Welcome to the hearing on growth policies for the new administration. I want to thank senator gramm for agreeing to testify. He was one of the first people i met when i got to washington. When i could see terror in the face of his opponents, i actually got to sit down and visit with him about some critical issues. I was on the Banking Committee that he was the dharm of at the time and i learned a lot. And i wanted to have him here because his past experience, but before that, when he worked with r r redhan and holings to do specific stuff with the budget. Thats had a carry over effect. That was quite a while ago so, there need to be revisions in it, so well be relying on him and others who have chaired the Budget Committee to come up with some solutions that will make it more possible for us to get control of the budget while we improve the economy. Senator gramms decades of experience serving in the house and senate, both as a democrat and as a republican, not at the same time, of course. Provide insight into this policies have historically led to growth upon implementation as well as which are most politically attainable for the new administration and congress. The last Time Congress updated its accounting rule was long before any of us near committee were in federal office. The last comprehensive change was 50 years ago. Last month, members of the committee unanimously improve reforms to lead to more orderly and transparent budget resolutions. In addition to the reforms have proposed a budget con cemecepts commission to review budget rules and ensure they keep pace with advances in economics with accounting and finance. Thrd review the quality of budget information used by the branches. All of us want to ensure that legislative estimates are clear, concise and accurate. For example, past scoring practices did not include the reaction of the general economy to major policy changes. Dynamic scoring can add missing economic information that static scores does not provide. This is critical information for policymakers to better understand how legislation effects the economy as a whole, how macroeconomic feedback or dynamic scoring interacts with congresss official costs of legislation which is important for the committee to discuss. These budget rules are particularly relevant when Congress Considers policies with the goal of increasing Economic Growth. Tax reform is a prime example. In last weeks hearing we discussed with National Economists how taxes influence Economic Growth. Both the Congressional Budget Office and the joint committee on taxation recognize the link between taxes and output of the economy. According to the jct tax policy can directly influence the level of labor supply, the physical capital, the human capital, and technology in an economy by changing the after tax returns to certain Economic Activities or changing the cost of pursuing them. Our tax codes a mess and its riddled with inefficiencies and loopholes. People are demanding some simplicity. Reform that makes it simpler and fairer for everyone would require bold policy changes, not tweaking around the edges of a broken structure. Broad evening the base and lowering tax rates will limit government distortion of market based decisions, it will increase efficiency and growth of business. Our projected Economic Growth is below average and we need to continue discussing the root causes of our lethargic economy in order to promote policies that grow it. As you can see from this graph, wheres my graph . There we go, as you can see from from this graph, a 1 increase in gdp significantly changes the trajectory of expected federal ref roou knew. The blue line is the current level and the orange line is the revenue with higher growth. The gray line is federal outlays regardless of growth our spending still exceeds our income. Cutting the growth of spending is something this committee will continue to address. I look forward to our conversation today on how congress can work with the new administrationing to foster a stronger u. S. Economy and the impact of that growth on the federal budget. So, since senator sanders isnt here, ill go ahead and introduce our witness. Our witness this morning is the former senator phil graham, a visiting scholar at the American Enterprise institute. He served six years in the u. S. House and 18 years in the u. S. Senate. His legislative record includes landmark bills like the graham latta budget, which mandated the reagan tax cut and the Graham Redmond act which placed the first binding constraints on federal spending. As chairman of the Banking Committee, senator graham steered through ledge sclags mod person which had been languishing for 60 years. He holds a from the university of georgia in economics. The subject he taught at texas a m university for 12 years. Hes published numerous articles and books on subjects ranging from monetary theory and poll stoi private property and the economics of mineral extraction. This morning, senator gramm will testify on growth policies and how a new congress and administration can get our economy going again. Weve talked not only with the chart that i had up, but other times with how much a slight increase in the economy makes it bringing in more revenue. So i look forward to hearing your testimony. Senator gramm. Mr. Chairman. [ inaudible ] honor to be here. I remember first meeting you as this young accountant who had this annoying habit of wanting things to add up. For the last two decades, ive watched your career as im sure the people of your state have watched it. And as a person who worked with you when you were a very young senator im very proud of your career and what youve done. Today i want to talk about the budget. Ive always taken an interest in the budget because behind these numbers with the sort of endless row of zeros behind them, is a vision for americas future. Ive always thought the budget in trying to set out what we wanted government to be and therefore what we wanted america to be was very important. So from my very first day in the house until the day that i left here in 02, i have paid very close attention to the budget. What id like to do today is to talk about where we are in the economy. Why the economy is performing poorly today, at least from my perspective, and how we change it. I realized in trying to write this testimony that when youre talking about the performance of the economy during the Obama Presidency and youre talking about the reagan program and the performance following the empla mentation of the reagan program, that no matter how you want to be nonpartisan, that were all invested in those things. And so its very difficult to talk about them without it becoming a partisan issue. And i think its too bad thats the case. I want to try today to the best of my ability to not inject partisanship into what i have to say. Id like to talk about what happened in these years and then the programs that gave rise to that performance, and then look to the future. First of all, we have a lot of experience about americas Economic Performance. This is an extraordinary country where labor from somewhere else and capital from somewhere else met here, fell in love, and with very few exceptions lived happily ever after. Even in postwar america, american exceptionalism has meant that we have outproduced and grown faster than any developed country in the history of the world. From 1948, the end of the post the beginning of the postwar era until 2008, counting recessions, ten recessions, ten recoveries, we averaged an astonishing 3. 4 real growth. In good years, in bad, under democrats, under republicans, we consistently grew. Until 2009, we had not had a president in 135 years that did not have at least one year during their term where we had 3 real Economic Growth. And i picked 135 years ago because thats where the data begins on an annual basis. I suspect its true that never in American History had that been the case. In ten of those recessions and recoveries, the American Economy behaved basically the same. We used to have a cliche in teaching freshman economics when i was a College Professor that the bigger the bust, the bigger the subsequent boom. And that pattern held throughout the postwar period until 2008. And then in 2008 we had a recession, the subprime crisis. And following that recession, we had far and away the slowest economic expansion, the slowest recovery in American History. The economy grew by an astoundingly low 1. 47 . Now, obviously the question why . And people can give whatever interpretation of the facts they want to give, but let me give you my interpretation. Our policies beginning in january of 2009 were distinctly different than the policies we had followed in every recovery in postwar america. There was a dramatic increase in marginal tax rates on individuals because congress and the president couldnt agree on reforming Corporate Taxes. We ended up with the highest Corporate Tax rate in the world. Eligibility standards for Social Security, disability, and food stamps, dramatically reduced and enrollment exploded. The we expanded medicare and medicaid. Obamacare was adopted. The work requirements were suspended under the Welfare Program. And through legislation, through agency action, and through executive action, a layer of regulation was applied like a wet blanket over the economy that literally choked the economy. And as a result of the policies being so different than the policies wed followed before during other postwar recoveries, the net result was very low Economic Growth. In fact, i dont think its an overstatement to say that as our government came to look more like a european government, our economy performed more like a european economy. Now, let me just give you a contrast to that. The two policies in postwar america that are the most distinct are the obama policy on one hand, and the reagan policy on the other. And it is i dont think a coincidence that the performance of the economy following those policy implementations represent the high and the low of americas postwar Economic Performance in terms of Economic Growth and achievement. When reagan took office, we were coming off a slower period of Economic Growth, 2. 5 in the late 1970s. The inflation rate was 13. 5 . Prime Interest Rates had peaked at 18. 9 . And there was a general discussion in america, serious discussion about how economic and political melees, and how the scarce sity of resources meant that americas future was going to be dramatically different. Mr. Chairman, you may be old enough to remember the Time Magazine headline the joyride for america is over. Well, Ronald Reagan was elected and dramatically changed policy. And what happened . The performance of the American Economy changed dramatically. Reagan cut marginal tax rates dramatically. Im being dramatic but these were dramatic times. He cut nondefense spending and entitlement spending, and he lifted Regulatory Burden. When that program was in effect, the economy in the last six years that Reagan Administration grew by 4. 6 . And in four of those six years, federal revenues grew by over 10 per year. Now, this comparison is important because the question were faced with now is are we in a secular stagnation or is this a policyinduced stagnation . My believe is, and i think an objective reading of the policies of the postwar period and the performance of the economy in the postwar period is that policy makes a difference. American exceptionalism is based on freedom and market efficiency. And when government policy reinforces those things, the economy grows and has no equal on earth. When government policy stifles those things, the growth of the economy is stunted. And i believe that thats what happened beginning in 2009. Now, the question is, what can we expect when we move from a policy that was implemented in the last eight years to a poll say that is closer to the reagan policy . What happened when we dramatically reform the tax code . When we reduce rates . When we strip out provisions of the tax code that misallocate resources . What happens when we lift Regulatory Burden . What happens when banks begin to hire people to make loans rather than hiring compliance officers . Well, what happens is i think we will begin to see the economy move back to what we knew for 60 years was the economic norm in america. Through ten recessions and ten recoveries until this last recession and recovery, we averaged 3. 4 real growth. If by changing policy we could get that growth back, as you showed in your chart, if we could get back the normal growth america experienced for 60 years in postwar america, revenues would rise by 4. 6 trillion over ten years. If we could just get half that difference back, if we could just get halfway back to the norm by implementing policies that have been the normal policies in postwar america, we would get 2. 3 trillion of new revenues in the American Economy. Now, i want to digress real briefly to make the point that growth is the key factor for federal revenues. And ill just give you two examples, and i give them because they show how powerful growth is. And i picked two examples of tax increases. In 1990 there was a budget summit agreement, and part of that agreement was to raise taxes. And a tax bill was adopted, and that tax bill was projected over five years to raise revenues by 159 billion. But because of subsequent poor Economic Performance, because the growth rate fell as the economy slipped into a recession, revenues actually declined by 206 billion because of a decline in Economic Performance. Probably the most dramatic one in American History occurred in 2013. The bush tax cut expired, a new tax bill was adopted that was supposed to raise 650 billion over a decade. After that tax bill was adopted, the cbo continually reduced its projection of Economic Growth to the point that those reductions in Economic Growth reduced revenues five times more than the tax increase was supposed to increase revenues. If you dont have Economic Growth, you cant balance the budget. If you dont have Economic Growth, you cant fund the policies that we are committed to fund. Right now the Congressional Budget Office estimates that the economy is going to grow about 1. 9 for a decade. At 1. 9 with a growing population and with a population that expects to have opportunity, that expects to have prosperity, and with a disappointment that will come at that growth rate, there is no possibility that were going to be able to meet our obligations in programs like medicaid, medicare, Social Security. So we have got to get out of this rut. Now, let me give you two examples of policies that have had a pretty big impact economically. And let me start with the 1986 tax reform. This is not only the standard in america, this is a standard in the world when you talk to economists anywhere in the world they talk about tax reform, they talk about 1986. When we adopted the 1986 tax reform, the Congressional Budget Office said it would have no effect on federal revenues. That was their official projection. But they actually almost immediately lowered their projection of Economic Growth to 2. 9 . They did that in january of 1987. By the time the tax reform was fully enforced over that ensuing five years are the economy grew by 3. 8 and revenues grew by a commensurate amount. The most dramatic underestimate by cbo occurred when it scored the 1997 balance budget act. You will remember the congress and the president under president clinton reached an agreement to commit to a balanced budget and adopt budget numbers to achieve the result. They also agreed to cut the Capital Gains tax. The Congressional Budget Office projected that that action would produce 33 billion of new revenues. In one year alone in the year 2000, the economy generated 303 billion more than the Congressional Budget Office projected, and by the time the whole budget cycle had been completed, revenues had grown by a whopping 1. 34 trillion more than the Congressional Budget Office had predicted. Now, when you write your budget, it is clear that the Congressional Budget Office is not going to be able to differentiate because it has never really been able to differentiate between policies that cause growth and policies that impede growth. And so if you adopt a major tax reform package, my guess is that the Congressional Budget Office is not going to score it as generating much in the way of revenues. I believe that we have every right to assume that if we change policies, especially if we adopt policies that have worked in the past, that theyre going to have an impact. If i were writing the budget and i were going to dramatically change policies with tax reform and with regulatory relief, i think you certainly have the right to assume that were going to get halfway back to norm with this policy. I think thats the conservative estimate. Now, what this will mean is when you write the tax reform bill, part of it will be permanent and part of it will go away in ten years if, in fact, we havent achieved what we set out do, which was to write one that was selffinancing. If it works, and if revenues grow, youve got to assume that public support would be sufficient to make it permanent. But i want to Say Something about permanence. If theres anything that you learn in being government is that nothing is permanent. The great 1986 tax act was changed twice in ten years. This idea that the economy will not respond to tax provisions that are going to potentially expire in ten years is invalid. There are very few Business People that ive ever met anywhere that have confidence as to what government policys going to be ten years from now because most of the people that had confidence have gone out of business long ago. Finally to conclude and then throw it open, i want to mention two dangers, two things i worry about that i think we ought to be paying attention to as were trying to get the economy going, as were trying to get this liftoff, and theyre sort of two problems that are out there that dont show up today. One of them is the debt servicing cost of the doubled federal debt that has occurred in the last eight years. 55 of that debt was bought directly and indirectly by the fed, and then the Interest Payments were rebated to the treasury, and weve had historically low Interest Rates. So actually in the last eight years we double borrowing and the cost of servicing the debt actually went down. But when we have a fullblown recovery, every recovery in the postwar period has been driven by exactly the same things and produced the same results. Its been driven by strong private investment and by home building. And in every recovery that has been a normal, robust recovery, Interest Rates have risen. If we get a fullblown recovery and Interest Rates go up, debtservicing costs are going to explode. Now, youve seen the numbers where in ten years debtservicing costs alone will exceed medicare. But let me give you even more frightening number to me, and that is historically in a recovery government borrowing has grown at about 1. 7 a year. In the recovery we hope to start, within five years with a fullblown recovery and Interest Rates returning to to their normal levels, debtservicing costs will rise to 6. 6 of gdp. Historically, the Federal Reserve bank has offset some of this by expanding the money supply to meet the needs of trade, and theyve created enough liquid ditty so that the net government borrowing has been 1. 4 . But now theyve quadrupled their Balance Sheet with all of the monetary easing programs, so when Interest Rates rise, banks are holding over 12 of reserves over 1 theyre required to hold. The fed is paying them interest so theyve really turned these reserves into a treasury note, a treasury security. But if we get a fullblown recovery, Interest Rates start to rise, banks are going to start to lend. And when banks start to lend, the money supplys going to start to grow. And so despite all the feds reassurances about all the things they can do, they can sell securities, they can pay higher interest on deposits, they can let the securities they hold mature on their Balance Sheets, they can borrow against the securities with reverse repos. All of those things have the same thing in common, and that is theyre all competing with a private sector for available capital. When you look at where they are in their Balance Sheet, if you assume that in a fiveyear recovery that they sold off the Balance Sheet, which is what bernanke has now predicted, they would have to sell over 500 billion worth of securities a year and absorb 3 of gdp in competing directly against private investment for loanable funds. So what is the message here . One, we need a strong recovery. Two, once a recovery is in place, Interest Rates, i believe, based on the debt problem and the Federal Reserve bank Balance Sheet problem, that Interest Rates are going to rise faster than they have in the average recovery and theyre going to be higher as the recovery reaches maturity. This is going to force us to look at things like spending control and entitlement control quicker than the congress or the president want to do. Its very important that this be done. Final point, mr. Chairman, thank you for your patience. If we dont break out of this rut were in, if we continue at a 1. 9 growth rate, or if we break out and we cant do the things necessary to keep the recovery going, we could easily end up in a secular stagnation. And america cant be the america we know if its not growing and prosperous. Everything our country stands for, all of the opportunities that we believe should be there for every american depend on growth. And so i think we need to be bold in getting the economy growing and then we need to be vigilant about what we do to keep it growing. Thank you, mr. Chairman. Thank you. Im always fascinated to hear you. You put things very clearly. Im going to defer to senator corker to ask the first questions, but before i do that i want to mention that once i had an opportunity to talk to all of the head accountants for the sec and when i was asking questions my people back in the office were noticing that the camera did a little wedge like that and everybody behind them was asleep. There arent many people that can talk about numbers and keep people awake, so i was keeping track and everybody was awake. You do an outstanding job at presenting. Thank you. Senator corker. Thank you mr. Chairman. Ill be very brief ive got folks wauting on me. That was a very full some presentation and senator graham im somewhat like you and others here like to listen to. Im just againly going to observe what i observe here right now, and that is a partylike atmosphere where nothing is going to be done to deal with spending, certainly when you have a president thats not willing to deal with 70 of our spending mandatory spending, were not only thats where the spending is but thats where all the growth is taking place too, its growing very rapidly, and then we have numbers of discussions about tax reform, tax cuts those are two different things, obviously. Sometimes they can take place in a combined way, but just for what are its worth, i think youve always been generally speaking, a fiscal hawk. I agree with you 100 , theres no way to deal with the issues that we have before us without growth rates substantially increasing. I do think that we will move ahead in a strong way on regulatory reform, think thats one thing the president is committed to, he can do a lot of that himself. We will pass substantial dodd frank reforms. Im conis vinced under the leadership of senator kra poe. And so some of the things you alluded to are going to happen. What i fear most, just an observation, again, youve answered most questions by your presentation, is that i will say, let me just guy digress for a inspected under reagan, no doubt the 86 law one is we all look at and certainly admire the economy that took place under reagan. I will say the National Debt doubled and we never got things under control. The National Debt doubled and we became the mantor for republicans became, unfortunately, deficits dont matter anymore. And so somehow or another, with your leadership and coming into caucus meetings and all that weve got to figure out a way to not just do the sugar side of this but to do the spinach side and im going to tell you right now i see no evidence whatsoever, no evidence of us being willing to deal with the spinach side of the equation. So i think were in a hell of a mess right now, hell of a mess, and i while im someone who happens to believe we ought to give some accountence to dynamic scoring, i think theres going to be a push to be carry that to levels that are beyond belief and beyond reality and id just love to have any comments and ill stop. But im telling you were in a hell of a mess right now from the standpoint of where the nation is and the lack of ability here to deal with the other side of the equation. Well, let me say that if we we are getting along now because we dont have any recovery. We dont feel the fever of this big debt and we dont feel the impact of this massive buildup in the Federal Reserve banks Balance Sheet because theres so little pulse. But when the economy starts to grow and Interest Rates start to rise, its not me saying that servicing the debt we have right now is going to cost as much as were spending on medicare annually, those numbers are numbers that are out there that are easy for anybody to calculate. No no debate. No debate. And if we can break out of this rut and get the economy going, it gives us a chance to gain control. Im not trying to be an alarmist, but i dont think well be able to keep the recovery going if we dont begin to deal with spending. And i think at some point well be forced to do it and my guess is what will force us to do is it is rising Interest Rates. If you dont ever get the economy going, then this problem will get worse without warning signs. But if we ever get the economy going and rates go up, these bills come due. Yeah. Well, just as one senator and its going to take this is going to take 50, its going to take 50 of us, okay, as one senator i think we need to be really careful when we do this tax reform to not overproject revenues. I mean, the fact is you talked earlier about 4. 6 trillion in additional revenues over the next ten years. Some of the i dont know which particular plan youre looking at. Well, no, thats if we could get back to the average growth we had over the previous 60 years. Thats what the number would be. Yeah. What i said was even if you could get back half that growth, so splitting the difference between the 1. 9 that is projected now and the 3. 4 we were able to get through recessions and expansions for 60 years, if we could get to that level, that would be 2. 3 trillion over ten years, that, to me, would be a conservative number. But, look, i dont fear having to give part of the tax reform cut back if it doesnt work. In fact, it is somewhat of a disciplining agent that part of it would be temporary. And like i said earlier, this deal where people wont respond if its not forever till jesus comes back, the 1986 tax bill was changed twice in ten years and it is still the Gold Standard for tax reform. Im going press on. Thank you, mr. Chairman, for deferring and thank you so much for your continued contributions to all of us. Thank you, sir. I cant possibly let him leave without asking this question. What overarching goals should congress focus on when debating tax reform for individuals, for corporations, internationally, how do we ensure that these marginal tax rates incentivize growth . Well, the one thing i would emphasize, mr. Chairman, is that everybody focuses on the 86 act and what it did to marginal rates. But that was only part of its productivity. It also eliminated all kinds of subsidies in the tax code where people were incentivized to do all kinds of things that made no sense economically. So the first thing i would do is get rid of every provision that you can possibly get adopted in the current tax code that pays people to do things. All of the and i know some of them reach almost religious fervor in terms of support some have for them, but to the extent that you could eliminate deductions and credits and subsidies, do it. And use the money to lower rates. That would be my first advice. I think we will have to assume that were going to have some success. I dont think we can make this work assuming that after we we lift Regulatory Burden and after we reduce tax rates and reform the system that were going to have the same economy we got now. If cbo is anything close, thats what theyre going to assume. I dont think we can or should assume that. I think that will mean that part of the tax cut part of the reform will have to be for ten years, but like i said, the greatest tax reform in American History it was amended twice in ten years. And quite frankly, if it doesnt work, having it snap back may not turn out to be a bad idea. Now, my belief is if were conservative, if, for example, we assumed that by implementing all these reforms we could just get back to half of where we were for 60 years prior to january 20th of 2009, i think that is the conservative estimate. I believe thats doable. Now, we need to be relentless and i just would throw in senator cork rubbermaid cork rubbermaid the point about Regulatory Burden. President reagan used to say to those of us that were involved in his program that we underestimated what they were doing in lifting Regulatory Burden. Racen used to say we underestimated what they were doing in lifting Regulatory Burden. I didnt pay a lot of attention to it. But looking back he was right. Regulatory burden today is at least as big a problem as the tax code, at least as big a problem. And the arbitrariness of it. The law is whatever the regulator says it is. And its a terrible situation and it wilts confidence and it wilts investment. And if we change it, america will change. Thank you. And the democrats have invoked a rule that means that this hearing has to end at 11 30 so in order of arrival i have senator gardner then senator grape poe then senator bullsman. Im only going to use 14 of the 15 minutes left so ill leave some time for everybody else if thats all right. Ill be quick. Thank you for your expertise. Senator lee and i have been working on legislation addressing the Regulatory Burden you talked about, also addressing the deficit situation, the debt situation this country facing dollars. By tying the issue of Regulatory Burdens on our businesses which slow the economy with the fact that we need a thriving economy order to address our debt crisis. And so the idea that weve come up with is this. If were face and we will be faced with increasing the increase the debt limit in this country again, then in order to increase that debt limit, shouldnt we then face shouldnt we put in place some kind of a mechanism to spur Economic Growth at the same time . Because if youre just increasing death without Economic Growth its its a spiral that results in more broken credit. So the idea would be this, that you take say you increase the debt limit by a trillion dollars, then would you at the same time have a regulatory reduction, reduce the Regulatory Burdens on businesses by some percentage. So maybe have a 15 reduction in the in the cost of regulations for every x amount that you increase the debt. So what do you think about that kind of approach to find the regulatory cost, to limit that and use that . I think anything you can do to reduce Regulatory Burden could be good. I think your you might end up with some problems with senate rules in trying to do that. Another idea that i have thought about is what about adopting a tenyear debtlimit increase where you set out in law the debt limit for ten years where the debt limit falls to the increase would be zero. So it will snap back in ten years. So that then, that would have two big advantages. One, youre voting for a balanced budget, which makes the vote a lot easier. Secondly, even if Congress Went over in a year the number wouldnt be so large as to make debate irrelevant. Today, the debt ceiling the debt ceiling increase will be so large theres no way you could go back and make changes in policy to deal with it. But here they would be much, much smaller and you might actually be able to control them. You could also keep up with it and basically, stop bills saying this is going to take us over. B and if i were a member of congress and we did that policy, id just say look, ive increased the dell ceiling for ten years and in ten equal amounts. Im not going to do it again. That, i think would be a good approach to it. What happened on the debt ceiling, quickly, in world war i, they changed the law to be able to pay for bills. They were spending so much money on the war effort. I wish we had gone back to the old system. Because what better way to stop spending than to make people vote to raise the debt ceiling to pay for it. You might go back, senator, and look at the preworld war i law and how it worked. Another nice reform would be to raise the debt ceiling and change the law, so beyond that point, any bill of any significance beyond in the budget, youd have to vote on a debt ceiling and that would thin the ranks for spending. Thank you very much, mr. Chairman and i thank you for inviting senator gramm to be with us. Its a welcome to see you. We misyou here. Im glad were get iting we still need your wisdom. I want to go quickly into two things. I want to get some numbers out. I wasnt here at the beginning, so you may have said, how many years has it been since we have not achieved greater than a 2 growth. I think its approaching ten years. Let me put thit this way. There is no president in the in the last 135 a years that is 3 growth in their presidency. That the Obama Presidency was the first one in American History that never had a 3 growth in any single near. We havent had growth over eight year, probably closer to ten. Youve indicate that had the average for the last 60 years was 3. 4. Thats counting part of the recession. Do you have the number of what it would be if we could actually get back . 4. 6. If we could have the average, we could have 4. 6. The point i made in the testimony, mr. Chairman, is that our policies in the last eight years have been so dramatically different from our policies in the previous 60 years. Youve got to believe if you change the policies, if the problem is not america, its it government. Youre getting europes results because our government looks more and more european. My understanding is that some of the Analysis Shows that the yearly cost is 1. 8 trillion cost per year. Now, that doesnt translate into its impact on the budget on our congressional budget rkt, but my question to you and i think youve discussed this. If we were to address that would also add to the generation of Economic Growth and revenue to the treasury, with which we could deal with our National Debt, kregt . If you gave me a choice of eliminating the obama era Regulatory Burden, or adopting the trump tax. People cant do business when they dont know what the rules are. That Financial Institutions are being shaken down. Youve got a government bureaucrat sitting in the board room of every major Financial Company in america like the old co comisar from the soviet union. Dominates everything in america. Do them both, were going to get america back. Thats right and people can. We can put questions in writing. Three minutes left. Senator boseman. Thank you for being here. We really appreciate your work on this. You mentioned historically averages and things. The historical average is 5. 6 . This is something that we can figure out easily. Where is the Tipping Point there . I dont know about a Tipping Point, but if the economy started to grow, and Interest Rates rose, which they have in every recovery in the post war period except this one, Debt Service Costs are going to rise rapidly. The Federal Reserve bank is going to have to start sopping up liquidity by selling assets and Interest Rates are going to rise. In the avrnl recovery in post war america, government barred 1. 7 a year in compete wg the private sector. In the government would only be borrowing 6. 6 of gdp. So, its we dont feel the problem, because we dont have any growth, but if we had real growth, youre going to get the fever fast. And so, what its going to mean is is if we can get the economy going, were going to have to deal with with spending quicker than the Political Part of our country wants to deal with. Cant let it pass. Thank you. No, no, i yield to mr. K kennedy. Just got an ininterpreter ration from one of the attorneys who are looking at the rules and our own statute. It appears that we can interpret as exempt from the two hour rule, so p if you have another question, go ahead. Let me take my time then. The other thing is again, looking at the historical average of our labor force. 1. 4 , we anticipate a 4. 5 a . Arkansas now has a very low unemployment rates, how is that going to, what do you do about that, how do you impact that with our able thety the grow in the future. Let me give you a number. When the reagan program was adopted, the disability rose and Social Security plumeted. I hate to sound like a name dropper, but i used to could always get the smile from president reagan by saying when those numbers came out, i would show them to him, i said, mr. President , people got up out of wheelchairs today an went to work. Thats not that farfetched. Our Labor Force Participation very low. It can go up and will go up if there are really good jobs out there and if we quit paying people not to work. Another thing we need to do desperately is president obama waived the work requirements in virtually every Welfare Program and every state in the union. We thieneed to put those requirements back. Im not worried about americans people willing to work if were willing to provide the incentive for them to go to work. I appreciate you mentioning the Regulatory Burden chblt in this style of doing things where youre trying to take the risk of capitalism with our Community Banks and the Regulatory Burden theyre facing that is making it o difficult for small Business People with good ideas to be b able to get out and actually make those come to fruition. And create the jobs we need. So thank you very much for being. When you take the risk of capitalism, the life out. Thats exactly right. Yeah. Senator kennedy. Senator, im sorry im late. Im going to take your testimony home and read it. I wanted to test a thought out on you. Trz as to why were not, were creating some b jobs, but were still about 6 million short of where we ought to be in recovering from a normal recession and the larger concern in my state in addition to jobs not being created is wages arent going up. I agree with you that part of that is the smothering of our businesses by reagan regulations and rules. But were grow iing at less tha 2 , pre 2008, for 30 year, we averaged about 3. 1 growth. The other problem it seems to me is productivity. Were rocking along about 1 increase in productivity every year. It ought to be at least 2 . Ive noted that a lot of our businesses are making record profits. But theyre not reinvesting. Theyre doing stock buy backs and paying dividends. At least part of the problem, our capital is not being reinvesteded. I think weve done just about all we can do. I dont see any choice. But to address it on the fiscal side. Let me address the productivity thing. Just to bring together the Regulatory Burden and the productivity, youve obviously seen the number that Community Banks have hired more compliance officers. Since the adoption of dodd frank than they have hired lo ed loan officers. My son has a little hedge fund. Hedge funds have nothing to do with the financial crisis, but he now has a compliance officer. We have imposed all of these costs that in many cases, do no good and often do some harm. And when we lift this Regulatory Burden, americans have not run out of ideas. What is has happened is that we made it hard to do business. We created tremendous uncertainties. Weve got a regulatory apparatus that is hostile to business. You know, theyre sort of, there are team that want to milk the cow. And you can have a successful economy and do that. But you cant have a successful economy if youre trying to do the cow harm. And i think what has happened is that we now have an environment where regulators are hostile to the very people they regulate. I remember when i was working in a bank, there wasnt an adversary yal situation between us and the fdic auditor or, they were doing their job, we were supposed to be doing our job. They wanted us to be successful. I think thats changed. Money, we have proven the limits of monetary policy. Now, were going to prove the cost of it. But i do believe that fiscal policy is important. But i never thought 20 years ago, i would ever believe this. Regulation is the number one problem in this country. Its bigger than the tax burden. And we need to deal with it and thank goodness, the bills that were adopted in the last eight years are all shells, where the regulator decides what the volcker rule rules, what the stress test tests, and that could all be changed and we need to be relentness in changing it. And i do believe tax reform will help. Just cant make sense. For us to have the highest Corporate Tax rate in the world when you bring in state rate, 39 . When you can operate in ireland for 13 . Youre not serving in they had about the tax code, that doesnt mean theyre hapy n with the tax code. In my opinion, some of these are fairly easy fixes. Ive introduced a bill that says if youre a financial institution, bank or credit union and you have less than ten billion dollars in asset, you no longer have to comply are dodd frank. I asked chairwoman yellen in front of our Banking Committee when it was my turn to ask her questions. I said, explain to me what the Community Banks defined as less than 10 billion in assets, did wrong in 2008. She said they did nothing to contribute to the meltdown. Now, i dont know if that bill will pass. But even former congressman frank has been quoted as saying we went a little too far on the small institutions. Not saying all what is well with the larger banks, but i am saying that its been my experience these Community Bankers are relationship bankers. They dont do derivatives. That they dont do mortgagebacked securities. They loan to small Business People. And theyre able to monitor their credit worthiness. And the average small bank is less than 100 employees. Weve lost 1700 of them. And the reason is that theyre having to sell or merge because of the regulatory costs, which ironically, is creating institutions that have more assets, which dodd frank was supposed to help. Well, the big banks have gotten bigger. And the small banks have gotten fewer. Thats true. I, look. If anything we can do to reduce this burden will have a big impact. And today, you cant make a character loan, today, all formula drivenen and if your lo violates that, youre going to get called in one of the four or five audits. Imagine youre run ining a litt bank and you get audited four different times, so you got to prepare for the audit for a week or two. And then youre audited for a week then for a week or two, youve got to respond to things they found that youve got to correct. When you multiply that times four, youre not knowing your customer very well. You know youre regulator real well. You mean the comisar . Yeah, so how did get into this mess and how do we get out of it . We got into it because there was an agenda that was waiting to happen. Dodd frank had nothing to do with the financial crisis. It was an agenda to have the government dominant the banking system. Its been an agenda to progressives for hundred years. And they have the opportunity and they got it. Now, were paying for it in lower growth. Now, they had the authority and they did it. And people voted for them. So so did people vote to do this, i didnt go you can say they did, but they didnt know what it was going to cost. That is a point i would argue. And i think again on this regulatory thing, we need to be absolutely relentless. I just cant state it too strongly. Its more important than anything else. These other o things are important. If we cant get out of this growth rate, were never going to be able to deal with the financial problems of the country. You cant balance the budget in america with a commitments we made with a 1. 9 growth rate. This cant be done. So, weve got to break out of this cycle. Thank you, mr. Chairman. Senator johnson has joined us, hes the other accountant and hes the chairman of the Homeland Security and government accou Accountability Committee and they had a hearing and theirs had to end because they didnt have the same ability that we do. We have rules. Thank you, mr. Chairman and senator grammeasuring, great to see you here. I think i can hop in when were talking about Economic Growth, i think i know a little bit about what it take to grow a economy. You can kind of that i can that little example right up to a macro example as well, but from my standpoint, you certainly need security. You need the rule of law. Need to make sure your fiscal location is safe and secure. Cant be vandalized. You need labor. People to work b and capital. Lets say, of course i just came from a hearing on cybersecurity, so, from a national level, you need a safe and secure you know, National Security and Homeland Security. So, lets concentrate on labor. And on capital. I come from the viewpoint, come from manufacture iing sector in wisconsin in the last six year, i have not visited one manufacturing plant in wisconsin that can hire enough people. Not one. We had a real problem in terms of Wisconsin Dairy not having enough people to milk the cows and they really rely on immigrants to do that. Can you just kind of address that situation, demographically, what your thoughts are and in terms of our labor pool, why you have such a low participation rate. Just an article in the wall street journal, even with a tight labor market, were not seeing real wage growth, not for years. Whats causing that. I would throw the in there, we have this Regulatory Burden that translates out to about 14,800 per year, might be a drag on wage, just talk about the whole labor situation in america. Well, well, first of all, th requirements been waived in virtually every Welfare Program and every state in the union. My guess its been waived in your state. We need to reinstitute those work requirements. The eligibility standards on food stamps have been reduced dramatically, and the eligibility for disability under Social Security have been reduced dramatically. Youve got some unions with 75 of their members get disability designation when they retire. This programs clearly abused. So we need to, i people to work, ablebodied people to get welfare or to at least go to school. And we ask do all this stuff by computer. The Labor Force Participation rate is down. I said it earlier, you werent here, that back during when the reagan Program First took hold, one of the most astonishing numbers was the number of people on Social Security disability declined. And i used to say, not totally joking, people are getting up out of wheelchairs and going to work. So i think thats part of the problem. I think another part of the problem is were wasting huge amounts of labor. There are high schools in my state where more people go to prison than go to college. If we reformed our education system, gave people a choice as to where they spent public money and educating their children, we could revolutionize the labor force in america. I wonder how many people in these schools, these failing schools have got real ability. My guess is a lot of them. And thats something we could fix. These all, i changes in policy. Well, also change in attitude. Ive always said, you know, we pay people not to work, which you just addressed. We also tell all our kids they have to get a fouryear degree which implies being a carpenter or laborer or something in the manufacturing sector. Theres something wrong with that. So we need to stop den grading the trades, but just demographically when you look ahead, theres a great piece written by nick ebber stat, you take a look at america long term in terms of our fertility rates and what do you think we need in terms of immigration and, you know, policies that really do promote people coming to this country to take advantage of the opportunity but are coming into this country to work and provide that labor that were going to need . I mean, thats certainly what i believe we need. What are your thoughts on that . Well, let me just say one thing about the previous problem then i will answer this question. There are a lot of things we could do to get americans to work longer. I dont understand that, it doesnt affect me one way or another. But why should we make somebody over 70 pay Social Security and medicare if theyre still working . Why wouldnt we want them to keep working and get the benefit theyve qualified for . So there are a lot of ways that we could get people to work longer by just making it easier. Look, america cant be america without immigrants. This is an issue im hard over on. I do i dont think people ought to come here illegally, ilLegal Immigration is a big problem, its illegal. And i think we ought to gain control of our border. Im willing to build a wall. I got fences around my ranch. So, but weve got we need people to come to america. And i think we ought to let people come that can bring things that help us. People that can bring the education they have, can bring the skills they have, can bring the capital they have. I i want a vigorous Legal Immigration program. And i dont buy it, im sorry, i just dont buy it. That some brilliant engineer coming here from wherever is taking a job away from somebody. Now, we need the best and the brightest and, by the way, i introduced a piece of legislation that makes that Legal Immigration system governed by the states. I think states would be better, you know, judge of, you know, what sectors they want them working in, what wage rates to make sure we dont depress american labors so im on the same page with that. Mr. Chirman youve been very indull gent, i appreciate it. Great hearing. Thank you, senator graham. Thank you for coming and thank you for all the complementary things that get done in your committee that were trying to do here and well have to Work Together on more of those. Senator graham, i cant thank you enough for being here today, for your outstanding comments and then your answers to questions. Incidentally, anybody on the committee that wants to submit questions can until close of Business Today and wed hope that you would answer those for us too. Some of them would be more specific. I have some that will deal with a lot more numbers that id appreciate someone putting together for me because it would be a help, but i love the ability you have to phrase things, you make it simple, you make it understandable, you even make the numbers seem exciting. Not many people have that talent. So appreciate you making the case for doing something, doing a lot of things that would keep this country from imploding, and you made some excellent suggestions. So. Well, mr. Chairman, i appreciated coming today. Im sorry that we got this dispute going on and we dont have our democrat colleagues here. But, let me say that just in conclusion that anybody thats writing off america is making a big mistake. We have stagnation because weve had bad policy. If we change these policies, were going to change america. And anybody who doesnt believe that policy matters, all theyve got do is look at the history of our country. America had better government, less of it, more efficient markets, and we took the huddle mass masses yerning to breathe free that nobody else in the world wanted and produced more empirical evidence of what you can do with a good system than any nation in history has ever done. So i dont understand how people can look you in the face and say, well, our poor economy has nothing to do with the policies we followed for the last eight years or the good economy for the previous 60 years, on average, had nothing do with the policies we followed there. You know, i guess the so yet union didnt collapse because of bad policies. Well, what did they collapse from . You know, we have grown faster than europe for our whole history. Is that just accident . I dont think so. So i think these are the pints we need points we need to get back to, and youve been very flattering to me because were old friends and i appreciate it. Thank you very much. Thank you. Ive got pages of notes here that ill go through some more and ill be sending some more questions. Thank you very much. The hearing is adjourned. Tonight on cspan 3 the National Taxpayer advocate discusses the irss. And foreign threats to u. S. Computer systems, and congresswoman rosa de lauro on why she thinks the u. S. Should enact a universal child allowance for families with young children. Nina olson the National Taxpayer advocate talked about customer
comparemela.com © 2020. All Rights Reserved.