Transcripts For CSPAN Discussion 20240703

Young was among the speakers. An hour and 45 minutes. Hi, i know everybody is excited about the budget scoring, but im asking to ask everyone to take their seats. Thank you all so much for coming, particularly on an intermittently rainy friday afternoon. We are so excited to be here for the launch of the budget lab. My name is marcy gimble, im with our chief economist and president , our hope is to bring attention to the way that budget scoring is an incredibly important part of the policy process, bring a new perspective with focus on innovation and transparency. Were incredibly excited for danny to get up here shortly and share some of the research that weve been working on. Before i do that, im going to briefly embarrass our team by pointing them out because without them this would not have been possible. We have rich, our director of policy analysis, ernie our director of economics, john rico, associate director of policy analysis, harris epsteiner, associate director of economics. Josh kendall, our research fellow. And until earlier this afternoon, a student and Research Assistant at yale law school, but she has been promoted to associate professor at yale. So were very excited for her. [applause] and then i also want to thank our undergraduate aids, jay, larry, thomas, and anna bell, who could not be with us today and also Sara Robinson who worked with us to get this thing started over the summer and fall and a shout out to sylvia none of this would have been possible. Your website looks so good, please tell them how nice it looks. And again, you know, were looking forward to the feedback which knowing this crew, there will be much of, but we just want to say for now, we are so proud of what weve built and what the team has put together and excited to get started. As i said, danny is going to run through our results, but before then, were incredibly excited and honored to have remarks from Shalanda Young the director of Office Management and budget, a member of joe bidens cabinet and made history when she was confirmed by a bipartisan vote in the u. S. Senate, the first black woman to lead the agency. Historic both as the first black woman to lead the agency and also with a bipartisan vote, which is becoming less and less common as time goes on. As director shes secured amazing levels of funding for key national priorities. She was a top negotiator of the fiscal responsibility act of 2023 that averted a catastrophe and lifted the debt ceiling. A native of southern louisiana and moved to serve as president ial management fellow at the National Institute of health. She then spent 14 years on capitol hill culminating as the staff director for the House Appropriations committee a masters from tulane, bachelors of arts from loyala new orleans, and with her young daughter in washington d. C. Please help me in welcoming Shalanda Young. [applause] all right. Well, one, because this is also a yale event, i have a teenager with me looking at colleges this weekend. My god son i cant believe is looking at colleges is visiting from new orleans with his mom, my best friend since high school, so, you know, they get to follow me to the wonkiest of things one can talk about and she goes, is this exciting . And i said for us, yes. And there are not many rooms in d. C. Budget score keeping, how excited you are and everyone else is also just as excited to talk about it, but i want to thank natasha and danny and marsha for having me and for doing this. This is a long time overdue, so, thank you all for taking on this important work. Ernie, did you take a break at all . Ernie left us and went straight over and i wont get too far down and calling people out. Talked about debt limit and negotiations. Michael linden, also, who was the, you know, someone who was staff for 14 years and whose boss often thanked them for their work. I just would be remiss to say, michael was the hand you always saw in the pictures when they captured me because i did nothing doing debt ceiling negotiations without michael linden. Good to see you here and a lot of friends and a lot of people ive known a long time and youre absolutely right, martha, everyone will let you know their opinions about what you present today. Im truly excited to be here because, of course, budgets scoring and the question of how to assess fiscal policy is central to what my agency does, kind of in the name, management and budget. Across the federal government. Our score keeping efforts are not only part of omb statutory role theyre central as we engage in each years budget process making recommendations to the president and ultimately laying out his agenda to congress and the public and not written yelling at agency like where is my score, how did you dare come up with this score. What is this . I cant use this, go look at it again. Thats budget score keeping, as one puts together a president s budget. At the same time because of how essential it is to the process, were mindful of the way that some of the score keeping and others, our cbo partners, for example, may not always provide a complete picture to policy makers as they wrestle with difficult decisions. After you will, thats ultimately one of the primary purposes of scoring, whether an intimate policy discussions or debates that may play out in the press or floor of congress, scoring is a tool that helps policy makers assess and consistent and standardized ways to tradeoffs associated with the change in law. It can help assess the pros and cons of different decisions. It can be used as an excuse not to do something or to do something. To help us understand where we might be going under our current trajectory and to weigh how different choices could affect our trajectory, so, its worth wrestling with places where current models may not always capture all of the elements that policy makers should care about, especially when translated to the public as a simple 10year fiscal cost. Weve seen this happen in the headlines, during the debate over complex, transformative policies and the fuller pros and cons of a given proposal. Providing better tools for the policy making processes requires first making sure that were asking the right questions. Lets take an example thats near and dear to my heart, investments in children. When were considering a new program like those in the president s budget, to invest in child care, early child care education, it may seem straight forward enough to estimate how much the government is going to spend on a program over the next decade. But when were thinking about the overall impact on the budget or perhaps more importantly, our economy, and our society, there are other questions we may want to know that score keeping may not always capture. We may care about longer term impacts beyond the 10year budget window. For example, Early Childhood education has many immediate benefits for Child Development and they also generate long run benefits including higher earnings in adulthood that materialize over decades and we may compare about the benefits that new ones can spur and thats not designed to capture. For example, expanding access to child care increases opportunities and Labor Force Participation of caregivers. I know a lot about that. Which can boost the economy and budget outcomes in turn. We may also care about distribution, recognizing that when we look at programs on either the tax or the spending side were mindful who benefits. We may especially care, for example, whether an investment in Early Childhood education is going to reach lower income families. Where the benefits both for family today and longterm outcomes may be particularly meaningful. And in each of those areas, research from economists and other experts can provide data and insights that can help inform how we approach these questions. And how we think about the impact new policy might have. These questions are not just relevant to questions around child care and early education. Theyre worth asking, for example, when were considering new investments in climate, and especially when it comes to the better cost of inaction and baseline scenario if we do nothing, and even outside of hot button policy debates, these questions can be important to ask in the bread and butter of managing the federal government. For example, when we look at the difficulties federal agencies have and in securing funding through the appropriations process for large, onetime Capital Investments such as the physical building or i. T. Modernization, those things matter because guess what . If the score is eaten up by those things, we cant do more in child care, we cant do more in head start so the rudimentary, daily, how do you manage those things, impacting how we do score keeping. These are challenging questions when it comes to the Technical Details as we consider how the answers should be incorporated and to the policy process and thats why its so important not only to ask the questions, but to develop additional tools to answer them. We work to do that in the federal government, but our work is greatly aided by outside experts, thats why im excited to be here today at the launch of the budget lab. From personal experience, i know danny, natasha, and martha and the team bring the kind of methodlogical rigor and trade in public finance, not just because of the personal experiences that theyve had and are anticipating around new investments and human capital. [laughter] theyre having babies. [laughter] im excited about the questions that theyre already bringing to the fore, and i look forward to engaging with the new ideas that develop as the budget lab gets up and going and thank you, again, for welcoming me here today and i look forward to reading this work, commenting on this work. I wont scream at you like i do oak and others, and im reading it. And delving into budget keeping, and how packed this room is, its important to know. Thank you so much. [applause] thank you so much, its an honor to have you here. Im danny, and part of the lab and uc berkeley and for the first couple years i got to learn from shalanda how to be analytically rigorous and actually useful, which is very, very hard and hopefully its lessons that were bringing here today and were just so excited to be able to share with you now. So, a huge thanks to our team and i get to be the one up here presenting these initial results, but it obviously leans on all of our work for weeks and years and months. Thank you. And were excite today share with you, our first two reports on the tax cuts and jobs act and the Child Tax Credit. What are we doing . What are we trying to do here . We are bringing an academic, nonpartisan perspective to try to do two things, to democratize and innovate on the budget scoring process. To try to quantify the tradeoffs that shalanda emphasized are there, theyre real, and theyre hard to understand. And so, the more information transparent, easy to use, easy to understand, that policy makers, voters, the press have, hopefully the Better Outcomes that we get. More in line with what voters want. We are trying to do this in sort of two ways and we chose our two policies to showcase the democratize half and the innovation half. Lets start with the democratization, what do we mean by that . All of us in this room have had some experience at some point where its, i wonder how much this tax proposal or spending proposal would raise, if made it less generous this way or applied to these taxpayers. Thats very hashed to do, hard to do in a Campaign Context or a policy, staffer context and without the long lag thats needed for the precise estimates from the Budget Office and joint committee on tax, or other entities. So what weve created for the tax cuts and jobs act is a do it yourself online portal where you can go right now and start turning the dials and we have tried to put our best frames forward here to come up with a different interaction that we run in the background so when you mix and match, you can get approximate scores and distributions that give you a sense who is going to win and who is going to lose and whats the impact on the deficit are both in the current year and beyond. So whats the same and whats different from what you are used to seeing . The same is that we have a 10year conventional score and we have a 10year dynamic score and producing the distribution analysis that would typically accompany these scores either right away or on a lag, but were also extending everything to 30 years, with a focus on intergenerational impacts when appropriate. Were going to showcase that with the Child Tax Credit and thats one of our key innovation areas. And along pt way, we are going to do more like the administrative which ill show you today. How long does it take to you file your taxes. When there are certain economic assumptions that we think that recent research has suggested. Maybe the Capital Gains fee should be lower than what is being used in the standard score keeping analysis. Document that, take a targeted approach and layout our reasoning that we hope everyone in this room will be able to read and say, yeah, that makes sense and thats where things should go. So, lets start with the tax cuts and jobs act. As a reminder, much of the tax cuts and jobs act expires on december 31st of next year, thats going to do two things, its going to restrain deficits, baked into the cbo baseline. If there werent these, those would be larger in the baseline and that comes at the cost of higher taxes, across the income distribution. Theres already a lot of discussion about whether this expiration time will be a moment for tax reforms in this country again. And so what we provide, are the do it yourself transparent, analysis of how you mix and match different options that could be on the table and were generally aiming to match cbo and gct. So what youre getting is fast, comprehensive do it yourself in real time, but there are going to be targeted areas like i was just mentioning when we definite evaluate deviate, well call it out and hopefully others agree with and other entities incorporate. So specifically you can think about what happens under expiration in two buckets. One that affects everybody, and one that affects only the highest earners. So, affecting everybody, tax rates are going to rise across the board. Were going to revert back to the lower standard deduction and higher exemption, the exemptions to compensate as we had before 2017 and the Child Tax Credit is going to fall in half. At the high end, the tax, our state and local Tax Deductions expired. The 20 tax subsidy to pass through business income, concentrated, called qbi will expire and then the state tax exception will fall by half so more of the wealthiest americans will have a state tax due as they die. And how are we going to anchor these analyses . Well look at three reform options, again, you can create your own, but just to talk through what should be on the table, weve looked at a full extension policy and takes current and forward. A partial extension policy does full extension, but concentrates taxes in only in the bottom 99 . How does that allow that, t top bracket 39. 6r and eliminates the qbis deduction. Those are unpaid for. We also analyzed the policy and the proposal by our own natasha and kim, formerly of treasury, that would extend at the bottom, except for the rate cuts so think of the standard deduction and the other tax components. Thats more than paid for through four trillion from progressive revenue raisers. So its one way to look at combining deficit reduction along with extension. All right. Everyone, put on your lab coats and enter the budget lab. So, we will start with the deficit picture and then go into distribution and then a couple longerrun analysis. So in black here is effectively the cbo baseline, so, little down dips in 2033 and 2028 come through mandatory changes to medicare that are already in the baseline. What you see here is that there are big stakes at play. So if there is full extension, primary deficits will be 1 of gdp higher every year going forward. In contrast, obviously, pairing with deficit reduction, you can reduce primary deficit, and what would it take to get to debt stabilization . Its something around the proposal that would reduce primary deficits down to about 1 of gdp. So theres an enormous stakes at play here. And just to note, if you are a close reader of the president s budget, as many of you are, the president s proposal would be something in the middle of partial extension and causing that would do partial extension, but would be fully paid for, so the deficit picture would look similar to the black line. Okay. So we see that there are big stakes at play, you know, 1 of gdp. Who is going to win and who is going to lose from these different proposals so were going to retain the color scheme, red, yellow and blue, partial extension and full extension and now show you changes in after tax income across the income distribution. And for now, ive deliberately left out the top 1 so we can just focus on working, middle and upper middle class families. So, what you see are two contrasting patterns of after tax income changes, depending on the type of reform proposals here. Full extension are partially identical, below the top 1 and thats why you really cant see the yellow line. In that scenario, rise across the board between 1 and 2 with largest increases at middle incomes and higher middle incomes. In contrast, under a string proposal, proposes full refundability of the Child Tax Credit with progressive raisers like a higher Corporate Income tax at the bottom the main beneficiary of the tax credit after tax incomes rise enormously, 8 increases in after tax incomes, that then tapers down with income gains through the middle income bracket and then in the top quintile, net losses. So, thats tax revenue raised from the top 20 . Now, what happens in the top 1 . This is where full refundability of partial im sorry, full extension and partial extension differ. When that top bracket rate rises, the state and local Tax Deduction limits deductions at the top. The top 1 and especially in the top. 1 end up paying more taxes on that so theyre partially clawing back that deficit reduction, im sorry, the extra deficits that full extension would imply. And instead, causing trends, raises revenue, a great deal from the top 1 . Now, lets focus for a second on this upper middle class dot here. The largest income gains under full extension and partial extension. Where is that coming from . Thats the upper middle class, call it incomes, 200,000, 300,000, 400,000 a year. Why are they getting the greatest benefit . So we can take these dots and specifically the blue dots and break out for you and again, this is the type of analysis were hopeful will be useful in mixing and matching policy reform proposals and where does that net increase of 2 come from. You can see the bulk of it comes from the little discussed expansion in the alternative minimum tax exemption. I wont go into all of the colorcoded brackets and this is the kind of thing you can do, wait a minute, i want more of this and less of that and you can see that transparency showing that here. Okay, so this distribution analysis, hopefully laid out transparently. One of the features of the tax cuts and jobs act was an attempt to simplify the tax code, to reduce the time burden that taxpayers face in complying with the tax code. Were able to quantify that and under current law, the average taxpayer will face a burden of 14 hours to comply with tax law. Because under current law, we lose the standard deduction, more taxpayers are going to itemize deductions and thats particularly burdensome, in all three of the reform proposals, the standard deduction is maintained. There are fewer taxpayers who are itemizing their deductions and thats showing up in a 10 reduction in the time burden as complying with the tax code and its the type of analysis, its part of the reason to do tax reform and comes up every time and here are the estimates that we can use alongside the policy decisions of the tax dollars in and dollars out. Okay, so, this is, you know, one innovation to bring that along into the automatic discussions of the policies as numbers come off the analysis. We also are intent on extending past the decade. So, in everything we do. We will provide 30year estimates not just 10year estimates and in this graph and the last graph were showing them out to three years. And this graph is showing you net interest outlays as a share of gdp from now until 2055. Notice the y axis. These numbers are very large, ranging from 3 to 8 of gdp and different net interest paths. Whats going on . Under baseline, primary deficit for adding to debt as a share of gdp, that mechanically increases net interest as a share of gdp, but also, theres feedback into Interest Rate. Were following convention outliers that others use and were using the feds Service Model for the alteration to that path. Under full extension and partial extension, which are not paid for, what happens . Well, you have higher deficits that mechanically add to higher net interest, but also feeds back through higher Interest Rates. The exact opposite causes, you actually get lower Interest Rates through the deficit reduction relative to the baseline and that shows up in gdp projections. So here is a mirror image graph that has different implications, albeit at small y axis impact in the short and long run. Whats happening here . Under full extension and partial extension this is a net tax cut and putting in Bank Accounts of american families, theyre spending it. Thats an impulse to aggregate demand. That increases gdp in the short run until the feds initial interest rule brings the economy back into balance and the opposite is happening for the deficit reducing causing proposal. Thats in the short run. In the long run, what happened . In the long run, higher Interest Rates under full and partial extension reduced gdp modestly relative to baseline. And cumulatively over 30 years. And despite the higher Corporate Tax rate that the Interest Rate effect from other effects from higher taxes. So, hopefully these end up being useful as you and others are crafting different policy responses over the next year and a half. So we move on to part two. The Child Tax Credit. A big part of what shalanda was describing in our motivation as young parents or parents to be, is thinking about the next generation and there is bipartisan interest in various policies that support families. A key feature of investments in children, as shalanda emphasized, is that they take decades to pay off. Theres never been, probably to a rounding error, investment in a 5yearold that had revenue feedback in the budget window. Theyre not earning wages, at least legally, by age 15. But by 25, 35, are their wages going to be higher thanks to Government Policies today . We want to help bring to Bear Research thats very much ongoing, but has really made advances in the last 10 to 15 years, to help put numbers in a methodology, how it impacts earnings and tax revenue in the next generation and that, we think, can hopefully help policy interests in the key quantitative tradeoffs. Not every policy is going to do everything. The Child Tax Credit policy reduces poverty today and it may increase wages in the next generations less than universal prek. Thats analysis we want to put numbers on to guide conversations as policy makers decide how best to support families. So we wanted to start with sim mr. I a cash policy, the Child Tax Credit, theres been a lot of movement in the Child Tax Credit space and thats also helpful in making it tangible and relevant to date. As a reminder, current policy is that theres a maximum Child Tax Credit of 2,000 per child. This is not fully refundable. If you dont have much Tax Liability you do not get the benefit from that 2,000. At least not in full. And after expiration its going to fall to 1,000. And we study four policy scenarios, again, to anchor discussions around this. First, we take the current policy and just extend it forward. Second, we take the family security act 2. 0, from senators romney, and daines and burr eexpansion in the family tax credit and more taxpayers get the benefit in full from that maximum, coupled with pay forward from the top and from the middle class. So the top gets hit with state and local Tax Deduction limitations and the middle and working class, see reductions in other child benefits including earned income credit. So its more than fully paid for and a swap of benefits at the bottom middle class. And we have two not fully paid for policies, but to the 2021 law, the tax credit, zero earners get the full amount and if they have children, and the wendy and melissa proposal which mirrors in many respects the 2021 law, but has limited refundability. If youre earning, approximately half of the amount instead of the full amount. Okay, dust off the lab coats. Here we are. Were going to start with the deficit picture and again, the stakes at play here are apparent. Remember, full extension of pcga costs about 1 of gdp per year. Cct is a quarter of that. Big dollars here, and see that in the light blue line relative to the black line and then weve split out the proposal into just the cct components in red for apple to apple comparisons, on the dotted line, the pay forward. Now, you see the paid fors make a huge difference. Who wins and who is in the policy . Here we have the same graphic that we had before, percent changes in after tax income across the income distribution. The Child Tax Credit when coupled with either full refundability and partial, you know, a lot more refundable than we have now or with the romney and burke proposal, a large percentage impact at the bottom quintile. I showed you 8 in after tax income, half of that is coming from the Child Tax Credit alone and then interestingly, in the fully paid for version, theres a who is benefitting. I want you to look at bottom three quinn tiles here. The bottom quintile benefits by about 1 of the income. The middle quintile, the middle earners the same amount, but the second quintile does not, only a tiny boost, why . Thats the earned income tax credit and other components of the paid for. So its more generous to the lowest earners, relatively more generous to them than it is to the second quintile earners although they still benefit a little bit on that. Now, how do we take this forward to the next generation . Youre going to see my smile light up because this is a fun and active area of Academic Research and investments that really can be central. For families for policies, we really really do lead later life impacts. How do we get those . For Child Tax Credit the key number is the causal impact of parental cash today on child earnings in the generation. We have tried to summarize and come to a number by asking the version of that question as follows we know that low income kids and high income kids grow up to earn different amounts as adults. Thats what we see in the data, in real life right now and we actually have precise estimates of that right now, and with the research in the last 15 years. That pattern, that relationship with the parentchild income, how much of that is causal . How much of that is the causal impact of literally having left at home . Is it 100 , 0 or something in the middle . With the help of a recent page by the economist marion page, we have constructed this graph and added to it and takes studies and the years of the studies these are not old studies and building area of research that takes cash and cashlike programs like food stamps and either directly measures impacts on earnings or impacts on test scores that then are transformed into earnings, based on the test scores of earnings and relationships in other work . These estimates of the causal share of that parentchild earnings relationship are why they widely vary and they kind of should. The first dollar of food stamps have a larger impact on the last dollar and there are temporal changes and policy changes along the way. And the estimate in this literature is about 30 . And the median is 10 . In our judgment. We think 20 is a good starting point for the causal share at 20 of the difference in later life outcomes of low income kids and its literally the causal impact of the cash at home. So what do we do with that number . We take the full matrix of every parent range, related to every child range and we, for every hypothetical person assign them to a parent with an income level that matches in the real world. We then apply the ccp reform proposal to the parents income. Multiply that income by 20 and ask ourselves, do people who earn a bit more, 20 in the world, how much are those kids earnings later and we assign those kids hypothetically richer kids earnings. Now, that is the first place that you want to start and i want to say that this is really our first place to start. We do not incorporate general equilibrium impacts such as the proposal paid for, thats going to result in higher Interest Rates and can reduce wages on net and thats not part of the analysis here. So, what could we find . This is our last graph and we want to leave you with three points from this initial analysis of intergenerational impacts of Child Tax Credit reform proposals. The first is that giving cash, raises, kids earnings in the next generation, by modest, but potentially important amounts. So, take 50,000 earner. The proposals most weighted to the quintile and think about 500 a year extra, on average the earnings impacts of 1 2 a percent. 250 a year, and thats a fully paid for proposal or the current extension. 2 , thats 100 a year extra. So, not life transformative, but not nothing. The second is that the pattern of benefits really do depend on the type of proposal youre doing. If its just refundability, its heavily waited to the bottom of the quintile. If you pay for it partially through low and middle income policies, thats going to need those results and the third and one that surprised me, had to look at it closely, even top quintile kids benefit and even in the fully paid for proposal. So whats going on there . I thought we were they were paying that tax and they were taking net cash away. Part of whats going on there, aside from reranking across the parents with kids, versus parents without kids, theres redistribution happening. If you are a high earner, who doesnt have kids, you dont benefit from the Child Tax Credit. You only get hit with the tax increases. If you have kids, you benefit from that Child Tax Credit and so on net, your family can actually increase in resources and on average in the quintile, moderate in resources and we see that appearing here in some benefits for even top quintile kids. So, with that, i hope that these two test driven reports, one on the tax cuts and jobs act, expiring next year and on tax proposals showcase what were trying to do here as bringing Academic Work to nonpartisan way to democratize and innovate on the budget scoring process with transparent tools that you can use to help drive to work policy outcomes that match voters and voters welfare. Thank you very much and with that let me invite martha back up. So, im very excited to introduce our panel, which is being moderated by greg of the wall street journal. Were very, very grateful to him. Josh fulton ceo of the business round table, but also the former director of the Office Management and budget and white house chief of staff of president george w. Bush and we have douglas holtzeakin, the action forum and former director of the congressional Budget Office and Economic Policy advisor to senator john mccain. Last but not least, making a break for it, is natasha, cofounder and president of the budget lab at yale. So, thanks so much to the panelists for taking the time and were excite today hear from all of you. [applause] thanks very much, everybody, for coming here and thank you, natasha and everybody for the budget lab for the event and coming up with this idea. One of the questions i was going to end with, but im going to start with, and ill answer in the affirmative yes, we do. Ive been covering fiscal policy for about 30 years and ill grant im probably more interested in this than the median voter, but nonetheless, even i sometimes run up against a derth of real rreally good analysis to make conclusions so in my view you cant have too much of this sort of stuff what youre doing are filling a valuable role. Thank you, let me start with that. Today were going to try to expand beyond some of of the technical issues that we just heard about from danny and talk about some of the issues right now pressing on us as a country and ways to address them. And perhaps some of the most issues, budget process, natasha, that youve written about. I am going to start more broadly with a question that i think a lot of people have been asking for the last year, especially since the Interest Rates started going up. But i think brought back to mind the question, well, to go back to my career, physical policy has been unsustainable since i started 20 years and and continues to be unsustainable and continued to be sustained. Last year, it felt like a bit after wakeup call, we had a variety of events from treasury auctions to down grades and a big upward move and felt like were finally meeting the moment when the world is recognizing that our fiscal situation is unsustainable. Let me put the question as broadly as possible starting with the panel, starting with you, gosh. How much closer is a fiscal crisis or punch point with everything going on right now and should we be worried . In order and in answer to your questions, i have no idea and, yes. [laughter] ill expand on that a little bit. Just to say, first of all, natasha, thank you to you and your colleagues at yale. Im in complete agreement with greg on the immediate value and i think the potential great value of what youre doing, so, im pleased to have a chance to be here to support the initiative. And greg, my experience is the same as yours. My career goes even farther back, and fiscal policy has always been not always been, but has been unsustainable for at least the last 20, maybe 25 years. And well, i would say with a brief exception with the three years i served as the budget director. [laughter] when everything looked entirely sustainable. But the challenge we face is that not even the best in the best economists in america or the world, every one of them can tell us with confidence that our budget trajectory is unsustainable and you only have to look at some of the charts presented earlier today to recognize that. None of them can say when the moment of unsustainability will hit. And persuading politicians to deal with a crisis that may be inevitable, but may well not be inevitable during the 10 years in which they operate is very difficult to do. On the one hand, and persuading ordinary americans of this is even more difficult to do, so all of us who care about the budget face a great challenge, both of educating the public and getting our political leaders to care enough about this issue to jeopardize their own careers. Doug. Well, let me first say thank you for the chance to be here and congratulations on the launch and, you know, endorse the idea of analysis of the budget and all of this is on a 4 00 on fridays. [laughter] for everyone else. I think the distressing part about this sort of 21st century phenomenon is that it has been we dont have the political economy to stop the upward rise, the inevitable rise of debt to gdp whatever your the potential for disaster is and thats been the source of the downgrade. No one said the United States economy is broken, cannot possibly find the funds for the national priorities. Its been our ability to manage our finances, witness the debt ceiling showdowns and government shutdowns and things like that. To me, the education process that josh mentioned is the central issue. There has to be the case has to be brought to the American People in a really direct way that the federal budget is a danger, it is a danger now. Theres an enormous benefit to you and to your successive generations taking care of it and that can then produce more consensus and bipartisan consensus over the path forward and thats the number one priority right now. Natasha. First, i want to be sure to thank josh and doug for being here, but also, for providing a ton of guidance to us and over the course of the last many months and to thank the people in this room who have been on the phone with us as weve been working through this analysis. Sometimes growing, sometimes disagreeing. To the broader question what the dynamics are and the nature of fiscal crisis and when to expect them, i think theyre sort a whole set of challenges here. One is that, you know, look at cbos projections, gdp 116 at current law, but if you do some version of deficit finance tax extension theyre going to rise to Something Like over 130 over the course of the next decade. But and that sounds like those numbers are huge and scary and unsustainable. The challenge, i think, is that youve all weve been in this posture where, and it goes to what josh is saying, i cant tell you when its going to happen. We cant have a debt to gdp ratio above 80, cant have one above 90, cant have one above 100. Its like the boy who called wolf, a threshold well hit that makes our fiscal posture unsustainable. Im not down playing the risks and costs of having a sort of few towards the deficit thats not front of mine for policy makers, there certainly are and youre starting to live through them now. Interest costs are higher for households and are going to continue to be higher, and the fiscal space and the thing i worry mostly about is the fiscal space to make the kind of investments on the spending side that i would really like to see in kids and in the climate. You kind of i understand that we dont necessarily know where or when, but the fact that you start being worried about our debt dynamic just crowds out the capacity to do a lot of what i think needs to be done. And so, the conversation that im super keen for us all to have and what i hope the budget lab facilitates us having, not just quantify what the longer term risks are, who bears them, who in future generation is actually hurt by some of the choices that we make today and why does that matter . And i think being able to show policy makers that, has some value because youre being able to say sort of concretely, like, these are the choices that you face and with our analytical tool sort of make the choice that you prefer. Those are great points and i hope we can get back to some of this on the budget part. Sticking with the fiscal outlook, youre right. We blew through 60, blew through 70, blew through 80 of debt to gdp and nobody worried. And the Interest Rates went down and in his president ial address to the American Economic association a few years ago, it sort of laid out for us, r minus g model. As long as the Interest Rates below the growth rate, the debt towards stability when the Interest Rates were Percentage Points below growth rates. Were not in that situation anymore any longer. The 90 debt to gdp ratio today is different than five or six years ago, in addition to which were running a primary deficit larger than years ago. Does that in your view change is that a game changer . Should that change the way we think about this and the cone of risks out there . So, it certainly should, right, and it certainly should. The with an i that we think about rng dynamics, has to be like the governing principle over which we decide whether debt is sustainable or unsustainable and the thing i think is important for i dont know if everyone agrees with this, this is sort of what i think. If you told me that the debt to gdp ratios were going to be high forever, lets say 150 forever, i actually think that that world might be a fine world. The challenge is whether or not we know sort of from a trajectory perspective we know the direction spending is going, we know the direction our demographics are going. We dont know if well find the political will to raise revenues to meet the needs. Its not a level point. Its more of a trend point and that has to be the way that we think about the future and the way that we think about the dynamics. I want to be sort of very specific. The number one thing that keeps me up at night, maybe different for jeff and doug. The thing that keeps me up, whether or not were in a position its referenced a few times a day. A deeply personal thing that, like, are we martha danny and i, by the end of july are going to have four children under two. Are we going to be in a position i know, and its definitely not going to be the thing keeping us up at night. [laughter]. Is doug, what do you think . Does he keep you up at night in a longer . When you were director was supposed to keep you up. Is he keeping you up more at night now . Theres always this, like when you testify, what the Tipping Point . Is a 120, 130 . My answer is i dont know i did to want to run the experiment. Why dont we simply not find out . And do what the folks are suggesting. Imagine the fiscal policy that actually has a purpose and recognizes future costs and benefits and lets forget where to go. You can take the crisis on the table. Get a little south and Capital Markets will that something will go up and now we are discussing which fiscal trajectory makes sense. So thats the discussion of like to have. Theres do without the ever made the case that the u. S. Has become so were literally picking who gets to live welcome us versus the next generation. I i think were picking poorly. Do want to add anything to that . First of all i agree with all of what doug just said. From the standpoint of keeping me up at night, i take myself back 20 years to win Mitch Daniels was handing over the reins of the office of management and budget to me, and we had a conversation about how worried we both were that large deficits that were building up in the early years of the bush administration, a mild recession and then spending on wars in iraq and afghanistan might have the risk of pushing our debt to gdp ratio above 40 gdp. And we were horrified that we would get a steep Market Reaction at 40 . We actually didnt exceed 40 during the course of the bush years, but with the 2008 the natural crisis we jumped 40 to 60. And then somehow we jumped from 60 to 80 over the course of obama and early trump. Then we jumped from 80 to 100 almost inconceivable with the pandemic. And yet no reaction from the financial markets. No punishment in the bond markets. If you ask the members of the organization that announcers, the business roundtable, which is about 225 ceos of big american companies, they will tell you they are worried. We ask of them and they said over twothirds of them said that there is a concerned or very concerned about the fiscal trajectory of the united , over the course of the next few years. And they are concern for two reasons. The most important and biggest one is that we are not going to know when the crisis is upon us until it actually hits. In other words, if and when, im totally with doug, lets not run the experiment. Lets not plan to have the crisis. But if and when the crisis hits, it will be quite visible and it will be far too late to do anything about it. Interest rates will skyrocket. The dollar may plummet. We will put at risk hour, the status of the dollar as the World Reserve currency, which is probably a central element of why we havent experienced the crisis already. And what the ceos see is basically collapse of the American Economy to which is essential to the prosperity of their enterprises. The other thing to worry about is that, is that the reaction to the possibility of this crisis, which is about a consensus may develop in our political system and a way to deal with it is to tax corporations. And most of them, by the way, they are rich people and they pay a lot of tax already. I have never heard a single one of them complain about it. I mean, theyre all at least in the 50 tax bracket. That doesnt bother them. They are probably so wealthy that it doesnt really matter. Every one of them is concerned that, about possibly of making get uncompetitive to do business in the United States. And every single one of them wants to grow here in the United States. They make a lot of, most of the make a lot of money overseas as well, but when they grow they like to see the growth and the employment is right here at home. And you dont want to be put into the position that will get into prior to the 2017 of having to make tough choices about moving people and assets and resources overseas because its uncompetitive to do business here. Maybe i will just say two things on what josh said. Im curious, i hope we get to dig into some of this, particularly tax reform in this conversation. We are heading in the direction. I mean, jost will remember this of course, like with respect to the corporate rate theres like two things i think we all should grapple with. One is that pc j came in at a corporate cut from 34 to 21 . What business roundtables have expired for and what its members a spy for the done is a corporative 25 . Select actually like even sort of industry and as they thought about an grapple with like what is the scope and what is competitive . Like have a number in mind. That is lower then, that isnumber we landed on. And that comes a real revenue calls. Thats like a choice with to make and have to grapple with. The of the peace that he think is important and it is related to our research on tc j8 is if a look at the sort of estimates and the research thats been done consecrate paper from harvard and treasury with e kind of try to sort of scope out the extent to which youve seen the increases in investment and the increases in Capital Formation that you would expect for a textbook, that you expect when you see substantial corporate rate cuts, when you see expensing provisions that were essential tends to tcja and when you see textbook stuff thats two partners also do as they do. You see like an increase in investment, d. C. Was expecting but whats true is that they are so outweighed by the static revenue loss of a 14 corporate rate cut that in aggregate you are actually not seeing some of the effects that josh is talking about as he pushes for and he is totally rightfully is focus on making this country, making corporations in this country sort of a competitive and driving force of economic growth. And i say all these things because i am sort of animated by the idea that there is a lot of scope to design tax packages that are progrowth, that are creating a level Playing Field not just here in the United States but with respect to pillar two and the oecd and International Tax reform that puts multinationals on a level Playing Field so you cant just decide which jurisdiction operate in an kind of pick paying 0 as your preferred tax rate. But also one that recognizes as were grappling with some of these fiscal concerns and are concerned about debt and deficits, like thinking seriously about the ways that Corporate Tax reform can help us address some of those concerns, like has to be part of the conversation. I think josh like broadly he probably does agree with the particulars if we sat down together with probably would not design a package that was like identical or that was sort of our dream in either one of our versions but i think talking through some of those tradeoffs seriously seems like you to important. Its hugely important for one of the recent josh said which is like early this week jamie dimon sort of wrote in his letter to shareholders that like jpmorgan is preparing for mediumterm Interest Rates that could be somewhere from 2 to 8 . So deep fiscal costs that government is bearing and the feedback loop to higher Interest Rates faced notches by companies but american households, to buy house, by car, is a real terms and totally rightfully so. I think we should be having a holistic conversation about the ways in which to address them the things that both sides of the ledger very seriously. Im not sure that the standard deviation of a any large at them with out to be using. That is fair. Those are scarce. All that said, were facing a deadline and the sense that in a 25 a new president and congress will have to decide what to do with the tcja. By exton giving us exist all the personal taxes would be expensive and put i collect the debt and deficit and we talk about it how should we fix that . Josh i know you want to have a rate cut. How we different pick the revenue losses associate with extending that law . Well, first of all just to come back for a second on what natasha mentioned. You would hope that a reduction from 34, five to 21 would be just 35 35 out of the e of expectations and huge game changer. It has been a game changer but what people who complain about that reduction dont use mentioned is tcja offsets threequarter of cut of other tax increases, including essentially an international minimum tax, which is turned out to be very successful. Now, you would think having brought it down from 34 to 21 we would be one of the most competitive Tax Jurisdictions in the oecd, we are not. Were in the bottom half. We are currently have the 15th highest taxes out of the 30 members of the oecd. And you raise that 21 just one or two ticks and you put a squarely in the bottom quartile. You raise it to what President Biden has requested and you will put the u. S. Once again dead last in the oecd. So i think we ought to approach the question with some what can and should be accomplished on the side of taxing business. Overall though, i mean we do have a challenge that needs to be met. The thing we havent talked about yet is, is what really is the challenge in our budget situation. I dont want to get the shower to stay on talk about taxes. Because one of my question is what do we do about the trip overall and all the expiring tax provision . Personally, i think they should be extended. And they should, i mean theres lots of stuff that can be done at the margins, but the last thing i would look to to impose a tax increase above what we have now is not the individual stuff i mean, its the corporate stuff because that is the seed corn of our country. And i think we have to accept that the tcja would put a real fiscal challenge on us. But where i i was trying to go was, what that fiscal challenge should force us to do is start addressing the real drivers of our deficit and debt that are not, that we are and under tax society. We are not. Doug . First of all, the shameless self promotion is kevin brady and i have oped in the wall street journal and what i think we should do with tcja. I think the wrong way to frame this, do you want to keep it or extended permanently, we want to look at 2025 as a chance to have tax reform to go forward. 2017 did a lot of good things. The first some 30 years weve taken a very serious action for. Should wait another 30 years. This is a great opportunity. Something has to happen so lets do something that is very progrowth which maintains the revenue for another relative decline trading path last time, and you know, lets not pretend somehow we got all right in 2017. Importantly, more than one half of business income is passed on individual returns, passthrough entities, the benchmark should be that effective tactic capital in the corporate sector and the passthrough is the same, its not. So there is a lot of tax reform work left to be done, nevadabased bronte, that generates there is an proof. Thats what we should do. I just want to like i wholly agree with doug and abroad from think about 125 is not a tcja and what gets extended more generally as a tax reform moment. Strikes me as like hugely valuable. Unlike in particular things that i would be like particularly excited to see in such a package includes on the corporate site it includes trying to think about the rest of the world is kind of moving on pillar two protect the rest of the world is like in a place where 50 minimum tax is like the rate that they are sort of applying and going to apply such that if youre a u. S. Who operates in france, the u. S. The site and decides not to implement against the oecd, the u. S. Is going to be an estate where we are sacrificing tax to other jurisdictions. Which is collecting it from the execs and multinationals. It strikes me that should be placed with her should be capacity for us to make progress. It also strikes me the should be some capacity for us to make progress. So most differences between how we treat passthroughs and see corpse, not only great differences in tax treatment. There also is usually distortionary. Because they put a lot of energy in trying to figure out and a lot of tax energy and try to figure out how should i classify myself such that a get to the safest lowest rates . That can surely find better uses in the u. S. Economy than that. The one thing i want to be sure to say about what im hoping to seem twinkly five and i delete the hoping to see one before then is a think on individual side, i dont want to like of under credit what one he 17 did with respect the Child Tax Credit. They meaningfully helping more children in need. But to let the job very substantially im done. The cause in ways to make a rescue plan actually tried to push against usefully in that full refund of those such the most Vulnerable Children in this country in 19 million kids core and poverty because they do not have access to these resources, strikes me as like i cant really see a policy argument against it other than you think we cant afford it. But trust me we can. And some of these tax reform measures can be funding exact of those types of investments. The faceting part of this conversation is theres a bigger debate on which parts of corporate reform should be kept in which should be changed. The scenes the and a pleasant agreement among the three of you despite your different political leanings that individual rates should be left where they are. I find this fascinating what . I dont think that. Lab expert individual rates for the 90 or below i didnt say that either. Okay. [laughing] did you say we should extend the credit . No. I said the worst way to think about this is speedy josh was kind of like no. [talking over each other] i didnt think i get to say that i didnt say that. [laughing] i would say we shouldnt touch the corporate rate. Let it stay 21 and we need to raise rates on the individual side because people need to pay for the government. Okay good thank you. Thank you for correcting me on that one. Too many double negatives in there. But the question to you, the tosha. The funny thing i think about tcja and corporate individual ricketts is a fact individual ricketts, people and asked in front of election whether it was in 2000 or 2016, almost no one set up on a lower tax rate. Republican president s are elected and give it to the democrats safe i do want to take that away from you. We end up with this consensus that i find fascinating, that the Republican Party says taxes must not go up 100 . The view of the democrat is the tax rate may not go for up tax. Idle see how retaining never raising tax on people make as much s400 thousand dollars is consistent with her progressive goals. Explain how to get into. And shouldnt we be maintaining that assumption . Michael has a great book about the rights of the antitax movement in the United States that i highly recommend that everyone read. And i will answer the question by want to reject sort of the false equivalence of the two comparisons here. Because like on one side of the aisle you have 44 sitting senators and more than 250 congressmen who had signed a pledge to never raise taxes on anyone. And that if you look at President Bidens green book you have 5 trillion of revenue raising over decade. On the top to spit i take the point but those are fundamentally different conceptions of the world. I think there is i see a person believes any more progressive i think there is logic in trying to say if you are starting to thinks is about where revenant can come from, starting from those at the top of the distribution who, even josh is telling us like are not complaining that the taxes are too high, is like a totally reasonable way to think about tax policy. I also want to say that i am like an academic in the budget lab is an academic exercise and i am like far from, im looking around the room and even on this panel other infinitely more sophisticated political minds than i but like i kind of understand why the political process land itself in a place where even if you have a tax plan like this tcja, which is universally opposed by one party, once gift tax rates, tx cuts and placed on individuals, it becomes hard to say that like oh, we actually want to increase taxes on this group of that group. I get why politically that is challenging. The thing that i think is important what the budget lab is doing is i hope and. In a value is it is useful to try to think in, danny was citing to in this discussion, kind of shares you that there are real tradeoffs to be had here. And, in fact, you can substantially raise the aftertax income of the bottom quintile in the way that makes the tax have much more progressive and is a and a revenue raising weight but it comes with the cost of raising some taxes on the top quintile. Thats like a tradeoff we had to face and decide whether we want to make it and decide whether it fits in the political construct that we live in. But i think not grappling with it is a problem and it is problem we are seeking a least a buildup the aperture, the infrastructure to help policymakers look at seriously. As an academic and with the principles of the budget lab do think we should look at raising taxes on the top 20 . As we think about the future and meeting revenue needs going forward, it is going to be important to think about where tax increases can fall. Because like frankly speedy you are not dash if you didnt add to my question. Youre happy to say lets raise taxes on this question until you get at can we strike about . [laughing] josh joseph fell on the floor. [laughing] so i think, so let me say, i know what youre trying to get me to say and let me say a version, which is that both as a think about 2025 but also as a think about our spending needs in the future. I know josh and doug and all of us should engage with talk about entitlement at some point in this conversation. Im going to do that right now. As we think about were talking about, think about the kind of investment i think we need in children and the kinds of investments i think we need in the climate and the kinds of investments that i think we need in the social safety net, looking at 2 or 3 of taxpayers as like the sort of beall and endall of the tax debate strikes me as a challenging place to start from. I fully acknowledge the premise from academic exercise. I will also tell you that having this as the sort of central pillar of how we think about where we start scenes hugely valuable and important. And also and we did even get to it, if you think about taxes that today are uncollected, that are owed, that is 3 of gdp on an annualized basis. It is 700 700 billion disproportionate from the top decisive for some of the reasons that was describing to us about the differences between and the ways in which people are able to obfuscate income through certain types of conflict in the past two structures that are held by the top. All im saying is theres a lot of revenue to be had from the top and top adjacent. You heard it here first. Looking at the top adjacent. Doug . Let me to say this is classic d. C. Because we love to talk about taxes at the threshold decision you make is to spend the money and then youre to finance its a period the threshold decision should be examined a lot more carefully. People talk about growth i go straight to tax policy. The federal budget and its structure is an ongoing growth. It is an enormous impediment to growing. I think its not a coincidence that gdp per capita grew 4. Sent every year in the toy century and now going at 1. 4 in the 21st century when we keep running of these enormous deficits and debt. The bulk of what we do in the federal budget is subsidize consumption. The budget is a big machine to take some consumption, most recent investment, transformative a definition does not save and invest and instead consumed it does not grow. Thats our problem. Thinking about how we subsidize consumption and how much to subsidize consumption is central to this. One of the things the budget lab is attempting to do is identify those outlays which are not consumption of but turn out e investment which will pay us in the future. Those should be preserved and subsidies need to be exempt much work early. That lead you straight to entitlement reform because the whole point of Social Security was to have the elderly live better in retirement. Subsidize the consumption, medicare, now have the tradeoff. The budget is out of control. Where are we going to tighten it is up . What consumption subsidies are going to be reduced . That has to be a central part of the discussion. Because we cannot let that go and somehow think were going to be okay. We will not be okay to. Josh, i will preface by saying one of the more interesting political evolutions the last years as the evolution of your party, republican part on entitlement. Dead set against any change whatsoever to medicare and Social Security. Can we drink it now . [laughing] soon. Soon, duxbury do you disagree with that and how did we get here . Know, and i dont know. Im reversing my first answer. I completely agree with where doug is going on this. And i think its a huge challenge for our entire country that we have, we are a rich country. We are so blessed with so many resources. And yet we face this enormous budget challenge, not because we are spending too much on the environment for education or our kids. We are probably understanding. We are overspending in our old age entitlement programs. And we are doing that a way that is subsidizing the middle class, the uppermiddleclass, and even the upperclass and i guess it is a Social Security recipient now. We are subsidizing people that dont need it, as doug said, for more consumption. And yet our politics have now made it impossible for us to address what is the overwhelming issue of our budget situation in a serious way. I worked for president george w. Bush all the way through his eight years in the white house. He campaigned in 2004 with two new initiatives that he had not really campaigned extensively on in 2000. One was Immigration Reform and the other was Social Security reform. And both of them fell short. Immigration by only a small amount, sadly, and it was still stronger without and thats been one of the major impediments to other impediments, to growth in this country over the last 20 years, and will be if we dont fix it for the coming years. And the other was Social Security reform but we didnt get close. I mean, that was no appetite in the rankandfile on capitol hill or among even the broader republican electorate at the time when it was a bush Republican Party. There was no appetite for addressing, even in modest ways, the enormous liabilities that entitlements are imposing on our country. I dont know what the answer is, but i know that we will not be a prosperous country for your kids, natasha, or mine, if we dont succeed and addressing the problem of entitlements, which can be done in a sensible and very straightway. Can i say one thing on entitlements which will be a plugged again . I think part of the challenges compu both tell me if this is wrong, its true Social Security trust fund is like approaching insolvency. But that approach is in like 2034. It just feels pretty far out in a world in which we are only now starting to grapple with like the 2025 tax cuts that are set to expire in like realistically like many people in his room probably put oddson like l on december 25 or december 31 of next year, right . So deadline is kind of, like a deadline that is proximate is kind of challenging. What i hope the budget lab is going to be able to contribute on this question and the many others is like who knows when the political process is going to start to get to engage with these questions in a deep way . But when you do we should prebaked some other work. We should give them a bunch of options and we should shut them what the different options are going to do in ways that enable the policymaking and analysis and analytical choices we all find appealing. Thats a great segue to my next question because whenever a few minutes left i do want to get to budget process question which is a a real area of vale added for this group. The tosha, one of the papers youve written the budget lab refers to an budget president. If i understand correctly are basically saying only thing that deficit in a way that is biased against progressive parties. In a second or two could you summarize that and i want to get doug and josh to reflect on whether they agree or desert. Com i think that a space at the right and i it through the lens of some of josh is members and a fall away. I teach Corporate Finance at yale and what i teach my student, i keep your seo is think about building a new factory, you would think about what other the cost to bue new factory and youre also think that what is a new factor going to give you. And i going to build a large a new product line or am i going to be able to broaden or make my production more efficient . When youre thinking about things through the lens and our historical reasons come budget rules, reckon solution process, lots of reasons why we landed on a short revenue estimate as the coins of lent as a think the legislative debate, but when youre doing that exercise your really only think about one half of the ledger. You are thinking about things like a Child Tax Credit or like universal prek or like the Inflation Reduction Act climate provision as costs because you think about that like mone door for the government today. But youre not really internalizing what that money is going to bring you in the future. In a way that allows you to make the cut camp costbenefit as that you would want to do if you were a corporate executor turn to think about building a factory. I actually think, its not, this is not to the fall of the scorekeeping process because thats what they do when they been asked to do that theyve been asked to produce over the budget window here a cost analysis. I think it is a flaw in the policy process and its one were hoping to crack with over because we think we can build the infrastructure and the tools to let people to discount analytical work themselves and then come to the conclusions about what the cost and benefits are of particular reform. Doug, in her paper the tosha has couple of ideas. One is she thinks beyond to the 25 or 50 year budget we do. Should like to more dynamic analysis like what other revenue benefits of reducing Child Poverty . More grappling with some of the nonfiscal outcomes like unemployment and so forth. Implicitly she sang maybe seo could do this maybe someone else but as a person whose help that seat for quite a few years what do you think of that . So first on budgeting, genuinely, i think we should budget for years one, two and 50. Because the value of a tenth your budget estimate is, the standard error rate has got to be 7000. I mean, speak to take a very precise number. What you want to know is what are we doing . Whats the plan that this congress has execute on . And are we on track backs we know we are not on track. Look at your 50, were widely off track. The actual numbers in between dont have a great view of value. They just tell us where off track. Im not huge fan of the room allies it the budget can an budget process year 27. That seems seems to be value added. The second is theres a big difference between a cost estimate which is is the budt cost of something, the economic costbenefit analysis, the social costbenefit analysis, and it is the job of our elected officials to go find up the benefits of programs and they are informed of the cost in very systemic and highquality way of cbo. Theres no paucity of estimates of the benefits federal programs. The whole industry out there in Research Centers and academic institutions that are trying to informant and theres room for more. And theres a great place to have, the budget lab putting the budget and the perceived economic benefit together in one place and let lawmakers take it. I do understand what symmetrical about taking a cbo thats doing its job and risking undercutting its excellent by giving it to many jobs. That does that seem like the right answer. I think im going to paraphrase the one of the points the tosha makes in her paper is that even though cbo is going to make, have , have uncertain else, it is perceived as a neutral arbiter and, therefore, exercises outsized influence on the direction of debate in this tent and thats why if i understand you correctly you would like Something Else like that, not just you know i would like to me that is true and like to write something to do it but they hide behind cb all the time. They just a cbo, with want to do it, and they hide. If you want to do it they can discard the cbo cost estimate, and they do, they can say the benefits are enormous when they are neil, and they do. The problem is that the cbo in the process but the problem is a problem. Its still true. I would love i want to make sure i dont overstep on josh. Oh, no. [laughing] so i think there are a couple of things. One, i think and i like dogs one, two, 50 mental model. The reality is look at for example, reconciliation is like a process. It has requirements of built in for what the second decade looks like from a revenue perspective. Partly like we are depending on some of these numbers. The thing i find sort of troubling or i find difficult and in this is a nofault of i want to be like super explicit, i like fully agree with doug. Im not sure whether this work should happen it cbo, at the budget lab, at another, institution thats not cbo. I dont know the answers but what i will say is that there is a tendency, at a found this when i was, ive done a lot of Academic Work on investing in the irs and then what happens. One of the things that happens when you invest in the irs and have audit of more high and taxpayers is the highend taxpayers look at the neighbors who are getting audited and they are more likely they are observing more people get audited. The corporations that are watching that they have the same tax planner and theyre saying this corporation got audited for doing that, youre likely to get audited in the same way. They are just like behavioral aspects that matter and that there arent on even what run and certainly in the long run the sort of expectation is from some of the investments the remake in Tax Administration today and send the revenue collection in the future. The thing and struggle sometimes is because theres uncertainty and bed and exactly what right number is, is the right number for a deterrent or behavioral effect the three that come from treasure . Is at the 12 the comes from the new paper by nathan and then is a summary between . We assume the right number is like zero or close to zero. And like that assumption is also a choice. All of these estimates are not, does not like some magic in the precision of them. They are all built on a series of assumptions, and assumptions are hard and difficult and challenging even in the short run light alone in the long run. But not grappling with them and thats part of why i think the budget lab is adding value by just showing you its like sort of democratizing the budget process. Thats how we can see ourselves come to showing the set of choices being made and set a choice of making why were making them i think like some might be like best disinfectant will add value. I take dougs point deeply. Im sensitive to where exactly this sort of costbenefit analysis should be happening at a not sure i know the right answer for the set of reasons doug laid out but also frankly our capacity reasons. Like, theres a lot of work that cbo and tcja doing day in a dance to and be able to produce with it produced today. And asking them to do all of the other stuff that we envision would be useful from a a poliy analysis perspective is really putting them in a totally different space. Let me just in the spirit of this, we conducted the first dynamic score under my tenure at cbo. We invested a lot of time in looking at it in different ways, showing giveaways to do the analysis and the answer you got. I thought this is great we will Teach Congress a lot about how they do their business. Their conclusion was that we do know what youre doing because it was all over. I thought they learn that if you paired 2000 tax cuts with a Prescription Drug capsule that would cancel each other. They conclude we did it wrong. Thats it. So when he said at the budget lab and allow people to learn about the stuff, do not think its can be members of congress. That belongs outside. They are not there to learn. They are busy people. They have a job and its not figuring out the models. I think with a few minutes for questions and we have the microphone back there if you want to raise your hand. Does anybody have a question . No . Martha has a question. Doug made a comment about looking at for Government Spending which areas, like payoff and have enough down the road that i will shout if your cds paper in medicaid publish was interesting and useful space. This is a very economic focus conversation but we are all also individuals who view utility function of a pointy things into. There are certain types the spending that people care about as like a think government should do and there are things i personally think even if there is in the pay of its use deadline something i would like to see the government do. Im sure you all also things that you think would like the government to do. This dont have come here think they should do it . None. A great. [laughing] arbeit. Debbie go. Im just wondering, you know, how you think about trying to think of the right way to phrase this question. Talking about the preferences within the budget that we try to have this very high minded economic conversations, it comes down to individual policy preferences. No, i think among the biggest concerns i had this just the basic mandatory discretionary split in the budget because discretion spin to come annual appropriation as we do basic research infrastructure, education, national security, all the things our founder saw as a rule of the government and the places where we generally invest in the future by conventional standards for and its getting pushed out of the budget. Thats a big problem for us. The broader issue of how do we pick among the varieties of investments, varieties of income, thats what are represented democracy is about. You settle it that way. Question here. Sorry. Kelly, can we have a microphone here . Thank you all. Nice to see some friends. One of the things that i think is hard for people to focus on when you have a policy say for example, like the Child Tax Credit extension to hopefully modeled is the effects on spending on other adjacent policies. I like the adjacent to. So we will go with adjacent policies, right . Danny you should for example, effects on earnings later in life, right, and some of the cost through taxes. Could reduce snap, medicaid, so if so forth. Is it something that is possible to show, nodding and look at show to hand it back to martha . Im looking at danny because he should take the answer is yes, and do something were pretty interested in trying to do. Especially when theres an academic base that we can rely on to like justify those estimates. I think particularly is really get the investments in children, theyre all those ways that those payoffs later, rig . Some of it is in very direct Government Spending. Like literally mechanically you no longer qualify for this program because you are a higher earner. Some of it is in more indirect effects. If youre less likely to get sick, you know, thats great for medicare, things like that. Im going to cop out and say stay tuned. I think you also again from cbo, using this kind of interests in those longer finds. That he give an example, how this plays out. When we did the Prescription Drug program in 2003, everyone said it people take the drugs and not going any other medical treatments, other therapies and so youre to offset that with reduced medicare spending elsewhere. That was a very compelling argument and so the question is how big is that . There was no research that we got how big it was. We provided no offset. Everyone was angry. Over time that research was developed. People do a lot of research on amount that is not a regular part of cbo scoring of this kind of things. The same chemistry for a lot of these policies. It takes a lot of research to get the magnitude correct and to hone the offsets. I think there was a question back there. Leah sergeant. I love your them about how you are modeling the administer burden of the tax could come particularly because it seemed like there are two ways to address that when you think about modeling both. One that is simply find it so when i find my taxes is less onerous for me to do. And the other is in housing but essentially unpaid work that is put on the taxpayer so that theres more staffing for help lines or assistance, et cetera. So how are you approaching those two rings of Administrative Burden . This is like but have a question, almost like i planted you to ask this. And both are superduper important. A part of what whats great, i want to shout out to the team here and this is really rich and john who have developed the infrastructure for us to be up to comment on this. Like, what we can show you already is two things that are really interesting. One is as danny was ascribed to come if you supply the code along the lines of like keeping the standard deduction high and also getting rid of the passthrough reduction you are going to see that overall and aggregate americans are spending over 200 million, 200 million fewer hours on tax filing then it would be otherwise. That is great news. At the thing i think is almost cooler is based on the research that rich and john have done, the irs today has enough information to information return to be able to prefill tax returns for almost 40 of americans. That brings us closer to being like sweden and the nordic countries are you fulfill your Tax Obligation not by spending hours on tax crap, that by spending hundreds of dollars by basing yes to a tax message. I do want to overstate the simplicity of doing this especially some have spent a lot of time with irs. They are running on 1950s technological infrastructure. The timing of those information returns is not aligned today such that it would be super easy for them to do this. But like that is the future and its a future we can build toward and we can can assure you what a the benefits are goingo be for people if we are able to make these investments i think are so first order of i worry some members of Congress Might be seeking to roll back. Jumping will quickly and note sorry. The original idea for the burden came from sophia took so so her. And to the methodology of how we do it that rich tells us honor website, please take a look and then yell at which. I think mark had a question. Okay. You can you be better if i stand . So i appreciate you all i think of budget estimate but also distributional economic of the things like that. Have you thought about or are you going to figure how the intertwined in particular like what the dispute shall effect of lord Compliance Costs and how do you think about financing and distributional effect of that . I can cut poverty a lot if i spent 2020 and try to save 20 trillion. So i dont want martha and danny should jump in and josh and induction tells the ways in which this make sense or doesnt make sense. But like i think were very interested in the interactions of the various types of the fact that were quantifying and focused on. And take a something that, i said to the beginning of the been but i will say it again, like i personally have been long interested from like academic lens but in super interesting thing but have budget lab can take this question about the burden of deficits on future generations. And like who bears dissipation the costs of running high and growing deficits . I think its a question that is ultimately really hard to answer and like hard to answer well but for some of the reason that was ascribed about like a Knowledge Base just doesnt exist today to be able to comment in way that we would like to with the empirical and academic decision that would like to on the question. Support of what the budget lab is interest in doing is not just serving as translation mechanism between the existing academic evidence and some of these questions the policy import but actually prodding academics to have discussions and develop this model exact with some what mark is describing. One more i think. [inaudible] some policy into. I just wanted to personal appreciate the immense amount of awesome interaction on site and also its all open source, or the code is that i think thats an awesome way to promote science. Given the committee of scientists in the room and got on curious how you view the development and advancement of the sites that we can all collaborate on together . Are the things youre looking for, institutions, hoping, other institutions from the methodologies, et cetera . I think what we are, so max, ive got to talk you about this some so i will say this year. Im super keen to talk with you more and more people and nation but exactly this. Like, i think part of why we are so committed to like opensource and making available all of our code and kind of not being black box with respect to how were driving summons estimates ghost to something that takes it earlier in this conversation which is about like confidence. Unlike the inherent like uncertainty about a lot of the assumptions that underlie even something that seems like relatively easy, like whats the tenure estimate attached to ask rate change on the individual level or on the corporate level. Edited one hoping to do is like tell you our best guess based on our reading of the literature but has external voices, apply had some today say we dont agree with you on x, y and z for these reasons. That can help shape our thinking but also help people make their own choices with our tools that allows them to derive their own estimate of what they think to get a pulse reforms are going to deliver. As we look on the horizon to tcja and expiration, i should stop calling as i was saying that wants it to be a product of addition and i agree with that, as a look on horizon of the major tax reform moment i think that more of us being in dialogue notches with each other but also being in dialogue with like the broader policy apparatus. Maybe its that members of Congress Committee is congressional staffers, about what some of these options look like and what the interactions are and what the longterm consequences might be. Like, thats a discussion icing for all of us having and theres real value in doing it and, frankly, i think theres real value in trying to started as far in advance of alleges that moment as we can. At the end of our time. Thank you to the painless. I think those of us whove been in the fiscal transfer along to start use a code with each other. We know what we really say. What the cbo says or Tax Policy Center or cfe, committee for responsible federal budget i hope and a plea years now what did why the oh, the Yale Budget Lab say about this . So good luck and thank you. Thank you so much. [applause] thank you all so much for coming. We really appreciate it. One, we joke but also please do send us feedback on the things when theyre working on as the taj is theres a lot of assumptions inherent in budgets going and we really love to discuss those. I would also not be me if i did that at the boat ask you to follow budget lab on twitter and also unlinked in. I will conclude by saying that across the hall we of food, drinks and hats. We hope of course you all would be able to stay around for all of those. Thank you. [inaudible conversations] [inaudible conversations]