R-NY) questioned OMB Director Russ Vought about strategizing how to cut Government spending.
00:00Nice. The vice chair of the committee, Mr. Lalota from New York.
00:04Thank you, Chairman. Director, good to be with you today.
00:06You're the director of the Office of Management and Budget, is that correct?
00:09Correct.
00:10And you've previously served in that capacity in 2020 and 2021?
00:15In 2019 and 2020.
00:18Went there January 2021?
00:20I did.
00:21Okay. And you're the executive branch's chief financial planner and policy coordinator.
00:26Is that a fair description of your title?
00:28I think that's fair, along with the Secretary of Treasury.
00:32Great. And in that role, how important is America's debt and deficit to you, sir?
00:37Huge. I mean, we have an enormous problem ahead of us with regard to the debt that we're facing as a country.
00:46It's hanging over us. It's causing massive interest costs each and every year to keep growing.
00:52And the impact that it can suddenly cause much worse situation than we've seen thus far is still always out there as a possibility.
01:03It's one of the reasons we have to pass this bill to be able to begin to get a handle on the spending that has been on autopilot.
01:10We're going to get into this.
01:11Members have been calling attention.
01:12About $37 trillion? Is that about right?
01:14Yes.
01:14And the deficit is about what?
01:16$2 trillion, somewhere between $1.5 trillion and $2 trillion.
01:21And the debt-to-GDP ratio, pretty bad, right?
01:25Yep.
01:25Worse since World War II?
01:26Yep.
01:27And what if we do nothing?
01:28What if Congress sits on its hands, the executive branch does nothing?
01:31What if we just do the status quo?
01:33What happens with respect to interest rates, opportunity, buying power, the dollar, opportunity for future generations?
01:39What happens to all that if we do nothing?
01:41It will all get worse, and we will continue to have issues with credit agencies.
01:45And one of the reasons why Moody's was late to the party, the original credit ratings were drawing attention to the futility that this town had with the inability to ever pass anything of substance.
01:57And I think that is what has changed with the bill that you all are considering right now through Congress.
02:02And I agree with you.
02:03Reconciliation is the start of something that we have to do to put our country on a better track to give more opportunity to the future generations.
02:11I want to switch gears just a little bit but get back to that point in a moment.
02:14In your experience, scores, predictions by the CBO, JCT, how have they been, sir?
02:20Not accurate.
02:23Thinking back to the first Trump administration and President Trump's 2017 Tax Cuts and Jobs Act, how would you rate the estimates by the CBO and JCT?
02:33They did not do a good job of rating it accurately, and they didn't think we'd ever get to 3% growth.
02:40We did.
02:41They were off in their revenue assumptions.
02:45But ultimately, that's par for the course.
02:47I mean, they don't think through dynamic assumptions with regard to their revenue policies.
02:51And about how much in revenue were they off by?
02:53Do you remember?
02:53I don't have it at my fingertips.
02:551.5 trillion?
02:56That's about right.
02:57Only 1.5 trillion.
02:59Are you familiar with CBO's work when they scored the American Rescue Plan?
03:04I am, but happy to be informed more.
03:07Accurate or not accurate?
03:09If you've got a question there, I'm happy to answer it.
03:11But at the top of my head.
03:12I'll lead you a little bit with this question.
03:14They projected inflation to be around 3.3% in 2021 and 2.5% in 2022 and 2.3% in 2024.
03:24Take a guess.
03:24Was it higher or lower than the projections, the inflation?
03:28I'm sure that it served the administration's policy objectives.
03:33Yeah, 4.78% and 4.1% respectively.
03:37Way off.
03:37But yes, favorable to that administration.
03:40And now, fast forward, we have this one big, beautiful bill before us that the House Republicans
03:44we passed last week.
03:45And we've received some new scores over the last day or so.
03:49And are you familiar with the CBO score on the growth rate they project in the one big,
03:54beautiful bill?
03:54It's about 2%.
03:55Yeah, 1.8%.
03:57Do you believe that it is an accurate enough growth rate, given some of the historical context
04:01between TCAJ1?
04:03Much of the same policies in TCAJ1 led to 2%, 3%, and 4% growth.
04:09And yet, they're scoring in this 1.8%.
04:11No, I don't think they're accurate.
04:13I don't think it's reflective of the growth.
04:15I think it's much more likely.
04:16And we'll get to our economic assumptions when we come later with more details from our
04:20fuller budget.
04:21But the budget resolution that you all passed, $2.5 trillion, I think the number
04:26there was 2.7.
04:28It was much more accurate in terms of a number that should flow from the policies in the bill.
04:33Great.
04:33I would agree.
04:342.6% is, I think, what the House Budget Committee put forth.
04:37I think that's a more, a better estimate.
04:40Would you agree that, assuming only the 1.8% CBO number, both underestimates the positive
04:46impact of the legislation and simultaneously overestimates the negative impacts like deficit
04:53projections?
04:54Yes.
04:54But I would go further.
04:56I think the challenge with the CBO score is the way they construct the baseline is they
05:00are asking policymakers who care about the debt and deficits to almost take the position
05:05that you shouldn't extend the tax relief.
05:07And then they don't model the extent to which that would implode the economy.
05:10There are dynamic assumptions with regard to tax policies and economic growth, and then
05:17there should also be an area where they model the economic impacts of their own baseline policies.
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