Policy conference. I am the director of the i amrch center and delighted to introduce the chairman and vice chair of the white House Counsel of Economic Advisors. In preparing for this session, i have a foundational commonality. He is originally from sweden. , am originally from minnesota the land of american swedes. Close enough. Currently on leave from the university of chicago, where he is a professor of public directs thees and program on Foundational Research and Health Care Markets and policies within the Health Economic initiatives. Severald in publicsector positions, including his role as Senior Advisor to the head of the food and Drug Administration and as the senior Economic Advisor to the head of the centers for medicare and medicaid services. He also served as the Health Care Advisor for senator john mccain during his president ial campaign. Thank you so much for joining us today. Start, it says on wikipedia that the chairman writes all 300 pages. If you would, please take us through some of the highlights of the report. Free. Can download it for i will talk a little bit about the main themes. It is i did not write the report. It is about 435 pages. I will go through the main themes. If you want the bottom line of general,ave done in our twitter account has daily andtes on all of activities the bottom lines on the economic report of the president. Themes in the report that are the main themes on how the Trump Administration cowrote the agenda which we think consists of four pillars. , freeing deregulation up Energy Innovation in the private sector and the fourth one renegotiating trade agreements to be more fair with more reciprocity across the globe. The two main themes in the report that overlays a lot of chapters is the first theme is what we have seen in the expansion after these policies were implement it under trump, very different than the early part of expansion after the Great Recession. The second theme, and i will get into those numbers, the second theme we laid out is about the opposed toyears, as the previous part of expansion, has been inclusive in terms of growth. Are the benefactors lower end of the distribution. Let me go into of why we document in two ways why this expansion is different. This part of the expansion is different from the earlier part. Usually, when you have a recession, you have early growth directly after the recession that is pretty rapid and then it levels off to normal growth levels. That is the opposite of what happened after the Great Recession where we had a pretty slow growth initially and we have had accelerated growth the last three years. This is in spite of the fiscal and Monetary Policy that was a lot looser in the early part of the recession as opposed to being more constrained. We had more easy Monetary Policy in the beginning of the cycle than in the end. Is two ways we show that it different from the earlier part what did people say would be the continuation of the obama economy in 2016. People forecasted what they thought 17, 18, 19 would look like. Forecastn goal is to undercurrent law what the future will look like. It is notk at that surprising but it is a pessimistic forecast. People generally had to believe the longer you go into an expansion, the harder it is to do well. Different thanas that. They predicted that the labor force partition rate Participation Rate would fall. Growth ofcted wage low income individuals very low when it actually accelerated. Week showsthis last whenhis has come to ahead the president called this a con claim that wanted to this was the continuation of the obama expansion. Those people in 2016 are claiming this is a continuation of the obama economy when they themselves in 2016 said something different. They are pretending to be someone else. That is what a con man is. That is something worth noting. No one predicted this kind of informance given current law 2016. The second way in which the later part of the extension expansion differs from the first is that if you look at the data compared to the first, it is different. Shrankorce participation in the earlier part of the expansion and has ticked up in the last three years. Same with homeownership. Same with inequality. Inequality has narrowed in the last three years as opposed to widening before that. That gets me to the second theme of the report, which is inclusive growth. If you look at inequality both in income and wealth, that has taken a turn for the better the last three years. Growth, allat wage across the board in terms of disadvantage group, the lower half, minorities versus white americans, you have had a reversal of disadvantage groups now growing faster compared to before 2017 when they were growing slower than their counterparts. Is the that, we argue, tax cut that increased labor demand but deregulation. Deregulation has been progressive in the sense that we have seen larger gains in the share of income from deliberation from deregulation. That is an important component of why we think deregulation is important. That is on income inequality. On the wealth inequality, you have seen in normas growth wealth. Growth of wealth among the lower part of the wealth distribution. It is generating selfsufficiency as opposed to government dependence. It is a big deal in terms of how much were gaining the poor are gaining. They are coming off welfare programs by not qualifying, which is how we want people to come off welfare programs. , we see gaining to become more selfsufficient. The belief in that labor and tois the best poverty programs by man, i would say. Selfsufficiency is something the forgotten men and women that we talk about, this is a big deal in terms of how we see the economy turning in their direction. There are some additional risks of housingn terms regulation we believe are intrusive. Housing regulation has led to not enough supply, restricting the supply and having very high prices in those areas. Is, can one on the state and local level deregulate those prices. Deregulating that supply to meet the demand better is very important Going Forward, given that people are working more and can have ae and housing boom. We can have a demand increase that is pretty substantial in those areas and you need supply to feed the demand better than what we are currently doing. It is very concentrated in certain areas. Housing becomes very expensive. Is a huge new york and california problem relative to other areas. Lastly, this report in terms of risk is the first report, which is surprising, that discusses the Opioid Crisis that has been going on for 10 years or more. It is something the president is very concerned about from day one. , this is ant important component of the partly ansis, it is economic phenomenon because if you look at essentially how much opioidernment finances prescription the markets got big enough for illegal innovators to improve quality and reduce price, which is really what fentanyl is about. If you look at the early part of the prescription epidemic, that was highly subsidized by the government so we went from about 15 of pills being government programsthrough public to about 67 of pills being government financed during a period. If you think of other addictions, alcohol and cigarettes, we tax those addictions. We have subsidized this addiction with well intended programs, obviously, that are aimed at doing Something Else which is subsidizing the medical use of opioids, which is not harmful. At the same time, we have subsidized the nonmedical use of opioids, which is what kills people in terms of an addiction. This would not this would not be feasible without those subsidies because if you look at the middle of the prescription 50,000, it cost about to buy an addiction out of pocket every year. You buy a lot of pills when youre addicted. If you are buying these outofpocket, the amount of pills you would need at the prices that were going, it will cost you 50,000 to keep up a yearly addiction. The report lays out that transmission. What are things that might be important to think about. I will stop there and take questions. Phone orpp on your ipad or computer, submit questions you have. I will start with one myself, the economic report has an annual gdp growth of 2. 9 . The administrations proposed budget depends on the level of growth to shrink deficits Going Forward that without it, deficits increase considerably. How concerned are you about the real possibility of this happening since past productions of gdp growth by the administration have not been realized . In terms of we are pretty close and if you look at the errors we document the of past administrations in terms of forecast errors in the trump lower than any other Administration Since reagan. If you are concerned about errors about forecasting, you should have seen the forecasts in the early part of the expansion. Bit,ve been off a little compared to other administrations, we have been awful lot less. We have been off a lot less. It is important to understand what the differences between what the white house does and cbo and what wall street does. White house ejections are different because projections are different because they include all policies. Law so no newrent Administration Policies get implemented. Bluechip is in between. Between the cbo every administration is always higher than cbo and bluechip because that is the nature of what is being predicted. That is important to keep in mind. Am i worried about the deficit and debt . I am less worried than the current front runner in a democratic dutch in the Democratic Party current front runner in the Democratic Party. Not evenhese policies, feasible to collect that amount of revenue to fund some of the programs they are proposing. Common argument against the tax cut of 2017 was that it was a tax cut for the wealthy and it drove a hole in the debt. Both of those arguments, and there is a lot of evidence suggesting both are not consistent with evidence. End aret one, the lower converging with the upper and of the wealth distribution. Wealthy individuals benefited from the tax cuts but poor individuals grew faster than the wealthy individuals. That it droveect a hole in the debt, if you look at cbos revisions to the revenue forecast due to improved Economic Conditions, that implies the tax cut paid for itself with additional revenue, according to cbos numbers. What has happened is that spending, particularly military spelling military spending because the military was going down the tube and the president has changed that, it is a spending issue as opposed to tax cuts reducing revenues. What we care about is the debt relative to the size of the economy. You might have deficit spending and that ratio shrinking over time if the economy grows fast enough. Believe we have put in place we are putting in place trade , necessary Structural Reforms for future growth to take place. Thank you. In talking about the increase in for lower distribution, last year, this is a question from the audience, last year, 28 out of 50 states raise their minimum wage. How are you able to distinguish wage growth due to this administrations tax cut and deregulation and simply a change in state laws . Some people have incorrectly argued that this bluecollar boom we talk about in governmention is a produced boom in the sense that minimum wages across the country are rising in lot of states. It turns out that is qualitatively correct but quantitatively, it is unimportant. Only about 2 of people among the working age are on minimum wage levels. We have analyzed this and come finding quantitative that this is not a big deal in terms of affecting overall wage growth. Tariffs anda bit to trade, trade uncertainty continues to be Impact Industries with the negotiations of the phase i deal with china but with no certainty on a resolution, how significant of an impact do you think china will have in this next year . Correctirst thing to about our trade policies, a lot of people have because the president was the first to take thereeveryone should be bipartisan support that there was unfair trade practices in china which need to be needed to be renegotiated. The president took that on and with any negotiation, there will be uncertainty as to what that negotiation leads to. That is what i think we have seen in terms of dampening investments. Overall effort clearly will have positive gdp effects. If you think of the longrun return, where there is a longrun benefit compared to any short run issue with renegotiation uncertainty. I think we see that in phase one. The phase one benefits will dominate any turning we have had in the market. Churning we have had in the market. I think people misinterpret the tariffs. These tariffs successfully created leverage for us to when you hear econ 101 discussions, it misses the point of how they have been used to generate a larger rate of return than any potential cause for uncertainty involved in the renegotiations. Four 2020, i think, we are going to get rid of some of that uncertainty coming down and that will be beneficial for investment. The agreements will be in place. The real threat is the coronavirus. We are taking a wait and see approach, to see what will happen before we start looking at the implications of it. Has thethe president safety of the American People as his number one priority. He wants to avoid what happened with the swine flu. We are taking strict measures. The secretary leading our task force, we have put Border Patrol that seems toace be pretty successful so far in terms of combating any impact here. In terms of the Public Health impact on the economy, i think that has been exaggerated. If you look at seasonal , the flu kills 40,000 americans a year. That is a big deal compared to the numbers we are talking about with the corona. You cannot vaccinate against those new strains. Against are vaccinated seasonal flu, you think you are protected from everything but you are not. It is important to keep in mind that we take a huge hit from Infectious Diseases that cannot and thenated against economy is resilient. That does not mean the economic effects from all the shutdowns in china will have will not have an impact here. The question is, how large are those effects. We are taking a wait and see approach. Box of onecked the of our audience questions about the coronavirus. Going back to the Opioid Crisis you mentioned, another audience question were you suggesting that the Affordable Care act had contributed to the Opioid Crisis . Is there something these is claiming are not well intended policies. Most of the opioid issue was a part d issue. It funds disability and disability is associated with a lot of pain and you have Pain Management being important in Medicare Part d relative to medicaid. Any program potentially has this effect. Everyone is on board to fund the medical use of Pain Management. Like i said, medical use of Pain Management is not what is killing people. It is the nonmedical use. How do you slow down the nonmedical use . If you look at the growth of the deaths hasn, opioid declined under trump. Reversing the trend and part of that is the aggressive efforts to try to limit the nonmedical that wereoids undertaken and i think that has been successful. Biguse the market became so on prescription opioids, there was great incentives for illegal innovators. What happens, fentanyl became much more potent and cheaper. If you think about the price of a high, that price went through the floor and that innovation became probable and a huge wantedpool of customers cheaper and Higher Quality product and that is what happened. That is important to keep in mind because a lot of that comes through the mexican border. Heroin comes through and fentanyl comes to this other border and that is 1 the southern border and that is why the president is focused on shutting down the influx of drugs on the border through the wall and ports of entry. Better monitoring the influx of new jobs. From where things stand now, what do you believe is the biggest threat to Economic Growth in the next five years . Senator and you cannot say senator Bernie Sanders. We have a section in the report on the threats for the next five years. We continue to lay out obviously, we are not done. We are working every day to continue this four pillar agenda. That four pillar agenda is essential to ensuring growth. I do think the biggest threat is government policy. That gets reversed and whether it is sanders or any other candidate, in terms of Economic Growth, that is the biggest threat. Thank you. We are out of time. Please join me in thanking the chairman. [applause] thank you for joining us today. Bright and early on the first day of our policy conference, i am pleased to welcome somebody who really needs no introduction. Swagel, he is the director of the cbo. He was formally at u. S. Treasury. He also served as chief of staff and senior economist at the council of economic white house. He was at the imf and the Federal Reserve board. He has been a professor at northwestern, Chicago School of business and the university of maryland. When i look at him i think, did you start when you were 12 . Announce a fun fact for the day, he is a retired baseball coach from bc