tv Economic Growth Policies CSPAN January 17, 2015 10:00am-1:24pm EST
here are some of our featured programs for this weekend on the c-span networks. on c-span2 tonight at 10, on book tv's afterwords, bret stephens argues that -- and sunday night at 10, democratic representative from new york steve israel on his recent novel about a salesman and a top-secret government surveillance program. and on c-span3, george mason university professor john turner on the early mormons and their attempt to create a new zion in the american west during the 1830's. and sunday afternoon at 4:00,
nine from little rock, the academy award-winning film about the forced desegregation of little rock's central high school. find our entire schedule at www.c-span.org. e-mail us or send us a tweet. join the conversation. like us on facebook, follow us on twitter. >> the house ways and means committee recently heard testimony from three economists about the state of the u.s. economy and strategy that can be used to spur economic growth. this was the first hearing held by the committee in the new congress.
>> i would like to start off by saying what an absolute privilege it is to chair this committee. i served with many of you for quite a while, 14 years from myself. i came into this congress with a number of you. i think joe is coming. it has been an absolute pleasure serving in this committee and i just want to tell you how i feel to be in this position. we are not in the ways and means room. the ways and means room is being rewired for sound reasons because it is the alternative floor location. that three working of the room
was supposed to be completed by april 16. hopefully if all goes well we will stop having meetings and hearings in this room and resume it in the ways and means hearing room in mid april. i have also seen this committee run very well and sometimes not so well. i want to have a full roof -- a full respectful debate on the issues. i want to ensure we treat each other with respect and we conduct our debates in a civil manner. i'm going to work very closely with the ranking member toward that result. that would also like to welcome all of our new members i -- all
of our new members. we have pat from pennsylvania christie from south dakota george from north carolina, and jason smith from missouri. welcome to our new members. last week we had a hearing titled moving america forward. today we will hear from three experts about the economy. for the time being we are not going to be calling this a hearing. the house has not yet elected members to the standing committees. committees cannot organize until members are officially elected by the house. we expect the selection to happen this afternoon. that is why we are holding an informal briefing rather than a hearing. we will run the briefing under the rules of past congresses.
the givens rule is somewhat unique to the ways and means community. the givens rule -- members who arrive after the gaveling will be recognized in order of which they were -- of which they arrived regardless of seniority. we will ask unanimous consent for the transcript of this formal briefing to be included in our next hearing so it is effectively a hearing. the fact they worked with us right out of the gate to overcome these technical issues to ensure we can talk about the economy is exactly the kind of economy it takes to make this committee run very well. i think the ranking member for that. professor feldstein is the chairman of the council of
economic advisers. and professor johnson is a senior fellow at the peterson institute for international economics. we look for to hearing your testimony. the way i see it our mission is to move america forward. this committee is going to be command essential. we are going to lead the charge in some of the issues -- some of the biggest issues facing our economy. our thinking is less get a lay of the land. we have to understand what is going wrong with the economy. how are we doing? we just got some good news. jobs are up. this bit of good news looks good because the rest of the news has been so bad for so long. there is no getting around the fact that this is the worst economic recovery since the great depression.
if our economy had grown at the pace of the average postwar economy, gross domestic product per person would be at $5,700 more per person. paychecks haven't budged. there have never been more people out of the labor force than there have been today. if you want to make nine dollars an hour -- this latest job report is simply the night is -- the nicest job -- nicest car in the junkyard. what we need is to take people off of the sidelines and get them back in the economy working, learning, building, creating. we will expand opportunity for all americans.
we want to start laying out solutions. this committee has done a lot of work on that front. the fact is we know what it will take to turn things around. it is clear our tax code is broken. we are one of the few countries that taxes countries -- taxes companies when they bring their money back home. america spent 6 billion hours per year just filling all the tax returns. there is no good reason for any of this. we need to make the tax code simpler, fairer, and flatter. we also had a good opportunity to expand americans -- expand markets for exports. the first thing we ought to do is trap -- is pass trade motion authority.
it would allow congress to set up our negotiating objectives and keep the administration accountable. as we all know 96% of the world's consumers, 96% don't live here. they live in other countries. u.s. manufacturers have more than a $50 billion surplus with trade agreement countries. in contrast the u.s. trade deficit have been manufacturing goods with the rest of the world from one than $500 billion. break down these barriers and american trade along with american jobs and they will take off. we need to replace obamacare with patient center reforms. i know good people have different opinions but this is how we feel. we need to start dismantling and
peace by piece. we've already passed three bills that do just that. take power away from bureaucrats and give it back to patients. we have to get spending under control. we have to get people out of poverty. we have to restore optimum ability. we have to restore the promise of the notion that your birth does not determine the outcome of your life in this country. that's what people have lived. we need to get people from welfare to work. there's a lot of untapped potential in this country. this committee has an opportunity to help working families get ahead. that is with this committee is going to be about, moving america forward.
some will agree with one another, some we may not. i look forward to hearing from our members and witnesses. we can all agree that this is our mission this year. that is our focus, that is our goal. with that i would like to you to the distinguished ranking member mr. 11. >> thank you very much. congratulations on your chairmanship. that wasn't our first wish. let me say as i expressed to you if the lions beat the packers you would be clean shaven today. >> and you would have a beard. >> true. i want to know everyone -- i
want everyone to know why paul ryan is growing a beard. if the quarterbacks health doesn't resume i think you will be clean-shaven at the next hearing. good luck to the packers. let me just lay out a few the use for us as democrats as we proceed. our economy has experienced a major bounce back. it has rebounded from the loss of 7 million jobs in a single year, beginning in 2008. an unemployment rate that soared to 10% in 2009. more than 11 million private sector jobs have been created in the last five years. it is shown in the chart that i hope will now appear here.
with 58 straight months of private sector job growth leading unemployment rate to fall to 5.6%. i think reference to a junkyard is terribly misguided. i know something about cars. i think the economy of this country has been put back on its feet. and it is moving ahead. it has climbed to record highs. the affordable care act, which the chairman and others
continued to say should be repealed has helped to genetically cut the percentage of americans without insurance. millions have it who have never had it before. health care premiums are at the lowest rate in 15 years. this major reversal from deep decline out of the junkyard -- it occurred despite republican opposition to the president proposals. and an incredibly heart 16 day governmental shut down you will buy an understanding ideological opposition to the aca. this year must see a different environment. it must, mr. chairman and colleagues, see bipartisan
action on important issues. it remains one that has persisted for decades. stagnant middle-class wage growth. and now the second chart shows the nearly flat line of wage growth that the bottom 90% of american workers has experienced since 1980, even if incomes have grown significantly and dramatically among the wealthiest. this chart goes back to 1980. the bottom 90% has stagnant income. indeed in december of the post
-- the long-standing problems facing america's middle class. they found the average wage in a quarter of american counties is lower today than it was 35 years ago. he even immediate and much-needed steps, the democrats have promoted and encountered in ideological roadblock, efforts to increase the minimum wage and to ensure that women aren't the same as men for equal work. and administration proposal to require overtime pay for millions of additional white-collar workers who are currently not covered has been
met with strong criticism from some congressional republicans. in financing the long-term needs of our nation's sure has taken a backseat, despite the fact that no investments and infrastructure and to make us stronger in the future. this committee has not held a hearing on this topic in the last four years. i hope in my further discussions we can reach an agreement quickly on holding hearings and the financing of major infrastructure legislation as you and i have discussed. democrats believe reforming the tax code should not be centered on rate cuts at the very top for the wealthiest americans and we have seen why that is true.
rather than creating a tax code that is fair for working families, promoting economic growth and eliminating loopholes for some -- for special interests and insuring individuals and businesses pay their fair share of taxes. we learned in 1986 and more recently it is essential there be serious open discussions on a bipartisan basis from the very beginning and throughout. i hope we can proceed accordingly. negotiations are at a vital juncture with many of the key issues still unresolved.
involving 12 nations representing 40% of the world's economy and representing many new issues for model lateral negotiations. this essential to whether we are moving effective trade policy forward. congress must be a full partner. as we have discussed i strongly suggest we organize on a bipartisan basis the substance of tpp. >> you will each have five minutes to present your testimony.
if you could summarize your testimony because a lot of members want to get on with questioning. we will go to professor johnson. you are recognized. >> members of the committee, it is a privilege to share today. i look forward to your questions you let me make three points briefly before we turn to questions. policies toward economic growth are really important right now. the economy is growing at something that looks like 2.3 quarters -- 2.7 5%. it generated 250,000 on jobs. we continue to see very flat and sluggish real wage growth.
we continue to see median household incomes fail to rise. there is an obvious need to do better. we should welcome that if it happens. it is important to remember the congressional budget office for long-term potential growth rate of the u.s. economy at 2.3%. if you take that at face value this is the boom. these are the good times. and the thought that that is the best we can do, i find that troubling. the major objectives is to look for opportunities to change that 2.3% into a more rapid long-term potential growth for the u.s. economy so we get more sustained increases. the standard of living -- two years.
getting improvements of that type. given the pace of growth in recent years, we have seen the standard of living on track to double every 90 years. we have to do much better over the long term in order for americans to feel like they have the opportunity for the american dream. the first source is to actually build up and accumulate your skills, your technologies, the means of production and incentives to relate the kinds of skills are essential and riddled throughout this committee. athat is one thing to focus on. the second is greater productivity from workers in the economy.
productivity comes from strong incentives. it comes from minimal interference from policies that distort the decisions firms make that allow them to choose the means of production to the best of their ability and focusing on stripping owing interferences with productivity growth i think should be high on the agenda for the committee. what kind of policies are they? trade policies are a great opportunity right now. both the transpacific partnership and transatlantic trade investment partnership. this could increase gdp by two hundred billion dollars. this has historically been a huge spur for activity growth if you go back to mid 90's. we put zero tariffs on semi conductors in a very important trade agreement. there -- immediately after we saw a boom in the trade industries. i would argue we would see the same more broad benefits -- same
on more broad benefits. tax reform is a great opportunity. i won't belabor the pieces in my written testimony. how is structured to be particularly anti-competitive. it raises almost no revenue. there is a lot of bad tax policy is a part of that. the structure of the device tax and health insurance we are all highly inefficient. the basic expansion of mandatory spending goes in the wrong direction from the long-term problems in our federal budget where we need to control that spending to control the debt and reduced threat.
there is a great need for better long-term growth. i look for to your questions. >> thank you. you have to turn it on. bullet close to you. thank you both for the invitation and for the advice in using this complex technology. i am pleased to appear again before this distinguished committee. tax reform can be major driver for gdp growth. fortunately the american tax code is better in many ways than it was when i first appeared before this committee. we now have lower tax rates and personal incomes on gains and corporate profits.
that includes incentives and countries to faster growth and jobs. there have also been backsliding in tax rates since the reform of 1986. remedying this should be an important goal of tax reform. there are many high-priority tax reforms that can strengthen growth and reduce our fiscal deficits. i will focus on a few things that receive less attention than they should. let me start with tax reforms that can increase the employment of women and raise their after-tax incomes. current tax and social security rules penalize married women more than others. the federal government of taxes writes the first dollar of earnings at the same -- of taxes wife -- married women have a greater incentive to work to her jobs that pay higher wages. social security taxes a woman on
her full earnings but provides no extra benefits. reforming these rules would increase women's labor force participation and the nation's gdp. let me turn to increase in unemployment among seniors. the labor force participation rate now declines from 60% among 60-year-olds have that among those 65 to 69. congress in 1983 race for all social security benefits from 65 to 67. as a result the labor force participation rate among 65 to 69-year-olds rose to 32%. life expectancy at age 67 has increased by three years 1983. raising the age for both -- for
full benefits and increase in life expectancy would expand the labor force and raise real gdp. let me turn to policies designed to raise our nations rate of saving and therefore our nations capital stock. household savings between 1960 and 1985 average 9% of after-tax incomes. now it is about a third of that. a variety of public policies contributes to the rate of saving it high rates of deceiving. these can include the deductibility of mortgage interest and the level of unfunded social security benefits. automatic enrollment ira plans and a shift in social security to a mixed system with supplementary investment based personal retirement accounts would increase national saving
and therefore would increase business investment that would raise real incomes and create jobs. most of household saving is now absorbed by the federal budget deficit. the resulting national debt has increased from less than 40% you take it a go to 75% now with the prospect that it will rise to more than 100% unless congress takes action to raise revenue and slow the growth of entitlements. the good news is that small reductions in the annual deficit can prevent the rising debt level. reducing the deficit from today's three to -- from today's 3% of gdp to 2% for put us on a path with a debt ratio of less than 50%.
because the annually appropriated spending for defense and nondefense programs already being squeezed at historically low levels, controlling government spending requires slowing the growth of the middle class programs for seniors. tax revenue can be raised without increasing marginal tax rates by limiting the ability of taxpayers to use the tax expenditure features to reduce tax liabilities. these expenditures are a major form of government spending. i would say it is the major form of domestic spending. capping the use of the subsidies could also simplify the tax paying process by inducing taxpayers to use the standard deduction rather than itemizing deductions.
my written testimony provides an effort to recent studies. the tax reform can improve the way our nation savings is used. now the highest in the industrial world and shifting to the type of international tax rule that is used by every other industrial nation. thanks for the opportunity to summarize our views. is >> thank you, mr. chairman. i am the former chief economist and i would like to make three points about the recent and likely future in our comparative and global context. the second is about longer-term stagnation in wages and the
third is about the ttp trait. if we look at the experience affected by all the other crisis. and it was a global financial crisis, it was a serious crisis the world has faced this the night 30's, most other countries have struggled to recover from this crisis. the right response includes discretionary fiscal policy were available. can you make it timely? can you targeted appropriately? we have seen problems across other countries on these dimensions. we have done remarkably well on exactly these points. including the fact that the deficit has come down and the debt level has increased and is
better than in other countries and does not close to any levels that would trigger a debt crisis. the problem has been the lack of consensus in the fiscal policy. these are destabilizing to financial markets. they damaged our trading partners and exacerbated problems in your area, several times through this mechanism. i wish we would stop. i wish we would focus on the issues you are sizing. during the attempt to recover, i think there have been two important achievements. if you repealed. frank you will open yourself again to another destabilizing global catastrophe.
and the second is the affordable care act which has contributed its holding down health care costs. it is essential to control our spending on social circle -- social programs. therefore the care act is taken some concrete steps in that direction. we need those programs have a chance to work and get evaluated. on the longer-term issue of statement incomes, we have to look at where these come from. it is about technological change . it is about globalization, which has done the same thing. this is nothing unique or special about the united states. other countries are caught up in the same process. the differences in the way which public policy has responded. you can work on improving human
capital. you can also send some health care and make it available to more of your citizens as a way to compete globally or share those benefits. or you can provide some trickle-down policies. assume that is going to share the benefits. that is going to disappoint performance for 97% of americans since the 1980's. i think there is plenty of scope here for changing and improving the tax system. keep in mind the problems we have,'s -- we have, declining with the middle class. these are very important issues. i would urge republicans and
democrats to take currency manipulation very seriously. there has been cheating by some governments. now it is not currently the number one problem -- now is a good moment where you can negotiate that and lock in the more flexible currency arrangement. it depends on the terms of the trade. if you let other governments continue to cheat it will go badly for the middle class. >> thank you. let me start with you. your opening testimony was pretty staggering.
historically we have doubled our standard of living among americans every 32 years. at the rate we are at now it is 90 years. our long-term forecast is now at a growth rate of 2.4%. there are -- the second is lower productivity growth. it comes from any sources would have marked down the capacity of the u.s. economy to produce effective workers. >> in two of those areas this committee has had an enormous impact on issues within our
jurisdiction. getting people into the workforce and capital stock productivity. in 1996 to 2000 you had a republican congress and a democratic president. the result of that combination then produced welfare reform, a capital gains tax cut, a balanced budget, the deregulation of the telecommunications industry, and he got approval of the trade agreements with bipartisan support. we saw strong economic growth across reform. it was a good time.
it seems to me that combination of reforms is what we need to now. give me your general sense of what we can best to to pull people from 92 million people who are not at work. what can we do to pull them into the work force to help them deal with that issue that are giving us these lower trend growth rates? and what do we do on the tax fronts to help increase our productivity. >> the oecd research has identified the single most potent growth tax. that's an invitation for bad growth performance. and it also hurts and international competitiveness. more generally i think you have
to be especially focused on the growth impacts of the tax treatment and return to capital. it is quite simple. you give up something now in order to save and invest in the economy in the future. whether it is in tax rules you want to provide people with incentives to do that. i think in the united states, the difference between poor and not court is work. at every juncture you want to have the social safety net support work. a lot of opportunities to do that. you want to take social security and want to have more highly
skilled americans in the years to come. every time you take up an issue in this committee you want to ask what are the work incentives and how can we do better. a lot of people think growth is a bill. you pass a recovery act and you get growth. the truth is growth is a philosophy. labor considerations versus growth considerations. you have to air on the side of growth. that is job of this community. >> you were around the reagan administration. we had 86, where the top rate was brought down. capital gains went up 28. are there some lessons we should derive from that? that was a different era where
the global economy was far less integrated than where it was today. it is sort of like other countries in the industrialized world and we tax most of our businesses as individuals through what we call pass-throughs. we are taxing our businesses at much higher rates. how much of a difference is that making with respect to global competitiveness and capital flows? what are the lessons as we ought to derive from bad -- from past experiences and what mistakes did you then make you think we should avoid? in a couple of minutes.
>> think the tax reform experience in the reagan years was a positive one. we saw an increase in tax revenue. the revenue cost of that was less than pure static analysis that it would suggest. it provided strong incentives for saving and for job growth. the corporate tax has become a bigger and bigger problem. we used to have a higher corporate tax rate. the rest of the world brought it down more rapidly. we now have ourselves with a higher tax rate than any other country in the world. it raises the cost of capital.
it raises the cost and the prices of the american product that makes it harder to compete with imports and harder to compete as we export to the rest of the world. i think that is why there is broad agreement that bringing down the corporate tax rate in moving down to an integrated system for a so-called territorial system for taxing corporate profits would make a lot of sense. >> i want to be respectful of others time did i will yield to mr. levin. >> first i would like there to be distributed two charts if you would do that right now. and also to our three witnesses. it is a little clumsy here.
we need to look to the future. but trying to describe what happened in these last years is a serious mistake. these two charts show to pick up what you just said. the first chart shows the net employment gain in the u.s. compared to the u.k., germany canada, japan, korea, and others. you can see more than half of the employment gain from 2010 22014 was in the united states the second chart, to pick up your point, relates to gdp and selected economies. now our three witnesses also have it. it is very striking what
happened in other countries compared to the united states. if we are going to move ahead i think it is important not to miss described the past. it is important for us to look at the policies that are undertaken. i hope republicans will take another look at their opposition to stimulus policies that have really worked. let me say about the corporate rate and other witnesses, i think we need to look at it. we need to look at the effective tax rate. it varied's dramatically according to sectors. in some sectors they are paying the full mid 30's.
in some cases the effective tax rate is zero. i think we need to take in -- take a good look at it. going back to my first chart that i put on -- actually it was the second chart. i would like dr. johnson to -- if we can put that back to the second chart that i referred to, which talks about the stagnant income for the bottom 90% in contrast to the top 10% and top 1%. you referred to this a bit. describe if you would -- this goes back to the 80's.
you mentioned a few of the factors. as we try to turn our attention to income stagnation for the middle class just review what you think are the major factors that cause this to go back 35 years. if not, go ahead. the >> it is important in doesn't matter too much which way you break it down. it is a very similar story. people who used to be in the middle of income distribution and people who are middle-class people who have a high school education have done relatively badly in terms of income growth. of the research on this, which has been done by many people including david or turned his colleagues at m.i.t., emphasizes the importance of technological change.
a lot of what were administrative clerical jobs before secondly the globalization. probably not as important as technological change but something that has reinforced that. i think as we talk about the importance of exports, relating to globalization you have to talk about the impact of imports. there is often a tendency to look at one side of the equation when clearly you have to look at both. >> colleagues have research on the effect of debt on the effectiveness of china's exports. they have mapped out, in compelling detail, the destruction of jobs and american manufacturing that came directly from that trade shop, which was
facilitated by an episode of current semen if you lay she and in which it was kept below market value. imports are absolutely very important. they destroy god -- destroy jobs. they go down in terms of the income they earn. that is a big part of what lies behind the big picture you showed earlier. >> because we are having some technical difficulties with the technology, when it comes to the pace of annual pay increases -- that is the slide the gentleman. >> it was the second slide we showed. >> mr. johnson. >> thank you, mr. chairman. thank you for this hearing as well.
i want to begin by asking use and questions regarding a social security disability. the programs are projected to become insolvent in 2016. the last thing that should happen is as congress is rating the program -- this is worse than kicking the can down the road and makes the social security retirement program worse without doing anything to fix it. do you believe disability insurance would improve economic ability at all? >> yes. we have a clear issue with people going onto facility insurance. it is useful for this community -- for this committee to review the definition of disability. we define people in these concrete work -- concrete groups
can work disabled. the di program provides -- there is a lot of fraud in the entry process on top of that. di is a black hole. people go in and never come out. i think the committee on to think hard about that especially young people. they would find ways to exit a move into the labor force at a relatively young age and we benefit from that. the structure of the program deserves review. it is a great opportunity for congress to look at a mandatory spending program. instead of just cutting and so it meets cutting it and reforming it so it meets -- we have a mandatory spending problem going forward. we tried cutting it care physicians, it doesn't work.
-- cutting medicare positions it doesn't work. >> i'm sure most of my colleagues agree with you. it can take a long time for person to receive a decision on an application for disability. afor those that do not qualify for benefits, how does this time out of the labor force affect your earnings? >> long spells of on a planet are bad for future employment abilities. >> sometimes workers take social security before they stop working. in other cases they need to keep working to supplement their retirement income. benefits are reduced based on
how much they earn. how can we better encourage work , especially later in a worker's career? >> there are a long list of things they can do. as i mentioned, looking at the normal retirement age and matching the life expectancies. it is something worth looking at. the program is -- it needs to be reformed. this is a pension program that is kept and promised to cut 25% across 20 years. it ought to be reformed so it could be sustainable for the future. they will be able to make labor force decisions. >> tell me why you ought to tax
those earnings? , i didn't say i wanted to. i said you ought to re-examine that. >> thank you mr. chairman, i yield back. >> i would like to take the opportunity to congratulate you on becoming the chairman of this committee. >> welcome members. dr. johnson, would you like to comment on the question raised by mr. johnson? >> this is a problem we encountered in many severe crises. this is why preventing financial crisis is so important. when so many people are dumped into the labor markets -- dumped out of the labor markets and loose their jobs you are
overwhelmed at everybody's capacity. more people do end up on disability. many end up with stress because of what has happened. that is why the dodd frank reforms are so important. getting people back to work, making sure they stay engaged with the neighbor force and kept those skills, it is about long-term being thrown out of work. this ignores the circumstances we found ourselves at the end of 2008 and 2009. >> the budget passed by the house republicans last year would have unfairly targeted moderate income americans. for significant cuts if at least six to 9% of its non-defense cuts coming from programs --
are you aware that cutting medical, food, and educational assistance to struggling americans might be counterproductive for the long-term economic growth? >> i think the human capital people's ability to learn children's ability to learn this is effective by their access to nutrition and health care. medicaid for children is a sensible investment in the long-term growth of the country and its fiscal sustainability. those people who pay taxes when they are grown up, if they cannot concentrate if they are sick and absent from school for those reasons, or if your family has medical emergencies it means they cannot keep the children in school.
all of this impacts negatively overseas. but also the rest of us as a society. them a few cuts for low income americans might increase any -- which is already a growing concern? >> inequality is an important issue. i would stress it is not just about any quality. it is not about redistribution at this point in our history. it is about growth, it is about human capitals. it is about who are you helping when they are young and their families can't help them? i think it is about immigration reform. we should be encouraging more people to enter. that is a huge advantage we have relative to other industrial countries. a potential growth in our labor
force through legal integration no major developed country have that opportunity going forward. >> thank you very much. >> thank you, mr. chairman. >> i have been working for several years on a proposal to get us out of the sandbox we have been in for the last 100 years for the progressive tax code come and get us to a system that allows us to really let investment flow where it needs to flow. and let capital off the sidelines. not only in banks here in the united states, but also offshore. and let that money go to where it is best use in the economy. where entrepreneurs and investors want to invest. you are familiar, it is based off the bradford -- what i did was i converted it into taking that tax and looking at it on --
as in all business activity, and created a cash flow tax under chairman camp, and now under chairman ryan, with joints tax to try and get this to a revenue neutral score. because it is a theory now, but i'm trying to vet it and get it out there in the public so that all republicans, democrats, the american people have a chance to look at what it would look like under a completely different tax structure. i know you're familiar with it, and i would like you to just -- if you could, on the record, talk about the positives and the negatives when transitioning to attacks like this. >> as you know, i'm a student of the late bradford, one of the greatest tax policy minds this country has ever seen. and i'm a big fan of your tech system, as a result. i think it has a lot of virtues, from the point of equalizing sectors across the economy. they can be paired with the kind of territorial systems that will allow us to stop the practice of
locking offshore the oversee learnings of our most successful global companies in bringing those back to the united states. again, that is having the investments flow to the highest rate of return. it effectively taxes people on what they take out of the economy people -- economy. their efforts, their skills, their savings in the capital pool and i think as a basis for taxation, that is a very fair principle to tax people on what they take out. as a result, between a high income individual who lives a lavish lifestyle and takes a lot outcome and an individual who pumps it back into the economy. i think that is something we ought to think about. not all companies are crated equal. the downside, in many people's eyes, is the inability to sort of have higher effective tax rate on the affluent. i think that could be addressed with a progressive tax structure.
and how you treat the return to capital for people who are extremely successful. the system is, i think, especially desirable because it basically turns the whole world into a big traditional ira. you tax everything that comes out. the original plus the earnings when it is realized. that means that if you come you know, hit a windfall. if you and of being microsoft or an enormously successful startup, all that gets taxed. in other systems, they look like roth style banks where they -- you pay the taxes and whatever happens after that goes untaxed. so you have to pick at this point in time a pro world policy that has better fairness considerations, i think, it it is a very good candidate -- it is a very good candidate. >> we know have onto news --
start out decision -- entrepreneurs make their start out decision based on the system. >> yes. >> i would like to get your thoughts come if i could. >> i'm also a fan of the tax. as douglas described it, a kind of generalized ira. in which individuals can save and pay tax only when they take it out --is a way of improving the fairness, and also conjure meeting to savings incentives and growth. >> all, i look for to sharing the proposal with you. it is just a giraffe for now but i would like to get your comments when you can. i would also like to get your comments come also, mr. johnson at a later date. thank you, mr. chairman. i yield back. >> thank you, mr. chairman.
and congratulations again. the panelists we have are all well regarded, so i like to talk about scoring. recently, mr. larson and myself -- we had the chance to see an almost completed project along the rail line from new haven to hartford and onto springfield and onto eventually, saint albans, vermont. it will mean 12 to 16 more trains per day between new haven and springfield. there are two union stations that are under construction because of it. in one case, up to $82 million. now, i supported stimulus. i got up on the floor and spoke in support of the stimulus package offered by president obama, and i believe he supported the stimulus package. i would like the dr. to reject that if it is not true, but how -- according to mr. ryan's dynamics going undertaking --
would you measure the effect of stimulus, in terms of investment , which i happen to believe is a pro growth economic undertaking? i'm comfortable enough acts -- asking all three panelists. >> let me go back to the stimulus bill in 2009. i thought that the design of that particular bill was not good. i thought, in the end, it provided some stimulus but coley added more to the national debt than it did to the gdp. i think in the and, we have had a very significant recovery because the federal reserve took over, introduced so-called
quantitative easing, drove doll -- down long-term interest rates. that ultimately led to big increases in both whole values and the stock market equity values. so stock market equity value rse -- rose. that, in turn, led to more hiring by firms, more inventory a key relation. that gave us the recovery that started in the second half -- the serious recovery that started in the second half of 2013. so, i think that as a more general proposition, when you do tax changes or to spending, it is worth trying to graduate what that is going to do to gdp. and historically, on the tax
side, that has not been done. so congress gives them an incorrect view of what the costs are of tax reductions, and what the benefits are of tax increases. >> think you dr. can we hear from the other two quickly ? >> first, very two views -- bills are substantial in their impacts to take a look at their dynamics. does the economy hold get larger or smaller? so a couple of bills and is congress will probably merit this consideration. i do not think it is going to change most of the work of the congress at all. the second thing i would say is this is not a new thing or particularly exotic thing. every president's budget is dynamically scored. so, we have been doing it --
the joint committee has done it. the third thing i will say it is no more uncertain or no more difficult, than conventional's going. i had to score terrorism risk insurance. the consequences of an unknown attack at an unknown time with an unknown weapon. that is hard. so there will be difficulties and challenges. i don't think any of that should stop the members of the committee from knowing which is better for growth from those of which are not. >> well, i agree that we should continue -- consider the full applications, but dynamics going is very come to get it. some of these models have strange features, including unemployment, for example. assuming it in the modern context is a little bit of a stretch, so i think it needs to be used extremely carefully. >> mr. chairman, i hope you will
examine come at the time, the opportunity to apply dynamic scoring. you will consider the idea of spending, as it relates. >> it is in the house rules. i think that element should review -- >> much of the if is is is on tax cuts. >> tax cuts come as well. the gentleman's concerns have been addressed. >> the language is difference - difference. there is an article in the "new york time" today -- >> the germans time has expired. mr. peabody is recognized. >> thank you p view noted that trade creates jobs. in fact, it supports nearly 11 million jobs in the united states. in my home state of ohio -- the home of the national champion buckeyes, by the way --
because we are winning. nevermind. >> a champion of what? >> a lot of misconceptions, a lot of rhetoric thrown around especially during presidential campaigns. in fact, we have had presidential candidates talk about trade being bad, but exports being good. can you do trade without exports? >> no. >> ok. it has been pretty surreal to watch. in ohio, international trade supports 1.4 million jobs. we come in ohio, since 2002, have exported to our trading partners about a 40% -- 48% increase. our trading partners purchased 19 times more goods per capita from ohio then non-trading countries in 2012. canada is our biggest exporter.
but nafta has backed many people in ohio. again, campaign rhetoric. so, my dad was a steel worker. like many jobs that people in that industry have -- have had those jobs do not go overseas. technology changed those jobs. oftentimes, dr., we never hear about the advancements about technology and what that has done to our economy. the scapegoat tends to always be these jobs went elsewhere. i have two at manufacturing plants where they used to be 20 people on an assembly line, and now there is one. 19 jobs gone because of technology. there is a lot of efficiencies by the way, but those have cost jobs. so, as we move forward, with
respect to your testimony, i think there is a huge opportunity for america. whether you look at trade, exporting, the tax code, we, in the united states, are doing well, despite the fact that we have a one arm -- have one arm tied behind her back. whether it is the tax rate we have talked about. whether it is a fact that we have fewer trading partners than many of our allies to around the world -- do around the world. can you tell us why, particularly on trade, opening up additional markets and giving the president tba is important -- tpa sooner rather than later in ohio and other states? >> so, it is important now because we are not fully employed. we don't have everybody who
wants to work at work. and additional opportunities to access markets and bring people in the workforce are especially important right now. second thing is, we will be in at the ground floor of setting the rules for those trading arrangements. if you are on the sidelines, roles are written in the ways that are probably undesirable. the third thing that is important is that, ultimately, we will expect us to get back to full important -- full employment. that is better income. that means better jobs, not just more, but people's jobs will be better as a result. and then you get to take advantage of the technology issues, as you said. if you have the ability to do something better, you can tick advantage of that to trade. the biggest example recently has been driven by advances in natural gas and i split ration -- and oil exploration.
you cannot imagine the level of geopolitical risk that we have in the middle east right now and oil prices at $50 a barrel five years ago, ten years ago. that has also changed the imports of those products. it is not all exports, there are imports, but if the countries take advantages of that, people will work more and make more money. it is interregional trade. textile jobs is to be in the northeast, went to the south. this is part of an economy adjusting. >> thank you. mr. doggett is recognized. >> thank you, mr. chairman. i suppose that on the hearing of this topic of this importance that it is merely an oversight that, i guess, the leader of republican thinking others in the senate, at least, senator
mcconnell began the session by what -- by noting what he called the uptick in our economy noted -- resulted from the mere expectation of a republican congress. and it is good to know that after so many apocalyptic predictions about the economic recovery act, the affordable care act, and on most everything else that come over the last six or seven years, this administration has done or has not done -- that we have enough progress that some republican leadership is claiming credit for all the things they said would hurt or hinder the economy that have come in fact, in most cases, helped it significantly. i guess it does give new meaning to the old reference to the memory of an elephant. one of the areas that we have not in the progress that we need to see, that mr. johnson has
referred to, is the fact that not all americans have shared. this is not by accident. but the data is rather remarkable that, according to the pew research center come we have the largest wealth gap in three decades. that the compensation for the chief executive officers at american corporations was about 20 times that of the typical worker back in the 1960's, but in more recent years, it has become about 300 times the typical worker's pay. since 1979, worker productivity increased by about 65%, but worker rages -- wages remain simply flat. but ceo pay grew by almost 1000%. i think that this income inequality has some of the same effects on economic growth in our country as just as against
various groups. gender discrimination, for example, claiming that we are not going to prevent, as some societies continue to do, women to participate fully in our economy. in this case we have treated one group of americans as really not having the potential to achieve -- not being able to fully achieve their god-given potential. mr. johnson, i just wanted to ask you about that further. if -- what the impact is of the decisions here in congress either through action or inaction. to not have all americans participate in this and adopt policies like the american opportunity tax credit to increases in power grants -- pe ll grants. does that have a direct impact on our future economic
productivity and growth as a country? >> it has a huge impact. look, the impacts of technology and globalization, we have been discussing. nobody is asking you to turn back the tide, but there are many sensible policies, absolute, under this committee. including other ways that will encourage people, give them an incentive, to become educated. we know what kind of skills you need to be productive. we know that you must be better at using information technology. you need to have quantitative and analytical skills. we know that it is hard for many people to get those skills, and it is very hard for them to get any kind of post high school education. i think we should shift away from talking about k-12 for education to k through four tee n -- k-14 because you need that extra time.
>> mr. junta, it is difficult to see how you can lower the rate much more for a company like general electric unless you begin to pay them for operating, which we in fact, have done in some years. as you look at corporate tax reform, is it important to close loopholes at the same time that we make any changes to the statutory rate? >> you should consider it on a revenue neutral approach. of course, quite a few of the proposals would do away with some sort of accelerated depreciation. i'm not sure that is going to help, in terms of capital formation. compare around the world compare with other countries asking entrepreneurs how they assessed the business model. we are number seven in the world, and we are very close to five of the country -- countries in those rankings. >> thank you.
>> like my colleagues, i support a robust trade agenda. i come from washington state and i think most everyone knows that washington state, with boeing and microsoft and other large corporations, 40% of the jobs created in washington are a direct result of our strong trade agenda. not only i think most of the college on the panel agree with a strong trade agenda, but in fact, the president of the united states and our ambassador both believe that tpp and tpa are critical. i haven't a be a member of the president's export council, and have been for the past six years. i have been at almost every one of those meetings. of course, the president's wish and the ambassador's wish is that the democrats recognize the importance is much as the
president and the ambassador do. and help them get both tpp and tpa pastor this congress. as i said, 40% of the jobs in washington state -- talked a little bit about technology. my focus is more on small business, and how technology has helped small businesses -- we all think of experts in larger corporations across this country exporting their goods, like airplanes, etc. -- but i have a son-in-law who is currently in china. a small software producer. and i have a son who is at a machine shop who sends their products all of the world. how important is trade to the small businesses and the future and expansion of their businesses? how important is trade to creating jobs in the small businesses, and opportunities
for people who migrate to the small businesses for the employment? >> to give you a ballpark number, 70% of our exporters would be conventionally classified a small businesses. they are small, but the value of what they export is not that large. but in terms of being engaged in international commerce, it is an important part of the customer markets to be able to get the other countries. we also know that those small and growing businesses that create -- businesses create the large majority of jobs. they are intimately linked to our success including new jobs with higher pay, and getting rid of the old less high-paying jobs as a part of the natural economic growth. so, i think it is important to keep an eye on the good ability to trade -- trade agreements that level the playing field.
>> we are talking about 80% are more of the jobs could across this country are really created by small businesses, correct? x yes, that is -- >> it really create the opportunity for them to sell their products not only here in the united states, but in what everybody has described, i think, on this panel -- 95% of our market is outside of this country. >> and the advantages come in very subtle ways. you sell on the other market you see the kinds of pressures you face there, the kinds of technologies your competitors are using. and those things get acquired and diffused into american terms. whether it is in physical technologies or the way they run their businesses. but there is a lot of advantages to being engaged. >> i would like to address my last question to you. in another area where we have
the ability to boost our economy through tax reform, as mentioned many times, businesses large and small will benefit from finally since 1996, looking at our tax code and critic some certainty and stability in our tax code. of course, they creating jobs. what about pass through businesses, sole priority ships. they face a high marginal tax rate in addition to high compliance costs. how do you see the change in the tax code specifically helping those small pass through businesses? >> i think that is a major challenge you face as a committee and congress in dealing with tax reform. that lowering the corporate tax rate, where both the president and the republicans have said we have to get down into the 20's would still leave pass through
businesses who file through their personal tax return facing much higher tax range. so, somehow, that has to be dealt with. and by treating the business income of passed through individuals differently from other things, so that in effect they get the advantages of the lower tax rate that come with corporate tax reform. >> i yield back. >> thank you. >> thank you, mr. chairman. and echoing the sentiments of the committee, congratulations on two fronts. becoming chairman and the great success with the green bay packers. condolences to kenny kevin -- you guys were robbed. it was a catch but i don't want to create for the controversy. i would also notes that -- >> how about the detroit lions? >> dynamic scoring, mr.
chairman. >> that is really dynamic scoring. but it does get to the point. first, i also want to a knowledge the announcements, in my district, a floor of $16 per hour for its employees. in large part due to the success of the affordable care act. and all the innovation technology and coming -- incoming and merging together in a program of industry. so i wanted to a knowledge that. and also returned to the point of dynamic scoring. not as related to the game, ron, but as it relates to the rules that are before us. with respect to infrastructure in general. something that come in general this committee desperately needs to address in terms of our highway infrastructure, roads bridges, sewer system, broadband for our schools. quick answer from the members. should dynamic scoring be
included in major national infrastructure programs? we will start from what -- left to right. >> if it is really major, i can to the case for it. but has been -- >> well, with 70% of the roads and bridges in deterioration, it has long been neglected by the congress. it seems like this is a pent-up need that certainly would require that. >> it would be good to know whether what impacts -- what impact that program would have. >> if it is large-scale, it would come under the house rule, be scored. that is the rule. if it is extremely large-scale and possibly going to have some macro impacts, the committee chairs can designate legislation and have it be dynamically scored. so, there's nothing about these rules that tilts the field in one direction or the other. >> yes congressman but can we
also please include medicaid for children, the afford will care act, and the dodd frank financial reforms? which are actually reformed backwards. you're not going to save the budget. you are going to open yourselves up to massive financial risk. if you're going to fix scoring please do a cover had to flee. >> let me yield to my colleague from massachusetts who, i think, was making the choice of different sitting on those rules as they exist. if i can yields to mr. neil. >> i think what we are trying to get to hear is the idea -- here is the idea that there are economic outcomes that come from significant infrastructure investments that are not only long overdue but have been resisted by the majority in the house. and the path forward seems, to me, to be one that would include, for example, in
investment into huge union stations, putting a lot of construction workers on the job. the rail being improved. broadband having been extended to the hill towns of western massachusetts so that children who, by the way, live in communities who have first class colleges have to go to the parking lot of the local library during the evening hours to connect to the internet. and i think that those of the sorts of measurements that we want to be assured of as we go forward. if we are only going to apply this to tax cuts, then it seems to me as though it is ill considered. if we are going to talk about long-term investments, what better way to do it than improving rail transportation. just for our colleagues here who are dubious about high-speed rail, that first train -- when we got to western massachusetts on the way to vermont -- that train got up to 79 miles per hour. how do we measure that
accurately, consistent with the point that mr. larson has made ec if we resist the idea that that doesn't count in terms of a long-term forecast? >> i think we should be considering these broader economic impacts. i worry about the uncertainty. i think that looms ray large over this congress. that is why i think you have to be careful with exactly the details of the models that are being used, and exactly the implications. but, of course, you're right. there are positive implications for renewing and expanding the infrastructure of this country. >> thank you. the time for the gentleman has expired. >> thank you, mr. chairman. here we are in year six of the recovery. you really laid out the task of this committee very, very clearly. our task is to accelerate long-term growth in this country
beyond the paltry 2.3% that we are seeing. as i have looked and read many, many things during the course of this past few years, trade and energy have been the two accelerants that have worked against the drag that we have seen in this economy. as we try to climb out of the recession. and i want to point out, in my state in louisiana, we are now seeing $86 billion in new investment in my district alone related to trade and energy. export now account for 25% of the state's gdp. we have doubled exports in four years. and this is all within the trade in energy space, from lng exports to come over -- chemical exports. we have seen resurgence in manufacturing come as a result. what really worries me about all of this are the macro economic
threats to this. from the slowing in asia -- the slowing of growth in asia, clearly the problems in europe where they can get policy straight as to what traction they are going to go and we're seeing many of these countries in a recession, and of course into cody in the middle east and elsewhere. what do we do about those things? there are many things that we can do here with regard to domestic policy, from tax reform and education and so forth, but what can the united states do to mitigate these threats and lead? because without u.s. leadership, we will not see this type of growth needed in this country nor globally. because our legislators -- this is the opportunity for growth. we have to focus on what we can
do to lead in the global economy. now, with energy and trade and the sick success story we are seeing. one, it is my sense that these jobs related to exports and manufacturing's pay significantly better than jobs on related to that. for instance, many, many folks back home with a high school education -- not even a next or two years -- are making pretty good bunny -- money . we know of stats that do with trade or export related jobs. i think the stats are roughly 18% higher. would you all agree that these type of jobs pay better ? >> i think that is a fact. as we do with income inequality this is also whether the potential solutions.
by opening markets, and also embracing this remarkable energy revolution. not penalizing it with taxes or other things, but embracing it as a truly revolutionary development that will put the united states in a leadership role. >> i agree with you completely on the strategic role of trade. but the question is -- do you need to give the tpa a fast-track to the administration? these talks are, as you know, very far along. >> our negotiators need to maximize their leverage in these negotiations. and i have had conversations with the japanese, and they will admit that. there are going to put their best deal on the table when we have tpa. but i want to raise another issue. one of the biggest issues we are going to face in it louisiana is
the lack -- in louisiana is the lack of workforce. i am very concerned about the labor market that we have in the united states. we are going to be robbing states along the gulf coast -- what can we do, what can this committee due to deal with the labor market? >> i think you really have a limited number of tools, in terms of geographic ability. something which has diminished in the united states. there are certainly a lot of state-level policies that i would urge the state level governors to look at. there is a lot of licensing that actually interferes with labor market mobility. those are some things.
and then you have the social safety net. you want people to work. you don't want them tight out of the workforce. so everything work-related in that regard would help. >> thank you. the germans time has expired. >> thank you, mr. chairman. this hearing, i think, was an interesting and thought-provoking panel to get us going. the issues that we have referenced in terms of tax trade and health care are somewhat complex and controversial, but i think they absolutely need to be on the agenda. but i would argue that there may be something that the panel did not address that is tied to this that actually can have an opportunity to bring people together. i am thinking the next hearing might well have the president of the u.s. chamber of commerce, the president of the american trucking association, the president of civil engineers
environmentalists, truckers who will unite and say after 22 years it might be time for us to raise the gas tax and fund our infrastructure. president ronald reagan, 22 years ago -- 23 years ago -- in his address for thanksgiving made an appeal that when congress came back, he wanted them to more than double the gas tax because roads were falling apart. because there were hundreds of thousands of people who could be put to work. because there was a user fee that conferred benefits on people who paid it and, in fact, there were costs that were being incurred at that time because of deteriorating roads. he said it would probably cost the average motorist less than a
pair of shock absorbers. well today, we are in a situation when we talk about productivity -- 42% of our major urban highways are congested. and the estimates, i think, are not controversial across the political spectrum. it costs about $100 billion a year. 1/3 are -- of our roads are in mediocre condition. and it is costing our motorists $300 a year in damage to their vehicles. the s&p dynamic report -- i think there is -- regardless of how you're going to use dynamics going or not, the evidence is strong that a $1.2 billion investment in infrastructure is
going to put close to 30,000 people to work. and my friend would not have to worry about whether it is in regions with high unemployment or not. these are jobs that would be available. family wage jobs for people across the country. across the country. now, i would respectfully suggest that our committee has a unique responsibility. this title for transportation is ways and means. this is our jurisdiction. we have not yet had a hearing on this in over two congresses. we are going to have on. circumstances do not permit. i respectfully suggest that this is an area that there is broad consensus where we can get local
governments, state governments, the private sector, the professions environmentalists and as i say, truckers and aaa to come together and say congress, get off the dime. when i came to the airport yesterday, the corner gas station was selling gasoline $1.60 less than peak this spring here in -- spring. the average motorist come if we raise the gas tax $.15 over three years, would be paying less than a 10th of what they are already benefiting come in terms of reduced gasoline prices . and remember, they are paying over $300 a year in damage to their cars. i would think we could have a very healthy this caution --
healthy discussion with experts across the political discussion -- spectrum on what we could do. if someone has a better approach than raising the gas tax supported by two commissions from the bush administration let's hear from them. >> unfortunately the time has expired to ask his question. [laughter] >> thank you for your courtesy. >> dr. price is recognized. >> take you, mr. chairman. and i want to join my colleagues who have congratulated you. i look for to working with you and assisting you efforts. i want to first talk a little bit about some macro economic analysis, or what some of my friends call dynamics going. i would just note, to some amusement, that all, -- all of my friends on the other side who ask questions of the panelists mr. jansen -- mr. johnson and
others, all of the questions were an effort to get the assessment of what a policy change would have on the economy. that is called macro economic analysis, dynamics going. it is what economist to every single day. they provide an assessment of the consequences of a policy decision that we would make. so i want to welcome my colleagues to embracing the importance of macro economic analysis. i want to stay for the record that we are all very pleased that the economy has begun to become a little more robust. it is also important to remember that this is the slowest recovery of economic -- any economic downturn in this country ever. ever. there is a reason for that, and
we come as policy makers, ought to be asking the question why is that? i want to ask dr. holt taken -- i think it is important that we asked the questions what are the work incentives? what are the work incentives? to that end last week, we learned that the december jobs numbers resulted in a decreased to 5.6%. that is a good thing, but it does not tell the whole story. the more troubling number was the labor participation rate. at 62.7 rate -- 62.7 percent rate, that is the lowest rate. i also discovered in those job numbers that only 56.6% of women are participating in the job market. that number is the lowest it has been in 26 years. so, i was wondering if you wouldn't mind answering as to
why the labor participation rates are so low? and maybe provide us with two or three items that we might consider to increase participation in the labor markets. >> so, if you look at the decline, some of it is just am a graphics. we know that the baby boomers are aging. so some of the labor force comes from that. >> how much would that account for? >> is about half the decline. as for the remainder -- about half a percentage of point appears to be where people got discouraged, left the work force. and then there is another quarter of the phenomenon which is just open to dispute. will they come back is in important question. how tight is the labor market? and when will wage inflation
start to push and? it is also important from the view of -- i tend to be in the campus of they are not coming back. it was only in the latter half of 2013 that if you look at a non-employed person, the probability that they would get a job exceeded the probability that they would lead -- leave the work force. i think we have discouraged a chunk of workers in a very big and substantial way. and we ought to re-examine, from start to finish, the kinds of anti-work incentives that are in all of our social savings programs. because they have to rely on that to some extent. >> would you like to highlight two or three of those? >>, what we know that a big chunk of that is going to come from single men.
and the eit c is not particularly keen on that. we were raising the minimum wage through the great recession from previous legislation, and teen departure from the labor force has been an or miss. that is the starting out jobs people rely on to get into the career ladder. i think we ought to look at what is going on with the teens, what is going on with a single men. and for the work as we have don't let them leave. >> thank you. >> mr. kind is recognize. >> thank you, mr. chairman. i, too, want to congratulate my friend from wisconsin. mr. johnson, you can comment on the question i'm going to give to you or not, but we are having a hearing today on the state of the economy where we need to go as a nation.
but it is difficult in the current environment because it seems as if the parties are in two different planets. we keep talking past each other. one of the consent to have with many of my friends on the other side -- and most of the republican economist that come forward, quite frankly -- they seem to be singing the same old song, regardless of economic conditions. it is always about tax cuts, especially for the most well-off and our nation. it is always about spending cuts, including important deals we should be making in the capital of our nation. it doesn't matter what the economic circumstances are that we face at the time, it is the same three notes over and over and over again. i'm a former quarterback.
i had a chance to play at harvard for a few years, but i knew that if the play wasn't working, you have to change it in the huddle around the line of scrimmage and call an audible. it is the inability -- given the economic circumstances that we face -- that leads to the gridlock and headbutting. it seems to me that it is less data and fact driven. that is where there is a problem because there is going to be an appropriate time to cut taxes and increase spending. or to raise spending -- taxes and decrease spending. it is the debility -- the ability to distinguish between the two that would turn us into a real private -- partner with the private sector. it is in that inability that has is tied up in knots. you can comment on that, but i want to ask you about - on page two, item nine, getting back to an original point you made in your opening statement you said our economic recovery was made much were difficult by the
policy of budget issues, including the lack of census regarding the needs to support the economy. government shutdowns and repeated confrontations over the debt ceiling, in particular, the fault on our debt increased a great amount of uncertainty. such uncertainty discourages investment and incentives. would you care to expand on that with some recommendations on how we can overcome that in the future to really be a partner with the growth that we need right now? >> well, congressman, my recommendation is don't do it. i talked, two years ago, exactly about these points. and i beseeched all the members not to engage in this kind of destabilizing confrontation where you threaten to default on the debt echo that is really -- that? that is really crazy.
that is not helpful. you can see that this has been measured. this was in my previous testimony. the way that uncertainties specs for everyone. we know that type of uncertainty fix -- discourages all the parts of the recovery that dr. price was talking about. all americans must want everyone to get back to work, and that we can sort out how we improve opportunities and improve roads. but if you generate that kind of uncertainty, you will slow down the economy for sure. >> there has been a lot of focus on tax reform and the impact it is going to have, but again, you look at the past data, the facts come you pack -- you talk to business owners themselves, it is way overplayed because of the multiple factors that business owners have to make every day. in regards to hiring sales, you name it. can you speak upon that come in
regards the whole dynamics going issue that we are talking about? and how hard it really is to produce the macro -- predict the macro economic impacts? >> first of all, congressman, i think you're absolutely right it is multidimensional. and you should look at the be indicators. we are number seven in those measures, but new york and l.a. the problems they identify are more about real estate. benchmarking, what business needs, make sense. i think you are going to see a range of things, including their availability of skilled labor. >> the last major tax reform in 1986 resulted in one of the largest corporate tax increases in our history at the time. >> thank you. mr. the canon is recognize. >> thank you, mr. chairman. and i agree that this committee has an opportunity to work
together and get things done right now. i want to touch quickly on the discussion earlier corporate rates, the highest rate in the world. i had the opportunity to be in hong kong in the 1980's. they lowered the rate to 16. i thought that 20 seemed more than fair. and he said that we need to be competitive in the world. so i think that we agree that we need to do something with corporate rates. my concern is passed through entities. you test on a little bit the effective rate in the country, when you're at everything, is 44. if you add in state income tax the average is -- what i read -- 49.6. so if you move corporate rates -- whatever they are thinking about doing their -- i do not know how you can be competitive. a lot of businesses, in terms of pass-throughs.
one statistic i got was 19 at percent of the companies registered -- 99% of the companies registered in florida and elsewhere are small businesses. 60% of the job creation comes to this job creation -- businesses and startups. i would also say, in terms of reducing the rate, if you are a pastor entity and you haven't have 70 employees and you're giving half your money back to the various government, it is pretty hard to be able to grow your business. my question is your thoughts in terms of if we lowered the rates and terms of pass-throughs, as well as corpse, what difference would that make in terms of going the economy and creating jobs? >> i mentioned earlier, it is a bad tax policy that treats the same business activity differently depending on whether
it is a pastor or other. that would drive you to organize your business on the basis of taxes. in the work i have done, on partnerships entrepreneurial adventures, they are disproportionately sensitive to tax considerations. they are heavily reliant on the cash flow, and many cases. they can, as a result, invest more and higher more. so you see strong linkages between tax policy towards those entities and their capacity to grow, expand payrolls, invest be happy to get the research. but they look much more on that front than did the larger corporations. >> yes, my sense -- from pass-throughs and partnerships moving back to corporations.
what are your thoughts? could you add anything more to that conversation echo >> as you said -- conversation echo? >> as you said, they can always go back. the reason that both corporations prefer to be in some sort of pastor is that they avoid second-round taxation on the distribution of the corporate profits. so i think it is a cap located issue. there isn't any simple solution to how you integrate the two. but i think the basic principle ought to be to take taxes out of the choice between whether you are in s corp. orc c corp.
>> i think it would really hurt businesses, especially small businesses and startups, if we don't address see corpse -- see corp. -- c corp. >> thank you, mr. chairman, and good luck. [laughter] mr. chairman, what i -- >> thank you. >> you're welcome. mr. chairman, i have noted that we have lowered the decibels, but there is still in ironclad position here and there. it is going to take a lot more than talk to get us out of the logjam. just one example. i hear from your side all the time about discussing and debating the business tax extenders. i hear nothing about personal
tax extenders. and i think that has become quite obvious, if we are going to come to any agreements, that there needs to be both in consideration. and i ask that you do that. and i sincerely wish you the best of luck. are going to need it. the questions at hand, i think i would like to ask mr. johnson on trade. you wrote an article in 2013 about what we needed to of -- to avoid in trade deals, which looks lovely from the outside. you talked about trade expanding unfairly at times, without a loving playing -- level playing field that protects our workers who benefit from tree trade -- free trade. is it the workers in the factories echo or is it the -- factories?
or is that the shareholders and executives at the top? >> as you know, and who and as we have been discussing all morning, many of the gains have been realized at the top of the distribution. much of that is for management for ceos. i think that this is an important point about tpp, which is really, as i understand it, in issue before this community -- committee. in the auto industry, japan has had a very closed market for cars and for auto-parts for a very long time. are they really offering to open that up to u.s. export? that would seem like an appealing opportunity. to an extent will be they -- will they be held accountable for that? that engage with tpp not with
the tpa you don't need the tpa. that's where you have the conversation. >> back in april 2009, you wrote a column for the financial times with the host: inflation is looming on america's horizon. i think maybe you can recall that. in almost six years since you wrote that piece, inflation has been consistently below the federal reserve's 2% target while the unemployment rate continued to be elevated causing real world pain and hardship for a lot of americans. recently with the economy improving, thanks largely to some specific policies that were passed between 2006 and 2010, the unemployment rate has been dropping but we're still a long way away from a healthy economy. we all agree on that.
yet despite your previous predictions of inflation, you've continued to call for the federal reserve to act aggressively, your words despite the fact that our recovery is nowhere near complete and there are few signs that inflation will soon hit or even exceed the federal reserve's target. why do you think your prediction in april of 2009 did not materialize? >> thank you for that question. caused them to deposit the extra funds that they got from the policy tho deposit that back at the pral reserve.
so we never saw the increase in the money supply that looked like it was going to happen back in 2009. so i think the fed handled this very well and ultimately as i said earlier in my comments i think it was the fed policy that gave us the strong recovery rather than fiscal policies in 2009 and 2010. thank you for calling this hearing t with the new congress in particular the recent improvements we've seen is certainly welcomed news but certainly also drowned out by knowing this has been stated by several members already the worst economic recovery since the great depression, the slowest economic recovery ever. we can't even get to an average. we should be able to at least
get a c grade. you started saying the standard of living that americans have enjoyed normally doubling every 32 years or so. now it's going to double every 90 years. added 60 years on to the standard of living for an american family. and it's probably no surprise that a lot of folks in our country think this is the new normal. i think the public is accepting it. many officials are accepting it. we can do better. and when we see the 72% of americans think the economy is still in recession and we've been out of recession for 5-1/2 years is alarming. what's troubling is two thirds of americans if you ask them are your children going to be better off than you are, two thirds will say no. i mean, they don't see a bright horizon and we know the policies we have an opportunity to make an impact on fixing the
broken tax code, we talked about that. trade policy knowing 750,000 jobs in my state of minnesota are tied to trade we have huge opportunities with the transportation partnership, with the european trade agreement, obviously, getting trade promotional authority is key to that if we're going to get the best deal on the table. there's no doubt about that. but i want to talk about regulation. maybe you can just mention real quick is the it possible to measure how much expansion of regulations in recent years are costing our workers is costing the economy in slower growth? and if so how much if you can measure that. >> well, thank you for the question. as -- i hope you know at the american action forum we have an ongoing attempt to measure the regulatory burden in the united states where what's called the reg lation data base tracks all regulations coming out of every agency in the federal government and looks at a couple different measures of
the burden all of which are incomplete but gives you some sense. first is the self-reported compliance cost. agencies say how long will this to comply with. there's the paperwork burden. how many hours. and in my written testimony there's some measure of the paperwork burden hours from regulations in the affordable care act. you can look at that. and i would be happy to get you the totals but if you look at 2014 for example final regulation added just in terms of compliance costs about $20 billion in 2014 ray lone. think about doing that every year it's $200 billion tax increase and this committee was debating a tax increase we would have a strong discussion about whether it was economically desireable. how do we want to think about that? that debate doesn't go on. i think if you look back over the past six years it has been an extraordinary period for regulation and these costs display that. the only comparable period in
my recent memory was post september 11th 2001 when the bush administration did a lot of national security anti-terrorism regulation which was comparabley covesly. these are big impacts and i think merit conversation. i would be happy to get you the numbers. >> i know we'll be looking at that in the coming months. i know in the 1990s i understand that we were successful as a country in boosting the labor force participation rate increasing take home pay and reducing poverty all which has gone in the opposite direction in the last 6 years currently through welfare reforms. could another round of welfare reform do the same? could it improve those numbers? could we do more on welfare reform? what are some ideas? >> as i said we need to look at the work incentives. the 1990s have lesson force the u.s. and also some thing that is are different. the economy grew and there's no substitute for rapid economic grutesdz and improving the long
term growth rate is the number one priority that makes the welfare reform of the 90's easier to both enact and for the participants to be successful. so you want it in that kind of environment. i think we should try to do it again. i don't think you can to replicate the dotcome bubble thinking it's easier to reduce the budget. and the kinds of spending restraints that we're successful in the 90's are no longer available. that was an era where discretionary spending got us to a balanced budget. the spending is now in the mandatory program. the discretionary part has been done. it's a different world. >> thank you. mr. davis is recognized. >> thank you very much mr. chairman and i thank you for calling this hearing and certainly thank our witnesses for participating. i also want to add my congratulations to you my friend from the midwest for your ascendancy to the
raising the minimum wage which is not entirely within your jurisdiction but certainly highly relevant to it. support for education support for education that's available early childhood education and post high school education for low income people pell grants for example. done a remarkable job in terms of slowing down health care inflation but this is an aging population. we have need to have the revenue there base in all the proposals i've heard so far are
cutting taxes and giving away revenue. nobody likes taxes >> the united states has the highest share of income going to the top 1% of earners compared to the other g-7 countries. does this policy and the trend seems to be continuing to go does this seemingly help expand our economy? does it have any impact on it? is it intended to? what would your response just simply be? rrm it's not unique to our economy. it's been going on since the 1980s. we saw the bottom.
it stopped. it poined out that all the evidence on the mobility to get from the bottom to the middle and top to the middle that's part of mobility too, says that mobility has unchanged. so for me in reading that evidence that says people still have a chance to get ahead in america. the rich can be rich in america. but we're not growing fast enough that we're happy with what's going. so i would focus on anti-poverty, on the ability to have the low levels of income be better in the future than they are at the present. that that gives people hope. that's the focus. the bottom and the poverty. not the top end. >> thank you. the time of the gentleman has expired. >> i would like to ask the panel some questions about the recent phenomena that's taken place in texas and north dakota and the oil patch.
created by the boom in the oil patch? over the last five years? and if we reach some stabilized level of oil prices is this going to have any kind of long term effect on the economy? and i would like each of your opinions. >> i think the decline in oil prices that we've experienced has been a very good plus for the u.s. economy. i think that's a view shared by the federal reserve and others. we're going to see stronger growth of course consumers real incomes have gone up. now, in part we've been fitted cost of other countries that from which we import oil. most of it is internal. and therefore oil companies u.s. oil companies are taking a
hit at the same time that consumers are directly better off. but there's no question that the combination leads to stronger growth, higher real incomes, more consumer spending. , better job creation in the near term. >> the dramatic impact, i've never seen anyone do a full accounting of what the stimulus was from the decline in that imports. it was important. the ability of chemical manufacturers to move back to the united states because of the cost of natural gas and feed stocks. the direct employment effects in the oil patch the income generated but certainly it changed what used to be a world in which oil prices up bad for the united states, down, good for the united states. to a more nuanced position. i still think that the bottom line, on balance we benefit
from having these oil prices but if you look forward some of the weakness is just global weakness and other economies grow more rapidly we'll see oil prices go back up. i would not be surprised if we a downturn. but i think on balance it's made a very difrpblt world from the energy policy. >> you need an economy opt investment side and it's an amount of technological that we've seen. secondly on job mobility. one thing the affordable care act did that you may or may not like is it reduced job lock. the previous tendency of people to stick with a certain job
even if there were good opportunities elsewhere. whatever you do please do not return us to a situation where we have greater job lock because we need to be able to move people and capital to these new opportunities. right now we're good at it. >> just add one thing. they're not identical in that most of the production in the first year. so if you see gas prices go down you'll see a bigger drop combrauf. they can ramp it up quickly as well. if the oil producers who sort of have to drill a well and count on getting sustained relatively high prices. they're the tougher call in this environment. >> mr. chairman in the absence of our chairman i congratulate him as well. so everybody can tell him i did so since all the members have up to this point.
chairman, in the absence of our chairman of with like to congratulate him as well since all members have of to this point. i want to go to the issue of capital it was a very interesting talk said chairman and gave to the u.s. chamber a couple of years ago and i was struck by what he said. may be items simple-minded and it made it so much and he said is about capital. if you don't have an influence in the calf total you would not create a business sorry job billion by that taxes
are paid on other thomases are services produced as well as the income of those workers. looking at capital and that influxes not occurring i just what you to start us off for someone who would be capital putting that in the market what keeps us from seeing that's right now? dixit -- taxes are a traitor everything combined? >> it is in tax from all of those things. looked at what the government can do at the very highest level the federal budget is anti-grows. with consumption and the return to capital with subsidize consumption we give people health care and subsidies. as a nation it is the anti-saving for that capital within the budgetary framework it crowds out any genuine investments so is very anti-a cumulation when the tax cuts can be the same way for:i am a fan of the tax
code for -- your fishing but that is a rapid incentive and it treats all capital the same if you hire a worker into educating you can expense that machinery machinery, expense that, you treat all the capital the same it is a good thing to do. then household savings tax rules for higher education and finance why would you save when they said we will not give any scholarships if you do? what about retirement? so security? medicare? it is all-important but are we going to save and
invest? we have to look at those. >> you keep talking about what we talk about is is incentivizing what we want and as you have already indicated there are many policies and the incentivizing what we want. talk about policies to help the kids had that together. would you like to weigh in on this issue? >> if we don't save little have capital. so closer to a third from 1985. so now the saving rate is very low.
partly because the other policies that sesotho for savings. that which brings savings down four american households. >> would you like to weigh it from your perspective? >> when we discuss capital don't forget to bring capital. after 200 years of experience the prosperity of the the country depends on the education and skills and health of its the sisyphean inhabitants. showing what it does and does not do the social insurance was introduced to encourage people to build the country and it was a great
success. >> weekly b white time i am at a time but it is the private sector that helps to grow the economy that helps to make these possible. mr. johnson. we have covered a lot of territory. the u.s. in the fact shirring in particular but with the chairman said in his introductory remarks the debt crisis is a dark cloud that hangs over us. to date is 18 trillion to keep the interest rate at zero? i cannot imagine if the if you agree
idea that the interest rates are rising. so for the congress a of this committee to slow the growth of spending with tax reform to raise revenue. but over the next 10 years the cbo baseline autopilot says the ratio start to rise and take years from now we're running a $1 trillion deficit 800 billion his previous intra so we're perilously
close and that is a death spiral. that is not a good thing. >> i wholeheartedly agree so that puts the whole thing a rest. i no question that they care for americans i but don't you jeopardize it all is should we have the responsibility as legislators to do the right things to deal with it now rather than later? >> don't give up on dodd/frank. it came from the deep recession. that is job number one. to not give up on the revenue. and third control health care costs. it is health care not just medicare the affordable care act has tilted
the curve. >> it is just the growth rate. >> i reclaiming my time. we'll have to do something and i yield back. >> your time has expired. >> congratulations to the chairman as well. but yes or no or should tax expenditures be revenue neutral? >> i think stacks' expenditure reform changes the limits. but know they should raise revenue. >> i think revenue neutral. >> with the entire package of tax reforms
should be revenue neutral but the with that trajectory of health care cost the wing for word you need to support what never forms of health care fifth. >> for many manchin and that the recovery has taken too long. and drew the last administration was not run into the ditch but over the cliff. we had a long way to go to climb now but i want to reiterate that there was a pediment to get out. and with
that crisis did not help. but where we are today it is a remarkable recovery i don't think anybody thinks this is where we need to stay but we have done quite a bit but it is fairly impressive. mr. johnson, to what to richard gere to with the progress we have made? >>. >> to have the enormous potential in the face to get themselves back up with the central bank should get kudos for what they did. this is standard textbook in to have the other circumstances about
stimulus with the economy goes down. but the disappointment to me is we all did not work together. and choose low-fat of recovery over fiscal policy. >> to pick up where mr. glickman fall left off. but it is the most immediate way to help our economy. there is now one of us here whose congress districts would not benefit greatly with the adequate level of investment in infrastructure. and use started to say
something and never by to hear your thoughts. >> and to make the point of the death tax so about how people move to and from work and around the country. it is roads their bridges and transportation it is broad bands so when in some situations in those parts of the country to use revenue sources to invest in interest for station and infrastructure. >> so what else to cut its core energy have our job creation or
our economy? >> if you look at the comparative the with the private sector we need a supportive environment for the united states. what i hear the most is the weakness of the infrastructure with the lack of investment. and for the business people traveling back and forth. >> your time has expired. >> my congratulations to your chairman right in. for the free-wheeling conversation i want to talk about tax reform does specifically focusing on
tax reform for smaller businesses and younger firms. the last congress may push of a draft with the leadership in analysis although not perfect we would increase the rate of gdp of 3.$4 trillion but i do have concerns back to the small and the number of firms of some intimation that we may only consider core for reform with those passer entities with simplification on one-handed
marginal rate reduction to pay only half of the point didn't profits in the bears' reminding to many constituents over the last decade six at of 10 jobs are through the smaller firms. a. >> there were some particularly vexing issues in the investment income, not the least of which is we have three different task forces. and that
different definition exists everywhere. so as a top priority, the simplification is one side that will help especially the smaller guys trying to deal with this in a big way. and we have done a lot of tax-writing from the 1980s and we when we had the marginal rates go down a little bit lower. the biggest obstacle was comprehensive reform and it was done and was very successful
and has been a part of this ever since. >> if you could offer me 30 or 45 seconds, please. >> 28%, that was the raid that we had after the 1986 tax reform and it's now up in the 40s and that is a very big difference for anybody who is contemplating a small business or expanding a small business. >> don't forget a 1986 there was other taxable income and that is a principle that we should go back to. if you consider the distortions in the comprehensive tax reform you should think about it on a revenue building basis, the differential taxation's introduce a lot of distortion, and i think that we should go
back to it on that point. >> should record and may perform as a we reform the tax system, should we also consider coordinating those reforms with the welfare system in the country? >> the welfare system as previous comments have brought out, have become a disincentive for working for lower income people and we need to be looking at food stamps and what food stamps have done to the incentive, particularly for second vernors. >> are there other provisions that we need to take a look at with respect to this matter? >> yes. >> what might they be? >> i wouldn't draw the distinction between the tax code and the safety net provisions. but almost 50 million individuals are now receiving
food stamps and that creates serious incentives for second vernors and effective marginal tax rate. >> thank you, i yield back. >> the gentleman's time has expired. >> thank you, mr. chairman thank you all for being here. i'm from the private sector and i'm never understood how you can say we are going to be okay when you look at the future. the numbers in may not be exact, but it's somewhere around 3.2 to $3.4 trillion a year. and we take this in in tax revenues and that's like telling someone who makes 25 or $26,000 per year it's okay to spend $34,000 per year and don't worry about it because you always be able to borrow what you need and if that doesn't work, you can print it
in the basement. we have talked about and bragged about how we have reduced deficit spending. but we don't talk about the effect of long-term debt that is going to affect our ability to recover. the numbers i understand are that lasser tax-preparation to about $77 billion and i would think that most americans would feel that that money could have been used more effectively. mr. johnson as well. my concern is that we are not addressing the real problem here. anybody that has a charge account, the worst thing you can do is asked the bank or the lender to give you greater spending limits. and so while we look at right now attacks are warm, we have an excellent opportunity to get this country back on track.
and doctor, if you could please talk about the annual growth at 2.3 to 2.4, that's a country that are so blessed with so many assets, what is the new normal, that is what we should shoot for. that doesn't make sense to me. if there is a global market that we can not only compete in but dominate in, we have an excellent opportunity and i think most of it comes from energy. the effects of lower cost of energy in our ability to compete and how that would strengthen our position in the world, i think the geopolitical consequences of this create the greatest danger for us and it's a little bit to talk about. so mike, i think that's almost laughable. if we are going to allow political agenda to outpace policy, then we are going to have trouble. but energy in our ability to capitalize energy is part of
it. >> i don't think that anyone has done a comprehensive accounting of the benefits to the u.s. economy and a rapid expansion in the oil and natural gas expansion in the united states. but we know from the postwar history of the u.s. economic growth that a standard problem has been a spike in global oil prices and the federal reserve's concern over inflation and the tightening of monetary policies leading to a recession, worsening budgetary outcomes and the anti-recession measures, we have seen that again and again. and i think that the biggest difference now given the production in north america and the rest of the world is that that is very different and we won't see that to the extent that we have in the past. that is the biggest benefit greatly should continue to let the private sector continue
this based on market incentives and we should also look at the ban on oil, allowing food prices to fall even further. so we have gotten a lot of benefits, we need to get more, but i don't think we need to single out the energy sector. if the markets continue, it will be successful. >> the effect on businesses, the private sector especially, one of your main worries is not competition but the way you are regulated and taxed by the country they live and work in. by the way, the same country that you fund every penny of what they spend or borrow, i think that we need to be looking at as to how we make those people stronger. people get confused about this.
and the prime rate was at 21%, i understood it because at that time i was 1% over prime. when you start seeing this come you quit ordering cars, which means the guys that build them don't make them and it's overwhelming. we have an excellent opportunity to really lift this country to a level that we haven't seen in quite some time if we look at this tax opportunity and the pro-growth. >> you have about one second left. i will say yes is you know what he said earlier about savings. i'm 66 years old and i'm hoping that i have more than one second lap heard. >> you're going to sell them off quick. >> is a great market out there
right now. my question is about getting to where we need to be. >> thank you. sir, you're recognized. >> thank you, mr. chairman. thank you to the witnesses for being here today. following up on what my colleague was talking about and what mr. kelly was talking about. we're talking about the national debt and the growth of national debt area i always get concerned. i was a businessman because i am a big lever that you have to look at the big picture before you can move forward, the date policy decisions moving forward, and i'm always somewhat concerned that we zero in on the national debt without also zeroing in on the unfunded liabilities that this country actually has. when you start to add those unfunded liabilities to the national debt, i believe that you make different policy decisions than zeroing in on the national debt and i would like to hear what your thoughts are an all-star revue as well. why don't we look at the total picture, and do you think that we should? >> i think that a number of economists and studies and the cbo, they all look at the unfunded liabilities and the
danger when you do it is that the numbers turn out to be so big that people throw up their hands and say it is hopeless. it is not hopeless. when is that we slow the growth of some of these entitlement programs not by a lot a little bit, we can avoid this explosion of unfunded liability. so i do believe that that is the challenge, and i spoke about increasing the retirement age in line with the increasing life expectancy and that would make a big difference to these unfunded liabilities. >> if you know what all your liabilities are abc this has changed, you made a good decision and we don't do enough of that. >> two things that we have left out of this discussion, and
numbers are big and terrifying, i personally dislike the term unfunded liability in this context because they are not liabilities the policy decisions and promises made, not like contractual obligations, they should be modified. and we can't afford a kind of a tax increase and i don't like the term. the second is this is often showing that these numbers are huge. this is an important part of the social segment and it's falling apart. 25% benefits across the board am a terrible way to run detention system. spending goes up, the gap is $300 billion every year and that is a program that will fall apart with seniors, please fix it. medicaid is a program where people go to the hospital for ordinary care, please fix it. it's not just the unfunded liability. they are not doing their job.
>> i think we had it and we looked at them, we would make good decisions. >> we should understand what drives those costs in its health care costs paid by the government and the private sector that should been that curve and slow down the rate of increase. and that is the data and i mentioned it in my testimony. and we should look at policies that have all health care costs. >> thank you. also a big issue for me is predictability. we make decisions here in the lemonade that uncertainty and predictability. government is good at doing that for the business owner. i would like to hear your thoughts as we have these expiring tax provisions. how does a business operate when they never know what their
tax policy is a matter i want to know. and i know that i have 50 some seconds. should these be permanent? they have been around for 20 some years, what are your thoughts? >> many of them get renewed every time. but there is an uncertainty about it. >> there is no virtue to do is come in the practice should end. >> uncertainty discourages investment and hiring. do not have this or threaten more government shutdowns. this will be a lot more than other tax expenditures. >> thank you, sir. mr. rangel, please go ahead. >> thank you, mr. chairman. and let me thank the panel. you have been around so long
that i consider you an institution of the congress. having said that as what we can accomplish in the next two years, the president has two years left and we have a new chairman of this committee. and we have a lot of things that we have a priority on infrastructure, education, disparity of incomes, but one opportunity that i would just confine my in worries with today in regards to trade, we have a new chairman and i look forward to working with the chairman and certainly the ranking member as well has dedicated so much to improving trade and creating jobs and a lot of things that you talked
about, i would hope that even after this hearing, that we can get together to see what part in your professional opinion we all agree upon so that we can just keep out the rhetoric and start concentrating on those things that we can cooperate because the trans-atlantic opportunity should not just fail because we are not talking to each other. there's a lot of thought that the president should have in regards to trade authority because there are many people that cannot negotiate a trade agreement and that includes how we want to make certain that the congress is not going to and congress is caught in the position where we just don't want to be caught in the position where there's so much time and an opportunity
for us to discuss what is it and how are we prepared to deal with it. there are some people when they see trade they see loss of jobs and other people say that we are talking about millions of jobs that are going to be created. so would seem to me, why is it so difficult to determine where these jobs are going to be loss and where they will be paying. the fact remains that if you have a progressive trade agreement or productivity, there are a lot of americans who have talked about this as well. so now comes an opportunity for new jobs to be created and if
we had any idea it was included on this for the protection of the american people and the standards that are going to be there in communist countries are at .2 respect this. so how do you expect that we can give them the authority and we have not the transparency to educate republicans and democrats base. and you can get this directly to the core and it's easy politically keep this down, but you have to admit including how
we have any reason and you talk about great opportunities and we won't know what it is until what do you do? >> i don't run for office, but you have already made your mistake. i think on the negotiating issue is my choice and i think every president should have authority and i believe that deeply for the reasons that you have talked about. and at the same time congress has the oversight capabilities trade ambassador should be at this table and you should be weighing in on what is the state of negotiations and would provisions that i care about and there's no reason why they get to negotiate with no oversight from congress in this way. >> we do not have oversight.
it's either yes or no. >> during the negotiation, that is when it is important. >> that is what i would say is the right combination. >> the gentleman's time has expired. mr. smith, you are recognized. >> thank you to our panel for your participation here today. honestly america is a big place in the world is even bigger. i think a discussion about trade and the economy in general are very important. it has been interesting as i have represented, one of the numbers of plains states and others, mountain states and others that are notable have fallen below average unemployment and lower cost of living throughout a lot of the economic downturn. what has been interesting is that
the states are going to experience substantial economic high and lows that other states have varied i'm wondering if you can reflect on the observations that you may have made throughout the last few years and the differences between regions of the country that are more specific and even state because obviously we had our share of challenges in nebraska amidst the economic downturn and certainly we did not see the high unemployment rate than other states have seen. so could any of you be so kind to reflect on that, starting with the doctor? >> i think that the number one thing that differs going into this crisis is the state of housing markets which are an integral part of the great
recession. we have two different kinds of housing markets, which is the california and nevada housing bubble collapse in the midwest have a very different housing problem. they were bad economies, they were not growing rapidly. people turned their housing into second mortgages and third mortgages because they are really struggling. and the state starts with those differences. they differ greatly depending upon the oil and natural gas opportunities and the other states did their part as well. and i think the third thing is state government matters in terms of the quality of policymaking, some states went
in and were unable to help and it was just the private sector and others are in great shape. i do not know the details of every state but i know this as well as. >> thank you. >> housing was very important and as i understand the new rules of fannie and freddie, taking mortgages with 3% down payment, and 97% loan to value ratio and that doesn't sound like a good idea. the notion was that mortgage originators should have an incentive to be careful by keeping this in the game and that has been scrubbed. it's not part of the numerals. i think that we are creating a possibility that we are going to see different parts of the country have serious problems if we do not continue to see this rise at the same rate. >> are there any opportunities of states that had low
unemployment? >> i think what the gentleman said is right. there were big differences in what preceded in the housing area and therefore the downturn was much more serious in some areas where house prices have gotten out of line. but if i could buy a house with 3% down, there's a temptation to run up house prices again in those markets. >> many states do not have fiscal capacity to deal with crisis, they don't have the resources and cannot borrow or they run in a way that is a little too close to the edge where they have the balanced budget legislation and that is why what the federal government does in terms of fiscal policy i think that we should, before we get a lot of rhetoric and complications, we need to think
about what is the right way for fiscal policy to be involved in any future difficulties that occur in as i recall at the end of 2007 and early 2008 when you had a republican president there was in favor of the fiscal stimulus at that point + there were a lot of republicans gains in favor. we should think about that before it gets partisan again. >> one additional question. do you believe that trade promotion authority has helped american agriculture? >> yes, we have the most productive agriculture sector on the planet. opening up __ for example the japanese agriculture market __ is a big opportunity. >> are __ i yield back. >> your time has expired.
i recognize mr. __ >> thank you. i have been fascinated by the questions from both sides about economic growth, static scoring, or accurate scoring. particularly because i believe that debate often times, in this committee and in the broader context, between left and right, on economic growth, on disparity, on the middle class, the wealthy, the poor, it is a question as to whether or not you believe in our economy's dynamic __ whether to take from those who have and redistribute, or whether to incentivize those who do not have, to work and innovate,
create, and for those that have, to invest. specifically, there has been a lot written about this over the last couple of years. i know one book that has a getting a lot of play right now, particularly on the left __ a book written by a french economist __ capital in the 21st century. some of the most interesting assumptions he makes is basically that throughout the last hundred years __ if you look at the bottom 5%, the bottom 10%, is based in making the assumption that those in those percentiles pre_much remain the same. there has not been the type of mobility, upward mobility up the economic ladder that those on the right side the i'll
believe america is all about. specifically, i know you have taken the author on on his assumptions, i would like you to speak a little bit of what you think this committee should be focused on __ as far as income disparities in our economy, and the best way to raise those who have with out __ and those in the middle class to go even higher. >> the professor was not very concerned with that problem. he was concerned with high incomes. i think that is the wrong place to focus. i think if we are concerned about income distribution is to focus on the question of poverty, and what we are doing with their. part of that is question of
education, part of it is the measurement problem, it is not as bad as it looks. i think all of those things that the committee might spend some time focusing on, drilling down and trying to understand what the actual nature is __ say the bottom 10%. >> would you like to comment? >> i think there are a couple of responses to this whole discussion. one is that his research has been question on a number of fronts. i think it is worth looking at the statistical fight as to whether he is measuring something real or not. for example, a lot of people were forced to report income after 1986, the reported world looks very different.
the second thing is, sometimes the wealth of the upper class went up relative to the middle class __ the housing market busted, do not do that again. the mobility evidence that says that on a whole the united states is the same as it was 50 years ago. people have a chance of getting ahead, people just do not like getting ahead. >> mr. johnson, i have 30 more seconds, do you believe in mobility? >> of course we believe in mobility. i am an immigrant, i him him because of mobility. i think you summed it up nicely __ let's go back to the chart that was shown at the beginning.
what we have seen is a big form of trickle_down __ that this would benefit people, but this has not happened. as far as tax reform, we should consider that. we know we got out of the 1980's in 1990's. it was not more for the middle, it was more for the top. you have to think about how you handle that. >> the time for zuma __ the gentleman has expired. >> thank you. i think i will wait until after next sunday in seattle, before i congratulate you totally. i listened __ we have been here three hours and you have been through just about everything under the sun. one of the interesting things that i've seen after sitting through this __ very little are
talking about the middle class and those struggling to get on that ladder __ one of those groups is students. no one has talked about the trillion dollars of debt for students. i am a doctor, i know what goes on in medicine. if you are a schoolteacher, you are $60,000 in debt __ what that does to your view of the economy and society, and how much you will invest, when you are basically trying to succeed in survival __ and pay your debt service __ there is nothing left to save. we hear there is no savings here in america, of course there isn't. all middle_class families have put the savings into their
student loans. one of the fascinating things about listing to this is also that sometimes you get very eccentric about what happened the united states. mr. johnson, i would like to hear your comments about european attitudes towards student that, and what that investment by societies is making in terms of the future. i have a university in my district, and i watched the national institute of health dropping their investment on higher_level students. they used to do 19%, now they do 6% to the grants. there are people deciding if they want to go into that kind of a thing. what is a long_term effect of the debt on the students?
how do the europeans do otherwise? >> congressman, is not just the europeans. it is also competitors in asia. the attitude is exactly what you said __ you want more people would post high school education __ and you do not want overburden them with that. i think it is a particular problem in the for_profit sector in higher education. higher education in this country has been a strength, and maybe it will be a strength moving forward. i think we need to expand that post high school vocational education. expand the supply of it. increase the skills that are out there. have them come out with manageable lower debt levels. >> to give your suggestion that you have commented on __ wwhy
should a student in this country pay more than 1% over prime on their student loans? why don't we have our bones down at that level, rather than these 13.6% loans from private banks. if we prodded so that every student could borrow on 1% over prime, how would that change the future? >> i think we want to be careful not to encourage over barring. you are absolutely right, the level of interest on some of these loans is too high. these people are a good credit risk, given the exact conditions of the loan. you get paid. the default rate is relatively low. it is harder to discharge these debts in in bankruptcy. >> impossible, in most.
>> which understand some of the companies that are inappropriately gouging the students. that is part of the picture. but most of all, expand the opportunity. >> one more question. if the oil patch goes in the tank, as it looks like it is going to because of the cost of oil coming down, and brings all of __ banks all over the southwest coming down. should we bail them out? >> no. >> thank you, mr. chairman. i am looking forward to being part of the work that this committee will do. i appreciate all of you being here. i want to talk a little bit about trade.
i wanted to reference a comment that was made earlier by member of the committee that was interesting to me. he talks about republicans, and people on our side of the aisle, always playing the same playbook, and how that is not working. i come from the state of south dakota. in fact, i represent the entire state of south dakota. we have made some tough decisions in that state. i served in the legislature from 2006 two 2010. we have become the number one state in the nation to do business in. we have done it by keeping our taxes low. we have a regulatory burden that is low. we have the lowest unemployment rate. we also have a constitutional requirement to keep our budget balanced every year. for us, it works.
we make tough decisions, and literally in one year or two, we can see our economy turnaround. our number one industry is agriculture. i have been working very hard to increase not only my own business opportunities, but also agriculture across the nation. i'm excited about the trade agreements that we have coming, and opportunities that that creates. i'm also kind of concern about how the process comes down. last year, the united states reached a record high in experts. also, i see we have more opportunities when comes to agricultural products. in history, they have given us some sticking points, and we have negotiated. sometimes the hangup to getting trade agreements done has been agricultural products.
i would like to ask you, tpa, when it comes to getting that, historically when looking at other trade agreements, has it been bipartisan? has it been a bipartisan agreement traditionally between republicans and democrats to give that sort of authority to the president? >> yes. honestly, in many cases it has been tough. members have to work out their concerns in gaining trade authority. >> in that role, when cpa is being sought after by congress, what is the role of the president? >> the white house involvement in this process is essential.
white house leadership is essential on any large bipartisan initiative __ you have to have white house leaves it to be successful. >> tell me what the near_term effects we could have with some of these trade agreements are wrapped up. the agreement that we have a negotiation now. what are some short_term immediate effects within the first five years, or down the road, 10 years? >> as with any beneficial economic policy, at a time when you are operating below your potential __ you still have some people that are unemployed __ you can put them to use. there are finite benefits to that. the larger impacts, i think, is the ability to set standards. standards in manufacturing __
that they are accepted internationally. you makes __ mix your employment sector, and you pay them better. >> this is important in negotiating good trade agreements trade __ ttrade related jobs pay better than nontrade related jobs. is that true? >> i believe it is true. you cannot do a trade agreement without it, without knowing what the other side will put on the table. my sense is that we are not looking at a robust set of
agriculture agreements with the japanese, as you and i would like. >> the gentleman from california is recognized. >> thank you. thank you for patiently answering our questions. i appreciate your willingness for joining us. i'm a little bit confused as to the purpose of this hearing __ or the information that has come out of this hearing. on the one hand, i hear that our terrible president is sending us down the drain, yet on the other hand, i am hearing that our country has seen 55 months of consecutive job growwth thanks to our president. the ways and means committee has a long history of holding
subsequent hearings in an effort to find actual solutions to move our country forward. there has been just a messaging piece today, not a lot of serious discussion. is our economy perfect? no, no economy is. ironically, i do not see the republican_led congress stepping up and fighting for workers anytime soon. they could cosponsored a bill to raise our minimum wage. in fact, most of our economic recovery has come in this country despite strong republican opposition. this is a party that has strained to default on our economic obligations, and shut our government down, at the cost of our taxpayers.
they live in a bubble in which they think history will stop repeating itself, and that things will work this time. let's talk about another piece __ healthcare __ pprobably one of the most important issues for american families. the republican leadership on healthcare has been nonexistent as well. healthcare should not be just a privilege that in tiled phuket to have and can afford. before the aca was enacted, being a woman was considered being a pre_existing condition. most women's health issues, including pregnancy, were routinely treated like the existing conditions. now, thanks to the aca, women cannot be charged more just because of our gender.
health plans must cover maternity services __ all of which helped many working women. women must now work to support their families. despite the progress we have seen on women's health, we have seen 54 different votes to try to repeal the healthcare law __ yet, no draft of a republican alternative plan. if we repeal the aca, what do they propose to replace it with. let's talk about the productivity game that we have as a country. for more women staying in the workforce, thanks to the preventive services that they received because of the aca. i particularly sensitive to women's issues as they relate to the workforce. i want to talk about the participation in the workforce.
i think it is critical for where our country goes in the future. i want to address some testimonies by mr. feldstein, and his claims that social security discriminates against women by taxing net income, but not paying them the social security benefits that they earn. coming to that conclusion requires assumptions. it assumes that all women are married. that is not the reality in my district. second, it assumes that married woman depend on their husbands to support them. again, that is not necessarily the case for many my constituents.
the third assumption that is built into that statement is that only women, and never men, would make a choice to earn less by raising children and being supported by a spouse. we know the reality now is that there are many men who choose to stay home and raise kids. in fact, the truth is that the vast majority of men and women get social security benefits based on their earnings alone, whether or not they are made. a smaller number __ if i could just finish my sentence, mr. chairman. i'm just going to close by saying __ some married women and men do not work at all but still qualified for social security benefits via their spouses work. i just felt the need to point that out. i do not know what reality you live in. the reality that i live in,
most women have to work to support a family. it is not the case that most women are supported by their spouse. >> all time has expired. gentlemen, you been here since 10:00 am this morning. this is our first hearing in the 114 congress. i very much thank you for taking time to indulge us today, and enlighten us. the committee stands adjourned.