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1 Answer to a Question for the Record following a Hearing on CBO's Appropriation Request for Fiscal Year 2019 Conducted by the Subcommittee on the Legislative Branch, Senate Committee on Appropriations 1 (May 23, 2018)

handle is hein.congrec/aqrhcbo0001 and id is 1 raw text is: nMAY 2 3, 2018 Answer to a Question for the Record Following a Hearing on CBO's Appropriation Request for Fiscal Year 2019 Conducted by the Subcommittee on the Legislative Branch, Senate Committee on Appropriations On April 25, 2018, the Subcommittee on the Legislative Branch of the Senate Committee on Appropriations convened a hearing at which Keith Hall, Director of the Congressional Budget Office, testified about CBO's appropriation request for fiscal year 2019.' A question raised at the hearing was submitted for the record. This document provides CBO's answer. It is available at www.cbo.gov/publication/53879. Question. In regards to the Buy America Law, Senator Murphy would like to know if CBO would be able to inform the Congress of the impacts to the economy if we were to move the majority of our defense supply chain overseas. He's specifically concerned with the Department of Defense moving a number of their functions overseas. Answer. A change by the Department of Defense and its contractors to permit greater purchases of goods and services abroad would have various economic effects, depending on the period examined and the economic conditions. Such a change could also affect national security. In the short run, such a change could create significant disruptions. A drop in federal defense spending on domestic goods and services, if it was abrupt or unexpected, would decrease domestic production, increase imports, and thus lower gross domestic product (GDP) in the short term. CBO estimates that for each one-dollar increase in net imports, the total decrease in GDP and income over two years would be 50 cents.2 1. See testimony of Keith Hall, Director, Congressional Budget Office, before the Subcommittee on the Legislative Branch of the Senate Committee on Appropriations, CBO's Appropriation Request for Fiscal Year 2019 (April 25, 2018), www.cbo.gov/publication/53763. 2. In CBO's estimation, that would be the case in economic conditions in which the Federal Reserve was likely to try to offset the effects of changes in fiscal policies by altering interest rates. See Valerie A. Ramey and Sarah Zubairy, Government Spending Multipliers in Good Times and in Bad: Evidence from US Historical Data, Journal ofPolitical Economy, vol. 126, no. 2 (March 2018), pp. 850-901, http://dx.doi.org/10.1086/696277; Charles J. Whalen and Felix Reichling, The Fiscal Multiplier and Economic Policy Analysis in the United States, Working Paper 2015-02 (Congressional Budget Office, February 2015), www.cbo.gov/publication/49925; and Congressional Budget Office, How CBOAnalyzes the Effects of Changes in Federal Fiscal Policies on the Economy (November 2014), www.cbo.gov/publication/49494.

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