Transcripts For CSPAN2 Economic Policy Discussion 20240713 :

Transcripts For CSPAN2 Economic Policy Discussion 20240713

Business economics, its two hours 15 minutes. Thank you everybody for joining us this morning over coffee. The opening session of the policy conference, i am the director of the center of the National Independent business. And i am delighted to introduce the vice chair of the white House Counsel of Economic Advisor. Preparing for the session i found that we have a foundational commonality and he is originally from sweden, im originally from minnesota, the land of american. He stopped a bit short of the minnesota border and currently on leave from the university of chicago where he is the professor of Public Policy studies at the University School of Public Policy. In the Freedman Institute program on research and healthcare markets and policies within the Health Economic initiative. Before rising at the university of chicago he served in several positions including his role as Senior Advisor to the head of food and Drug Administration and as a senior Economic Advisor to the head of the center for medicare and medicaid services. He also served as a healthcare advisor for john mccain during his president ial campaign. Thank you so much for joining us today. To start at the 74th edition of the economic report of the president was released last week which is says on wikipedia the chairmans rights, all 300 pages im sure. If you would please share some of the highlights of the report. This is the report you can download for free at the white house site, im gonna talk a little bit about the main theme, obviously i did not write the report, its about 435 pages and effort that takes place over several months, im gonna go through the main theme, if you want the bottom line of what pa has done or in general our twitter account white house d. A. Has almost daily updates from all of our activities and on the bottom lines on the economic report of the president. So basically there is two themes in the report that are the main theme on how the Trump Administration agenda which we take to be four pillars, one is taxcut per capital Economic Activity in the third is basically freeing up Energy Innovation in the private sector in the fourth being renegotiating trade agreements more fair across the globe. The two main themes in the report that gets a lot of chapters, the first thing what weve seen in the expansion after these policies were implemented under trump is very different from the expansion after the Great Recession. The second theme ill get into those numbers, the second theme we laid out is about the last three years of the economy as opposed to the previous part of the expansion has really been inclusive in terms of growth in the real benefactor the people are doing better are the lower end of the distribution. So let me going to how we document, we document in two ways essentially why this expansion is different, this part of the expansion is different from the earlier parts, usually when you have a recession you have early growth directly after the recession that is pretty rapid and it levels out to normal growth after that. That is opposite of what happened after the Great Recession where we have essentially a pretty slow growth initially and we panic celebrated growth for the last three years. This is in spite of the Monetary Policy that was stimulative in the early part of recession. We have rate hikes since 16 and have them coming down three times since then. But essentially we had more easy Monetary Policy in the beginning of the cycle then in the end. So the two ways we show its different on the earlier part of the expansion, we look at what the people say would be the continuation of the obama economy in 2016. So people obviously forecasted in 2016 what they saw and 17, 18, 19 look like. In fact the main goal is the forecast under current law to say obama policy what the future would look like. And if you look at that, its basically a pessimistic forecast. Because people generally had to believe that in recessions the longer you go into expansion the harder it is to do well. So what happened obviously was different than that, they predicted the Participation Rate would fall at an increase in the unappointed race would rise and decreased to 3. 6 currently. They predicted wage growth of lowincome individuals very low whether it accelerated et cetera. So i think this last week this comes to a head where the president calls this job basically and people wanted to claim this is a continuation of the obama expansion. But it is kind of a con job because those people in 2016 or now are claiming its a continuation of the obama economy when they themselves in 2016 says something different, theyre pretending to be someone else and they actually are thats what a con man is. I think that is actually something worth noting, no one predicted this performance and given current law in 2016. The second way in which the later part of the expansion differed from the first, if you look at just the data of the second part of expansion compared to the first is very different, for example labor enforcement participation shrink in the early part of the expansion in the house picked up in the last three years, same with homeownership, same with inequality, inequality is basically narrowed the last three years as opposed to widening before that. That kinda 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 of the less three years. So in income inequality if you look at wage growth, all across the board in terms of Disadvantaged Group or the lower end or the bottom half you have had a reversal of the disadvantage groups growing faster compared to before 2017 when they were groins under growingrowing slower. Obviously e increased labor demand but also deregulation, deregulation has been progressive in a sense that weve seen larger gains of the share of income from deregulation of poor individuals that weve seen for rich individuals. Thats an important component of why we think the regulation is important. Thats all the income inequality, the wealth inequality you see in a normal growth of wealth in the Bottom Health of the Wealth Distribution, 15 times faster than the last three administrations. So 47 growth and wealth among the lower half of the Wealth Distribution to benchmark that, this is great, is generating selfsufficient in the development dependent into benchmark that against other things we do to try to help the poor, about. 6 trillion larger than the largest is high Poverty Program which would be medicaid, food stamps and cash transfers. Any given year, its a big deal in terms how much the poor are gaining. Therefore theyre coming out Welfare Programs basically by not qualifying which is how we want people to come out as opposed to not being ineligible for other reasons but pretty much every means for the Welfare Program we see people gaining enough income to become more selfsufficient. So this is kind of the belief in labor demand is probably the best antiPoverty Program we invented by man i would say in the selfsufficiency is something that the forgotten minimum we talk about their administration is a big deal in terms of how we see the economy turning in their direction. There are some additional risks, those are the kind of two main things that some additional risk discussed in housing regulation that we believe are extremely inclusive intrusiv ink and california in the housing regulation has led to not enough supply the restricting the supply and having very high prices in those areas and the question is, can one on the state and local level get a deregulating prices which is deregulating that supply to meet the demand better, its very important gordon forward that given people are working more and earning more and we have a housing boom in connection with a low interestrate so will have a demand increase that is produced essential in those areas and you need supply to see demand than what we are doing, its very concentrated in certain areas because housing becomes very expensive and homelessness is a huge new york and california problem in other areas where housing is not regulated. Lastly, this report in terms of risk as a first report which is surprising that discusses the Opioid Crisis, its been going on for ten years now or more, it is really something that the president is very concerned about from day one and in the report we argue its a really important component of the open crisis of how it was financed is partly an economic phenomenon. Because if you look at potentially how much the government finances opioid prescription, first of all there was a prescription wave of the crisis and then the market got big enough for illegal innovators to improve quality and reduce price which is what fentanyl is about but if you look at the early part of the prescription epidemic, really that would highly subsidized by the government so we went from about 15 of pills being government announced through Public Programs to about 67 of pills being government financed during the period. So to think of other addictions, alcohol and cigarettes, we taxed those addictions, this is essentially weve been subsidizing this addiction with well intended programs obviously that are aimed to Something Else which is subsidizing the medical use of opioids which is not harmful, people dont die from medical use of pain meds about words. But at the same time we subsidize the nonmedical use of opioids which is what kills people in terms of an addiction. So this i think, this growth or epidemic would not be feasible without the subsidence, if you look at the middle of the prescription epidemic it cost about 50 grand to buy an addiction out of pocket for years. If you buy a lot of pills when youre addicted, its not like your copay when you go to pharmacy and is 20. Its basic if you were buying these outofpocket, the amount of pills you would need at the prices they were going it would cost about 50 grand to keep up with your yearly addiction which is infeasible for a large part of the population who are addicted. I think the government was important to basically provide the secondary market of nonmedical use of opioids during this period. In the report lays out that transmission. Thats part of the threat that we talked about on the report and Going Forward one of the things in the future that might be important to think about. I will stop there and will take questions. Thank you for your remark. A reminder your app on your phone or ipad or computer, submit questions that you have, i will start off with one myself, the economic report and annual gdp growth through 2030 if all the recommended policies are enacted, the Administration Proposed budget depends on the level of growth to shrink deficit Going Forward but without it deficits increase considerably, how concerned are you about the real possibility of this happening since past prediction of gdp growth by the administration have not been realized and it assumes no recession during the forecast. Which seems unlikely. In terms of related past addiction, we are pretty close, if you look at the report we document the errors of pastor administration in terms of forecast errors. The Trump Administration is lower than the other administration, reagan essentially, if youre concerned about the forecast, you should see the areas of 5 roughly that took place in the early part of the expansion where people thought those programs would be very beneficial to the economy. Weve been up a little bit, compared to other administrations weve been up a lot less but up to start. Its also important to understand what the difference between the white house and the c. B. O. And wall street with bluechip. The white house projection by definition are different because they include all potential Administration Policies and probability one of those policies happening. C. B. O. Was a probability of 0, they assume current loss, no new Administration Policies get implemented and bluechip is in between, will these actually happen or not, they cut them in between c. B. O. At 0 in a probability of one, the administration is always higher than c. B. O. And bluechip because thats the nature of whats been predicted. Thats important to keep in mind when you hear how we compare to other forecasters. In my worried about the deficit and debt . Im less worried than the current front runner in the democratic party, if they get power id be a lot more worried given the policies that senator sanders has proposed in terms of the revenue which we cannot collect some of these policies is not even feasible to collect that amount of revenue upon the programs they are proposing. The common argument against the tax cut was that basically it was not a tax cut for the wealthy and he drew a hole in the debt. I think both of those arguments, theres a lot of evidence now suggesting are both not consistent with evidence. The first one, i just told you, the lower end are converging with upper end so certainly yes wealthy individuals benefited the poor individuals who were faster than the wealthy individuals, inequality is falling. The second aspect that i drove a hole in the debt, if you look at c. B. O. Revision to the revenue forecast due to improved economic conditions, that essentially implies that the tax cut paid for itself with additional revenue according to c. B. O. s numbers. What has happened is really the spending military spending the president correctly has changed that but its really spending opposed to the tax cut reducing revenue. What ultimately we care about is a debt relative to the size of the economy you might even have deficit spending in that ratio shrinking over time as the economy grows fast enough. We believe that weve now put in place, the trade agreement, tax cut and deregulation, thats a reform for that future growth to take place. Thank you. In talking about the increase in income for lower distribution, this is a question from the audience, laster 28 out of 50 states rank the minimum wage, how are you able to distinguish the wage growth due to the Administration Tax cut and deregulation and simply change in state law. Some people have incorrectly argued that the bluecollar boom that we talk about in the administration is the lower and growing so fast. Its a Government Produced boomed and a sense of minimum wage across the country are raising in a lot of states. It turns out that is quantitatively qualitatively correct but quantitatively unimportant. Only about 2 of people among the working age are minimumwage levels and we basically have analyzed and come up with a quantitative that this is not a big deal in terms of affecting overall wage programs. Shifting a bit to tariffs and trade, tariffs and trade uncertainty continues to be a Significant Industries including agriculture and manufacturing to name a few with the negotiation of the phase i deal with china complete the certainty on a resolution, how significant of an impact do you think the trade dispute with china has in the next year in 2020 . A without any renegotiation there will be uncertainty as to what that leads to and that is what we have seen in terms of investments. However the overall effort is going to have problems as sort of the longrun return and benefit compared to the short run issue with renegotiation so i think we see that in the benefits they will dominate any sort of journey we have had in the market the last couple of years. I also think people misinterpreted it created leverage for us and when you hear the discussions it kind of misses the point of how they have been used to generate a large rate of return so that is an important point. We are going to get rid of some of the uncertainty and that will be very beneficial and also the agreements will be in place. The real threat is the coronavirus. We dont know yet. We are taking a wait and see approach to see what will happen before we start looking at the implications of it. Those that were infected time and we are taking strict measures and put forth a control policy. In forms of combating any impact here and in terms of the impact on the economy thats been exaggerated if you look at the influence on the average 40,000 americans each year so thats a big deal relative to the numbers we were talking about. In 2018 in the high growth here you cant vaccinate against the new strengths and seasonal flu you think you are protected against everything but youre not. It might have been a fraction of the strain that they come back. Its important to keep in mind the diseases that can be vaccinated against. That doesnt mean the economic effects wont have an impact here. The question is how large are those effects in the wait and see approach. Going back to the Opioid Crisis that you mentioned are you suggesting they Affordable Care act contributed to the Opioid Crisis do you think there is something with that quite . Most a lot of times are associated with a lot of pain so you have Pain Management in portland but either program has this effect and its obviously to fund the medical use of Pain Management it is the nonmedical use so how do you slow down the nonmedical use in the growth of the prescription c

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