Please welcome them. [ applause ] good morning, thank you very much for being here. Thank you for joining us. So the topic of this session is taxes, taxes, taxes so well start off talking about alabama. Original, original, original. We had a lot of discussion about taxes with your colleague the treasury secretary but i want to get in more detail and ask you some of the more detail. Let me start off with something i said with s. E. C. Theecretary. This is a one and a half trillion dollar Immediate Tax cut. Federal debt is already at 78 of gdp total federal revenues is at 17 , quite low by historical standards, the economy is close to full employment. This is this seems an unusual time historically to be adding such a huge amount to the deficit. Why now . So let me take that question to pieces because you ask a lot of different pieces in there and lets start with the core issue here. When you look at whats happened to the u. S. Work force since the recession, yes, weve created jobs. Were at 4. 1 unemployment right now. Were at a 16year low in unemployment. But even if you look at last months unemployment report which was a good report we had zero wage growth in the United States. Weve had many, many years of zero wage real wage growth. Wages have been growing basically in line with low inflation. One of the big drivers of our tax reform policy is to get real wage growth back into the United States. And we think thats really important, something that American Workers deserve. That they deserve real wage growth in this country so when we talk about lowering taxes on businesses, small businesses, big businesses, every business in between one of the results of that, we believe, is that businesses are going to be able to pay their workers more, theyre going to be competition for labor and when you compete for labor as you expand your business were going to drive real wage income in the United States and we believe that is very important and the effects of driving real wages are pretty dramatic on the economy. We know that individuals know how to spend their money much more efficiently than government does. The Multiplier Effect of individual spending is substantially higher than the Multiplier Effect of government spending. But isnt surely the way that wages are going to rise through a Competitive Labor market. Youve seen as you said, unemployment is down 4. 1 . There are issues about Labor Participation rates but clearly the pool of available workers is drying up. That now, that hasnt had the effects of dramatically increasing wages as the way it has in the past but the general expectation is, and janet yellen has said this and others, that the wages are going to start rising. As the competition for labor increases wages will rise. Why does it need a tax cut addressed to business to help do that . We havent seen it. We keep talking about what should happen and what could happen and what might happen but we havent seen any of that happen. What we have seen is we have seen companies acting as good fiduciaries for their shareholders and weve seen Small Companies thinking about how they can drive their earnings and weve seen them use international models, weve seen them use outsourcing models, weve seen them move employees overseas, weve seen them move revenue overseas because thats rational Human Behavior so we need to combat that and we need to make the United States competitive where we can drive wages in this country. One of the biggest reasons the Bigger Companies arent able to provide wage increases is because they do have good earnings and we have had relatively good earnings during this cycle but all of those earnings are trapped offshore and the penalty to bring that money back on shore is too high so Companies Just leave that money and it builds up offshore so in spite of good earnings, it hasnt really made its way down to the workers. Why not just, though, again, if this is about raising wages, why not just raising disposable income, why not just have the middleclass tax cut and why not the bulk of the tax cuts be directed at the personal level instead of what youve got which is both the house and senate plan have the tax cut is a Corporate Tax cut and the personal side roughly balances because of eliminated deductions and various other things. Why not direct all of the tax stimulus at the workers . This is where i think theres a lot of misunderstanding and people really arent getting the details. So if you take the tax cuts, the tax simplification apart, and this is not sophisticated data im going to give you, this is readily available data and you look at whats in there, there are close to 6 trillion of tax cuts in this plan. Thats 6 trillion. Sure. There are close to 4. 5 trillion of base broadeners in there. That nets to the trillion and a half dollars that Everyone Wants to talk about. When you look at the close to 6 trillion of tax cuts, many, many, many of those are in the middleclass. So the way it works the when youre moving all of the different pieces of tax around, a lot of that is going even just the increase in the child tax credit, the ctc as we call it, when youve got slightly different plans in the house and senate thats i think its 700 billion or 800 billion by itself just the increase from a thousand dollars of refundable to 1650 and the extra 650 being nonrefundable, thats 800 billion by itself. So right there we talk about theres no must be going to the middleclass, right there is 800 billion going to hardworking middleclass families. There is no question someone on Median Income under these measures den, it varies house and senate and you have these effects in the house where that tax cut someone gets immediately does start to fade away as these other effects take place but there is a reasonable size tax cut for someone on Median Income. Well remember in the house plan, just so i dont want to let that point drop. So the house plan in there to get in their Budget Constraint window, they have a they looked at it as a fiveyear window and a longer window. They have two things that disappear at the end of fiveyear windows the, immediate expensing and the 300 credit for taxpayers for spouse and dependents. Those disappear at the end of five years. Its the assumption of the house members that if our plan creates the economic stimulus that we believe it will create that those plans will get elongated and that 300 will become permanent so when people show you that cliff in 2023 which everyone loves to show you your paper is one of many that loves to show it, we believe that cliff will disappear if and when we get the Economic Growth we think well get. Let us talk about the economy growth. Youve again, u. S. Growth has been about 2 for the last ten years, disappointing by historical standards, thats true and the president said hed like to get it to four but certainly he believes your economists believe he can get it to three. But lets understand whats been going on. A large part of the reason why growth has dropped, the trend growth seems to have dropped from 3 20 years ago to 2 today seems to do with demographics, right . Theres an aging work force. There are fewer people coming into the work force, theres the birthrate 20 years ago was lower. And by the way that is a global phenomenon, not just in the u. S. How does a tax cut change what and by the way, the other phenomenon is productivity, growth has been weak. But thats a global phenomenon. You just answered the question for me. But thats a global phenomenon. Productivity has been weak everywhere. Europe had week productivity growth, japan. Even china started to see productivity growth slow. How does the u. S. Whats going to go on here with this tax cut aimed at business thats going to raise productivity out of the trend weve seen for the last 20 years . Its about productivity. If you look at the last time our economy took off it was a productivity boom in this country. We need to get productivity back growing again in the country and we believe we can do that. One of the big components of the tax bill is a fiveyear day one immediate no matter which plan we end up going with is day one immediate expensing for Capital Expenditures. We do believe theres an enormous amount of Capital Expenditures that can be spent in the system that will really enhance productivity in the system. We need to get workers producing more per unit of labor and we feed to become more productive and more efficient in our system your question before on Artificial Intelligence is really interesting as we continue to develop Artificial Intelligence we get more companies to invest in automation we will create more and more productivity so that five year window of immediate expensing, thats aimed at jobs, number one, but really productivity equally as jobs around trying to create productivity gains to get the economy growing. But weve seen this extraordinary expansion of the technology sector. This enormous investment theres been in technology in the last 25 years and in the revolution in peoples lives and the way businesses work, theres been no increase in prukreecrease in pr. Productivity has declined. One of the mysteries of modern economics so that investment youve seen, automation, increasing use of technology is not improving productivity. Again, thats a global phenomenon, weve seen this weakness in productivity everywhere. How is that going to change . I would argue its a multiple factor model. We would argue the Regulatory Environment has had a huge impact on productivity and the fact that we have overburdened companies with regulation and that companies are spending so much money on what we would consider nonproductive regulation and the cost associated with that nonproductive regulation is chewing up enormous amount of their earnings that they cant reinvest that into what is really productivity and product of assets. That matters so i know you talked about this last night and we continue to talk about rolling back some of the regulations thats may us less effective. We need to consider to roll back that regulation. We need to make our businesses more competitive. Im not looking to deregulate our businesses, were looking to make our businesses efficient. Were looking to have them properly regular gaited but were looking to allow them to compete around be more productive than businesses around the world. That could be a Competitive Edge of ours. The government should not be stifling growth. The government should be encouraging growth but with proper guardrails. What data are you seeing right now that suggests to you that business in the United States is not competitive, is not productive . Youve seen you see profit share as proportion of gdp is close to an all time high. Way, way up to where it was 20 years ago. Stock prices are up 30 in the last year. Shareholders have done extremely well. The companies are making profits. Investment is down, its true. Theyre giving those profits back to shareholders. How is it again im not sure what it is that Business Needs right now that is actually answered for by a big tax cut thats going to somehow make them invest more. Look, again, we Want Companies to invest back in the economy, not give money back or sit on money because they dont think theres anything to do with it. We think there should be enormous amount of opportunity in the economy right now to invest capital into our economy and thats what we Want Companies to do and the reason theyre not doing it is because its really hard. If you want to go out and create a new mine and theres a company in the United States thats been trying to create a new copper mine for over 15 years and its literally tens of thousands of jobs in arizona, they just cant get permits. But thats a regulatory issue, i get that. How is cutting the Corporate Tax rate to 20 no, weve got to fix the entire system. I was talking about productivity, i was talking about deregulating. On there, the ability to expense all of your things capex, if t makes sense 15 years ago, it makes more sense today if you can expense in the first five years. So the economics to do that, to make that investment today when youre looking at aftertax returns or roae or roi or whatever you want to look at, the ability to expense up front and the ability to look at that with a lower tax rate, even when you pay your employees more money, which youre going to in a tight labor market is going to make more sense which is going to drive Economic Growth. Lets quickly take a poll question which we have here. You know the drill by now. Open up your app, here we are. The question is will Congress Pass a major tax reform by the end of 2017. Were only seven weeks away now. Yes, no, it depends on who wins in alabama. Some people are voting many times. A little bit of pessimism in the room there. That surprises me. Youre very confident, we were just talking about this backstage. Theres a lot to be worked out. You have to house bill different from the senate bill, there will be amendments to both, there will be reconciliation, conference but youre really confident this is going to get done now . So lets take a real look at where we are today. Last week we got the house bill through the ways and Means Committee with 24 votes, 2416. This week were in the Senate Finance committee, i think there are 355 amendments filed, they had to be filed by sunday at 5 00, washington trick, file them by sunday at 5 00, there were 355 amendments filed by sunday at 5 00. The Senate Finance committee will work all week to get through the bill out of the Senate Finance committee. So i assume i assume that before they go home for the thanksgiving recess and, by the way, theyre scheduled to leave thursday night for thanksgiving recess only in washington do you get a week for thanksgiving. I assume they will get the bill through the Senate Finance committee so that would be thursday or friday of this week, the house is scheduled to vote on the full bill again on thursday. I am pretty confident that the house is going to vote on the full bill before they go home for the thanksgiving recess. Again, theyre scheduled to leave on thursday. So by the end of this week before we get to the thanksgiving recess which start this is week, we will have the whole the bill through the house, we will have the Senate Finance committee done. The only thing left to do is to get the full senate to vote on the bill. Then at that point, we need we may need to go to conference committee, create a bill that both can agree on and send it back to both chambers to be voted on again so i think theres a lot of people you ask that question four weeks ago, by thanksgiving would we have both bills out of committee you probably would have gotten similar results. Is it really important to have it done by december 31 . I think people in the house particularly want it done so you can have a bill in place for the new tax year or youll settle for it if it drifts into the new year a bit . I think its really important to get it done. Weve got to get taxes done this year. In fact, the legislative calendar is going to get very crowded come the first, second week of december. There are a bunch of irk shoes that got punted for a few months into the first and second week of december. December will get very, very crowded in the legislative calendar. Theres a few potential wrinkles here and by the way i asked the treasury secretary about it and the president tweeted about one of them overnight and i want to ask you about that which is this plan by senator tom cotton, supported by a lot of other people to roe introduce the removal of the individual mandate, the obamacare individual Health Care Mandate requiring people to sign up for health insurance, that would because of its affects on medicaid and other aspects save significant amount, give you a lot of additional revenue to play with, 340 billion, cotton saying hes going to do it, the president supported in the a tweet last night, said its time to get rid of it. There are concerns once you start pulling on that string which is called obamacare, as weve seen for the last ten months, all kinds of difficult things arise but do you think its would you welcome that . Were highly supportive of it. It comes down to whether the house and senate have the votes and i think its more of a question does the senate have the vote. The house would tell me look, weve already voted on obamacare. Weve shown you weve delivered the votes, can the senate deliver the votes so tax reform is really important to us in the administration. I think its important to the house and senate, we have to get that done, if we can get the individual mandate revealed as well and incorporate that into taxes that to us is a real windfall and wed love to see that happen but were still plotting ahead on tax reform whether it happens or whether it doesnt happen. A few specifics on the tax reform then i want to open it up for questions, too. The state and local Tax Deduction elimination, a lot of republicans in high tech states are very upset about that. The house has a at least some allowance for deduction on property taxes. Do you prefer the house measure or Senate Measure . There are going to be some pete who are going to be hit very hard. I dont think thats a proper characterization, the question should b