Then we will come back and compare those answers to a macro economist who happens to be here answering questions. Larry, i will start with the subject that should be near and dear to your heart. , you in one way shape or form had to do with why the United States ended up in nafta, the create u. S. Trade agreements, and the partnership. We now have a president at the administration who believes all those things were mistakes in the u. S. Has been a loser as a result of free trade. Why are they wrong . What are the risks of them behaving like this . They are wrong because each of those were good deals. They were good deals in the following sense. If you look at how much trade barriers in the u. S. Were reduced, and you look at how much trade barriers in the other countries were reduced, in every case they were reduced two or three or four times as much in the other countries as they were reduced in the United States. The reality is, rightly or wrongly, by the mid 1980s, the United States had an essentially openmarket. The main thing these trade agreements have done is to open other markets to our businesses and to our exports. You dont have to get into abstractions or free trade. If you just look at it, we are tearing down there barriers lots more than we are reducing any of our barriers, mostly because we didnt have any barriers to start with. as we are now seeing what has happened as a consequence of american sdp p. As well as we are going to give Japanese Producers substantially Privileged Access relative to american producers in all variety of important and rapidly growing markets. So yeah, of course trade agreement should be made in our national interests. That is the right focus. There should not be endeavors of altruism. Of course not, but they have fundamentally been much greater changes by the other countries than ours and if we repealed them, what is going to happen as other countries trade very or is will go up much more than any other protection we will be in a position to impose and it will hurt our economy. After those agreements were signed, our trade deficit with china got bigger in korea got bigger and those deficit are evident of losing. In the nafta negotiation, theres been talk about requiring the mexicans and canadians are targets for the environmental trade deficit. At the bilateral trade deficits with the concept dont make any sense. I run a huge bilateral trade surplus. I run a huge bilateral trade deficit. It makes sense to think about whether im selling more to the rest of the economy than buying from the rest of the economy. It makes no sense to think about that entity by entity. I can see no logic with the bilateral trade deficit as a concept. And rapidly emerging and we signed trade agreements. We cant be surprised that those are countries that are exporting substantially more growth to the United States. That would be happening with or without the trade agreement. The clearest example is china. Shining into the wto, we did not reduce a single tariff and United States that have not been, we kept them at the same level for the previous 10 years. The reason there is a trade search was changes taking place in china, not changes in trade policies. What happens if the administration proceeds to exit these agreements. I mean, theyve already made it clear they dont get a deal they like the canadians are prepared to exit nafta. Presumably that is an option they are. What happens to our growth and the trade balance is which is the bogey if we exit those agreements. Trade deficits grow up a little bit in to export and growth is determined by many things and also it would otherwise be. But our Broad National interest is usually affect it. And they will elect to hugo chavez like figure. The best way to make them maximum likely would be for us to aggregate in a way that proved that all those who represent the United States are right. That would be catastrophic for our broad security interest. Im not a security person paradigm in economics person. I dont presume to understand everything going on in the korean peninsula, but i cant believe they would serve our strategic interest to have a major rift and seen as the unreliable partner with south korea, which would surely be the consequence of repealing that agreement. The biggest strategic gift the United States has given to china in the last 15 years was leading the whole asian region down the path of tpp and then withdrawing dumping man and leaving them disappointed. So in terms of our broad position in the world, and i would think the consequences of abandoning all of this would be hugely serious. I think that the enemy if i could go back, and 1930s, if you go do a bunch of careful economic calculations at the model, youthful five it wasnt that big of a deal and certainly cant explain the whole depression. But if you ask what it symbolically said about whether the World Economy was going to keep working, keep integrating coming keep being a place of opportunity, and that symbolic value, coming from the leading economy in the world, and i was pretty serious. If the United States were to wholesale, not just stop moving forward on trade, but abandoning treaties that have always agreed to, that would be the signal that he would be sending. Youll see a huge impact on gdp right away. Ive got very little doubt it could have a substantial impact on both our security and over the longterm our economy. Not against free trade to maximize the u. S. Selfinterest. The treasury secretary said this last night. When we lock herself in multilateral deals, which diminishes because it minimizes u. S. Leverage. We are not prepared to threaten they are going to close their mark. Threatening to pull out of the treaty. Not saying youre planning to to make a free trade agreement. But the traditional argument has been if you want want to open the korean market, much better for the united state and japan and japan make some concessions to get the koreans to open their market, then we have to make your concessions the usual view, to think about common sense is three economists, if i want to persuade the wall street journal to do something, am i better off trying to do a as part of a group of economists trying to get the wall street journal to do something or i better off doing it as myself . The usual idea has been when you have a larger group come you cannot more powerful agreements. If you are allowed to in your farming and industry, you would rather form with all terms in your industry then with other firms. The general notion has been for 50 years that one reaches more successful agreement if one is able to include more parties that the process becomes more complex with more parties and sometimes you cant do it and sometimes the right thing to do then is to have a narrower group where you can reach well deal to reach an agreement, but in principle it is much better to have multiple countries pushing for openness than it is to have just us. Another thing the treasury secretary said in the house and senate will pay for itself. Even if we get 40 to 50 basis points of economic growth, missile pay for itself. Is he right . Could he be right . Is there a scenario in which he could be right . Or turn off the growth . Yes, could. If you are about to flip it died and i predicted it was going to come up 12, and i could turn out to be right, but it would be a crazy prediction. I dont think theres any rational basis for the judgment of the tax cut will pay for itself. There is nothing in the x variants of tax cut, nor is there anything in the x. Of a large number of modeling exercises that suggest that this tax cut would pay for itself. Ive read what the secretary said here last night. He said the treasury had published a study that had publication that demonstrated we have sought to receive the publication and there is no publication. I am still familiar with the models and the analysis they do. And they are career professional analysis i am 99 certain will not support the judgment that the tax cut will raise revenue and even if you look at what republican economists are saying, theres really no support from any serious supporter for the view that tax cut will raise revenue. People can argue and tax reform is important in the 1986 principles they dont change the distributional tables endquotes tax shelter opportunities, dont open them or the right principles to guide tax reform and unfortunately this proposal is a large increase in the budget deficit is very skewed in its distributional linpack can particularly with the provisions opens up substantial shelter opportunities. I think its exactly in the opposite direction from the model that worked in 1986. But look, reasonable people can differ and theres argument on both sides got something that will be worked out. But i do have to say, greg, that i think there is a profound responsibility for people who are making foster claims that the economy to have a basis for those factual claims when they indicate that they are based on publications to be prepared to come forward with those publications and im afraid i havent seen that from the treasury department. You would like to treasury secretary to bring for those publications. It wasnt that there was going to be a publication. And misunderstanding something from something that could be laid out. Lets talk about what we can realistically expect. [inaudible] i think probably 2 . They are really pretty substantially optimistic. Let me tell you why what i want to do is compare your answer to what we have from the polls. They are saying to. 5 , see were only 11 . So you are in the minority obviously there. Let me point out by the way, in january the market was rallying the. You have to listen my answer first because john is going to take the mic away from me. He said in january this to be a sugar high, but here we had blasted a long time marks the 20 . Surely that is some evidence the anticipation of trump policy is lifting u. S. Growth and if not, why not . You yourself said the obama administration, maybe thats what we are seeing. Maybe. Here is what i look at a neurotic terrific column last week. The points you made word the u. S. Stock market lab most of the countries in the world and they didnt elect a new president and you could say well that is because the u. S. Economy is pulling along somehow. But if thats the stories he pointed out, you would expect the dollar to have risen, not to have had the dollar fall. The more convincing explanation for why markets have gone up is the one you gave when he said that trump should be thankful rather than taking credit for the growth, which is as it turned out over the last six to nine, to an extent that i didnt expect or an extent that stop market analysts didnt expect, the corporate profit have kept surprising in a kept surprising significantly on my side and that drives stock prices a. Im going to come back to the forecast. I will answer about the growth forecast. It might turn out to a whole range of possibilities and economists have a terrible record of longterm growth forecast. Here is the reason for being skeptical. Over the last seven years, we had a big tailwind that came from a fact closing the gap by reducing unemployment. And even with the massive tailwind, averaged about 2 . If you look at the adult labor force, it was significantly faster over the last seven years then it will be over the next seven years. And so, if you say we grew 2 , we are losing this huge cyclical tailwind, which most economists would estimate half a percent or 1 and we are having a slowing of the labor force growth, they be various factors will happen that will change us and cause us to get back to what we average. What you are really talking about a massive acceleration in order to get to 3 . Or to put it differently, you can look at growth historically, but surely the right way to look at growth historically is to look not at the growth of gdp, but to look at the growth of gdp per working age persons and if that stays the same as it was historically, we will be well below 3 . Its pretty unlikely. I do want about the fascinating conversation. Is there a fascinating one for larry otherwise look at the last five minutes up to grade. Greg . Above to hear it. What are the chances that measuring gdp is actually not the most intelligent measure of how the economy is really doing . You just pointed and adjusted gdp is one way to think of it. What are the chances gdp as a whole is a functionally deficient measure and possibly an age gone by as opposed to an age we are headed to . Gdp is not a perfect measure. There are tons of flaws with gdp. He is more crime, more locks on the doors, that doesnt make much sense to grade takes care of my kids and i take care of greg gives its more gdp. Lots of problems with gdp in quite a bit of work in the economics profession direct dig at finding better measures on a whole set of taking account of the environment and the account of changes in how. I dont think any of that work will strongly change the picture of changes. That is if you measured a you measured it recommended that we are growing at 4 , not 2 , but if you measured it right and it used to be growing at 5 , not 4 . I dont think a least a large number of people who looked at it would find much support for the view that the pattern we are growing more slowly kind of makes sense with adults in the labor force. I dont think you will support that conclusion from the gdp statistics. Other questions . Greg, back to you. Somewhere in my undergraduate days part of the cost of capital, lowering the tax rate and other things i had to lower the cost of capital. Somewhere, somehow that would bolster investment in gdp. Is there going to be some positive results or not . This morning gary cohn is here at only a few people raised their hands. Less than zero. Thomas visio, and having some positive increment that will slow from this change in the tax plan. Why are you so pessimistic we are going to get any positive result from that plan . You never heard me say that the Corporate Tax rate would have no impact. Im sure there will be some modest impact on investments. There will also be a set of adverse consequences for the economy to come from a large budget deficit associated impact on Interest Rates and the associated impact on the governments capacity to engage in public investments. The question is how those two things balance out. Im not at all sure that they balance out in a positive way. But i would argue strongly against the conclusion that they would balance out very modestly in a positive way. And then you have to look at the other kinds of consequences in terms of whos going to enjoy those games and to what extent those games are going to be fully shared. Look, i have been saying for years that tax reform is very important and a part of that has to be reform of Corporate Taxation. The question is what form does it take and how do you do it . I think if you put more emphasis on closing Corporate Tax shelters as a way of raising revenue to cover the race coming to have a much better policy package. I have a fundamental difference in this area as in many. Should the objective of u. S. Policy in the Corporate Tax area be to win the race to the bottom in order to attract business to cut the Corporate Tax rates ever more towards zero and eventually there is no taxation of mobile capital that can move and all taxes are paid for by workers or should the United States work to establish a global system for this cooperation and rules that make it impossible for the Cayman Islands to be a destination turn profits. An International Regime committed. All of you who are eager to win this race think about the mediumterm consequences because at some point, if there is a sense that the deck is being stacked there is a revolt somebody put it to me very well. They told the workers they might lose their job but it is okay because they would have much Cheaper Products than they could get a different job. Actually your firm is going to move out of the country and take their job with it, but really it okay because your firm is going to be more competitive as a consequence and that will mean more and they said okay. Now, theyre trying to tell them that its just kind of the way it is. Your firm can move. You can move and youve got to reduce taxes on your firm and raise taxes on you. Maybe, but i think at a certain point a degree of disillusionment is going to set in. That dirty happened and disallowing what happened behind the 2016 election. Dont think thats the limit on both the right and the left. We need to find some ways of having International Cooperation focused on issues with the vast majority of the people in other countries and not just the people who go to the office. The way would be for me the real economic national and that would be right. The time for one more . Earlier this year you are very critical for ceos align themselves because they were looking forward to lower tax and Regulation Committee said they should take principled stands. Basically disintegrated. What is the responsibility if any of the people mr. And other ceos speak about issues that are not direct pocket books for the shareholders . Do they have a responsibility to speak he on the issues . It something that one has to judge in their own context. My advice, which was good and i think turned out to be right and ultimately was taken not because it was my advice, was that if you remembered one of these advisory councils, you are giving an enormous amount of your companys prestige to this administration and was not remotely realistic to think that being part of the council that met once every two months as giving you any substantial influence on policy. So i couldnt see why people who were resisted to racist marches, for example, would want to lend their prestige and the companys prestige to the administration. I think that was the right advice. Responsible Business People would give advice on issues today are on their companies. I think when you emphasize as many Business Leaders do the importance you attach to your tic holders, your customers and employees, and then when their fundamental values are being produced, its important in proving ways so even if you dont want to speak out, to avoid bending your prestige to the people in the organizations that are producing those values. Thanks very much for providing a great conversation. Fascinating discussion. [applause] in the meantime commander in the thanksgiving break, lawmakers have been weighing in on republican tax reform effort including mr. Republican senator marco rubio. One of the most important things to confront and tax reform is what we do for the working people in this country. We have to take care of working people making 40, 50, 60,000 struggling with the cost of raising their families. Democratic senator Pamela Harris tweed at the gop plan targets california families, disaster but dems, homeowners, lowincome americans and Small Business owners. Heres the truth. Congress should do what is best for the people, not just those at the very top. Up next on cspan2, look at key malls in the senate ein interview of the republican tax reform bill. In this portion of the meeting, Senate Democrat finance Committee Members objected to news that republicans plan to include a health care individual men and a repeal of reform bill. Those objections came as the
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