tv Key Capitol Hill Hearings CSPAN February 21, 2016 3:30am-5:01am EST
your time to enlighten us today. we will have a presentation and some questions from the governor. we will turn this over to joseph. joseph: thank you governor herbert and thank you to all of you for having us. hearing the broad range of accents from across the country. i will add my irish accent to it this morning. bes is a great time to having this discussion. looked atus who have the 401(k) over the last few weeks, it is a difficult time for stock markets around the world. there is a lot of uncertainty at the moment and a greater fear and what we have seen for some time regarding the outlook of the u.s. economy. what we will try to do this morning is to parse through some of the noise and giving -- and give you a better sense of what you can expect in the economy in
the next 12 months and longer-term. hopefully this will help you as governors to know whether to invest more now or to save for a rainy day. i am delighted to have such a distinguished panel of guests here to have this discussion. yogi bear is says it is difficult to make predictions, especially about the future but if anyone can do it accurately, it is these guys. we have a broad wealth of experience and knowledge. start withl do is five minutes or so about the current shape of the u.s. economy and we will turn to the discussionnd have a for the next half hour or so. at the end, i would like to open it up to westerns from the governors. if there are certain topics that are more pertinent to you. to set the scene a little bit allay some fears, it is a
bit bizarre at the moment that there is so much speculation that we are headed towards a recession. measures, the u.s. economy is in stronger shape than it has been for the best part of a decade and probably in much stronger shape than most global economies at the moment. unemployment rate is down to 4.9%, the lowest in eight years. the economy created 2.7 million jobs on top of the 3 million created the year before. federal finances are in better shape than they have been for quite some time and so our state and local governments. u.s. companies are sitting on a big tile of cash at the moment and u.s. households, perhaps the most important part of this discussion, are in much better shape than they have been in a long time. they are earning more now than they have and their household debt situation is in much better
shape. they have taken the opportunity over the last few years to repair their balance sheet. the u.s. economy is in such good shape that the federal reserve decided a few months ago that it could withstand slightly harel -- higher borrowing costs. thes doing that alone among developed nations around the world because at the same time that we are raising interest ises here, the eurozone cutting them into negative territory as well as japan. beacon. stands out as a of a strong economy in this turbulent time. there is the positivity out of the way. there are a couple of good reasons why concerns have risen lately because the risk to the economic outlook has risen. the first of these concerns is the stock market. market had its worst start to the year on record. in the first 10 trading days of
the year, more than a trillion dollars of value was wiped off at the s&p 500. that is concerning. the question you want to ask about that is what was the reason for that. is this a sign of a weaker domestic economy. the answer is no. one is fierce about the outlook that has swept through global markets. the second major factor, was the oil price and the slump in the oil price and stocks have been significantly correlated with the oil price the last few months and followed the price downwards. there is an old joke that the stock market has predicted nine out of the past five recessions. [laughter] theense at the moment in sense of a lot of people share is that will be the case again. it will predict the recession that does not happen because the fact remains that the strength of the domestic economy is still robust. concernnd reason that
has risen over the past few months over the outlook of the u.s. economy is the state of industry in the country. i am thinking particularly of the manufacturing sector and the energy sector. oil and gas and mining. there has been a significant downward trend over the last year and both of those sectors have shrunk. that is particularly important depending on which you state your coming from because i know those sectors are very important for several of you. if you're looking at the health of the overall u.s. economy, they contract down. industry accounts for 10% of the economy. wantof thumb -- when you to know where the u.s. economy going, look at consumers and not industry. if you can get americans to open their checkbooks and wallets and
spend some money there is a good chance that the economy will continue to float along. seeing.what we are consumer spending remains strong in the face of adversity in industry. there are a few reasons why industry is falling including the oil price and the strong dollar which has made u.s. exports less competitive abroad. there are that two main reasons regarding the risk of recession but i would put that risk this year at about 20%. but not ouricant central scenario. panelists,rn to the there was a title asking is the u.s. headed to recession. the answer is no. perhaps the better question would be when will the recession come. since the second world were, we
have had 11 recessions. the business cycle expansions have lasted for five years. we are now in the fifth year of this cycle. the reality is that the next recession is probably closer than the last one. i will tell you now that it is unlikely that the u.s. economy will plunge into recession this year but there is a very good chance, better than 50-50, that in the next few years you will see a recession. thatat of the note -- on upbeat note, i turned to the panelists. we start with a broad view from my thoughts. what you areme confident about and what keeps you up at night? >> the u.s. economy is in better shape than the panthers were against denver. by the way, we feel your pain.
[laughter] think -- to build on your come the way to think about this is that you have a u.s. economy where domestic -- we have rebuilt the economy from the crisis. banks have healed. the housing market has healed. households are in better shape and the labor market has improved. you are seeing a little creep growth telling you that the labor market is now approaching full health. that pickup in wages is very positive. domestic backdrop of healing -- has worked well past that. the other positive thing is the government. at both the state and local level as well as the federal
level, we went through wrenching austerity programs. local governments are now in a backion to start hiring people that were laid off and the federal government has gone from brinkmanship moments where we had fiscal cliffs and shutdowns and threatening to default on the debt to a much environmentcalmer in washington. i view those developments in washington as being an ongoing headwind to growth. we are not seeing that kind of pressure on the economy. the problem is that the domestic backdrop has improved dramatically but the global challenges are there.
the surge in the dollar and the damage to u.s. competitiveness and mining has a recession going on because of the collapse in commodity prices. if you look at government -- growing slowly. service sector is not affected by global events. and looking at the housing industry, very domestically oriented and doing well. a 5% of the economy is growing at an ok place and then we have deeply troubling sectors. what worries me is that we are seeing the global environment to see a if we were collapse in the chinese economy -- which by the way has not happened. but juststill growing lowered. if china were to collapse or if we were to have a big crisis in or the complete reversal of the oil situation, a crisis
in the middle east and oil goes through the roof now we are in the kind of environment where worries about recession are there. answer your final question about preparing for recession, i ofee with you that the odds recession next year are low, 25%. in the next three years, maybe 50-50. i think that we need to acknowledge that. give us a few more years and we may no longer be in this low -- where welow would be in an environment where the fed gets tough. we will not be at $30 oil forever so we will no longer be in such a low environment for oil.
a longer horizon, we need to acknowledge that recession is a real possibility. there has been far too much agreement so far. tell us something you disagree with. : let me take a different tact. it may be dangerous for me to venture into the world of football analogy but we have seen a lot of defensive games during the super bowl as well as leading up to that. in my view, the u.s. economy has been playing a defensive game ever since the crisis. -- i have earned a reputation of being an optimist. we have never gotten the cyclical engagement of this economy that we have during -- cycles. sometimes. up to it it has been political events. 11 years working for
peta minute she in the 1980's. i never thought that our be -- andolicy would yet we saw that in the early phases. terms ofave done in financial regulation is that we have created such a high capital requirements and also the threat of litigation that our banks are simply not lending at the rates that they have in any other post-world war ii recovery. whether you look at the u.s. domestically or you look locally, the level of credit growth is lower by far than it has been in any post-world war ii expansion. when you do not have credit, some of the key sectors like investment and durable goods do not benefit from that additional stimulus.
credit is sort of the healthy stimulus that comes to the economy from economic opportunities that are pulled forward into the present and they are not all certain. it is called risk. by expanding on those opportunities come you end up with an uplift, not just in your domestic economy or in investment but in global trade. as a consequence, we have had a lower rate of growth in global trade in this cycle than we did during the post-world war ii cycle. views were a good synthesis of where we are because we exchange these views and no -- i don't think any of us see this year as a recession. 100%, aly would put a certainty on a recession by
2018. i think it is something -- i have a private business, i do some real things on the side. i don't just do economics. we have a recession in our three-year plan for 2018 and the reason i say this is because it is not just the average length of an economic cycle. one of the lessons of the crisis thehat the financial -- stock of wealth is so large, and the financial system so important, that we can have financial shocks that create recession even when all of these good rings in terms of the consumer and the day-to-day data that the economy looks good. my concern is that we are going to get another financial shock and thenow and by 2018 governors here should be planning on that in terms of their-- not only in
fiscal plants but their plans in terms of these new initiatives for how they deliver greater security to their population. that -- what could joseph: on a slightly different topic, mark, i want to bring you in here. when it comes to the economy has been the oil price. no matter where you are it has a huge impact on you whether it cost you less to fill your tank with gas or as some of the arernors know, finances falling because the energy sector is doing so weekly at the moment. can you tell me what the oil price will be? i know you're just back from saudi arabia this week and it was a landmark deal announced that perhaps does not seem to have a lot of substance behind it. what is your outlook?
mark: thank you. i want to first think governor herbert and the staff here at nga to join this panel. thanks to you. price ofd predict the oil i would not be here but on a beach somewhere but i would like to share our perspective both on the oil market and its prospects but also on the implications of that for the u.s. economy. i will focus specifically on the short-term outlook but i did include a copy of a just released long-term energy outlook including a summary and data looking out over the next 20 years. something for your swag bag. happy to speak about longer-term dimensions of the u.s. energies to tuition as well. -- u.s. energy situation as well. it is important to recognize where we come from. the reason oil prices have
collapsed is that we saw all-time time record growth of production outside of opec in 2014. the u.s. not only had the biggest increase in domestic oil production in the country's history but it was also the third biggest increase of oil production ever in the history of the planets. a huge increase in oil production outside of opec and it was mostly driven by the united dates. long-livedthis supply shop, opec's members made a reasonable decision to say -- the only thing we can do in the face of this is to defend our market share. inn they made that decision november 2014, oil prices collapsed. the market has evolved in a way that any economist would tell you to expect. in the face of lower prices, we saw demand grow by double the historical average. we saw production growth in the u.s. and elsewhere outside of opec slowed dramatically.
in 2015, we also saw a very large increase in production in opec. including in iraq and also saudi arabia. that thet has been situation of an oversupplied market has persisted to where we are today. where we sit today is that there is still around the world to much of supply and not enough demand. we also face the prospect of increased production coming out of iran as sanctions are lifted. in the face of too much of supply and not enough demand, we have seen oil inventories around the world overflow. inventories of oil and refined products like gasoline and diesel fuel in the u.s. are at all-time time record levels and they continue to grow. thatr data, we do believe global demand will finally begin to catch up with supply in the latter half of this year and what we think there might still
be some risks to the downside of oil prices in the short term, that should provide some support in the back half of this year but that does not mean that the situation isn't rebalanced. inventories have been growing. and you need to really work off all of that surplus inventory before the market will truly feel rebalanced. that is where we have come from. you may have heard our ceo bob dudley say that all along the oil price will be lower but not forever. the next question -- what does that mean for the economy? were leading off with questions regarding a recession, many of the governors in energy producing states know there is already a recession in the energy sector. on net, u.s. is still the second-biggest net importer of oil in the world after china. that is to say the u.s. consumes more than it produces even after the shell revolution. lower oil prices
should be good for the u.s. economy. there are some interesting wrinkles in that. i will be interested to explore this further. it certainly seems to be the case that u.s. consumers have not in spending this windfall. you made mention of this. why ourhe questions is consumerist not spending this windfall and will they begin to or not. it has also been clear that there has been a collapse in spending, investment in jobs in the energy sector. impacts had an outsized on the economies of the energy producing states. there are a couple of other wrinkles that i would like to plant for consideration. one is that the shell revolution means that energy does not fall along the old lines that we would have thought. it has redefined where the energy producing states are.
for examples like state including oil and pennsylvania, the decline in prices are having a bigger impact. part is that the supply chain for the energy industry is nationwide. bp produces an annual economic impact report. we show that for bp at least, a a share of our spending is not in the traditional energy producing states. we spend our in places like alaska, texas, and easy on but we also spent in 2014, 600 million dollars in california and 300 million dollars in new york. an illustration of the fact that reverberations of the energy shock are truly felt nationwide because of the national dimension of our supply. joseph: i want to come back to the topic of oil in a moment.
you are done a lot of work with the states that are present here today. what soundsg up to like a recession in the next few years and further headwinds from the oil prices in the next few months. can you give us an idea of what happens to a state's finances when it is about to fall into a recession. walk us through what you saw back in 2008. >> thanks again for having me. sector from the public to the private sector a decade ago and one thing i have learned is you always have to make the lawyers happy. i need to make a disclaimer. i work for movies and a letter -- moody's analytics. on a personal note, please don't come up and asked me why i downgraded your state.
thing -- i feel a little uncomfortable because we had five economists and we all agree and that makes me very on -- there he uncomfortable. have the same probability of recession this year, roughly 25%. virtually a 100% certainty in the next three years. we are six years into the business cycle that is one of the longest periods since world war ii that we have had an expansion. we have been working with a lot of folks to make sure the next recession. one of the main reasons being that what states do matter a lot to the economy. you guys have a lot of power in the u.s. economy. we havehe reasons being decided to stress test state
governments as a matter of practice in order to develop how sensitive state governments are to the overall economy. we did a research paper stress testing state governments in part because we were tired of the friends in the banking sector getting all of the fun. back at whatd happened in the great recession we found that what states and local governments did had dramatic ripple effects through the recovery. it is one of the great reasons why the great recession was followed by the recovery. if you look at the total number if you look at the thes of jobs, you will see jobs we have regained are not those that we lost. if you look at low-wage jobs we are much further ahead than our
recession peak. we are still at about 800,000 jobs of where we were before the recession. 400,000800,000, roughly of those are from states and local governments. with the majority of those from local governments, local government -- local governments have had a rougher time. what we found is that states in were not well prepared for recession going into 2008 of any size let alone one of this magnitude. -- we have our own internal tax models for every stage. we aggregated them together and we went through one of our alternative economic scenarios. eight different
economic situations for each estate and we went through a moderate recession scenario. what would state finances look like? was that the spending impasse is just as important to keep an eye on on the revenue impasse. if you go back to 2008 and look at the timing of when a lot of stresses were placed on state budgets -- first from medicaid programs. look at the spike in medicaid spending. it happened almost a full year before the first it's in revenue came. a lot of the first cuts and tax increases that states implemented was to deal with a higher medicaid costs. saw wasnd thing that we that state budgets in general are much more sensitive to changes in the business cycle
15-30 yearshey were ago. a lot of that is because medicaid makes up a much larger piece of state budgets overall and i can have a lot of fluctuation going into and out of a recession. state tax revenues are more sensitive to changes in the business cycle and they have in the past. from 2001-2 thousand 10, they were three times as volatile as the underlying economy. which means that in a decade book ended by recessions, we will see much larger fluctuations in tax revenue over time. if you are alaska or the note to go to coming your used to this. seeing largeto fluctuations in your tax revenue. if you are new york or california, i will pick on them because their governors are not here, you will see similar
fluctuations today than what you saw 20 years ago. personal income taxes make up a are a veryse volatile revenues source. general states move to a more progressive system. that makes sense from an equity standpoint but what it does is make states that more reliant on a small number of taxpayers at the high end of the tax bracket for revenue. while that may make sense from an equity standpoint, it also makes it more volatile. we are seen states like california or new york who are reliant on progressive tax systems and they need to start budgeting more like oklahoma or alaska or texas because they will see much more sensitivity to changes in the business cycle going forward.
you made some interesting points, when you enter and down spending starts to rise in income starts to fall. and states were not prepared for this great recession. are they prepared now for the one? course that is a great question. what we did with the stress testing was to see if they would be ready. there is no such thing as an average state, but it should 8% in aercent in a if you do not want to cut taxes are increased spending, the average state should have a .5% put away. -- 8% put away. they?do now is the time to start
building that fund. >> absolutely. most states we work with our already working towards protecting against the next recession. as economists, most of us hope that other states follow your example, governor. theirps them focus on individual states and sensitivity. most importantly, it helps them create very purposeful reserves. some states in the great recession had reserves but they did not use them. >> i want to talk more about policy. dale, you and i had a conversation about what states could be doing better now to help not prevent the next downturn but to make it easier. what can we be doing now in the good times coming terms of job programs, to improve the average
america at the moment all we have this opportunity. >> i was excited to hear you sharing of this state successes, state laboratories of innovation. the ability, for example, to address the unemployment system, which in many states is extremely archaic, yet there are states that have seen their unemployment insurance systems, which are recently to deal with ,eople who are unemployed actually become more proactive in terms of developing programs to make them key employment services. -- ourre other states business is in california where they have a workshare program. it is a manufacturing business. and that workshare program has important -- has been important to us.
been in this manufacturing recession. we had to go to a 40 week. the workshare program helps our employees be able to cushion the income effect of this slowdown and it helps us not have to cut back in terms of total employment. the idea that the governors could then look at a recession model that would -- programs might not work in every single state -- but programs that could -- we canis effect learn here, to come on the panel -- but having these purposeful rainy day funds can kick in and fund some of this specialized improvement in terms of the theciency, the training and intersection government
education, in terms of universities and apprenticeship programs in the private sector. in this day and age, when we are linking everything, there are almost modes around every so what are the sectors who are not maximizing our opportunity to work together. >> icu not a your head in agreement. any thoughts -- i see you nodding your head in agreement. any thoughts? >> i think what she says is right. i think everyone in this room would agree. we need to invest in infrastructure. that obviously is the federal government needs to play a big role. anything we can do to kind of becausethat direction that is, in no way, the rainy day fund in the future your infrastructure investment is
something we have neglected as a country. that really rights you over the longer-term. that would be the only thing i would add. >> i want to make one thing clear. when we look at the employment situation, we look at total employment, whether it is going up or down your belt -- down. but there is this thing called job creation or job destruction. reception -- during recession, there are still job openings. even today, if you look at the national federation of independent business, they are according something like 3 million job openings, a substantial number, that are not being told today. so -- not being filled today. so making employment much more so that the inventory of jobs is always low level because we have many people who are cycling through this of women system. i think this will happen at the
state level. >> i would add one thing to that. when i talk to clients, middle sized businesses that we give services to as a big bag, it is amazing the consistent message you get from so many medium-sized businesses. we can't fill jobs because we don't have the right trained people. a lot of it has to do with -- i've got a liberal arts degree and then went on to get my phd. but i don't think that is for everyone. we need more technical training that is actually aimed at the jobs that are out there. it is uniform across businesses. >> that is a really good point. what we are seeing in the housing market, we have been -- we have had to reduce our forecast for housing or homebuilding over the next couple of years because, even though there is demand in the housing market, there are not enough plumbers, roofers,
skilled tradesmen to physically put up these houses fastener. >> looks like you have something important to say. >> and important point about the investment planning as well. as we look around the world, we find that shale resources are ubiquitous. but it only happened here. not just happens below the ground, but what happens above the ground that matters. to flow to that, investment opportunity, a system that encourages innovation and competition? we see the example in a number of states about policies that promote investment and innovation. i think that is an important part of this new -- this dynamic as well. true.t's i feel like the shell revolution could have happened in any number of countries but it hit desperate kicked off here. the energy sector is the one that has been heard.
we have lost over 100,000 jobs in the past a little bit over a year in oil and gas. what is your outlook for oil shale? terry has been surprisingly robust. protectionist kept a quite strongly people thought it would tol off, when oil and down $40 in the dental $30. fisher fall in investment. late 2014, it has now fallen by total 75%. it is the lowest it has been since 1999. in u.s. natural gas production has continued to grow. and the declining u.s. oil production has been modest. the sector behind that has been amazing increases in every oil that has been drilled. so going forward, there are two
key moving parts. cameo -- how many wells will get drilled and the productivity of the each of those wells? in theot production united states declining this year. but as oil prices stabilize and begin to recover, which is our reference case, as investment activity begins to return, we think there is significant upside potential. use production of oil and natural gas can double over the next 15 to 20 years. >> so the longer-term verizon is a positive story. i would like -- so the longer-term horizon is a positive story. i would like to open it up to the governors. we get focused on the short-term. sitting here five
years from now, what would we be talking about them that we are not talking about now? what is the next thing we should be aware of? what's the next big factor that could shape the u.s. economy? and anyone who has the first answer can go for. >> to me, the medium-term story for the u.s. and they hold developed world's demographics. the very slow developing timebomb. we've got to get used to the idea we will be in an economy with your low growth in the labor force and therefore very base.owth in the tax with a building budget pressures, which everyone in this room knows about. so there is no avoiding the challenges of retirement and a slow tax face growth. to me that if something know you know for sure because we look at the statistics. >> and five years time, that will be the pressing concern. >> time 59.
i was born -- i am 59. i was born in 1956. i am the peak year of the bb boom -- the baby boom. the demographic pressure is going to get very high. >> five years from now? >> maybe not even five years from now. i never retiring. [laughter] and we are not going to talk about age. [laughter] china. the view there has been all of this handwringing about china being weak and collapsing and all of this, i think it's absolutely wrong. china's strong. it's dynamic. i don't quite agree the demographics is destiny. of the global population and we still have the biggest market in the world. but china is becoming
economically aggressive. we have seen already these big acquisitions that are now under regulatory review. that is just the expert -- the tip of the iceberg. globallyl be competitive, a major sectors of innovation. unless we get ourselves together and think about investment and advance,n and economic we are going to find ourselves completely on our heels was -- with respect to a china challenge. reality is that energy is one of the big building blocks of the u.s. and the world economy. five years from now, we'll still be talking about energy and we will talk about whether we can still find policies to make energy building blocks that are
still secure, affordable and sustainable. >> i will try to be extra quick. i think fiscal possibly -- fiscal policy. cbs new productions have the federal budget, 80% of it will 2025-2026.ilot in our projection for state local government budgets will be 40%. forecast -- weur have very high hopes for tax reform in mostly entitlement reform. that is something that has to happen because medicaid will be larger portion of their budget last year than the year before. so quite a broad range of answers. we've got five minutes or so. i would like to take the opportunity for any of you governors who have anything you want to ask your analysts -- our panelists. so if you have any questions,
switch your microphone on and introduce yourself quickly. >> colorado, not an economist. i don't think i have ever taken an economics class. is there some point where we can you said because we haven't had one, part of this fourth industrial revolution of smartphones and technology is allowing inventories to be razor thin. time has become a practical reality. with what little i have picked up over the years, it has always talked about the cycle of about building up inventory to a greater extent and then consumer purchasing goes down a little bit and all of a sudden you have businesses that have to cut back and lay people off.
doesn't the just-in-time revolution diminish the probabilities of a recession? create some real controversy within the panel here. i don't think there is 100% chance a recession in the next three years. i think you are right in pointing out that the u.s. business cycle absent a major financial shock like we had in 2008-2009 is more stable because -- iventory management think it is more stable. i think we are on a clock here. recessions happen when you have big imbalances in the economy. when the fed allows inflation to control andt out of you have to put on the brakes. when you have a big spike in oil prices. we have a big bubble in some part of the economy. in those three respects, i don't see the preconditions in place right now. but give us a few years, you
know, and then you really start to worry about it. the reason the rainy day fund thing is so important is that we all know how painful it is to build a rainy day fund so you start early. >> what we saw in the crisis was a very new phenomenon. , fornderlying economy those of you who know corporations, the underlying economy was doing really quite well going into 2006. housing had tailed off and housing alike. but when you get a financial event where markets do not trade, we had a whole strata of securities in the financial markets that did not trade. so it was essentially money destruction. it was financial destruction. . a virus the migrated
from the financial sector into thesesiness sector, inventories that were low and lame, you had to translate working capital into cash. this went on through the entire economy. if we made banks so strong regulation,ncial why was it, when we see the financial markets collapse, that suddenly this goes right back to the banks -- we see european banks on the ropes here because people are afraid they cannot make their dividend payments. and we have-- something we call a zone of risk in our analytics -- and it really relates to where we see instability to begin to build between the rate of growth and wealth and the rate of growth and the underlying economy. and we are in the zone now. but that is a transmission advice. that is not from the economy.
we have done away with the cyclical instability. but we have created potential financial instability because we don't understand the financial system. >> i think we have time for one more question. was struck by mr. white making commons about signs of recession first would be on the spending side of government, particularly medicaid. and then you would see revenue impact. i wanted to focus on the medicaid side. i assume that is because the consumer white lose a job -- heht lose a job, might involved in medicaid so we monitor the number more than the growth and their rate of growth in medicaid spending. i want to focus on whether that is the right indicator people participating, first the rate of growth. right now, the rate of growth is
very minimal, at least in arkansas. we have been very blessed in medicaid spending. other than having a great rainy day fund, there is not a good ourto control it under present system of minimal flexibility for the states. would you elaborate a little bit more on what governors should be looking for in terms of medicaid spending and how we should react to that as an early warning sign? >> absolutely. you are absolutely right. does depend more on the enrollment numbers than on the overall spending. if you include the federal funding, the spending per enrollee is growing much faster than revenues are coming in. so that number can also fluctuate based on how much federal hope you are getting versus how much the state's in. that can be very tricky to do right now because a number of states are in the form of expanding of their medicaid program. so some are coming onto medicaid
for non-economic reasons. we expect beyond 2017, as those programs run their course, it will be a better indicator of where a state economy is headed. another place to look is the unemployment insurance claims. one of the reasons we don't use testing modelss of because it is small compared to the overall medicaid. the other thing that states can be looking at in terms of medicaid, i know you will be going across the street tomorrow monday -- medicaid is unique in some of the state should actual issues, like pensions and rainy day funds, in that states are what to do a lot with on their own under the offices -- the auspices of the affordable care act. reasons it scares us
in terms of economists is that, if you look at -- if you look at the cms numbers from the department of health and human services, they project that state spending on medicaid over the next 10 years will average about 6%, 7%. if you look at a long-term, 30 year window, tax revenues are 1.5%. life is tough in a world of constrained resources. when you have a year when and tax spending is 7% revenue is 1.5%, that has to come from somewhere. autopilot we call the spending programs are expected to grow. >> that is all the time we have this morning. will you please join me in thanking our panelists? [applause]
>> we do thank you. i will take the prerogative as chair because i do have one question. that is the question about the entitlements. we will be talking about that in the next five years. the concern that governors have, we have different perspectives on this, but the national debt and what that will cause to happen, our ability to function and provide the services that we the people think should be appropriate from the government. could you take a couple of minutes -- i am interested in your opinion of the $19 trillion national debt and what is that going to impact us into the future? >> i can have a first shot at this. in terms of the short term take sure, it looks quite good at the moment. the federal fiscal deficit has fallen five years in a row, from 10% at the peak of the crisis, to 3% this year.
that is the fastest fall in the fiscal deficit since the world war. so that was an incredible retrenchment of what we saw in the post crisis response. the longer-term picture is quite different. as you mentioned, entitlements will kick in in the next year years. you touched on this when you talked about the demographics. >> i don't think in the next five years it's going to be an issue. the u.s. government has zero problem funding itself on the market. so the debt doesn't act as a real constraint in the ability of government to function. know, it is a slow moving train wreck. for the same reason we talked about -- there were too many things on automatic pilot here. the problem i think politically here is that there isn't -- there's no panelists solution to this. if you -- there's no painless
solution to this. you either have to create more out-of-pocket expenses for the patients so they have an insensitive -- an incentive to sell ration or you have quantity controls or limit the amount of service to people. but there's no answer, no magical cure here that doesn't involve forcing some painful decisions. again, in the next five years -- and i'm in wall street. --ave a three-day verizon no, a two-year horizon. the things no big deal in the short term. sidet's the health care much more than the social security site. >> what do rising interest rates mean for it? >> i think the congressional budget office estimates of the additional funding issues around higher rates make perfect sense.
there is a gradual pressure in the budget for higher interest rates. the problem is not that. . -- what if is why you are in an environment where people who see the deficit see note and inside to the increase and an easter having to pay premiums on your budget? it's like having a debt to downgrade. and now you are in a debt crisis cycle. the good news for the u.s.'s we have a lot of rope to hang ourselves with because we are the center of global capital markets. so markets will fund us if we are much more irresponsible than other countries. the bad news is that we have a lot of rope to hang yourselves with. [laughter] the shortnal comment, term is absolutely fine. we need to start worrying when ethan retires. [laughter] >> within the next five years, ethan is absolutely correct. there is nothing in will majorly affect the economy.
to fix longer we wait these problems, the more difficult they will be to fix and they are already difficult to fix. if they were easy, they would have been fixed years ago. >> the debt is sort of the final station on what is a downward spiral in terms of the train heading to that point. -- danof these decisions talks about medicaid. i see education cuts. the we talk about entitlements, i see the inability -- they have finally passed a highway bill, but we is to have all of our federal spending was in infrastructure and now almost no of our federal spending is an infrastructure. such of the extent that you degrade economic ability of the vitaly to support a governmental system because you have all of these problems that
just keep building up and taking tor the available resources me is much more serious than the down the road debt problems. because it's too late in the pre-shows. it is too late to solve that problem when you're at that point. >> thank you, you demonstrate the complexities of the economy. am sure we can spend another hour here and be fascinated with your opinions. we appreciate your courage in trying to give us an economic forecast in some of the areas we had to be concerned about. really ground zero it comes to development. it is something that is on the top of my for every governor and every state and territories, what can we do to a -- to improve economic conditions in provide quality jobs. i know it is a tough job predicting the economy. between palmething reading and astrology when it comes to the accuracy of forecast. [laughter] but we appreciate you being
here. let's give them a round of applause this morning. [applause] we are going to take two minutes. governor branstad is here with us. 20 recognize you in your absence, your record in iowa for 22 years. we know you will be the host of our summer meetings. if you will take a couple of minutes and tell us about that. >> thank you very much. we are excited to host the national governors meeting in des moines, iowa, july 14 through the 17th. we want this to be a real family friendly event. so we encourage you to bring your children and grandchildren. i've done that with my family for the last three governors conferences. they have all really enjoyed it. my family is involved in planning this and we want to
make it a really successful event. we are going to have the governor's counsel meet at camp dodge, which is home of the iowa national guard -- national guard. . we will have an event at the state capital, at the norman were a lot of food -- and at the iowa state fairgrounds. so this should be a lot of fun. you can get a little taste of iowa out here the hallway. we've got blue bunny ice cream and jolly time popcorn. we are famous for great food and very friendly people. also, it is a lot cheaper than going to the greenbrier. [laughter] so we had a great time at the greenbrier. but iowa is a very economical place to bring your whole family. so we encourage you all to come. thank you very much. [applause]
>> thank you. between competition west virginia and iowa. pretend like we are running for president when we go to iowa. we look forward to being there. it's time to recognize some companies. one of the great things about the national governors association is her center for best practices. come together and share what is working in our states and the best practices we learn from each other, from our successes, were things aren't going as well and we learn from that, too. the ability for us to share those best practices really is a focal point of the national governors association. our nj corporate fellows is a group of corporate entities that nonprofitnd that is a organization to make sure we can share those ideas and practices and give governors throughout the country an opportunity to
learn and incorporate as they will some of these best practices. so -- these corporate fellows have been a sustained commitment. they have been here for many, many years to help us with that money. we have 125 participating companies that provide very critical and crucial financial support to our nga center best practices. it is one of the best in america now.ioning right we appreciate the good work of our staff and those who participate as governors on their organization. so right now, i would like him if i could, recognize some of corporate sponsors have raised major milestones in support of this organization. please join me in thanking these companies. i will read their names and invite them to,. give them a little token of our appreciation. first, we would like to have brian result from general motors. they have been a sustaining manner for 25 consecutive years.
announcer: today, a lot of courage continues at 10:00 a.m. eastern. governors will discuss how to attract foreign and domestic investment. 1:30 p.m., the new education law known as the every student succeeds at talks about repairing the law and preparing students for high-paying careers. both here on c-span. >> i think we are on the cusp of
a progressive revolution. i consider both bernie sanders and her larry clinton progressives. be the next president come i believe. now is a great time to take stock. aw is the guy who we thought real progressive, how did he do and how can we learn from this? and as we move to the next administration? >> tonight, bill press talks about his book "buyer's remorse, how obama let progressive down." >> the blurb is totally harmless. the blurb does not endorse the book. it repeats a point that he makes in every campaign speech, which is twofold. one, we need a political revolution. that's his phrase. and that political revolution
means that the progressives have to really keep the pressure on the next president, whom we hope will be a democrat and a progressive, birdie or hillary, to really stick to the -- be not to the progressive and -- and follow through. announcer: tonight on q&a. c-spaner: tonight, the tour goes to greenville, north carolina. >> in 1939, september 1939, when you're went to war, our allies, primarily england and france, d.c., forshington, goods and materials they need it. so washington, d.c. look down to the text out o of the world and our present government contracts came finally into this area asking the mills to begin
producing for the war effort. and for the united states as well. announcer: on american history tv -- >> this really was a pretty nasty spot. it is hard to believe now looking at it, one of the best arcs in the country of this really was a very depressed nasty place. how a community can start tod and appreciate and cherish a river and its waterfall again. announcer: the c-span cities tour, working with cable affiliates in visiting cities it is the country. announcer: the funeral mass for antonin scalia was held at the