tv Professor Edward Kleinbard on We Are Better Than This CSPAN May 26, 2015 10:10pm-10:41pm EDT
hank you. the biggest programs we have our air quality and climate and us china council focused on sustainable urbanization. so i see where the question comes from. if if you had asked me going back if i was sitting here today and i did not know how bad the year was more which i sure do. i just a couple of weeks ago ground zero of this problem. you can hardly see you know, you could not see the sun and everything was dark case. eyes. a chapter in my book is called darkness at noon. but if you -- if i was told all the things i chinese
were going to do in terms of investing in new technology, turning down you know, shutting down dirty plants i would not have expected that the situation would have gotten worse. it has all been blown away any kind of progress by this breakneck growth the model which is you know unsustainable. energy intensive development with an energy inefficient economy. so what gives me hope okay so what gives me hope are several things. optimism.. optimism. first the leaders understand the problem big-time because the chinese people do's. the chinese people are demanding. the survival of the party depends upon making progress they have change the way mayors and governors are evaluated. it used to be if you visit with any senior official at
the city or provincial level they were just real off their gdp and economical statistics because they knew if they did that, if they grew the economy, avoided the scandal or social unrest they were just do finally get promoted. now they are being evaluated and their performance, you know is being evaluated. what there doing with the environment. they give you the progress. the other day it just looked terrible. seventy-three out of 73 provinces have some unique problems. they talk about the 12% improvement. now i think the i think the upside and the reason that we are focused on this area big-time is energy efficiency. give you a couple of statistics. half of all knew buildings going up on earth or in china's. 40 percent of carbon emissions come from buildings. they have lousy energy efficiency standards with buildings.
one of the things the paulson institute is working on is our urbanization council for rocky mountain institute energy efficient buildings. a big upside. the cheapest cleanest energy there is is energy you don't use. the most difficult issue you pointed to is the mix of call in their overall energy usage. and projections and the deal that the obama administration came to the agreement with them requires them you know to do the things they say there going to do, they will have to change that makes. it will take a while. so this is difficult. it is important. but i would say that the obama administration's agreement is usually important because 1st of all it is a demonstration
that the chinese care a lot about their relationship with the us. they did not have to do that when the obama administration was there, but they did. secondly, they are focused on this and care about it. they don't announce these things lightly. it greatly enhances the chance of success. excuse me. just really, really enhances it. i think it would have been hard to see much progress there without this, and i think having done this it creates a much better environment for getting things done. >> i just want -- our time is up but i want to say, this book is a wonderful read. so we have been talking about really tough issues on the economy today, but just read what hank paulson writes about where he was on
september 11 and his personal engagement with these people. this is an insider's account such a personal touch. i just want to congratulate you on the book and recommend dealing with china because it has been a fascinating experience for me. >> thank you very much. thank you. thank you all for being here today. [applause] >> i want to thank andrea for being here and leading this conversation which was wonderful. thank you to secretary paulson. we were going to add to your collection of national press club mugs. [applause] >> here is some of what we are covering wednesday on c-span2.
>> i was chief of staff of the congress is nonpartisan joint community on taxation. the staff works to provide lawmakers with information about how a change in tax law is going to affect our tax revenues in the future. it it helps to draft tax legislation. does so in a nonpartisan way which means it has four masters. republicans and democrats and house and senate and it turns out that it means you are the easiest dog in the room to kick.
>> so if i were a member of congress and i came to you and said to my want to tax system that is x it is your job to draft that? >> yes. >> regardless of what happens? >> yes. i think all of us to who have been chief of staff you know appreciate that responsibility and try to take it seriously. you know deliver what the bosses are asking for regardless of our personal feelings. >> you have also penned the book, we are better than this kamal government should spend our money. in this book you write that readers may be disappointed by the modesty of my substantive recommendations on tax policy. what does that mean? >> what it means is i sat down to write this book and began as another book about tax and budget policy with the emphasis on tax. that is my specialty.
the more i worked on it the more i realize that taxing is easy. it it is spending that is difficult figuring out what government should be doing that is difficult. taxing is not the purpose of government. sometimes government. sometimes we behave as if it is. the purpose of government is to spend money. i'll be spending it wisely, spending appropriately, spending too little spending too much tonight is a much more difficult questions. you tell me how much money we need to run the government we want command i can raise that money for you easily enough. the tax side is easy. spending is hard to figure out. ♪ let's start with the tax side. a big argument in washington our tax system is too complicated. is it true? >> our tax system is complicated. his unnecessarily complicated but it is complicated precisely because that is exactly what congress wants.
must be very clear about who was the tax system. it is congress that owns the tax system not the irs or anyone else command congress wants that complexity because congress runs in air set sort of industrial plan through the tax code with hundreds of breaks for different companies for different industries command we do the same for individuals all sorts of social spending that we break into the tax code so it is invisible except in the form a less revenue. but if that's the spending program. it is all of that that leads to complexity, not a question of how many tax rate we have. i had calculated is that does that for you. it is all about the other programs that we stuff into the tax system in order to accomplish one alleged objective or another. of course we never take the time to review any of it take the time to think about whether these programs are doing is this a useful way
to reduce revenue which is to say to spend money. that is the source of complexity. again washington is paralyzed on tax matters in part because no one wants to give up the brakes they have and also in part because we are using that as a way of arguing indirectly about what is the appropriate size of government. one of the themes of the book is let's talk about the right subject, let's talk about what is the right size of government. in the book argue strenuously that in fact government investment and insurance has big payoffs, not just touchy-feely payoffs, although those other but it has big economic payoffs. we are essentially starving ourselves as a country by virtue of not making the kinds of investments that only government can make or not offering the kind of insurance that government is ideally situated to make. and so we argue about taxes. we put the cart before the
horse. >> government spending as investment as an example. >> an easy example. infrastructure investment in general. roads, bridges, highways airports controls more more airports but airports better airports'. all of these are examples of old-fashioned infrastructure investment. today today it is hard to do worse because we're spending approximately zero on net infrastructure investment. that is you you take the where and tear, the depreciation on existing infrastructure and compare that to what we're spending. we are treading water, spending essentially nothing to improve the transportation infrastructure the internet infrastructure any other physical plan that you can imagine. education is another example. the biggest asset and the united states of america is
ourselves our investment and ourselves. we are the drivers of the profitability of this country as individuals. we individuals. we are the sole the country. and we don't invest in ourselves as much as we could be investing because we make public education so expensive. as i want to think the public education is expensive, but it is in several important ways. at the level of primary and secondary education we are one of four countries in the oecd which is the trade association of countries around the world. of those 34 countries there are four and spend less on educating poor kids and rich kids and we are one of those. we spend more on the public education of rich kids and poor kids.
that is the most perverse policy that you could imagine. and when you get to college level we have long programs and the like, but the result is that we are graduating students with enormous sums of that. it is heartbreaking to me to see students at this law school or any other law school graduating with a hundred and $50000 in debt or more. that is a millstone around the next that constrains the kinds of opportunities they can follow that takes away the freedom of exploring's different career paths. that is a terrible burden asking people to assume before they have even really started their careers. >> social spending. spending. social security food stamps are those investments as well? >> i don't think -- i think i think you have to break that category down. social security for example is a form of income security for seniors. it is not a strict insurance
program. you don't get back what you pay. in fact if you are of modest means you get back a lot better deal than what you put into the system. if you are affluent you get the worst deal than what you put into the system. is an income security system for seniors and today it and medicare account for about 70 percent of all of the transfer payments that we make programs were there is a check a check was someone's name on it. about 70 percent of that is going to seniors in the form of medicare and social security. so the bulk of what goes to families in need of help because they are just plain poor the bulk of that is going to children or disabled individuals. there is very little in fact that we do for healthy
adults under the age of 65 who are down on their luck and in fact, again, within the oecd as a percentage of income our national income gdp, again 29th out of 34 in the amount that we spend of 34 in the amount that we spend on social spending in general for on the income security for adults under the age of 65. either way you cut it we are at the bottom of the heap and yet we are the richest large economy in the world. we can afford to do better than that. >> we spend a lot of money on our military. is that an investment? 's. >> carefully agnostic on the subject of military. it is true we spent a tremendous amount relative to other countries. we spend as much as the next 14 countries combined. we spend about 45 percent of the world spending on military's us.
there are, i think, 12. cares in the world. you think about that, the most expensive's movable objects in the world of flotilla of support ships and aircraft's. of those 12 we have 11 and, of course, the 12 -- if you don't know the answer you're a poor student of geopolitics. the answer is france. the the book does not suggest that 11 is there are number. i don't know what the right number is. if 11 is the right number that's fine. what i do know is we should jolly well pay for the military that we feel we need global we should also pay for investing in ourselves and ensuring ourselves command we can do that but the time when we are has in fact we are the lowest taxed country in the oecd. you oecd. you know there is almost no relationship between how we
conceive of ourselves and how we actually played relative to other countries. the book spends a lot of time trying out these kinds of comparisons to help people see the truth but we are the lowest taxed country, including state and local in the entire 34 member oecd relative to our income. we excel at tax whining, planning but we are not overburdened the taxation. >> did you have written this book we are better than this when you were on the joint committee? 's. >> absolutely not. this is not a nonpartisan book. this book i tell it as i see it. it is not easily categorized it argues that the right has things wrong in their belief's that government should be smaller, quite to smaller, quite to the contrary our government is too small. low tax small government.
so the so the political right gets that incorrect's. the political left is also wrong in thinking that the solution to inequality today lies in steeply higher marginal tax rates. what the book demonstrates is that what makes for a progressive fiscal system which is what we care about. we should not care about taxing. we should care about the net of taxing and spending they gives and gets between every citizen in our government. and when government. and when you look at that question, when you look at the question of the net of fiscal spending it turns out that the spending side dominates. not even president bush proposed. so once you acknowledge that spending is what drives progress every government spending cannot help but be highly's progressive in his distributional effects and
you get the benefits because spending is so inherently progressive how we raise the money is much less important than how we spending it from the.of view of addressing inequality. that turns out to be the secret of northern european countries. take germany. germany has the same market before tax before government intervention, roughly the same market inequality as the united states. but it is a much more equal society and yet at the same time it is a more progressive tax system. our tax system is more progressive and the reason is it is just plain bigger. and the bigger government tax collections funds more government interventions, explains why university in germany is free and why there students are graduating without mountains
of debt and because they have a larger government that is investing in ways that help all citizens they end up with a substantially more equal society. so if you take a step back you can say about what the book is trying to do is address the question what should fiscal policy, taxing and spending what should our fiscal policy be in an age of inequality? what the book answers is it has to be a larger pace because we are the smallest government of any large economy. it needs to be a larger based more tax. does not have to be super high rates on the rich. we need to collect more revenue and we need to spend those remedies wisely by investing and ensuring an all caps. >> so start with the spending, then come spending, then come up with the tax system's. >> the tax system is not that difficult.
i have done this for decades. we can argue like all academics are policy wonks can about this feature that feature but in the end it is just not that difficult. we are such a low tax country relative to others. if you look at all taxes taxes, federal state local, income tax payroll tax bill put them all together. it is not difficult to find ways to raise the revenues. i give specific plan in the book but i don't want to dwell on it too much because it is just too easy. what is hard is convincing people that government in fact can be and is useful. it can be an instrument for making ourselves not just by leveling down but through investment throwing out positive returns and makes us all healthier wealthier, and wiser for generations from now. >> as you well know the budget process on capitol hill is on automatic pilot
the last several sessions. >> yes. you know if i were to write a sequel i have decided the book should be called when congress. congress is the problem. it really is. and we spend so long defecating government we forget that the reason that government does the government does not work is because congress doesn't work. congress does not fulfill its own mandates that it has given itself on the budget process. they don't revisit important spending programs that are baked into the tax code so that they are invisible to ordinary people. at every turn you see at best a marginally functional 's enterprise that is really letting us all down and the down command the solution is for us to elect a better class of legislative. the practical people who want to get things done whether they are conservatives or liberals can find common ground and
lead us to much more productive economies in which we all participate. but that requires a better class of legislative than we have today. >> a a balanced-budget important? >> not at all. a balanced budget is clearly wrongheaded a wrongheaded and perverse thing. there are a few things you can say about economics with great certainty, but this is one of them. a budget to have a balanced-budget is wrong headed for several reasons. one is that the economy keeps growing. so what we should care about is how much debt we have relative to our income. that is, after all how are private firm would think of things. it is not i have x million in debt. $100 million in debt is that is a great deal for you or me to carry but not a great deal for apple a company
that would be our 1st trillion dollar corporation in the world. so everything is relative. the right question about national debt is not how many dollars as it but how it compares to our incomes. in fact because our national income grows if we have -- if we want deficits on the order of 2 percent of gdp to hear at a time when our economy grows at 3 percent per year, well it means that we end up with the national debt of about two thirds or annual income which is perfectly sustainable. a little bit lower. those numbers by way of example. and the other point, of course is course is that sometimes once in a great while things go horribly wrong's as they did in 2007 to 2009 and the bottom to spas out. at that time government deficit spending leads to better economic outcomes. we
can see the difference between the success that the united states is at coming out of the great recession compared to europe which tighten its belt out of the misguided idea that deficits were the 1st priority rather than growth. so a. so a balanced-budget would've led to a great depression. is just that simple. spending would have collapsed because revenues collapsed. revenues collapsed because that is what it means to be in economic freefall. and when revenues are on 7/2% but we were down 14 1/2's. balanced-budget would've meant we half's. balanced-budget would've meant we were chasing her own tail cutting, cutting, cutting and in doing so reducing incomes and consumption leading the lower tax revenues intern and we chaser tail all the way down to a a great
depression. and it was secretary paulson at the end of the bush administration the knew obama administration, they understood this. they acted appropriately. they recognized that deficit financing is what paul us out -- would have been a great depression in 2,008. >> another common refrain in washington is close loopholes. >> i. >> am all in favor of closing loopholes. >> what does that mean? >> it means that the tax code is filled with rules that are not germane to collecting tax in a fair and orderly way. this is what is called the technical term tax expenditures for but the idea is these are spending programs of one kind or another that congress has chosen to run through the tax system because then they don't show up as a spending program's. they show up as a reduction in tax revenue. there revenue. there are a handful of just
plain hoops. places where the rule is wrong and should be fixed, and those places are there either out of inertia on the part of congress or because of powerful political interests that block fixing them things that carried interest affluent fund managers get tax capitol gains rates rather than ordinary income rates on their annual income. it is a nonsensical, but the fact is it is not that large number in the great scheme of things. it's what it's what i think of loopholes i think beyond the carried interest all the personal i do my seductions that run a train and a half dollars over five years' in reduced revenues in which
we're not accomplishing the purchases we think we are. it helps affluent upper-middle-class families by a five bedroom home and set up a four bedroom home command is a strange kind of government spending program. so we need to look at the personal i demised adduction and a handful of others. these are not -ellipsis. they are deliberate policies. they just happen to be bad. >> how much money should the federal government be spending? >> and my view the government should be spending on the neighborhood of 44% of gdp. it has been spending around 22%. 22 percent. historically it was lower. one of the reasons spending is going up democrat or republican, nobody can hold back this with a broom. the number of americans over the age of 65 is skyrocketing.
and that means that social security and medicare are going to take larger and larger charts of our national income. that is income. that is just the reality. so government just by virtue of that alone the doubling of the number of americans over the age of 65 between now and 2040 the government has to be bigger in terms of his total spending. so we could pretend that we are in 1965 but we are not. we not. we have to deal with the reality of our aging population. so 24 percent of gdp is about the right number. so what the book advocates, you know, is not that we become france overnight. i'm not a socialist. have a socialist. advocates that we spent about 2 percent of gdp more than we are now. that is a lot of money. $350 billion but it is completely affordable and it buys a l