The Bipartisan Policy Center. Good morning. A little about the Bipartisan Policy Center and who is behind it . Byst it was founded in 2007 4 former leaders. We are one of the few think tanks that proactively works towards bipartisan policymaking. Were looking for good policies that have a chance of passing on capitol hill. There are a lot of organizations focusing on policy favorable to one side or the other. Nonpartisan think tanks that come up with policies that are not partisan in nature. We are trying to find policies they both can agree on. Host the Senate Majority leader minority leader were touting the fact they came up with this deal. What does it do for the budget . Guest there are three good things about this deal. First, it avoids a shutdown. A shutdown is something no one benefits from. It has real harm to real americans that rely on the federal government in their everyday lives. And it makes us look like a laughingstock to the rest of the world. The second thing it does is it puts the budget process on a sustainable path for the next year and a half. With the top level spending will be for defense and nondefense programs. Hopefully, that means we will not see more shutdowns in the near future. Hopefully, it also means we will not be operating on continued continued revolution. We are four months into the current fiscal year continued resolution. We are four months into the current fiscal year and are operating on a monthtomonth basis. That is not sufficient for everyone. Hopefully we can have a regular budget process for the next year and a half. Third, it provides resources for certain areas of the budget that has been starved. Defense and nondefense agencies. Many of those are the investment portions of the budget. Both categories are close to 50year lows as a percentage of the economy. One keeps our National Defense and americans safe. The other is planning for the future and investing in the next generation. We are at levels of spending that are too low and it can have real impacts down the road. The problem is what is not in agreement. Nothing addresses the longterm debt problem. The problem is that this makes it worse. It adds an additional 300 billion to 400 billion to the debt. If you extend these policies, as they probably will, we are talking 5 trillion in debt. It is roughly the same estimate as the tax cut added to the debt. Were doubling to the policy where we add to the debt in relatively good economic time. It increases in bad Economic Times. In good Economic Times you are supposed to be working it down. This is working backwards on where we should be headed on our fiscal policy. Ways toy not build in pay for the increases . Guest good question. They do have some they are quite small compared to the additional spending they allocated. The problem is that for each party they care about the debt more than other partys priorities but less than their own priorities. That means that when you get an agreement like this where both parties get spending that they out, the debt worries go the window because that is for the next generation to deal with. Both parties now get to tell their constituents that they provided additional spending for areas of the budget that they care for. Host topics for our guest, shai policyof the Bipartisan Center p review can ask questions on the line. 202 7488001, republicans. 202 7488000, democrats. One of the elements from yesterday, what you think about the debt ceiling. Talk about the debt ceiling, its importance, and why they focused on this in the package. Guest we have been working at ceiling sincedebt 2011. We forecasted what we call the x date. When the government can no longer pay its bills in full and on time. The debt limit limits the amount of borrowing. The we reach that level country is not able to borrow to pay our bills. We are in a time with the treasury secretary has been a fudgeasures that give factor. Additional time to extend the debt limit. Our projection is that if the debt limit is not addressed by march we could reach that x date. That is like staring into the economic abyss. We have never been to that point as a country where we have not been able to pay our bills. This would extend the debt limit. That means it will not be in effect through march of 2019 and they will not deal with it for another year or two. The reason they are dealing with it now is because that x date is getting so close. We are pastat december. What does it mean to the process they are thinking about making that go away, so to speak . Guest theyre allowing to account for the tax decisions we have already made. We are the only country in the world that effectively has a debt limit. That is because the debt limit does not restrict what we do on spending or the tax side. It only restricts the byproducts. It is ineffective in helping us control spending or controlled revenue to pay for anything. It really says you have already done that, now we are not going to let you borrow for it. That is not an effective tool because we have already spent it. If you have a credit card and you already spent the money coming cannot say you are not going to pay it. Host it sounds like a Political Tool more than anything else. Guest is seems like policymakers draw attention to the debt. It does eliminate the fact that we have a 28. 5 trillion debt. We would be better served to say that process and refocus on parts of the budget that are inefficient driving the debt, like major spending programs that we have and revenue we bring in. In recent days, those have been getting worse, even though we have the debt limit in place. Host our first call in Virginia Beach for our guest shai akabas of Bipartisan Policy Center on the democrat line. Caller thank you. Bipartisanship under Ronald Reagan. When Ronald Reagan started we had 209 billion in debt with no deficit. When he left we had 4 trillion in debt. When bush got into office he took tax cuts. Debt. Icans are running up the only time it makes a difference is when democratic president s are in office and they talk about debt. You remember dick cheney . Bipartisanship is the worst. If democrats vote for this, they us taking resistance from here they are going along with trump. Schumer is in new york looking for a deal for trump. Democrats are losing resistance, losing everything that we built up. They are going along with trump. Host we got you. Guest you make a good point in that there have been president s of both parties that have added to the debt. In fact, the only administration where we paid down the debt in the last several decades was the Clinton Administration when there was a Republican Congress and democratic president. We had several years where the debt went down. Most other demonstrations of their administrations, it has been a steady increase. Most parties have the spending or the tax side adding to this. Was ax plan republicandriven up rent that added to the debt by all objective analyses. The plan now is a bipartisan deal, so both parties are signing on to the debt increases. When our policy makers going to make the difficult choices for the next generation that will help us control the debt had and put us on a more sustainable fiscal path . Host ralph . Caller tying into that, i do not think we will find a responsible formula. The government is so corrupted that they are not capable of balancing the budget. The latest thing, deferred tax where all of the Hedge Fund Managers get taxed at 15 of their salary. On top of that we cut down the top tax bracket to 35 , yet we have a 15 tax on Capital Gains. Which is where some people make a living, including myself. If we go down the path we are going we will end up with major inflation. We already have inflation at 5 or 6 . 90 goes to the top 1 . Nobody, including democrats who harp on social justice, are willing to say we need to raise taxes on the wealthy. Thank you. Guest the decisions it will take to address debt are difficult for policymakers to swallow. They are generally unpopular. Whether entitlement programs like Social Security and medicare that are driving debt upwards, or taxes that people feel in their paychecks. That is the other side. Neither are easy decisions because they affect constituents now in a negative way for their finances. It will take americans collectively telling their policymakers that this is an important priority and that we need to address it now before it gets worse. Before we get to the point where policymakers feel like they have the space to address the major challenges on fiscal policy, they will keep looking to the area of the budget easiest to cut. The domestic agencies and defense department. This undid some of the damage done in recent years from the sequester policy that cut those areas, but they are the easiest to target because people feel than the least in their everyday life. Host what is the likelihood the tax law will open a discussion on cutting spending from the programs that you highlighted . Guest republicans talk about cutting spending, but democrats are saying you added significantly to the debt, and now youre saying we need to cut the programs that our party cares about . Ae issue is that when it is political battle about cutting or not cutting, it does not get at the underlying issue. These programs need reform. It will mean some people get less funding, but Social Security is a good example. We can change it in a way that could increase benefits to people who need them, deserve them, who worked long careers at low income and are living under the poverty line on Social Security. We need to make decisions for population the that is living longer and in some cases does not need the additional funds. Make sure they are allocated in a way and bring in more revenue to make them sustainable. We have a plan of the bipartisan. Olicy center in that involved plan there are several policy priorities that need to be changed. Ands lifting the bottom adjusting benefits through a slow increase in the retirement age for the general population. We have been increasing the retirement age passed in the 67. s right now to age we can put in place these policies that taken place 2030 years down the road, but we need to recognize that people are living longer. Host salt lake city. Hi. Caller hello. I wanted to ask, can the United States of america go bankrupt . Thank you. Guest the United States cannot go bankrupt in a traditional sense because we have the ability to borrow in our own currency. The only way that we would encounter a fiscal crisis, a bankruptcy of some sort, is if we owned bills to people and were not able to pay because we could not borrow the money necessary. We are a long way from anything like that, but the problem is that we are close to a situation where with the debt levels we have now, 80 of our overall size of the economy, if we encounter a financial crisis like the one in 2008 or an unexpected global event like a war or something else, we might not have the fiscal room to put money towards that. We passed a stimulus package. There were debates about how effective it was and how large it should have been, but it is clear that it helped prevent something that could have been worse than the great recession. Are we going to have the fiscal room to do that . If so, what will the debt look like after that occurs . Host borrow in our own currency, what do you mean . Guest some countries, like the european union, the country itself does not control the currency because it is part of a broader currency zone. When that happens, it is difficult to guarantee that the country will be able to pay its debts. We could manage the value of the dollar in terms of how much the Federal Reserve is making and what Interest Rates are here and we have some control of our own destiny and that financial sense. It puts us in a more secure position we would be otherwise if we did not have our own currency. We have a new Federal Reserve chairman. What does he bring to the table and matters concerning debt, how that should best be managed . Guest chairman powell is someone i worked closely with at the bipartisan panel. Brings a lot of experience to the table. He has been in the private sector in the Financial Markets and has a long experience serving in the federal government in the george w. Bush administration. He served at the treasury department. He understands these from a market perspective and a policymaking perspective. The thing about chairman powell is that he is a consensus builder by nature. He tries to take information perspectivesy of and incorporate them into his own thinking to bring people together around a clear policy path. He in the mind of the previous chairman that put money into the market and put quantitative easing . Is he one of those minds, or does he take restraint when it comes to adjusting the money and currency to solve problems . Guest hes levelheaded about these questions. He is not a monetary hawk or dove. He will not increase Interest Rates or keep them low without evidence. He is good at looking at the data that comes in, talking to people that are knowledgeable and have perspectives, and figuring out what is the best economic path forward for the country as a whole. Host Interest Rates, will it continue the increasing of Interest Rates this year . Guest i expect he will keep in a fairly similar path. I do not think he intends to make radical change in terms of how they will increase meeting by meeting i am not making forecasts. The indication is that he will generally continue the study policy they have had. Host darrell, virginia, independent line. Caller your guest has done an excellent job in describing the budget and revenue problem we face, and also the political conundrum in addressing it and doing something about it. In terms of how we can solve the problem, i think that we think too narrowly. Really, the way that we do taxation, taxing production, beat it Capital Gains or wages, there is a perverse incentive that harms the economy and fromh and prevents people taking on additional work. By doing that, it is always going to be unpopular and perverse incentives will get in the way of doing something about it. If we can open our minds and think about taxing net worth instead of income, it does not have those perverse incentives. Guest the caller is definitely right that some have more economic drag associated with them than others. Income tax is a good example. It does just incentivize Economic Activities we want to , forrage, like work example. There are others, like the estate tax, that do not carry those incentives. Wealth tax. Arm of from an economic perspective, putting more of a tax burden on those taxes and proportionally less on Something Like the income tax makes sense. There are a lot of other countries that have larger consumption taxes than we have. In the u. S. , we do not have any National Consumption tax. We only have it at the estate level. At the state what we can reduce income taxes as a whole is increasing taxes through consumption. The issue is that it is regressive because a taxes everyone at the same percentage. It hurts lower income households. The way you can accommodate that and make sure it retains the progressive nature as attack system we have today. I am an upper0, income individual, i am on Social Security. I want to praise the quality of this conversation. It is clear. It is helpful. It is educational. I want to suggest a new kind of based on a combination of washington journal interviews like this with your threeour indepth format you do for nonfiction and recently, experimenting with fictional. The clarity of the communication is spectacular. I heard representative Adam Kinzinger to an honest and clear interview on this topic. If you were to bring together, out of your archives, a series of interviews with people like and others. Even going back to the 1986 budget deal. The consistently good ideas versus the consistent political blockades. Adam kinzinger said that we can solve this problem, not on current retirees, but dealing with future numbers on the Social Security and medicare. When you hear someone of that youth and vigor, combined with this man and his youth and vigor, with incredible clarity to make the people understand. What he said in the question about the answer to the womans question, can the United States go bankrupt, that is a question ive always wanted to know. When he talked about no, because of the nature of our currency, that is the part where i need more education. Take all of the q a from the good questions and answers from this interview and make it into a threeour indepth on the budget would be helpful. Host thank you for the suggestion. Anything from the you want to add . Guest thank you for your kind words. The Social Security element. I wanted to mention that we recently launched a new campaign called funding our future. You can find it at fundingourfuture. Us. Social security is a huge component of that. Helping policymakers with what they need in addressing social what hasand attacking been the third rail of american politics. How people save for retirement through 401 k s and preserved that income when they retire and live in increasingly long lives. Host Steve Mnuchin was asked about the volatility in the market. He said monitoring that situation, not that concerned, how much concern did you see your self . Guest everyone is worried what will happen with their savings. When you look at the bigger picture, the market has been an incredible run for the last seven or eight years. Triple, times, double, and looking at a couple of days of that does not take the full picture into perspective. Even the last few days it has leveled out and we are net down from the top peak a couple of percents. Are taking a longterm view. That is something chairman powell will do. He will not act quickly were rashly to these situations. He thinks about the longterm trajectory and what will come next. Host we heard the white house take credit for the market when it is on the rise. How much falls under the power of the president . Guest very small amounts under the actual power of the president. He can create through policy environments. What the market sees and how companies perform, there are a lot of factors. From Interest Rates to the general Global Economic climate. There has been a political issue about what he takes that for versus what he does not take credit for. That is true for virtually every administration. Lots of administrations point to good numbers and not to bad numbers. It is the president , policymakers, the Federal Reserve, the economy, the business industry, all of those are factors. Democrats line, you are on with shai akabas. Caller i am on the republican line. Host sorry about that. Caller i want to thank the gentleman for speaking this morning. I think one of the biggest areas that need to be addressed is the governments responsibility is to fund the military to protect the american people. I understand the bipartisan bill that the democrats and republicans did in the senate. However, when a demand we spend as much on domestic as the military after negating spending for the last 10 years, letting the military deplete, this is why we are having an issue with having to spend so much on the military now. The other issue, one of the biggest areas that we can cut, you talked about clinton being the last administration that had a balanced budget. I do not think his administration was dealing with spending 115 billion a year on 19 al immigration and day on housing illegal criminals. That is a day. Your first point, the bill they are talking about today. Youre right that the military has been starved. That can harm readiness and the morale of the troops when they are not getting the resources that they need to protect our country. At the same time, the nondefense portion of ,iscretionary spending there are a lot of important programs investments in our future. Like infrastructure, research into health care and science, inspection for foods, or new drugs coming onto the market. Inefficiencye and in both portions. The military is one where people point to where there are areas that could be reduced if there is a careful look at how we are spending the money. That is true in the defense and nondefense portions. Looking at the levels at what those are at relative to history, they have been starved. When we talk about the broader budget challenges, focusing on that 1 3 of the budget, those of thebined are 1 3 budget. Those on autopilot are medicare, Social Security. Those are the pieces we need to tackle to get a hold of our budget. Not cutting the defense and nondefense discretionary portions. Ben in california. Caller the only longterm solution for the dead is to tax for the debt is to tax the rich. Additional taxes will almost inevitably have to be part of the solution to our fiscal challenges. Even with extremely aggressive to major spending programs and phasing them and quickly, our debt will rise to high levels if we do not bring in more revenue. It has been doubled by the fact we passed the tax cut. Not only will we need to undo the revenue loss, we will need to bring in more revenue on top of that. Sooner or later we will meet that reality and have to live up to these challenges. The government shutdown, will that cost us . Guest that means we effectively pay people for not working. Hundreds of thousands are furloughed and do not come into work. We saw that in the 2013 shutdown. The flash shutdown was one business day. When those workers do not come in for several weeks they are not getting the critical functions that government does like food inspection and drug inspection. That is not happening when the employees are not there. Is wethe shutdown ends, pay those Civil Servants because they deserve to have a reasonable expectation of being paid. That means we have been paying people to not work on the federal time. Federal dime. Not only through that, but through inefficiency, there are a lot of problems that come from a government shutdown. Host shai akabas heres where things stand. We have been waiting for the house to come back in for further consideration of the continuing resolution but the senate has to act first and senator paul has been blocking debate