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tv   After Words  CSPAN  August 27, 2015 11:51pm-12:53am EDT

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1980s. that generation is having babies. what happened to the birth rate in the 1990s? it crashed and burned. so a decade from now you'll see the resumption of a very rapid decline in russia's birth rate and population. and i have to be honest with you, the russian economy, which i studied two years, is not very complicated. it's a petro state. it's more petro state now than it was eight years before, before the economic crisis. i takes $110 a barrel to balance the budget. unfortunately for the kremlin, we have oil now hoverer around 40 some bucks a barrel. we're not even close. the difference is that they have -- they did have massive exchange rate reserves, but you can burn through those very quickly when you're -- russia is in recession. the economy is being contracting
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for at least three quarters. so, russia has been floating on a blissful sea of hydrocarbons for over a decade and enact nothing structural reforms when they had time. i know my -- i am going to finish here. my presentations tim to at the bleak. what i present -- my boss is not here today. he is on vacation. when i present with him he only wants to present with me late in the afternoon so he can go out and get a drink. i'll finish with a quote from one of my favorite movies, the 1987 movie, "the classic wall street." remember the scene when charlie sheen is arrest by the fed for insider trading. gets arrested in the office in front of everybody, and i his
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boss is playedly hal holbrook, and he tells this quote: man looks into the abyss and sees nothing looking back at him. only then does he find his own character, which prevents him from following into the abyss. i'm an economist. i happen to like crises. i tell you why. because you don't get structural reforms normally unless there's a deep economic crisis. think of china, late 1970s. india, 1991. think of asia, 1997. and after that, the countries in regions enacted large structural reforms. as for russia, the man looking into the abyss is vladimir putin and russia is not going to change until he is gone. thank you. [applause]
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>> okay. the bar will be open after the session is over with. either that or coffee will be offered. thank you for your presentations. we have a few minutes left for questions for the panel. i would -- we have ay here with a microphone. if you could wait or two the microphone so everybody can hear you. if you could just raise your hand, identify yourself briefly, and in the interest of time, if you please ask a question and if possible keep it as short and to the point as possible. so, anyone would like to start? down here. >> sherry from voice of america. dr. wilson said we shouldn't worry too much about china's stock market crash. i'm just wondering, the other experts, do you hold similar view on that?
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>> i think you do have to worry about it but it's probably for something that my colleague would agree. the truth is that the -- it represents a discontinuity based on a lack of information and transparency in the way the chinese government operates, and because there's not enough information in the marketplace, expectations are never in line with reality, and then you get this sort of sharp contraction. so nat unlike what underpinned the crisis in the united states. jinping's willingness to concentrate on consolidating power makes sense. it forestalls the changes needed to change the economy to one that is based on the rule of law, that allows for broader range of personal exchange but deferring economic reforms is setting the stage for the crisis because it's the reforms that are essential to try to tack
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then underlying issues in the chinese economy, and i can understand why he is doing what he is doing and this is really about settling old scores and clearing out to the old guard but the reality is that by deferring the economic reforms, it's setting the stage for real economic folly. >> if i could just add one more thing. i've never owned a chinese stock. and it's a good reason why. simply no transparency. what i did once was i did a very simple graph. i looked at u.s. listed companies, s&p 500, and the two variables on the grand. i listed reported cash flow, and reported net profits for u.s. companies, and the correlation was 90%, very high correlation with cash flow. you have extraordinary items, write-offs, things like that. i do the same thing for chinese
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listed companies to see if there's any correlation and i got a cloud. there's no correlation between cash flow and net profits. how can that be? what happens is when chinese companies have he cash flow they don't want to pay high taxes. i so they report lower net profits. and what is interesting is just the opposite. if they have a loss or low earnings, a lot of chinese companies will list higher profits or less -- fewer losses. why is that? why would a chinese company do that? because the worst fear of any chinese company is that they'll be audited. and until there's significant changes in transparency, accounting standards, -- if choice companies rated aaa in shanghai, they're also listed in new york and they're rated as
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close to junk. how can that be? not just a couple companies. a lot of companies. so a lot has to change first. >> next? terry. >> thank you, terry miller from the heritage foundation. dr. wilson said he liked crisis because that was how you get structural reform, but i'd like to link that back to mr. aldonas' point about freedom and the fact that we have seen crisis used, for example, with germany, before world war ii, and as recently as 2008 in the united states, for governments to enact structural reforms that do not promote freedom and in fact do not contribute to stronger economic growth in the future. so, my question would be, how can we help ensure when we have crisis like we had in 2008, or
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the current crisis, if it is in fact one, how can we ensure that -- help promote the idea that governments will promote positive reforms that actually increase economic freedom and guard against reformed that would have just the opposite impact? >> this is why we have to make it the central issue in the 2016 campaign. i you think about donald trump lead neglect republican party in the polls, he represents an economic theory that reflects his life. if you're a property developer in new york, it's pay to play april. his view of politics and it's under fingerprintally undemocratic. it hires someone to sand up face to face with donald trump to point that out to have the courage to do that. not say he has bought into something or he is reflect something sort of fundamental tenor in american politics but to point out what the underlying
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philosophy is, and it's time for candidates to stand up and not simply decry the impact of trump on conservativeism or politics but to point out what is wrong in the underlying philosophy. the reasonables why an individual shall expect something differenter and better if they've reject that -- nativism, isolationism, always sorts of-isms but you have to have the courage to do that. what we're waiting for is a candidate with the courage to lead. when you think about what you had with reagan and thatcher, and you think about the degree to which we had evolved in the direction of social democracy in both u.k. and the united states, their willingness to lead was all the morning remarkable. was a crisis in the 1970 in the united states, and
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internationally rate the same thing. we tend to think that america is in decline. i made a bet with myself thinking we will -- ten years down the road be a larger share or the global economy for all the wrong reasons. and it will be simply because the institutional setting in the united states was so strong in its founding that we still live with the benefit that freedom while everything else is declining. what happens when you have a crisis, with all due respect, good for economieses but the rest of us, we have a tendency to think that the human reaction is fight or flight. the reality is it's a protective crouch. right? and that is what the politician seizes on. and in the fails of that, all the more reason you need the courage of a reagan to stand up and illustrate why you need to fight for freedom in that context. that's what i think we're waiting for. that's why it's actually central to the campaign. you see where hillary is going.
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she is deferring to folks who are interested in that greater good, that collective enterprise, so it's going to have to come out of the republican side, but that first requires standing up and shining a bright light on what is currently being sold as a version of where the country ought to go. >> yes, sir. >> happy that sounded as harsh as it was meant to be. >> american citizen. this is always a great report. there's one problem with, i think, that it's easy to miss the trees for the forest there a few streets be looked at carefully because they sort of stick out ask they're not the same as other one. freedom is good between me and you, but freedom with my wallet? no. there are limits to freedom, and free trade is one of those. i we look at the american economy, the biggest export item is agriculture, and the second is scrap.
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we have gone from the world's largest creditor nation to the largest debtor nation. our s5, latest top line fighter, 70% of the electronics are made in east asia do you see any problem with that particular tree in the for rest? >> -- forest? >> lead me explain. today we are negotiating a transpacific partnership. one leading opponent is ford motor company. that are dying because there's 25% tariff on pickup trucks. if you look at entrepreneurs is in this country we have this lazy notion that it take place in silicon valley in austin, maybe minneapolis. we tend to forget that most entrepreneurialism is starting a business that is something like landscaping, and that the first and largest capital purchase is a pickup truck. think what this means in the
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context of entrepreneurialism and trying to develop new jobs. imposing a 25% tax before anyone earned their first dollar on creating the enterprise elm pallets what ford motor company is asking to maintain. so when looked at the tpp, even accepting what you said, the first thing i think about is why is that hispanic person who is trying to create a business in east los angeles, subject to a 25% tax because ford motor company sees in its interests after the auto industry has been bailed out to maintain that protection. why is that choice limited for that individual? now at the same time you have to be conscious of what is really go on in the world. as a free trader, when i see a china company, state owned, i'm very considered. the fact the conventional concern that it is somehow eroding our defense industrial base because so little of that base depends on the microchips
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that micron produces. i worry about the technology and i worry about the fact that a state-owned chinese company becomes part of our political process. public choice theory, all those thing wes learn, reflects while we should be concerned about that. so when you say there's limit on free trade, i would say we should pursue the idea of freedom choice for the benefit of eliminating those taxes that injure or ability to bro as an economy -- intro as an economy and be very conscious of the areas where you're inviting in forces that will actually limit freedom down the road mitchell response is, bullish on free trade. bullish on trying to make sheer we're trying to vein indicate our ideas of economic freedom in the global marketplace and deep concerns whether and when other places that violate those rules start to undermind our ability
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to deliver that ability to deliver that here and abroad. >> okay. yes, sir. >> john with cti-tv, taiwan. will the volatility of the chinese stock market have any negative impact on president extinct xi jinping's position when he comes here for a state visit next month? will it make him more acceptable or easier to make deals or concessions to the u.s.? another issue with taiwan, we all know that the taiwanese economy is so dependent on the mainland. where will the volatility of the chinese market and stock market and slower than expected growth, and potential financial crisis, have any impact on taiwan? are there any things that tie
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juan can do to prevent that? thank you. >> let me say this. you look at the -- brazil is in recession, russia is entering a deep recession. you have had massive -- as recently as four years ago, china was growing at almost 10%. probably half that now. and grinding down slowly. so, when xi jinping comes to washington in september, he won't be strutting in. the u.s. economy now is growing at a rate around 3%. we have created 200,000 jobs a month over the last 12 years. so you have seen the u.s. economy -- the u.s. economy is always written off. written off in '81, '82:19:90s, the jobless recovery, and it's -- it's resuscitated once again. the fundamentals are pretty
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strong. asian corporates were lauding up the past years. u.s. corporate balance sheets are in cringes condition, low debt and capability to spend money on hiring over the next two or three years. the question is in taiwan -- i was in taiwan nine months ago. we are concerned. we used to be by far the largest trading partner for tie one. during most of -- taiwan, during most of the postwar period, and this his completely reversed, a lot of it because of the proximity. china is so big now, and 40% is tie one's experts -- taiwan reside experts go to china, many cases they're assembled and exported again. so have to be careful with the figures and the value added, but you have the case where 70% of taiwan's outward-begunked foreign direct investment goes to china, and then if they end
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up approving the cross-straits service agreement, that could go both ways for tie one. after living in china, the service sector is extremely poor. there's no culture in terms of -- in the service industry and providing quality services. spent an afternoon in a restaurant and realize that quickly. so, there's a possibility tie one could do well -- taiwan could do bell was it hat a more sews fix tis indicated service sector, and given the differences in size, the chinese economy now is 20 times larger than that of taiwan. as recently as 2000 it was 10 times larger. and so there's a worry among small, medium size enterprises in taiwan of being consumed and
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swallowed if the service agreement is passed, and we're concerned about that. >> i take a little different approach. i think that xi jinping will come strutting into town because he read his opposition accurately. the president has invested a lot in china being onboard in terms of the climate change agreement at the end of the year. the idea that president obama will try to undermine the relationship, given what he views as his legacy in these other areas, same thing with the iran deal and other things -- is exactly what xi jinping will exploit. and the reality is, let's not kid ourselves. often times the most revealing things we say are the criticisms we offer about other people, and i always used to love when the chinese would describe the united states in the bad old days of the cold war as a paper tiger. a moment of self-reflection. china and xi jinping in particular is very good at projecting an idea of power and calm, despite the turmoil in the
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markets. the reality is much more unsettling. this is a country that is ruled for the benefit of people in the conclave of to the forbidden city. nor to the so site and under those circumstance wes should be concerned about the fundamentals politically and economic bily but -- economically but a that don't play out in terms of a meeting with president obama. >> i'll take the liberty of asking the last question. going back to the question that terry was asking about how do you direct a crisis in the right direction? we have been in a series of crises now for a number of years and got know thinking about the one about ronald reagan and maggie thatcher and was turned in the right direction, and 2008 went in the other direction. what was going on in the country that allowed the politics to go off in different directions? i don't know the answer to that. maybe you do have it.
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but did remind me of another thing. that clearly in the case with reagan and thatcher, there was widespread perception that the direction the country was going was not working and they thought they understood what the cause was. wasn't a lot of confusion. high inflation from then 1970s, which leads me to the federal reserve. by artificially keeping the interest rates low, by putting all this money into the system, every time the stock market hiccups, they think about continuance. same thing with china. this is -- the artificial perception that things are better than they. hiding structural problems and politically this is benefiting the party or the movement who wants the easy answers on security, collectivism and all the things you mentioned. so the other things we talk about here, there's not 2,000 people in this room. we talk about hard things. we have -- i think we speak the
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truth. but the truth is not always what people want to hear. so my question to you is, talk about the federal reserve, talk about this issue, and is it possible to unwinds that problem without having the kind of pain that actually could put the crisis in a direction -- in which direction i don't know but the point i right now a lot of the americans north seeing the reality of what is going on because of this. >> ow raise such an interesting -- you raise such an interesting quicker as always, ken. it is the central problem. if you think about the debt crisis we have had, there's just an excess of debt that has been floating freely in the system for very long time. decades. driven starting with the inflation during the vietnam era. and what we have done is abet that with the existing policies. so, we are simply -- the federal reserve is simply augmenting the
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possibility of global financial crisis down the road. how are you trying -- and combat that when the orthodoxy within the economics profession still has faith in macroeconomic theories despite its failings, is a real problem. i have to save i admire -- worked -- janet yellen is something who is steady, pragmatic and was when she was profit the san francisco fed, but having said that the orthodoxy she is confronting is one that is built in with saying, let's keep the money flowing. certainly the politics of the moment, in terms of who is in charge downtown, is, let's keep the money flowing as a practical matter. until somebody brings that up short i doubt you'll see much resistance to that. so it's like hey yack. he was pointing out things that temperature fundamentally true but he was disregarded in the 1940s and 1950s.
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he was shunned because he was speaking the truth but known point you're absolutely right. think about it as economists in a practical way. when he measure inflation we look at hard goods, and so we delewd ourselves -- greenpan said as much -- with delude ourselves into thinking inflation is low you. see inflation in housing and other -- so ironically, all the dat that you're looking in that persuades most people that things are steady also she goes, let's stay where we are, ignores the very feature of the system that is creating the next crisis. and that's where we're stuck. china, frankly, i think, because it had the opportunity to take advantage of that period with this rapid growth, havein svelte, foreign reserves, is now stuck with the problem that was answer in the united states, once in asia, in russia, but it's this money that -- this debt that is sloshing around in
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the international system, and it is until we sort of bring it up short, but that has to start with a little bit like i said -- there has to be some courage on the people -- part of people to stand up and say, this is not what it purports to be. >> any others? >> not a very satisfying answer, i have to admit. >> all right. well, i help everyone will join me in thinking the participants in the speakers. it was an excellent sings. i learned a lot. i hope you did as well. stay tuned for next year's index of economic freedom comes out in january of 2016. thank to all of you. [applause]
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next. "after words" features an interview with michael tanner
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auction authorize of "going for broke. " he iser viewed by the president over the committee for a responsible federal budget. this is an hour. >> host: michael tanner. nice to be with you. so, today we'll discuss your book "going for broke. "maybe you can start by talking about what prompted you to write this book. >> guest: one thing that frustrated me lately is the fact that people have stopped paying attention to the deficit and the debt crisis. we think we have beaten it because the deficit is down. down a lot, really in the last couple of years, and people think that's sort of solved the problem. the reality is we're in a temporary lull and within a year or so we'll see the deficit go back up. we're adding to the debt every year. haven't even begun to hit the problem that ticks in when medicare, medicaid, social security, begin to start adding up, and if we don't start acting
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now, while sort of the sun is shining, we'll be in real trouble once the rain starts. >> host: so, walk us through the numbers. the deficit is down, the debt, we're still adding to it. psychiatrics the difference between the debt and the deficit and walk us through the numbers. >> guest: the deficit is this year's shortfall. how much more we spend this year than we take in in revenue. somewhere in the $450 billion range, which sounds like a lot of money, but considered just about three or four years were in $1.4 trillion range. so we're doing better than then. but as i say that's jest -- just a temporary thing. we'll see that going back up. if you add up each year's, the shortfall each year, then you get the debt and that's the total amount that we owe, and you can think of it with your household budget. if you run short this week, that's your deficit.
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but if you're running shot every week, and -- short every week, and you take more out on the credit cards this week and the next week and the week after that, that's the debt that you will owe. when we talk about the national debt, we're talking about how much the deficit edded up each year, and the national debt consists of both the debt held by the public, which is the debt that is in your portfolio. if you have government bonds, treasury bonds, you have debt held by the public. you're the public. of course it's all parts of that the chinese hold and japanese and foreign governments but that's one type of debt. the most solid. hardest debt, the debt the economists talk about. les includes intergovernmental debt which is debt that one part of the government owes the other, the social security, medicare, highway trust fund, where the government owes these programs a certain amount of money. and that adds up to $18 trillion right now.
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a little over that. and that's national debt that makes the headlines in the newspapers. but there's also a third kind of debt which is the intergenerational debt or unfunded liables of these programs like social security and medicare, but we know how much we owe under current law in the future to pay these benefits under the programs. we also know pretty well what we'll be taking in in tax revenue to support the programs, and there's a gap. and while that is not as solid has the government treasury bond we owe right now, it's still money we promised to pay and don't have the revenue to pay it and that's a kind of debt, too. throw all that in and we're talking bat real debt that is anywhere from $70 trillion to $120 trillion, depending on how to measure it. >> host: those are eye-popping numbers. let's go back to the first one, the debt held by the public. and as share of the economy that's twice the average that it
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has been historically. what does that mean for people? one thing that is talked about, the fiscal issues, the deficit, the debt, connecting them to team people's daily lives. what should people think when they hear the debt is twice the historical average or unsustainable trajectory. what does that mean? right? right now the rest of the world is so messed up people are willing to lend us money at absurdly interest rates. so we're not as bad as we might but bust but debt held by the public begins to slow economic growth when it reaches the level we're at. so the businesses, for example, find it a little more difficult to borrow money than they would, or people are less willing to take the risk of investment because they see the debt as going to be something they have to pay back through higher taxes so his welling to take risks. and it has been estimated our children will be $2,000 a year
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poorer because of the level of debt we're carrying. >> $2,000 every year? >> right. >> host: 2,000 to 5,000 every year. >> guest: our children will be down the road simply because of the amount of debt we're carrying right now. second, we have to pay interest on this debt, and that interest begins to crowd out other government spending. eventually you end up with spending a lot of money you're simply paying to foreign investors that you're not able to invest on things you might want to whether you're republican who wouldn't spend the money or defense on a democrat wants to spend the money on social programs. instead we're paying that money to pay back investors who are collecting on government bonds. seems like a waste of money. >> people thought,. >> host: peek talk about if we get rid of waste, and people think it's a silly thing but if you bring down the cost -- the carrying costs or interest paymented.
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that's the fastest growing partner budget, interest payments. >> guest: that's right. we're lucky the interest rates are low. if the go back to the historic rate outfields interest we had to pay in the past we'll be shoveling money out the door that doesn't do anything. it's not an investment in anything, not defending us, not helping poor people. it simply money going to people to pay them to lend us money. so it's a real waste of money, and the classic sense of the word. think of it like your credit cards. maybe you get something when you actually buy the new tv, but when you pay the 16%, 18% interest, that's not money your doing anything with. that just money your paying to the bank. >> i think i saw an estimate that if interest rates went up one percentage point that would cost the government $130 billion additionals every year. right? we're talking about really staggering numbers in terms of rates are very low right now. if and when they good up, that's going increase the cost.
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like you said, it can squeeze out whether you're the most liberal and want to spend more on spends problems, or conservative, want to cut tacks. over spending it on interest you're not spending it on those pry sorts. one thing -- priorities. people make the argue. , don't worry, we owe it to ours. talk about that. >> guest: that's a classic keynesian argue. that says that we shouldn't worry about debt because in the ends we simply owe that debt to ourselves, and we can argue about, well, of course, foreigners hold a certain amount of the debt but then we hold their debt so it awe equals out. the bigger problem is. that the distribution of who holds that debt is not the same thing as the who gets benefits from. the debt today. now, to make the argument in a classic sense, if you borrowed money to go to college, let's say, and you took that money and because you went to college, you earned higher wages when you got out, and you used that to pay back the debt, you're no worse
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off because you borrowed that money to go to college. the problem is that a lot of that money we're borrowing right now is not for -- not to wake our wages better or improve our infrastructure or do something that will make a higher economic growth in the future that makes it easier to pay it back. instead it's just re-distribution. we borrow the money to give it to somebody who spends it and it's gone. so it's nat being invested. >> host: so it's consumption. >> guest: that's right. that's exactly right. consumption. the second part is that the person that is going pay it back in the future may not be the same one who benefit from it today. so it may be like someone else had to pay back that college loan right after you. >> host: my kid. >> guest: there grew. so there's unfair of restriction -- redistribution, and that's going to affect their
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decisions in investment and growth. so may not see the benefit from higher wages for the college education may not be there if somebody business that was going to hire you instead has to pay back your loan. >> host: i think it's a really interesting point about the who is borrowing and who is doing the spending. you hear people saying, don't worry, it's all in this country, even though we're borrowing overseas. out bit an intergenerational issue. right? if we were investing to grow the economy for the next generation, theater visit than if we're con summing and -- consuming and don't pay the bills, handing them over to the next generation. talk about the enter generational -- >> guest: it's an unfair taxation without representation. we get consumed today and our kids pay the bills. generations not even born yet are paying for our consumption today. like you're going to have party today and leave the -- send the bill to your kids. they didn't get to go to the
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party. and in addition hate to don't think people realize how little investment we do. 13% is invest and that's a road definition. education and things like that...
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>> >> there is no annual appropriations bill for social security. so that they have met asserted and criteria. that is all entitlement means. for social security is the entitlement but traditional welfare is not because it appropriates on an annual basis. those sorts of things people ms. >> one third of the budget goes to the appropriation process, a two-thirds does not go at all. how do people decide which
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is in which which is mandatory or discretionary through the appropriations process? that is tricky each year they don't pass them sometimes but how did they determined? >> guest: is specifies in the original legislation for the program where other it is subject to renewal probation and - - appropriation, which is defined in the budget process of have the votes every five years or 10 years i'd like medicare/medicaid social security. votes at all but eventually those that are subject to domestic discretionary spending fda, fbi all of that is 16% of federal spending another 60 is the non war fighting part of
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defense that is it that is all congress basically talks about with spending that is what the budget bill is all about with those two sets of programs while everything like social security medicare and medicaid interest on the debt debt, multi-year programs all of that is outside congress is a dual though. >> host: another word is sequester that was put in place a couple years ago. talk about that. >> guest: that was a cap on how much could be spent each year over the next tenures we are three years into with but that all the affected the two types of discretionary only domestic and defense discretionary and limited that was designed to impose some cost to be split if you need.
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now we're already seeing with the republican budget they took so many to ship it to the overseas consent contingency so it does not apply to that portion but he essentially there was no mandatory sequester program so basically a cap on those two types of programs and largely it is possible for the slowdown we have seen in spending the last couple of years. >> host: redo of what which is a budget gimmicks the overseas contingency operations 33 is becoming a slush fund were they talk about putting more money into your the emergency area then they can spend more
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than they are supposed to sell those gimmicks you see that all the time. what do you think of those? >> year period the dishonest you see that with defense spending simply designed to get out from underneath it. >> did not want that caps are paid for getting rid of them. >> they were in a situation the democrats would insist they wave on domestic so they took money that is not over site -- overseas emergency spending and took routine spending to put it in there and congress does this all the time with the emergency spending whether natural disasters for those and have nowhere near those natural disasters that occurred or defense spending with the iran and iraq war fought off budget with spending it did not apply
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because of that. congress does this all the time and make smudging difficult me she wondered you can trust them in the future we will budget somehow in ted years that is not trustworthy often in those budgets of all savings that are very mysterious. one of my favorites is they continually save money by not invading countries. four years after iraq we continued to save money by not invading iraq. >> host: with a 10 year budget you see the numbers of a lot of timeless that savings is back loaded the you cannot trust something of this savings are in the future but now you borrow even more.
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>> guest: redid this with medicare which is essentially medicare was required to reduce spending every year by a certain amount. of it did never actually do that but their requirements period readers reimbursement in a wave that was unrealistic. so we knew we really wouldn't do that every year but it did force them to come up with other ways to save money. they did do some of that not as much as they were supposed to but they got tired of playing a game so now it is a permanent fix essentially they got rid of the requirement was that the payments should be cut back and said don't worry we will come up with an additional
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$200 billion to offset that many we will not save any more. but they just haven't said what they will be but we shouldn't worry because someday they will think of them. >> host: and they passed the bill without doing that. >> and it is worse by doing that they said we will fax it someday and the republican budget acknowledges the fact they will have to do they just don't want. >> host: it is at odds on one hand you have republican budget to not add more to the debt at the same time they pass a bill that was adding well over 100 billion or half a trillion dollars over two decades that is significant borrowing. was heralded as a big bipartisan success were the only times republicans and democrats can agree is when they borrow money. >> guest: that is one of the real problems we have
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that neither party wants to balance the budget. democrats are happy to taxation and to spend the common denominator is spent so the idea to reduce spending is something neither party seems to be serious about. >> host: one of the interesting things there is a difference of opinion so i think fiscal responsibility is to pay for what you spend more in bad times you borrow more battle for business cycle of research and an argentine you pay for what you spend the you make a case it is less just about bringing year deficit down by your spending denimed that is more of the libertarian perspective that more about the spending issue. >> the real cost of government isn't ipiutak sore how much you spent
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because both taxation and borrowing takes resources out of the economy transferred over to the government where it isn't invested but consumed. while that distribution in different people pay taxes in essence they are the same thing to take money out of the economy than transferring over to the government and both are equally bad. the republicans and democrats prefer different ones it to pass by which you choose lyndon this book i try to make the point boltzmann you can have a government that is embedded with so much of the economy that the economy cannot function regard this and how you pay for that the cbo estimates right now we spend 21 percent of gdp at the federal level another 15
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estate sold little over one-third of the economy by the government aware up data .40 or 50% under current projections for even if you pay for it all to raise taxes you still could that have a functioning economy. >> host: what would you cut? >> we should cut across-the-board with the usual suspects but these don't get you very far. >> if you listen to them talk about ways tried and abuse they will say cut foreign aid or kill big bird or defund planned parenthood but that will get you anywhere but is a size of the budget.
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a lot of people believe we spend all this money on foreign aid. the net includes what we want to keep going. big bird and planned parenthood combined are 1,110,000 of a percent say you're not balancing the budget that way. defense will have to be on the table display chophouse the current climate no doubt there is waste because we doing for them but there is a reason why we spend four percentage of gdp europe is 1.five nowhere near what we spent because we're the army we have to cut their as well but the big money is entitlement programs 47%
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justin of these programs allow medicare/medicaid social security you cannot really do much of anything unless you can take on those programs. >> host: would you raise any taxes to? >> i think to do spending first the problems i have seen with those balance proposals to promise to reduce spending tomorrow frankly i don't trust that so to have that locked in an then we can talk about the taxes and i am not opposed to any specific taxes as to overall revenue. search of the there is a tax break out there that are distortion kerry do we have a special tax break for ethanol?
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those sorts of things don't benefit the economy but how many moves around i have no problem reducing those types of rather see it done on a revenue neutral basis but i don't think any particular tax break is sacrosanct. >> host: $1 trillion of lost revenue so whether you want to broaden the base brief form the tax code to use them there is a lot of money there and also spending through the tax code them lowering taxes. >> i wouldn't argue that the government owns the money is and how they are spending on new but that said it could harm the economy from the mortgage interest deduction deduction, the tax break you
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get from employer provided health insurance that is the second biggest these hard the economy and i would favor eliminating nearly all of these moving to a flatter and simple system then we can argue about the proper rate. >> then you have people passed off but tax breaks targeted to use certain thing is pushup the price so if you have the home mortgage interest deduction so house says are more expensive it goes to the industry. >> lot goes jews second homes or vacation homes and whether the tax break gore direct spending it is passed through to the final end user even with college aid is just drives up the cause
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they take it then raise the tuition and to go with it. >> host: talk about the cater institute and being a libertarian how that affects your thinking. >> guest: the think tank in washington considered one of the big for the heritage is conservative of the right. the brookings institution on the left. and american enterprise institute which one is writing gold politicians angle until the next administration but they are center-right from my perspective. but we are libertarian that the idea of limited government very seriously and does not belong in your wallet, a bedroom, of business or medicine cabinet we would reduce government
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control pretty much all aspects of people's lives the only thing take care in washington simultaneously was to cut defense, domestic spending, legalize drugs, we would favor increased immigration increased free trade, across the board believers in individual liberty. >> host: what are the issues you write about? >> as a senior fellow by generally work of the domestic side of the budget so i deal with social welfare including poverty poverty, welfare programs, health care from the affordable care acting medicare/medicaid how to reform medicare at the local level and retirement issues like social security as it feeds into the overall budget deficit in the general need for economic growth. >> host: also issues of
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poverty and income equality. >> guest: i am working on that right now but i have done a couple of books in the past on welfare reform on how to get people out of poverty. the goal should not be make poverty more comfortable which is what i think they do but to lift them up. >> host: give us the one thing we could do? >> cry now simply to end the war on drugs which makes the hard for people to invest and delivers people out of jobs that may have been the first rung on the economic ladder into real-life of crime because they can make big profits short-term of the drug trade that leads to criminal justice problems we're seeing as well so that is a big barrier.
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i think ultimately government can fix. >> host: jump to the big parts of your book starting with the biggest program social security talk about how networks and what we need to do is. >> i think that is misunderstood people think when they paid their taxes that pays for their retirement but when you pay your social security tax is no amount of that money is put away you pay those that pay benefits for people who are already retired today and you hope when you come to retirement there is a generation behind you to support year with your retirement is in many ways it is like a ponzi scheme the people at the bottom support the people at the top and the first retiree's
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made out pretty well. but now the pyramid is inverted 1956 seem people were paid eight blue dash paying and and today it is three we year headed down at two or less to support each retiree. we're making slightly higher wages but still ultimately the system will break down. you can only tax them so much before the recess to. in fact, the tax burden is enormous for future degenerations it will be double long-term one. >> host: so we are living longer. >> guest: that's right one reason why more retirees are living a lot longer we could spend as much as one-third of our life but in retirement added it is a
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long time. >> retirement age was 65 when it started that life expectancy was 62 but now the retirement age is at 67 but people are living into their 90s. >> guest: that's right maybe we need to raise the age they become eligible but i seem to have to raise it at 71 or 72 to bring into balance but for some reason it is the least popular. people feel they am are having that goalpost moved but politically it doesn't seem to fly. the other is more practical the issue if you raise it it doesn't make much difference
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i will shuffle papers and tell i am 99 but if you are a coal miner to raise it as 72 that is a big deal. also every age and income level and african-americans to live this long and you already have one out of three black men who paid taxes but die before they collect benefits how much you want to increase that? is mitt is not as easy to raise that age as policymakers think. >> host: is certainly for those who cannot work longer or until 67. >> guest: but then you have what they have been directed different retirement age for every class teachers, a truck drivers, farmers

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